UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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(Mark One)
FOR THE FISCAL YEAR ENDED DECEMBER 31 , 2025
OR
FOR THE TRANSITION PERIOD FROM _________ TO _________
Commission File Number 001-38971
(Exact name of Registrant as specified in its Charter)
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Registrant’s telephone number, including area code: (866) 777-8235
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Securities registered pursuant to Section 12(b) of the Act:
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | o | Accelerated filer | o | ||||||||
| x | Smaller reporting company | ||||||||||
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. o
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. o
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). o
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
The aggregate market value of the Registrant’s voting and non-voting common stock held by non-affiliates of the Registrant as of June 30, 2025 based on the closing price of the Registrant’s common stock as reported by the New York Stock Exchange of $2.02 per share, was approximately $31.6 million. Shares of common stock beneficially owned by each executive officer, director or holder of more than 5% of the Registrant’s common stock have been excluded as such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
As of March 19, 2026, 18,168,863 shares of the Registrant’s common stock, $0.0001 par value, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Proxy Statement for the 2026 Annual Meeting of the Stockholders of the registrant are incorporated by reference into Part III of this report.
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TABLE OF CONTENTS
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CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that relate to future events or our future financial performance including, but not limited to, statements regarding our plans, strategies and prospects, both business and financial, our growth plans, future financial and operating results, costs and expenses,our ability to continue as a going concern and to repay or refinance our debt prior to the applicable maturity dates, the outcome of contingencies, financial condition, results of operations, liquidity, cost savings, business strategies, and other statements that are not historical facts. Forward-looking statements generally are characterized by the use of certain words or phrases (and their derivatives) such as “anticipate,” “believe,” “could,” “expect,” “intend,” “may,” “opportunity,” “plan,” “goals,” “target” “predict,” “potential,” “estimate,” “should,” “will,” “would,” “continue,” “likely,” and similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These statements are based upon our current plans and strategies, management’s assumptions and expectations about future events, and market conditions, and reflect our current assessment of the risks and uncertainties related to its business and are made as of the date of this report. There can be no assurance that actual future results, performance or achievements of, or trends affecting, us will not differ materially from any future results, performance, achievements or trends expressed or implied by such forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from historical results or the forward-looking statements contained herein, including but not limited to:
•Uncertainties relating to the solar energy industry and the risk that sufficient additional demand for home solar energy systems may not develop or take longer to develop than we anticipate.
•Disruptions to our solar monitoring systems could negatively impact our revenues and increase our expenses.
•Warranties provided by the manufacturers of equipment for our assets and maintenance obligations may be inadequate to protect us.
•The solar energy systems we own or may acquire may have a limited operating history and may not perform as we expect, including as a result of unsuitable solar and meteorological conditions.
•Problems with performance of our solar energy systems may cause us to incur expenses, may lower the value of our solar energy systems, and may damage our market reputation.
•Developments in technology or improvements in distributed solar energy generation and related technologies or components may materially adversely affect demand for our offerings.
•We could be harmed by a material reduction in the retail price of traditional utility generated electricity, electricity from other sources or renewable energy credits.
•We may fail to manage our growth effectively, grow by expanding our market penetration, or execute and consummate business plans in anticipated time frames.
•We may not be able to identify strategic acquisition or strategic relationship opportunities, we may not be able to complete strategic acquisitions or strategic relationships, or we may experience difficulties in integrating strategic acquisitions.
•We may not be able to develop and market new products and services.
•We may require additional financing to support the development of our business and implementation of our growth strategy.
•We are subject to risks relating to our outstanding debt, including risks relating to rising interest rate, the risk that we may not have sufficient cash flow to pay our debt and the risk that we may not be able to continue as a going concern if we are unable to repay or refinancing our debt prior to the applicable maturity dates
•We may be adversely affected by the impact of natural disasters and other events beyond our control, such as hurricanes, wildfires, or pandemics.
•We are subject to cybersecurity risks.
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•We are subject to risks relating to general economic, financial, legal, political, and business conditions and changes in domestic and foreign markets.
•Governmental investigations, litigation, complaints, other claims, or adverse publicity may cause us to incur significant expense, hinder execution of business and growth strategy, harm our reputation or impact the price of our common stock.
•Changes in tax laws may materially adversely affect our business, prospects, financial condition, and operating results.
•Our ability to use net operating loss carryforwards and other tax attributes may be limited in connection with business combinations or other ownership changes.
•We are subject to risks associated with construction, regulatory compliance, risks relating to changes in, and our compliance with, laws and regulations affecting our business, and other contingencies.
•Violations of export control and/or economic sanctions laws and regulations to which we are subject could have a material adverse effect on our business operations, financial position, and results of operations.
•Our insurance coverage may not be adequate to protect us from all business risks.
•We face competition from traditional energy companies as well as solar and other renewable energy companies.
All forward-looking statements should be considered in the context of the risks and other factors described above and in Item 1A under the heading “Risk Factors”, which are not exhaustive. Other sections of this Annual Report on Form 10-K, such as the description of our business set forth in Item 1 and our Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in Item 7 describe additional factors that could adversely affect our business, financial condition or results of operations. New risk factors emerge from time to time, and it is not possible to predict all such risk factors, nor can we assess the impact of all such risk factors on its business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. Forward-looking statements are not guarantees of performance. You should not put undue reliance on these statements, which speak only as of the date hereof, and you are urged to consider all risks, uncertainties, and any other factors in evaluating any forward-looking statement made by the Company. All forward-looking statements attributable to Spruce Power or persons acting on its behalf are expressly qualified in their entirety by the foregoing cautionary statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
This report includes certain registered trademarks, including trademarks that are the property of Spruce Power and its affiliates. This report also includes other trademarks, service marks, and trade names owned by Spruce Power or other persons. All trademarks, service marks, and traded names included herein are the property of their respective owners. Use or display by us of other parties’ trademarks, trade dress, or products in this report is not intended to, and does not, imply a relationship with, or endorsements or sponsorship of, us by the trademark or trade dress owners.
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PART I
Unless the context provides otherwise, all references in this Annual Report on Form 10-K to the “Company”, “Spruce Power”, “we”, “our”, and “us” refer to Spruce Power Holding Corporation and its consolidated subsidiaries, including Legacy Spruce Power after the acquisition of Legacy Spruce Power on September 9, 2022. Depending on the context, references to “Spruce Power” may also include the historical business of Legacy Spruce Power prior to September 9, 2022.
Item 1. Business
Company Overview
Spruce Power Holding Corporation and its subsidiaries (“Spruce Power”) is a leading owner and operator of distributed solar energy assets across the United States (the “U.S.”), offering subscription-based services to approximately 84,000 home solar assets and customer contracts, making renewable energy more accessible to everyone. We are engaged in the ownership and maintenance of home solar energy systems for homeowners in the U.S.
Our primary customers are homeowners and our core solar service offerings to these customers generate revenues primarily through (i) the lease of, and the sale of electricity generated by, our home solar energy systems to homeowners pursuant to long-term Customer Agreements (as defined below) which require the homeowners to make recurring monthly payments, (ii) third party contracts to sell solar renewable energy credits (“SRECs”) generated by our home solar energy systems for contracted prices, and (iii) the servicing of third party-owned solar energy systems through our Spruce Pro servicing platform, which is contracted to offer portfolio managed services to over 60,000 systems owned by third parties, as well as to our portfolio of home solar energy systems (the “Portfolio”). These portfolio managed services include (a) billing and collections/asset recovery, (b) account support services, (c) financial asset management, (d) homeowner support and servicing technology, (e) asset operations, and (f) transaction and execution services related to SRECs. Our Spruce Pro brand, launched in the first quarter of 2024, expands our prior existing residential servicing platform to the commercial solar market, offering third-party owners a range of services for residential, commercial, and industrial assets.
In addition to our core solar service offerings, we generate cash flows and earn interest income from customer contracts related to a master lease agreement described below.
We hold subsidiary fund companies, defined below as the Funds, that own and operate portfolios of home solar energy systems, which are subject to solar lease agreements (“SLAs”) and power purchase agreements (“PPAs”, together with the SLAs, “Customer Agreements”) with residential customers who benefit from the production of electricity generated by our Portfolio, which may qualify for subsidies, renewable energy credits and other incentives as provided by the federal government and various states and local agencies. These benefits have generally been retained by our subsidiaries that own the systems, with the exception of the investment tax credit (“ITCs”) under Section 48 of the Internal Revenue Code, as amended, which were generally passed through to the various financing partners of the solar energy system portfolios.
Corporate History and Background
Historically, as XL Fleet Corp. (“XL Fleet”), we provided fleet electrification solutions for commercial vehicles in North America, offering our systems for vehicle electrification (the “Drivetrain” business) and offering and installing charging stations to enable customers to develop charging infrastructure required for electrified vehicles (the “XL Grid” business). In early 2022, we performed a strategic review of our overall business operations, which resulted in (i) the sale of our Drivetrain and XL Grid businesses in January 2023, which are both presented as discontinued operations in our consolidated financial statements, and (ii) the decision to pursue merger and acquisition (“M&A”) opportunities. On September 9, 2022, we acquired 100% of the membership interests of Spruce Holding Company 1 LLC, Spruce Holding Company 2 LLC, Spruce Holding Company 3 LLC and Spruce Manager LLC (collectively and together with their subsidiaries, “Legacy Spruce Power”), which was one of the largest privately held owner and operator of home solar energy systems in the U.S. at the time of the transaction. In November 2022, following the acquisition of Legacy Spruce Power, we changed our corporate name from “XL Fleet Corp.” to “Spruce Power Holding Corporation.” Additionally, we changed our ticker symbol from “XL” to “SPRU.”
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In the first quarter of 2023, we completed the acquisition of all issued and outstanding interests in SS Holdings 2017, LLC and its subsidiaries (“SEMTH”) from certain funds managed by HPS Investment Partners, LLC, pursuant to a membership interest purchase and sale agreement as of that date (the “SEMTH Acquisition”). The SEMTH related asset includes a 20-year use right to customer payment streams of approximately 22,500 customer contracts (the “SEMTH Master Lease”). Subsequently on August 18, 2023, we acquired approximately 2,400 home solar assets and customer contracts, with an average remaining contract life of approximately 11 years, from a publicly traded, regulated utility company (the “Tredegar Acquisition”).
In the fourth quarter of 2024, we completed the acquisition of a residential solar portfolio consisting of approximately 9,800 home solar assets and long-term Customer Agreements, with an average remaining contract life of over 11 years, from a publicly traded energy services company (the “NJR Acquisition”). During 2025, the Company acquired 200 additional systems pursuant to the NJR Acquisition.
With the completion of the NJR Acquisition, we have, in the aggregate, 14 portfolios of home solar assets and customer contracts with a combined capacity of approximately 509 MWdc. In the aggregate, as of December 31, 2025, we offered subscription-based services and owned the cash flows from approximately 84,000 home solar assets and customer contracts.
Corporate Strategy
We believe the combination of our existing customer base and proven servicing platform related to our Customer Agreements, together with our capital resources and relationships, gives us the ability to take advantage of rapid growth in distributed solar and battery storage services, while creating a path to more predictable revenues, profits and cash flow for our shareholders. Our corporate strategy has three key elements:
Leveraging the Spruce Power platform to become a leading provider of subscription-based solutions for distributed energy resources
We have more than a decade of experience owning and operating rooftop solar systems, as well as energy efficiency upgrades. We believe our proven platform for managing home solar can be extended to other categories of distributed energy resources, and by leveraging our platform, we intend to grow our revenues by providing subscription-based solutions for rooftop solar and energy storage and other future energy-related products to homeowners and businesses. We are focused on delivering best-in-class customer service, with investment into process and platform improvement for on-site monitoring, customer billing and working with qualified partners for field services.
Profitably growing return on assets by focusing on channels with the lowest customer acquisition cost
We seek to grow our customer revenues by focusing on those channels that have lowest customer acquisition costs and the ability to increase return on assets, including acquiring existing systems from other companies or investment funds, selling additional services to existing customers, selling services to new customers online and partnering with selected independent installers to provide a subscription-based solution for their customers. Historically we have grown our number of residential customers through acquisitions, while also organically developing our Spruce Pro servicing platform.
Increasing shareholder value by delivering predictable revenues, profits and cash flow
By focusing on subscription-based solutions with long-term customer contracts, we seek to generate consistent revenues, profits and cash flow from our residential customers and by leveraging our Spruce Pro servicing platform for portfolio managed services.
Customer Operations
We have more than a decade of experience servicing our Portfolio and also certain systems owned by third parties. A noteworthy differential is our in-house capabilities which include customer billing and collections, account management services, customer support, systems monitoring and maintenance, and portfolio accounting and financial reporting. We have made progress in elevating our customer service and continue to invest resources in our goal of becoming best-in-class customer experience. Our in-house capabilities and operations infrastructure has established a scalable platform where we are able to continually improve profitability through growth while reducing incremental operational costs.
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Corporate Development
We believe our corporate growth strategy provides a unique differential from our competitors. While our competitors may lose future long-term value creation for short-term cash flow by selling new solar systems outright directly to consumers, we focus on long-term positive cash flow. We have a dedicated corporate development (“M&A”) team that has historically been successful in acquiring high quality portfolios of solar energy systems that are already in operation and have existing long-term contracts with homeowners. Our in-house M&A team focuses on acquiring operating home solar energy systems “in-bulk” from other companies, and such approach has enabled us to achieve step-change growth while minimizing our customer acquisition costs. Our M&A team also brings significant experience in renewable energy credit markets, and other tax incentives programs, which enables additional value creation alongside our acquisition strategy.
Competition
Distributed solar generation is a capital-intensive, evolving business with numerous industry participants. While our solar generation portfolios are currently contracted, we may compete in the future primarily on the basis of price of electricity, quality of service and low/no carbon energy. We consider the long-term contracted profile of our solar generation assets, among other strengths discussed below, as competitive advantages. Distributed solar generation is a growing industry in the U.S. and diverse in terms of industry structure, and as such, there is a wide variation in terms of the capabilities, resources, nature and identity in the companies we compete with depending on the market. In residential distributed solar generation, customers’ needs are met through long-term bilateral contracts, which supply power and maintenance services.
We also compete with other companies to acquire operating portfolios of home solar energy systems with stable contracted cash flows. We consider our primary competitors for opportunities in North America as other solar companies with vertically integrated business models, existing solar servicing companies, purely finance focused organizations and regulated utility holding companies. We believe we are well-positioned to execute our strategy over the long term based on the following competitive strengths:
Our management and operational expertise
We benefit from our Management’s seasoned experience in industry (renewables, utilities and financial services), corporate development and customer focused, cost-efficient operations.
Contracted assets with stable cash flows
The contracted nature and diversification of off-takers in our Portfolio of home solar assets supports stable long-term cash flows. Home solar assets in our Portfolio are contracted under long-term contracts, which generally provide for lease payments or production-based power purchase payments over the contract term. Our home solar asset portfolios have a total weighted average remaining contract term of approximately 10 years as of December 31, 2025.
Geographic and resource diversification
With the SEMTH, Tredegar and NJR Acquisitions, our Portfolio of approximately 84,000 home solar systems and customer contracts is geographically diverse across 18 states in the U.S., which reduces exposure to localized weather events, natural disasters, regional underperformance, and adverse regulatory actions and provides a more stable stream of cash flows over the long term when compared to a non-diversified portfolio.
Flexible customer service platforms
We utilize scalable, cost-effective customer service platforms and systems in our operations, which support efficient integration and service of acquired portfolios and third party owned portfolios. These service platforms also provide our customers with self-service options to make payments and other services.
Competitiveness of renewable energy
Renewable energy technology has improved in recent years. Solar energy generation is becoming one of the lowest cost energy generation technologies in many regions in the U.S., which is expected to lead to significant growth in the renewable energy industry. Solar technology is improving as solar cell efficiencies improve and installation costs are declining.
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Intellectual Property
Generally, the solar generation business is not dependent on intellectual property. Within our residential business, we utilize licensed software, which enables our organization to efficiently manage our Portfolio. The success of our business depends, in part, on our ability to maintain and protect our proprietary information, license agreements and other contractual provisions, processes and know-how.
Human Capital Management
With our mission of “Powering Our Customers’ Clean and Efficient Energy Use, for a Sustainable Future”, we believe that starts with our employees. We aim to attract top talent by building a culture upon our values of coordination, purpose-driven and results oriented. We make investments in talent management and employee engagement initiatives, in order to foster a culture of belonging and inclusion. As of December 31, 2025, we had 159 full time employees primarily located in Texas, New Jersey, and California. As of December 31, 2025, no employees were covered by collective bargaining agreements, and we have not experienced any work stoppages.
To develop, attract, and retain personnel, we establish an environment of learning, purpose, inclusion, and opportunity and our leadership continually looks for ways to improve. We do this by implementation of several training programs, which includes our internally developed educational platform, Spruce University, to nurture an environment of learning, employee development, and talent retention. Bi-annually, we are committed to enhancing our senior leadership with curricula to promote and develop teamwork and accountability.
Attraction and retention of key employees contributes to our ability to remain competitive, and we have comprehensive rewards programs to help ensure we are compensating and rewarding our employees in line with market practice, providing a competitive benefits program, paid time off, retirement 401(k) matching, education assistance, internally developed trainings, and flexibility through programs like our floating holidays. Our ongoing support of our employees’ financial, health, and wellness needs will continue to be essential.
Government Regulations
Although we are not regulated as a public utility in the U.S. under applicable federal, state, or other local regulatory regimes where we conduct business, we compete primarily with regulated utilities. As a result, we maintain a team that focuses on the key regulatory and legislative issues impacting the entire industry.
Certain of our portfolio managed services are subject to stringent and complex federal, state and local laws, including regulations governing the occupational health and safety of our employees and wage regulations. For example, we are subject to the requirements of the federal Occupational Safety and Health Act, as amended (“OSHA”), and state laws that protect and regulate employee health and safety. We endeavor to maintain compliance with applicable state and federal government regulations.
Interconnection permission from any applicable local primary electric utility is already granted upon acquisition of existing home solar systems. Depending on the size of the solar energy system and local law requirements, interconnection permission is provided by the local utility to our customers upon initial installation. In almost all cases, interconnection permissions are issued on the basis of a standard process which has been pre-approved by the local public utility commission or other regulatory body with jurisdiction over net metering policies. As such, no additional regulatory approvals are required once interconnection permission is given.
We may be required to make certain disclosures to our homeowner customers regarding the solar energy system and the terms of the applicable agreements and/or record a notice against the title to the real property on which the electricity is generated and against the title to any adjacent real property on which the electricity will be used. The notice does not constitute a title defect, lien or encumbrance against the real property. We may also be subject to laws and regulations related to interactions with consumers, including those pertaining to sales and trade practices, privacy and data security, equal protection, consumer financial and credit transactions, consumer collections, mortgages and re-financings, home or business improvements, trade and professional licensing, warranties and customer solicitation protocols, as well as specific regulations pertaining to solar installations.
Our collection activities are regulated in all the states where we operate. As such, we maintain collection agency licenses in the states in which we operate, as required by law, and we are subject to regulatory examination of such collection activities on a regular basis.
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As noted in the Risk Factors section below, we also have received subpoenas from the state attorneys general offices for the states of Connecticut, New Jersey, New York, and Texas regarding, among other things, certain sales, marketing, billing, and operations protocols. We are responding to the subpoenas and otherwise are cooperating with these state investigations and intend to continue to do so until they are resolved.
Government Incentives
Federal, state, and local government bodies provide incentives to owners, distributors, system integrators, and manufacturers of solar energy systems to promote solar energy in the form of rebates, tax credits, payments for renewable energy credits associated with renewable energy generation, and exclusion of solar energy systems from property tax assessments. These incentives enable us to lower the price we charge customers for energy from, and to lease, our solar energy systems, helping to catalyze customer adoption of solar energy as an alternative to utility-provided power. In addition, for some investors, the acceleration of depreciation creates a valuable tax benefit that reduces the overall cost of the solar energy system and increases the return on investment. The federal government currently offers an ITC under Section 48(a) of the Internal Revenue Code for the installation of certain energy properties, including solar power facilities owned for business purposes.
Inflation Reduction Act
The Inflation Reduction Act (“IRA”) was enacted August 16, 2022. This legislative package includes major policy initiatives enacted to enhance the clean energy industry. While there are numerous federal, state, and local government incentives that benefit our business, some adverse actions, interpretations, or determinations of new or existing laws or regulations could have a negative impact on our business. Congress could revise or eliminate certain provisions in the IRA, or the current presidential administration could take steps that delay distribution of funds or recognition of tax benefits provided by the IRA, any of which could negatively impact our business. Federal agencies may also issue tax guidance or regulations that could negatively impact our business or prevent certain businesses from participating.
One Big Beautiful Bill Acts
On July 4, 2025, the One Big Beautiful Bill was enacted (“OBBBA”), introducing significant and wide-ranging changes to the U.S. federal tax system. Significant components include permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, the restoration of favorable tax treatment for certain business provisions, and accelerated phase outs to the Inflation Reduction Act energy tax credits.
Corporate Information
Our principal executive offices are located at 820 Gessner Rd, Suite 500, Houston, Texas, and our telephone number is (866) 777-8235. Our website address is www.sprucepower.com and the information contained in, or that can be accessed through our website, is not, and should not be considered, part of this Annual Report on Form 10-K.
Information Available on the Internet
Our website address is www.sprucepower.com, to which we regularly post copies of our press releases as well as additional information about us. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports, are available free of charge through the Investor Relations section of our website as soon as reasonably practicable after such materials have been electronically filed with, or furnished to, the Securities and Exchange Commission (the “SEC”). The SEC maintains an internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. We include our website address in this Annual Report on Form 10-K only as an inactive textual reference. Information contained on our website does not constitute a part of this report or our other filings with the SEC.
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Summary of Risk Factors
Our business is subject to numerous risks and uncertainties, including those highlighted in the section below entitled “Risk Factors,” that represent challenges that we face in connection with the successful implementation of our strategy and growth of our business. The occurrence of one or more of the events or circumstances described in the section entitled “Risk Factors,” alone or in combination with other events or circumstances, may have an adverse effect on our business, financial condition, results of operations, and prospects. Such risks include, but are not limited to:
Risks Related to the Solar Energy Industry
•The solar energy industry may not develop to the size or at the rate we expect, which could cause an adverse effect on our business.
•We face competition from traditional energy companies and solar and other renewable energy companies.
•Improvements in distributed solar energy generation and related technologies or components may materially adversely affect our ability to retain customers.
•Our solar energy systems depend heavily on suitable solar and meteorological conditions, so seasonality fluctuations and effects of climate change could adversely affect our results of operations.
•We typically bear the risk of loss and cost of maintenance, repair, and removal on solar energy systems owned by our subsidiaries, and warranty or product liability claims or accidents could adversely affect our business.
•Our solar energy systems’ value at the end of the Customer Agreement term may be lower than projected, which may adversely affect our financial performance, results of operation, and valuation.
•Increases in cost or reduction in supply of solar energy system components due to tariffs or trade restrictions could have an adverse effect on our business, financial condition, and results of operations.
•A material reduction in the retail price of traditional utility generated electricity or electricity from other sources could harm our business, financial condition, and results of operations.
Risks Related to Our Business Operations
•We may not realize the anticipated benefits of past or future investments, strategic transactions, or acquisitions, and integration of these acquisitions may disrupt our business and management.
•If we fail to manage our recent and future growth effectively, we may be unable to execute our business plan, maintain high levels of customer service, adequately address competitive challenges, or develop, produce, or sell our products or services successfully.
•We may be unsuccessful in introducing or executing on new service offerings or in penetrating new markets, which could adversely affect our business.
•If financing is not available on acceptable terms, it could materially adversely affect our business growth.
•We do not directly control certain costs related to our business, which could put us at a disadvantage.
•Our growth and performance depend in part on the success of our relationships with third parties, including our third party servicing providers.
•Our operating results and ability to grow may fluctuate, which could make our future performance difficult to predict and cause our operating results to fall below expectations.
•The loss or transition of key employees or senior management, or our inability to attract and retain qualified personnel, could adversely affect our business.
•Rising interest rates could adversely affect our financial condition, and our use of hedging strategies to mitigate interest rate risk may not be effective.
•We are exposed to the credit risk of our customers and payment delinquencies on our accounts receivable.
•Our employees and independent contractors may engage in improper activities, which could have an adverse effect on our business and operating results.
•Any unauthorized intrusions into or through our systems or those of our third-party service providers could harm our reputation, subject us to litigation and financial harm, and adversely impact our business.
•If we fail to timely and responsibly implement, adopt, and innovate in response to technological developments, it could adversely impact our ability to compete, financial condition, and operating results.
•Unfavorable publicity could adversely affect our business.
•Material adverse or unforeseen legal actions, judgments, fines, penalties, or settlements could result in substantial damages and other related costs and may require management-level attention.
Risks Related to Regulation
•Our business depends in part on the regulatory treatment of third-party owned solar energy systems.
•We may become subject to new regulations for our solar service offerings.
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•Compliance with applicable laws and requirements can be costly, and noncompliance with such requirements may result in potentially significant monetary penalties, operational delays, negative publicity, investigations, litigation, or otherwise adversely affect our business.
•Electric utility policies and regulations may present barriers to the purchase and use of solar energy systems, which could adversely impact our business.
•We have received subpoenas from states attorneys general requesting information about our business. These investigations could result in fines, penalties, or damages and may divert Management’s time and attention from our business.
Risks Related to Our Financial Performance
•We have a history of losses, and we expect to incur significant expenses and continuing losses.
•Servicing our existing debt requires a significant amount of cash to satisfy payment obligations. We may not have sufficient cash flow to service our debt, and we may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.
Risks Related to Ownership of Our Securities
•We have no current plans to declare a dividend in the foreseeable future.
•We are a “smaller reporting company” and avail ourselves of reduced disclosure requirements.
•Our common stock may be subject to delisting from the New York Stock Exchange (the “NYSE”).
•The price of our common stock has been and may continue to be volatile.
•We may issue additional shares of equity securities without stockholder approval, diluting existing stockholders’ interest and potentially depressing our common stock’s market price.
•Our Certificate of Incorporation contains anti-takeover and exclusive forum provisions that could adversely affect the rights of our stockholders.
•We are subject to risks associated with proxy contests and other actions of activist stockholders.
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1A. Risk Factors
Risk Factors
An investment in our securities is speculative and involves a high degree of risk. Before deciding whether to invest in our securities, you should consider carefully the risks described below, together with other information in this Annual Report on Form 10-K and the other information and documents we file with the SEC. The occurrence of any of the following risks could have a material and adverse effect on our business, reputation, financial condition, results of operations and future growth prospects, as well as our ability to accomplish our strategic objectives. As a result, the trading price of our common stock could decline, and you could lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations, financial condition, results of operations and stock price.
Risks Related to the Solar Energy Industry
The solar energy industry is an emerging market which is constantly evolving and may not develop to the size or at the rate we expect, which could cause an adverse effect on our business
The distributed home solar energy market is at a relatively early stage of development and is a constantly evolving market. The solar energy industry is still developing and maturing, and as such, we cannot be certain that the market will grow to the size or at the rate we expect. Any future growth of the solar energy market and the success of our solar service offerings depend on many factors beyond our control, including recognition and acceptance of the solar service market by consumers, the pricing of alternative sources of energy, a favorable regulatory environment, the continuation of expected tax benefits and other incentives, and our ability to provide our solar service offerings cost effectively. If the markets for solar energy do not develop to the size or at the rate we expect, or demand for distributed home solar energy systems fails to develop sufficiently, our business may be adversely affected.
Many factors may affect the demand for solar energy systems, including the following:
•availability, substance and magnitude of solar support programs including government targets, subsidies, incentives, renewable portfolio standards and residential net metering rules;
•the relative pricing of other conventional and non-renewable energy sources, such as natural gas, coal, oil and other fossil fuels, wind, utility-scale solar, nuclear, geothermal and biomass;
•performance, reliability and availability of energy generated by solar energy systems compared to conventional and other non-solar renewable energy sources;
•availability and performance of energy storage technology, the ability to implement such technology for use in conjunction with solar energy systems and the cost competitiveness such technology provides to customers as compared to costs for those customers reliant on the conventional electrical grid; and
•general economic conditions and the level of interest rates.
Solar energy has yet to achieve broad market acceptance and depends in part on continued support in the form of rebates, tax credits, and other incentives from federal, state and local governments. If this support diminishes materially, our ability to obtain external financing on acceptable terms, or at all, could be materially adversely affected. These types of funding limitations could lead to inadequate financing support for the anticipated growth in our business, to renew financing for the acquisitions that we have completed, or to provide financing for acquisitions that we identify in the future. We cannot be certain if historical growth rates reflect future opportunities or whether growth anticipated by us will be realized. Furthermore, growth in home solar energy depends in part on macroeconomic conditions, retail prices of electricity and customer preferences, each of which can change quickly. Declining macroeconomic conditions, including in the job markets, commodity markets, and residential real estate markets, could contribute to instability and uncertainty among customers and impact their financial wherewithal, credit scores and ultimately, their demand for home solar energy systems or interest in entering into long-term contracts, even if such contracts would generate immediate and long-term savings.
Market prices of retail electricity generated by utilities or other energy sources could decline for a variety of reasons, as discussed further below. Any such declines in macroeconomic conditions, changes in retail prices of electricity or changes in customer preferences would adversely impact our business.
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Our solar partners or suppliers may be unwilling or unable to fulfill their respective warranty and other contractual obligations. Warranty claims, product liability claims or accidents against us could adversely affect our business
We agree to maintain the solar energy systems during the length of the term of our Customer Agreements, which are typically 20 years. We are exposed to any liabilities arising from the solar energy systems’ failure to operate properly and are generally under an obligation to ensure each solar energy system remains in good condition during the term of the Customer Agreement. We are the beneficiary of the manufacturers’ and system installers’ warranty coverage, typically of 20 years for equipment warranties and five to ten years for workmanship warranties. In the event that such warranty providers file for bankruptcy, cease operations or otherwise become unable or unwilling to fulfill their warranty or related maintenance obligations, we may not be adequately protected by such warranties or maintenance obligations. Even if such warranty providers fulfill their obligations, the warranty or maintenance obligations may not be sufficient to protect us against all of our losses. These warranties are subject to liability and other limits. If we seek warranty protection and a warranty provider is unable or unwilling to perform its warranty obligations, whether as a result of its financial condition, its ability to act in a timely manner, or otherwise, or if the term of the warranty or maintenance obligation has expired or a liability limit has been reached, there may be a reduction or loss of protection for the affected assets, which could have a material adverse effect on our business, financial condition and results of operations. Additionally, it is possible that the solar energy systems could cause injuries or property damage due to product malfunctions, defects or other causes. The solar energy systems or their components could also be subject to recalls either due to production defects or malfunctions, which could be expensive to resolve and may divert management’s attention. In addition, product liability claims, injuries, defects or other problems experienced by other companies could lead to unfavorable market conditions to the industry as a whole and may have an adverse effect on our ability to expand our portfolio of customer agreements and related solar energy systems, which could affect our business, financial condition and results of operations.
Our failure to accurately predict future liabilities related to material quality or performance expenses could result in unexpected volatility in our financial condition. Due to the long estimated useful life of our solar energy systems, we have been required to make assumptions and apply judgments regarding a number of factors, including our anticipated rate of warranty claims and the durability, performance and reliability of our solar energy systems. We made these assumptions based on the historic performance of similar solar energy systems or on accelerated life cycle testing. Our assumptions could prove to be materially different from the actual performance of our solar energy systems, causing us to incur substantial expense to repair or replace defective solar energy systems in the future or to compensate customers for solar energy systems that do not meet their performance guarantees. Equipment defects, serial defects or operational deficiencies also would reduce our revenue from Customer Agreements since the customer payments under such Customer Agreements are dependent on solar energy system production or would require us to make refunds under performance guarantees. Any widespread product failures or operating deficiencies may damage our market reputation and adversely impact our financial results.
Developments in technology or improvements in distributed solar energy generation and related technologies or components may materially adversely affect our ability to retain customers
Significant developments in technology, such as advances in distributed solar power generation, energy storage solutions such as batteries, energy storage management systems, the widespread use or adoption of fuel cells for residential or commercial properties or improvements in other forms of distributed or centralized power production may materially and adversely affect our ability to retain customers and otherwise affect our business. Future technological advancements may result in reduced prices to consumers or more efficient solar energy systems than those available today, and we may not be able to adopt these new technologies as quickly as our competitors or on a cost-effective basis. This could result in current customer dissatisfaction, resulting in customers switching to competitor service providers who provide these new technologies more quickly or more cost-effectively.
Due to the length of our Customer Agreements, the solar energy system deployed on a customer's residence may be outdated prior to the expiration of the term of the related Customer Agreement, reducing the likelihood of renewal of our Customer Agreement at the end of the applicable term and possibly increasing the occurrence of customers seeking to terminate or cancel their Customer Agreements or customer defaults. If current customers become dissatisfied with the price they pay for their solar energy system under our Customer Agreements relative to prices that may be available in the future or if customers become dissatisfied by the output generated by their solar energy systems relative to future solar energy system production capabilities, or both, this may lead to customers seeking to terminate or cancel their Customer Agreements or to higher rates of customer default and have an adverse effect on our business, financial condition and results of operations. Additionally, recent technological advancements may impact our business in ways we do not currently anticipate. Any failure by us to adopt or have access to new or enhanced technologies or processes, or to react to changes in existing technologies, could result in product obsolescence or the loss of competitiveness of and decreased consumer retention for our solar energy services, which could have a material adverse effect on our business, financial condition and results of operations.
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Our solar energy systems depend heavily on suitable solar and meteorological conditions. Seasonality fluctuations and the effects of climate change could adversely affect our results of operations
The energy produced and the revenue and cash receipts generated by a solar energy system depend on suitable solar, atmospheric and weather conditions, all of which are beyond our control. Furthermore, our systems could be damaged by severe weather or natural catastrophes, such as hurricanes, freezes, hailstorms, tornadoes, fires or earthquakes. Shifts in weather are difficult to predict and may not be immediately apparent, and the impact of these changes is difficult to quantify from period to period. Our economic model and projected returns on our solar energy systems require achievement of certain production results from our systems and, in some cases, we guarantee these results to our consumers. There can be no assurance we will be successful in implementing effective strategies to counter these shifts in weather. If the solar energy systems underperform for any reason, our business could suffer. For example, the amount of revenue we recognize in a given period and the amount of our obligations under the performance guarantees of our Customer Agreements are dependent in part on the amount of energy generated by solar energy systems under such Customer Agreements. Furthermore, climate change could exacerbate the frequency and severity of weather events in all areas where we operate. Climate change or other factors could also cause prevailing weather patterns to materially change in the future, making it harder to predict the average annual amount of sunlight striking each location where our solar energy systems are. Potential negative effects of climate change include, among others, a temporary decrease in solar availability in certain locations, disruptions in transmission grids and delays or reductions in new installations. These or other effects could make our solar energy systems less economical overall or make individual solar energy systems less economical. Any of these effects on meteorological conditions could harm our business, financial condition and results of operations.
We typically bear the risk of loss and the cost of maintenance, repair and removal on solar energy systems that are owned by our subsidiaries and included in tax equity vehicles
We typically bear the risk of loss and are generally obligated to cover the cost of maintenance, repair and removal for any of our solar energy systems. Under our Customer Agreements, we agree to operate and maintain the solar energy system for a fixed fee calculated to cover our future expected maintenance costs. If our solar energy systems require an above-average amount of repairs or if the cost of repairing the solar energy systems is higher than our estimate, we would need to perform such repairs without additional compensation. If our solar energy systems are damaged as the result of a natural disaster beyond our control, losses could exceed or be excluded from our insurance policy limits and we could incur unforeseen costs that could harm our business and financial condition. We may also incur significant costs for taking other actions in preparation for, or in reaction to, such events. We purchase property insurance to protect against such risk, but such coverage may not be adequate to cover our losses.
The value of our solar energy systems at the end of the associated term of the Customer Agreement may be lower
than projected, which may adversely affect our financial performance, results of operation and valuation
We depreciate the costs of our solar energy systems over their estimated useful life of 30 years. At the end of the initial term of the Customer Agreement, we may choose to remove the solar energy systems at no cost to the customer, or customers may choose to purchase their solar energy systems, ask to remove the system at our cost, or renew their Customer Agreements. Customers may choose not to renew or purchase for any reason, including pricing, decreased energy consumption, relocation of residence, or switching to a competitor’s product. Furthermore, it is difficult to predict how future environmental regulations may affect the costs associated with the removal, disposal or recycling of our solar energy systems. If the residual value of the solar energy systems is less than we expect at the end of the Customer Agreement, we may be required to accelerate the recognition of all or some of the remaining unamortized costs. This could materially impair our results of operations.
Increases in the cost or reduction in supply of solar energy system components due to tariffs or trade restrictions
imposed by the U.S. government could have an adverse effect on our business, financial condition, and results of
operations
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China is a major producer of solar products. Certain solar cells, modules, laminates and panels from China are subject to various U.S. anti-dumping and countervailing duty rates, depending on the exporter supplying the product, imposed by the U.S. government as a result of determinations that the U.S. was materially injured as a result of such imports being sold at less than fair value. If alternative sources are not available on competitive terms, our servicers may be required to purchase these products from manufacturers in China. In addition, tariffs on solar cells, modules and inverters in China may put upward pressure on prices of these products in other jurisdictions, which could reduce our ability to offer competitive pricing to customers. The anti-dumping and countervailing duties are subject to annual review and may be increased or decreased. Furthermore, under Section 301 of the Trade Act of 1974, the Office of the United States Trade Representative has imposed and raised, and may continue to raise, tariffs on certain imports from China, including certain solar products, and such additional tariffs on certain Chinese solar products have been imposed during the first quarter of 2025. Since these tariffs impact the purchase price of solar products, these tariffs raise the cost associated with purchasing these solar products from China and reduce the competitive pressure on providers of solar products not subject to these tariffs. The U.S. government also has imposed various trade restrictions on Chinese entities determined to be acting contrary to U.S. foreign policy and national security interests. Although we maintain policies and procedures designed to maintain compliance with applicable governmental laws and regulations, these and other similar trade restrictions that may be imposed against Chinese entities in the future may have the effect of restricting the global supply of, and raising prices for, certain solar products, which could increase the overall cost of solar energy system maintenance and reduce our ability to offer competitive pricing in certain markets.
We cannot predict what additional actions the U.S. may adopt with respect to tariffs or other trade regulations or what actions may be taken by other countries in retaliation for such measures. The tariffs described above, the adoption and expansion of trade restrictions, the occurrence of a trade war or other governmental action related to tariffs, trade agreements or related policies have the potential to adversely impact our suppliers’ supply chains and access to equipment and products, as well as our costs and ability to economically serve certain markets. If additional measures are imposed or other negotiated outcomes occur, the ability of our suppliers to purchase these products on competitive terms or to access specialized technologies from other countries could be further limited, which could adversely affect our business, financial condition, and results of operations.
We face competition from traditional energy companies as well as solar and other renewable energy companies
The solar energy industry is highly competitive and continually evolving as participants strive to distinguish themselves within their markets and compete with large utilities. We face competition from established utilities that supply energy to customers by traditional means. Utilities generally have substantially greater financial, technical, operational, and other resources than we do. As a result, utilities may be able to devote more resources to the research, development, or promotion of their products or respond more quickly to evolving industry standards and changes in market conditions than we can. Furthermore, these competitors are able to devote substantially more resources and funding to regulatory and lobbying efforts. Utilities could also offer other value-added products or services that could help them compete with us. Regulated utilities also are increasingly seeking approval to “rate-base” their own solar energy system businesses. Rate-basing means that utilities would receive guaranteed rates of return for their solar energy system businesses. Our competitiveness would be significantly harmed if more utilities receive such permission since we do not receive guaranteed profits for our solar service offerings.
We compete with solar companies with vertically integrated business models, including maintenance services. If
the integrated approach of our competitors is successful, it may limit our ability to acquire solar energy systems. Solar companies with vertically integrated business models could also offer other value-added products or services that could help them to compete with us. Larger competitors may also be able to access financing at a lower cost of capital than we are able to obtain. We also compete with solar companies with business models similar to our own, and we may also face competition from new entrants into the market. Some of these competitors may have a higher degree of brand name recognition, differing business or pricing strategies, lower barriers to entry into the solar market, and greater capital resources than we have, as well as extensive knowledge of our target markets.
We have historically provided our solar services to residential customers and have begun, and intend to continue, to expand to other markets. There is intense competition in the solar energy sector in the markets in which we operate and the markets in which we intend to operate. As new entrants continue to enter into these markets, and as we enter into new markets, we may be unable to grow or maintain our operations and we may be unable to compete with companies that have already established themselves in those markets.
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As the solar industry grows and evolves, we will continue to face existing competitors as well as new competitors who are not currently in the market (including those resulting from the consolidation of existing competitors) and new technologies. Our failure to adapt to changing market conditions, to compete successfully with existing or new competitors and to adopt new or enhanced technologies could limit our growth and have a material adverse effect on our business, financial condition, and results of operations.
A material reduction in the retail price of traditional utility generated electricity or electricity from other sources
could harm our business, financial condition, and results of operations
Decreases in the retail price of electricity from electric utilities or from other energy sources, could harm our ability to offer competitive pricing and could harm our business. The price of electricity from utilities could decrease as a result of:
•the construction of a significant number of new power generation plants, including nuclear, coal, natural gas, or renewable energy technologies;
•the construction of additional electric transmission and distribution lines;
•a reduction in the price of natural gas or other natural resources;
•energy conservation technologies that provide less expensive energy, including storage; and
•utility rate adjustments and customer class cost reallocation.
A reduction in utility electricity prices would make our solar service offerings less attractive. If the retail price of energy available from utilities were to decrease due to any of these or other reasons, we would be at a competitive disadvantage. As a result, we may be unable to maintain our customers and our growth would be limited.
Risks Related to Our Business Operations
We may not realize the anticipated benefits of past or future investments, strategic transactions, or acquisitions, and integration of these acquisitions may disrupt our business and management
We have in the past and may in the future, acquire solar portfolios, companies, products or technologies or enter into other strategic transactions. For example, in March 2023, we completed the SEMTH Acquisition acquiring approximately 22,500 customer contracts; in August 2023, we completed the Tredegar Acquisition acquiring 2,400 home solar assets and contracts; and in November 2024, we completed the NJR Acquisition acquiring approximately 9,800 solar energy systems at that time and subsequently acquired an additional 200 energy systems. During 2025, we acquired 200 additional systems pursuant to the NJR Acquisition. We may not realize the anticipated benefits of past or future investments, strategic transactions or acquisitions, and these transactions involve numerous risks that are not within our control. These risks include the following, among others:
•failure to satisfy the required conditions and otherwise complete a planned acquisition or other strategic transaction on a timely basis or at all;
•legal or regulatory proceedings, if any, relating to a planned acquisition or other strategic transaction and the outcome of such legal proceedings;
•difficulty in assimilating the operations, systems and personnel of the acquired company;
•difficulty in effectively integrating the acquired technologies or products with our current products and technologies;
•difficulty in maintaining controls, procedures and policies during the transition and integration;
•disruption of our ongoing business and distraction of our Management and employees from other opportunities and challenges due to integration issues;
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•difficulty integrating the acquired company’s accounting, management information and other administrative systems;
•inability to retain key technical and managerial personnel of the acquired business;
•inability to retain key customers, vendors and other business partners of the acquired business;
•inability to achieve the financial and strategic goals for the acquired and combined businesses;
•incurring acquisition-related costs or amortization costs for acquired intangible assets that could impact our results of operations;
•significant post-acquisition investments which may lower the actual benefits realized through the acquisition;
•potential failure of the due diligence processes to identify significant issues with product quality, legal and financial liabilities, among other things;
•moderating and anticipating the impacts of inherent or emerging seasonality in acquired customer agreements; and
•potential inability to obtain, or obtain in a timely manner, approvals from governmental authorities, which could delay or prevent such acquisitions.
Our failure to address these risks, or other problems encountered in connection with our past or future investments, strategic transactions or acquisitions, could cause us to fail to realize the anticipated benefits of these acquisitions or investments, cause us to incur anticipated liabilities, and harm our business generally. Future acquisitions could also result in dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities, amortization expenses, incremental expenses or the write-off of any related goodwill, any of which could harm our financial condition or results of operations, and the trading price of our common stock could decline.
If we fail to manage our recent and future growth effectively, we may be unable to execute our business plan, maintain high levels of customer service, or adequately address competitive challenges
We have experienced growth in recent periods, and we intend to continue such efforts to expand our business. This growth has placed, and any future growth may continue to place, a significant strain on our management, operational and financial infrastructure. Our growth requires our management to devote a significant amount of time and effort to maintain and expand our relationships with customers and other third parties, acquire new customers and otherwise manage our expansion. In addition, our current and planned operations, personnel, information technology, and other systems and procedures might be inadequate to support our future growth and may require us to make additional unanticipated investments in our infrastructure. Our success and ability to further scale our business will depend, in part, on our ability to manage these changes in a cost-effective and efficient manner. If we cannot manage our growth, we may be unable to take advantage of market opportunities, execute our business strategies, or respond to competitive pressures. This could also result in declines in quality or customer satisfaction, increased costs, difficulties in introducing new solar service offerings, or other operational difficulties. Any failure to effectively manage growth could adversely impact our business, operating results, financial condition, and reputation.
We may be unsuccessful in introducing or executing on new service offerings or in penetrating new markets, which could adversely affect our business
Our success and ability to compete depend on the service offerings that we have developed or may develop in the future. There is a risk that the service offerings that we have developed or may develop may not meet the demands of our customers or target markets, do not achieve market acceptance, or that the marketing of the services may not be as successful as anticipated. If we fail to introduce new service offerings that meet the demands of our customers or target markets or do not achieve market acceptance, or if we fail to penetrate new markets, our business could be adversely affected.
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We may require additional financing to support the development of our business and implementation of our growth strategy, and if financing is not available to us on acceptable terms when needed, our ability to continue to grow our business could be materially adversely affected
We may require additional financing in the future to fund operations and support strategic initiatives. There can be no assurance that we will have access to the financing we need on favorable terms when required or at all. Additional financing may not be available on terms acceptable to us. If we are unable to obtain needed financing on acceptable terms, we may not be able to implement our business plan, which could have a material adverse effect on our business, financial condition, results of operations and prospects. If we raise additional funds through the sale of equity, convertible debt or other equity-linked securities, our shareholders’ ownership will be diluted. We may issue securities that have rights, preferences and privileges senior to our common stock. Any future debt financing into which we enter may impose covenants upon us that restrict our operations or may otherwise contain terms that are not favorable to us or our stockholders.
We do not directly control certain costs related to our business, which could put us at a disadvantage relative to companies who have a vertically integrated business model
We do not have direct control over the costs our suppliers charge for the components of solar energy systems or the costs of maintaining such systems. This may lead us to charge higher prices than our competitors with a vertically integrated business model, causing us to be unable to maintain or increase market share.
Our growth and performance depend in part on the success of our relationships with third parties, including our third party service providers
Our growth depends in part on developing or expanding our relationships with third parties. Among other things, our business depends on attracting and retaining new and existing third party service providers. Negotiating relationships with our third party service providers, investing in due diligence efforts with potential third party service providers, training such third party service providers and monitoring them for compliance with our standards require significant time and resources and may present greater risks and challenges than expanding our internal servicing teams. If we are unsuccessful in establishing or maintaining our relationships with these third parties, our ability to grow our business and address our market opportunity could be impaired. Even if we are able to establish and maintain these relationships, we may not be able to execute on our goal of leveraging these relationships to meaningfully expand our business, brand recognition, and customer base, which could limit our growth potential and our opportunities to generate significant additional revenue or cash flows. In the event that any of our third-party servicers fails to perform its servicing duties, or experiences a termination or cancellation event under the applicable servicing agreement, or we otherwise experience an interruption in that third party servicer’s performance, we may incur additional costs associated with obtaining a replacement servicer and seeking recovery of amounts owed to us. In such an event, there can be no assurance that a replacement servicer could be retained in a timely manner or at comparable cost to us, and any servicing transfer can result in data input errors, misdirected notices, and other issues.
Our operating results and our ability to grow may fluctuate from quarter to quarter and year to year, which could make our future performance difficult to predict and could cause our operating results for a particular period to fall below expectations
Our quarterly and annual operating results and our ability to grow are difficult to predict and may fluctuate significantly in the future. We have experienced seasonal and quarterly fluctuations in the past and expect to experience such fluctuations in the future. In addition to the other risks described in this “Risk Factors” section, the following factors could cause our operating results to fluctuate:
•significant fluctuations in customer demand for our services;
•expiration, reduction, or initiation of any governmental rebates or incentives;
•our ability to continue to expand our operations and the amount and timing of expenditures related to this expansion;
•announcements by us or our competitors of significant acquisitions, strategic partnerships, join ventures or capital-raising activities, or commitments;
•changes in our pricing policies or terms or those of our competitors, including centralized electric utilities;
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•actual or anticipated developments in our competitors’ businesses, technology, or the competitive landscape; and
•natural disasters or other weather or meteorological conditions.
For these or other reasons, the results of any prior quarterly or annual periods should not be relied upon as indications of our future performance.
The loss or transition of key members of senior management or key employees, or our inability to attract and retain qualified personnel, could adversely affect our business
Our success depends, in part, on our ability to retain our key personnel. The loss of any of our key personnel could have an adverse effect on our business. There have been, and from time to time there may continue to be, changes in our management team resulting from the hiring or departure of executives and key employees, or the transition of executives within our business, which could disrupt our business. For example, during 2024 and 2025, we had turnover in key positions, including our former CEO and our former CFO. In April 2024, we completed a CEO transition with the appointment of Christopher Hayes as our President and CEO. In addition, effective May 14, 2025, our former CFO resigned, and effective June 5, 2025, we appointed Thomas James Cimino as the Company’s Interim CFO. Effective December 1, 2025, Mr. Cimino was appointed as our CFO. Management transitions may create uncertainty and involve a diversion of resources and management attention, be disruptive to our daily operations or impact public or market perception, any of which could negatively impact our ability to operate effectively or execute our strategies and result in a material adverse impact on our business, financial condition, results of operations or cash flows.
Our success also depends, in part, on our continuing ability to identify, hire, attract, train, develop and retain other highly qualified personnel. Experienced and highly skilled employees are in high demand and competition for these employees can be intense, and our ability to hire, attract and retain them depends on our ability to provide competitive compensation. We may not be able to attract, assimilate, develop or retain qualified personnel in the future, and our failure to do so could adversely affect our business, including the execution of our global business strategy. Any failure by Management and our employees to perform as expected may have a material adverse effect on our business, prospects, financial condition and operating results.
Rising interest rates could raise our cost of capital and may adversely affect our financial condition
We have $695.5 million of long-term debt outstanding as of December 31, 2025, which are secured by our solar assets, and the majority of which is variable rate debt. Increases in interest rates could result in an increase in our interest expense under our variable-rate borrowings and the costs of refinancing existing indebtedness or obtaining new debt, including debt to finance future acquisitions. Although we use interest rate swap contracts to mitigate the market risk associated with rising interest rates, including on our existing variable-rate debt, significant increases in interest rates or continued higher interest rates may still increase our cost of capital and may make it more difficult for us to finance our business.
Our use of hedging strategies to mitigate our interest rate risk may not be effective and may adversely affect our net income, comprehensive income, liquidity, and book value per common share
We use interest rate swap contracts to help mitigate increased financing costs due to adverse changes in interest rates on our syndicated term loans, which are recognized on the balance sheet at their fair values. Our hedging activity will vary in scope based on, among other things, our forecast of future interest rates, our acquisition activity, the actual and implied level and volatility of interest rates, and source and terms of financing used. No hedging strategy can completely insulate us from the interest rate risk to which we are exposed. Interest rate swaps may fail to protect or could adversely affect our results of operations, book value, and liquidity due to, among other things:
•available derivative financial instruments may not correspond directly with the interest rate risk from which we seek protection;
•the value of the derivative financial instruments is adjusted from time to time in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) to reflect changes in fair value and the related adjustments will impact our earnings, shareholders’ equity, and book value;
•the credit quality of the counterparty owing money on the derivative financial instrument may be downgraded to such an extent that it impairs our ability to sell, assign, or otherwise modify our side of the transaction; and
•the counterparty owing money in the transaction may default on its obligation to pay.
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Derivative financial instruments can be traded on an exchange or administered through a clearing house or under bilateral agreements between us and a counterparty. Our bilateral hedging agreements expose us to increased counterparty risk, and we may be at risk of loss of any collateral held by a hedging counterparty if the counterparty becomes insolvent or files for bankruptcy. Additionally, if a counterparty fails to perform under the hedging agreements, our operating liquidity and financial performance could be materially and adversely affected.
We are exposed to the credit risk of our customers and payment delinquencies on our accounts receivable
We have long-term, contractual relationships with our customers, which require them to make payments throughout the term of their contract. Consequently, we are subject to the credit risk of our customers and we expect that the risk of customer defaults may increase as we continue to grow our business. Our future exposure may exceed the amount of reserves that we establish in the future. If we experience increased customer credit defaults, our business and revenue could be adversely affected. During an economic downturn or during periods of rising inflation and interest rates, the risk of customer defaults may increase, which could have a material adverse effect on our financial condition and results of operations.
Our employees and independent contractors may engage in misconduct or other improper activities, including noncompliance with regulations, which could have an adverse effect on our business and operating results
We are exposed to the risk that our employees and independent contractors may engage in misconduct or other illegal activity. Misconduct by these parties could include intentional, reckless or negligent conduct or other activities that violate laws and regulations, including production standards, U.S. federal and state fraud, abuse, data privacy and security laws, other similar non-U.S. laws or laws that require the true, complete, and accurate reporting of financial information or data. It is not always possible to identify and deter misconduct by employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. In addition, we are subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, prospects, financial condition and operating results, including, without limitation, the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, disgorgement, integrity oversight and reporting obligations to resolve allegations of non-compliance, imprisonment, other sanctions, contractual damages, reputational harm, diminished profits and future earnings and curtailment of our operations, any of which could adversely affect our business, prospects, financial condition, and operating results.
Any security breach, unauthorized access or disclosure, or theft of data, including personal information, we, our third party service providers, or our suppliers gather, store, transmit or use, or other hacking, cyber-attack, phishing attack, and unauthorized intrusions into or through our systems or those of our third-party service providers could harm our reputation, subject us to claims, litigation, and financial harm and have an adverse impact on our business
In the ordinary course of business, we, our third-party service providers and our suppliers receive, store, transmit and use proprietary, confidential and sensitive data, including the personal information of customers, such as names, addresses, email addresses, credit information and other housing and energy use data, as well as the personal information of our employees. Any unauthorized disclosure of such proprietary, confidential or sensitive data, including personal information, whether through a breach of our systems or those of our third-party service providers or suppliers by an unauthorized party, including, but not limited to hackers, threat actors, sophisticated nation-states or nation-state-supported actors, or through the theft, or misuse of information, or otherwise, could harm our business. In addition, we, our third party service providers and our suppliers may be subject to a variety of evolving threats, such as computer malware (including as a result of advanced persistent threat intrusions), ransomware, malicious code (such as viruses or worms), social engineering (including spear phishing and smishing attacks), telecommunications failures, natural disasters and extreme weather events, general hacking, and other similar threats.
Cybersecurity incidents have become more prevalent and could occur on our systems or those of our third-party service providers or suppliers in the future. Our team members who work remotely pose increased risks to our information technology systems and data, since many of them utilize less secure network connections outside our premises.
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Applicable data privacy and security obligations may require us to notify relevant stakeholders, including affected individuals, customers, regulators and investors, of security incidents. Such disclosures are costly, and the disclosure or the failure to comply with such requirements could lead to adverse consequences. Inadvertent disclosure of confidential data or unauthorized access by a third party could result in future claims or litigation arising from damages suffered by those affected, government enforcement actions (for example, investigations, fines, penalties, audits and inspections), additional reporting requirements and/or oversight, indemnification obligations, reputational harm, interruptions in our operations, financial loss and other similar harms. In addition, we could incur significant costs in complying with the multitude of federal, state, and local laws, and applicable independent security control frameworks, regarding the unauthorized disclosure of personal information. Although we have not experienced a material information security breach in the past and have developed systems and processes to prevent or detect security breaches and protect the confidential information we receive, store, transmit, and use, we cannot assure that such measures will provide adequate security. Any perceived or actual unauthorized disclosure of such information, unauthorized intrusion, or other cyberthreat could harm our reputation, substantially impair our ability to attract and retain customers, interrupt our operations and have an adverse impact on our business.
We rely on third-party service providers and technologies to operate critical business systems to process sensitive information in a variety of contexts, including, without limitation, cloud-based infrastructure, encryption and authentication technology, employee email, and other functions. Our ability to monitor these third parties’ information security practices is limited, and these third parties may not have adequate information security measures in place. If our third-party service providers experience a security incident or other interruption, we could experience adverse consequences. While we may be entitled to damages if our third-party service providers fail to satisfy their privacy or security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award.
Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security obligations. While we currently maintain cybersecurity insurance, such insurance may not be sufficient to cover us against claims, and we cannot be certain that cybersecurity insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim.
Information technology systems are a critical component of our long-term competitive strategy, and if we fail to timely and responsibly implement, adopt, and innovate in response to rapidly evolving technological developments, including the use of artificial intelligence (“AI”), our ability to compete, financial condition, and operating results could be adversely impacted
Our ability to compete effectively requires our continued investment in technology to ensure we provide ongoing value to our current and potential customers and operate efficiently. However, there are many new uncertainties in newly emerging technologies and if we are unable to integrate and introduce new technologies and services effectively, our ability to compete may be adversely affected and our business could be materially harmed. Whether we compete effectively may also be impacted by our ability to accurately anticipate and effectively respond to the risks and opportunities presented by the disruptions and developments of emerging and newly available technologies, including AI. We may not be successful in anticipating or responding to these developments on a timely and cost-effective basis, and if the rate at which we adopt and the ways in which we apply new technologies lags or differs negatively in meaningful ways from our competitors, our business could be adversely affected. New and emerging technologies present a number of risks and incorporating them into our information technology infrastructure and services responsibly is important to maintaining and strengthening our competitive position in the market.
Unfavorable publicity could adversely affect our business
Recent negative publicity has adversely affected, and may in the future affect, our industry, brand, reputation, and stock price, which may make it difficult for us to attract and retain employees, partners and customers, reduce confidence in our services, harm investor confidence and the market price of our securities, and invite legislative and regulatory scrutiny, litigation and government investigations. Negative publicity may result from allegations of fraud, improper business practices, employee misconduct or any other matters that could give rise to litigation and/or governmental investigations. Unfavorable publicity relating to us or those affiliated with us has and may in the future adversely affect public perception of the entire company. Adverse publicity and its effect on overall public perceptions of our brand, or our failure to respond effectively to adverse publicity, could have a material adverse effect on our business.
Material adverse or unforeseen legal actions, judgments, fines, penalties, or settlements could result in substantial damages and other related costs and may require management-level attention
We have in the past and may in the future, from time to time, become a party to legal proceedings or be subject to claims or investigations relating to our business, including, but not limited to, alleged claims relating to product liability,
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occupational safety and health and environmental compliance, intellectual property infringement, commercial disputes, securities laws, antitrust and competition laws, regulatory or administrative actions, corporate matters and employment matters.
Any legal proceedings, claims, or investigations are subject to inherent uncertainties, and the actual costs to be incurred relating to these matters will depend upon many unknown factors. The outcome of legal proceedings, claims, or investigations is uncertain, and we could be forced to expend significant resources in the defense of these actions, and we may not prevail. Monitoring and defending against legal actions is time-consuming for our Management and staff, and may detract from our ability to fully focus our internal resources on our business activities. We are also generally obligated, to the extent permitted by law, to indemnify our current and former directors and officers who are named as defendants in legal actions. It is possible that we could, in the future, incur judgments or enter into settlements of claims for monetary damages. An adverse outcome in any legal proceedings, claims, or investigations that results in significant sanctions could have a material adverse effect on our cash flow, results of operations, financial position, or our stock price.
We may need to defend ourselves against patent, copyright or trademark infringement claims or trade secret misappropriation claims, which may be time-consuming and cause us to incur substantial costs and could materially adversely affect our business, prospects, financial condition and operating results
Companies, organizations, or individuals, including our competitors, may own or obtain patents, trademarks or other proprietary rights that would prevent or limit our ability to make, use, develop or sell our home solar and other products and services, which could make it more difficult for us to operate our business. We may receive inquiries from patent, copyright or trademark owners inquiring whether we infringe upon their proprietary rights. We may also be the subject of allegations that we have misappropriated their trade secrets or other proprietary rights. Companies owning patents or other intellectual property rights relating to battery packs, electric motors, or electronic power management systems may allege infringement or misappropriation of such rights. In response to a determination that we have infringed upon or misappropriated a third party’s intellectual property rights, we may be required to do one or more of the following:
•cease development, sales or use of our products that incorporate the asserted intellectual property;
•pay substantial damages;
•obtain a license from the owner of the asserted intellectual property right, which license may not be available on reasonable terms or at all; or
•redesign one or more aspects of an applicable product or service.
A successful claim of infringement or misappropriation against us could materially adversely affect our business, prospects, financial condition and operating results. Any litigation or claims, whether valid or invalid, could result in substantial costs and diversion of resources.
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Risks Related to Regulation
Our business depends in part on the regulatory treatment of third-party owned solar energy systems
Retail sales of electricity by third parties such as us face regulatory challenges in some states and jurisdictions, including states and jurisdictions we intend to enter where the laws and regulatory policies have not historically embraced competition to the services provided by vertically integrated centralized electric utilities. Some of the principal challenges pertain to whether third-party owned solar energy systems qualify for the same levels of rebates or other non-tax incentives available for customer owned solar energy systems, whether third-party owned solar energy systems are eligible at all for these incentives and whether third-party owned solar energy systems are eligible for net metering and the associated significant cost savings. Furthermore, in some states and utility territories third parties are limited in the way they may deliver solar energy to their customers. These regulatory constraints may, for example, give rise to various property tax issues.
Changes in law and reductions in, eliminations of, or additional requirements for, benefits such as rebates, tax incentives, and favorable net metering policies decrease the attractiveness of new solar energy systems to distributed home solar power companies and the attractiveness of solar energy systems to customers, which could reduce our acquisition opportunities. Net metering has helped to enable the growth of distributed generation solar energy systems in the U.S., and net metering programs have been subject to legislative and regulatory scrutiny in some states and territories. Net metering and related policies concerning distributed generation have also received attention from federal legislators and regulations. Such a loss or reduction in benefits, incentives, and favorable net metering policies could also adversely impact our access to capital and reduce our willingness to pursue solar energy systems due to higher operating costs or lower revenues.
We are not currently regulated as a utility under applicable laws, but we may be subject to regulation as a utility
in the future or become subject to new federal and state regulations for any additional solar service offerings we
may introduce in the future
Most federal, state and municipal laws do not currently regulate us as a utility. As a result, we are not subject to the various regulatory requirements applicable to U.S. utilities. However, federal, state, local or other applicable regulations could place significant restrictions on our ability to operate our business and execute our business plan by prohibiting or otherwise restricting our sale of electricity. If we become subject to the same regulatory authorities as utilities in other states or if new regulatory bodies are established to oversee our business, our operating costs could materially increase and we may not be able to execute on our business plans.
Compliance with occupational safety and health and environmental requirements can be costly and noncompliance with such requirements may result in potentially significant monetary penalties, operational delays and adverse publicity
The ongoing operations and maintenance of solar energy systems requires individuals hired by us or third-party contractors, potentially including our employees, to work at heights with complicated and potentially dangerous electrical systems. There is substantial risk of serious injury or death if proper safety procedures are not followed. Certain of our operations are subject to regulation under OSHA and Wage and Hour Division, the U.S. Environmental Protection Agency and equivalent state and local laws that protect and regulate employee health and safety and the environment. Changes to these requirements, or stricter interpretation or enforcement of existing laws or regulations, could result in increased costs. If we fail to comply with applicable occupational safety and health and environmental regulations, we may be subject to civil or criminal enforcement and be required to pay substantial penalties, incur significant capital expenditures, or suspend or limit operations. Since individuals hired by us or on our behalf to perform ongoing operations and maintenance of our solar energy systems, including third-party contractors, are compensated on a per project basis, they are incentivized to work more quickly than servicers compensated on an hourly basis. While we have not experienced a high level of injuries to date, this incentive structure may result in higher injury rates than others in the industry and could accordingly expose us to increased liability. Individuals hired by or on behalf of us may have workplace accidents and receive citations from OSHA regulators for alleged safety violations, resulting in fines. Any such accidents, citations, violations, injuries or failure to comply with industry best practices may subject us to adverse publicity, damage our reputation and competitive position and adversely affect our business.
A failure to comply with laws and regulations relating to interactions by us with current or prospective customers, including consumer protection laws, could result in negative publicity, claims, investigations, and litigation and adversely affect our business
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Our business substantially focuses on Customer Agreements and transactions with residential customers. As a result, we must comply with numerous federal, state and local laws and regulations that govern matters relating to interactions with residential consumers, including those pertaining to consumer protection, marketing and sales, privacy and data security, consumer financial and credit transactions, mortgages and refinancing, home improvement contracts, and warranties. These laws and regulations are subject to change and to potentially differing interpretations. Additionally, various federal, state and local legislative and regulatory bodies may initiate investigations, which can lead to enforcement actions, expand current laws or regulations, or enact new laws and regulations regarding these matters. Changes in these laws or regulations or their interpretation could dramatically affect how we do business, acquire customers, manage and use information collected from and about current and prospective customers and the costs associated therewith. As a result, we are subject to a constantly evolving consumer protection environment that is difficult to predict and may affect our business. While we have developed policies and procedures designed to assist in compliance with these laws and regulations, no assurance is given that our compliance policies and procedures will be effective. Failure to comply with these laws and with regulatory requirements applicable to our business could subject us to, among other things, damages, class action lawsuits, enforcement actions, civil and criminal liability, settlements, changes in business practices, increased compliance costs, and reputational damage that may harm our business, results of operations, and financial condition.
Electric utility policies and regulations, including those affecting electric rates, may present regulatory and economic barriers to the purchase and use of solar energy systems that may significantly reduce demand for electricity from our solar energy systems and adversely impact our ability to acquire new solar service agreements
Federal, state, and local government statutes and regulations concerning electricity heavily influence the market for our solar service offerings and are constantly evolving. These statutes, regulations, and administrative rulings relate to, among other things, electricity pricing, net metering, consumer protection, incentives, taxation, competition with utilities, and the interconnection of homeowner-owned and third party-owned solar energy systems to the electrical grid. These statutes and regulations are constantly evolving. In the U.S., governmental authorities and state public service commissions that determine utility rates, rate structures, and the terms and conditions of electric service continuously modify these regulations and policies. These regulations and policies could result in a significant reduction in the potential demand for electricity from our solar energy systems and could adversely impact our ability to acquire new solar service agreements.
In addition, many utilities, their trade associations, and fossil fuel interests in the country, which have significantly greater economic, technical, operational and political resources than us, are currently challenging solar-related policies, which may have the effect of reducing the competitiveness of residential solar energy. Any adverse changes in solar-related policies could have a negative impact on our business, financial condition, and results of operations.
We are subject to U.S. and foreign anti-corruption and anti-money laundering laws and regulations. We could face criminal liability and other serious consequences for violations, which could harm our business
We are subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act and possibly other anti-bribery and anti-money laundering laws in countries in which we conduct or will conduct activities. Anti-corruption laws are interpreted broadly and prohibit companies and their employees, agents, contractors, and other collaborators from authorizing, promising, offering or providing, directly or indirectly, improper payments or anything else of value to recipients in the public or private sector. We can be held liable for the corrupt or other illegal activities of our employees, agents, contractors, and other collaborators, even if we do not explicitly authorize or have actual knowledge of such activities. Any violations of the laws and regulations described above may result in substantial civil and criminal fines and penalties, imprisonment, the loss of export or import privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm, and other consequences.
We are, and may become, subject to stringent and evolving laws, regulations, rules, contractual obligations, industry standards, policies, and other obligations related to data privacy and security. Many of these laws and regulations are subject to change and uncertain interpretation and could result in claims, increased costs of operations, or otherwise harm our business
Personal privacy and data security have become significant issues and the subject of rapidly evolving regulation and
expectations. Federal, state, and local government bodies or agencies have in the past adopted, and may in the future
adopt more laws and regulations affecting data privacy. Interpretations and enforcement of these laws continue to
evolve. Changes to interpretations or enforcement strategies could create a range of new compliance obligations,
which could cause us to incur additional costs. If interpretations or enforcement of these laws deviate significantly in
the future, those costs could become even more severe. Any inability to adequately address privacy and security
concerns, even if unfounded, or comply with applicable privacy and data protection laws, regulations and policies,
could result in additional cost and liability to us, damage our reputation, inhibit acquisitions, and adversely affect our
business. Furthermore, the costs of compliance with, and other burdens imposed by, the laws, regulations, and
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policies that are applicable to our business may limit the use and adoption of, and reduce the overall demand for, our
services. If we are not able to adjust to changing laws, regulations, and standards related to privacy or security, our
business may be harmed. Moreover, as noted above, we are also subject to the possibility of security breaches, some
of which may result in a violation of these laws.
We have received subpoenas from states attorneys general requesting information about our business. These investigations could result in fines, penalties or damages and may divert Management’s time and attention from our business
We have received subpoenas from certain state attorneys general requesting information about our business. These investigations could result in fines, penalties, or damages and may divert Management’s time and attention from our business. Specifically, we have received subpoenas from the attorneys general offices for the states of Connecticut, New Jersey, New York, and Texas regarding, among other things, certain sales, marketing, billing, and operations practices. We are timely responding to these subpoenas, and otherwise are cooperating with the states in connection with these investigations, each of which have involved requests for a substantial volume of documents. While we cannot now predict the outcome of these matters, it is possible that these investigations may result in a fine, penalty, or injunction which may impact our ability to operate in these states.
Risks Related to Our Financial Performance
We previously had identified material weaknesses in our internal control over financial reporting, and determined that it resulted in our internal control over financial reporting and disclosure controls and procedures not being effective as of December 31, 2024. Although we have remediated these material weaknesses, we may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal control in the future, and as a result we may not be able to accurately or timely report our financial condition or results of operations and the trading price of our common stock may decline
SEC rules define a material weakness as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the financial statements will not be prevented or detected on a timely basis. As previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, management identified material weaknesses in internal control over financial reporting. We have successfully completed the testing necessary to conclude that these material weaknesses have been remediated and, as a result, we have concluded that our internal control over financial reporting was effective as of December 31, 2025.
Effective internal controls are necessary for us to provide reliable financial statements and prevent or detect fraud. Although the material weaknesses in internal control over financial reporting described above have been remediated, any new material weaknesses or other deficiencies identified in the future or any deficiencies in our disclosure controls and procedures, if not timely remediated, could limit our ability to prevent or detect a misstatement of our accounts or disclosures that could result in a material misstatement of our annual or interim financial statements. We can provide no assurance that the remediation measures we have taken will be effective at preventing or avoiding potential future significant deficiencies or material weaknesses in our internal control over financial reporting.
If we identify any new material weaknesses in the future, the accuracy and timing of our financial reporting may be adversely affected, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, we could be subject to sanctions or investigations by the SEC, or other regulatory authorities, and we may not be able to source external financing for our capital needs on acceptable terms or at all. Each of the foregoing items could adversely affect our business, results of operations, financial condition, and the market price and volatility of our common stock. In addition, we have expended, and expect to continue to expend, significant resources, including accounting-related costs and significant management oversight, in order to assess, implement, maintain, remediate and improve the effectiveness of our internal control over financial reporting and our general control environment.
Our independent registered public accounting firm has included an explanatory paragraph relating to our ability to continue as a going concern in its report on our audited financial statements included in this Annual Report on Form 10-K for the fiscal year ended December 31, 2025.
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The report from our independent registered public accounting firm for the year ended December 31, 2025, includes an explanatory paragraph stating that there is substantial doubt about our ability to continue as a going concern for a period of one year after the date our audited consolidated financial statements are issued because (i) the maturity date of our SP1 Facility with Silicon Valley Bank (the “SP1 Facility”) is within twelve months from the date the accompanying audited consolidated financial statements are issued, (ii) the Company has not yet entered into a commitment to refinance the SP1 Facility, (iii) we have determined that we are unlikely to have sufficient cash on hand or proceeds from currently available liquidity sources to satisfy the SP1 Facility at the maturity date of the SP1 Facility, (iv) we had negative working capital of $122.9 million as of December 31, 2025 solely due to the current maturity of the SP1 Facility at that date, and (v) we have experienced recurring net losses and negative cash flows from operations for the year ended December 31, 2025. If we are unable to refinance the SP1 Facility before its due date, our business, prospects, financial condition and results of operations will be materially and adversely affected, and we may be unable to continue as a going concern. If we are unable to continue as a going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our audited financial statements, and it is likely that investors will lose all or a part of their investment. There can be no assurance that the current operating plan will be achieved in the time frame anticipated by us, or that our cash resources will fund our operating plan for the period anticipated by the Company or that sufficient funding to refinance the SP1 Facility or any of our other outstanding debt will be available on terms acceptable to us, or at all.
We have a history of losses, and we expect to incur significant expenses and continuing losses
We incurred net losses of $26.0 million and $70.5 million for the years ended December 31, 2025 and 2024, respectively. We believe that we will continue to incur operating and net losses through the near future. We completed the acquisition of Legacy Spruce Power and discontinued and disposed of our legacy businesses, and as a result our future net income or loss will depend upon the implementation of our strategy to expand our business. We expect the rate at which we will incur future losses will depend on a number of factors, including:
•Costs which may be incurred in connection with the implementation of our business strategy;
•Costs related to our general and administrative functions to support our public company obligations; and
•Acquisition and integration of other solar energy portfolios or businesses.
We will incur portions of the costs and expenses from these efforts before we receive the expected incremental revenues with respect thereto, as such, we expect losses in future periods. In addition, we may find that these efforts are more expensive than we currently anticipate or that these efforts may not result in revenues, which would have a material adverse effect on our results of operations and further increase our losses.
We have generated significant net operating loss carryforwards (or “NOLs”) as a result of the losses that we have historically incurred which, for U.S. federal income tax purposes, can be used to offset future taxable income subject to certain limitations under the Internal Revenue Code and related regulations of the U.S. Treasury. Our ability to use our NOLs will depend on the amount of taxable income generated in future periods. In addition, the use of NOLs and other carryforwards to offset taxable income is subject to various limitations if we undergo an “ownership change” as defined in Section 382 of the Internal Revenue Code. As of December 31, 2025, we have recorded a full valuation allowance against our NOLs and we can offer no assurance when, or if, we may be able to use our NOLs to offset taxable income.
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Servicing our existing debt requires a significant amount of cash to satisfy payment obligations. We may not have sufficient cash flow to service our debt, and we may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful
We have $695.5 million of long-term debt outstanding as of December 31, 2025, as discussed in more detail in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements, both included in this Annual Report on Form 10-K. Our ability to make scheduled principal payments, to pay interest on or to refinance our indebtedness depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. We may not have sufficient cash flow in the future to service our debt. As a result, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt, or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to timely repay or otherwise refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations and negatively impact our financial condition and prospects. Furthermore, we expect to incur additional debt in the future, and increases in our existing debt obligations would further heighten the debt related risk discussed above. In addition, we may not be able to enter into new debt instruments on acceptable terms or at all. If we were unable to satisfy the terms under existing or new instruments, or obtain waivers or forbearance from our lenders, or if we were unable to obtain refinancing or new financings for our working capital, equipment and other needs on acceptable terms if and when needed, our business would be adversely affected.
Risks Related to Ownership of Our Securities
We have no current plans to declare a dividend in the foreseeable future
We have no current plans to declare any cash dividends to holders of our common stock in the foreseeable future. Consequently, investors may need to rely on sales of their shares after price appreciation, which may never occur, as the only way to realize any future gains on their investment.
We are a “smaller reporting company” and will be able to avail ourselves of reduced disclosure requirements applicable to smaller reporting companies, which could make our common stock less attractive to investors
We are a “smaller reporting company,” as defined in the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and we currently take, and in the future, intend to continue to take, advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “smaller reporting companies,” including reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. We may take advantage of these reporting exemptions until we are no longer a “smaller reporting company.” We will remain a “smaller reporting company” until (a) the aggregate market value of our outstanding common stock held by non-affiliates as of the last business day of our most recently completed second fiscal quarter is $75 million or more and we reported annual net revenues as of our most recently completed fiscal year is $100 million or more, or (b) the aggregate market value of our outstanding common stock held by non-affiliates as of the last business day of our most recently completed second fiscal quarter is $700 million or more, regardless of annual revenue.
If our stock price declines, our common stock may be subject to delisting from the New York Stock Exchange
If the average closing price of our common stock is less than $1.00 per share for 30 consecutive trading days, we may receive a letter from the staff of the NYSE stating that our common stock will be delisted unless we are able to regain compliance with the NYSE listing criteria requiring that we maintain an average closing price for our common stock of at least $1.00 per share. The average closing price of our common stock was below $1.00 per share for 30 consecutive trading days in 2022 and 2023, as a result of which we received notices of non-compliance from the NYSE on October 20, 2022 and March 28, 2023. On October 6, 2023, following stockholder approval, we filed an amendment to our Certificate of Incorporation to effect a 1-for-8 reverse stock split of the issued and outstanding shares of our common stock. Although, subsequent to the reverse stock split, we were able to regain compliance because the average closing price for our common stock was subsequently at least $1.00 per share for 30 consecutive trading days, we cannot guarantee that our stock price will continue to trade above $1.00 per share or otherwise meet the NYSE listing requirements and therefore our common stock may in the future be subject to delisting. If our common stock is delisted, this would, among other things, substantially impair our ability to raise additional funds and could result in a loss of institutional investor interest and fewer corporate development opportunities for us.
The price of our common stock has been and may continue to be volatile
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The price of our common stock has fluctuated, and may continue to fluctuate, due to a variety of factors, including:
•actual or anticipated fluctuations in our quarterly and annual results and those of other public companies in our industry;
•our failure to meet market expectations for our performance;
•mergers and strategic alliances in the industry in which we operate;
•market prices and conditions in the industry in which we operate;
•changes in laws or government regulations applicable to our business;
•substantial sales of our common stock;
•issuance of new or updated research reports from securities analysts or failure of securities analysts to maintain coverage of us;
•announcement or expectation of additional equity or debt financing efforts;
•the public’s reaction to our press releases, other public announcements and filings with the SEC;
•actual or perceived data privacy or security incidents;
•potential or actual military conflicts or acts of terrorism;
•announcements concerning us or our competitors;
•the general state of the securities markets;
•threatened or actual lawsuits, investigations, or other legal proceedings;
•any significant change in our management;
•short-selling activity related to our common stock;
•general economic conditions including instability in financial markets and bank failures, and slow or negative growth of our markets; and
•the other factors described in these “Risk Factors”.
These market and industry factors may materially reduce the market price of our common stock, regardless of our operating performance. In addition, we believe there has been and may continue to be substantial trading in derivatives of our common stock, including short selling activity or related similar activities, which are beyond our control, and which may be beyond the full control of the SEC and Financial Institutions Regulatory Authority (“FINRA”). While the SEC and FINRA rules prohibit some forms of short selling and other activities that may result in stock price manipulation, such activity may nonetheless occur without detection or enforcement. There can be no assurance that should there be any illegal manipulation in the trading of our common stock, it will be detected, prosecuted or successfully eradicated. Significant short selling market manipulation could cause our common stock trading price to decline, to become more volatile, or both.
We may issue additional shares of common stock, preferred stock, or other equity securities, including under our equity incentive plan, without stockholder approval, which would dilute existing stockholders’ interest and may depress the market price of our common stock
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We may issue a substantial number of additional shares of common stock, preferred stock, or other equity securities, including under our 2020 Equity Incentive Plan (the “2020 Plan”), without stockholder approval. As of December 31, 2025, we had options and restricted stock units (“RSUs”) outstanding that would require us to issue up to an aggregate of 4,159,272 shares of our common stock. We also have the ability to issue additional shares of common stock under the 2020 Plan. Pursuant to the 2020 Plan, the number of shares available for issuance automatically increases annually on the first day of each fiscal year during the period beginning with the fiscal year immediately following the fiscal year during which the 2020 Plan is first approved by our stockholders, and ending on the second day of fiscal year 2030, in an amount equal to the lesser of: (a) 5% of the number of outstanding shares of common stock on such date; and (b) an amount determined by the plan administrator. Any such issuance of additional shares of common stock, preferred stock, or other equity securities:
•may significantly dilute the equity interests of our existing stockholders;
•may subordinate the rights of holders of common stock if equity securities are issued with rights senior to those afforded our common stock;
•may adversely affect the amount of cash available per share, including for payment of dividends (if any) in the future;
•could cause the relative voting strength of each previously outstanding share of common stock to be diminished;
•could cause a change in control if a substantial number of shares of our common stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; and
•may adversely affect the market price for our common stock.
Our Certificate of Incorporation contains anti-takeover provisions that could adversely affect the rights of our stockholders
Our Certificate of Incorporation contains provisions to limit the ability of others to acquire control of our or cause us to engage in change-of-control transactions, including, among other things:
•provisions that authorize our Board of Directors, without action by our stockholders, to issue additional shares of common stock and preferred stock with preferential rights determined by our Board of Directors;
•provisions that permit only a majority of our Board of Directors to call stockholder meetings and therefore do not permit stockholders to call stockholder meetings;
•provisions that impose advance notice requirements, minimum shareholding periods and ownership thresholds, and other requirements and limitations on the ability of stockholders to propose matters for consideration at stockholder meetings;
•provisions limiting stockholders’ ability to act by written consent; and
•a staggered board whereby our directors are divided into three classes, with each class subject to retirement and re-election once every three years on a rotating basis.
These provisions could have the effect of depriving our stockholders of an opportunity to sell their common stock at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transaction. With our staggered Board of Directors, at least two annual or special meetings of stockholders will generally be required in order to effect a change in a majority of our directors. Our staggered Board of Directors can discourage proxy contests for the election of our directors and purchases of substantial blocks of our shares by making it more difficult for a potential acquirer to gain control of our Board of Directors in a relatively short period of time.
Our Certificate of Incorporation provides, subject to limited exceptions, that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders
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Our Certificate of Incorporation provides, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be sole and exclusive forum for (a) any derivative action or proceeding brought on our behalf, (b) any action asserting a claim of breach of a fiduciary duty owed by any our current or former director, officer, employee or agent to us or our stockholders, (c) any action asserting a claim against us arising pursuant to any provision of the Delaware General Corporation Law, our Certificate of Incorporation or our Bylaws, (d) any action or proceeding to interpret, apply, enforce or determine the validity of our Certificate of Incorporation or our Bylaws (including any right, obligation, or remedy thereunder), or (e) any action asserting a claim against us that is governed by the internal affairs doctrine, except for any suit brought to enforce any liability or duty created by the Securities Act of 1933, as amended (the “Securities Act”), the Exchange Act or any other claim as to which the federal courts have exclusive jurisdiction. Our Certificate of Incorporation also provides that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by applicable law, the federal district courts of the United States are the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act.
This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that we find favorable for disputes with our or any of our directors, officers, other employees, or stockholders, which may discourage lawsuits with respect to such claims. We cannot be certain that a court will decide that this provision is either applicable or enforceable, and if a court were to find the choice of forum provision contained in our Certificate of Incorporation to be inapplicable or unenforceable in an action, our may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results, and financial condition.
Our Certificate of Incorporation provides that the exclusive forum provision will be applicable to the fullest extent permitted by applicable law. Notwithstanding the foregoing, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction.
We are subject to risks associated with proxy contests and other actions of activist stockholders
Publicly traded companies have increasingly become subject to campaigns by activist investors advocating corporate actions such as governance changes, financial restructurings, increased borrowings, special dividends, stock repurchases or even sales of assets or entire companies to third parties or the activists themselves.
A proxy contest or related activities on the part of activist stockholders could adversely affect our business for a number of reasons, including, without limitation, the following:
•responding to proxy contests and other actions by activist stockholders can be costly and time-consuming, disrupting our operations and diverting the attention of our Board of Directors, management and our employees;
•perceived uncertainties as to our future direction may result in the loss of potential business opportunities and may make it more difficult to attract and retain qualified personnel, business partners, customers and others important to our success, any of which could negatively affect our business and our results of operations and financial condition;
•actions by activist stockholders may be exploited by our competitors, cause concern to our current or potential customers and make it more difficult to attract and retain qualified personnel;
•if nominees advanced by activist stockholders are elected or appointed to our Board of Directors with a specific agenda, it may adversely affect our ability to effectively and timely implement our strategic plans or to realize long-term value from our assets, and this could in turn have an adverse effect on our business and on our results of operations and financial condition; and
•proxy contests may cause our stock price to experience periods of volatility.
Item 1B. Unresolved Staff Comments
None.
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Item 1C. Cybersecurity
Cybersecurity Strategy, Policy and Procedures
We recognize the importance of assessing, identifying, and managing material risks associated with cybersecurity threats, as such term is defined within Item 106(a) of Regulation S-K. These risks include, among other things, operational risks, intellectual property theft, fraud, extortion, harm to employees or customers and violation of data privacy or security laws. We utilize information technology (“IT”) that enables our teams to access both operational and financial performance data in real time, while at the same time, helping to identify and prevent cybersecurity threats and risks.
Risk Management and Strategy
Risk Management
•Employing a cybersecurity policy that sets forth a protocol for assessing, testing, identifying and preventing security risks;
•Conducting assessments of risk likelihood and magnitude from unauthorized access, use, disclosure, disruption, modification or destruction of IT systems and the related information processes, storage, or transmission;
•Training personnel on security risks and how to identify and prevent such risks;
•Performing risk analysis and security assessments that document the results of the assessment for use and review;
•Overseeing and identifying any risk from cyber threats associated with any third-party service provider ;
•Ensuring security controls are assessed for effectiveness, implemented correctly and operating as intended; and
Monitoring
In accordance with our cybersecurity policy, we have established a monitoring strategy and program which includes:
•Defined security metrics to be monitored;
•Performance of security control assessments on an ongoing basis;
•Engaging third party security consultants to, among other things, conduct periodic reviews of our cybersecurity program, which is overseen by the FRS Committee, for identifying any cybersecurity threats ;
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•Addressing results of both internal and third-party cybersecurity analyses and reporting security status to the executive team;
•Monitoring information systems to detect attacks and indicators of potential attacks; and
•Identification of unauthorized use of information system resources.
Data Protection
We have also implemented procedures set forth in our cybersecurity policy that secure sensitive data in our possession, which include:
•Establishing policies governing data security;
•Monitoring data access throughout the organization;
•Providing annual security training and awareness;
•Protecting sensitive data through encryption techniques; and
•Designing and implementing systems to include backup and recoverability principles, such as periodic data backups and safeguards in the case of a disaster.
Incident Management Plan
Our cybersecurity policy includes an incident management plan (“IMP”), which consists of the following processes:
•The development, documentation, review and testing of security procedures and incident management procedures, which are regularly re-assessed, updated and tested;
•The FRS Committee reviews any identified matters by assessment, verification and classification of incidents to determine affected stakeholders and appropriate parties for contact;
•The FRS Committee notifies the Board of Directors and the Audit Committee;
•The FRS Committee consults with outside experts, if determined that the incident rises to a significant level;
•The FRS Committee initiates containment by making tactical changes to the computing environment to mitigate active threats based on currently known information;
•The FRS Committee establishes the root cause of incidents, identification and evidence collection from all affected machines and logs sources, threat intelligence and other information sources;
•IT personnel recovers and restores normal business functionality, which includes the reversal of any damage caused by the incident and responding as needed; and
•The FRS Committee reviews the closure of each incident and conducts a “lessons learned” analysis to improve prevention and ensure the IMP and cybersecurity plans are more efficient and effective.
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Notwithstanding the extensive approach we take to cybersecurity, we may not be successful in preventing or mitigating a cybersecurity incident that could have a material adverse effect on us. While we maintain cybersecurity insurance, the costs related to cybersecurity threats or disruptions may not be fully insured. For more information about the cybersecurity risks we face, see the risk factor entitled “Any security breach, unauthorized access or disclosure, or theft of data, including personal information, we, our third party service providers, or our suppliers gather, store, transmit or use, could harm our reputation, subject us to claims, litigation, and financial harm and have an adverse impact on our business” within Item 1A. Risk Factors.
Item 2. Properties
Our corporate headquarters is located in leased office space in Houston, Texas.
Item 3. Legal Proceedings
See Note 14. Commitments and Contingencies in Part II, Item 8. Financial Statements and Supplementary Data for a description of our material pending legal proceedings.
Item 4. Mine Safety Disclosures
Not Applicable.
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Information About Our Executive Officers
The executive officers of the Company as of the date of this filing are as follows:
| Name | Age | Principal Occupation During the Past Five Years | ||||||||||||
Christopher Hayes | 51 | Chief Executive Officer and President of the Company since April 2024, and a director of the Company since December 2020. From January 2023 to April 2024, Mr. Hayes served as the Chair of the Board of the Company. From August 2019 until December 2020, Mr. Hayes served as a member of the Board of the Company’s predecessor, XL Hybrids Inc. From August 2016 to January 2017, Mr. Hayes served as the Senior Vice President of Edison Energy, LLC, an indirect subsidiary of Edison International, a publicly traded energy and power markets company, following Edison’s acquisition of Altenex, a renewable energy procurement company co-founded by Mr. Hayes in 2011. Most recently, Mr. Hayes served as managing partner and director of Alturus, a sustainable infrastructure investment company he co-founded in 2018. The Board believes that Mr. Hayes’ knowledge of our business as its CEO allows him to provide important insights to the Board on the Company, its business, and its potential strategic priorities. | ||||||||||||
Thomas J. Cimino | 57 | Chief Financial Officer of the Company since December 2025. Prior thereto, Interim Chief Financial Officer of the Company since June 2025. Prior to joining Spruce Power, Mr. Cimino was an independent consultant and provided interim chief financial officer and advisory services across a variety of sectors from April 2024 to June 2025. Prior thereto, Chief Financial Officer – Executive Vice President Finance and Administration of EnfraGen, an international owner, operator and developer of power assets, from January 2021 to January 2024, Chief Financial Officer of Vantage Drilling Company, an international offshore drilling company, from September 2016 to June 2020, and Chief Financial Officer and Controller of AEI Services, an international power infrastructure company from May 2007 to August 2016. Prior to AEI, Mr. Cimino worked at PricewaterhouseCoopers and started his career with KPMG. | ||||||||||||
Jonathan M. Norling | 57 | Chief Legal Officer of the Company since February 2023; prior thereto General Counsel of Spruce Power from January 2019 to February 2023, Deputy General Counsel of Spruce Power from January 2018 to January 2019, and Interim General Counsel of Spruce Power from July 2017 to January 2018. | ||||||||||||
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Part II
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock is currently listed on the NYSE under the symbol “SPRU.”
Holders
As of March 19, 2026, there were approximately 44 holders of record of our common stock. This figure does not include shareholders whose certificates are held in the name of their broker-dealers or other nominees.
Dividends
We have not paid any cash dividends on our common stock to date. We may retain future earnings, if any, for future operations, expansion and debt repayment and have no current plans to pay cash dividends for the foreseeable future. Any decision to declare and pay dividends in the future will be made at the discretion of our Board of Directors and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions, and other factors that our Board of Directors may deem relevant. In addition, our ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness we or our subsidiaries incur. We do not anticipate declaring any cash dividends to holders of our common stock in the foreseeable future.
Securities Authorized for Issuance Under Equity Compensation Plans
See Item 12 of Part III of this Annual Report on Form 10-K regarding information about securities authorized for issuance under our equity compensation plans.
Recent Sales of Unregistered Securities
We had no sales of unregistered equity securities during the period covered by this Annual Report on Form 10-K that were not previously reported in a Current Report on Form 8-K or Quarterly Report on Form 10-Q.
Issuer Purchases of Equity Securities
In May 2023, our Board of Directors approved a share repurchase program for the repurchase of up to $50.0 million of our outstanding common stock through May 15, 2025 (the “Repurchase Program”). In May 2025, the Board authorized the extension of the Repurchase Program to expire on May 15, 2027. The Repurchase Program authorizes the Company to effect repurchases through open market transactions, privately negotiated transactions, Rule 10b5-1 trading plans and/or Rule 10b-18 trading plans, and other means. We are not obligated to repurchase any specific number of shares or dollar amount and may discontinue the Repurchase Program at any time. The timing, number, and purchase price of share repurchases, if any, will be determined by the Company’s management in its discretion and will depend on a number of factors, including the market price of the shares, general market and economic conditions, and other alternatives available to the Company.
The Company did not repurchase any shares of its common stock during the quarter ended December 31, 2025. During the year ended December 31, 2025, the Company repurchased 778,619 shares of common stock under the Repurchase Program in open market transactions at a weighted-average price of $2.33 per share for an aggregate purchase price of $1.8 million, inclusive of transaction costs. As of December 31, 2025, $42.0 million remained available for future share repurchases under the Repurchase Program.
The IRA introduced a 1% excise tax on all stock repurchases effective January 2023. In relation to the Repurchase Program, this excise tax had no material impact on our financial position, results of operations or cash flows as of and for the years ended December 31, 2025 and 2024.
Future share repurchases under our Repurchase Program are subject to the business judgment of our Board of Directors or Management, taking into consideration our historical and projected results of operations, financial condition, cash flows, capital requirements, covenant compliance, current economic environment and other factors considered relevant. As of December 31, 2025, we had approximately $42 million available under the Repurchase Program. Refer to Item 7,
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“Management’s Discussion and Analysis of Financial Condition and Results of Operations” within this Annual Report on Form 10-K for additional information on our share repurchases.
Item 6. [Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis provides information which our Management believes is relevant to an assessment and understanding of our financial condition and results of operations. This discussion and analysis should be read together with our results of operations and financial condition and the audited consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. In addition to historical financial information, this discussion and analysis contains forward-looking statements based upon current expectations that involve risks, uncertainties, and assumptions. Refer to the section entitled “Cautionary Note Regarding Forward-Looking Statements.” Actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” or elsewhere in this Annual Report on Form 10-K.
Certain figures, such as interest rates and other percentages, included in this section have been rounded for ease of presentation. Percentage figures included in this section have not in all cases been calculated on the basis of such rounded figures but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this section may vary slightly from those obtained by performing the same calculations using the figures in our consolidated financial statements or in the associated text. Certain other amounts that appear in this section may similarly not sum due to rounding.
Company Overview
We are a leading owner and operator of distributed solar energy assets across the U.S., offering subscription-based services to approximately 84,000 home solar assets and customer contracts, making renewable energy more accessible to everyone. We offer asset management and operating and maintenance services, and are contracted to service approximately 60,000 systems owned by third parties, as well as to our Portfolio, through our Spruce Pro servicing platform. Refer to Item 1, “Business” within this Annual Report for additional information on our corporate history and background.
Operating Highlights
For the years ended December 31, 2025 and 2024, our revenues totaled $111.8 million and $82.1 million, respectively, while our net loss attributable to stockholders was $26.0 million and $70.5 million, respectively. Our 2025 financial performance reflects the full impact of the NJR Acquisition in November 2024, resulting in increased revenues from energy generation and SRECs. 2025 results were also impacted by fluctuations of our interest rate swaps and variations in our operations and maintenance costs. Our 2024 financial performance was impacted by impairment of our goodwill and legal settlements during fiscal year 2024. See the section titled “Results of Operations” in this Annual Report on Form 10-K for more information on our operating results for the years ended December 31, 2025 and 2024.
We focus on several core pillars in our operations and we strive to deliver operational excellence to our clean energy customers and the communities we serve. For the year ended December 31, 2025, our portfolio generated approximately 709 thousand MWh of power, compared to 515 thousand MWh for the year ended December 31, 2024. We prioritize a high level of customer satisfaction through our in-house call centers and customer service support teams. For the year ended December 31, 2025, our customer satisfaction score was 81%. We also execute a growth strategy focused on accretive acquisitions and a capital-light approach, while expanding our existing service offerings through Spruce Pro services. As a result of this strategy, revenues increased 39% for the year ended December 31, 2025 from the year ended December 31, 2024.
Certain information above constitutes key operating metrics that we use to evaluate our operations, measure our performance and identify trends in our business. Some of our key operating metrics are estimates that are based on our management’s beliefs and assumptions and on information currently available to management. Although we believe we have a reasonable basis for each of these estimates, we caution that these estimates are based on a combination of assumptions that may prove to be inaccurate over time, and any inaccuracies could be material to our actual results when compared to our calculations. See the section titled “Risk Factors” in this Annual Report on Form 10-K for more information. Furthermore, other companies may calculate these operating metrics differently than we do now or in the future, which would reduce their usefulness as a comparative measure.
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Recent Developments
SET Facility and SP4 Facility
In June 2024, we entered into a non-recourse credit agreement with Barings GPSF LLC (the “SET Facility”), which provided a fixed interest term loan of $130.0 million. We used the proceeds from the SET Facility to fully repay the outstanding balance on the SP4 Facility of $125.0 million. In connection with the repayment of the SP4 Facility, we settled the related interest rate swap contracts.
Capital Investments, Acquisitions and Divestitures
In November 2024, we completed the NJR Acquisition acquiring approximately 9,800 solar energy systems for approximately $132.5 million, pursuant to an asset purchase agreement (the “APA”). The NJR Acquisition was funded by proceeds from the concurrent issuance of the SP5 Facility (defined below) and $22.7 million of our cash. During the year ended December 31, 2025, the Company acquired 200 additional systems for approximately $5.3 million in cash, inclusive of transaction costs of approximately $0.1 million.
SP5 Facility
In November 2024, we entered into a non-recourse credit agreement with Banco Santander, S.A., New York (the “SP5 Facility”), which provided a term loan of approximately $109.8 million, of which proceeds were used to partially fund the NJR Acquisition described above. In addition, we entered into an interest rate swap agreement to hedge the floating rate of the SP5 Facility, which included a notional amount of $87.9 million, a fixed rate of 3.98%, and a maturity date of May 17, 2033.
SP1 Facility Amendment
On March 27, 2026, the Company entered into an amendment (the “SP1 Facility Amendment”) to the SP1 Facility with Silicon Valley Bank (the “SP1 Facility”) which extends the maturity date to October 30, 2026 (the “Amended SP1 Maturity Date”), unless a signed term sheet for a long-term financing is obtained, in which case the Amended SP1 Maturity Date will be January 30, 2027. Under the terms of the SP1 Facility Amendment, the applicable margin is 2.75% per annum from the effective date of the extension to October 30, 2026, and 3.25% per annum until maturity. The SP1 Facility Amendment includes a cross-default provision with the Second Key Bank Credit Agreement.
Reportable Segments
Segment reporting is based on the management approach, following the method Management organizes our reportable segments for which separate financial information is made available to and evaluated regularly by our chief operating decision maker (“CODM”) in allocating resources and in assessing performance. Our CODM is our Chief Executive Officer. Our CODM does not evaluate operating segments using segment asset information. As of December 31, 2025, we have one reportable segment, which constitutes selling electricity to homeowners and providing related services to the homeowners, as well as to third-party owners.
Key Factors Affecting Operating Results
We are a leading owner and operator of distributed solar energy assets across the U.S., offering subscription-based services to owners of home solar assets and customer contracts. Additionally, we provide servicing functions for our assets and customers, as well as for other institutional owners of home solar energy systems. Our operating results and ability to grow our business over time could be impacted by certain factors and trends that affect our industry, as well as elements of our strategy, including the following factors, as well as the risk factors and other factors set forth under “Risk Factors” or elsewhere in this Annual Report on Form 10-K.
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Development of Distributed Energy Assets
Our future growth depends significantly on our ability to acquire operating home solar energy systems “in-bulk” from other companies. Industry data suggests there is a substantial existing base of operating home solar energy systems, providing us the opportunity to pursue acquisitions. Over the long-term, our continued ability to pursue acquisitions will be dependent on development of distributed energy assets, namely home solar energy systems, by third parties. This development may be impacted by numerous factors that influence homeowner demand for home solar energy systems including but not limited to macroeconomic dynamics, utility rates, climate change impacts and government policy and incentives.
Availability of Financing
Our ability to raise capital from third parties at reasonable terms is a critical element in supporting ownership of our existing home solar energy assets as well as enabling our future growth. We have historically utilized non-recourse, project-level debt as a primary source of capital for acquisitions. Our ability to raise debt either as means to refinance existing indebtedness or for future acquisitions may be impacted by general macroeconomic conditions, the health of debt capital markets, the interest rate environment and general concerns over its industry or specific concerns over our business.
Results of Operations
Comparison of the Years Ended December 31, 2025 and 2024
The results of operations related to our Drivetrain and XL Grid businesses, which were determined to be discontinued operations in the fourth quarter of 2022, are presented as net loss from discontinued operations in our consolidated statements of operations.
Information with respect to the consolidated statements of operations for the years ended December 31, 2025 and 2024 are presented below:
| Years Ended December 31, | |||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Revenues | $ | 111,812 | $ | 82,107 | $ | 29,705 | 36 | % | |||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Cost of revenues - solar energy systems depreciation | 29,139 | 23,377 | 5,762 | 25 | % | ||||||||||||||||||
| Cost of revenues - operations and maintenance | 9,764 | 16,597 | (6,833) | (41) | % | ||||||||||||||||||
| Selling, general and administrative expenses | 55,113 | 58,889 | (3,776) | (6) | % | ||||||||||||||||||
| Litigation settlements | 1,711 | 7,384 | (5,673) | (77) | % | ||||||||||||||||||
| Gain on asset disposal | (1,855) | (2,504) | 649 | (26) | % | ||||||||||||||||||
| Impairment of goodwill | — | 28,757 | (28,757) | (100) | % | ||||||||||||||||||
| Total operating expenses | 93,872 | 132,500 | (38,628) | (29) | % | ||||||||||||||||||
| Income (Loss) from operations | 17,940 | (50,393) | 68,333 | (136) | % | ||||||||||||||||||
| Other (income) expense: | |||||||||||||||||||||||
| Interest income | (20,718) | (22,758) | 2,040 | (9) | % | ||||||||||||||||||
| Interest expense, net | 50,918 | 40,232 | 10,686 | 27 | % | ||||||||||||||||||
| Other expense, net | 13,383 | 2,211 | 11,172 | 505 | % | ||||||||||||||||||
| Net loss from continuing operations | (25,643) | (70,078) | 44,435 | (63) | % | ||||||||||||||||||
| Net (loss) income from discontinued operations | (64) | 25 | (89) | (356) | % | ||||||||||||||||||
| Net loss | (25,707) | (70,053) | 44,346 | (63) | % | ||||||||||||||||||
| Less: Net income attributable to noncontrolling interests | 320 | 436 | (116) | (27) | % | ||||||||||||||||||
| Net loss attributable to stockholders | $ | (26,027) | $ | (70,489) | $ | 44,462 | (63) | % | |||||||||||||||
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Revenues
Revenues increased by $29.7 million, or 36%, to $111.8 million in 2025 as compared to 2024. The increase was primarily due to i) an increase in SREC revenue of $17.0 million related to the NJR Acquisition, ii) $10.4 million of incremental SLA revenue related to the NJR Acquisition, and (iii) $3.1 million increase due to incremental servicing revenues related to contracted services on third-party owned solar energy systems in 2025.
Cost of Revenues — Solar Energy Systems Depreciation
Cost of revenues - solar energy systems depreciation increased by $5.8 million, or 25%, to $29.1 million in 2025 as compared to 2024. The increase in cost of revenue - solar energy systems depreciation was primarily due to incremental depreciation related to the NJR Acquisition in November 2024.
Cost of Revenues — Operations and Maintenance
Cost of revenues - operations and maintenance decreased by $6.8 million, or 41%, to $9.8 million in 2025 as compared to 2024. The decrease in cost of revenue - operations and maintenance was primarily due to cost reductions resulting from certain O&M efficiencies implemented in the second half of 2025, including greater leverage of our asset management platform to streamline third-party vendor management and return material authorization (RMA) processing. In addition, we implemented processes to efficiently manage instances where we needed to initiate a truck roll to maintain or repair systems and managed customer contracts in a more cost-effective manner, both resulting in lower third-party contractor spend. Furthermore, our in-house servicing team is fully operational in New Jersey, where we have a heavy concentration of solar assets. This team is able to handle a majority of service calls in house, further driving down third-party contractor spend.
Selling, General and Administrative
Selling, general and administrative expenses decreased by $3.8 million, or 6%, to $55.1 million in 2025. The decrease was primarily due to $3.1 million decrease in professional service costs due to fewer outstanding legal cases, better utilization of in-house resources, and a decrease in payments to third party consultants. Higher labor costs in the first half of the year were offset in the second half of the year through a reduction in labor force resulting in a net decrease in labor costs for the year.
Litigation Settlements, Net
Litigation settlements, net decreased by $5.7 million, or 77%, to $1.7 million in 2025. The decrease related to 2024 costs associated with settlements of various Legacy XL legal matters. See Note 14. Commitments and Contingencies in Part II, Item 8. Financial Statements and Supplementary Data for a description of our material pending legal proceedings.
Impairment of Goodwill
During the third quarter of 2024, we recorded a full impairment of goodwill totaling $28.8 million resulting from a continuous decline in our stock price and market capitalization.
Interest Income
Interest income of $20.7 million in 2025 relates to $18.1 million of interest income from the SEMTH Master Lease and $2.6 million of interest earned on investments in U.S. Treasury securities. In comparison, interest income of $22.8 million for 2024 relates to $16.8 million of interest income from the SEMTH Master Lease and $6.0 million of interest earned on investments in U.S. Treasury securities.
Interest Expense, Net
Interest expense, net of $50.9 million for 2025 primarily relates to (i) $44.4 million of interest expense, related to the principal amounts of our outstanding non-recourse debt, net of swaps and (ii) $6.5 million related to the amortization of debt discount and deferred financing costs.
In comparison, interest expense, net of $40.2 million for 2024 primarily related to (i)$34.2 million of interest expense related to the principal amounts of our outstanding non-recourse debt, net of swaps and (ii) $6.0 million related to the amortization of debt discount and deferred financing costs.
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Interest expense, net was negatively impacted by the fluctuations in the settlements of our interest rate swaps, which we use to convert variable rates on our non-recourse debt into fixed recourse obligations and are subject to interest-rate risk. See Note 8. Interest Rate Swaps in Part II, Item 8. Financial Statements and Supplementary Data for further information on our interest rate swaps.
Other Expense, Net
Other expense, net of $13.4 million for 2025 consists of $12.6 million of unrealized losses from the change in fair value of interest rate swaps, in addition to $0.7 million of other expense, net, while other expense, net of $2.2 million for 2024 primarily consisted of $2.7 million of unrealized losses from the change in fair value of interest rate swaps, partially offset by $0.5 million of other income, net.
Liquidity and Capital Resources
As of December 31, 2025, we had negative working capital of $122.9 million. Our working capital included cash and cash equivalents and restricted cash of $93.1 million. We had net losses attributable to stockholders of $26.0 million and $70.5 million for the years ended December 31, 2025 and 2024, respectively.
Our principal sources of liquidity include cash and cash equivalents and cash flows from operations as well as cash received from investment related to SEMTH Master Lease. We receive cash from certain of our wholly-owned subsidiaries specifically related to the portfolio servicing fees provided for under the relevant servicing agreements between us and the subsidiaries, as well as reimbursement for any expenses we pay on behalf of those subsidiaries, which are allowed under certain agreements related to those subsidiaries. Our cash requirements depend on many factors, including the execution of our business strategy. We may be required to utilize our cash to support certain current and future operations of our wholly owned subsidiaries. We remain focused on carefully managing costs, including capital expenditures, maintaining a strong balance sheet, and ensuring adequate liquidity. Our primary cash needs are debt servicing, acquisition of solar energy portfolios, operating expenses, and working capital to support the growth in our business. Working capital is impacted by the timing and extent of our business needs. See below discussions under “Cash Flows Summary” for the impact of our operations and M&A transactions on our cash balances during the years ended December 31, 2025 and 2024.
As of December 31, 2025, our debt balance was $676.8 million, net of $16.5 million of unamortized fair value adjustment and $2.3 million of unamortized deferred financing costs, all of which is non-recourse project-level debt. See Note 7. Non-Recourse Debt. Our debt consists of four senior debt facilities and two subordinate facilities, of which the earliest maturity date is October 30, 2026. For additional information on our debt, refer to Note 7. Non-Recourse Debt included within the accompanying audited consolidated financial statements.
The accompanying audited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) assuming the Company will continue as a going concern.
The Company’s debt obligations under the SP1 Facility are non-recourse to the Company (see Note 7. Non-Recourse Debt included within the accompanying audited consolidated financial statements). On March 27, 2026, the Company entered into the SP1 Facility Amendment to extend the maturity of this facility to October 30, 2026 (the “Amended SP1 Maturity Date”), unless a signed term sheet for a long-term financing is obtained, in which case the extended maturity date will be January 30, 2027. Because (i) the Amended SP1 Maturity Date is within twelve months from the date the accompanying audited consolidated financial statements are issued, (ii) the Company has not yet entered into a commitment to refinance the SP1 Facility, (iii) the Company has determined that it is unlikely to have sufficient cash on hand or proceeds from currently available liquidity sources to satisfy the SP1 Facility at the Amended SP1 Maturity Date (iv) the Company had negative working capital of $122.9 million as of December 31, 2025 solely due to the current maturity of the SP1 Facility at that date, and (v) the Company has experienced recurring net losses and negative cash flows from operations for the year ended December 31, 2025, these conditions raise substantial doubt about the Company’s ability to continue as a going concern. Our consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty.
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The Company plans to refinance the SP1 Facility prior to the Amended SP1 Maturity Date consistent with the Company’s historical financing strategy for investing in solar assets on a leveraged basis. The Company has commenced preliminary discussions with potential lenders, which are currently being reviewed by management. The Company’s management believes that such refinancing will be completed prior to the Amended SP1 Maturity Date. However, the Company can offer no assurances it will be able to obtain financing at acceptable terms or at all. Therefore, the Company has concluded that there is substantial doubt about its ability to continue as a going concern. Should the Company be unsuccessful in refinancing the SP1 Facility, this could result in a foreclosure of collateral and negatively impact operations. Further, an event of default on the SP1 Facility, if not cured in the permittable time allowed under the agreement, would result in a cross default on the Second Key Bank Credit Agreement, which is also non-recourse.
Cash Flows Summary
Presented below is a summary of our operating, investing and financing cash flows:
| Years Ended December 31, | |||||||||||
| (Amounts in thousands) | 2025 | 2024 | |||||||||
| Net cash provided by (used in) | |||||||||||
| Continuing operating activities | $ | (3,405) | $ | (41,686) | |||||||
| Discontinued operating activities | (125) | (125) | |||||||||
| Continuing investing activities | 24,780 | (101,412) | |||||||||
| Continuing financing activities | (37,253) | 79,349 | |||||||||
| Discontinued financing activities | — | 81 | |||||||||
| Net change in cash and cash equivalents and restricted cash | $ | (16,003) | $ | (63,793) | |||||||
Cash Flows Used in Operating Activities
Operating cash inflows include cash from the sale of solar energy power generated by our home solar energy systems and the servicing of long-term agreements for other institutional owners of home solar energy systems. These operating cash inflows are primarily offset by operating expenses and interest payments on our outstanding debt. The related cash flows for Drivetrain and XL Grid businesses are reflected as discontinued operating activities for the years presented.
The net cash used in continuing operating activities improved by $38.3 million in 2025 compared to 2024 primarily due to increased revenue and decreased operating expenses as a result of O&M efficiencies in 2025.
Cash Flows Provided by (Used in) Investing Activities
The net cash provided by continuing investing activities in 2025 was $24.8 million, which primarily relates to $24.7 million of proceeds from our investments under the SEMTH Master Lease and $5.6 million of proceeds from the sale of certain solar energy systems, partially offset by $5.3 million of net cash paid for incremental tranches purchased in 2025 related to the NJR Acquisition.
The net cash used in continuing investing activities in 2024 was $101.4 million, which primarily relates to $132.8 million of net cash paid for the NJR Acquisition in 2024, partially offset by $25.6 million of proceeds from our investments under the SEMTH Master Lease, and $6.1 million of proceeds from the sale of certain solar energy systems.
Cash Flows Provided by (Used in) Financing Activities
The net cash used in continuing financing activities in 2025 was $37.3 million, which primarily relates to $35.1 million for the repayment of non-recourse long-term debt, and $1.8 million related to shares repurchased under our Repurchase Program.
The net cash provided by continuing financing activities in 2024 was $79.3 million, which primarily relates to $239.8 million of proceeds from the issuance of non-recourse long-term debt under the SET and SP5 Facilities in 2024, partially offset by $155.9 million for the repayment of non-recourse long-term debt, including the full repayment of $125.0 million for the SP4 Facility, and $3.4 million of payments for related deferred financing costs.
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Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with U.S. GAAP. Preparation of these financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Our most critical accounting policies and estimates are those most important to the portrayal of its financial condition and results of operations and which require us to make our most difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain. Although Management believes that its estimates and assumptions are reasonable, they are based on information available when they are made and, therefore, may differ from estimates made under different assumptions or conditions. We have identified the following as the most critical accounting policies and judgments.
Our significant accounting policies are discussed in Note 2. Summary of Significant Accounting Policies, included in accompanying audited consolidated financial statements, and should be reviewed in connection with the following discussion of accounting policies that require difficult, subjective and complex judgments.
Acquisitions
All acquisitions, regardless of whether a business combination or asset acquisition, are evaluated to determine whether the acquired entity is a variable interest entity (“VIE”), including an evaluation of whether there is sufficient equity at risk.
Business combinations are accounted for using the acquisition method of accounting. The purchase price of a business combination is measured at the estimated fair value of the assets acquired, equity instruments issued and liabilities assumed at the acquisition date. Any noncontrolling interests acquired are also initially measured at fair value. Costs that are directly attributable to the acquisition are expensed as incurred to selling, general and administrative expense. Goodwill is recognized if the aggregate fair value of the total purchase consideration and the noncontrolling interests is in excess of the aggregate fair value of the assets acquired and liabilities assumed.
Asset acquisitions are measured based on the cost to us, including transaction costs. Asset acquisition costs, or the consideration transferred, are assumed to be equal to the fair value of the net assets acquired. If the consideration transferred is cash, measurement is based on the amount of cash paid to the seller, as well as transaction costs incurred. Consideration given in the form of non-monetary assets, liabilities incurred or equity instruments issued is measured based on either the cost to us or the fair value of the assets or net assets acquired, whichever is more clearly evident. The cost of an asset acquisition is allocated to the assets acquired based on their estimated fair values. Goodwill is not recognized in an asset acquisition. We concluded that the SEMTH, Tredegar and NJR Acquisitions do not individually meet the definition of a business or variable interest entity.
The fair values of the assets acquired and liabilities assumed are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. Significant estimates include, but are not limited to, discount rates and forecasted cash flows. These estimates are inherently uncertain and unpredictable.
Revenue Recognition
Our revenue is derived from our home solar energy Portfolio and servicing platform, which primarily generates revenue through the sale to homeowners of power generated by the home solar energy systems pursuant to long-term agreements. Pursuant to Accounting Standards Codification (“ASC”) 606 defined below, we have elected the “right to invoice” practical expedient, and revenues for the performance obligations related to energy generation and servicing revenue are recognized as services are rendered based upon the underlying contractual arrangements. Previously, we also derived revenue from the Drivetrain operations which generated revenue from the sales of hybrid electric powertrain systems, and the XL Grid operations which generated revenues through turnkey energy efficiency, renewable technology and other energy solutions.
Energy generation
Customers purchase solar energy from us under PPAs or SLAs, both defined above. Revenue is recognized from contracts with customers as performance obligations are satisfied at a transaction price reflecting an amount of consideration based upon an estimated rate of return which is expressed as the solar rate per kilowatt hour or a flat rate per month as defined in the customer contracts.
•PPA revenues - Under ASC 606, Revenue from Contracts with Customers (“ASC 606”) issued by the Financial Accounting Standards Board, PPA revenue is recognized when generated based upon the amount of electricity delivered as determined by remote monitoring equipment at solar rates specified under the PPAs.
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•SLA revenues - We have SLAs, which do not meet the definition of a lease under ASC 842, Leases, and are accounted for as contracts with customers under ASC 606. Revenue is recognized on a straight-line basis over the contract term as the obligation to provide continuous access to the solar energy system is satisfied. The amount of revenue recognized may not equal customer cash payments due to the performance obligation being satisfied ahead of cash receipt or evenly as continuous access to the solar energy system has been provided. The differences between revenue recognition and cash payments received are reflected in deferred rent assets on the consolidated balance sheets. Certain SLAs contain provisions to provide customers a performance guarantee that each solar energy system will achieve certain specified minimum solar energy production output. If the solar energy system does not produce the guaranteed production amount, we are obligated to pay a performance guarantee calculated as the product of (a) the shortfall production amount and (b) guaranteed rate per kWh as defined in the SLA.
Solar renewable energy credit revenues
We enter into contracts with third parties to sell SRECs generated by the solar energy systems for fixed prices. Certain contracts that meet the definition of a derivative may be exempted as normal purchase or normal sales transactions (“NPNS”). NPNS are contracts that provide for the purchase or sale of something other than a financial instrument or derivative instrument that will be delivered in quantities expected to be used or sold over a reasonable period in the normal course of business. Certain SREC contracts meet these requirements and are designated as NPNS contracts. Such SRECs are exempted from the derivative accounting and reporting requirements, and we recognize revenues in accordance with ASC 606. We recognize revenue for SRECs based on pricing predetermined within the respective contracts at a point in time when the SRECs are transferred. As SRECs can be sold separate from the actual electricity generated by the renewable-based generation source, we account for the SRECs it generates from its solar energy systems as governmental incentives and do not consider those SRECs output of the underlying solar energy systems. We classify these SRECs as inventory held until sold and delivered to third parties. As we did not incur costs to obtain these governmental incentives, the inventory carrying value for the SRECs was $0 as of December 31, 2025 and December 31, 2024.
Investment related to SEMTH master lease agreement and interest income
We account for our investment related to the SEMTH master lease agreement in accordance with ASC 325-40, Investments—Other—Beneficial Interests in Securitized Financial Assets. We recognize accretable yield as interest income over the life of the related beneficial interest using the effective yield method, which is reflected within interest income in our consolidated statements of operations. On a recurring basis, we evaluate changes in the cash flows expected to be collected from the cash flows previously projected, and when favorable or adverse changes are deemed other than temporary, we prospectively update our expected cash flows accordingly. Assumptions used in the development of the expected cash flows include expected cash inflows related to the market utility rates in the states where these solar assets are located, estimated production, and expected cash outflows associated with operating and maintenance of these solar assets.
Impairment of long-lived assets
We review long-lived assets, such as property and equipment, and intangible assets with definite lives, for impairment whenever events or changes in circumstances indicate that an asset group’s carrying amount may not be recoverable. We group assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against the sum of the undiscounted future cash flows. If the undiscounted cash flows do not indicate the carrying amount of the asset group is recoverable, an impairment charge is measured as the amount by which the carrying amount of the asset group exceeds its fair value. There were no long-lived asset impairment charges during the years ended December 31, 2025 and 2024.
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Valuation of deferred tax assets
We account for income taxes using the asset and liability method under which deferred tax liabilities and assets are recognized for the expected future tax consequences of temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities and net operating loss and tax credit carryforwards. Deferred income taxes are provided for the temporary differences arising between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and net operating loss carry-forwards and credits. Deferred tax assets and liabilities are measured using enacted rates in effect for the year in which the differences are expected to be recovered or settled. The effect of changes in tax rates on deferred tax assets and liabilities is recognized in the consolidated statements of operations in the period in which the enactment rate changes. The ultimate recovery of deferred tax assets is dependent upon the amount and timing of future taxable income and other factors such as the taxing jurisdiction in which the asset is to be recovered. Deferred tax assets are reduced through the establishment of a valuation allowance if, based on available evidence, it is more likely than not that the deferred tax assets will not be realized.
A high degree of judgment is required to determine if, and the extent to which, valuation allowances should be recorded against deferred tax assets. We have provided valuation allowances as of December 31, 2025 and 2024 aggregating $96.7 million and $100.0 million, respectively, against such assets based on our assessment of past operating results, estimates of future taxable income and the feasibility of tax planning strategies. Although we believe that our approach to estimates and judgments as described herein is reasonable, actual results could differ and we may be exposed to increases or decreases in income taxes that could be material.
Noncontrolling interests
Noncontrolling interests represent third-party interests in the net assets of certain consolidated subsidiaries. We consolidate any VIE of which we are the primary beneficiary. We formed or acquired VIEs which are partially funded by tax equity investors in order to facilitate the funding and monetization of certain attributes associated with solar energy systems. The typical condition for a controlling financial interest ownership is holding a majority of the voting interests of an entity; however, a controlling financial interest may also exist in entities, such as VIEs, through arrangements that do not involve controlling voting interests. A variable interest holder is required to consolidate a VIE if that party has the power to direct the activities of the VIE that most significantly impact the VIE's economic performance and the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. We do not consolidate a VIE in which we have a majority ownership interest when we are not considered the primary beneficiary. We evaluate our relationships with the VIEs on an ongoing basis to determine if we are the primary beneficiary.
As of December 31, 2025 and 2024, our investments in Volta Solar Owner II, LLC and ORE F4 HoldCo, LLC (collectively, the “Funds”) were each determined to be a VIE upon investment.
We considered the provisions within the contractual arrangements that grant us power to manage and make decisions that affect the operation of the VIEs, including determining the solar energy systems contributed to the VIEs, and the operation and maintenance of the solar energy systems. We consider the rights granted to the other investors under the contractual arrangements to be more protective in nature rather than substantive participating rights. As such, we were determined to be the primary beneficiary, and the assets, liabilities and activities of the Funds (before any ceased being a VIE) were consolidated by us. The distribution rights and priorities for the Funds (before any ceased being a VIE) as set forth in their respective operating agreements differ from the underlying percentage ownership interests of the members. As a result, we allocate income or loss to the noncontrolling interest holders of the Funds (before any ceased being a VIE) utilizing the hypothetical liquidation of book value (“HLBV”) method, in which income or loss is allocated based on the change in each member's claim on the net assets at the end of each reporting period, adjusted for any distributions or contributions made during such periods. The HLBV method is commonly applied to investments where cash distribution percentages vary at different points in time and are not directly linked to an equity member's ownership percentage.
44
The HLBV method is a balance sheet-focused approach. Under this method, a calculation is prepared at each reporting date to determine the amount that each member would receive if the entity were to liquidate all of its assets and distribute the resulting proceeds to its creditors and members based on the contractually defined liquidation priorities. The difference between the calculated liquidation distribution amounts at the beginning and the end of the reporting period, after adjusting for capital contributions and distributions, is used to derive each member's share of the income or loss for the period. Factors used in the HLBV calculation include U.S. GAAP income (loss), taxable income (loss), capital contributions, ITCs, distributions and the stipulated targeted investor return specified in the subsidiaries' operating agreements. Changes in these factors could have a significant impact on the amounts that investors would receive upon a hypothetical liquidation. The use of the HLBV method to allocate income (loss) to the noncontrolling interest holders may create volatility in the consolidated statements of operations as the application of HLBV can drive changes in net income or loss attributable to noncontrolling interests from period to period.
Interest Rate Swaps
We utilize interest rate swaps to manage interest rate risk on existing and planned future debt issuances. These swaps are not designated as cash flow hedges or fair value hedges. The fair value of the interest rate swaps are calculated by discounting the future net cash flows to the present value based on the terms and conditions of the agreements and the forward interest rate curves. As these inputs are based on observable data and valuations of similar instruments, the interest rate derivatives are primarily categorized as Level 2 in the fair value hierarchy. The fair value of interest rate swaps are recorded on the consolidated balance sheets. Realized gains and losses on interest rate swaps are recognized in interest expense, net on the consolidated statements of operations. Unrealized gains and losses on interest rate swaps are reflected in the consolidated statements of operations and as a non-cash reconciling item in operating activities on the consolidated statements of cash flows.
New and Recently Adopted Accounting Pronouncements
Refer to Note 2. Summary of Significant Accounting Policies to the consolidated financial statements, included below in Item 8. Financial Statements and Supplementary Data.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
Item 8. Financial Statements and Supplementary Data
Our consolidated financial statements are presented beginning on page F-1 following this caption.
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Index to Consolidated Financial Statements
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Spruce Power Holding Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Spruce Power Holding Corporation (the “Company”) as of December 31, 2025, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for the year ended December 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as o December 31, 2025, and the results of their operations and their cash flows for the year ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
We also have audited the adjustments to the 2024 consolidated financial statements to retrospectively adjust the prior year segment information to conform with the current year segment information as described in Notes 2 and Note 20. In our opinion, such adjustments are appropriate and have been properly applied. We were not engaged to audit, review, or apply any procedures to the 2024 consolidated financial statements of the Company other than with respect to such adjustments and, accordingly, we do not express an opinion or any other form of assurance on the 2024 consolidated financial statements taken as a whole.
Substantial Doubt about the Company's Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, (i) the Company has debt with a maturity date of less than one year from the date these consolidated financial statements are issued and has determined that it is unlikely to have sufficient cash on hand or proceeds from currently available liquidity sources to repay the debt and (ii) the Company has experienced recurring net losses and negative cash flows from operations for the year ended December 31, 2025. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) related to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. We have determined that there are no critical audit matters.
/s/ CohnReznick, LLP
March 31, 2025
We have served as the Company’s auditor since 2025.
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Spruce Power Holding Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Spruce Power Holding Corporation (the "Company") as of December 31, 2024, the related consolidated statements of operations, changes in stockholders' equity, and cash flows, for the period ended December 31, 2024, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte and Touche, LLP
Houston, TX
March 31, 2025
We began serving as the Company's auditor in 2023. In 2025 we became the predecessor auditor.
F-3
Spruce Power Holding Corporation
Consolidated Balance Sheets
| As of December 31, | ||||||||||||||
| (In thousands, except share and per share amounts) | 2025 | 2024 | ||||||||||||
| Assets | ||||||||||||||
| Current assets | ||||||||||||||
| Cash and cash equivalents | $ | $ | ||||||||||||
| Restricted cash | ||||||||||||||
Accounts receivable, net of allowance of $ December 31, 2025 and 2024, respectively | ||||||||||||||
| Interest rate swap assets, current | ||||||||||||||
| Prepaid expenses and other current assets | ||||||||||||||
| Total current assets | ||||||||||||||
| Investment related to SEMTH master lease agreement | ||||||||||||||
| Property and equipment, net | ||||||||||||||
| Interest rate swap assets, non-current | ||||||||||||||
| Intangible assets, net | ||||||||||||||
| Deferred rent assets | ||||||||||||||
| Right-of-use assets, net | ||||||||||||||
| Other assets | ||||||||||||||
Total assets 1 | $ | $ | ||||||||||||
| Liabilities, stockholders’ equity and noncontrolling interests | ||||||||||||||
| Current liabilities | ||||||||||||||
| Accounts payable | $ | $ | ||||||||||||
| Non-recourse debt, current | ||||||||||||||
| Accrued expenses and other current liabilities | ||||||||||||||
| Deferred revenue, current | ||||||||||||||
| Lease liability, current | ||||||||||||||
| Interest rate swap liabilities, current | ||||||||||||||
| Current liabilities of discontinued operations | ||||||||||||||
| Total current liabilities | ||||||||||||||
| Non-recourse debt, non-current | ||||||||||||||
| Deferred revenue, non-current | ||||||||||||||
| Lease liability, non-current | ||||||||||||||
| Unfavorable solar renewable energy agreements, net | ||||||||||||||
| Interest rate swap liabilities, non-current | ||||||||||||||
| Other long-term liabilities | ||||||||||||||
Long-term liabilities of discontinued operations | ||||||||||||||
Total liabilities 2 | ||||||||||||||
Commitments and contingencies (Note 14) | ||||||||||||||
| Stockholders’ equity: | ||||||||||||||
Common stock, $ | ||||||||||||||
| Additional paid-in capital | ||||||||||||||
| Accumulated deficit | ( | ( | ||||||||||||
F-4
Treasury stock at cost, | ( | ( | ||||||||||||
| Noncontrolling interests | ||||||||||||||
| Total equity | ||||||||||||||
| Total liabilities, stockholders’ equity and noncontrolling interests | $ | $ | ||||||||||||
See Notes to Consolidated Financial Statements.
(1) The company’s consolidated assets include $35.1 million of assets from consolidated variable interest entities (“VIEs”) as of December 31, 2025 that can only be used to settle obligations of VIEs, see Note 13 Noncontrolling Interests.
(2) The company’s consolidated liabilities include $2.0 million of liabilities from consolidated variable interest entities (“VIEs”) as of December 31, 2025, for which creditors do not have recourse to the general credit of the Company, see Note 13 Noncontrolling Interests .
F-5
Spruce Power Holding Corporation
Consolidated Statements of Operations
| Years Ended December 31, | ||||||||||||||
| (In thousands, except per share and share amounts) | 2025 | 2024 | ||||||||||||
| Revenues | $ | $ | ||||||||||||
| Operating expenses: | ||||||||||||||
| Cost of revenues - solar energy systems depreciation | ||||||||||||||
| Cost of revenues - operations and maintenance | ||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||
| Litigation settlements | ||||||||||||||
| Gain on asset disposal, net | ( | ( | ||||||||||||
| Impairment of goodwill | ||||||||||||||
| Total operating expenses | ||||||||||||||
| Income (loss) from operations | ( | |||||||||||||
| Other (income) expense: | ||||||||||||||
| Interest income | ( | ( | ||||||||||||
| Interest expense, net | ||||||||||||||
| Change in fair value of warrant liabilities | ( | |||||||||||||
| Change in fair value of interest rate swaps | ||||||||||||||
| Other expense (income) | ( | |||||||||||||
| Net loss from continuing operations | ( | ( | ||||||||||||
| Net income (loss) from discontinued operations | ( | |||||||||||||
| Net loss | ( | ( | ||||||||||||
| Less: Net income attributable to noncontrolling interests | ||||||||||||||
| Net loss attributable to stockholders | $ | ( | $ | ( | ||||||||||
| Net loss from continuing operations per share, basic and diluted | $ | ( | $ | ( | ||||||||||
| Net income (loss) from discontinued operations per share, basic and diluted | $ | $ | ||||||||||||
| Net loss attributable to stockholders per share, basic and diluted | $ | ( | $ | ( | ||||||||||
| Weighted-average shares outstanding, basic and diluted | ||||||||||||||
See Notes to Consolidated Financial Statements.
F-6
Spruce Power Holding Corporation
Consolidated Statements of Changes in Stockholders’ Equity
| Year Ended December 31, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-In Capital | Accumulated Deficit | Treasury Stock | Noncontrolling Interests | Total Equity | |||||||||||||||||||||||||||||||||||||||||||||
| (In thousands, except share data) | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of restricted stock | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Share repurchases | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense, net | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||
| Capital distributions to noncontrolling interests | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2025 | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
| Year Ended December 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-in Capital | Accumulated Deficit | Treasury Stock | Noncontrolling Interests | Total Equity | |||||||||||||||||||||||||||||||||||||||||||||
| (In thousands, except share data) | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of restricted stock | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Share repurchases | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense, net | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||
| Capital distributions to noncontrolling interests | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
See Notes to Consolidated Financial Statements.
F-7
Spruce Power Holding Corporation
Consolidated Statements of Cash Flows
| Years Ended December 31, | ||||||||||||||
| (In thousands) | 2025 | 2024 | ||||||||||||
| Operating activities: | ||||||||||||||
| Net loss | $ | ( | $ | ( | ||||||||||
| Add back: Net loss (income) from discontinued operations | ( | |||||||||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||
| Stock-based compensation, net | ||||||||||||||
| Bad debt expense | ||||||||||||||
| Amortization of deferred revenue | ( | ( | ||||||||||||
| Depreciation and amortization expense | ||||||||||||||
| Amortization related to unfavorable solar renewable energy agreements | ( | ( | ||||||||||||
| Impairment of goodwill | ||||||||||||||
| Accretion expense | ||||||||||||||
| Change in fair value of interest rate swaps | ||||||||||||||
| Change in fair value of warrant liabilities | ( | |||||||||||||
| Interest income related to SEMTH master lease agreement | ( | ( | ||||||||||||
| Gain on disposal of assets | ( | ( | ||||||||||||
| Change in operating right-of-use assets and lease liability | ( | |||||||||||||
| Amortization of debt discount and deferred financing costs | ||||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||
| Accounts receivable, net | ( | ( | ||||||||||||
| Deferred rent assets | ( | ( | ||||||||||||
| Prepaid expenses and other current assets | ||||||||||||||
| Other assets | ( | |||||||||||||
| Accounts payable | ( | |||||||||||||
| Accrued expenses and other current liabilities | ( | ( | ||||||||||||
| Other long-term liabilities | ( | |||||||||||||
| Deferred revenue | ||||||||||||||
| Net cash used in continuing operating activities | ( | ( | ||||||||||||
| Net cash used in discontinued operating activities | ( | ( | ||||||||||||
Net cash used in operating activities | ( | ( | ||||||||||||
| Investing activities: | ||||||||||||||
| Proceeds from sale of solar energy systems | ||||||||||||||
| Proceeds from investment related to SEMTH master lease agreement | ||||||||||||||
| Cash paid for acquisitions | ( | ( | ||||||||||||
| Purchases of other property and equipment | ( | ( | ||||||||||||
| Net cash provided by (used in) continuing investing activities | ( | |||||||||||||
| Financing activities: | ||||||||||||||
| Proceeds from issuance of non-recourse debt | ||||||||||||||
| Payment of deferred financing costs | ( | |||||||||||||
| Repayments of non-recourse debt | ( | ( | ||||||||||||
| Share repurchases | ( | ( | ||||||||||||
F-8
| Capital distributions to noncontrolling interests | ( | ( | ||||||||||||
| Net cash provided by (used in) continuing financing activities | ( | |||||||||||||
| Net cash provided by discontinued financing activities | ||||||||||||||
Net cash provided by (used in) financing activities | ( | |||||||||||||
| Net change in cash and cash equivalents and restricted cash: | ( | ( | ||||||||||||
| Cash and cash equivalents and restricted cash, beginning of period | ||||||||||||||
| Cash and cash equivalents and restricted cash, end of period | $ | $ | ||||||||||||
| Supplemental disclosure of cash flow information: | ||||||||||||||
| Cash paid for interest | $ | $ | ||||||||||||
| Supplemental disclosure of noncash investing and financing information: | ||||||||||||||
| Right-of-use asset obtained in exchange for lease liability | $ | $ | ||||||||||||
See Notes to Consolidated Financial Statements.
F-9
Note 1. Organization and Description of Business
Description of Business
Spruce Power Holding Corporation and its subsidiaries (“Spruce Power” or the “Company”) is a leading owner and operator of distributed solar energy assets across the United States (the “U.S.”), offering subscription-based services to approximately 84,000 home solar assets and customer contracts, making renewable energy more accessible to everyone. The Company is engaged in the ownership and maintenance of home solar energy systems for homeowners in the U.S.
The Company’s primary customers are homeowners and its core solar service offerings to these customers generate revenues primarily through (i) both the lease of, and the sale of electricity generated by its home solar energy systems to homeowners pursuant to long-term Customer Agreements as defined below, which require the homeowners to make recurring monthly payments, (ii) third party contracts to sell solar renewable energy credits (“SRECs”) generated by the Company’s home solar energy systems for contracted prices, and (iii) the servicing of third-party owned solar energy systems through the Company’s Spruce Pro servicing platform, which is contracted to offer portfolio managed services to third party owners, as well as to the Company’s portfolio of home solar energy systems (the “Portfolio”). These portfolio managed services offered include (a) billing and collections/asset recovery, (b) account support services, (c) financial asset management, (d) homeowner support and servicing technology, (e) asset operations, and (f) transaction and execution services related to SRECs.
In addition to the Company’s core solar service offerings, the Company generates cash flows and earns interest income from customer contracts related to the SEMTH Master Lease, defined below.
The Company holds subsidiary fund companies, defined below as the Funds, that own and operate the Company’s portfolio of home solar energy systems, which are subject to solar lease agreements (“SLAs”) and power purchase agreements (“PPAs”, together with the SLAs, “Customer Agreements”) with residential customers who benefit from the production of electricity generated by the Company’s Portfolio, which may qualify for subsidies, renewable energy credits and other incentives as provided by the federal government and various states and local agencies. These benefits have generally been retained by the Company's subsidiaries that own the systems, with the exception of the investment tax credit (“ITCs”) under Section 48 of the Internal Revenue Code, as amended, (the “IRC”), which were generally passed through to the various financing partners of the solar energy systems.
Corporate History and Discontinued Operations
Historically, as XL Fleet Corp. (“XL Fleet”), the Company provided fleet electrification solutions for commercial vehicles in North America, offering its systems for vehicle electrification (the “Drivetrain” business) and offering and installing charging stations to enable customers to develop charging infrastructure required for electrified vehicles (the “XL Grid” business). In early 2022, the Company performed a strategic review of its overall business operations, which resulted in (i) the sale of the Company’s Drivetrain and XL Grid businesses in January 2023, and (ii) the decision to pursue merger and acquisition (“M&A”) opportunities. On September 9, 2022, the Company acquired 100 % of the membership interests of Spruce Holding Company 1 LLC, Spruce Holding Company 2 LLC, Spruce Holding Company 3 LLC and Spruce Manager LLC (collectively and together with their subsidiaries, “Legacy Spruce Power”) (See Note 3. Business Combinations), which was one of the largest privately held owner and operator of home solar energy systems in the U.S. at the time of the transaction. In November 2022, following the acquisition of Legacy Spruce Power, the Company changed its corporate name from “XL Fleet Corp.” to “Spruce Power Holding Corporation.” Additionally, the Company changed its ticker symbol from “XL” to “SPRU.”
After the acquisition of Legacy Spruce Power, the Company also commenced a review of its XL Grid business to evaluate its strategic fit with Legacy Spruce Power, and in the fourth quarter of 2022, the Company entered into a non-binding letter of intent for the sale of World Energy Efficiency Services, LLC (“World Energy”) for an immaterial amount. The divestiture of World Energy closed in January 2023 and the Company subsequently ceased its XL Grid operations.
Both the Drivetrain and XL Grid operations are presented as discontinued operations in the consolidated financial statements.
F-10
In the first quarter of 2023, the Company completed the acquisition of all issued and outstanding interests in SS Holdings 2017, LLC and its subsidiaries (“SEMTH”) from certain funds managed by HPS Investment Partners, LLC, pursuant to a membership interest purchase and sale agreement as of that date (the “SEMTH Acquisition”). The SEMTH related asset includes a 20-year use rights to customer payment streams of approximately 22,500 customer contracts (the “SEMTH Master Lease”). Subsequently on August 18, 2023, the Company acquired approximately 2,400 home solar assets and customer contracts, with an average remaining contract life of approximately 11 years, from a publicly traded, regulated utility company (the “Tredegar Acquisition”).
In the fourth quarter of 2024, the Company completed the acquisition of a residential solar portfolio consisting of approximately 9,800 home solar assets and customer contracts, with an average remaining contract life of approximately 10 years, from a publicly traded energy services company (the “NJR Acquisition”). During the year ended December 31, 2025, the Company acquired 200 additional systems for approximately $5.3 million in cash, inclusive of transaction costs of approximately $0.1 million.
With the completion of the NJR Acquisition, the Company has, in the aggregate, 14 portfolios of rooftop solar Customer Agreements. In the aggregate, as of December 31, 2025, the Company offered subscription-based services and owned the cash flows from approximately 84,000 home solar assets and customer contracts.
Going Concern
These consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) assuming the Company will continue as a going concern.
The Company’s debt obligations under the SP1 Facility are non-recourse to the Company (see Note 7. Non-Recourse Debt included within the accompanying audited consolidated financial statements). On March 27, 2026, the Company entered into the SP1 Facility Amendment to extend the maturity of this facility to October 30, 2026 (the “Amended SP1 Maturity Date”), unless a signed term sheet for a long-term financing is obtained, in which case the extended maturity date will be January 30, 2027, see Note 7. Because (i) the Amended SP1 Maturity Date is within twelve months from the date the accompanying audited consolidated financial statements are issued, (ii) the Company has not yet entered into a commitment to refinance the SP1 Facility, (iii) the Company has determined that it is unlikely to have sufficient cash on hand or proceeds from currently available liquidity sources to satisfy the SP1 Facility at the Amended SP1 Maturity Date (iv) the Company had negative working capital of $122.9 million as of December 31, 2025 solely due to the current maturity of the SP1 Facility at that date, and (v) the Company has experienced recurring net losses and negative cash flows from operations for the year ended December 31, 2025, these conditions raise substantial doubt about the Company’s ability to continue as a going concern. Our consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty.
The Company plans to refinance the SP1 Facility prior to the Amended SP1 Maturity Date consistent with the Company’s historical financing strategy for investing in solar assets on a leveraged basis. The Company has commenced preliminary discussions with potential lenders, which are currently being reviewed by management. The Company’s management believes that such refinancing will be completed prior to the Amended SP1 Maturity Date. However, the Company can offer no assurances it will be able to obtain financing at acceptable terms or at all. Therefore, the Company has concluded that there is substantial doubt about its ability to continue as a going concern. Should the Company be unsuccessful in refinancing the SP1 Facility, this could result in a foreclosure of collateral and negatively impact operations. Further, an event of default on the SP1 Facility, if not cured in the permittable time allowed under the agreement, would result in a cross default on the Second Key Bank Credit Agreement, which is also non-recourse.
Note 2. Summary of Significant Accounting Policies
Basis of consolidated financial statement presentation
F-11
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and include the accounts of its wholly owned subsidiaries and variable interest entities (“VIEs”), for which the Company was the primary beneficiary. All intercompany transactions and balances have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform to the Company’s presentation as of and for the year ended December 31, 2025 and such reclassifications had no effect on the Company’s previously reported financial position, results of operations, or cash flows.
Use of estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the balance sheet date, as well as reported amounts of income and expenses during the reporting period. The Company’s most significant estimates and judgments involve (i) valuation allowance on deferred income taxes, (ii) valuation of stock-based compensation, (iii) the useful lives of certain assets and liabilities, including property and equipment, and intangible assets, (iv) the allowance for credit losses, (v) asset retirement obligations, (vi) relative fair value of asset acquisitions,
Variable interest entities
The Company consolidates any variable interest entity (“VIE”) of which it is the primary beneficiary. The Company formed or acquired VIEs which are partially funded by tax equity investors in order to facilitate the funding and monetization of certain attributes associated with solar energy systems. The typical condition for a controlling financial interest ownership is holding a majority of the voting interests of an entity; however, a controlling financial interest may also exist in entities, such as VIEs, through arrangements that do not involve controlling voting interests. A variable interest holder is required to consolidate a VIE if that party has the power to direct the activities of the VIE that most significantly impact the VIE's economic performance and the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. The Company does not consolidate a VIE in which it has a majority ownership interest when the Company is not considered the primary beneficiary. The Company evaluates its relationships with the VIEs on an ongoing basis to determine if it is the primary beneficiary.
The Company’s initial investments in Volta Solar Owner II, LLC and ORE F4 HoldCo, LLC (collectively, the “Funds”) were determined to be VIEs and remained as such as of December 31, 2025 and 2024.
Noncontrolling interests
The distribution rights and priorities for the Funds (before any ceased being a VIE) as set forth in their respective operating agreements differ from the underlying percentage ownership interests of the members. As a result, the Company allocates income or loss to the noncontrolling interest holders of the Funds (before any ceased being a VIE) utilizing the hypothetical liquidation of book value (“HLBV”) method, in which income or loss is allocated based on the change in each member's claim on the net assets at the end of each reporting period, adjusted for any distributions or contributions made during such periods. The HLBV method is commonly applied to investments where cash distribution percentages vary at different points in time and are not directly linked to an equity member's ownership percentage.
F-12
The HLBV method is a balance sheet-focused approach. Under this method, a calculation is prepared at each reporting date to determine the amount that each member would receive if the entity were to liquidate all of its assets and distribute the resulting proceeds to its creditors and members based on the contractually defined liquidation priorities. The difference between the calculated liquidation distribution amounts at the beginning and the end of the reporting period, after adjusting for capital contributions and distributions, is used to derive each member's share of the income or loss for the period. Factors used in the HLBV calculation include U.S. GAAP income (loss), taxable income (loss), capital contributions, ITCs, capital distributions and the stipulated targeted investor return specified in the subsidiaries' operating agreements. Changes in these factors could have a significant impact on the amounts that investors would receive upon a hypothetical liquidation.
Cash and cash equivalents
The Company considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. Cash and cash equivalents include cash held in banks, and money market accounts. Cash equivalents are carried at cost, which approximates fair value due to their short-term nature. The Company’s cash and cash equivalents are placed with large financial institutions, and at times exceed federally insured limits. To date, the Company has not experienced any credit loss relating to its cash and cash equivalents.
Concentration of credit risks and revenue
Financial instruments which potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents. At times, the Company may hold cash balances at a single bank in excess of the Federal Deposit Insurance Corporation deposit insurance limit of $250,000. At December 31, 2025 and 2024, the Company had cash in excess of the federal deposit insurance limit. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents as most of the balances are invested in treasury bills, which are government backed securities.
As of and for the year ended December 31, 2025, the Company had one customer receivable balance related to solar renewable energy credits that represented 41 % of the Company’s accounts receivable balances and 11 % of total revenue.
As of and for the year ended December 31, 2024, the Company had no customers that represented at least 10% of the Company’s revenues or its accounts receivable balances.
Restricted cash
Restricted cash held at December 31, 2025 and 2024 of $38.3 million and $36.3 million, respectively, primarily consists of cash that is subject to restriction due to provisions in the Company's financing agreements and the operating agreements of the Funds. The carrying amount reported in the consolidated balance sheets for restricted cash approximates its fair value.
The following table provides a reconciliation of cash and cash equivalents and restricted cash reflected on the consolidated balance sheets to the total amounts shown within the consolidated statements of cash flows for each year:
| As of December 31, | |||||||||||
| (Amounts in thousands) | 2025 | 2024 | |||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Total cash, cash equivalents and restricted cash | $ | $ | |||||||||
F-13
Accounts receivable, net
| As of December 31, | ||||||||
| (Amounts in thousands) | 2025 | 2024 | ||||||
| Balance at the beginning of the period | $ | $ | ||||||
| Write-off of uncollectible accounts | ( | ( | ||||||
| Provision for current expected credit losses | ||||||||
| Balance at the end of the period | $ | $ | ||||||
Derivative instruments and hedging activities
The Company utilizes interest rate swaps to manage interest rate risk on existing and planned future debt issuances. The fair value of all derivative instruments are recognized as assets or liabilities at the balance sheet date on the consolidated balance sheets. The fair value of the interest rate swaps are calculated by discounting the future net cash flows to the present value based on the terms and conditions of the agreements and the forward interest rate curves. As these inputs are based on observable data and valuations of similar instruments, the interest rate derivatives are primarily categorized as Level 2 in the fair value hierarchy.
Prepaid expenses and other current assets
Prepaid expenses and other current assets include prepaid insurance and supplies, which are expected to be recognized or realized within the next 12 months.
Investment related to SEMTH master lease agreement and interest income
The Company accounts for its investment related to the SEMTH master lease agreement in accordance with Accounting Standards Codification (“ASC”) 325-40, Investments—Other—Beneficial Interests in Securitized Financial Assets. The SEMTH master lease agreement includes 20 year use rights to customer payment streams of approximately 22,500 home SLAs and PPAs. The Company recognizes accretable yield as interest income over the life of the related beneficial interest using the effective yield method, which is reflected within interest income in the consolidated statements of operations in the amount of $18.1 million and $16.8 million for the years ended December 31, 2025 and 2024, respectively. On a recurring basis, the Company evaluates changes in the cash flows expected to be collected from the cash flows previously projected, and when favorable or adverse changes are deemed other than temporary, the Company prospectively updates its expectation of cash flows to be collected, which may impact the allowance for credit losses if the cash flow change is unfavorable, and recalculates the amount of accretable yield for the related beneficial interest. Assumptions used in the development of the expected cash flows include expected cash inflows related to the market utility rates in the states where these solar assets are located and expected cash outflows associated with operating and maintenance of these solar assets.
Property and equipment, net
Property and equipment, net consists of solar energy systems and other property and equipment.
F-14
Solar energy systems, net
Solar energy systems, net consists of home solar energy systems which are subject to long-term Customer Agreements and asset retirement costs (“ARC”). Solar energy systems are recorded at their relative fair value upon acquisition, while ARCs are capitalized as part of the carrying amount of the solar energy systems and depreciated over the remaining useful life. Subsequently, any impairment charges that may arise are recognized and the impairment loss reduces the carrying amount of the asset to its recoverable amount. For all acquired systems, the Company calculates depreciation using the straight-line method over the remaining useful life as of the acquisition date based on a 30-year useful life from the date the asset was placed in service. When a solar energy system is sold or otherwise disposed of, a gain (or loss) is recognized for the amount of cash received in excess of the net book value of the solar energy system (or vice versa), at which time the related solar energy system is removed from the consolidated balance sheets.
Other property and equipment, net
Other property and equipment, net is stated at cost less accumulated depreciation, or if acquired in a business combination, at fair value as of the date of acquisition. Depreciation is calculated using the straight-line method, based upon the following estimated useful lives:
| Equipment | |||||
| Furniture and fixtures | |||||
| Computer and related equipment | |||||
| Software | |||||
| Vehicles | |||||
| Leasehold improvements | Lesser of useful life of the asset or remaining life of the lease | ||||
Intangible assets, net
Impairment of long-lived assets
F-15
Leases
The Company determines if an arrangement is a lease, or contains a lease, at the inception of the arrangement and evaluates whether the lease is an operating lease or a finance lease at the commencement date. The Company’s assessment is based on: (i) whether the contract involves the use of a distinct identified asset, (ii) whether the Company obtained the right to substantially all the economic benefit from the use of the asset throughout the period, and (iii) whether the Company has the right to direct the use of the asset.
The Company recognizes lease right-of-use (“ROU”) assets and lease liabilities for operating and finance leases with initial terms greater than 12 months. ROU assets represent the Company’s right to use an asset for the lease term, while lease liabilities represent the Company’s obligation to make the related lease payments. The ROU assets for all leases are recognized based on the present value of fixed lease payments over the lease term at the lease commencement date. The lease liabilities of all leases are calculated as the present value of fixed payments not yet paid at the measurement date, however subsequent to the measurement date, the lease liabilities are presented at amortized cost using the effective interest method.
The Company generally uses its incremental borrowing rate as the discount rate for leases unless an interest rate is implicitly stated in the leases. The Company’s incremental borrowing rate is determined using a portfolio approach based on the rate of interest that the Company would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term. The lease term for all of the Company’s leases includes the noncancelable period of the lease, in addition to any additional periods covered by either the Company’s option to extend the lease, which the Company is reasonably certain to exercise, or the option to extend the lease controlled by the lessor. All ROU assets are reviewed periodically for impairment.
Lease expense for operating leases consists of the lease payments plus any initial direct costs and is recognized on a straight-line basis over the lease term. Variable lease payments that are not based on an index or a rate, such as common area maintenance fees, taxes and insurance, are expensed as incurred.
Asset retirement obligations
| Years Ended December 31, | |||||||||||
| (Amounts in thousands) | 2025 | 2024 | |||||||||
| Balance at the beginning of the period | $ | $ | |||||||||
Additions | |||||||||||
| Accretion expense | |||||||||||
| Balance at the end of the period | $ | $ | |||||||||
F-16
Asset acquisitions
The Company accounts for assets acquired based on the consideration transferred by the Company, including direct and incremental transaction costs incurred by the Company as a result of the acquisition. An asset acquisition’s cost or the consideration transferred by the Company is assumed to be equal to the fair value of the net assets acquired. If the consideration transferred is cash, measurement is based on the amount of cash the Company paid to the seller, as well as transaction costs incurred by the Company. Consideration given in the form of nonmonetary assets, liabilities incurred or equity interests issued is measured based on either the cost to the Company or the fair value of the assets or net assets acquired, whichever is more clearly evident. The cost of an asset acquisition is allocated to the net assets acquired based on their estimated relative fair values. The Company engages third-party appraisal firms to assist in the fair value determination, however management is responsible for, and ultimately determines the fair value. Goodwill is not recognized in an asset acquisition.
Impairment of goodwill
Goodwill represents the excess of cost over the fair market value of net tangible and identifiable intangible assets of acquired businesses. Goodwill is not amortized, however it is annually tested for impairment, or more frequently if events or circumstances indicate that the carrying amount of goodwill may be impaired. The Company has historically recorded goodwill in connection with its business combinations.
The Company performs its annual goodwill impairment assessment on October 1 of each fiscal year, or more frequently if events or circumstances arise which indicate that goodwill may be impaired. An assessment can be performed by first completing a qualitative assessment of the Company’s single reporting unit. The Company can also bypass the qualitative assessment in any period and proceed directly to the quantitative impairment test and then resume the qualitative assessment in any subsequent period. Qualitative indicators that may trigger the need for annual or interim quantitative impairment testing include, among other things, deterioration in macroeconomic conditions, declining financial performance, deterioration in the operational environment, or an expectation of selling or disposing of a portion of the reporting unit. Additionally, a significant change in business climate, a loss of a significant customer, increased competition, a sustained decrease in share price, or a decrease in estimated fair value below book value may trigger the need for interim impairment testing of goodwill.
If the Company believes that, as a result of its qualitative assessment, it is more likely than not that the fair value of the reporting unit is less than its carrying amount, the quantitative impairment test is required. The quantitative test involves comparing the fair value of the reporting unit with its carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds its fair value, an impairment loss is recorded as a reduction to goodwill with a corresponding charge to earnings in the period the goodwill is determined to be impaired. The income tax effect associated with an impairment of tax-deductible goodwill is also considered in the measurement of the goodwill impairment. Any goodwill impairment is limited to the total amount of goodwill.
The Company evaluates the fair value of the Company’s reporting unit using the market and income approach. Under the market approach, the Company uses multiples of earnings before interest, taxes, depreciation and amortization (“EBITDA”) or revenues of the comparable guideline public companies by selecting a population of public companies with similar operations and attributes. Using this guideline public company data, a range of multiples of enterprise value to EBITDA or revenue is calculated. The income approach of computing fair value is based on the present value of the expected future economic benefits generated by the asset or business, such as cash flows or profits which will then be compared to its book value. During the year ended December 31, 2024, the Company recorded a charge of $28.8 million to fully impair its goodwill within the consolidated statements of operations. See Note 11. Goodwill for further information on the Company’s determination relating to impairment of goodwill.
F-17
Warranties
Customers who purchased the Company's Drivetrain systems were provided limited-assurance-type warranties for equipment and work performed under the contracts. The warranty period typically extends for three years following transfer of control of the equipment. The warranties solely relate to correction of product defects during the warranty period, which is consistent with similar warranties offered by competitors. Customers of XL Grid were provided limited-assurance-type warranties for a term of one year for installation work performed under its contracts.
The Company accrued the estimated cost of product warranties for unclaimed charges based on historical experiences and expected results. Should product failure rates and material usage costs differ from these factors, estimated revisions to the estimated warranty liability will be required. The Company periodically assesses the adequacy of its recorded product warranty liabilities and adjusts the balances as required. Warranty expense is recorded as a component of discontinued operations in the consolidated statements of operations. With the Company’s exit from the Drivetrain business and the subsequent sale of World Energy, the Company will not enter into any additional warranty obligations and the existing warranty obligation expired in 2025.
The following is a roll forward of the Company’s accrued warranty liability:
| As of December 31, | |||||||||||
| (Amounts in thousands) | 2025 | 2024 | |||||||||
| Balance at the beginning of the period | $ | $ | |||||||||
| Warranty fulfillment charges | ( | ( | |||||||||
| Balance at the end of the period | $ | $ | |||||||||
The Company’s warranty liability is included in accrued expenses and other current liabilities on the consolidated balance sheets.
Unfavorable solar renewable energy agreements
Contingencies
F-18
Fair value measurements
The fair value of the Company’s financial assets and liabilities reflects Management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. For assets and liabilities measured at fair value on a recurring and nonrecurring basis, a three-level hierarchy of measurements based upon observable and unobservable inputs is used to arrive at fair value. Observable inputs are developed based on market data obtained from independent sources, while unobservable inputs reflect the Company’s assumptions about valuation based on the best information available in the circumstances. Depending on the inputs, the Company classifies each fair value measurement as follows:
•Level 1: Observable inputs that reflect unadjusted quoted market prices in active markets for identical assets or liabilities that are accessible at the measurement date.
•Level 2: Observable inputs other than Level 1 prices, such as quoted market prices for similar assets or liabilities in active markets, quoted market prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
•Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy must be determined based on the lowest level input that is significant to the fair value measurement. An assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and consideration of factors specific to the asset or liability.
The Company’s financial instruments consist of cash and cash equivalents, restricted cash, accounts receivable, net, accounts payable, accrued expenses and other current liabilities, non-recourse debt, and interest rate swaps. The carrying value of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses and other current liabilities approximates fair value due to the short-term nature of those instruments. See Note 10. Fair Value Measurements for additional information on assets and liabilities measured at fair value.
Stock-based compensation
The Company grants stock-based awards to certain employees, directors and non-employee consultants. Awards issued under the Company’s stock-based compensation plans include stock options and restricted stock units. For transactions in which the Company obtains employee services in exchange for an award of equity instruments, the cost of the services are measured based on the grant date fair value of the award. The Company recognizes the cost over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). Costs related to plans with graded vesting are generally recognized using a straight-line method.
Stock Options
The Company uses the Black-Scholes option pricing model to determine the fair value of stock-based awards and recognizes the compensation cost on a straight line basis over the requisite service period of the awards for employees, which is typically the four-year vesting period of the award, and effective contract period specified in the award agreement for non-employees. The fair value of common stock is determined based on the closing price of the Company’s common stock on the NYSE at each award grant date.
F-19
The determination of the fair value of stock-based payment awards utilizing the Black-Scholes model is affected by the stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends. The Company does not have a significant history of trading its common stock as it was not a public company until December 21, 2020, and as such expected volatility was estimated using historical volatilities of comparable public entities. The expected life of the awards is estimated based on a simplified method, which uses the average of the vesting term and the original contractual term of the award. The risk-free interest rate assumption is based on observed interest rates appropriate for the expected life of the awards. The dividend yield assumption is based on history and expectation of paying no dividends. Forfeitures are accounted for as they occur.
Restricted Stock Units
Restricted stock units generally vest over the requisite service periods (vesting on a straight–line basis). The fair value of a restricted stock unit award is equal to the closing price of the Company’s common stock on the NYSE on the grant date. The Company accounts for the forfeiture of equity awards as they occur.
Revenues
The Company’s revenue is derived from its home solar energy portfolio and servicing platform, which primarily generates revenue through the sale to homeowners of power generated by the home solar energy systems pursuant to long-term agreements. Pursuant to ASC 606 defined below, the Company has elected the “right to invoice” practical expedient for PPA and servicing revenues, and revenues for the performance obligations related to energy generation and servicing revenue are recognized as services are rendered based upon the underlying contractual arrangements.
The following table presents the detail of the Company’s revenues as reflected within the consolidated statements of operations for the years ended December 31, 2025 and 2024:
| Years Ended December 31, | ||||||||||||||
| (Amounts in thousands) | 2025 | 2024 | ||||||||||||
| PPA revenues | $ | $ | ||||||||||||
| SLA revenues | ||||||||||||||
| Solar renewable energy credit revenues | ||||||||||||||
| Performance-based incentives | ||||||||||||||
| Servicing revenues | ||||||||||||||
| Intangibles amortization, unfavorable solar renewable energy revenue agreements | ||||||||||||||
| Other revenue | ||||||||||||||
| Total | $ | $ | ||||||||||||
Energy generation
Customers purchase solar energy from the Company under PPAs or SLAs, both defined above. Revenue is recognized from contracts with customers as performance obligations are satisfied at a transaction price reflecting an amount of consideration based upon an estimated rate of return which is expressed as the solar rate per kilowatt hour or a flat rate per month as defined in the customer contracts.
•PPA revenues - Under ASC 606, Revenue from Contracts with Customers (“ASC 606”) issued by the Financial Accounting Standards Board (“FASB”), PPA revenue is recognized when generated based upon the amount of electricity delivered as determined by remote monitoring equipment at solar rates specified under the PPAs.
F-20
•SLA revenues - The Company has SLAs, which do not meet the definition of a lease under ASC 842, Leases, and are accounted for as contracts with customers under ASC 606. Revenue is recognized on a straight-line basis over the contract term as the obligation to provide continuous access to the solar energy system is satisfied. The amount of revenue recognized may not equal customer cash payments due to the performance obligation being satisfied ahead of cash receipt or evenly as continuous access to the solar energy system has been provided. The differences between revenue recognition and cash payments received are reflected as deferred rent assets on the consolidated balance sheets. As of December 31, 2023, the deferred rent assets balance was $2.5 million. Certain SLAs contain provisions to provide customers a performance guarantee that each solar energy system will achieve certain specified minimum solar energy production output. If the solar energy system does not produce the guaranteed production amount, the Company is obligated to pay a performance guarantee calculated as the product of (a) the shortfall production amount and (b) guaranteed rate per kWh as defined in the SLA.
Solar renewable energy credit revenues
The Company enters into contracts with third parties to sell SRECs generated by the solar energy systems for fixed prices. Certain contracts that meet the definition of a derivative may be exempted as normal purchase or normal sales transactions (“NPNS”). NPNS are contracts that provide for the purchase or sale of something other than a financial instrument or derivative instrument that will be delivered in quantities expected to be used or sold over a reasonable period in the normal course of business. Certain SREC contracts meet these requirements and are designated as NPNS contracts. Such SRECs are exempted from the derivative accounting and reporting requirements, and the Company recognizes revenues in accordance with ASC 606. The Company recognizes revenue for SRECs based on pricing predetermined within the respective contracts at a point in time when the SRECs are transferred. As SRECs can be sold separate from the actual electricity generated by the renewable-based generation source, the Company accounts for the SRECs it generates from its solar energy systems as governmental incentives and does not consider those SRECs output of the underlying solar energy systems. The Company classifies these SRECs as inventory held until sold and delivered to third parties. As the Company did not incur costs to obtain these governmental incentives, the inventory carrying value for the SRECs was $0
Performance-based incentives
The Company participates in residential solar investment programs, which offer a performance-based incentive (“PBI”) for certain of its solar energy systems that are associated with the programs (“eligible systems”). PBIs are accounted for under ASC 606 and are earned based upon the actual electricity produced by the eligible systems.
Servicing revenues
The Company earns operating and maintenance revenue from third-party solar fund customers at pre-determined rates for various operating and maintenance and asset management services as specified in Maintenance Service Agreements (“MSAs”). The MSAs contain multiple performance obligations, including routine maintenance, nonroutine maintenance, renewable energy certificate management, inventory management, delinquent account collections, expense reimbursements and customer account management.
Other revenue
Other revenue relates to revenue generating activities that do not fall into the Company’s primary revenue categories discussed above, including uniform commercial code revenues, other fees charged to the Company’s customers pursuant to the Company’s long-term Customer Agreements and servicing contracts, and other miscellaneous revenue and income.
Deferred revenue
Deferred revenue consists of amounts for which the criteria for revenue recognition have not yet been met and includes prepayments received for unfulfilled performance obligations that will be recognized on a straight-line basis over the remaining term of the respective customer agreements. Deferred revenue, in the aggregate, as of December 31, 2025 and 2024 was $5.0 million and $4.0 million, respectively. As of December 31, 2023, the Deferred Revenue balance was $2.7 million. During the years ended December 31, 2025 and 2024, the Company recognized revenues of $0.3 million and $0.2 million related to deferred revenue as of December 31, 2024 and 2023, respectively.
F-21
Cost of revenues - solar energy systems depreciation
Cost of revenues - solar energy systems depreciation consists of the depreciation expense relating to the solar energy systems.
Cost of revenues - operations and maintenance
Cost of revenues - operations and maintenance primarily consists of costs of third parties used to service the Company’s systems and any cost associated with meter swaps.
Income taxes
The Company accounts for income taxes using the asset and liability method under which deferred tax liabilities and assets are recognized for the expected future tax consequences of temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities and net operating loss and tax credit carryforwards. Deferred income taxes are provided for the temporary differences arising between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and net operating loss carry-forwards and credits. Deferred tax assets and liabilities are measured using enacted rates in effect for the year in which the differences are expected to be recovered or settled. The effect of changes in tax rates on deferred tax assets and liabilities is recognized in the consolidated statements of operations in the period in which the enactment rate changes. The ultimate recovery of deferred tax assets is dependent upon the amount and timing of future taxable income and other factors, such as the taxing jurisdiction in which the asset is to be recovered. Deferred tax assets and liabilities are reduced through the establishment of a valuation allowance if, based on available evidence, it is more likely than not that the deferred tax assets will not be realized.
Uncertain tax positions taken or expected to be taken in a tax return are accounted for using the more likely than not threshold for financial statement recognition and measurement. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. For the years ended December 31, 2025 and 2024, there were no uncertain tax positions taken or expected to be taken in the Company’s tax returns.
In the normal course of business, the Company is subject to regular audits by U.S. federal and state and local tax authorities. With few exceptions, the Company is no longer subject to federal, state or local tax examinations by tax authorities in its major jurisdictions for tax years prior to 2020. However, net operating loss carryforwards remain subject to examination to the extent they are carried forward and impact a year that is open to examination by tax authorities.
The Company did not recognize any tax related interest or penalties during the periods presented in the accompanying consolidated financial statements, however, would record any such interest and penalties as a component of the provision for income taxes.
There has historically been no federal or state provision for income taxes since the Company has historically incurred net operating losses and maintains a full valuation allowance against its net deferred tax assets. For the years ended December 31, 2025 and 2024, the Company recognized no provision for income taxes, consistent with its losses incurred and the valuation allowance against its deferred tax assets. As a result, the Company's effective income tax rate was 0
On July 4, 2025, the One Big Beautiful Bill was enacted (“OBBBA”), introducing significant and wide-ranging changes to the U.S. federal tax system. Significant components include permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, the restoration of favorable tax treatment for certain business provisions, and accelerated phase outs to the Inflation Reduction Act energy tax credits. We continue to assess any potential impact to our Consolidated Financial Statements but for fiscal year 2025, OBBBA did not have a material impact.
F-22
Net income (loss) per share
Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period, without consideration for potentially dilutive securities. Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock and potentially dilutive securities outstanding during the period determined using the treasury stock and if-converted methods. For purposes of the diluted income (loss) per share calculation, stock options, restricted stock units, restricted stock unit awards and warrants are considered to be potentially dilutive securities. Potentially dilutive securities are excluded from the calculation of diluted income (loss) per share when their effect would be anti-dilutive.
Segment reporting
Segment reporting is based on the management approach, following the method that management organizes the Company’s reportable segments for which separate financial information is made available to, and evaluated regularly by, the Company’s chief operating decision maker (“CODM”) in allocating resources and in assessing performance. The Company is organized and managed as a single operating and reportable segment, on a consolidated basis, which engages in the sole business of providing solar energy and related services to its customers, and as of December 31, 2025 and 2024, the Company had one
Related parties
A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, the board of directors, members of the immediate families of principal owners of the Company, its management, the board of directors and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or that has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.
SEC Climate Disclosure Rule
Recent Accounting Pronouncements Adopted
F-23
In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvement to Reportable Segment Disclosures, (“ASU 2023-07”), which requires enhanced disclosures for reportable segments, primarily in relation to significant segment expenses, even in the event an entity has a single reportable segment in accordance with Topic 280. ASU 2023-07 was effective for the Company for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company adopted this ASU as of December 31, 2024 and has retrospectively applied its requirements to all prior periods based on the significant segment expense categories identified and disclosed in its consolidated financial statements in the period of adoption. See Note 20. Segment Information.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, (“ASU 2023-09”). The ASU enhances the transparency and decision usefulness of income tax disclosures by requiring additional disaggregation of information related to the effective tax rate reconciliation, income taxes paid, and income tax expense and pretax income by jurisdiction. The Company adopted ASU 2023 09 on a prospective basis effective January 1, 2025. Accordingly, the enhanced income tax disclosures are presented beginning in fiscal year 2025, and prior period disclosures have not been recast. The adoption of this guidance did not have an impact on the Company’s consolidated results of operations, financial position, or cash flows, as the amendments relate solely to disclosure requirements.
In July 2025, the FASB issued ASU 2025-05, Financial Instruments Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, (“ASU 2025-05”), to address challenges encountered by entities when estimating expected credit losses on current accounts receivable or current contract assets resulting from transactions accounted for under ASC 606. ASU 2025-05 introduces a practical expedient for entities which, if elected, assumes that current conditions as of the balance sheet date do not change for the remaining life of the asset. ASU 2025-05 is effective for annual reporting periods, including interim reporting periods within those annual reporting periods, beginning after December 15, 2025, with early adoption permitted. The Company evaluated the practical expedient and determined that it will not adopt the practical expedient in its annual consolidated financial statements for the year ending December 31, 2025.
Recent Accounting Pronouncements Not Yet Adopted
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40) (“ASU 2024-03”), which requires enhanced detailed disclosures about the types of expenses in commonly presented expense line items of entities. Subsequent to the issuance of ASU 2024-03, the FASB issued ASU 2025-01 of the same topic to clarify the effective date of ASU 2024-03, stating that all public entities are required to adopt the disclosure requirements in the first annual reporting period beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. The Company plans to adopt this ASU in its annual financial statements for the year ending December 31, 2027 and in its interim financial statements in the subsequent year ending December 31, 2028, and is currently assessing the impact of this ASU on its consolidated financial statements.
In September 2025, the FASB issued ASU No. 2025-07, Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606) Derivatives Scope Refinements and Scope Clarification for Share-Based Noncash Consideration from a Customer in a Revenue Contract. The ASU amends derivative scope exceptions for specific non-exchange traded contracts and clarifies the application of ASC 606 to share-based noncash consideration from customers. The ASU is effective for interim reporting periods within annual reporting periods beginning after December 15, 2026. An entity is permitted to apply the amendments either (1) prospectively to new contracts entered into on or after the date of adoption or (2) on a modified retrospective basis through a cumulative-effect adjustment to the opening balance of retained earnings as of the beginning of the annual reporting period of adoption for contracts existing as of the beginning of the annual reporting period of adoption. Early adoption is permitted. The Company is currently evaluating the provisions of this ASU and does not expect this ASU to have a material impact on our consolidated financial statements.
F-24
In December 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. The ASU clarifies interim disclosure requirements and the applicability of Topic 270. The objective of the amendments is to provide further clarity about the current interim disclosure requirements. The ASU is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. Adoption of this ASU can be applied either a prospective or a retrospective approach. Early adoption is permitted. The Company is currently evaluating the provisions of this ASU and does not expect this ASU to have a material impact on our consolidated financial statements.
In December 2025, the FASB issued ASU No. 2025-12, Codification Improvements. The ASU addresses thirty-three items, representing the changes to the Codification that (1) clarify, (2) correct errors, or (3) make minor improvements. Generally, the amendments in this Update are not intended to result in significant changes for most entities. The ASU is effective for interim reporting periods within annual reporting periods beginning after December 15, 2026. The adoption method of this ASU may vary, on an issue-by-issue basis. Early adoption is permitted. The Company is currently evaluating the provisions of this ASU and does not expect this ASU to have a material impact on our consolidated financial statements.
Note 3. Acquisitions
NJR Acquisition
On November 22, 2024, the Company acquired approximately 9,800 solar energy systems from the subsidiary of a publicly traded, regulated utility company for $132.5 million (the “NJR Acquisition”) pursuant to an asset purchase agreement (the “APA”). The solar energy systems acquired have an average remaining contract life of approximately 11 years. The NJR Acquisition was funded in part by the proceeds from the concurrent issuance of the SP5 Facility, as defined below (See Note 7. Non-Recourse Debt) and $22.7 million of the Company’s cash balances.
The NJR Acquisition has been accounted for as an acquisition of assets, wherein the total consideration paid was allocated to the assets acquired and liabilities assumed based on their relative fair value. The Company’s determination of the fair value of assets acquired and liabilities assumed was based on an independent third-party valuation, which involved significant estimates and assumptions, including Level 3 (unobservable) inputs, using the income method approach to value long-lived assets. The Company engages third-party appraisal firms to assist in the fair value determination, however management is responsible for, and ultimately determines the fair value. The Company estimated the fair value of the NJR Acquisition to be approximately $132.5 million, inclusive of transaction costs of $0.3 million, all of which was allocated to the solar energy systems.
F-25
Note 4. Property and Equipment, Net
Property and equipment, net consisted of the following as of December 31, 2025 and 2024:
| As of December 31, | |||||||||||
| (Amounts in thousands) | 2025 | 2024 | |||||||||
| Solar energy systems | $ | $ | |||||||||
| Less: Accumulated depreciation | ( | ( | |||||||||
| Solar energy systems, net | $ | $ | |||||||||
| Furniture and fixtures | |||||||||||
| Computers and related equipment | |||||||||||
| Leasehold improvements | |||||||||||
| Gross other property and equipment | |||||||||||
| Less: Accumulated depreciation | ( | ( | |||||||||
| Other property and equipment, net | $ | $ | |||||||||
| Property and equipment, net | $ | $ | |||||||||
Depreciation expense related to solar energy systems is included within cost of revenues - solar energy systems depreciation within the consolidated statements of operations, and for the years ended December 31, 2025 and 2024 was $29.1 million and $23.4 million, respectively. Depreciation expense related to other property and equipment is included within selling, general and administrative expenses within the consolidated statements of operations, and for the years ended December 31, 2025 and 2024 was $0.3 million and $0.2 million, respectively.
Note 5. Intangible Assets, Net
The following table presents the detail of intangible assets, net as recorded in the consolidated balance sheets as of December 31, 2025 and 2024:
| As of December 31, | |||||||||||
| (Amounts in thousands) | 2025 | 2024 | |||||||||
| Intangible assets: | |||||||||||
| Solar renewable energy agreements | $ | $ | |||||||||
| Performance based incentives agreements | |||||||||||
| Trade name | |||||||||||
| Gross intangible assets | |||||||||||
| Less: Accumulated amortization | ( | ( | |||||||||
| Intangible assets, net | $ | $ | |||||||||
Amortization of intangible assets for the year ended December 31, 2025 was $0.7 million recorded in selling, general and administrative expenses. Amortization of intangible assets for the year ended December 31, 2024 was $1.2 million, of which $0.5 million and $0.7 million were recorded within revenues and selling, general and administrative expenses, respectively.
Amortization of unfavorable solar renewable energy revenue agreements for the years ended December 31, 2025 and 2024 was $3.0 million and $3.1 million, respectively, which is included within revenue on the statement of operations.
F-26
As of December 31, 2025, expected amortization of intangible assets for each of the five succeeding fiscal years and thereafter is as follows:
| As of December 31, | |||||
| (Amounts in thousands) | 2025 | ||||
| 2026 | $ | ||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
Thereafter | |||||
Total | $ | ||||
Note 6. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following as of December 31, 2025 and 2024:
| As of December 31, | ||||||||||||||
| (Amounts in thousands) | 2025 | 2024 | ||||||||||||
| Accrued interest | $ | $ | ||||||||||||
| Accrued professional fees | ||||||||||||||
Accrued contingencies (See Note 14 Commitments and Contingencies) | ||||||||||||||
| Accrued compensation and related benefits | ||||||||||||||
| Accrued expenses, other | ||||||||||||||
| Accrued taxes, stock-based compensation | ||||||||||||||
| Accrued operating and maintenance | ||||||||||||||
Accrued expenses and other current liabilities | $ | $ | ||||||||||||
F-27
Note 7. Non-Recourse Debt
The following table provides a summary of the Company’s non-recourse debt as of December 31, 2025 and 2024:
| As of December 31, | ||||||||||||||||||||
| (Amounts in thousands) | Due | 2025 | 2024 | |||||||||||||||||
SVB Credit Agreement, SP1 Facility (1) | April 2026 | $ | $ | |||||||||||||||||
Second SVB Credit Agreement, SP2 Facility (1) | May 2027 | |||||||||||||||||||
KeyBank Credit Agreement, SP3 Facility (1) | November 2027 | |||||||||||||||||||
Second KeyBank Credit Agreement (1) | April 2030 | |||||||||||||||||||
Barings GPSF Credit Agreement, SET Facility | April 2042 | |||||||||||||||||||
Banco Santander Credit Agreement, SP5 Facility | November 2027 | |||||||||||||||||||
Less: Unamortized fair value adjustment (1) | ( | ( | ||||||||||||||||||
| Less: Unamortized deferred financing costs | ( | ( | ||||||||||||||||||
Total non-recourse debt | ||||||||||||||||||||
| Less: Non-recourse debt, current | ( | ( | ||||||||||||||||||
| Non-recourse debt, non-current | $ | $ | ||||||||||||||||||
(1) In connection with the acquisition of Legacy Spruce Power effective September 9, 2022, the Company assumed long-term debt instruments valued at approximately $507.2 million as of that date. In connection with accounting for the business combination, the Company adjusted the carrying value of this long-term debt to its fair value as of the Acquisition Date. This fair value adjustment resulted in a reduction of the carrying value of the debt by $35.2 million. This adjustment to fair value is being amortized to interest expense over the life of the related debt instruments using the effective interest method. Amortization expense for the fair value adjustment and deferred financing costs for the years ended December 31, 2025 and 2024 was $6.5 million and $6.0 million, respectively.
SVB Credit Agreement
The SVB Credit Agreement (the “SP1 Facility”), executed with Silicon Valley Bank (“SVB”), a division of First-Citizens Bank & Trust Company, includes a debt service reserve letter of credit (the “SP1 LC”) with related amounts outstanding of $17.1 million and $15.6 million as of December 31, 2025 and 2024, respectively. Amounts outstanding under the SP1 LC bear interest of 2.50 % per annum and unused amounts bear interest at 0.50 % per annum. The term loans under the SP1 Facility require quarterly interest and principal payments, paid a month in arrears, with the remaining principal balance due in a single payment in April 2026 and bear interest at the Secured Overnight Financing Rate (the “SOFR”) plus the applicable margin. The applicable margin is 2.25 % per annum for the first three years, 2.375 % per annum from the third anniversary through the sixth anniversary and 2.5 % per annum starting on the sixth anniversary. The effective interest rate on the SP1 Facility was 7.01 % and 7.16 % as of December 31, 2025 and 2024, respectively. The SP1 Facility requires the Company to enter into and maintain Interest Rate Hedging Agreements on a pro rata basis to the extent necessary to provide interest rate protection of at least 75 % but in no event greater than 100 % of the aggregate principal amount outstanding.
The obligations of the Company under the SP1 Facility are secured by substantially all of the assets and equity interest in certain of the Company’s subsidiaries. The SP1 Facility requires the Company to be in compliance with various covenants, including debt service coverage ratios and as of December 31, 2025, the Company was in compliance with the required covenants under the SP1 Facility.
On March 27, 2026, the Company entered into an amendment (the “SP1 Facility Amendment”) to the SP1 Facility with Silicon Valley Bank (the “SP1 Facility”) which extends the maturity date to October 30, 2026 (the “Amended SP1 Maturity Date”), unless a signed term sheet for a long-term financing is obtained, in which case the Amended SP1 Maturity Date will be January 30, 2027. Under the terms of the SP1 Facility Amendment, the applicable margin is 2.75 % per annum from the effective date of the SP1 Facility Amendment to to October 30, 2026, and 3.25 % per annum thereafter. The SP1 Facility Amendment includes a cross-default provision with the Second Key Bank Credit Agreement.
F-28
Second SVB Credit Agreement
The Second SVB Credit Agreement (the “SP2 Facility”) includes a debt service reserve letter of credit (the “SP2 LC”). Amounts outstanding under the SP2 LC bear interest of 2.30 % per annum and unused amounts bear interest at 0.50 % per annum. The term loans under the SP2 Facility require quarterly principal and interest payments, mature in April 2027 and bear interest at the SOFR plus the applicable margin. The applicable margin is 2.30 % per annum for the first three years, 2.425 % per annum from the third anniversary through the sixth anniversary and 2.55 % per annum starting on the sixth anniversary.
On August 18, 2023, the Company entered into a second amendment to the SP2 Facility with SVB, which provided the Company (i) incremental term loans with a principal amount of approximately $21.4 million, of which proceeds were primarily used to fund the Tredegar Acquisition (See Note 3. Acquisitions) and (ii) incremental letters of credit in the aggregate amount of approximately $2.7 million (collectively, the “SP2 Facility Amendment”). Excluding the aforementioned amounts, all other terms of the original SP2 Facility remain unchanged. The SP2 Facility Amendment was treated as a debt modification under ASC 470-50, Debt—Modifications and Extinguishments. The Company also incurred $0.4 million of deferred financing costs, which is being amortized to interest expense over the term of the loan. Related unamortized deferred financing costs were $0.5 million as of December 31, 2025. The SP2 Facility requires the Company to enter into and maintain Interest Rate Hedging Agreements on a pro rata basis to the extent necessary to provide interest rate protection of at least 75 % but in no event greater than 100 % of the aggregate principal amount outstanding.
Amounts outstanding under the SP2 LC, as amended, was $6.0 6.97 % and 7.25 % as of December 31, 2025 and 2024, respectively. The obligations of the Company under the SP2 Facility are secured by substantially all of the assets and equity interest in certain of the Company’s subsidiaries. The SP2 Facility requires the Company to be in compliance with various covenants, including debt service coverage ratios, and as of December 31, 2025, the Company was in compliance with the required covenants under the SP2 Facility.
Key Bank Credit Agreement
The Key Bank Credit Agreement (the “SP3 Facility”), executed with KeyBank National Association, includes a debt service reserve letter of credit (the “SP 3 LC”) with related amounts outstanding of $4.1 3.00 % per annum. The term loans under the SP3 Facility require quarterly principal and interest payments, mature in November 2027 and bear interest at the SOFR plus the applicable margin. The applicable margin is 3.00 % per annum for the first three years, 3.125 % per annum from the third anniversary through the fifth anniversary and 3.25 % per annum starting on the fifth anniversary. The effective interest rate on the SP3 Facility was 7.58 % and 7.86 % as of December 31, 2025 and 2024, respectively. The SP3 Facility requires the Company to enter into and maintain Interest Rate Hedging Agreements on a pro rata basis to the extent necessary to provide interest rate protection of at least 75 % but in no event greater than 100 % of the aggregate principal amount outstanding.
The obligations of the Company under the SP3 Facility are secured by substantially all of the assets and equity interest in certain of the Company’s subsidiaries. The SP3 Facility requires the Company to be in compliance with various covenants, including debt service coverage ratios, and as of December 31, 2025, the Company was in compliance with those required covenants under the SP3 Facility.
Second Key Bank Credit Agreement
The Second Key Bank Credit Agreement, executed with Key Bank National Association as the administrative agent and certain third parties as the lenders, includes term loans which require semi-annual principal and interest payments, mature in April 2030 and bear interest at 8.25 % per annum. The effective interest rate on term loans under the Second Key Bank Agreement was 8.25
F-29
Deutsche Bank Credit Agreement
As part of the acquisition of SEMTH (See Note 3. Acquisitions) in March 2023, the Company assumed debt with Deutsche Bank AG, New York Bank (“Deutsche Bank”). Prior to the SEMTH Acquisition, SET Borrower 2022, LLC (“SET Borrower”), a wholly owned subsidiary of SEMTH, entered into a credit agreement effective June 10, 2022 (the “Closing Date”) with Deutsche Bank as the facility agent, which consisted of a term loan of $125.0 million (the “SP4 Facility”) and is collateralized by all of the assets and property of SET Borrower. The term loan bears interest at the SOFR rate, plus the applicable margin. For the period from the Closing Date through the first twelve months , the applicable margin is 2.25 % per annum, 2.50 % for the following six months , and 2.75 % for the next six months , and 3.00 % through the maturity date. The term loan required quarterly payments, which began on August 17, 2022, and if the outstanding loan balance exceeded the borrowing base on a calculation date, the remaining balance would become due in a single payment in August 2025.
On June 26, 2024, the Company fully repaid the outstanding balance on the SP4 Facility of $125.0 million using proceeds from the SET Facility, as defined below. The repayment of the SP4 Facility was treated as a debt extinguishment under ASC 470-50, Debt—Modifications and Extinguishments. In connection with the repayment of the SP4 Facility, the Company settled the related interest rate swap contracts (see Note 8. Interest Rate Swaps for further discussion).
Barings GPSF Credit Agreement
On June 26, 2024, Spruce SET Borrower 2024, LLC (the “SET Borrower”), a wholly owned subsidiary of the Company, entered into a non-recourse Credit Agreement with Barings GPSF LLC, which provided a fixed interest term loan in the aggregate principal amount of $130.0 million (the “SET Facility”). The proceeds of the SET Facility were primarily used to repay the SP4 Facility discussed above. The SET Borrower incurred approximately $2.1 million of deferred financing costs related to the SET Facility, which are being amortized on a straight-line basis over the anticipated debt servicing period. The SET Facility matures on April 17, 2042 and requires quarterly principal and interest payments at 6.89 % per annum beginning August 2024. The effective interest rate on the SET Facility as of December 31, 2025 and December 31, 2024 was 6.89 % and 6.89 %, respectively. Effective December 26, 2027, the SET Facility requires additional interest to be accrued on any outstanding aggregate principal or unpaid accrued interest.
The SET Facility is collateralized by all of the assets and property of the SET Borrower. The SET Facility requires the SET Borrower to be in compliance with various covenants, and the SET Borrower was in compliance with the required covenants under the SET Facility as of December 31, 2025.
Banco Santander Credit Agreement
On November 22, 2024, Spruce Power 5 Borrower 2024, LLC (the “SP5 Borrower”), a wholly owned subsidiary of the Company, entered into a non-recourse credit agreement with Banco Santander, S.A., New York, which provided for a 3-year term loan facility in the aggregate principal amount of approximately $109.8 million (the “SP5 Facility”), of which proceeds were used to fund the NJR Acquisition. The SP5 Facility matures on November 22, 2027 and requires quarterly principal and interest payments with the remaining balance due in a single payment on November 22, 2027. Borrowings under the SP5 Facility bear interest at a variable rate equal to the SOFR as administered by the Federal Reserve Bank of New York plus a margin of 2.15 % from the original closing date through the end of the 24th month after the original closing date, and 2.75 % from the beginning of the 25th month after the original closing date until the date all principal and accrued and unpaid interest has been paid in full. The effective interest rate on the SP5 Facility as of December 31, 2025 and December 31, 2024 was 6.48 % and 6.48 %, respectively.
The SP5 Facility is collateralized by all of the assets and property of the SP5 Borrower. The SP5 Facility requires a swap percentage of at least 80 % of the outstanding loan balance and to be in compliance with various covenants. The Company obtained a waiver for the swap coverage at year-end and subsequently entered into an additional incremental swap contract. As of the date these financials were issued, the SP5 Borrower is in compliance with all required covenants under the SP5 Facility.
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Certain of the Company’s credit agreements require the Company, on a quarterly basis, to consider loan to value ratios or estimated principal repayments based on the projected cash waterfall when determining current and future debt principal payments, which are subject to change. As of December 31, 2025, the estimated principal maturities of the Company’s debt were as follows:
| As of December 31, | ||||||||
| (Amounts in thousands) | 2025 | |||||||
| 2026 | $ | |||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| 2030 | ||||||||
Thereafter | ||||||||
Total | $ | |||||||
F-31
Note 8. Interest Rate Swaps
The purpose of the Company’s swap agreements is to convert the floating interest rate on its credit agreements (discussed above) to a fixed rate. In connection with the acquisition of Legacy Spruce Power, the Company assumed interest rate swaps from agreements Legacy Spruce Power executed with four financial institutions.
As part of the SEMTH Acquisition in 2023, the Company assumed interest rate swaps related to the SP4 Facility, which were settled concurrently with the full repayment of the SP4 Facility in June 2024 and resulted in a gain of approximately $3.6 million within interest expense, net during the year ended December 31, 2024. The Company also completed the early settlement of certain interest rate swaps, which resulted in a gain of approximately $1.6 million within interest expense, net during the year ended December 31, 2024.
As of December 31, 2025 and 2024, the notional amount of the interest rate swaps covered approximately 89 % and 91 % of the balance of the Company’s floating rate term loans, respectively.
As of December 31, 2025, the following interest rate swaps are outstanding (in thousands):
| # | Notional Amount | Fixed Rate | Effective Date | Maturity Date | Total Fair Value Asset (Liability) | |||||||||||||||||||||||||||
| 1 | $ | % | 4/30/2020 | 1/31/2031 | $ | |||||||||||||||||||||||||||
| 2 | % | 4/30/2020 | 1/31/2031 | |||||||||||||||||||||||||||||
| 3 | % | 4/30/2020 | 1/31/2031 | |||||||||||||||||||||||||||||
| 4 | % | 10/31/2019 | 1/31/2031 | |||||||||||||||||||||||||||||
| 5 | % | 10/31/2019 | 1/31/2031 | |||||||||||||||||||||||||||||
| 6 | % | 10/31/2019 | 1/31/2031 | |||||||||||||||||||||||||||||
| 7 | % | 10/31/2019 | 1/31/2031 | |||||||||||||||||||||||||||||
| 8 | % | 7/31/2019 | 1/31/2031 | |||||||||||||||||||||||||||||
| 9 | % | 7/31/2019 | 1/31/2031 | |||||||||||||||||||||||||||||
| 10 | % | 7/31/2019 | 1/31/2031 | |||||||||||||||||||||||||||||
| 11 | % | 7/31/2019 | 1/31/2031 | |||||||||||||||||||||||||||||
| 12 | % | 01/31/2023 | 07/31/2032 | |||||||||||||||||||||||||||||
| 13 | % | 01/31/2023 | 07/31/2032 | |||||||||||||||||||||||||||||
| 14 | % | 07/12/2022 | 04/30/2032 | |||||||||||||||||||||||||||||
| 15 | % | 07/12/2022 | 10/31/2031 | |||||||||||||||||||||||||||||
| 16 | % | 08/18/2023 | 01/31/2032 | ( | ||||||||||||||||||||||||||||
| 17 | % | 11/22/2024 | 05/17/2033 | ( | ||||||||||||||||||||||||||||
| $ | $ | |||||||||||||||||||||||||||||||
During the year ended December 31, 2025, the aggregate impact of the Company’s interest rate swaps in the consolidated statements of operation was $4.8 million, of which $12.7 million related to unrealized losses and $7.9 million related to realized gains, which is recognized within interest expense, net in the consolidated statements of operation.
During the year ended December 31, 2024, the aggregate impact of the Company’s interest rate swaps in the consolidated statements of operation was $15.2 million, of which $2.8 million related to unrealized losses and $18.0 million related to realized gains, which is recognized within interest expense, net in the consolidated statements of operations.
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Note 9. Right-of-Use Assets and Lease Liabilities
The Company’s operating leases primarily relate to office space. The Company’s related ROU assets and lease liabilities are comprised of the following as of each period end:
| As of December 31, | |||||||||||
| (Amounts in thousands) | 2025 | 2024 | |||||||||
| Operating leases: | |||||||||||
| ROU assets | $ | $ | |||||||||
| Lease liability, current | |||||||||||
| Lease liability, non-current | |||||||||||
Other information related to leases is presented below:
| Years Ended December 31, | |||||||||||
| (Amounts in thousands) | 2025 | 2024 | |||||||||
| Other information: | |||||||||||
| Operating lease cost | $ | $ | |||||||||
| Variable lease cost | |||||||||||
| Sublease income | |||||||||||
| Operating cash outflows from operating ROU assets | |||||||||||
.
| As of December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Weighted-average remaining lease term – operating leases (in months) | |||||||||||
| Weighted-average discount rate – operating leases | % | % | |||||||||
As of December 31, 2025, the annual minimum lease payments of the Company’s operating lease liabilities were as follows:
| As of December 31, | ||||||||
| (Amounts in thousands) | 2025 | |||||||
| 2026 | $ | |||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| 2030 | ||||||||
| Total future minimum lease payments, undiscounted | ||||||||
| Less: Imputed interest | ( | |||||||
| Present value of future minimum lease payments | $ | |||||||
F-33
Note 10. Fair Value Measurements
The Company uses various assumptions and methods in estimating the fair values of its financial instruments.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Private placement warrants to purchase 529,167 shares of common stock with an exercise price of $92.00 per share, which expired on December 21, 2025, were valued using a Black-Scholes model, pursuant to the inputs provided in the table below.
| Assumptions for Assets and Liabilities Measured at Fair Value on a Recurring Basis | |||||||||||
| Input | December 31, 2024 | ||||||||||
| Risk-free rate | % | ||||||||||
| Remaining term in years | |||||||||||
| Expected volatility | % | ||||||||||
| Exercise price | $ | ||||||||||
| Fair value of common stock | $ | ||||||||||
The Company’s interest rate swaps are not traded on a market exchange and the fair values are determined using a valuation model based on a discounted cash flow analysis. This analysis reflects the contractual terms of the interest rate swap agreements and uses observable market-based inputs, including estimated future SOFR interest rates. The fair value of the Company's interest rate swap is the net difference in the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on the expectation of future interest rates and are observable inputs available to a market participant. The interest rate swap valuation is classified as Level 2 of the fair value hierarchy.
The following table sets forth the Company’s assets and liabilities which are measured at fair value on a recurring basis by level within the fair value hierarchy:
| Fair Value Measurements as of December 31, 2025 | ||||||||||||||||||||||||||
| (Amounts in thousands) | Level I | Level II | Level III | Total | ||||||||||||||||||||||
| Asset: | ||||||||||||||||||||||||||
| Interest rate swaps | $ | $ | $ | $ | ||||||||||||||||||||||
| Money market accounts | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||
| Interest rate swaps | $ | $ | $ | $ | ||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
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| Fair Value Measurements as of December 31, 2024 | ||||||||||||||||||||||||||
| (Amounts in thousands) | Level I | Level II | Level III | Total | ||||||||||||||||||||||
| Asset: | ||||||||||||||||||||||||||
| Interest rate swaps | $ | $ | $ | $ | ||||||||||||||||||||||
| Money market accounts | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||
| Interest rate swaps | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
The fair value of the Company’s non-recourse debt as of December 31, 2025 and 2024 was $692.5 million and $723.8 million, respectively.
Note 11. Goodwill
Note 12. Stock-Based Compensation Expense
Stock-based compensation expense for stock options and restricted stock units for the years ended December 31, 2025 and 2024 was $3.0 million and $2.7 million, respectively. As of December 31, 2025, there was $7.2 million of unrecognized compensation cost related to stock options and restricted stock units which is expected to be recognized over the remaining vesting periods, with a weighted-average period of 2.6 years.
Stock Options
The Company grants stock options to certain employees that will vest over a period of to four years . A summary of stock option award activity for the years ended December 31, 2025 and 2024 was as follows:
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| Options | Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | |||||||||||||||||
Outstanding at December 31, 2023 | $ | |||||||||||||||||||
| Granted | ||||||||||||||||||||
| Exercised | ||||||||||||||||||||
| Cancelled or forfeited | ||||||||||||||||||||
Outstanding at December 31, 2024 | $ | |||||||||||||||||||
| Granted | ||||||||||||||||||||
| Exercised | ( | |||||||||||||||||||
| Cancelled or forfeited | ( | |||||||||||||||||||
Outstanding at December 31, 2025 | $ | |||||||||||||||||||
Exercisable at December 31, 2025 | $ | |||||||||||||||||||
The aggregate intrinsic value of stock options outstanding as of December 31, 2025 and 2024 was $0.8 million and $0.1 million, respectively. Cash received from options exercised for the years ended December 31, 2025 and 2024 was less than $0.1 million and $0.0 million, respectively.
During the year ended December 31, 2024, the Company granted 295,229 stock options to its President and Chief Executive Officer (the “CEO”) upon his appointment to such positions effective April 12, 2024. There were no stock options granted during the year ended December 31, 2025.
The fair value of stock options granted during the year ended December 31, 2024 was measured with the following assumptions:
| 2024 | ||||||||
| Expected volatility | ||||||||
| Expected term (in years) | ||||||||
| Risk-free interest rate | % | |||||||
| Expected dividend yield | % | |||||||
Restricted Stock Units
The Company grants restricted stock units to certain employees that will generally vest over a period of four years . The fair value of restricted stock unit awards is estimated by the fair value of the Company’s common stock at the date of grant. Restricted stock units activity during the years ended December 31, 2025 and 2024 was as follows:
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| Number of Shares | Weighted Average Grant Date Fair Value Per Share | ||||||||||
Non-vested, at December 31, 2023 | $ | ||||||||||
| Granted | |||||||||||
| Vested | ( | ||||||||||
| Cancelled or forfeited | ( | ||||||||||
Non-vested, at December 31, 2024 | $ | ||||||||||
| Granted | |||||||||||
| Vested | ( | ||||||||||
| Cancelled or forfeited | ( | ||||||||||
Non-vested, at December 31, 2025 | $ | ||||||||||
During the year ended December 31, 2024, the Company granted restricted stock unit awards of 88,636 shares of common stock to the CEO upon his appointment effective April 12, 2024. In addition, upon the separation of the prior President and Chief Executive Officer (“Former CEO”) from the Company effective April 12, 2024, 97,994 and 244,267 restricted stock units awarded to the Former CEO were vested and forfeited, respectively. The Company recorded $0.5 million of expense related to the 97,994 vested awards during the year ended December 31, 2024.
Former CEO's Ladder Restricted Stock Unit Award
In connection with the acquisition of Legacy Spruce Power and his appointment as the Company's President effective September 9, 2022, the Company granted to its Former CEO a restricted stock unit award (the “Ladder RSUs”) of 208,333 shares of common stock. The Ladder RSUs were to vest in 10 % increments on the dates the Plan administrator certifies the applicable milestone stock prices have been achieved or exceeded, provided that the Former CEO remained employed on the date of certification and such achievement occurs within ten years of the date of the grant.
The Company used a Monte Carlo simulation valuation model to determine the fair value of the award as of the Acquisition Date, which was accounted for as a liability until the separation of the Former CEO effective April 12, 2024. The following inputs were used in the simulation: grant date stock price of $9.36 per share, annual volatility of 85.0 %, risk-free interest rate of 3.3 % and dividend yield of 0.0 %. For each tranche, a fair value was calculated as well as a derived service period which represents the median number of years it is expected to take for the Ladder RSUs to meet their corresponding milestone stock price excluding the simulation paths that result in the Ladder RSUs not vesting within the 10 -year term of the agreement. Each tranche's fair value would have been amortized ratably over the respective derived service period.
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The fair value and derived service period of each tranche was as follows:
| Stock Price Tranche | Fair Value | Derived Service Period (in years) | ||||||||||||
| $ | $ | |||||||||||||
The Company recognized no expense related to the Ladder RSUs for the years ended December 31, 2025 and December 31, 2024. Upon separation of the Former CEO from the Company effective April 12, 2024, the Ladder RSUs were terminated and the Company recorded a gain of $0.7 million during the year ended December 31, 2024.
Note 13. Noncontrolling Interests
The following table summarizes the Company’s noncontrolling interests as of December 31, 2025:
| Tax Equity Entity | Date Class A Member Admitted | |||||||
| ORE F4 Holdco, LLC | August 2014 | |||||||
| Volta Solar Owner II, LLC | August 2017 | |||||||
The tax equity entities were structured at inception so that the allocations of income and loss for tax purposes will flip at a future date. The terms of the tax equity entities’ operating agreements contain allocations of taxable income (loss), Section 48(a) ITCs and cash distributions that vary over time and adjust between the members on an agreed date (referred to as the flip date). The operating agreements specify either a date certain flip date or an internal rate of return (“IRR”) flip date. The date certain flip date is based on the passage of a fixed period of time as defined in the operating agreements for each entity. The IRR flip date is the date on which the tax equity investor has achieved a contractual rate of return. From inception through the flip date, the Class A members' allocation of taxable income (loss) and Section 48(a) ITCs is generally 99 % and the Class B members' allocation of taxable income (loss) and Section 48(a) ITCs is generally 1 %. After the related flip date (or, if the tax equity investor has a deficit capital account, typically after such deficit has been eliminated), the Class A members' allocation of taxable income (loss) will typically decrease to 5 % (or, in some cases, a higher percentage if required by the tax equity investor) and the Class B members' allocation of taxable income (loss) will increase by an inverse amount.
Total assets on the consolidated balance sheets include $35.1 million, of which $33.2 million relate to Property and equipment, net as of December 31, 2025 of assets held by the company’s VIEs, which can only be used to settle obligations of the VIEs. Total liabilities on the consolidated balance sheets include $2.0 million as of December 31, 2025 of liabilities that are the obligations of the Company's VIEs.
Total assets on the consolidated balance sheets include $36.0 million as of December 31, 2024 of assets held by the Company's VIEs, which can only be used to settle obligations of the VIEs. Total liabilities on the consolidated balance sheets include $0.8 million as of December 31, 2024 of liabilities that are the obligations of the Company's VIEs.
F-38
Spruce Power Holding Corporation
| Notes to Unaudited Condensed Consolidated Financial Statements | ||
Note 14. Commitments and Contingencies
Legal Proceedings
The Company is periodically involved in legal proceedings and claims arising in the normal course of business, including proceedings relating to intellectual property, employment and other matters. Management believes the outcome of these proceedings, as outlined below, will not have a significant adverse effect on the Company’s financial position, operating results, or cash flows.
Securities Class Action Proceedings
On March 8, 2021, two putative securities class action complaints were filed against the Company, and certain of its current and former officers and directors in the federal district court for the Southern District of New York. Those cases were ultimately consolidated under C.A. No. 1:21-cv-2002, and a lead plaintiff was appointed in June 2021. On July 20, 2021, an amended complaint was filed alleging that certain public statements made by the defendants between October 2,
2020, and March 2, 2021, violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. Following negotiations with a mediator, in September 2023, the Company and the plaintiffs agreed on a settlement in principle in the aggregate amount of $19.5 million (the “Settlement Amount”), and on December 6, 2023, the lead plaintiff and the defendants entered into a stipulation and agreement of settlement requiring the Company to pay the Settlement Amount to resolve the class action litigation and the related legal fees and administration costs. On April 30, 2024, the New York Court approved a final settlement of the Class Action Litigation. The Settlement Amount was offset by approximately $4.5 million of related loss recoveries from the Company’s directors and officers liability insurance policy with third parties, which was paid out in February 2024. The Company paid the $15.0 million net settlement amount to the settlement claims administrator in February 2024.
On September 20, 2021, and October 19, 2021, two class action complaints were filed in the Delaware Court of Chancery against certain of the Company’s current officers and directors, and the Company’s sponsor of its special purpose acquisition company merger, Pivotal Investment Holdings II LLC. These actions were consolidated as in re XL Fleet Corp. (Pivotal) Stockholder Litigation, C.A. No. 2021-0808, and an amended complaint was filed on January 31, 2022. Defendants filed a motion to dismiss the amended complaint on May 13, 2022, and on July 11, 2022, plaintiffs filed a second amended complaint. The second amended complaint alleges various breaches of fiduciary duty against the Company and/or its officers, several allegedly misleading statements made in connection with the merger, and aiding and abetting breaches of fiduciary duty in connection with the negotiation and approval of the December 21, 2020 merger and organization of XL Hybrids, Inc., a Delaware corporation (“Legacy XL”) to become XL Fleet Corp. On August 19, 2022, defendants moved to dismiss the second amended complaint, which was granted in part and denied in part on June 9, 2023. The parties then engaged in discovery. On November 13, 2024, the Company filed a stipulation and settlement agreement seeking court approval to settle this matter in full for $4.75 million, which is currently accrued for as of December 31, 2024 (See Note 6. Accrued Expenses and Other Current Liabilities). On March 26, 2025, the court approved the stipulation and settlement agreement, and in April 2025, the Company paid the settlement amount of $4.75 million.
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Shareholder Derivative Actions
On June 23, 2022, the Company received a shareholder derivative complaint filed in the U.S. District Court for the District of Massachusetts, captioned Val Kay derivatively on behalf of nominal defendant XL Fleet Corp., against all current directors and former officers and directors, C.A. No. 1:22-cv-10977. The action was filed by a shareholder purportedly on XL Fleet Corp.’s behalf, and raises claims for contribution, as well as claims for breach of fiduciary duty, waste of corporate assets, unjust enrichment, and abuse of control. In March 2023, two shareholder derivative actions were filed in the U.S. District Court for the District of Delaware, namely Reali v. Griffin, et al., C.A. No. 1:23-cv-00289 and Tucci v. Ledecky, et al., C.A. 1:23-cv-00322. These actions were consolidated and captioned In re Spruce Power Holding Corporation Shareholder Derivative Litigation, C.A. No. 1:23-cv-00289. In August 2023, an additional derivative action was filed in the U.S. District Court for the Southern District of New York, captioned Boyce v. Ledecky, et al., C.A. No. 1:23-cv- 8591 (collectively, the “Derivative Matters”).On December 8, 2023, the parties reached a settlement-in-principle to settle, the Derivative Matters. The court granted preliminary approval of the settlement on May 1, 2024, and final approval in full on August 8, 2024. The settlement provides for certain corporate governance enhancements and no monetary payments. On August 14, 2024, the court awarded attorney fees of $1.0 million, which were paid in September 2024.
State Attorney Generals’ Investigations
In 2023, the Company received subpoenas from the attorneys general for the states of Connecticut, New Jersey, New York and Texas requesting information on the Company’s billing and operations practices. The Company has been timely responding to the states’ information requests and otherwise cooperating with these investigations and intends to continue to do so until they are resolved. In March 2026, the Company resolved the matter with the Connecticut Attorney General pursuant to a Stipulation that required the Company’s subsidiary Spruce Power 3, LLC to adhere to certain billing practices and pay a nominal fee. At this time, the Company estimates the potential loss to be approximately $0.1 million for the Connecticut matter, and has been accrued for as of December 31, 2025 (See Note 6. Accrued Expenses and Other Current Liabilities). At this time the Company is unable to estimate potential losses, if any, related to these matters in the remaining states.
BMZ USA, Inc.
On February 11, 2022, BMZ USA Inc. (“BMZ”), a battery manufacturer, sued XL Hybrids for breach of contract, alleging that XL Hybrids failed to timely purchase the full allotment of batteries required under a certain master supply agreement between the parties. In January 2024, BMZ obtained a judgment for $3.9 million against XL Hybrids, Inc. In June 2024, BMZ sought to enforce the judgement against the Company in Massachusetts Trial Court and that enforcement action was dismissed in March 2025. In April 2025, BMZ sought to enforce the judgement against the Company in Colorado Superior Court, which was removed to Federal Court. That enforcement action was dismissed in March 2026. The Company believes it is probable that BMZ will either appeal the dismissal or seek to enforce the judgement in another jurisdiction and currently estimates the potential loss to be approximately $1.2 million, which has been accrued for as of December 31, 2025 (See Note 6. Accrued Expenses and Other Current Liabilities).
ITC Recapture Provisions
The IRS may disallow and recapture some, or all, of the ITCs due to improperly calculated basis after a project was placed in service ("Recapture Event"). If a Recapture Event occurs, Spruce Power is obligated to pay the applicable Class A Member a recapture adjustment, which includes the amounts the Class A Members are required to repay the IRS, including interest and penalties, as well as any third-party legal and accounting fees incurred by the Class A Members in connection to the Recapture Event, as specified in the operating agreements. Such a payment by Spruce Power to the Class A Members are not to be considered a capital contribution to the fund per the operating agreements, nor would it be considered a distribution to the Class A Members. A Recapture Event was not deemed to be probable by the Company, therefore no accrual has been recorded as of December 31, 2025 and 2024.
F-40
Plastic Omnium
Plastic Omnium is the assignee of the contractual rights of Actia Corp. under a certain battery purchase order between XL Hybrids and Actia Corp. On March 17, 2023, Plastic Omnium sued Legacy XL and the Company for breach of contract, alleging that Legacy XL ordered a total of 1,000 batteries from Plastic Omnium, paid for 455 of those batteries, and then reneged on 545 of those products. While Plastic Omnium admits it never actually delivered the remaining 545 products, it claims it purchased materials to complete the order, and as a result, Legacy XL and the Company are liable for at least approximately $2.5 million. The Company reached a settlement in principle to settle the matter for $1.25 million, which was paid in December 2024.
Parker-Hannifin
On March 11, 2024, the Company filed a lawsuit against Parker-Hannifin for a declaratory judgment, captioned
XL Hybrids, Inc. v. Parker-Hannifin Corporation, No. 1:24-cv-10894-WGY (D. Mass, removed from Mass. State Court No. 2484-CV-00661). The case related to a contract for the purchase of motors designed, produced and manufactured by Parker-Hannifin for XL Hybrids, Inc. which was executed in July 2019. On April 5, 2024, Parker-Hannafin filed counterclaims, alleging that XL Hybrids, Inc. and the Company were in breach of the contract. On November 1, 2024, the
parties reached a settlement in principle to settle the matter for $0.5 million, which was accrued for as of December 31, 2024, and subsequently paid in January 2025 (See Note 6. Accrued Expenses and Other Current Liabilities).
Master SREC Purchase and Sale Agreement
The Company has forward sales agreements, which are related to a certain number of SRECs, to be generated from the Company’s solar energy systems located in Maryland, Massachusetts, Delaware, and New Jersey to be sold at fixed prices over varying terms of up to 20 years. In the event the Company does not deliver such SRECs to the counterparty, the Company could be forced to pay additional penalties and fees as stipulated within the contracts.
Debt Guarantees
The Spruce Guarantor, Spruce Power Holding Corporation, entered into guarantees in favor of the SP5 Borrower and the SET Borrower wherein they guaranteed the payment and performance of Solar Service Experts, LLC, a wholly owned subsidiary of the Company, as servicer under servicing agreements with these borrowers.
Indemnities and Other Guarantees
During the normal course of business, the Company has made certain indemnities and guarantees under which it may be required to make payments in relation to certain transactions. The duration of the Company’s indemnities and guarantees varies, however the majority of these indemnities and guarantees are limited in duration. Historically, the Company has not been obligated to make significant payments for such obligations, does not anticipate future payments, and as such, no reserve has been established and no other liabilities have been recorded for these indemnities and guarantees as of December 31, 2025 and 2024.
Insurance Claims and Recoveries related to Los Angeles Fires
Note 15. Stockholders’ Equity
Common Stock
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As of December 31, 2025 and 2024, the Company had 350,000,000
The following shares of common stock are issued and outstanding or unvested as of December 31, 2025:
| Restricted stock units | |||||
| Stock options | |||||
| Total | |||||
Share Repurchase Program
In May 2023, the Company's Board of Directors approved a share repurchase program for the repurchase of up to $50.0 million of the Company's outstanding common stock through May 15, 2025 (the “Repurchase Program”). In May 2025, the Board authorized the extension of the Repurchase Program to expire on May 15, 2027. The Repurchase Program authorizes the Company to effect repurchases through open market transactions, privately negotiated transactions, Rule 10b5-1 trading plans and/or Rule 10b-18 trading plans, and other means. The Company is not obligated to repurchase any specific number of shares or dollar amount and may discontinue the Repurchase Program at any time. The timing, number and purchase price of share repurchases, if any, will be determined by the Company’s management in its discretion and will depend on a number of factors, including the market price of shares, general market and economic conditions, and other alternatives available to the Company
During the years ended December 31, 2025 and 2024, the Company repurchased 0.8 million shares and 0.3 million shares of common stock under the Repurchase Program in open market transactions at a weighted-average price of $2.33 and $2.93 per share for an aggregate purchase price of $1.8 million and $0.9 million, respectively, inclusive of transaction costs. As of December 31, 2025, $42.0 million remained available for future share repurchases under the Repurchase Program.
Note 16. Net Loss Per Share
The following is a reconciliation of the numerator and denominator used to calculate basic and diluted earnings per share for the years ended December 31, 2025 and 2024:
| Years Ended December 31, | |||||||||||
| (Amounts in thousands, except share data) | 2025 | 2024 | |||||||||
| Numerator: | |||||||||||
| Net loss attributable to stockholders | $ | ( | $ | ( | |||||||
| Denominator: | |||||||||||
| Weighted average shares outstanding, basic and diluted | |||||||||||
| Net loss attributable to stockholders per share, basic and diluted | $ | ( | $ | ( | |||||||
For the years presented, potentially dilutive outstanding securities, which include stock options, restricted stock units and warrants, have been excluded from the computation of diluted net loss per share as their effect would be anti-dilutive for each year presented. As such, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share are the same for each year presented.
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Note 17. Income Taxes
Net deferred income tax assets consist of the following components as of December 31, 2025 and 2024:
As of December 31, | |||||||||||
| (Amounts in thousands) | 2025 | 2024 | |||||||||
| Deferred tax assets (liabilities): | |||||||||||
| Net operating loss carryforwards | $ | $ | |||||||||
| Accrued settlements | |||||||||||
| Pass-through equity interests | |||||||||||
| Fair market value adjustments | ( | ( | |||||||||
| Tax credit carryforwards | |||||||||||
| Reserves | |||||||||||
| Stock-based compensation | |||||||||||
| Depreciation and amortization | ( | ( | |||||||||
| Interest expense carryforward | |||||||||||
| Right of use assets | |||||||||||
| Other | |||||||||||
| Total deferred tax assets, net | |||||||||||
| Less valuation allowance | ( | ( | |||||||||
| Net deferred tax assets | $ | $ | |||||||||
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Upon adoption of ASU 2023-09, Improvements to Income Tax Disclosures, the reconciliation of taxes at the federal statutory rate to our provision for (benefit from) income taxes for the year ended December 31, 2025 was as follows:
| Year Ended December 31, 2025 | |||||||||||
| (Amounts in thousands) | Amount | Percent | |||||||||
| US federal statutory income tax rate | $ | ( | % | ||||||||
| State taxes, net of federal benefit | % | ||||||||||
| Effects of changes in tax law or rates enacted in the current period | — | % | |||||||||
| Tax credits | |||||||||||
| Research and development tax credits | ( | % | |||||||||
| Changes in valuation allowance | ( | % | |||||||||
| Nondeductible/nontaxable items | |||||||||||
| Stock based compensation | ( | % | |||||||||
| Fair market value adjustments | ( | % | |||||||||
| Other | ( | % | |||||||||
| Other adjustments | |||||||||||
| Return to accrual | ( | % | |||||||||
| Net operating loss adjustments | ( | % | |||||||||
| RSU forfeitures/cancellations | ( | % | |||||||||
| Sec 163(j) adjustment | ( | % | |||||||||
| Other | ( | % | |||||||||
| Effective tax rate | $ | % | |||||||||
For the year ended December 31, 2025, state taxes for California, New Jersey and New York made up the majority (greater than 50%) of the tax affect.
The reconciliation of taxes at the federal statutory rate to our provision for (benefit from) income taxes for the year ended December 31, 2024 in accordance with the guidance prior to the adoption of ASU 2023-09 was as follows:
| Year Ended December 31, 2024 | ||||||||
| U.S. federal statutory rate | % | |||||||
| State taxes, net of federal benefit | % | |||||||
| Change in fair value of warrant liability | % | |||||||
| Option and RSU expense | % | |||||||
| Goodwill impairment | ( | % | ||||||
| Other | ( | % | ||||||
| True-up to prior years' return | % | |||||||
| Change in valuation allowance | ( | % | ||||||
| Purchase accounting | % | |||||||
| Effective tax rate | % | |||||||
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The Company utilizes an asset and liability approach for financial accounting and reporting for income taxes. The provision for income taxes is based upon income or loss after adjustment for those permanent items that are not considered in the determination of taxable income. Deferred income taxes represent the tax effects of differences between the financial reporting and tax basis of the Company’s assets and liabilities at the enacted tax rates in effect for the years in which the differences are expected to reverse.
The Company evaluates the recoverability of deferred tax assets and establishes a valuation allowance when it is more likely than not that some portion or all the deferred tax assets will not be realized. Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In management’s opinion, adequate provisions for income taxes have been made. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary..
Tax benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50% likely to be realized upon settlement. A liability for “unrecognized tax benefits” is recorded for any tax benefits claimed in the Company’s tax returns that do not meet these recognition and measurement standards. For the years ended December 31, 2025 and 2024, no liability for unrecognized tax benefits was required to be reported.
The Company has provided a full valuation allowance against its net deferred tax assets since realization of any future benefit from deductible temporary differences and net operating loss cannot be sufficiently assured. Management of the Company has evaluated the positive and negative evidence bearing upon the reliability of its deferred tax assets, which are comprised principally of net operating loss carryforwards and research and development credits. Under the applicable accounting standards, Management has considered the Company’s history of losses and concluded that it is more likely than not that the Company will not recognize the benefits of federal and state deferred tax assets. During the years ended December 31, 2025 and 2024, the Company decreased and increased its valuation allowance by $3.3 million and $25.1 million, respectively.
As of December 31, 2024, the Company had federal and state net operating loss (“NOL”) carryforwards of $523.3 million and $525.7 million, respectively. As of December 31, 2025, the Company had federal and state net operating loss (“NOL”) carryforwards of $568.7 million and $574.0 million, respectively. The federal NOL carryforwards were generated between the years ended December 31, 2018 and 2025 and have an indefinite life. At December 31, 2025, the Company had federal tax credits of approximately $0.9 million. These federal tax credits are available to reduce future taxable income and expire at various dates commencing 2038 through 2041.
The Company files income tax returns in the U.S. federal jurisdiction, and various states. With few exceptions, the Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years before 2018. The Company follows the provisions of FASB Accounting Standards Codification 740-10 (ASC 740-10), Accounting for Uncertainty in Income Taxes. ASC 740-10 prescribes a comprehensive model for the recognition, measurement, presentation and disclosure in consolidated financial statements of uncertain tax positions that have been taken or expected to be taken on a tax return. No
Note 18. Defined Contribution Plan
The Company has adopted a 401(k) plan to provide all eligible employees a means to accumulate retirement savings on a tax-advantaged basis. The 401(k) plan requires participants to be at least 21 years old. In addition to the traditional 401(k), eligible employees are given the option of making an after- tax contribution to a Roth 401(k) or a combination of both. Plan participants may make before-tax elective contributions up to the maximum percentage of compensation and dollar amount allowed under the IRC. Participants are allowed to contribute, subject to IRS limitations on total annual contributions from 1 % to 90 % of eligible earnings. The plan provides for automatic enrollment at a 3 % deferral rate of an employee’s eligible wages. The Company provides safe harbor matching contributions equal to 100 % on the first 3 % of an employee’s eligible earnings deferred and an additional 50 % on the next 2 % of an employee’s eligible earnings deferred. Employee elective deferrals and safe harbor matching contributions are 100 % vested at all times.
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In connection with the acquisition of Legacy Spruce Power, the Company adopted the Spruce Power 401(k) plan, which contains features similar to those of the XL Fleet Corp. 401(k) plan, except that (i) participants are allowed to contribute, subject to IRS limitations, on total annual contributions from 1 % to 80 % of eligible earnings and (ii) the safe harbor non-elective contribution is equal to 3 % of employee’s compensation.
The Company recognized expenses related to its 401(k) plans of approximately $1.3 million and $1.0 million for the years ended December 31, 2025 and 2024, respectively.
Note 19. Discontinued Operations
The following table provides supplemental details of the Company’s discontinued operations related to the Drivetrain business contained within the consolidated statements of operations for the years ended December 31, 2025 and 2024:
| Years Ended December 31, | |||||||||||
| (Amounts in thousands) | 2025 | 2024 | |||||||||
| Revenues | $ | $ | |||||||||
| Operating expenses: | |||||||||||
| Cost of revenues - operations and maintenance | |||||||||||
| Gain on asset disposal | ( | ||||||||||
| Total operating expenses | |||||||||||
| Net income (loss) from discontinued operations | $ | ( | $ | ||||||||
The following table presents aggregate carrying amounts of assets and liabilities of discontinued operations related to the Drivetrain business contained within the consolidated balance sheets:
As of December 31, | ||||||||||||||
| (Amounts in thousands) | 2025 | 2024 | ||||||||||||
| Assets from discontinued operations | $ | $ | ||||||||||||
| Liabilities from discontinued operations | $ | $ | ||||||||||||
Note 20. Segment Information
As of December 31, 2025 and 2024, the Company has one
The Company’s CODM is its CEO who is focused on strategic planning aimed at generating revenue and monetizing the Company’s home solar energy systems and its ability to provide top-tier related servicing solutions to its customers and third-parties. The CEO is provided on a quarterly basis with the Company’s consolidated segment expenses for the year ended 2024, which the CEO utilizes to assess the Company’s performance and for making decisions about resource allocation. For the year ended December 31, 2025, the information being provided to the CEO is at a lower level of aggregation as a result the Company has recast the prior period. The following tables presents the Company’s significant segment expenses for the years ended December 31, 2025 and 2024:
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| Years Ended December 31, | |||||||||||
| (Amounts in thousands) | 2025 | 2024 | |||||||||
| Revenues | $ | $ | |||||||||
| Cost of revenues - solar energy systems depreciation | |||||||||||
| Cost of revenues - operations and maintenance | |||||||||||
| Selling, general and administrative expenses - professional services | |||||||||||
| Selling, general and administrative expenses - compensation and benefits | |||||||||||
| Selling, general and administrative expenses - other | |||||||||||
| Interest expense, net | |||||||||||
| Litigation settlements | |||||||||||
| Impairment of goodwill | |||||||||||
| Other segment items | ( | ( | |||||||||
| Net loss | $ | ( | $ | ( | |||||||
Note 21. Subsequent Events
On March 27, 2026, the Company entered into an amendment (the “SP1 Facility Amendment”) to the SP1 Facility with Silicon Valley Bank (the “SP1 Facility”) which extends the maturity date to October 30, 2026 (the “Amended SP1 Maturity Date”), unless a signed term sheet for a long-term financing is obtained, in which case the Amended SP1 Maturity Date will be January 30, 2027. Under the terms of the SP1 Facility Amendment, the applicable margin is 2.75 % per annum from the effective date of the SP1 Facility Amendment to October 30, 2026, and 3.25 % per annum thereafter. The SP1 Facility Amendment includes a cross-default provision with the Second Key Bank Credit Agreement.
Management has reviewed all events subsequent to December 31, 2025 and prior to the issuance of these consolidated financial statements, and except as referenced above, the Company has determined there have been no events that have occurred that would require adjustments or disclosures within the consolidated financial statements.
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The term “disclosure controls and procedures” is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, as “controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms.” The Company’s disclosure controls and procedures are designed to ensure that material information relating to the Company and its consolidated subsidiaries is accumulated and communicated to its management, including its Chief Executive Officer and its Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures. In designing and evaluating the Company disclosure controls and procedures, the Company’s management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
The Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of its disclosure controls and procedures as of December 31, 2025. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms as of that date.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of the Company’s financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Due to its inherent limitations, the Company’s internal control over financial reporting may not prevent or detect all misstatements, including the possibility of human error, the circumvention or overriding of controls, or fraud. Effective internal control over financial reporting can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2025, based on the criteria established by the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations (the “COSO Framework”). A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the financial statements would not be prevented or detected on a timely basis.
Management has concluded that the Company maintained effective internal control over financial reporting as of December 31, 2025, based on the criteria established by the COSO Framework.
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Remediation of Previously Reported Material Weakness in Internal Control over Financial Reporting
As previously disclosed in Part II, Item 9A. “Controls and Procedures” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, and in Part I, Item 4. “Controls and Procedures” in the Company’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2025, June 30, 2025, and September 30, 2025, as of those dates, the Company did not design and maintain effective controls and identified material weaknesses in the control environment and certain control activities. These material weaknesses have been remediated as described below.
The Company is committed to supporting a strong culture of internal controls by designing, implementing and maintaining internal controls over financial reporting to maintain a strong internal control environment. To remediate the identified material weaknesses in internal control discussed above, management, with the oversight of the Audit Committee, took the following actions:
•The Company developed and presented a training program educating control owners concerning financial statement risk and principles of the COSO Framework, and invested in additional training opportunities related to the COSO Framework;
•The Company’s internal control department specifically focused on oversight of the Company’s internal control over financial reporting through the establishment of structures, reporting lines, and appropriate authorities and responsibilities for professionals within the Company;
•The Company designed and implemented controls related to billing and revenue recognition of its revenue contracts, in accordance with ASC 606, Revenue from Contracts with Customers. This included a combination of manual and automated controls as the Company has increased and is continuing to increase the use of automated controls to help mitigate the risk associated with manual intervention and human error.
•The Company hired qualified personnel with specialized skill sets to further bolster the Company’s ability to provide an appropriate level of oversight activities related to internal control over financial reporting. These personnel have significantly contributed to the remediation of the previously disclosed material weakness in control activities.
The Company completed the testing of the design and operating effectiveness of the internal controls and, based on the results of this testing, as of December 31, 2025, the Company concluded that the controls are adequately designed, implemented and have operated effectively for a sufficient period of time to remediate the previously reported material weaknesses.
Changes in Internal Control over Financial Reporting
Other than the remediation activities discussed above, there have been no other changes in our internal control over financial reporting during the quarter ended December 31, 2025 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
Disclosure Pursuant to Item 1.01 of Form 8-K - Entry into a Material Definitive Agreement
On March 27, 2026, the Company entered into an amendment to the SP1 Facility (the “SP1 Facility Amendment”) which extends the maturity date to October 30, 2026 (the “Amended SP1 Maturity Date”), unless a signed term sheet for a long-term financing is obtained, in which case the Amended SP1 Maturity Date will be January 30, 2027. Under the terms of the SP1 Facility Amendment, the applicable margin is 2.75 % per annum from the effective date of the SP1 Facility Amendment to October 30, 2026, and 3.25 % per annum thereafter. The SP1 Facility Amendment includes a cross-default provision with the Second Key Bank Credit Agreement.
The foregoing summary of the SP1 Facility Amendment and the transactions contemplated thereby does not purport to be a complete description and is qualified in its entirety by reference to the terms and conditions of the SP1 Facility Amendment, a copy of which is attached hereto as Exhibit 10.18 and incorporated herein by reference.
99
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
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PART III
Item 10. Directors, Executive Officers, and Corporate Governance
The information required by this Item will be set forth in the sections headed “Proposal One Election of Directors,” "Delinquent Section 16(a) Reports," “Corporate Governance and Committees – Code of Ethics,” “Corporate Governance and Committees – Insider Trading Policy,” “Corporate Governance and Committees – Audit Committee” and “Corporate Governance and Committees – Nominating and Corporate Governance Committee” in the Proxy Statement for the 2026 annual meeting of stockholders which will be filed within 120 days after the end of the fiscal year and is incorporated in this report by reference.
The Audit Committee of the Company’s Board of Directors is an “audit committee” for purposes of Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The members of the Audit Committee are John P. Miller (Chair), Clara Nagy McBane Hayes and Jonathan Ledecky.
Item 11. Executive Compensation
The information required by this Item will be set forth in the section headed “Executive Officer and Director Compensation” in the Proxy Statement for the 2026 annual meeting of stockholders which will be filed within 120 days after the end of the fiscal year and is incorporated in this report by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item will be set forth in the section headed “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement for the 2026 annual meeting of stockholders which will be filed within 120 days after the end of the fiscal year and is incorporated in this report by reference.
Information regarding the Company's equity compensation plans will be set forth in the section headed “Executive Officer and Director Compensation - Equity Compensation Plan Information” in the Proxy Statement for the 2026 annual meeting of stockholders which will be filed within 120 days after the end of the fiscal year and is incorporated in this report by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item will be set forth in the sections headed “Certain Relationships and Related Person Transactions” and “Corporate Governance and Committees – Director Independence” in the Proxy Statement for the 2026 annual meeting of stockholders which will be filed within 120 days after the end of the fiscal year and is incorporated in this report by reference.
Item 14. Principal Accountant Fees and Services
The information required by this Item will be set forth in the section headed “Independent Registered Public Accounting Firm – Audit Fees” and “Independent Registered Public Accounting Firm – Pre-Approval Policies and Procedures” in the Proxy Statement for the 2026 annual meeting of stockholders which will be filed within 120 days after the end of the fiscal year and is incorporated in this report by reference.
101
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a)Documents filed as part of this report.
1.The following financial statements of Spruce Power Holding Corporation and Report of CohnReznick LLP and Deloitte & Touche LLP, Independent Registered Public Accounting Firms, are included in this report:
2.List of financial statement schedules:
All schedules have been omitted since they are not applicable, or the required information is shown in the financial statements or notes thereto.
3.List of Exhibits required by Item 601 of Regulation S-K. See part (b) below.
(b)Exhibits.
| Exhibit No. | Description | Included | Form | Exhibit | Filing Date | |||||||||||||||||||||||||||
| 2.1 | By Reference | 8-K | 2.1 | September 15, 2022 | ||||||||||||||||||||||||||||
| 3.1 | By Reference | 8-K | 3.1 | December 23, 2020 | ||||||||||||||||||||||||||||
| 3.2 | By Reference | 8-K | 3.1 | October 6, 2023 | ||||||||||||||||||||||||||||
| 3.3 | By Reference | 8-K | 3.1 | November 14, 2022 | ||||||||||||||||||||||||||||
| 3.4 | By Reference | 8-K | 3.2 | November 14, 2022 | ||||||||||||||||||||||||||||
| 4.1 | Herewith | |||||||||||||||||||||||||||||||
102
| Exhibit No. | Description | Included | Form | Exhibit | Filing Date | |||||||||||||||||||||||||||
| 10.1 | By Reference | 10-Q | 10.1 | November 13, 2023 | ||||||||||||||||||||||||||||
| 10.3 | By Reference | 8-K | 10.1 | September 18, 2020 | ||||||||||||||||||||||||||||
| 10.4 | By Reference | S-4 | 10.6 | October 2, 2020 | ||||||||||||||||||||||||||||
10.5# | By Reference | 10-K | 10.5 | April 9, 2024 | ||||||||||||||||||||||||||||
10.6# | By Reference | 10-K | 10.6 | April 9, 2024 | ||||||||||||||||||||||||||||
10.7# | By Reference | 10-K | 10.7 | April 9, 2024 | ||||||||||||||||||||||||||||
10.8# | By Reference | 8-K | 10.11 | December 23, 2020 | ||||||||||||||||||||||||||||
| 10.9 | By Reference | 8-K | 10.2 | September 15, 2022 | ||||||||||||||||||||||||||||
| 10.10 | By Reference | 8-K | 10.3 | September 15, 2022 | ||||||||||||||||||||||||||||
| 10.12# | By Reference | 10-Q | 10.2 | August 14, 2024 | ||||||||||||||||||||||||||||
| 10.13# | By Reference | 10-Q | 10.1 | August 14, 2024 | ||||||||||||||||||||||||||||
| 10.14 | By Reference | 8-K | 10.1 | June 24, 2024 | ||||||||||||||||||||||||||||
| 10.15 | By Reference | 8-K | 10.1 | July 1, 2024 | ||||||||||||||||||||||||||||
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| Exhibit No. | Description | Included | Form | Exhibit | Filing Date | |||||||||||||||||||||||||||
| 10.16† | By Reference | 8-K | 10.1 | November 26, 2024 | ||||||||||||||||||||||||||||
| 10.17*# | Herewith | |||||||||||||||||||||||||||||||
| 10.18 | Herewith | |||||||||||||||||||||||||||||||
| 16.1 | By Reference | 8-K | 16.1 | February 5, 2025 | ||||||||||||||||||||||||||||
| 16.2 | By Reference | 8-K | 16.2 | February 5, 2025 | ||||||||||||||||||||||||||||
| 19.1 | By Reference | 10-K | 19.1 | March 31, 2025 | ||||||||||||||||||||||||||||
| 21 | Herewith | |||||||||||||||||||||||||||||||
23.1* | Herewith | |||||||||||||||||||||||||||||||
| 31.1* | Herewith | |||||||||||||||||||||||||||||||
| 31.2* | Herewith | |||||||||||||||||||||||||||||||
| 32.1^* | Herewith | |||||||||||||||||||||||||||||||
| 32.2^* | Herewith | |||||||||||||||||||||||||||||||
97* | By Reference | 10-K | 97* | March 31, 2025 | ||||||||||||||||||||||||||||
| 101.INS* | Inline XBRL Instance Document | Herewith | ||||||||||||||||||||||||||||||
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document | Herewith | ||||||||||||||||||||||||||||||
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | Herewith | ||||||||||||||||||||||||||||||
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | Herewith | ||||||||||||||||||||||||||||||
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | Herewith | ||||||||||||||||||||||||||||||
| 101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document | Herewith | ||||||||||||||||||||||||||||||
104
| Exhibit No. | Description | Included | Form | Exhibit | Filing Date | |||||||||||||||||||||||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | Herewith | ||||||||||||||||||||||||||||||
*Filed herewith
*+Schedule and exhibits to this exhibit omitted pursuant to Regulation S-K Item 601(b)(2). The Company agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request.
†Certain confidential portions of this exhibit were omitted by means of marking such portions with asterisks because the identified confidential portions (i) are not material and (ii) would be competitively harmful if publicly disclosed.
# Indicates management contract or compensatory plan or arrangement.
^ In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 34-47986, the certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Annual Report on Form 10-K and will not be deemed “filed” for purposes of Section 18 of the Exchange Act or deemed to be incorporated by reference into any filing under the Exchange Act or the Securities Act of 1933 except to the extent that the registrant specifically incorporates it by reference.
Item 16. Form 10-K Summary
Not applicable.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| SPRUCE POWER HOLDING CORPORATION | ||||||||
Date: March 31, 2026 | By: | /s/ Christopher Hayes | ||||||
| Name: | Christopher Hayes | |||||||
| Title: | Chief Executive Officer | |||||||
| (Principal Executive Officer) | ||||||||
| SPRUCE POWER HOLDING CORPORATION | ||||||||
Date: March 31, 2026 | By: | /s/ Thomas J. Cimino | ||||||
| Name: | Thomas J. Cimino | |||||||
| Title: | Chief Financial Officer and Head of Sustainability | |||||||
| (Principal Financial Officer and Principal Accounting Officer) | ||||||||
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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| Person | Capacity | Date | ||||||||||||
| /s/ Christopher Hayes | Chief Executive Officer and Director | March 31, 2026 | ||||||||||||
| Christopher Hayes | (Principal Executive Officer) | |||||||||||||
| /s/ Thomas J. Cimino | Chief Financial Officer and Head of Sustainability | March 31, 2026 | ||||||||||||
| Thomas J. Cimino | (Principal Financial Officer and Principal Accounting Officer) | |||||||||||||
| /s/ Shawn Kravetz | Director | March 31, 2026 | ||||||||||||
| Shawn Kravetz | ||||||||||||||
| /s/ Jonathan J. Ledecky | Director | March 31, 2026 | ||||||||||||
| Jonathan J. Ledecky | ||||||||||||||
| /s/ John P. Miller | Director | March 31, 2026 | ||||||||||||
| John P. Miller | ||||||||||||||
/s/ Ja-chin Audrey Lee | Director | March 31, 2026 | ||||||||||||
Ja-chin Audrey Lee | ||||||||||||||
/s/ Clara Nagy McBane | Director | March 31, 2026 | ||||||||||||
Clara Nagy McBane | ||||||||||||||
| /s/ Eric Tech | Director | March 31, 2026 | ||||||||||||
| Eric Tech | ||||||||||||||
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