本公告乃由中國能源建設股份有限公司（「本公司」，連同其附屬公司統稱「本集團」）根據 香港聯合交易所有限公司（「聯交所」）證券上市規則（「上市規則」）第13.51B(2)條，就根據 上市規則第13.51(2)(l)條，有關本公司獨立非執行董事（「董事」）魏偉峰博士（「魏博士」）的 資料變更而作出。 本公司近日獲魏博士（亦為SPI Energy Co., Ltd.（其股份曾於納斯達克上市，舊股票代碼： SPI， 於開曼群島註冊成立的公司，為商業、住宅、政府及公用事業客戶提供光伏解決方 案的全球供應商（「SPI Energy」））的前獨立董事）知會，開曼群島大法院已於2025年7月22 日發出針對SPI Energy的清盤令，並委任共同清盤人處理SPI Energy的相關清盤程序（「該 訴訟」）。魏博士已於2025年1月16日辭任SPI Energy的獨立董事，並確認其並非該訴訟的 一方。 SPI Energy及其附屬公司與本集團並無關連，且該訴訟不會涉及本集團。 由於該訴訟乃於魏博士不再擔任SPI Energy獨立董事後12個月內發生，故根據上市規則第 - 1 - 香港交易及結算所有限公司及香港聯合交易所有限公司 ...

Financial Data and Key Metrics Changes - Revenue grew by 4.9% year-on-year, with hospitals up 4.7% and adjusted EBITDA increased by 2.8% to £133 million [7][8] - Adjusted profit before tax declined by 11.2% to £23.8 million, primarily due to the phasing of savings and increased depreciation and finance costs [7][8] - Adjusted free cash flow decreased, attributed to the same phasing impacts, with a cash balance of £20.8 million at the period end [23][24] - Return on capital employed expanded by 50 basis points to 8.1% [7][22] Business Line Data and Key Metrics Changes - Hospital revenue increased by 4.7% to £732.3 million, with adjusted EBITDA rising by 3.3% to £130 million, representing a margin of 17.8% [8][9] - Private business revenue grew just under 1%, with average revenue per case increasing by 5.4% [12][11] - NHS revenue saw strong growth of over 16%, with a 4.2% uplift in average revenue per case [15][16] - Primary Care revenue reached £64.4 million, a 6.5% increase, with adjusted EBITDA at £3.8 million [17][18] Market Data and Key Metrics Changes - The independent sector treated 500,000 patients since the start of the administration, highlighting the government's commitment to reducing waiting lists [45][46] - The market for integrated healthcare is valued at £12 billion, with a focus on preventative care and elective operative care [28][27] - Spire continues to lead in its addressable markets, conducting the largest number of hip and knee procedures across all patient groups [17][16] Company Strategy and Development Direction - The company is focused on a diversified three-payer strategy, transformation, scaling primary care, and maintaining quality and innovation [3][28] - The transformation program aims to enhance efficiency and service delivery, with significant changes in hospital resourcing and administrative functions [19][20][32] - The company is pursuing targeted acquisitions to support growth, including the recent acquisition of Acorn Health and Physiolistic [36][49] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating a dynamic environment, with expectations for full-year performance in line with market expectations [4][25] - The government remains focused on reducing waiting lists, which supports the independent sector's role in healthcare delivery [45][46] - Management highlighted the importance of maintaining a disciplined approach to capital expenditure and M&A activities [25][88] Other Important Information - The company has invested £51 million in capital expenditures in the first half, focusing on growth and efficiency projects [21][22] - The company maintains a strong balance sheet, supported by a freehold portfolio valued at over £1.4 billion [22][24] Q&A Session Summary Question: Can you provide insights on budgetary pressures at the ICB level and mitigation opportunities? - Management noted that NHS England is focused on reducing waiting lists and balancing budgets, with ongoing discussions with local commissioners to navigate these pressures [43][45][46] Question: What is the M&A landscape for the Primary Care business? - Management indicated that they are pursuing targeted acquisitions while maintaining a disciplined approach, with a focus on integrating new businesses into their existing operations [49][50] Question: What are the potential impacts of doctor strikes on self-pay and PMI? - Management acknowledged that while strikes are undesirable, they have continued to deliver services and noted that increased waiting lists could support self-pay demand [57][58] Question: What are the expectations for volume growth in PMI in the second half? - Management expressed confidence in leveraging patient service centers to build on existing platforms, although specific volume growth figures were not provided [103][104] Question: Is there a plan to crystallize the value of the property portfolio? - Management highlighted the value of the property portfolio but did not indicate any immediate plans for crystallization, stating that it underpins their valuation [68][69]

Financial Performance - Group revenue increased by 4.9% year-over-year in H1 2025, with Hospital revenue growing by 4.7%[12] - Group adjusted EBITDA reached £133.8 million, a 2.8% year-over-year increase, representing a margin of 16.8%[12] - Group adjusted PBT was £15.3 million, up 17.7% year-over-year, excluding impacts from National Insurance and National Minimum Wage rises[12] - Adjusted free cash flow was £23.8 million, a decrease of 11.2% year-over-year[12] - The company delivered efficiency savings of over £10 million in H1 2025 and expects £20 million in H2 2025[15] Hospital Performance - Hospital revenue reached £732.3 million, a 4.7% year-over-year increase[15] - Hospital adjusted EBITDA was £130.0 million, a 3.3% year-over-year increase, with a margin of 17.8%[15] - Hospital adjusted EBIT was £74.5 million, a 2.2% year-over-year increase, with a margin of 10.2%[15] - NHS patient revenue increased by 16.2% driven by a 13.0% increase in volume[22] Primary Care Performance - Primary Care revenue was £64.4 million, a 6.5% year-over-year increase[39] - Primary Care adjusted EBITDA was £3.8 million, a 14.0% year-over-year decrease, with a margin of 5.9%[36] - Excluding new clinics, Primary Care EBITDA grew by over 6% year-over-year[39]

Part I. Financial Information [Item 1. Interim Financial Statements](index=3&type=section&id=Item%201.%20Interim%20Financial%20Statements) The unaudited condensed consolidated financial statements for Q3 and 9M 2023 report total assets of $230.2 million, a $14.3 million net loss, and a $3.2 million cash decrease, with notes raising going concern doubts and detailing the deconsolidation of Phoenix Motor Inc Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2023 (Unaudited) | December 31, 2022 | | :--- | :--- | :--- | | **Total Current Assets** | $80,990 | $81,956 | | **Total Assets** | $230,192 | $231,095 | | **Total Current Liabilities** | $195,658 | $189,697 | | **Total Liabilities** | $214,189 | $213,223 | | **Total Equity** | $16,003 | $17,872 | Condensed Consolidated Statements of Operations Highlights (in thousands) | Metric | Q3 2023 | Q3 2022 | 9M 2023 | 9M 2022 | | :--- | :--- | :--- | :--- | :--- | | **Net Revenues** | $55,928 | $42,803 | $159,762 | $127,752 | | **Gross Profit (Loss)** | $7,465 | $(2,410) | $17,087 | $3,726 | | **Operating Income (Loss)** | $961 | $(10,037) | $(2,540) | $(17,743) | | **Net Income (Loss) from Continuing Operations** | $818 | $(9,563) | $(5,617) | $(14,320) | | **Net Loss** | $(1,893) | $(13,493) | $(14,283) | $(22,497) | Condensed Consolidated Statements of Cash Flows Highlights (9 Months Ended Sep 30, in thousands) | Cash Flow Category | 2023 | 2022 | | :--- | :--- | :--- | | **Net cash provided by (used in) operating activities** | $2,289 | $(12,968) | | **Net cash used in investing activities** | $(1,430) | $(4,615) | | **Net cash (used in) provided by financing activities** | $(4,410) | $13,503 | | **Decrease in cash, cash equivalents and restricted cash** | $(3,183) | $(5,048) | - The company's financial statements have been prepared on a going concern basis, but recurring losses, a net working capital deficit of **$114.7 million**, and an accumulated deficit of **$684.7 million** raise substantial doubt about its ability to continue as a going concern[31](index=31&type=chunk) - On September 26, 2023, the Group sold **56.36%** of its subsidiary Phoenix Motors Inc. to a related party and deconsolidated it. The business of Phoenix is now presented as a discontinued operation[30](index=30&type=chunk)[71](index=71&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance, noting a **25.1%** increase in net revenues and improved gross margin to **10.7%**, but highlights significant liquidity challenges including a **$114.7 million** working capital deficit and **$684.7 million** accumulated deficit, raising substantial doubt about its going concern ability, while also covering discontinued operations and future financing plans [Results of Operations for the Three Months Ended September 30, 2023 and 2022](index=30&type=section&id=Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20September%2030%2C%202023%20and%202022) For Q3 2023, net revenues increased **30.7%** to **$55.9 million** driven by PV component and solar module sales, leading to a gross margin turnaround to **13.3%** and net income from continuing operations of **$0.8 million**, a significant improvement from a **$9.6 million** net loss in Q3 2022 Q3 2023 vs Q3 2022 Performance (in thousands) | Metric | Q3 2023 | Q3 2022 | Change (%) | | :--- | :--- | :--- | :--- | | **Net Revenues** | $55,928 | $42,803 | 30.7% | | **Gross Profit (Loss)** | $7,465 | $(2,410) | N/A | | **Gross Margin** | 13.3% | -5.6% | N/A | | **Net Income (Loss) from Continuing Operations** | $818 | $(9,563) | N/A | - The revenue increase was driven by a **$9.3 million** rise in PV component sales and **$6.7 million** from self-assembled solar modules, while revenue from roofing and solar installation decreased by **$2.8 million** due to a downsizing strategy[131](index=131&type=chunk) - The improvement in gross margin was primarily due to higher margins from solar module sales and a reduced contribution from the low-margin roofing and solar installation business[132](index=132&type=chunk) [Results of Operations for the Nine Months Ended September 30, 2023, and 2022](index=32&type=section&id=Results%20of%20Operations%20for%20the%20Nine%20Months%20Ended%20September%2030%2C%202023%2C%20and%202022) For the nine months ended September 30, 2023, net revenues grew **25.1%** to **$159.8 million** due to PV component and solar module sales, improving gross margin to **10.7%** and narrowing the net loss from continuing operations to **$5.6 million** from **$14.3 million**, aided by a **$3.3 million** ERC tax refund 9M 2023 vs 9M 2022 Performance (in thousands) | Metric | 9M 2023 | 9M 2022 | Change (%) | | :--- | :--- | :--- | :--- | | **Net Revenues** | $159,762 | $127,752 | 25.1% | | **Gross Profit** | $17,087 | $3,726 | 358.8% | | **Gross Margin** | 10.7% | 2.9% | N/A | | **Net Loss from Continuing Operations** | $(5,617) | $(14,320) | -60.8% | - Revenue growth was primarily driven by increased PV component sales due to a strategic supplier cooperation and the commencement of the self-assembled solar modules business, partially offset by a **$21.5 million** decrease in roofing installation revenue[141](index=141&type=chunk) - The company recognized a **$3.3 million** Employee Retention Credit ("ERC") tax refund and a **$4.5 million** gain from PPP loan forgiveness in the nine months of 2023 and 2022, respectively, which positively impacted other income[146](index=146&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) As of September 30, 2023, the company had **$7.8 million** in cash but faces severe liquidity constraints with a **$114.7 million** net working capital deficit and **$684.7 million** accumulated deficit, raising substantial doubt about its going concern ability, which management plans to address through project sales, bondholder negotiations, profitability improvements, and new financing - The company suffered a net loss of **$5.6 million** from continuing operations for the nine months ended September 30, 2023, and had a net working capital deficit of **$114.7 million** and an accumulated deficit of **$684.7 million** as of that date[153](index=153&type=chunk) - Management's plans to mitigate the going concern risk include negotiating PV solar project sales, postponing convertible bond payments, improving US business profitability, and seeking new debt and equity financing[154](index=154&type=chunk) Cash Flow Summary (9 Months Ended Sep 30, in thousands) | Cash Flow Category | 2023 | 2022 | | :--- | :--- | :--- | | **Net cash from continuing operations** | | | | Operating Activities | $4,831 | $1,275 | | Investing Activities | $(1,268) | $(4,166) | | Financing Activities | $(7,161) | $(66) | | **Net decrease in cash** | $(3,183) | $(5,048) | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is not applicable as the company qualifies as a smaller reporting company - The company has omitted this section as it is not applicable to smaller reporting companies[168](index=168&type=chunk) [Item 4. Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were not effective as of September 30, 2023, due to six identified material weaknesses, for which a remediation plan is outlined to strengthen oversight, engage professional advisers, and improve internal training - Management concluded that as of September 30, 2023, the company's disclosure controls and procedures were **not effective**[169](index=169&type=chunk) - **Six material weaknesses** were identified in the 2022 audit, including failures in the control environment, risk assessment, monitoring, process-level controls, financial reporting expertise, and IT general controls[171](index=171&type=chunk) - Remediation plans include strengthening governance oversight, engaging professional advisers to optimize the internal control system, and providing more comprehensive training to accounting personnel[172](index=172&type=chunk)[173](index=173&type=chunk) Part II. Other Information [Item 1. Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in significant legal proceedings, including a U.S. court order requiring SPI to pay at least **$60.4 million** to SINSIN and a judgment against SPI for **$1.825 million** plus **15%** annual interest to Streeterville due to a convertible note default - In the SINSIN dispute, a U.S. court confirmed an arbitration award against SPI, ordering the company to pay no less than **$60.4 million**, plus interest accruing from 2015 and 2016, and attorneys' fees[179](index=179&type=chunk) - Due to a default on a convertible note, Streeterville obtained a judgment against SPI for **$1.825 million**, with interest accruing at **15%** per annum from July 31, 2023[180](index=180&type=chunk)[181](index=181&type=chunk) [Item 1A. Risk Factors & Other Items](index=37&type=section&id=Item%201A.%20Risk%20Factors%20%26%20Other%20Items) As a smaller reporting company, the company has omitted the Risk Factors section, and reported no unregistered sales of equity securities or defaults upon senior securities, with mine safety disclosures also being inapplicable - Risk Factors (Item 1A) have been omitted as the company is a smaller reporting company[182](index=182&type=chunk) - There were no unregistered sales of equity securities (Item 2) or defaults upon senior securities (Item 3) reported for the period[182](index=182&type=chunk)

Financial Data and Key Metrics Changes - The company reported a net sales increase of over 21% year-over-year, reaching nearly $59 million in Q2 2023, compared to $48.6 million in Q2 2022 [4][14] - Gross profit improved by more than 35% to $5.2 million, resulting in a gross margin of 8.9%, up from 8% in the prior year [4][15] - Operating loss was just over $3 million, which included a $3.2 million loss from the Phoenix Motor division [15] Business Line Data and Key Metrics Changes - The solar manufacturing business has been profitable since Q4 2022, with ongoing capacity expansion in Sacramento, California, and new capacity being built in Sumter, South Carolina [5][10] - The company launched a new 500-megawatt n-type TOPCon solar cell manufacturing facility, expected to deliver products in the first half of 2024 [9][10] - The Australian solar distribution business delivered 448 megawatts of inverters and 105 megawatts of solar modules, representing 15% of rooftop PV installations in Australia in 2022 [11] Market Data and Key Metrics Changes - The company is positioned to benefit from the Inflation Reduction Act, which provides incentives for U.S. solar manufacturing, including $0.07 per watt for solar modules produced [12] - The U.S. customers will also benefit from an additional 10% tax credit, which is expected to increase average selling prices and gross margins [12] Company Strategy and Development Direction - The company is focused on creating sustainable energy solutions and aims to achieve near-term profitability through its diverse portfolio in solar and EV technologies [6][8] - Plans for further spin-offs include SolarJuice and Orange Power, with the company retaining majority ownership in these entities [8] - The company is committed to expanding its project pipeline and increasing cash flow from operating assets [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving the 2023 net income guidance of $29 million to $35 million despite a net loss of $12 million in the first half of the year [18][19] - The company is actively working to resolve a long-standing dispute with SinSin, which has significant financial implications [25][26] Other Important Information - Total assets as of June 30, 2023, were $230.5 million, with $5.9 million in cash and equivalents [16] Q&A Session Summary Question: Does the 2023 net income guidance assume the $0.07 solar panel U.S. manufacturing tax credit? - Management confirmed that the guidance includes the $0.07 credit but is not currently reflected in the financial report [18][19] Question: What percentage of U.S. solar panel sales will recognize the accumulated credit? - Management stated that the specifics of how the $0.07 will be recognized in financial reports are still unclear [20][21] Question: Is there any update on the dispute with SinSin? - Management indicated ongoing dialogue with SinSin and emphasized the priority of resolving the legal issue, although no timeline could be provided [25][26]

[PART I - FINANCIAL INFORMATION](index=4&type=section&id=PART%20I) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) SPI Energy reported a **$12.4 million** net loss and **$116.7 million** working capital deficit for H1 2023, highlighting liquidity issues and going concern doubts [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets slightly decreased to **$230.5 million**, while liabilities rose to **$222.3 million**, causing total equity to fall to **$8.2 million** by June 30, 2023 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2023 (Unaudited) | December 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $4,516 | $3,533 | | Inventories | $35,288 | $28,987 | | Total current assets | $82,137 | $81,956 | | Total assets | $230,539 | $231,095 | | **Liabilities & Equity** | | | | Accounts payable | $38,091 | $30,405 | | Convertible bonds, current | $45,250 | $42,676 | | Total current liabilities | $198,820 | $189,697 | | Total liabilities | $222,331 | $213,223 | | Total equity | $8,208 | $17,872 | [Unaudited Condensed Consolidated Statements of Operations](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) H1 2023 revenues grew to **$106.8 million**, but net loss widened to **$12.4 million** due to higher operating and interest expenses Key Operating Results (in thousands, except per share data) | Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | Net revenues | $58,850 | $48,584 | $106,773 | $87,119 | | Gross profit | $5,238 | $3,872 | $9,734 | $6,581 | | Operating loss | $(3,067) | $(5,595) | $(10,335) | $(12,574) | | Net loss | $(2,641) | $(2,218) | $(12,390) | $(9,004) | | Net loss per share (Basic & Diluted) | $(0.08) | $(0.08) | $(0.39) | $(0.34) | [Unaudited Condensed Consolidated Statements of Comprehensive Loss](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) Total comprehensive loss for H1 2023 was **$11.9 million**, primarily driven by the **$12.4 million** net loss, partially offset by foreign currency adjustments Comprehensive Loss Summary (in thousands) | Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | Net loss | $(2,641) | $(2,218) | $(12,390) | $(9,004) | | Foreign currency translation adjustments | $(128) | $(2,427) | $478 | $(2,362) | | **Total comprehensive loss** | **$(2,769)** | **$(4,645)** | **$(11,912)** | **$(11,366)** | [Unaudited Condensed Consolidated Statements of Equity](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Equity) Total equity decreased from **$17.9 million** to **$8.2 million** by June 30, 2023, primarily due to a **$11.9 million** net loss - Total equity fell by **$9.7 million** in the first six months of 2023, from **$17.9 million** to **$8.2 million**[17](index=17&type=chunk) - The primary driver of the equity decrease was the net loss of **$11.9 million** attributable to shareholders during the first half of 2023[11](index=11&type=chunk)[17](index=17&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operations was **$5.5 million** for H1 2023, with overall cash decreasing by **$5.1 million**, largely due to reduced financing activities Cash Flow Summary (in thousands) | Activity | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(5,484) | $(11,539) | | Net cash used in investing activities | $(1,994) | $(387) | | Net cash provided by financing activities | $136 | $15,856 | | **Increase (decrease) in cash** | **$(5,097)** | **$3,408** | [Notes to Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Notes detail business operations, a **going concern** warning due to **$12.4 million** net loss and **$116.7 million** working capital deficit, and significant legal issues - The company is engaged in providing photovoltaic (PV), roofing, solar energy systems installation, and electric vehicle (EV) solutions[23](index=23&type=chunk) - There is substantial doubt about the Group's ability to continue as a **going concern** due to recurring losses, a net loss of **$12.4 million** in H1 2023, a working capital deficit of **$116.7 million**, and an accumulated deficit of **$682.7 million**[27](index=27&type=chunk)[127](index=127&type=chunk) Revenue by Stream - H1 2023 (in thousands) | Revenue Stream | Amount | | :--- | :--- | | Sales of PV components | $74,027 | | Sales of self-assembled solar modules | $18,739 | | Roofing and solar systems installation | $1,425 | | Electricity revenue with PPAs | $2,248 | | Automotive sales & leasing | $2,083 | | Others | $8,251 | | **Total** | **$106,773** | - The company is involved in significant legal proceedings, including an arbitration award against it for **€38.1 million** plus interest in the Sinsin case, and a default on a note held by Streeterville[79](index=79&type=chunk)[80](index=80&type=chunk) Segment Gross Profit - H1 2023 (in thousands) | Segment | Revenues | Gross Profit | | :--- | :--- | :--- | | Renewable energy solutions | $94,191 | $8,201 | | PV stations constructions and operations | $8,991 | $2,221 | | Electric vehicles | $2,083 | $286 | | Others | $1,508 | $(974) | | **Total** | **$106,773** | **$9,734** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses H1 2023 revenue growth and improved gross margin, while addressing significant liquidity challenges and outlining plans to mitigate going concern doubts - The company is a global provider of photovoltaic (PV) and electric vehicle (EV) solutions, developing solar projects and selling PV components, alongside sales and leasing of EVs and roofing/solar installation services in the U.S.[97](index=97&type=chunk) - The company's liquidity has deteriorated, with a net loss of **$12.4 million** and cash used in operations of **$5.5 million** for the six months ended June 30, 2023, raising substantial doubt about its ability to continue as a **going concern**[98](index=98&type=chunk)[127](index=127&type=chunk) - Key operational drivers include market demand for PV/EV solutions, government subsidies and regulations (like California's zero-emission mandates), and the ability to develop and operate solar projects effectively[102](index=102&type=chunk)[106](index=106&type=chunk)[108](index=108&type=chunk) [Results of Operations](index=28&type=section&id=Results%20of%20Operations) H1 2023 revenues grew **22.6%** to **$106.8 million** with improved gross margin, but net loss widened to **$12.4 million** due to increased expenses Q2 2023 vs Q2 2022 Performance (in millions) | Metric | Q2 2023 | Q2 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Net Revenues | $58.9 | $48.6 | +21.1% | | Gross Profit | $5.2 | $3.9 | +33.3% | | Gross Margin | 8.9% | 8.0% | +0.9 ppt | | Net Loss | $(2.6) | $(2.2) | +18.2% | H1 2023 vs H1 2022 Performance (in millions) | Metric | H1 2023 | H1 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Net Revenues | $106.8 | $87.1 | +22.6% | | Gross Profit | $9.7 | $6.6 | +47.0% | | Gross Margin | 9.1% | 7.6% | +1.5 ppt | | Net Loss | $(12.4) | $(9.0) | +37.8% | [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) The company faces significant liquidity challenges with a **$116.7 million** working capital deficit and **$12.4 million** net loss, outlining plans to improve cash flow and seek new financing - The company has a working capital deficit of **$116.7 million** and an accumulated deficit of **$682.7 million** as of June 30, 2023, raising substantial doubt about its ability to continue as a **going concern**[127](index=127&type=chunk) - Management plans to implement measures to improve liquidity, including negotiating PV solar project sales, postponing convertible bond payments, improving US business profitability, and seeking credit facilities and new financing[128](index=128&type=chunk) Cash Flow Summary - H1 2023 vs H1 2022 (in thousands) | Activity | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(5,484) | $(11,539) | | Net cash used in investing activities | $(1,994) | $(387) | | Net cash provided by financing activities | $136 | $15,856 | [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section is omitted as the company qualifies as a smaller reporting company - The company has omitted this section as it is a smaller reporting company[142](index=142&type=chunk) [Item 4. Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were **not effective** as of June 30, 2023, due to identified material weaknesses, and has outlined remediation plans - Management concluded that disclosure controls and procedures were **not effective** as of June 30, 2023[143](index=143&type=chunk) - Material weaknesses were identified in several areas: (1) **control environment**, (2) **risk assessment**, (3) **monitoring activities**, (4) **process-level controls**, (5) lack of resources with requisite U.S. GAAP skills, and (6) **IT general controls**[144](index=144&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk) - Remediation plans include strengthening oversight, engaging professional advisers, improving internal control execution, establishing a formal risk assessment program, and providing more training on U.S. GAAP and SEC requirements[146](index=146&type=chunk)[147](index=147&type=chunk)[148](index=148&type=chunk) [PART II - OTHER INFORMATION](index=35&type=section&id=PART%20II) [Item 1. Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) The company faces significant legal proceedings, including a **€38.1 million** arbitration award against it and a default on a note held by Streeterville seeking at least **$2.7 million** - An arbitration tribunal in Malta ordered the company to pay SINSIN **€38,054,000** plus interest. Sinsin is now seeking to confirm this award in a U.S. District Court in California[153](index=153&type=chunk)[154](index=154&type=chunk) - The company defaulted on a 2022 Note held by Streeterville, which filed a complaint seeking damages of at least **$2,676,000**. The parties have entered into a term sheet to mediate the dispute with a structured payment plan[155](index=155&type=chunk) [Item 1A. Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) This section is omitted as the company qualifies as a smaller reporting company - Information regarding risk factors has been omitted because the company qualifies as a smaller reporting company[157](index=157&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=36&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds from registered securities were reported - None reported[157](index=157&type=chunk) [Item 3. Defaults Upon Senior Securities](index=36&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported during the period - None reported[157](index=157&type=chunk) [Item 6. Exhibits](index=36&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and XBRL interactive data files - The report includes certifications from the Chief Executive Officer and Chief Financial Officer as required by the Sarbanes-Oxley Act[158](index=158&type=chunk) - XBRL interactive data files are included as exhibits for financial reporting[158](index=158&type=chunk)

[PART I Financial Information](index=3&type=section&id=PART%20I%20Financial%20Information) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Q1 2023 financials reveal a widened net loss, significant working capital deficit, and negative operating cash flow, raising going concern doubts [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Balance sheet as of March 31, 2023, shows decreased assets, increased liabilities, and total equity reduced to $10.5 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 (Unaudited) | December 31, 2022 | | :--- | :--- | :--- | | **Total Current Assets** | $81,505 | $81,956 | | **Total Assets** | **$230,291** | **$231,095** | | **Total Current Liabilities** | $196,941 | $189,697 | | **Total Liabilities** | **$219,790** | **$213,223** | | **Total Equity** | **$10,501** | **$17,872** | - The company had a net working capital deficit of **$115.4 million** as of March 31, 2023, indicating significant short-term liquidity challenges[7](index=7&type=chunk)[27](index=27&type=chunk)[111](index=111&type=chunk) [Unaudited Condensed Consolidated Statements of Operations](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) Q1 2023 net revenues grew 24.4% to $47.9 million, yet increased operating expenses led to a wider net loss of $9.7 million Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Q1 2023 | Q1 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Net Revenues | $47,923 | $38,535 | 24.4% | | Gross Profit | $4,496 | $2,709 | 66.0% | | Operating Loss | $(7,268) | $(6,979) | (4.1)% | | Net Loss | $(9,749) | $(6,786) | (43.7)% | | Net Loss per Share (Basic & Diluted) | $(0.31) | $(0.27) | (14.8)% | [Unaudited Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 2023 net cash used in operations was $4.9 million, leading to a $6.0 million decrease in total cash, ending at $5.0 million Summary of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(4,873) | $(8,583) | | Net cash (used in) provided by investing activities | $(354) | $1,096 | | Net cash (used in) provided by financing activities | $(2,013) | $2,129 | | **Decrease in cash, cash equivalents and restricted cash** | **$(5,972)** | **$(4,988)** | | **Cash, cash equivalents and restricted cash at end of period** | **$5,015** | **$12,857** | [Notes to the Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20the%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Notes disclose substantial doubt about the company's going concern due to recurring losses, a **$115.4 million** working capital deficit, and significant legal contingencies - The company provides photovoltaic (PV), roofing, solar energy systems installation, and electric vehicle (EV) solutions[22](index=22&type=chunk) - Substantial doubt exists about the Group's ability to continue as a going concern due to recurring net losses of **$9.7 million** in Q1 2023, a net working capital deficit of **$115.4 million**, and a large accumulated deficit of **$680.2 million**[27](index=27&type=chunk) Disaggregation of Revenues by Stream for Q1 2023 (in thousands) | Revenue Stream | Q1 2023 Revenue | | :--- | :--- | | Sales of PV components | $34,997 | | Sales of self-assembled solar modules | $9,020 | | Automotive sales & leasing | $1,241 | | Electricity revenue with PPAs | $924 | | Revenue from roofing and solar systems installation | $879 | | Others | $862 | | **Total** | **$47,923** | - The renewable energy solutions segment generated the most revenue at **$45.2 million** and gross profit at **$4.0 million** in Q1 2023, across its EV, renewable energy, and solar projects segments[77](index=77&type=chunk)[78](index=78&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes Q1 2023 revenue growth to PV and solar module sales, but acknowledges critical liquidity and a **$115.4 million** working capital deficit, outlining plans to address going concern [Results of Operations](index=25&type=section&id=Results%20of%20Operations) Q1 2023 net revenues grew **24.4%** to **$47.9 million** from PV and solar module sales, improving gross margin to **9.4%**, but rising expenses widened net loss to **$9.7 million** - The **$9.4 million** increase in net sales for Q1 2023 was primarily due to a **$7.0 million** increase in PV component sales and **$9.0 million** from solar module sales[105](index=105&type=chunk) - Gross margin increased to **9.4%** in Q1 2023 from **7.0%** in Q1 2022, driven by higher margin solar module sales and a lower proportion of low-margin services[106](index=106&type=chunk) - General and administrative expenses increased by **$1.4 million** (**15.3%**) mainly due to higher research and development expenses[106](index=106&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) Critical liquidity with **$5.0 million** cash and a **$115.4 million** working capital deficit raises substantial doubt about going concern, prompting management to seek project sales and new financing - As of March 31, 2023, the company held **$5.0 million** in cash, cash equivalents, and restricted cash[111](index=111&type=chunk) - Substantial doubt about going concern stems from a Q1 2023 net loss of **$9.7 million**, a net working capital deficit of **$115.4 million**, and an accumulated deficit of **$680.2 million**[111](index=111&type=chunk) - Management plans to mitigate liquidity risks by negotiating PV solar project sales, postponing convertible bond payments, improving US business profitability, and seeking new credit facilities and equity/debt offerings[112](index=112&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section is not applicable as the company qualifies as a smaller reporting company - Disclosure is not required as the company is a smaller reporting company[126](index=126&type=chunk) [Item 4. Controls and Procedures](index=30&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were ineffective as of March 31, 2023, due to material weaknesses in internal control over financial reporting, and has outlined a remediation plan - Management concluded that the company's disclosure controls and procedures were not effective as of March 31, 2023[128](index=128&type=chunk) - Material weaknesses identified include an ineffective control environment, lack of a formal risk assessment process, ineffective monitoring, process-level controls, U.S. GAAP skills, and IT general controls[129](index=129&type=chunk) - The company plans remediation measures, including strengthening governance, engaging professional advisers, improving internal control execution, and providing more accounting team training[130](index=130&type=chunk)[132](index=132&type=chunk) [PART II Other Information](index=32&type=section&id=PART%20II%20Other%20Information) [Item 1. Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) The company faces significant legal proceedings, including an arbitration award of **€38.05 million** and a default on a 2022 Note, with damages sought of at least **$2.68 million** - An arbitration tribunal in Malta ordered the company to pay SINSIN **€38,054,000** plus interest, which SINSIN is now seeking to enforce in a U.S. District Court[138](index=138&type=chunk)[139](index=139&type=chunk) - The company defaulted on a 2022 Note, leading Streeterville to file a complaint seeking damages of not less than **$2,676,000** plus interest and fees[140](index=140&type=chunk) [Other Items (1A, 2, 3, 4, 5, 6)](index=33&type=section&id=Other%20Items) Item 1A (Risk Factors) was omitted as a smaller reporting company, with no events reported for Items 2, 3, and 5, and Item 4 being not applicable - Risk Factor disclosure (Item 1A) has been omitted due to the company's status as a smaller reporting company[142](index=142&type=chunk) - There were no unregistered sales of equity securities (Item 2) or defaults upon senior securities (Item 3) during the period[142](index=142&type=chunk)

Financial Data and Key Metrics Changes - The company reported revenues of $177.5 million for fiscal year 2022, an increase of nearly 10% compared to $162 million in 2021 [4][15] - Gross profit rose to $14.5 million in 2022, with a gross margin of 8.2%, up from 6.6% in the previous year [16] - The net loss for 2022 was $33.4 million, an improvement from a net loss of $44.8 million in 2021 [17] Business Line Data and Key Metrics Changes - The solar project development business, SPI Solar, completed significant projects including a 5 megawatt solar project in Hawaii and secured land for additional projects [8][9] - Orange Power, the independent power producer, generated approximately 55.9 million kilowatt hours of renewable energy, with revenue up by 30% and net income increasing by 83% [9] - Solar4America, the solar module manufacturing business, achieved profitability in Q4 2022 and ramped up production capacity to 700 megawatts [10] Market Data and Key Metrics Changes - The company anticipates revenue growth driven by the Inflation Reduction Act, which provides incentives for U.S. solar module production [13] - The demand for locally made solar wafers is increasing, with a target production capacity of 3 gigawatts by 2024 [11] Company Strategy and Development Direction - The company aims to expand its renewable energy platforms, focusing on solar module manufacturing, project development, and electric vehicles [5][12] - The strategic partnerships with companies like Tesla and Fronius are expected to enhance growth in the Australian distribution business [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving positive EBITDA and net profitability in 2023, with net income guidance between $29 million and $36 million [4][17] - The company is optimistic about the growth potential in the solar module and wafer manufacturing sectors due to favorable market conditions [13] Other Important Information - The company secured two provisional patents in 2022 related to machine learning technology and automation in solar module manufacturing [14] - The company has a strong foundation in various renewable sectors, positioning itself well for future growth [12] Q&A Session Summary Question: What drove the increase in gross profit margin in Q4 2022? - Management indicated that the increase was driven by improvements in module manufacturing, solar project development, and the performance of Orange Power [20][21][22] Question: How has pricing for U.S. made solar modules changed? - The COO noted that pricing remains stable, with expectations for continued demand in both residential and commercial sectors [23][24] Question: Can you clarify the net profit guidance for this year? - Management confirmed that the guidance includes all business segments and considers ongoing investments in EV and wafer businesses [25][26][27] Question: What are the expectations for revenue from solar module manufacturing? - The COO projected that revenue could double each quarter, with significant demand driving this growth [32][33] Question: How will working capital be funded for module manufacturing? - The company plans to use its own resources and reinvest profits, with customer support for capacity expansion [34][35]

PART I [Business](index=9&type=section&id=Item%201.%20Business) SPI Energy is a global renewable energy company with six key businesses, deriving a majority of its revenue from its Australian distribution operations - The company operates across six main business segments: solar project development, electricity sales (IPP), US solar module manufacturing, Australian PV distribution, US roofing/solar installation, and EV manufacturing[29](index=29&type=chunk) - The Inflation Reduction Act of 2022 is expected to provide significant benefits through production tax credits for US-manufactured solar components (Section 45X) and an extended 30% residential clean energy tax credit, boosting the Solar4America and Roofs 4 America businesses, respectively[116](index=116&type=chunk)[117](index=117&type=chunk)[118](index=118&type=chunk) Net Sales by Geographic Location (in thousands) | Region | 2022 ($) | % of Total | 2021 ($) | % of Total | | :--- | :--- | :--- | :--- | :--- | | Australia | 132,954 | 74.9% | 124,248 | 76.7% | | United States | 38,867 | 21.9% | 33,093 | 20.4% | | United Kingdom | 2,053 | 1.2% | 1,211 | 0.7% | | Greece | 2,545 | 1.4% | 2,686 | 1.7% | | Italy | 1,019 | 0.6% | 690 | 0.4% | | Japan | 80 | 0.0% | 65 | 0.1% | | **Total** | **177,518** | **100.0%** | **161,993** | **100.0%** | [Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) The company faces substantial risks from its financial instability, material weaknesses in internal controls, and operational challenges across its business segments - The company's financial condition, including **net losses of $33.7 million in 2022**, an accumulated deficit of $670.8 million, and a working capital deficit of $107.7 million, raises **"substantial doubt about the Company's ability to continue as a going concern"**[190](index=190&type=chunk) - Management has identified several **material weaknesses in internal control over financial reporting**, including failures in the control environment, risk assessment, monitoring activities, and IT general controls[199](index=199&type=chunk) - The company is **in default on multiple obligations**, including **$35.0 million in convertible bonds** from 2016 and a **$2.1 million convertible loan** from Streeterville Capital[195](index=195&type=chunk) - The business is **highly dependent on government subsidies and incentives** (e.g, FITs, tax credits), and any reduction, modification, or discontinuation of these programs could materially harm the business[221](index=221&type=chunk)[222](index=222&type=chunk) - The Phoenix EV business faces **intense competition** from established automotive manufacturers and other EV companies with greater financial and technical resources, and its success is unproven[381](index=381&type=chunk)[387](index=387&type=chunk) [Properties](index=92&type=section&id=Item%202.%20Properties) The company leases its global headquarters and manufacturing facilities in California, along with various other office, warehouse, and land parcels globally - The company's headquarters and primary manufacturing facility are located in a **~196,000 sq. ft. leased space** in McClellan Park, CA, with the lease expiring in January 2031[181](index=181&type=chunk)[495](index=495&type=chunk) - Phoenix Motorcars operates out of a **39,043 sq. ft. leased facility** in Anaheim, CA, capable of producing up to 240 units per year with two shifts[183](index=183&type=chunk) - The company leases approximately **465 acres in Illinois and 473 acres in Maryland** for the development of utility-scale solar projects[184](index=184&type=chunk) [Legal Proceedings](index=92&type=section&id=Item%203.%20Legal%20Proceedings) This section refers to "Item 1 - Business - Legal Proceedings" for a detailed discussion of the company's significant legal matters - For a discussion of significant legal proceedings, this item refers to the detailed disclosure in "Item 1 Business - Legal Proceedings"[495](index=495&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=93&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's shares trade on NASDAQ under the symbol "SPI", it has never paid dividends, and it made no equity repurchases in Q4 2022 - The company's ordinary shares are traded on the NASDAQ Global Select Market under the ticker symbol **"SPI"**[497](index=497&type=chunk) - The company has **never paid dividends** and has no current plans to do so, intending to retain funds for business expansion[499](index=499&type=chunk) - **No repurchases** of the company's ordinary shares were made during the fourth quarter of FY2022[500](index=500&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=94&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Fiscal year 2022 saw revenue growth and a reduced net loss, but significant liquidity concerns raise substantial doubt about its going concern status - The company's financial condition raises **substantial doubt about its ability to continue as a going concern**, citing recurring losses, a working capital deficit of **$107.7 million** as of Dec 31, 2022, and negative operating cash flow[580](index=580&type=chunk)[796](index=796&type=chunk) Consolidated Results of Operations (in thousands) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Net Revenues | $177,518 | $161,993 | | Gross Profit | $14,485 | $10,620 | | Operating Loss | $(28,632) | $(41,476) | | Net Loss | $(33,723) | $(44,834) | | Net Loss per Share | $(1.3) | $(1.9) | Revenue Breakdown by Activity (in thousands) | Activity | 2022 | % of Total | 2021 | % of Total | | :--- | :--- | :--- | :--- | :--- | | Sales of PV components | $133,930 | 75.5% | $123,138 | 76.0% | | Roofing and solar systems installation | $25,899 | 14.6% | $29,028 | 17.9% | | Electricity revenue with PPAs | $5,725 | 3.2% | $4,587 | 2.8% | | Revenue from sales and leasing of EV | $2,340 | 1.3% | $2,336 | 1.4% | | Others | $9,624 | 5.4% | $2,904 | 1.9% | | **Total** | **$177,518** | **100.0%** | **$161,993** | **100.0%** | Cash Flow Summary (in thousands) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(15,966) | $(27,484) | | Net cash used in investing activities | $(8,157) | $(8,866) | | Net cash generated from financing activities | $17,304 | $18,425 | [Quantitative and Qualitative Disclosures About Market Risk](index=111&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is primarily exposed to foreign exchange and interest rate risks from its international operations and borrowings but does not use derivative instruments - The company is exposed to foreign currency exchange risk due to its international operations and recorded a **net foreign exchange gain of $2.6 million in 2022**[598](index=598&type=chunk)[599](index=599&type=chunk) - The company is exposed to interest rate risk on its borrowings, and a hypothetical **10% increase in the average interest rate** would have increased interest expense by approximately **$0.2 million in 2022**[600](index=600&type=chunk) [Financial Statements and Supplementary Data](index=112&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section includes audited financial statements, with the auditor's report highlighting a "Going Concern" uncertainty and identifying critical audit matters - The independent auditor's report includes an explanatory paragraph expressing **substantial doubt about the Company's ability to continue as a going concern**[758](index=758&type=chunk) - **Critical audit matters** identified by the auditor include the accounting for convertible bonds and derivative liabilities, and the impairment assessment of long-lived assets[762](index=762&type=chunk)[764](index=764&type=chunk)[766](index=766&type=chunk) Key Balance Sheet Items (in thousands) | Account | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Current Assets | $81,956 | $84,067 | | Total Assets | $231,095 | $228,080 | | Total Current Liabilities | $189,697 | $173,838 | | Total Liabilities | $213,223 | $202,130 | | Total Equity | $17,872 | $25,950 | [Controls and Procedures](index=112&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were ineffective as of year-end 2022 due to multiple material weaknesses in internal financial controls - Management concluded that as of December 31, 2022, the company's **disclosure controls and procedures were ineffective**[604](index=604&type=chunk) - **Multiple material weaknesses** were identified in internal control over financial reporting, including deficiencies in the control environment, risk assessment, and financial reporting skills[607](index=607&type=chunk) - A **remediation plan** is in place to address these weaknesses, involving strengthening oversight, engaging a professional adviser, and enhancing training[610](index=610&type=chunk)[612](index=612&type=chunk)[613](index=613&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=115&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) The company's leadership and board structure are detailed, including director independence and the composition of its key committees - The Board of Directors consists of five members, including **three independent directors**: Maurice Wai-fung Ngai, Lu Qing, and Jing Zhang[619](index=619&type=chunk)[629](index=629&type=chunk) - The company has three board committees (Audit, Compensation, Nominating and Corporate Governance), **each composed entirely of independent directors**[633](index=633&type=chunk) - The Board has determined that **Maurice Wai-fung Ngai qualifies as an audit committee financial expert**[635](index=635&type=chunk) [Executive Compensation](index=120&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation for 2022 consisted of salaries and equity awards, governed by employment agreements and two primary stock incentive plans - The company's **2015 Equity Incentive Plan** was amended in December 2022 to increase the number of ordinary shares authorized for issuance to **4,326,185**[667](index=667&type=chunk) - Non-executive directors received compensation in the form of stock awards, with each of the three independent directors receiving awards valued at **$10,000 for fiscal year 2022**[659](index=659&type=chunk) 2022 Executive Compensation Summary | Name and Position | Salary ($) | Stock and Option Awards ($) | Total ($) | | :--- | :--- | :--- | :--- | | Xiaofeng Peng (CEO) | 196,667 | 300,000 | 496,667 | | HoongKhoeng Cheong (COO) | 290,140 | 120,000 | 410,140 | | Janet Chan (CFO) | 244,524 | 30,000 | 274,524 | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=126&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Chairman and CEO Xiaofeng Peng is the largest beneficial owner, with all directors and executives as a group holding 23.73% of the company's shares - Chairman and CEO Xiaofeng Peng is the largest beneficial owner, holding **19.88%** of the company's ordinary shares[679](index=679&type=chunk) - All directors and executive officers as a group beneficially own 7,187,024 shares, representing **23.73%** of the company[679](index=679&type=chunk) Equity Compensation Plan Information (as of Dec 31, 2022) | Category | Securities to be issued upon exercise () | Weighted-average exercise price ($) | Securities available for future issuance () | | :--- | :--- | :--- | :--- | | Plans approved by security holders | 1,293,900 | 8.0 | 3,033,285 | [Certain Relationships and Related Transactions, and Director Independence](index=128&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The company discloses minor related party transactions, overseen by its Audit Committee, and confirms the independence of three board members - As of December 31, 2022, the company had **$332 thousand due from related parties**, representing expenses paid on their behalf[687](index=687&type=chunk) - The company's **Audit Committee is responsible for reviewing and approving** all related party transactions[688](index=688&type=chunk)[689](index=689&type=chunk) - The Board has determined that directors **Maurice Ngai, Qing Lu, and Jing Zhang are independent**[690](index=690&type=chunk) [Principal Accountant Fees and Services](index=129&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Audit fees paid to the principal auditor decreased in 2022, with all services pre-approved by the Audit Committee - The **Audit Committee pre-approves all audit and permissible non-audit services** provided by the independent auditor[695](index=695&type=chunk) Accountant Fees (in thousands) | Fee Category | 2022 | 2021 | | :--- | :--- | :--- | | Audit fees | $576.8 | $968.2 | | Audit-related fees | $0 | $0 | | Tax fees | $0 | $0 | | All other fees | $0 | $0 | | **Total** | **$576.8** | **$968.2** | PART IV [Exhibits, Financial Statement Schedules](index=131&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists all financial statements, schedules, and exhibits filed with the report, including material contracts and executive certifications - This section contains a comprehensive list of all exhibits filed with the 10-K, including corporate governance documents, material contracts, and executive certifications[701](index=701&type=chunk)[704](index=704&type=chunk)

Financial Data and Key Metrics Changes - For Q3 2022, net sales increased by 10.9% to $43.2 million, up from $39 million in Q3 2021, primarily driven by the solar business line [11] - Gross loss was $2.3 million in Q3 2022, compared to a gross loss of $1.1 million in the same period last year, resulting in a negative margin of 5.3% [12] - General administrative expenses decreased to $8.8 million, or 20.5% of net sales, down from $9.5 million, or 34.4% of net sales in Q3 2021 [12] Business Line Data and Key Metrics Changes - The solar module manufacturing business in Sacramento has a capacity of 100 megawatts, fully booked for the remainder of the year, with backlog orders exceeding 20 megawatts [9] - The average selling price (ASP) for solar modules is $0.55 per watt, with an average cost of $0.36 to $0.37 per watt, leading to a gross margin of over 35% [10] - The company anticipates an additional $0.07 per watt incentive from the Inflation Reduction Act, expected to increase income from solar module manufacturing by 10% to 15% in 2023 [5][10] Market Data and Key Metrics Changes - The company is ramping up solar wafer production in the U.S., with a capacity of 3 gigawatts expected by 2024, addressing the growing demand for locally sourced solar wafers [6] - The utility-scale solar project in Illinois, with a capacity of 32.4 megawatts AC, is expected to begin operations by 2026, producing 57 million kilowatt-hours of energy in its first year [8] Company Strategy and Development Direction - The company is focused on expanding its solar module manufacturing capacity to 2.4 gigawatts in 2023, alongside a new facility in the Midwest [5] - The strategic investment in SEM Wafertech aims to mitigate supply chain issues and enhance high-margin revenue generation [6] - The company is building on a multi-decade track record of success, aiming to increase market share across all business units [7] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth potential due to the Inflation Reduction Act, which is expected to accelerate growth in the solar module manufacturing sector [4] - The company anticipates a strong performance in Q4 2022, driven by increased production capacity and demand for solar modules [20] - Management noted that the gross margin is expected to improve in the coming quarters as ramping up processes are completed [35] Other Important Information - As of September 30, 2022, the company had $6.1 million in cash, cash equivalents, and restricted cash [13] - The company has a pipeline of over 400 megawatts of solar projects globally, with significant investments made over the past 5 to 10 years [26] Q&A Session Summary Question: Regarding the California facility and solar module manufacturing capacity - Management confirmed that production is fully booked for the year, with demand expected to be significantly higher than current production capabilities [16] Question: Is there any seasonal factor affecting the Australian solar distribution business? - Management indicated that revenue is still increasing year-over-year, despite some slowdown in roofing business [20] Question: Do you have sales guidance for the fourth quarter? - Management has not provided specific guidance due to uncertainties but expects additional revenue from fully booked production [24] Question: Will revenue from solar module and wafer manufacturing be reported separately? - Management stated that revenue will likely be consolidated, as most business segments are profitable [25] Question: What caused the gross loss in the September quarter? - Management explained that losses were due to ramp-up costs in the EV business and solar module production, but profitability is expected to improve in future quarters [34]