SUNLIGHT FINANCIAL HOLDINGS INC. MANAGEMENT REPORT ON THE FINANCIAL POSITION AND OPERATING RESULTS (Form 10-Q)

The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of Sunlight Financial
Holdings Inc.'s (the "Company," "Sunlight," "Successor" or "we," "our" and "us")
consolidated results of operations and financial condition. The discussion
should be read in conjunction with Sunlight's consolidated financial statements
and notes thereto included elsewhere in this Form 10-Q. This discussion contains
forward-looking statements and involves numerous risks and uncertainties,
including, but not limited to, those described under the heading "Risk Factors."
Actual results may differ materially from those contained in any forward-looking
statements. Unless the context otherwise requires, references in this
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" to "Sunlight" is intended to mean the business and operations of
Sunlight Financial Holdings Inc. and its consolidated subsidiaries.

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CAUTION REGARDING FORWARD-LOOKING STATEMENTS AND RISK FACTORS

                                    SUMMARY

This report contains certain "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995, which statements involve
substantial risks and uncertainties. Such forward-looking statements relate to,
among other things, the operating performance of our investments, the stability
of our earnings, our financing needs, and the size and attractiveness of market
opportunities. Forward-looking statements are generally identifiable by the use
of forward-looking terminology such as "may," "will," "should," "potential,"
"intend," "expect," "endeavor," "seek," "anticipate," "estimate,"
"overestimate," "underestimate," "believe," "could," "project," "predict,"
"continue" or other similar words or expressions. Forward-looking statements are
based on certain assumptions; discuss future expectations; describe future plans
and strategies; contain projections of results of operations, cash flows, or
financial condition; or state other forward-looking information. Our ability to
predict results or the actual outcome of future plans or strategies is
inherently limited. Although we believe that the expectations reflected in such
forward-looking statements are based on reasonable assumptions, our actual
results and performance could differ materially from those set forth in the
forward-looking statements. These forward-looking statements involve risks,
uncertainties, and other factors that may cause our actual results in future
periods to differ materially from forecasted results.

Our ability to implement our business strategy is subject to numerous risks, as
more fully described under Item 1A. "Risk Factors." These risks include, among
others:
•Sunlight has incurred net losses in the past, and Sunlight may be unable to
sustain profitability in the future.
•The ongoing COVID-19 pandemic and other health epidemics and outbreaks could
adversely affect Sunlight's business, results of operations and financial
condition.
•If Sunlight fails to manage its operations and growth effectively, Sunlight may
be unable to execute its business plan, maintain high levels of customer
services and support or adequately address competitive challenges.
•Sunlight may in the future expand to new industry verticals outside of the U.S.
solar system and home improvement industries, and failure to comply with
applicable regulations, accurately predict demand or growth, or build a process
valued in those new industries could have an adverse effect on Sunlight's
business.
•To the extent that Sunlight seeks to grow through future acquisitions, or other
strategic investments or alliances, Sunlight may not be able to do so
effectively.
•A material reduction in the retail price of electricity charged by electric
utilities, other retail electricity providers, or other energy sources as
compared to potential savings for purchasing and using a solar system or an
increase in pricing for purchasing and using a solar system above the cost of
other energy sources could result in a lower demand for solar systems, which
could have an adverse impact on Sunlight's business, results of operations and
financial condition.
•Sunlight's inability to compete successfully or maintain or improve Sunlight's
market share and margins could adversely affect its business.
•Disruptions in the operation of Sunlight's computer systems and those of its
critical third-party service providers and capital providers could have an
adverse effect on Sunlight's business.
•Existing regulations and policies and changes to these regulations and policies
may present technical, regulatory, and economic barriers to the purchase and use
of solar energy systems, which may significantly reduce demand for our loan
products.
•Sunlight's growth is dependent on its contractor network and in turn the
quality of the service and products they provide to their customers, and
Sunlight's failure to retain or replace existing contractors, to grow its
contractor network or the number of Sunlight loans offered through its existing
network, or increases in loan delinquencies due to any deficiencies in
Sunlight's contractor underwriting practices, could adversely impact Sunlight's
business.
•Sunlight's revenue is impacted, to a significant extent, by the general economy
and the financial performance of its capital providers and contractors.
•Sunlight has never paid cash dividends on its capital stock, and does not
anticipate paying dividends in the foreseeable future.
•If assumptions or estimates Sunlight uses in preparing its financial statements
are incorrect or are required to change, Sunlight's reported results of
operations, liquidity, and financial condition may be adversely affected.
•A significant portion of Sunlight's total outstanding shares are restricted
from immediate resale but may be sold into the market in the near future. This
could cause the market price of its Class A common stock to drop significantly,
even if its business is doing well.


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Company presentation

Sunlight is a business-to-business-to-consumer, technology-enabled point-of-sale
("POS") financing platform that provides residential solar and home improvement
contractors the ability to offer seamless POS financing to their customers when
purchasing residential solar systems or other home improvements. The resulting
loans are funded by Sunlight's network of capital providers who, by partnering
with Sunlight, gain access to a difficult-to-reach loan market, best-in-class
consumer credit underwriting, and attractive risk adjusted returns. These loans
are facilitated by Sunlight's proprietary technology platform, Orange® (the
"Platform"), through which Sunlight offers instant credit decisions to
homeowners nationwide at the POS on behalf of Sunlight's various capital
providers. Since Sunlight's founding in 2014 through September 30, 2021,
Sunlight has facilitated over $5.4 billion of loans through the Sunlight
Platform in partnership with its contractor relationships.

Sunlight's success is fueled by its strong and intentional culture based on core
values such as honesty, fairness, and scrappiness. Sunlight's culture encourages
Sunlight teammates to work collaboratively with Sunlight's contractor and
capital provider partners, and the consumers they serve, to find the right
result to business challenges and to deliver white-glove service. Also core to
Sunlight's values is a passion for Sunlight's business and the societal benefits
that the business funds. To date, Sunlight has facilitated loans to more than
135,000 homeowners who, as a result, have had the opportunity to save money on
their utility bills and choose renewable energy over carbon-producing
traditional sources of power. As of September 30, 2021, residential solar
systems and energy-efficient home improvement products, facilitated through
Sunlight financings, have eliminated an estimated 13.5 million metric tons of
carbon dioxide from the atmosphere. Sunlight has also executed the United
Nations Climate Neutral Now Pledge, and its business was certified as carbon
neutral for its fiscal year 2020. Sunlight will continue to pursue certification
for carbon neutrality in the future.

Sunlight's core business is facilitating loans made by Sunlight's various
capital providers to the consumer customers of residential solar contractors.
Sales of Sunlight-facilitated loan products are made by contractors in the
context of selling residential solar systems to consumers, allowing homeowners
to go solar with no money down, and in most cases, immediately saving money on
their utility bills and often saving a significant amount of money over the life
of their solar system. While only approximately 20% of residential solar system
sales were financed with solar loans in 2015, an estimated 63% of residential
solar loan sales were financed with solar loans in 2020. Solar loans made to
finance residential solar systems through Sunlight's Platform are made
exclusively to homeowners. Sunlight believes that homeowners generally have
better credit characteristics than other consumer groups. As of September 30,
2021, the average FICO score of all solar borrowers financed through Sunlight's
Platform is 747. Both the generally strong credit profile of solar loan
borrowers and attractive risk-adjusted returns on solar loans to capital
providers have enabled Sunlight to build a diversified network of capital
providers to fund the solar loans facilitated by Sunlight's Platform.

Loan providers in the residential solar industry compete primarily on process
(customer and contractor experience), pricing and products. Orange® offers
contractors robust tools to sell more solar systems and home improvements and
homeowners a fast, fully-digital and frictionless experience. Because Sunlight
has diverse funding sources, Sunlight is able to offer a large suite of
competitive loan products that include multiple loan structures and combinations
of interest rates and tenors.

Sunlight's revenue is primarily from platform fees earned on each solar and home
improvement loan facilitated through Orange®. The platform fee is generally
equal to the margin between the contractor fee charged to the contractor by
Sunlight for each loan facilitated through Orange® and the discount at which
Sunlight's capital provider either funds or purchases such loan (as described in
more detail below). The best-in-class credit quality of Sunlight-facilitated
loans attracts diverse and attractively-priced capital (the "price" to Sunlight
being the amount that a capital provider will pay to originate or purchase a
Sunlight-facilitated loan), ensuring that Sunlight can offer competitive pricing
to its network of contractors while still earning attractive margins. Sunlight's
business model is asset light and therefore Sunlight has minimal consumer credit
risk. Sunlight does not earn material revenue from loans maintained on its
balance sheet.

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On July 9, 2021 (the "Closing Date"), Sunlight consummated the transactions
contemplated by that certain Business Combination Agreement (the "Business
Combination Agreement"), dated as of January 23, 2021, by and among Spartan
Acquisition Corp. II ("Spartan"), Sunlight Financial LLC and the Spartan
Subsidiaries, FTV Blocker and Tiger Blocker (each as defined in the Business
Combination Agreement). On the Closing Date, Spartan changed its name to
"Sunlight Financial Holdings Inc." and Sunlight Financial LLC became the
operating subsidiary of Sunlight Financial Holdings Inc., organized in an "Up-C"
structure (the "Business Combination").

For the periods prior to the Business Combination, Sunlight presents the results
of operations for Sunlight Financial LLC and its consolidated subsidiary (the
"Predecessor"), which does not include the results of operations for Spartan.
For the periods after the Business Combination, Sunlight presents the results of
operations for Sunlight Financial Holdings Inc. and its consolidated
subsidiaries, including Sunlight Financial LLC, (the "Successor"). The three
months ended September 30, 2021 (the "Combined Quarterly Period") includes the
results of operations for the Successor during the period of July 10, 2021
through September 30, 2021 (the "Successor Period") and the results of operation
for the Predecessor during the period July 1, 2021 through July 9, 2021 (the
"Predecessor Quarterly Period"). Similarly, the nine months ended September 30,
2021 (the "Combined Year-to-Date Period") includes the results of operations for
the Successor during the Successor Period and the results of operation for the
Predecessor during the period January 1, 2021 through July 9, 2021 (the
"Predecessor Year-to-Date Period").

Executive overview

Sunlight's revenue is primarily attributable to platform fees earned by Sunlight
for facilitating the origination of solar and home improvement loans by its
capital providers. Sunlight believes that revenue and resulting Adjusted EBITDA
will increase over time as the solar and home improvement markets grow
organically, as Sunlight adds solar and home improvement contractors to its
network, and as Sunlight continues to expand its relationship with its existing
contractor partners.

The combined quarterly period compared to the three months ended September 30, 2020 (Predecessor)

•Sunlight facilitated the origination of $639.5 million of loans during the
Combined Quarterly Period, representing an increase of 77.4% from $360.4 million
of loans during the three months ended September 30, 2020.
•Revenue was $28.6 million for the Combined Quarterly Period, representing an
increase of 65.8% from $17.2 million for the three months ended September 30,
2020.
•Net income (loss) was $(22.2) million for the Combined Quarterly Period,
representing a decrease from $4.1 million in income for the three months ended
September 30, 2020.
•Adjusted EBITDA was $11.4 million for the Combined Quarterly Period,
representing an increase of 97.4% from $5.8 million for the three months ended
September 30, 2020.

The cumulative period accumulated to date compared to the nine months ended September 30, 2020 (Predecessor)

•Sunlight facilitated the origination of $1.9 billion of loans during the
Combined Year-to-Date Period, representing an increase of 126.7% from $832.3
million of loans during the nine months ended September 30, 2020.
•Revenue was $79.6 million for the Combined Year-to-Date Period, representing an
increase of 96.4% from $40.5 million for the nine months ended September 30,
2020.
•Net income (loss) was $(14.3) million for the Combined Year-to-Date Period,
representing a decrease from $3.4 million for the nine months ended
September 30, 2020.
•Adjusted EBITDA was $34.4 million for the Combined Year-to-Date Period,
representing an increase of 315.6% from $8.3 million for the nine months ended
September 30, 2020.

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Adjusted EBITDA

Information regarding the use of Adjusted EBITDA, a non-GAAP measure, and a reconciliation of Adjusted EBITDA to net income, the most comparable GAAP measure, is included in “- Non-GAAP financial measures. GAAP ”. The following charts illustrate Adjusted EBITDA and other key performance measures for the combined quarterly period, the combined cumulative period, and the three and nine months ended. September 30, 2020 (in thousands):

[[Image Removed: sunl-20210930_g2.jpg]][[Image Removed: sunl-20210930_g3.jpg]][[Image Removed: sunl-20210930_g4.jpg]][[Image Removed: sunl-20210930_g5.jpg]][[Image Removed: sunl-20210930_g6.jpg]] [[Image Removed: sunl-20210930_g7.jpg]][[Image Removed: sunl-20210930_g8.jpg]][[Image Removed: sunl-20210930_g9.jpg]][[Image Removed: sunl-20210930_g10.jpg]][[Image Removed: sunl-20210930_g11.jpg]]

To. Includes the results of operations for the Successor during the period of
July 10, 2021 through September 30, 2021. See “- Key Performance Measures” and “- Results of Operations” for amounts relating to this period.

Strong points

In the Combined Quarterly Period, Sunlight continued to experience strong growth
including:
•Number of borrowers increased to 18,189, up 65% from 11,020 borrowers in the
prior-year period
•Contractor relationships grew 54% relative to the prior-year period, with 30
new solar contractors and 62 new home improvement contractors joining the
Sunlight platform in the third quarter of 2021
•Battery attachment rate grew to 24%, compared with 14% in the prior-year period
•Average loan balance increased 8% year-over-year to $35,398, with a record-high
average solar loan balance of $40,991 in the third quarter of 2021
•As of September 30, 2021, Sunlight had a cumulative funded loan total of $5.4
billion

Key Performance Measures

Sunlight reviews several key performance measures, discussed below, to evaluate
its business and results, measure performance, identify trends, formulate plans
and make strategic decisions. Sunlight believes that the presentation of such
metrics is useful to its investors and counterparties because they are used to
measure and model the performance of companies such as Sunlight using similar
metrics.

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The following table sets forth key performance measures for the Successor
Period, the Predecessor Quarterly Period, the Predecessor Year-to-Date Period,
and the three and nine months ended September 30, 2020 (in thousands, except
percentages):

                                Successor                               Predecessor                                                            Predecessor
                             For the Period                                       For the Three                                                            For the Nine
                            July 10, 2021 to               For the Period          Months Ended                                   For the Period           Months Ended
                              September 30,               July 1, 2021 to         September 30,            Percentage           January 1, 2021 to        September 30,            Percentage
                                  2021                      July 9, 2021               2020                 Change(a)              July 9, 2021                2020                 Change(b)

Funded Loans                $      577,197                $      62,268          $     360,379                    77.4  %       $     1,309,504          $     832,326                   126.7  %
Direct Channel Funded
Loans                              425,953                       44,693                328,260                    43.4                1,048,232                644,141                   128.9
Indirect Channel
Funded Loans                       151,244                       17,575                 32,119                   425.6                  261,272                188,185                   119.2
Platform Fee Loans                 591,715                       44,693                373,325                    70.5                1,318,644                841,967                   126.9
Direct Channel
Platform Fee Loans                 425,953                       44,693                328,260                    43.4                1,048,232                644,141                   128.9
Indirect Channel
Platform Fee Loans                 165,762                            -                 45,065                   267.8                  270,412                197,826                   120.5
Revenue                             26,520                        2,074                 17,247                    65.8                   53,064                 40,519                    96.4
Net Income (Loss)                  (20,431)                      (1,772)                 4,072                       n.m.                 6,131                  3,371                       n.m.
Adjusted EBITDA                     11,096                          276                  5,760                    97.4                   23,260                  8,266                   315.6


a.Change represents the Combined Quarterly Period compared to the three months
ended September 30, 2020.
b.Change represents the Combined Year-to-Date Period compared to the nine months
ended September 30, 2020.

Funded Loans. Sunlight refers to the aggregate principal balance of the loans
facilitated through Orange®, and funded by Sunlight's capital providers, during
a given period, as "funded loans." Direct channel capital providers fund
Sunlight-facilitated solar or home improvement loans one-by-one directly onto
their balance sheet via Orange®. Sunlight's direct channel capital providers are
depository institutions with the power and authority to originate loans such as
banks and credit unions. In the indirect channel, Sunlight's solar loan
allocation engine directs the solar loans to be funded on the balance sheet of
Sunlight's intermediary bank partner. These loans are aggregated, pooled and
sold to indirect channel capital providers that cannot, or do not wish to,
directly originate solar loans. The indirect channel capital provider
relationship allows Sunlight to access a broader range of capital, which may
include, among others, credit funds, insurance companies and pension funds. The
home improvements line of business represents an immaterial portion of the
funded loans.

Loans with platform fees. Indicates the loans facilitated by Sunlight on which it collects platform fees during a given period (as described in more detail under “Income” below).

Revenue. Sunlight earns revenue in two primary streams: platform fees earned on
funded loans, as described above, and fees for loan portfolio management and
administration services. For loans originated through Sunlight's direct channel,
Sunlight earns platform fees when the direct channel capital provider funds a
particular loan and, for loans originated through Sunlight's indirect channel,
Sunlight earns platform fees when the indirect channel capital provider
purchases a particular loan from Sunlight's bank partner. Fees earned by
Sunlight for loan portfolio management and administration services are paid to
Sunlight by the capital providers for which such services are performed on a
monthly basis or such other period as the parties agree.

Net revenue. Net income is a financial measure used to measure Sunlight’s performance from period to period on a consistent basis.

Adjusted EBITDA. Adjusted EBITDA is a non-GAAP financial measure used by Sunlight management to assess operating performance, generate future operating plans, and make strategic decisions, including those relating to operating expenses and the allocation of internal resources. Please see “- Non-GAAP Financial Measures” for a more detailed description of the calculation of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to Net Income.

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Loan characteristics

The following table shows the average characteristics of Sunlight facilitated loans for the successor period, the previous quarterly period, the previous cumulative period and the three and nine months ended.
September 30, 2020 (USD in thousands):

                                               Successor                                                 Predecessor
                                                                                                                     For the
                                                                             For the          For the Three          Period           For the Nine
                                             For the Period                Period July        Months Ended         January 1,         Months Ended
                                            July 10, 2021 to              

from 1st 2021 to September 30, 2021 to july September 30, Average loan characteristic

                September 30, 2021             July 9, 2021            2020               9, 2021              2020

Solar
Loan Term (in months)                             234                            231                 231                 231                 224
Customer Interest Rate                            2.3       %                    2.3  %              3.5  %              2.5  %              3.8  %
Customer FICO Score                               752                            753                 749                 752                 746
Loan Balance                               $       41                     $       42          $       36          $       40          $       35
Home Improvement
Loan Term (in months)                             111                            106                 107                 107                 105
Customer Interest Rate                           10.7       %                   10.3  %              9.9  %             10.2  %             10.1  %
Customer FICO Score                               747                            753                 755                 754                 753
Loan Balance                               $       16                     $       16          $       16          $       16          $       15



Recent Developments

Coronavirus Outbreak. During the first quarter of 2020, Sunlight experienced
strong continued growth in funded loan volume, which was a continuation of the
rapid growth experienced in fiscal year 2019. The onset of the novel coronavirus
("COVID-19") pandemic beginning in March 2020 led to a 3% decline in the number
of credit approvals and a 15% decline in volume of loans funded during the
second quarter of 2020 compared to the second quarter of 2019. However, the
number of credit approvals and funded loan volumes largely recovered in the
third quarter of 2020 to exceed the levels experienced during the third quarter
of 2019. At September 30, 2021, Sunlight facilitated a cumulative funded loan
volume since inception of approximately $5.4 billion.

Key factors affecting operating results

Sunlight's future operating results and cash flows are dependent upon a number
of opportunities, challenges, and other factors, including (i) growth in the
number of loans funded to the customers of each contractor; (ii) the
availability of capital to fund the loan products offered by Sunlight and
desired by the markets in which Sunlight participates and on economic terms
favorable to Sunlight: (iii) funded loan volume; (iv) competition in the markets
in which Sunlight operates; (v) the cost of traditional and other alternative
sources of power to consumers and industry trends and general economic
conditions; (vi) growth in the number of contractors included in Sunlight's
network and (vii) concentration among Sunlight's contractor partners and capital
provider partners.

Growth in the number of entrepreneurs and the number of loans financed for the clients of each entrepreneur

Sunlight's expansive network of residential solar and other home improvement
contractors, supported by a differentiated set of tools and services offered
through Orange® and by Sunlight more generally, constitutes the distribution
channel through which Sunlight builds funded loan volume and earns fee income.
Sunlight believes that continued growth in the number of contractors in
Sunlight's network, and growth in the number of loans funded to the customers of
each such contractor, have been and will continue to be key components of
Sunlight's increased market penetration, growth in funded loan volume and
Sunlight's operating results.

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Availability of capital to finance loans; Volume of loans financed

Sunlight's business model is heavily dependent on connecting its capital
providers, who wish to build a portfolio of residential solar or home
improvement loans, to the homeowner customers of the contractors in Sunlight's
distribution network, who wish to finance the purchase of residential solar
systems or home improvements. Sunlight earns a platform fee on each solar and
home improvement funded loan facilitated through Orange®. Sunlight's ability to
continue to increase its funding capacity either by adding additional capital
providers or by increasing the commitments of its existing capital providers to
fund loans on terms desired by the solar and/or home improvement markets and on
terms that are economically favorable to Sunlight is a critical factor in
Sunlight's ability to increase funded loan volume, which is a critical factor in
Sunlight's operating results.

Competetion

Competition for Sunlight occurs at two levels: (i) competition to acquire and
maintain contractor relationships; and (ii) competition to acquire high quality
capital to fund loans, in each case on economic terms favorable to Sunlight.

Competitions to acquire and maintain relationships with entrepreneurs

Competition to obtain contractor relationships is significant. Contractors
generally do not enter exclusive relationships with residential solar loan
providers and Sunlight's agreements with its network of contractors generally do
not provide for exclusive relationships. Contractors may offer loan products
from Sunlight, as well as from Sunlight's competitors, and generally select
between loan providers based on pricing (original issue discount charged),
consumer credit approval rates, variety of loan products to address shifting
consumer demands and market conditions, ease of loan application and completion
process (platform) and other services to facilitate the contractor's business).

Sunlight believes that the following factors, among others, are key to
Sunlight's success in acquiring and maintaining contractor relationships:
•Superior value proposition for contractors. Sunlight's large array of loan
products and flexibility in offering new and additional products stem from the
depth, diversity and attractively-priced funding of Sunlight's capital
providers. Sunlight loan products allow contractors to capture additional
purchase opportunities from consumers that do not want to or are not able to pay
cash for solar system installation or do not want to lease a system from a third
party and forego the benefits of ownership. Sunlight's attractive loan products
and competitive contractor fees allow contractors to choose products that fit
their business needs and the financing needs of their customers. The broad range
of products offered by Sunlight improves the contractor's chances of meeting its
customers' financing needs and completing a sale.
•Easy-to-use technology-enabled POS financing platform, instant credit
decisioning. Orange® is easy to use and provides instant credit decisions for
homeowners interested in financing the purchase of a residential solar system or
home improvement. Access to prompt credit decisions and the ability to close
financing transactions through an intuitive and easy process through the
execution of loan agreements in one encounter with a potential customer provides
significant additional sale opportunities for contractors. Orange® may be
accessed via the Orange® web address, directly from certain contractor's own
website via a flexible application programming interface, or API, and via
Sunlight's mobile application. Besides instant credit decisioning, Orange®
includes automated loan stipulation, secure document upload, e-sign capacity and
other features that facilitate efficient loan transactions and provide
contractors with the ability to grow their businesses.
•Additional features and services offered by Sunlight further support the growth
of contractor businesses, attract new contractors to Sunlight's network and
build contractor loyalty. Sunlight prioritizes innovation in Orange® and
services that support growth in the businesses of its existing network of
contractors, attract new contractors and build contractor loyalty. Examples of
such innovations include Sunlight's advance program, Sunlight's launch of
Spanish-language loan products and Sunlight Rewards™. Sunlight believes that it
has innovated more quickly than its competitors and offers contractors a greater
array of valuable services that drive their determination to offer their
customers Sunlight-offered loan products over those of Sunlight's competitors
and that Sunlight will continue to be able to innovate quickly to meet the needs
of its contractor network.

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Competition to Acquire capital to finance loans

The solar system and home improvement loan markets are relatively fragmented.
Facilitating the aggregation of loan volume from these markets is a highly
competitive sector of these broader industries. Sunlight faces competition from
a diverse landscape of consumer lenders, including traditional banks, credit
unions, and specialized solar system lenders and lease providers. Sunlight's
competitors source capital from a mix of alternative sources, including
depository capital and/or other alternatives that rely on the capital markets.

Sunlight believes that it offers capital providers an attractive value
proposition due to its industry-leading consumer credit underwriting, attractive
risk-adjusted returns earned by its capital providers relative to other asset
classes, the access that Sunlight's Platform provides to a unique and growing
asset class that may reduce volatility in the ability to deploy capital, and the
ability to access new customers for very little cost. Sunlight has successfully
added capital providers and grown commitments from existing capital providers
since inception. As its contractor network has grown, Sunlight has consistently
diversified its capital provider base to ensure that it has sufficient capital
to fund the demand for Sunlight facilitated loans and that it is able to offer
an evolving competitive mix of loan products to meet contractor and consumer
demand. Capital providers have actively participated in this success and
Sunlight has not experienced any capital provider attrition since inception,
although one capital provider provided notice to Sunlight that it had exceeded
its internal asset concentration levels for solar loans and, accordingly, such
capital provider terminated their program agreement with Sunlight during April
2021. This capital provider purchased an immaterial portion (less than 2.2%) of
Sunlight's total facilitated solar loans in 2020. Sunlight believes that there
are many institutions seeking to deploy capital into solar and home improvement
loan assets, but Sunlight intends to continue to be selective about adding
capital provider partners. Sunlight values diversification but will specifically
focus on partnering with potential capital providers that can enable Sunlight to
meet strategic goals, including access to the most attractive pricing and access
to capacity for a growing suite of loan products, among others.

Industry trends and general economic conditions; Cost of energy

Sunlight's results of operations in the past have been fairly resilient to
economic downturns but in the future may be impacted by the relative strength of
the overall economy and its effect on unemployment, consumer spending and
consumer demand for solar systems and home improvements. As general economic
conditions improve or deteriorate, the amount of disposable income consumers
have access to tends to fluctuate, which in turn impacts consumer spending
levels and the willingness of consumers to take out loans to finance purchases.
Specific economic factors such as interest rate levels, changes in monetary,
fiscal and related policies, market volatility, consumer confidence, the impact
of the pandemic crisis and, particularly, the unemployment rate also influence
consumer spending and borrowing patterns.

Sunlight's results of operations are also dependent upon continued growth in the
residential solar market and the continued penetration of residential solar
across the country. Growth in the solar market is attributable to several
factors including, among others, savings available to consumers as compared with
the cost of traditional sources of power or other forms of clean or alternative
power and the opportunity to participate in the world-wide effort of reducing
carbons in the atmosphere, or "going green." The cost to homeowners to install
solar is impacted by many factors, including the cost of materials, the cost of
labor, to the extent financed, prevailing interest rates and the availability of
federal, state and local incentives.

Specifically, future results of operations may be impacted by the potential
discontinuation or material reduction or other change in the federal solar tax
credit (the "ITC"). The ITC currently allows a qualifying homeowner to deduct
26% of the cost of installing residential solar systems from their U.S. federal
income taxes, thereby returning a material portion of the purchase price of the
residential solar system to homeowners. Congress has extended the ITC expiration
date multiple times including, most recently, in December 2020. Under the terms
of the current extension, the ITC will remain at 26% through the end of 2022,
reduce to 22% for 2023, and further reduce to 0.0% after the end of 2023 for
residential solar systems, unless it is extended before that time. Although the
ITC has been extended several times, there is no guarantee that it will be
extended beyond 2023.

Though the residential solar market has grown steadily over the last several
years, Sunlight cannot guarantee that such growth will continue. In addition,
although the home improvement business is not currently a material part of
Sunlight's business, Sunlight believes that it is well-positioned to grow that
business significantly over time. The home improvement industry is, however,
subject to many of the same industry trends and challenges associated with a
changing economy as the solar industry and Sunlight cannot guarantee that it
will be successful in growing that business as planned.

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Concentration

Sunlight's expansive network of residential solar system and other home
improvement contractors, supported by a differentiated set of tools and services
offered through Orange®, constitutes the distribution channel through which the
Sunlight-facilitated loans made available by Sunlight's channel of capital
providers are sold to the consumer customers of those loan products. Such an
expansive network enables Sunlight to build increased funded loan volume and
earn increased platform fees. Sunlight partners with some of the largest
contractors in the U.S., which in the aggregate sell a material portion of
Sunlight's funded loan volume through Sunlight's network of capital providers.
However, Sunlight's contractor network is considerably diversified. In the
period from September 30, 2019 to September 30, 2020, the top ten contractors in
Sunlight's network were responsible for selling 43.6% of Sunlight's funded loan
volume, and in the period from September 30, 2020 to September 30, 2021 that
percentage increased to 45.2%. In both of these periods, only one contractor
sold loans aggregating more than 10% of Sunlight's revenue. That contractor was
responsible for selling more than 15.8% and 14.5% of Sunlight's funded loan
volume in the period from September 30, 2019 to September 30, 2020 and in the
period from September 30, 2020 to September 30, 2021, respectively. While the
percentage of Sunlight's funded loan volume sold by any contractor in Sunlight's
network varies from period to period, there is one contractor, Marc Jones
Construction, L.L.C. d/b/a Sunpro Solar ("Sunpro"), that sold 12.1%, 17.1%, and
15.2% of Sunlight's funded loan volume during the Successor Period, the
Predecessor Quarterly Period, and the Predecessor Year-to-Date Period,
respectively, and 15.8% and 16.4% during the three and nine months ended
September 30, 2020, respectively. Sunlight believes that its contractor network
is sufficiently diversified to continue to grow with the solar markets and
increase share given market dynamics, but intends to continue adding contractors
to the network in order to further diversify.

Sunlight has multiple capital providers in both its direct and indirect funding
channels, all of which have increased their commitments since partnering with
Sunlight. Sunlight's largest capital provider in the period from September 30,
2020 to September 30, 2021 has materially increased its commitment since the
relationship began in 2015. Though Sunlight believes that the relationship with
this capital provider is healthy and will continue without disruption, the
significant portion of funded loan volume attributable to this capital provider
results in concentration risk. Sunlight cannot guarantee that this capital
provider will continue to fund loans facilitated by Sunlight in the same volume
or at all beyond its current contractual commitment which expires in 2022. This
capital provider funded 47.0% and 33.7% of Sunlight's funded loans during the
period from September 30, 2019 to September 30, 2020 and during the period from
September 30, 2020 to September 30, 2021, respectively. If this capital provider
elects to terminate its relationship with Sunlight, then the capital provider is
contractually required to provide Sunlight 12 months' advance notice of
termination. If Sunlight were to receive such an advance notice of termination,
then Sunlight would use this period to develop alternate funding plans by
utilizing existing relationships and exploring possible new capital provider
relationships. While Sunlight believes that it would be able to identify and
implement alternative arrangements during this period, Sunlight cannot guarantee
that it would be able to do so at all or on equivalent or favorable terms.
Sunlight believes that a failure to arrange alternative loan funding on
equivalent terms would have less of an impact on Sunlight's funded loan volume,
as capital for the solar loan industry has historically been readily available.
Rather, Sunlight believes that such failure would be more likely to have a
greater negative impact on the amount of platform fees that Sunlight earns, and
therefore could impact revenue.

Presentation basis

Sunlight operates in one operating segment and Sunlight operates in one geographic region, United States. See Notes 1 and 2 to Sunlight’s accompanying consolidated financial statements for more information.

Components of the results of operations

Income

Revenue. Sunlight earns revenue in two primary streams: platform fees earned on
each loan facilitated via Orange® and fees earned for loan portfolio management
and administration services.

Platform fees. Platform fee revenue, for each loan facilitated via Orange®, is
generally the difference between the contractor fee that Sunlight charges to the
contractors in its network for access to Orange® and the ability to offer
financing options to their customers and the capital provider discount charged
to Sunlight (cost of capital to Sunlight) for such loan. The platform fee
percentage is equal to the dollar amount of such fee divided by the principal
balance at origination of such loan. For solar system loans, platform fees are
generally earned by Sunlight in the direct channel when the direct channel
capital provider funds a particular loan and in the indirect channel generally
when an indirect channel capital provider purchases a particular loan from
Sunlight's bank partner. The contract between Sunlight and its bank partner for
home improvement loans is considered a derivative for GAAP purposes, whereas the
contract between Sunlight and its bank partner for solar loans is not. For home
improvement loans, Sunlight records a "realized gain on
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contract derivative (net)" in lieu of a platform fee generally when the loans
are purchased by Sunlight's indirect capital provider from Sunlight's bank
partner, and Sunlight is paid. As such, Sunlight excludes from its revenue any
platform fee associated with a home improvement loan under Sunlight's related
home improvement agreement. Sunlight estimates the fair value of the derivative
components of the bank partnership arrangement based on the present value of the
net cash flows that Sunlight expects to collect under the agreement. Under this
home improvement bank partnership arrangement, with respect to a given home
improvement loan, Sunlight will expect to collect (x) the amount paid by
Sunlight's indirect capital provider to purchase the loan from Sunlight's bank
partner (the outstanding principal balance of the loan less the amount of the
capital provider discount applied to that loan plus any accrued and unpaid
interest) minus (y) the total of amounts funded to the relevant contractor in
respect of the related home improvement project (total cost of the project to
the consumer customer of the relevant contractor less the applicable contractor
fee) and any amounts that Sunlight owes to its bank partner in the form of
minimum guaranteed returns to the bank partner on the origination of such loan.
The aggregate estimated fair value of this agreement is marked to market by
Sunlight on a monthly basis. When a loan sale occurs, the estimated fair value
associated with the loans included in the sold portfolio is reversed and
Sunlight recognizes the related realized net cash as a realized gain as noted
above.

Loan portfolio management and administration revenue. Sunlight also earns
revenue from fees charged by Sunlight for providing loan portfolio management
and administration services for certain of its capital providers. These services
include the reporting of loan performance information, administration of
servicing performed by third parties, and addressing customer concerns or
complaints through Sunlight's call center on behalf of the relevant capital
provider.

Costs and expenses

Cost of revenues. Sunlight's cost of revenues includes the aggregate costs that
Sunlight incurs to satisfy its obligations in facilitating the origination of a
loan. The cost of revenues includes variable consideration that Sunlight pays
for its platform fees which do not otherwise meet the criteria necessary for
netting against gross revenues, including items such as credit bureau fees, the
cost to check homeowners' title in connection with the homeowner credit
underwriting, the cost of certain sales incentives, and certain information
technology costs directly associated with loan origination activities, among
others.

Compensation and benefits. Compensation and benefits expenses represent costs
related to our employees, such as salaries, bonuses, benefits and equity-based
compensation expenses. Also included are any recruiting costs incurred by
Sunlight in attracting talent and professional and consulting fees related to
certain services that Sunlight outsources to third parties.

Selling, general, and administrative. Selling, general and administrative
expenses include legal, audit and other professional services fees, travel and
entertainment expenses, and insurance premiums as incurred. Sunlight recognizes
expenses associated with co-marketing agreements when earned by the
counterparty.

Property and technology. Real estate and technology expenses include rent, IT services to support Orange® infrastructure and operations, as well as other Sunlight technology requirements, and non-capitalizable costs to develop software in-house as and when. as they are engaged.

Depreciation and amortization. Depreciation and amortization expense relate
primarily to the amortization of definite-lived intangible assets acquired in
the Business Combination that include contractor and capital provider
relationships, developed technology, and trademarks/ tradenames. Other
amortization includes internally developed software to support Orange® or
otherwise developed by or on behalf of Sunlight after the Business Combination
and leasehold improvements. Depreciation expense includes the depreciation of
computer hardware as well as furniture, fixtures, and equipment.

Provision for losses. Provision for losses expenses relate primarily to certain
receivables that are held-for-investment by Sunlight that are not performing or
Sunlight estimates will not perform based upon historical experience. The term
relates to Sunlight's advances program, its prefunding program, and to certain
solar and home improvement loans and loan participations that Sunlight purchased
from Sunlight's capital providers pursuant to the terms of its contract with
those capital providers.

Management fees to affiliate. These expenses relate to fees paid pursuant to
management agreements entered into between Sunlight and certain of Sunlight's
affiliates. These management agreements terminated upon closing of the Business
Combination.

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Other income (expenses), net

Interest income. Sunlight recognizes income on certain receivables that are
held-for-investment by Sunlight, including certain solar or home improvement
loans, or participations in such loans, held on the Sunlight balance sheet, in
each case to the extent such receivables are performing. Sunlight accrues
interest income based on the unpaid principal balance and contractual terms of
such receivables, and recognizes income related to the discounts associated with
such receivables as a yield adjustment using the interest method, or on a
straight-line basis when it approximates the interest method, over the loan
term.

Interest expense. Interest expenses represent interest payable by Sunlight on
its borrowings under its Loan and Security Agreement (as defined below).
Interest expense also includes the amortization of associated deferred financing
costs prior to the Business Combination.

Change in the fair value of liabilities related to warrants. The change in the fair value of the liabilities related to the warrants relates to certain warrants issued by Sunlight to certain third parties to purchase the Class A shares of Sunlight. These warrants are periodically marked-to-market and any change in value is reflected in this item.

Change in fair value of, and realized gains on, contract derivative, net. The
arrangement with Sunlight's bank partner to originate home improvement loans is
considered a derivative under GAAP. As such, Sunlight's revenues exclude the
platform fees that Sunlight earns from the sale of home improvement loans from
the bank partner's balance sheet. Instead, Sunlight records a derivative that is
marked to market on a monthly basis, with realized gains recognized on the
derivative on the sale of the loan from the bank partner to an indirect channel
capital provider and accounting for the impact of any changes to the applicable
interest rates on the amounts payable to the bank partner in connection with any
such sale.

Other losses realized, net. Other realized losses relate primarily to losses incurred by Sunlight in connection with certain indirect channel loans.

Other income (expense). Other income or expense primarily relate to the changes
in a liability for certain guarantees of performance provided by Sunlight to
Sunlight's bank partner relating to the loans held on the balance sheet of
Sunlight's bank partner and certain other guarantees of performance made by
Sunlight to certain of its capital providers with respect to specified solar
loans.

Business combination costs. Expenses incurred by Sunlight are not considered operating expenses. For the combined quarterly period and the combined cumulative period, these costs primarily represent legal and other professional fees incurred by Sunlight in connection with the business combination.

Tax benefit (expense). Income taxes incurred by Sunlight on income, or loss, not attributable to non-controlling interests in Sunlight Financial LLC.

Noncontrolling interests in income (loss) of consolidated subsidiaries. The net
income (loss) of Sunlight's consolidated subsidiaries allocable to third parties
and to which Sunlight is not entitled.

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Results of operations

This section includes a summary of our results of operations, followed by
detailed comparisons of our results for the Successor Period, the Predecessor
Quarterly Period, the Predecessor Year-to-Date Period, and the three and nine
months ended September 30, 2020 (in thousands, except percentages):

                                   Successor                               Predecessor                                                                              Predecessor
                                For the Period                                       For the Three                                                                             For the Nine
                               July 10, 2021 to               For the Period          Months Ended                                               

For the period of the months ended

                                 September 30,               July 1, 2021 to         September 30,                                                    January 1, 2021         September 30,
                                     2021                      July 9, 2021               2020                    Increase (Decrease)(a)              to July 9, 2021              2020                    Increase (Decrease)(b)

Revenue                        $       26,520                $       2,074          $      17,247          $       11,347               65.8  %       $      53,064          $      40,519          $       39,065               96.4  %
Costs and Expenses
Cost of revenues
(exclusive of items
shown separately below)                 4,841                          365                  3,468                   1,738               50.1                 10,556                  8,715                   6,682               76.7
Compensation and
benefits                               32,782                        1,042                  6,748                  27,076              401.2                 17,162                 19,471                  30,473              156.5
Selling, general, and
administrative                          3,330                          330                    904                   2,756              304.9                  3,450                  2,726                   4,054              148.7
Property and technology                 1,502                          162                  1,105                     559               50.6                  2,790                  3,153                   1,139               36.1
Depreciation and
amortization                           20,541                           78                    812                  19,807            2,439.3                  1,688                  2,430                  19,799              814.8
Provision for losses                      254                            -                    310                     (56)             (18.1)                 1,172                    788                     638               81.0
Management fees to
affiliate                                   -                            4                    100                     (96)             (96.0)                   204                    300                     (96)             (32.0)
                                       63,250                        1,981                 13,447                  51,784              385.1                 37,022                 37,583                  62,689              166.8
Operating income (loss)               (36,730)                          93                  3,800                 (40,437)                 n.m.              16,042                  2,936                 (23,624)                 n.m.
Other Income (Expense),
Net
Interest income                            77                            9                     94                      (8)              (8.5)                   262                    370                     (31)              (8.4)
Interest expense                         (291)                         (32)                  (264)                    (59)              22.3                   (604)                  (592)                   (303)              51.2
Change in fair value of
warrant liabilities                    10,116                       (1,439)                   (95)                  8,772                  n.m.              (5,504)                   (66)                  4,678                  n.m.
Change in fair value of
contract derivatives,
net                                       489                          125                    391                     223               57.0                   (662)                   846                  (1,019)                 n.m.
Realized gains on
contract derivatives,
net                                     1,377                            6                    170                   1,213              713.5                  2,992                    291                   4,078            1,401.4

Other income (expense)                    (60)                          (5)                   (24)                    (41)             170.8                    616                   (414)                    970                  n.m.
Business combination
expenses                               (1,093)                        (529)                     -                  (1,622)                 n.m.              (7,011)                     -                  (8,104)                 n.m.
                                       10,615                       (1,865)                   272                   8,478            3,116.9                 (9,911)                   435                     269               61.8
Net Income (Loss) Before
Income Taxes                          (26,115)                      (1,772)                 4,072                 (31,959)                 n.m.               6,131                  3,371                 (23,355)                 n.m.
Income tax benefit
(expense)                               5,684                            -                      -                   5,684                  n.m.                   -                      -                   5,684                  n.m.
Net Income (Loss)                     (20,431)                      (1,772)                 4,072                 (26,275)                 n.m.               6,131                  3,371                 (17,671)                 n.m.
Noncontrolling interests
in loss of consolidated
subsidiaries                            9,108                            -                      -                   9,108                  n.m.                   -                      -                   9,108                  n.m.
Net Income (Loss)
Attributable to Class A
Shareholders                   $      (11,323)               $      (1,772)         $       4,072          $      (17,167)                 n.m.       $       6,131          $       3,371          $       (8,563)                 n.m.


a.Change represents the Combined Quarterly Period compared to the three months
ended September 30, 2020.
b.Change represents the Combined Year-to-Date Period compared to the nine months
ended September 30, 2020.

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The combined quarterly period compared to the three months ended September 30, 2020 (Predecessor)

Revenue

The following table shows the components of Sunlight revenue for the successor period, the previous quarterly period and the three months ended.
September 30, 2020 (in thousands, except percentages):

                                       Successor                           Predecessor                          Increase (Decrease)(a)
                                        For the
                                      Period July                For the            For the Three
                                      10, 2021 to              Period July          Months Ended
                                     September 30,              1, 2021 to          September 30,
                                         2021                  July 9, 2021             2020                      $                    %

Direct Channel Platform Fees,
net                                  $   21,670                $   1,972          $       17,703          $        5,939              33.5  %
Indirect Channel Platform
Fees, net                                 2,489                       11                  (1,160)                  3,660                 n.m.
Other revenues                            2,361                       91                     704                   1,748             248.3
                                     $   26,520                $   2,074          $       17,247          $       11,347              65.8

a.The change represents the combined quarterly period versus the three months ended September 30, 2020.

Revenue increased by $11.3 million or 65.8% for the three months ended
September 30, 2021 as compared to the three months ended September 30, 2020 due
to an increase of 70.5% in platform fee loans, and an increase of 0.1% in the
average platform fee percentage earned on loans funded by direct channel capital
providers or purchased by indirect channel capital providers. Sunlight's revenue
excludes amounts earned through its facilitation of home improvement loan
originations, which Sunlight presents as realized gains on contract derivatives.

Funded loans increased from $360.4 million in the three months ended
September 30, 2020 to $639.5 million in the three months ended September 30,
2021, an increase of 77.4%. Sunlight believes that an increase in funded loans
year-over-year is attributable primarily to both growth in the residential solar
market and an increase in the number of contractors in Sunlight's contractor
network. The total number of contractors in Sunlight's network increased from
approximately 963 at September 30, 2020 to over 1,484 at September 30, 2021. The
number of solar contractors in the network increased from 609 at September 30,
2020 to 776 at September 30, 2021, an increase of 27.4%. The number of home
improvement contractors in the network increased from 354 at September 30, 2020
to 708 at September 30, 2021.

The average platform fee percentage earned on loans funded by direct channel
capital providers or purchased by indirect channel capital providers increased
0.1% from the three months ended September 30, 2021 to the three months ended
September 30, 2020. The platform fee percentage earned by Sunlight is dependent
on several factors, including (i) the contractor fees charged by Sunlight to
contractors (which is impacted by competitive pressure that varies from period
to period, by loan product based on consumer preferences, and by the mix of
contractors in a particular period as certain contractors may generally have
higher or lower contractor fees than others), (ii) the capital provider
discounts charged to Sunlight by Sunlight's capital providers (which fluctuate,
among other things, based on market conditions impacting cost of capital,
opportunities in other asset classes, and the mix of capital providers funding
or purchasing loans in a particular period as certain capital providers may
generally have higher or lower capital provider discounts than others), (iii)
the mix of Sunlight loan products funded in a particular period (as certain
products in that period, for reasons relating to competitive pressure for
certain loan products or otherwise, may generally carry a higher or lower
capital provider discount or contractor fee, than others) and (iv) other
factors. Sunlight earns revenues from platform fees, which are determined by the
margin between capital provider discounts charged to Sunlight and contractor
fees charged by Sunlight to the contractors that sell the Sunlight facilitated
loan products. Both components in the calculation of platform fees are
influenced by a variety of factors, including but not limited to those described
above. For example, capital providers wishing to obtain greater volume may
reduce capital provider discounts charged across all products to make funding
with this capital provider an attractive option to Sunlight. As well,
competitive pressures or volume discounts negotiated with given contractors may
reduce the contractor fees that Sunlight charges to such contractors on certain
loan products or across loan products.

Sunlight believes that the difference in platform fee percentage from
September 30, 2020 to September 30, 2021 is primarily attributable to
competition in the market with regard to contractor fees, the mix of Sunlight
loan products funded in the two periods (based on the recent trend towards
contractor preference to offer certain longer term, lower interest rate loan
products facing significant competitive pressure from other participants
offering loan financing in the market and driving attractive contractor fee
pricing in those periods) and an increase in capital provider discounts charged
to Sunlight by capital providers in Sunlight's indirect channel during the
second quarter of 2020. Sunlight's indirect channel capital providers are
generally more reactive than direct channel capital providers to market
uncertainty and interest rate market
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volatility as presented at the onset of the COVID-19 pandemic. Unlike Sunlight's
direct channel capital providers, Sunlight's indirect channel capital providers
are generally not depository institutions and therefore their own cost of
capital is subject to market uncertainty. Consequently, the capital provider
discounts charged to Sunlight by such indirect channel capital providers are
also likely to be more reactive. Deposits, which are generally used by
Sunlight's direct channel capital providers to fund loans, are generally more
stable, less reactive to market variance and the least expensive cost of
capital. The following table presents averages weighted by original loan balance
of capital provider discounts, contractor fees and platform fees.
                                          Successor                       Predecessor                                         Predecessor
                                     For the Period July              For the Period July                                For the Three Months
                                         10, 2021 to                  1, 2021 to July 9,             Combined             Ended September 30,            Change in
                                     September 30, 2021                      2021                Quarterly Period                2020                    Average(a)

Solar Total - Capital Provider
Discount                                         17.0  %                           17.2  %                 17.0  %                     12.1  %                   4.9  %
Solar Total - Contractor Fee                     21.5                              21.6                    21.5                        16.5                      5.0
Solar Total - Platform Fee                        4.5                               4.4                     4.5                         4.4                      0.1

Solar Direct Channel - Capital
Provider Discount                                16.8                              17.2                    16.8                        11.7                      5.1
Solar Direct Channel -
Contractor Fee                                   21.9                              21.6                    21.8                        17.1                      4.7
Solar Direct Channel -
Platform Fee                                      5.1                               4.4                     5.0                         5.4                     (0.4)

Solar Indirect Channel -
Capital Provider Discount                        18.1                                 -                    18.1                        15.2                      2.9
Solar Indirect Channel -
Contractor Fee                                   20.3                                 -                    20.3                        12.6                      7.7
Solar Indirect Channel -
Platform Fee                                      2.2                                 -                     2.2                        (2.6)                     4.8

a.The change represents the combined quarterly period versus the three months ended September 30, 2020.

Costs and Expenses

Cost of revenues increased by 50.1% for the three months ended September 30,
2021, less than the 65.8% increase in revenues, when compared to the three
months ended September 30, 2020. The $1.7 million increase in cost of revenues
resulted from $0.9 million of increased costs of consumer credit underwriting
arising from increased credit approval volumes, $0.1 million from rewards earned
by salespeople under Sunlight Rewards™, $0.6 million from costs incurred in
connection with the increase of funded loan volumes and Sunlight's role in
facilitating those loans, and $0.1 million of cost increases from broker fees
paid to financial institutions for arranging certain loan origination or
purchase arrangements with capital providers. The broker fees are calculated as
a percentage of the funded loan volume originating from an applicable loan
origination or purchase arrangement with a capital provider. Sunlight's
obligation to pay these broker fees generally terminates between three and five
years after the date that the initial loan is originated or purchased pursuant
to an arrangement facilitated by the broker.

Compensation and benefits expense increased by $27.1 million, or 401.2% for the
three months ended September 30, 2021 when compared to the three months ended
September 30, 2020, primarily due to an increase of $24.8 million from
recognition of compensation expense in connection with equity-based awards
during the Successor Period, while remaining costs were associated with an
increase in full-time employees from 165 at September 30, 2020 to 220 at
September 30, 2021 and The increase in full-time employees is consistent with
the growth in Sunlight's business year-over-year and Sunlight expects to
continue hiring as its business grows in order to continue to expand its
contractor network, develop its home improvement business and meet the demands
of its contractors and capital providers.

Selling, general, and administrative expense increased by $2.8 million, or
304.9% for the three months ended September 30, 2021 when compared to the three
months ended September 30, 2020 primarily due to increased professional fees
including legal, audit and tax services.

Property and technology expense increased by $0.6 million, or 50.6% for the
three months ended September 30, 2021 when compared to the three months ended
September 30, 2020 primarily due to an increase in licensing fees charged by
certain of Sunlight's third-party service providers that support the
infrastructure and operation of Orange® associated with the growth in Sunlight's
network of contractors.

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Depreciation and amortization expense increased by $19.8 million, or 2,439.3%
for the three months ended September 30, 2021 when compared to the three months
ended September 30, 2020 primarily due to the amortization of intangible assets
acquired in the Business Combination during the Successor Period.

Provision for loss expense decreased by $0.1 million, or (18.1)% for the three
months ended September 30, 2021 when compared to the three months ended
September 30, 2020. Such increase was due primarily to a decreased level of loan
write offs. The ratio of provision for loss expense over aggregate funded bank
partner loan volume in the three months ended September 30, 2020 was 0.4% as
compared to 0.8% over the three months ended September 30, 2021 as a result of
the write offs.

Operating margin decreased materially from the three months ended September 30,
2020 to the three months ended September 30, 2021 due to the factors described
above, primarily related to non-cash charges in connection with the Business
Combination. Generally, operating margin benefits from the fixed nature of a
material level of Sunlight expense and revenue generally growing materially
faster than operating expenses when excluding the amortization effects of
identified intangible assets and equity-based compensation expense.

Other income (expenses), net

Total other income increased $8.5 million for the three months ended
September 30, 2021 when compared to the three months ended September 30, 2020,
primarily resulting from (a) $8.8 million decrease in the fair value of warrants
issued by Sunlight and redeemable in its equity, treated as liabilities and (b)
a $1.2 million increase in income Sunlight realized from the arrangement with
Sunlight's bank partner to originate home improvement loans treated as a
derivative under U.S. GAAP. This in increased income was partially offset by a
$1.6 million increase in costs incurred in connection with the Business
Combination.

Tax benefit

Sunlight’s predecessor is a limited liability company not subject to income tax. During the succession period, the $ 5.7 million the tax benefit reflects an effective tax rate of 23.1%.

Non-controlling interests in consolidated subsidiaries

Sunlight's Predecessor did not consolidate any entities in which third parties
owned a noncontrolling interest. During the Successor Period, income (loss) of
consolidated subsidiaries allocated to noncontrolling interests represents $26.1
million of Sunlight Financial LLC consolidated net loss during the Successor
Period and weighted-average noncontrolling interests of 34.9%.

The cumulative period accumulated to date compared to the nine months ended September 30, 2020 (Predecessor)

Revenue

The following table provides the components of Sunlight revenue for the successor period, the predecessor’s time of year to date, and the nine months ended.
September 30, 2020 (in thousands, except percentages):

                                       Successor                              Predecessor                            Increase (Decrease)(a)
                                        For the
                                      Period July                                        For the Nine
                                      10, 2021 to               For the Period           Months Ended
                                     September 30,              January 1, 2021          September 30,
                                         2021                   to July 9, 2021              2020                      $                    %

Direct Channel Platform Fees,
net                                  $   21,670                $       45,703          $       36,607          $       30,766              84.0  %
Indirect Channel Platform
Fees, net                                 2,489                         5,054                   2,018                   5,525             273.8
Other revenues                            2,361                         2,307                   1,894                   2,774             146.5
                                     $   26,520                $       53,064          $       40,519          $       39,065              96.4

a.The change represents the cumulative period compared to the nine months ended September 30, 2020.

Revenue increased by $39.1 million or 96.4% for the nine months ended
September 30, 2021 as compared to the nine months ended September 30, 2020 due
to an increase of 126.9% in platform fee loans, partially offset by an overall
0.3% decrease in the average platform fee percentage earned on loans funded by
direct channel capital providers or purchased
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by indirect channel capital providers. Sunlight’s revenue excludes amounts earned from its facilitation of home improvement loan origination, which Sunlight presents as realized gains on contract derivatives.

Funded loans increased from $832.3 million for the nine months ended
September 30, 2020 to $1.9 billion for the nine months ended September 30, 2021,
an increase of 126.7%. Sunlight believes that the increase in funded loans
year-over-year is attributable primarily to both growth in the residential solar
market and an increase in the number of contractors in Sunlight's contractor
network.

The average platform fee percentage earned on loans funded by direct channel
capital providers or purchased by indirect channel capital providers decreased
0.3% from the nine months ended September 30, 2020 to the nine months ended
September 30, 2021 for the same reasons described in Sunlight's
quarter-on-quarter results of operations. The following table presents averages
weighted by original loan balance of capital provider discounts, contractor fees
and platform fees.

                                          Successor                       Predecessor                                            Predecessor
                                     For the Period July                For the Period                                       For the Nine Months
                                         10, 2021 to                  January 1, 2021 to               Combined              Ended September 30,            Change in
                                     September 30, 2021                  July 9, 2021            Year-to-Date Period                2020                    Average(a)

Solar Total - Capital Provider
Discount                                         17.0  %                           16.7  %                    16.8  %                     11.5  %                   5.3  %
Solar Total - Contractor Fee                     21.5                              20.8                       21.1                        16.1                      5.0
Solar Total - Platform Fee                        4.5                               4.1                        4.3                         4.6                     (0.3)

Solar Direct Channel - Capital
Provider Discount                                16.8                              16.6                       16.6                        10.4                      6.2
Solar Direct Channel -
Contractor Fee                                   21.9                              20.9                       21.2                        16.1                      5.1
Solar Direct Channel -
Platform Fee                                      5.1                               4.3                        4.6                         5.7                     (1.1)

Solar Indirect Channel -
Capital Provider Discount                        18.1                              17.2                       17.5                        15.4                      2.1
Solar Indirect Channel -
Contractor Fee                                   20.3                              20.2                       20.2                        16.3                      3.9
Solar Indirect Channel -
Platform Fee                                      2.2                               3.0                        2.7                         0.9                      1.8

a.The change represents the cumulative period compared to the nine months ended September 30, 2020.

Costs and Expenses

Cost of revenues increased by 76.7% for the nine months ended September 30,
2021, which is less than the 96.4% increase in revenues, when compared to the
nine months ended September 30, 2020. The $6.7 million increase in cost of
revenues resulted from $2.0 million of increased costs of consumer credit
underwriting arising from increased credit approval volumes, $1.4 million from
rewards earned by salespeople under Sunlight Rewards™, $2.3 million from costs
incurred in connection with the increase of funded loan volume in 2020 and
Sunlight's role in facilitating those loans, and increased costs of $1.0 million
from broker fees paid to financial institutions for arranging certain loan
origination or purchase arrangements with capital providers. The broker fees are
calculated as a percentage of the funded loan volume originating from an
applicable loan origination or purchase arrangement with a capital provider.
Sunlight's obligation to pay these broker fees generally terminates between
three and five years after the date that the initial loan is originated or
purchased pursuant to an arrangement facilitated by the broker.

Compensation and benefits expense increased by $30.5 million, or 156.5% for the
nine months ended September 30, 2021 when compared to the nine months ended
September 30, 2020, primarily due to an increase of $24.8 million from
recognition of compensation expense in connection with equity-based awards
during the Successor Period and an increase in full-time employees from 165 at
September 30, 2020 to 220 at September 30, 2021. The increase in full-time
employees is consistent with the growth in Sunlight's business and Sunlight
expects to continue hiring as its business grows in order to continue to expand
its contractor network, develop its home improvement business and meet the
demands of its contractors and capital providers.

Selling, general, and administrative expense increased by $4.1 million, or
148.7% for the nine months ended September 30, 2021 when compared to the nine
months ended September 30, 2020 primarily due to increased professional fees
including legal, audit and tax services.

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Property and technology expense increased by $1.1 million, or 36.1% for the nine
months ended September 30, 2021 when compared to the nine months ended
September 30, 2020 primarily due to an increase in licensing fees charged by
certain of Sunlight's third-party service providers that support the
infrastructure and operation of Orange® associated with the growth in Sunlight's
network of contractors.

Depreciation and amortization expense decreased by $19.8 million, or 814.8% for
the nine months ended September 30, 2021 when compared to the nine months ended
September 30, 2020 primarily due to the amortization of intangible assets
acquired in the Business Combination during the Successor Period and the
amortization of investments made in Orange® to support ongoing innovation and to
automate certain other corporate processes.

Provision for loss expense increased by $0.6 million, or 81.0% for the nine
months ended September 30, 2021 when compared to the nine months ended
September 30, 2020. Such increase was due primarily to an increased level of
funded loan volume with Sunlight's bank partner. The ratio of provision for loss
expense over aggregate funded bank partner loan volume in the nine months ended
September 30, 2020 was 0.7% as compared to 0.3% over the three months ended
September 30, 2021, indicating an decrease in loss experience as compared to
funded bank partner loan volume.

Operating margin decreased materially from the nine months ended September 30,
2020 to the three months ended September 30, 2021 due to the factors described
above, primarily related to non-cash charges in connection with the Business
Combination. Generally, operating margin benefits from the fixed nature of a
material level of Sunlight expense and revenue generally growing materially
faster than operating expenses when excluding the amortization effects of
identified intangible assets and equity-based compensation expense.

Other income (expenses), net

Total other expenses increased $0.3 million for the nine months ended
September 30, 2021 when compared to the nine months ended September 30, 2020,
primarily resulting from (a) $8.1 million increase in costs incurred in
connection with the Business Combination, (b) $4.7 million increase in the fair
value of warrants issued by Sunlight and redeemable in its equity, treated as
liabilities, and (c) $1.0 million reversal of the change in fair value of the
arrangement with Sunlight's bank partner to originate home improvement loans
treated as a derivative under U.S. GAAP. caused by an offsetting $4.1 million
realized gain from the sale of those loans.

Tax benefit

Sunlight’s predecessor is a limited liability company not subject to income tax. During the succession period, the $ 5.7 million the tax benefit reflects an effective tax rate of 23.1%.

Non-controlling interests in consolidated subsidiaries

Sunlight's Predecessor did not consolidate any entities in which third parties
owned a noncontrolling interest. During the Successor Period, income (loss) of
consolidated subsidiaries allocated to noncontrolling interests represents $26.1
million of Sunlight Financial LLC consolidated net loss during the Successor
Period and weighted-average noncontrolling interests of 34.9%.

Liquidity and capital resources

As of September 30, 2021, Sunlight had $72.8 million of unrestricted cash on
hand and had drawn $20.6 million available to it under its $30.0 million credit
facility. At the closing of the Business Combination, Sunlight had an additional
$49.5 million cash on hand from the proceeds of the Business Combination, which
we intend to use as working capital to finance operations and other potential
needs in the business.

On April 26, 2021, Sunlight entered into a Loan and Security Agreement (the
"Loan and Security Agreement") with Silicon Valley Bank ("SVB"). The Loan and
Security Agreement, which replaces Sunlight's prior $15.0 million credit
facility, has a borrowing capacity of up to $30.0 million and matures on April
26, 2023. To secure the payment and performance of Sunlight's obligations under
the Loan and Security Agreement, Sunlight granted a continuing security interest
in certain collateral, which generally includes all Sunlight assets, whether
currently owned or thereafter acquired, and all proceeds and products there To
secure the payment and performance of Sunlight's obligations under the Loan and
Security Agreement, Sunlight granted a continuing security interest in certain
collateral, which generally includes all Sunlight assets, whether currently
owned or thereafter acquired, and all proceeds and products thereof. Borrowings
under the Loan and Security Agreement accrue interest at a rate equal to the
greater of (i) 5.0% and (ii) the prime rate plus 1.75% per annum. The Loan and
Security Agreement contains certain financial covenants, including maintenance
of (i) Liquidity
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(as defined therein) at all times in an amount equal to or greater than the
greater of (a) 35% of all outstanding principal amounts of any advances and (b)
$10.0 million; (ii) at all times Available Takeout Commitment Amount (as defined
therein) in an amount equal to or greater than $200.0 million; and (iii) EBITDA
(as defined in the Loan and Security Agreement) of at least $5.0 million for the
six month period ending on the last day of each month. The Loan and Security
Agreement contains customary events of default. SVB could elect to accelerate
the maturity of the loans and/or terminate the commitments under the Loan and
Security Agreement upon the occurrence and during the continuation of an event
of default, and Sunlight could be required to repay all amounts outstanding
under the Loan and Security Agreement. In connection with the transition of
accounts to SVB, Sunlight experienced a technical default that was waived
internally by SVB via email. Sunlight expects to receive a formal waiver
similarly addressing the technical default. Otherwise, no defaults or events of
default have occurred as of the date of this filing.

Sunlight's cash requirements relate primarily to funding Sunlight advances and
prefunding programs, to invest in continued innovations in Orange® and to pay
Sunlight's operating expenses, repayment of borrowings (and interest thereon),
management fees, outstanding commitments and guarantees (including Sunlight's
purchase of loans pursuant to the terms of certain of its capital provider
agreements and loan participations), other operating expenses, and tax
distributions. Sunlight may be required to purchase loans from its bank partner
after an agreed period of time if Sunlight has not arranged the sale of such
loans. To date, Sunlight has not been required to purchase loans from its bank
partner due to an inability to sell such loans to an indirect channel capital
provider. Additionally, Sunlight assumes the risk of compliance errors and the
risk of borrower or contractor fraud in the origination of the loans, and as
such, Sunlight is obligated to purchase the applicable loan from its bank
partner should these events occur. Sunlight has also entered into a program
agreement with its bank partner to fund its home improvement loans that contains
similar provisions related to risks accepted by Sunlight.

Historically, Sunlight has met its cash requirements from cash flow generated by
operations, collection of advances under its contractor advance funding program
and in prefunding payments under its prefunding program, and draws on Sunlight's
credit facility. Sunlight believes that it will continue to generate cash flow
from its operations which, together with funds available under its new credit
facility and cash on hand, will be sufficient to meet its current and future
liquidity needs.

Relations with entrepreneurs and capital providers

Relations with entrepreneurs

Sunlight's expansive network of residential solar system installers and other
home improvement contractors, supported by a differentiated set of tools and
services offered through Orange®, constitutes the distribution channel through
which Sunlight builds funded loan volume and earns platform fees. The ability to
finance residential solar systems on terms that typically translate to immediate
saving for homeowners on their utility bills and significant amounts in lifetime
savings has materially contributed to the strong growth in the number of
residential solar systems installed in the United States over the last five
years. Sunlight attracts and builds strong relationships with residential solar
system contractors of all sizes in key solar markets by prioritizing innovations
in Orange® and providing services that assist the contractors in growing their
own businesses. Sunlight's team of business development and relationship
management professionals provides hands-on support to these contractors.
Sunlight believes that innovations such as prequalification capabilities, easy
and secure document upload features, reliable next day funding and Sunlight's
capital advance program (as described more fully below), amongst other
innovations, both attract new contractors to Sunlight's network and build
loyalty and deepen Sunlight's existing contractor relationships. In addition,
Sunlight's diverse set of capital providers enables Sunlight to offer its
network of contractors a wide array of loan products that vary as to structure,
interest rate and tenor, and thereby permits Sunlight's network of contractors
to offer competitively-priced products that best serve their markets, and all at
competitive pricing. These benefits to Sunlight's existing network of
contractors translate to deeper penetration of the contractors' sales, which is
an important contributor to the growth of Sunlight's market share and revenue.
There can be no assurance that Sunlight will be able to maintain its current
contractor relationships. Sunlight may lose existing contractors that represent
a significant portion of Sunlight's business, and there is no guarantee that
Sunlight would be able to engage replacement contractors on terms similar to its
existing contractors.

Sunlight started its business in 2014 and developed key anchor partnerships with
a residential solar contractor in 2016. Beginning in 2017 and through 2018,
Sunlight focused on building and diversifying its contractor relationships and
continues that process today. In 2020, as compared with 2019, Sunlight grew its
solar contractor base by more than 60%. However, dependence on any one
contractor or small group of contractors creates concentration risk,
particularly in the event that any such contractor elects to terminate its
relationship with Sunlight or experiences business disruption or a business
failure or bankruptcy. For example, during May 2021, Sunlight was advised by a
significant contractor that it will discontinue use of the Sunlight's platform
to source solar loans effective immediately. This contractor accounted for
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approximately 6.7% and 10.6% of Sunlight's total funded loan volumes during the
year ended December 31, 2020 and for the nine months ended September 30, 2021,
respectively. Sunlight believes that its strong relationships with the existing
contractors in Sunlight's network, the continued growth in the number of
contractor relationships, and the various competitive loan products and sales
tools in Orange® that Sunlight can offer those contractors have been and will
continue to be key components of Sunlight's increased market penetration, growth
in funded loan volume and revenue.

Relations with capital providers

Sunlight's business model is dependent on its ability to connect its capital
providers, who wish to build a portfolio of residential solar system loans, to
the homeowner customers of the contractors in Sunlight's distribution network,
who wish to finance the purchase of a residential solar system. Sunlight earns a
platform fee on each solar and home improvement loan facilitated through
Orange®. The platform fee is generally equal to the difference, or the margin,
between (i) the contractor fee that Sunlight charges to contractors for access
to Orange® and for making the various Sunlight-offered loan products available
to such contractors and (ii) the capital provider discount charged by the
relevant capital provider either funding or purchasing the loan in the direct
and indirect channels, respectively (as described below). Sunlight's business is
therefore heavily dependent upon the availability of capital on attractive
economic terms. Sunlight believes that it offers capital providers an attractive
value proposition due to its industry-leading consumer credit underwriting, the
attractive risk-adjusted returns that Sunlight's capital providers earn relative
to other asset classes, the access that Sunlight's Platform provides to a unique
and growing asset class that may reduce volatility in the ability to deploy
capital, and the ability to access new customers for very little cost.

Sunlight engages with its capital providers not just as funding sources but as
funding partners. As with Sunlight's network of contractors, Sunlight works
closely with its capital providers to understand and address their business
needs as related to the residential solar loan industry. Matters related to loan
product, credit strategy, contractor commercial underwriting and consumer
protection practices are considered and designed in tandem with the goal of
creating a robust and growing channel for funded loan volume. Additionally,
through Orange®, Sunlight's capital providers operating within Sunlight's direct
channel can track and manage the pipeline of solar loan volume allocated to that
capital provider. Sunlight's relationships with its diverse and growing network
of capital providers provides significant flexibility to source competitively
priced capital. Since the acquisition of Sunlight's initial flow capital funding
source in 2016, the number of capital providers funding Sunlight-facilitated
solar loans has increased materially and, more importantly, all of Sunlight's
direct channel capital providers have significantly increased their commitments
to fund solar loan volume.

Sunlight categorizes its capital providers as being either in Sunlight's direct
or indirect channel. Sunlight maintains both channels to provide diversification
of funding sources, access to funding for different types of loan products and
for other strategic purposes. The ability of Sunlight to allocate loans to
various capital providers, as well as the availability of the two different
funding channels, creates flexibility and allows Sunlight to respond nimbly to
shifting market conditions.

Direct channel capital providers fund Sunlight-facilitated solar or home
improvement loans one-by-one directly onto their balance sheet via Orange®.
Sunlight's direct channel capital providers are depository institutions with the
power and authority to originate loans such as banks and credit unions.
Generally, direct channel capital providers choose to service the loans they
originate.

In the indirect channel, Sunlight's solar loan allocation engine directs the
solar loans to be funded on the balance sheet of Sunlight's intermediary bank
partner. These loans are aggregated, pooled and sold to indirect channel capital
providers that cannot, or do not wish to, directly originate solar loans. The
indirect channel capital provider relationship allows Sunlight to access a
broader range of capital, which may include, among others, credit funds,
insurance companies and pension funds. Indirect channel capital providers
present a unique opportunity for Sunlight to access high quality and significant
sources of funding that are diverse from traditional depository sources.

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Analysis of cash flow and liquidity

Sunlight assesses liquidity primarily in terms of its ability to generate cash
to fund operating and financing activities. Sunlight has generated increasing
amounts of cash from operating activities, and management believes that Sunlight
is in a strong financial and liquidity position. Sunlight's cash from operating
activities are generally derived from platform fees which are fully earned at
the funding of a loan by direct channel capital providers and the purchase of a
loan from our bank partner's balance sheet by an indirect channel capital
provider. Refer to "Critical Accounting Policies and Estimates" and Item 1A.
"Risk Factors" for a full description of the related estimates, assumptions, and
judgments.

The cumulative period accumulated to date compared to the nine months ended September 30, 2020 (Predecessor)

The following is a summary of the cash flow data for the nine months ended.
September 30, 2021 and 2020 (in thousands):

                                                          Successor                                 Predecessor
                                                                                                                For the Nine
                                                        For the Period                 For the Period           Months Ended
                                                       July 10, 2021 to              January 1, 2021 to         September 30,
                                                      September 30, 2021                July 9, 2021                2020

Net cash provided by (used in) operating
activities                                            $       (47,921)               $        14,356          $      (12,347)
Net cash used in investing activities                        (305,344)                        (1,404)                 (3,690)
Net cash provided by (used in) financing
activities                                                    211,791                         (2,025)                    827


Cash flow from operating activities

For the nine months ended September 30, 2021, net cash used in operating
activities was $33.6 million. Operating cash inflows for the nine months ended
September 30, 2021 primarily consisted of proceeds from Sunlight's direct
channel capital providers to fund, and indirect channel capital provider to
purchase, without duplication, loans of $1.6 billion, of which Sunlight paid
$1.5 billion to contractors; repayment of advances and prefunds of $1.2 billion
(conversely, Sunlight advanced or prefunded $1.4 billion); and net interest
expense paid of $0.8 million. Operating cash outflows primarily consisted of
compensation and benefits of $49.4 million, information technology expenses of
$3.9 million, and management fees paid to affiliates of $0.2 million.

For the nine months ended September 30, 2020, net cash used in operating
activities was $12.3 million. Operating cash inflows for the nine months ended
September 30, 2020 primarily consisted of proceeds from Sunlight's direct
channel capital providers to fund, and indirect channel capital providers to
purchase without duplication, loans of $0.7 billion, of which Sunlight paid $0.7
billion to contractors; repayment of advances and prefunds of $0.6 billion
(conversely, Sunlight advanced or prefunded $0.6 billion); and net interest
expense paid of $0.6 million. Operating cash outflows primarily consisted of
compensation and benefits of $15.9 million, information technology expenses of
$2.8 million, and management fees paid to affiliates of $0.3 million.

Cash flow from investing activities

For the nine months ended September 30, 2021, net cash used in investing
activities was $306.7 million, of which $304.6 million represents cash paid for
the acquisition of Sunlight Financial LLC and the remaining activities involved
recurring business activities consisting of cash paid to acquire loans and loan
participations of $1.4 million, net of $1.2 million in cash received as return
of capital thereon, and $1.9 million paid to internally develop software and
acquire property and equipment. For the nine months ended September 30, 2020,
net cash used in investing activities was $3.7 million, consisting of cash paid
to acquire loans and loan participations of $2.1 million, net of $1.0 million in
cash received as return of capital thereon, and $2.5 million paid to internally
develop software and acquire property and equipment.

Cash flow from financing activities

For the nine months ended September 30, 2021, net cash provided by financing
activities was $209.8 million, which included a $250.0 million equity raise, net
of $19.6 million of related costs and tax payments made on equity issued in
connection with the Business Combination. The remaining uses of cash consisted
of ongoing operations consisting of repayments of borrowings under Sunlight's
prior credit facilities of $14.8 million, net of borrowings of $20.7 million,
distributions of $7.5 million, and $0.5 million payment of debt issuance costs.
For the nine months ended September 30,
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2020, net cash provided by financing activities was $0.8 million, consisting of
borrowings of $8.7 million, net of repayments of borrowings under Sunlight's
prior credit facilities of $5.9 million, and distributions of $2.0 million.

Long-term debt

On April 26, 2021, Sunlight entered into a Loan and Security Agreement with SVB.
The Loan and Security Agreement, which replaces Sunlight's prior $15.0 million
credit facility, has a borrowing capacity of up to $30.0 million and matures on
April 26, 2023. Borrowings under the Loan and Security Agreement accrue interest
at a rate equal to the greater of (i) 5.0% and (ii) the prime rate plus 1.75%
per annum. The Loan and Security Agreement contains certain financial covenants,
including (i) liquidity in an amount equal to or greater than (a) 35% of all
outstanding principal amounts of any advances and (b) $10.0 million; (ii)
Available Takeout Commitment Amount (as defined therein) in an amount equal to
or greater than $200.0 million; and (iii) EBITDA (as defined in the Loan and
Security Agreement) of at least $5.0 million for the six month period ending on
the last day of each month. The Loan and Security Agreement contains customary
events of default. SVB could elect to accelerate the maturity of the loans
and/or terminate the commitments under the Loan and Security Agreement upon the
occurrence and during the continuation of an event of default, and Sunlight
could be required to repay all amounts outstanding under the Loan and Security
Agreement. In connection with the transition of accounts to SVB, Sunlight
experienced a technical default that was waived internally by SVB via email.
Sunlight expects to receive a formal waiver similarly addressing the technical
default. Otherwise, no defaults or events of default have occurred as of the
date of this filing.

Other changes in financial situation

Nine months ended September 30, 2021

In addition to the changes in Sunlight's financial position from December 31,
2020 to September 30, 2021 described in "- Results of Operations" and "- Cash
Flow and Liquidity Analysis," the following activities also occurred:
•Restricted cash. The cash Sunlight holds subject to contractual restrictions
increased by $0.7 million resulting from a $0.8 million increase in cash
temporarily held by Sunlight in connection with Sunlight's administration of
loan participations on behalf of a third party.

Other factors affecting liquidity and capital resources

Distribution to unitholders

Predecessor

Pursuant to the Fourth Amended and Restated Limited Liability Company Agreement
of Sunlight, dated as of May 25, 2018, as amended or otherwise modified (the
"Prior Sunlight LLC Agreement"), holders of Class A-1 Units, Class A-2 Units or
Class A-3 Units (collectively, the "Class A Units") were generally entitled to
receive, with respect to each such Class A Unit, a preferred return on a
quarterly basis. Sunlight's board of directors could have elected to pay this
return in cash or by issuing additional Class A Units to each such holder. If
the board of directors elected to pay this return in cash, Sunlight would have
paid such in an amount equal to $12.50, $15.22, and $24.06 per unit per annum to
the Class A-1, Class A-2, and Class A-3 Units. If the board of directors elected
to pay this return in additional units, the company would have issued a number
of units equal to 14.5% of each such holders outstanding units, on an annualized
basis. Sunlight's board of directors elected to pay this return in the form of
additional Class A Units for all periods through the date of the Business
Combination. In addition, the Prior Sunlight LLC Agreement also provided that
members of Sunlight were entitled to be paid certain tax distributions on a pro
rata basis in accordance with their relative tax obligation from available cash
and subject to certain customary limitations on distributions.

Successor

Sunlight replaced the Prior Sunlight LLC Agreement with the Sunlight A&R LLC
Agreement which was entered into concurrently with the Closing. Under the
Sunlight A&R LLC Agreement, SL Financial Holdings Inc., as the sole managing
member of Sunlight, has the right to determine when distributions will be made
to the holders of Sunlight Units and the amount of any such distributions,
except that Sunlight is required to make distributions to the extent and in an
amount such that the Sunlight Unitholders, including Sunlight Financial Holdings
Inc. ("Sunlight Financial Holdings"), receive certain tax-related distributions
and to make distributions in the event of dissolution. If a distribution is paid
to the Sunlight Unitholders, such distribution will be made to the holders of
Sunlight Units on a pro rata basis in accordance with their respective
percentage ownership of Sunlight Units. Funds used by Sunlight to satisfy its
tax distribution obligations will not be available for reinvestment in its
business, except to the extent Sunlight Financial Holdings uses any excess cash
it receives to reinvest in Sunlight for additional Sunlight Units.
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The holders of Sunlight Class X Units and Sunlight Class EX Units, including SL
Financial Holdings Inc., will generally incur U.S. federal, state and local
income taxes on their share of any net taxable income of Sunlight. Net income
and losses of Sunlight generally will be allocated to the holders of Sunlight
Class X Units and Sunlight Class EX Units on a pro rata basis in accordance with
their respective percentage ownership of Sunlight Class X Units and Sunlight
Class EX Units, subject to requirements under U.S. federal income tax law that
certain items of income, gain, loss or deduction be allocated disproportionately
in certain circumstances. To the extent that Sunlight has legally available cash
(including borrowings available under the new credit facility or other debt
arrangements) and subject to the terms of any current or future debt
instruments, the Sunlight A&R LLC Agreement requires Sunlight to make pro rata
cash distributions to all holders of Sunlight Units, including Sunlight
Financial Holdings, (1) first, in an amount sufficient to allow Sunlight
Financial Holdings and its wholly owned subsidiaries to satisfy their actual tax
liabilities and obligations under the Tax Receivable Agreement except to the
extent (i) based on the written advice of legal counsel, the distribution may
reasonably constitute a fraudulent conveyance, or (ii) the terms of any
financing necessary to make such tax distribution could reasonably, in the good
faith judgment of SL Financial Holdings Inc., cause Sunlight to become insolvent
within the twelve (12) month period following the date of such distribution, and
(2) thereafter to the extent necessary, in an amount generally intended to allow
Sunlight Unitholders, including Sunlight Financial Holdings, to satisfy their
respective income tax liabilities with respect to their allocable share of
income of Sunlight, based on certain assumptions and conventions (including an
assumed income tax rate) and after taking into account other distributions
(including prior tax distributions) made by Sunlight.

Tax claim agreement (successor)

On the Closing Date, Sunlight Financial Holdings entered into the Tax Receivable
Agreement with the TRA Holders and the Agent (as defined therein). The Tax
Receivable Agreement generally provides for the payment by Sunlight Financial
Holdings to the Agent, for disbursement to the TRA Holders on a pro rata basis,
of 85% of the net cash savings, if any, in U.S. federal, state and local income
tax and franchise tax that Sunlight Financial Holdings actually realizes (or is
deemed to realize in certain circumstances) in periods after the Closing as a
result of (i) certain increases in tax basis that occur as a result of Sunlight
Financial Holdings' acquisition (or deemed acquisition for U.S. federal income
tax purposes) of all or a portion of a TRA Holder's Sunlight Class EX Units upon
the exercise of the redemption or call rights set forth in the Sunlight A&R LLC
Agreement (as defined herein) and (ii) imputed interest deemed to be paid by
Sunlight Financial Holdings as a result of, and additional tax basis arising
from, any payments Sunlight Financial Holdings makes under the Tax Receivable
Agreement. Sunlight Financial Holdings will retain the benefit of the remainder
of the actual net cash savings, if any.

If Sunlight Financial Holdings elects to terminate the Tax Receivable Agreement
early or if it is terminated early due to Sunlight Financial Holdings' failure
to honor a material obligation thereunder or due to a Change of Control (as
defined in the Tax Receivable Agreement), Sunlight Financial Holdings will be
required to make a payment equal to the deemed present value of the anticipated
future payments to be made by it under the Tax Receivable Agreement (based upon
certain assumptions and deemed events set forth in the Tax Receivable
Agreement), which amount may substantially exceed the actual cash tax savings
realized by Sunlight Financial Holdings. In the case of an early termination
upon a Change of Control, such early termination payment may, at Sunlight
Financial Holdings' election, be paid ratably over the two-year period following
the Change of Control.

Operating Lease Obligations

Sunlight's operating lease obligations consist of its lease of real property
from third parties under noncancellable operating leases, including the lease of
its current office spaces. Sunlight leases office space at two locations: (i)
101 N. Tryon Street, Suite 1000, Charlotte, North Carolina 28246 (the "North
Carolina Office Space") and (ii) 234 West 39th Street, 7th Floor, New York, New
York 10018 (the "New York Office Space"). The operating lease rent expense for
the North Carolina Office Space was $0.3 million, $0.0 million and $0.6 million
for the Successor Period, the Predecessor Quarterly Period, and Predecessor
Year-to-Date Period, respectively, and $0.2 million and $0.5 million for the
three and nine months ended September 30, 2020, respectively. The lease for the
North Carolina Office Space will expire in June 2030. The operating lease rent
expense for the New York Office Space was $0.1 million, $0.0 million, and $0.3
million the Successor Period, the Predecessor Quarterly Period, and Predecessor
Year-to-Date Period, respectively, and $0.1 million and $0.3 million for the
three and nine months ended September 30, 2020, respectively.

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Available cash and capital resources

As of September 30, 2021, Sunlight's cash and cash equivalents and restricted
cash was $75.0 million. The restricted cash held by Sunlight primarily relates
to a cash reserve that Sunlight's bank partner requires to secure Sunlight's
short-term guarantee obligations of certain loans temporarily held by Sunlight's
bank partner. The contractual cash reserve is the difference between (a) the
average original issue discount percentage of loans originated and held by
Sunlight's bank partner and (b) a contractual minimum original issue discount
percentage, multiplied by the balance of the loans on the bank partner's balance
sheet at a given time. Sunlight guarantees the loans between the time the bank
partner originates such loans and the time Sunlight arranges the sale of such
loans to a Sunlight indirect channel capital provider.

Sunlight's liquidity and its ability to fund its capital requirements is
dependent on its future financial performance, which is subject to general
economic, financial and other factors that are beyond its control and many of
which are described under Item 1A. "Risk Factors." If those factors
significantly change or other unexpected factors adversely affect Sunlight,
Sunlight's business may not generate sufficient cash flow from operations or it
may not be able to obtain future financings to meet its liquidity needs.

Non-GAAP financial measures

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial measure used by Sunlight's management to
evaluate operating performance, generate future operating plans, and make
strategic decisions, including those relating to operating expenses and the
allocation of internal resources. Accordingly, Sunlight believes this measure
provides useful information to investors and others in understanding and
evaluating Sunlight's operating results in the same manner as Sunlight's
management and board of directors. In addition, Adjusted EBITDA provides a
useful measure for period-to-period comparisons of Sunlight's business, as it
removes the effect of certain non-cash items, variable charges, non-recurring
items, unrealized gains or losses or other similar non-cash items that are
included in net income or expenses associated with the early stages of the
business that are expected to ultimately terminate, pursuant to the terms of
certain existing contractual arrangements or expected to continue at levels
materially below the historical level, or that otherwise do not contribute
directly to management's evaluation of its operating results. Adjusted EBITDA is
defined as net income excluding interest expense incurred in connection with
Sunlight's debt obligations, income taxes, amortization and depreciation
expense, stock-based compensation expense, non-cash changes in certain financial
instruments, fees paid to brokers related to the funding of loans by certain of
Sunlight's capital providers that will terminate pursuant to existing
contractual arrangements, certain transaction bonuses and other expenses
resulting from the Business Combination, and other items that management has
determined are not reflective of Sunlight's operating performance.

Free movement of capital

Free Cash Flow is a non-GAAP financial measure that Sunlight uses to indicate
cash flow generated by Sunlight's operations. Sunlight believes that Free Cash
Flow is a supplemental financial measure useful as an indicator of Sunlight's
ability to generate cash. Sunlight's calculation of Free Cash Flow, however, may
not necessarily be comparable to similar measures presented by other companies.
Specifically, Sunlight defines Free Cash Flow as cash from operating activities
adjusted for changes in working capital (including changes in advances and
funding commitments), capital expenditures, certain restricted cash items,
business combination costs, and other items that management has determined are
not reflective of cash generation in Sunlight's business.

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The following table presents a reconciliation of net income to Adjusted EBITDA
and free cash flow as well as cash from operating activities to free cash flow
for the three and nine months ended September 30, 2021 and 2020 (in thousands):

                                            Successor                                                      Predecessor
                                         For the Period                                       For the Three                                  For the Nine
                                        July 10, 2021 to               For the Period          Months Ended          For the Period          Months Ended
                                          September 30,               July 1, 2021 to         September 30,         January 1, 2021         September 30,
                                              2021                      July 9, 2021               2020             to July 9, 2021              2020

Net Income (Loss)                       $      (20,431)               $      (1,772)         $       4,072          $       6,131          $       3,371
Adjustments for adjusted EBITDA
Depreciation and amortization                   20,541                           78                    812                  1,688                  2,430
Interest expense                                   291                           32                    264                    604                    592
Income taxes                                    (5,684)                           -                      -                      -                      -
Non-cash change in financial
instruments                                    (10,568)                       1,316                   (272)                 5,547                   

(366)

Equity-based compensation                       24,821                            -                     15                     18                    112
Fees paid to brokers                             1,033                           93                    869                  2,261                  2,127
Expenses from the Business
Combination                                      1,093                          529                      -                  7,011                      -
Adjusted EBITDA                                 11,096                          276                  5,760                 23,260                  8,266
Adjustments for net cash provided
by (used in) operating activities
Interest expense                                  (291)                         (32)                  (264)                  (604)                  (592)
Income taxes                                     5,684                            -                      -                      -                      -
Fees paid to brokers                            (1,033)                         (93)                  (869)                (2,261)                (2,127)
Expenses from the Business
Combination                                     (1,093)                        (529)                     -                 (7,011)                     -
Provision for losses                               254                            -                    310                  1,172                    788
Changes in operating capital and
other                                          (62,538)                      (2,372)               (14,662)                  (200)               

(18,682)

Net Cash Provided by (Used in)
Operating Activities                           (47,921)                      (2,750)                (9,725)                14,356                

(12,347)

Adjustments for free cash flow
Capital expenditures                              (560)                        (229)                (1,668)                (1,066)                

(2,533)

Changes in advances, net of
funding commitments                             29,188                        4,214                  9,534                 32,809                 

11,448

Changes in restricted cash                       1,585                           17                    217                   (125)                  

(682)

Payments of Business Combination
costs                                              968                           67                      -                  7,011                      -
Other changes in working capital                20,638                         (391)                   386                (40,793)                   537
Free Cash Flow                          $        3,898                $         928          $      (1,256)         $      12,192          $      (3,577)


Critical accounting conventions and estimates

The preparation of Sunlight's financial statements in conformity with GAAP
requires management to make estimates, assumptions and judgments that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported
amounts of revenue and expenses during the reporting period. Management makes
subjective estimates and assumptions about future events that affect the amounts
reported in Sunlight's financial statements and accompanying notes. These
estimates significantly impact revenues, determinations of fair value and the
recognition of interest income on financing receivables and loss allowances
thereon.

In accordance with Sunlight policies, Sunlight regularly evaluates its estimates, assumptions and judgments, and bases its estimates, assumptions and judgments on historical experience and on factors that Sunlight believes are reasonable under the circumstances. The results involve judgments about the carrying amounts of assets and liabilities that are not readily apparent from other sources. If Sunlight’s assumptions or conditions change, the actual results reported by Sunlight may differ materially from those estimates.

Sunlight believes the estimates and assumptions underlying its consolidated
financial statements are reasonable and supportable based on the information
available as of September 30, 2021; however, uncertainty over the ultimate
impact COVID-19 will have on the global economy generally, and on Sunlight's
business, makes any estimates and assumptions as of September 30, 2021
inherently less certain than they would be absent the current and potential
impacts of COVID-19.

See Note 2 - "Summary of Significant Accounting Policies" in the notes
accompanying Sunlight's financial statements included elsewhere herein for a
summary of Sunlight's significant accounting policies, and discussion of recent
accounting pronouncements. Sunlight believes that the following discussion
addresses Sunlight's most critical accounting policies,
                                       65
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which are those that are most important to the portrayal of Sunlight's financial
condition and results of operations and require management's most difficult,
subjective and complex judgments.

Platform fees

Sunlight is a business-to-business-to-consumer, technology-enabled POS financing
platform that provides residential solar and home improvement contractors the
ability to offer seamless POS financing to their customers when purchasing
residential solar systems or other home improvements. The resulting loans are
funded by Sunlight's network of capital providers who, by partnering with
Sunlight, gain access to a difficult-to-reach loan market, best-in-class
consumer credit underwriting and attractive risk adjusted returns. These loans
are facilitated by Sunlight's proprietary technology platform, Orange®, through
which Sunlight offers instant credit decisions to homeowners nationwide at the
POS on behalf of Sunlight's various capital providers. Sunlight recognizes
platform fees as revenues at the time that direct channel partners or indirect
channel loan purchasers obtain control of the service provided to facilitate
their origination or purchase of a loan, which is no earlier than when Sunlight
delivers loan documentation to the customer. Sunlight wholly satisfies its
performance obligation to direct channel partners, bank partner and indirect
channel loan purchasers upon origination or purchase of a loan. Sunlight
considers rebates offered by Sunlight to certain contractors in exchange for
volume commitments as variable components to transaction prices; such
variability resolves upon the contractor's satisfaction of their volume
commitment. For outstanding volume commitments that require the contractor to
deliver future loan volume, Sunlight reduces platform fee revenues it recognizes
based on its estimates of the contractor's delivery of future loan volume, which
require significant judgment and are based, in part, upon the contractor's
historical volume delivery and Sunlight's estimates of the contractor's ability
and likelihood to deliver future volume.

Sunlight's contract pursuant to which its bank partner originates home
improvement loans is considered a derivative under GAAP. As such, Sunlight's
revenues exclude the platform fees that Sunlight earns in connection with this
contract. Instead, Sunlight estimates the fair value of the contract derivative
based upon the present value of net cash flows Sunlight expects to collect under
the contract, which predominately consist of the difference of the proceeds
Sunlight expects to collect from an indirect channel capital provider at
purchase of the loans by such capital provider (the principal balance of loans
purchased less the relevant capital provider discount plus unpaid accrued
interest on the loans to the date of purchase) and any amounts Sunlight owes to
its bank partner in connection with such loans. Upon sale, Sunlight reverses the
unrealized estimated fair value of the contract derivative for the loans sold
and recognizes the net cash Sunlight receives from the sale within "Realized
Gains on Contract Derivative, Net" in Sunlight's consolidated statement of
operations.

Sunlight is obligated to repurchase non-performing loans originated by its bank
partner from the date of origination to the date the loans are purchased from
Sunlight's bank partner by a Sunlight indirect channel capital provider.
Sunlight does not record loans originated by its bank partner on its
consolidated balance sheets (as Sunlight is not the originator of the loans),
but Sunlight does record a liability for the losses Sunlight reasonably expects
to incur in connection with Sunlight's guarantee of its bank partner. Sunlight's
measurement of this liability is subject to significant judgement using
historical loss experiences to estimate the likelihood that the guaranteed loans
will default prior to sale and the severity of the loss Sunlight expects to
incur. At September 30, 2021 and December 31, 2020, the unpaid principal balance
of loans, net of applicable discounts, for guaranteed loans held by Sunlight's
bank partner and delinquent more than 90 days was $0.2 million and $0.5 million,
respectively.

Financing Receivables

Sunlight records financing receivables for (a) advances that Sunlight remits to
contractors to facilitate the installation of residential solar systems and (b)
loans purchased by Sunlight pursuant to the terms of its contracts with its
various capital providers and certain five percent (5%) loan participations
purchased by Sunlight. Sunlight uses significant judgement in its recognition of
interest income and impairment of financing receivables.

Interest income

Loans (including Sunlight's participation interests in such loans) with respect
to which Sunlight expects to collect the unpaid principal balance and interest
payments as they become due are considered performing loans. Sunlight accrues
interest income on performing loans based on the unpaid principal balance and
contractual terms of the loan. Interest income also includes discounts
associated with the loans purchased as a yield adjustment using the interest
method, or on a straight-line basis when it approximates the interest method,
over the loan term. Sunlight expenses loan origination costs for loans acquired
by Sunlight (including its participation interests in loans) as incurred.
Sunlight does not accrue interest on loans placed on non-accrual status or on
loans where the collectability of the principal or interest of the loan are
deemed uncertain.
                                       66
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Loans are considered past due or delinquent if the required principal and
interest payments have not been received as of the date such payments are due.
Generally, loans, including impaired loans, are placed on non-accrual status (i)
when either principal or interest payments are 90 days or more past due based on
contractual terms or (ii) when an individual analysis of a borrower's
creditworthiness indicates a loan should be placed on non-accrual status. When a
loan owned by Sunlight is placed on non-accrual status, Sunlight ceases to
recognize interest income on the loans and reverses previously accrued and
unpaid interest, if any. Subsequent receipts on non-accrual loans are recorded
as a reduction of principal, and interest income may only be recorded on a cash
basis after recovery of principal is reasonably assured. Sunlight may return a
loan to accrual status when repayment of principal and interest is reasonably
assured under the terms of the loan or the restructured loan, as the case may
be.

Advances made to entrepreneurs under Sunlight’s Entrepreneur Advance Program or Pre-Finance Program are created at par and do not bear, and therefore, do not earn interest income.

Loss allowance

The allowance for financing receivable losses represents Sunlight's best
estimate of probable credit losses arising from financing receivables.
Sunlight's allowance for financing receivable losses is evaluated at least
quarterly, and based upon management's assessment of several factors including
historical losses, changes in the nature and volume of financing receivables,
overall portfolio quality, and existing economic conditions that may affect the
customer's ability to pay. Although management uses the best information
available, the evaluation of these indicators of impairment requires significant
judgment by Sunlight's management to determine whether failure to collect
contractual amounts is probable as well as in estimating the resulting loss
allowance. Future adjustments to the allowance for financing receivable losses
may be necessary due to economic, operating, regulatory and other conditions
beyond Sunlight's control. Sunlight believes that its allowance for financing
receivable losses is adequate to cover probable loan losses. However, actual
losses, if any, could materially differ from management's estimates.

Provision for income taxes

Sunlight accounts for income taxes under the asset and liability method. Under
this method, deferred tax assets and liabilities are determined based on
differences between the consolidated financial statement carrying amounts and
tax bases of assets and liabilities and operating loss and tax credit
carryforwards and are measured using the enacted tax rates that are expected to
be in effect when the differences reverse. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in the accompanying
Consolidated Statements of Operations in the period that includes the enactment
date. Valuation allowances are established when necessary to reduce deferred tax
assets to an amount that, in the opinion of management, is more likely than not
to be realized.

Sunlight recognizes uncertain tax positions by reporting a liability for unrecognizable tax benefits resulting from uncertain tax positions taken or required to be taken in a tax return. Sunlight recognizes interest and penalties, if any, related to tax benefits not recognized in income tax expense.

Judgment is required in assessing the future tax consequences of events that
have been recognized in Sunlight's consolidated financial statements or tax
returns. Variations in the actual outcome of these future tax consequences could
materially impact Sunlight's consolidated financial statements.

Derivative asset

Sunlight's contract under which Sunlight arranges loans for the purchase and
installation of home improvements other than residential solar energy systems
contain features determined to be embedded derivatives from its host. Embedded
derivatives are separated from the host contract and carried at fair value when
the embedded derivative possesses economic characteristics that are not clearly
and closely related to the economic characteristics of the host contract and a
separate, standalone instrument with the same terms would qualify as a
derivative instrument. The derivative is measured both initially and in
subsequent periods at fair value, with changes in fair value recognized on the
statement of operations.

Sunlight uses a discounted cash flow model to value its derivative asset using
various key assumptions, such as estimation of the timing and probability of
expected future cash flows and selection of a discount rate applied to future
cash flows using Sunlight's implied credit risk.

                                       67
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Sunlight ™ Rewards Program

The Sunlight Rewards™ Program is a proprietary loyalty program that Sunlight
offers to salespeople selling residential solar systems for Sunlight's network
of contractors. Sunlight records a contingent liability under ASC 450-20 Loss
Contingencies using the estimated incremental cost of each point based upon the
points earned, the point redemption value, and an estimated probability of point
redemption consistent with Sunlight's historical redemption experience under the
program. When a salesperson redeems points from Sunlight's third-party loyalty
program vendor, Sunlight pays the stated redemption value of the points redeemed
to the vendor. If all points earned under the Sunlight Rewards™ Program were
redeemed at September 30, 2021 and December 31, 2020, Sunlight would pay $2.7
million and $1.3 million, respectively, of which Sunlight recorded liabilities
of $1.7 million and $0.8 million.

Commercial combination

Sunlight evaluates its acquisition of assets and other similar transactions to
assess whether or not the transaction should be accounted for as a business
combination or asset acquisition by first applying a test to determine if
substantially all of the fair value of the gross assets acquired is concentrated
in a single identifiable asset or group of similar identifiable assets. If the
test is met, the transaction is accounted for as an asset acquisition. If the
test is not met, further determination is required as to whether or not Sunlight
acquired inputs and processes that have the ability to create outputs which
would meet the definition of a business. Significant judgment is required in the
application of the test to determine whether an acquisition is a business
combination or an acquisition of assets.

Sunlight uses the acquisition method in accounting for acquired businesses.
Under the acquisition method, Sunlight's financial statements reflect the
operations of an acquired business starting from the completion of the
acquisition. The assets acquired and liabilities assumed are recorded at their
respective estimated fair values at the date of the acquisition. Any excess of
the purchase price over the estimated fair values of the identifiable net assets
acquired is recorded as goodwill.

Determining estimated fair value requires a significant amount of judgment and
estimates. If Sunlight's assumptions change or errors are determined in its
calculations, the fair value could materially change resulting in a change in
our goodwill or identifiable net assets acquired, including identified
intangible assets.

Emerging growth company

As an "emerging growth company," as defined in Section 2(a) of the Securities
Act of 1933, as amended (the "Securities Act"), as modified by the Jumpstart Our
Business Startups Act of 2012 ("JOBS Act), Sunlight is eligible to take
advantage of certain exemptions from various reporting requirements that are
applicable to other public companies that are not "emerging growth companies."
Section 107 of the JOBS Act provides that an "emerging growth company" can take
advantage of the extended transition period provided in Section 7(a)(2)(B) of
the Securities Act for complying with new or revised accounting standards. In
other words, an "emerging growth company" can delay the adoption of certain
accounting standards until those standards would otherwise apply to private
companies. Unless otherwise stated, Sunlight elected to adopt recent accounting
pronouncements using the extended transition period applicable to private
companies. Accordingly, the information contained herein may be different than
the information you receive from other public companies.

Sunlight also intends to take advantage of some of the reduced regulatory and
reporting requirements of emerging growth companies pursuant to the JOBS Act so
long as Sunlight qualifies as an emerging growth company, including, but not
limited to, not being required to comply with the auditor attestation
requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure
obligations regarding executive compensation and exemptions from the
requirements of holding non-binding advisory votes on executive compensation and
golden parachute payments.

Recent accounting position papers published but not yet adopted

See Note 2 – “Summary of significant accounting policies” in the notes to Sunlight’s consolidated financial statements.

Related party transactions

Prior to the closing of the Business Combination, Sunlight entered into
management agreements with certain affiliates. For the three months ended
September 30, 2021 and 2020, Sunlight paid an aggregate of $0.1 million and $0.1
million, respectively, and $0.2 million and $0.2 million for the nine months
ended September 30, 2021 and 2020 in management
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fees under the agreements. The agreements were terminated in connection with the
closing of the Business Combination. For additional information, see Note 9 of
the accompanying consolidated financial statements of Sunlight.

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