# EDGAR Filing Document

**Accession Number:** 0001865506
**File Stem:** 0001213900-25-054762
**Filing Date:** 2025-6
**Character Count:** 230248
**Document Hash:** 97340b94ceeec69ae4aeb601908bea64
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001213900-25-054762.hdr.sgml**: 20250616

**ACCESSION NUMBER**: 0001213900-25-054762

**CONFORMED SUBMISSION TYPE**: 10-Q

**PUBLIC DOCUMENT COUNT**: 92

**CONFORMED PERIOD OF REPORT**: 20250331

**FILED AS OF DATE**: 20250616

**DATE AS OF CHANGE**: 20250616

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Zeo Energy Corp.
- **CENTRAL INDEX KEY:** 0001865506
- **STANDARD INDUSTRIAL CLASSIFICATION:** CONSTRUCTION SPECIAL TRADE CONTRACTORS [1700]
- **ORGANIZATION NAME:** 05 Real Estate & Construction
- **EIN:** 981601409
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 10-Q
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-40927
- **FILM NUMBER:** 251050111

**BUSINESS ADDRESS:**
- **STREET 1:** 5956 SHERRY LANE, SUITE 1400
- **CITY:** DALLAS
- **STATE:** TX
- **ZIP:** 75225
- **BUSINESS PHONE:** 214-987-6100

**MAIL ADDRESS:**
- **STREET 1:** 5956 SHERRY LANE, SUITE 1400
- **CITY:** DALLAS
- **STATE:** TX
- **ZIP:** 75225

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** ESGEN Acquisition Corp
- **DATE OF NAME CHANGE:** 20210602

?xml version='1.0' encoding='ASCII'?

**UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549**

**FORM 10-Q**

(Mark one)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2025

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File Number: 001-40927

**ZEO ENERGY CORP.**

(Exact name of registrant as specified in its charter)

---

| | |
|:---|:---|
| **Delaware** | **98-1601409** |
| (State or other jurisdiction<br> of incorporation or organization) | (IRS Employer<br> Identification No.) |

---

**7625 Little Rd, Suite 200A, New Port Richey, FL 34654**

(Address of principal executive offices and Zip Code)

**(727) 375-9375**

(Registrant's telephone number, including area code)

**Not Applicable**

(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

---

| | | |
|:---|:---|:---|
| **Title of each class** | **Trading Symbol(s)** | **Name of each exchange on which registered** |
| **Class A Common Stock, par value $0.0001 per share** | **ZEO** | **The Nasdaq Stock Market LLC** |
| **Warrants, each exercisable for one share of Class A Common Stock at a price of $11.50, subject to adjustment** | **ZEOWW** | **The Nasdaq Stock Market LLC** |

---

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐ <br> Non-accelerated filer ☒ Smaller reporting company ☒ <br> Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒

As of June 6, 2025, the registrant had 22,824,845 shares of Class A common stock, par value $0.0001 outstanding, and 26,480,000 shares of Class V common stock, par value $0.0001, outstanding.

---

| | |
|:---|:---|
|  | **Page** |
| [**PART 1 – FINANCIAL INFORMATION**](#a_001) | 1 |
| [Item 1. Financial Statements (Unaudited)](#a_002) | 1 |
| [Condensed Consolidated Balance Sheets as of March 31, 2025, and December 31, 2024](#a_003) | 1 |
| [Condensed Consolidated Statements of Operations for the three months ended March 31, 2025, and 2024](#a_004) | 2 |
| [Condensed Consolidated Statements of Changes in Redeemable Noncontrolling Interests and Stockholders' Deficit for the three months ended March 31, 2025](#a_005) | 3 |
| [Condensed Consolidated Statements of Changes in Redeemable Noncontrolling Interests and Stockholders' Deficit for the three months ended March 31, 2024](#a_006) | 4 |
| [Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2025, and 2024](#a_007) | 5 |
| [Notes to Condensed Consolidated Financial Statements](#a_008) | 6 |
| [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](#a_009) | 29 |
| [Item 3. Quantitative and Qualitative Disclosures about Market Risk](#a_010) | 39 |
| [Item 4. Control and Procedures](#a_011) | 39 |
| [PART II – OTHER INFORMATION](#a_012) | 41 |
| [Item 1. Legal Proceedings](#a_013) | 41 |
| [Item 1A. Risk Factors](#a_014) | 41 |
| [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](#a_015) | 42 |
| [Item 3. Defaults Upon Senior Securities](#a_016) | 42 |
| [Item 4. Mine Safety Disclosures](#a_017) | 42 |
| [Item 5. Other Information](#a_018) | 42 |
| [Item 6. Exhibits](#a_019) | 43 |
| [SIGNATURES](#a_020) | 44 |

---

i

**PART I – FINANCIAL INFORMATION**

**Item 1. Financial Statements**

**ZEO ENERGY CORP.**

**CONDENSED CONSOLIDATED BALANCE SHEETS**

---

| | | |
|:---|:---|:---|
|  | **As of<br> March 31,**<br>**2025** | **As of<br> December 31,**<br>**2024** |
| **Assets** | (unaudited) |  |
| Current assets |  |  |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents | $2894103 | $5634115 |
| &nbsp;&nbsp;&nbsp;Accounts receivable, including $286,103 and $191,662 from related parties, net of allowance for credit losses of $4,703,905 and $1,165,336, as of March 31, 2025, and December 31, 2024, respectively | 4999508 | 10186543 |
| &nbsp;&nbsp;&nbsp;Inventories | 847395 | 872470 |
| &nbsp;&nbsp;&nbsp;Contract asset, including $545,805 and $0 from related parties | 577398 | 64202 |
| &nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | 936673 | 2131345 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets | 10255077 | 18888675 |
| &nbsp;&nbsp;&nbsp;Other assets, including $37,656 and $0 from related parties | 113591 | 314426 |
| &nbsp;&nbsp;&nbsp;Property, equipment and other fixed assets, net | 2629283 | 2475963 |
| &nbsp;&nbsp;&nbsp;Right - of-use operating lease asset | 1087496 | 1268139 |
| &nbsp;&nbsp;&nbsp;Right-of-use finance lease asset | 412893 | 447012 |
| &nbsp;&nbsp;&nbsp;Intangibles, net | 2938804 | 7571156 |
| &nbsp;&nbsp;&nbsp;Related party note receivable | 3000000 | 3000000 |
| &nbsp;&nbsp;&nbsp;Goodwill | 27010745 | 27010745 |
| **Total assets** | $47447889 | $60976116 |
| **Liabilities, mezzanine equity and stockholders' deficit** |  |  |
| Current liabilities |  |  |
| &nbsp;&nbsp;&nbsp;Accounts payable | $3569632 | $2780885 |
| &nbsp;&nbsp;&nbsp;Accrued expenses and other current liabilities, including $2,320,129 and $3,359,101 with related parties at March 31, 2025, and December 31, 2024, respectively | 6581799 | 8540188 |
| &nbsp;&nbsp;&nbsp;Current portion of long-term debt | 301091 | 291036 |
| &nbsp;&nbsp;&nbsp;Current portion of obligations under operating leases | 555672 | 583429 |
| &nbsp;&nbsp;&nbsp;Current portion of obligations under finance leases | 133408 | 130464 |
|  | 2455000 | 2440000 |
| &nbsp;&nbsp;&nbsp;Contract liabilities, including $0 and $2,000 with related parties as of March 31, 2025, and December 31, 2024, respectively | 119417 | 203607 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities | 13716019 | 14969609 |
| &nbsp;&nbsp;&nbsp;Obligations under operating leases, non-current | 662291 | 799385 |
| &nbsp;&nbsp;&nbsp;Obligations under finance leases, non-current | 314167 | 348807 |
| &nbsp;&nbsp;&nbsp;Warrant liabilities | 785551 | 1449000 |
| &nbsp;&nbsp;&nbsp;Long-term debt | 414268 | 496623 |
| **Total liabilities** | 15892296 | 18063424 |
| Commitments and contingencies (Note 17) |  |  |
| **Redeemable noncontrolling interests** |  |  |
| Convertible preferred units, 1,500,000 units issued and outstanding as of March 31, 2025 and December 31, 2024 | 16536108 | 16130871 |
| Class B Units | 38097300 | 115693900 |
| **Stockholders' deficit** |  |  |
| &nbsp;&nbsp;&nbsp;Class V common stock, $0.0001 par value, 100,000,000 authorized shares; 26,730,000 and 35,230,000 shares issued and outstanding as of March 31, 2025, and December 31, 2024, respectively | 2673 | 3523 |
| &nbsp;&nbsp;&nbsp;Class A common stock, $0.0001 par value, 300,000,000 authorized shares; 21,796,464 and 13,252,964 shares issued and outstanding as of March 31, 2025, and December 31, 2024, respectively | 2180 | 1326 |
| &nbsp;&nbsp;&nbsp;Additional paid-in capital | 16486224 | 14523963 |
| &nbsp;&nbsp;&nbsp;Accumulated deficit | (39568892) | (103440891) |
| Total stockholders' deficit | (23077815) | (88912079) |
| **Total liabilities, redeemable noncontrolling interests and stockholders' deficit** | $47447889 | $60976116 |

---

*The accompanying notes are an integral part of these condensed consolidated financial statements.*

**ZEO ENERGY CORP.**

**CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**

**(UNAUDITED)**

---

| | | |
|:---|:---|:---|
|  | **Three Months Ended<br> March 31,** | **Three Months Ended<br> March 31,** |
|  | **2025** | **2024** |
| Revenue, net | $6216391 | $11329387 |
| Related party revenue, net | 2567304 | 8812769 |
| &nbsp;&nbsp;&nbsp;Total revenue | 8783695 | 20142156 |
| Operating costs and expenses: |  |  |
| &nbsp;&nbsp;&nbsp;Cost of goods sold (exclusive of depreciation and amortization shown below) | 4789679 | 13957966 |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization | 4900729 | 459529 |
| &nbsp;&nbsp;&nbsp;Sales and marketing | 2137092 | 6553787 |
| &nbsp;&nbsp;&nbsp;General and administrative | 10467593 | 3219422 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total operating expenses | 22295093 | 24190704 |
| **(Loss) income from operations** | (13511398) | (4048548) |
| Other income (expenses), net: |  |  |
| &nbsp;&nbsp;&nbsp;Other income, net | 82363 | - |
| &nbsp;&nbsp;&nbsp;Change in fair value of warrant liabilities | 663449 | (138000) |
| &nbsp;&nbsp;&nbsp;Interest expense | (30277) | (35222) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total other income (expense), net | 715535 | (173222) |
| **Net (loss) income before taxes** | (12795863) | (4221770) |
| Income tax (expense) benefit | (523500) | 114668 |
| **Net (loss) income** | (13319363) | (4107102) |
| &nbsp;&nbsp;&nbsp;Less: Net loss attributable to Sunergy Renewables, LLC prior to the ESGEN Business Combination | - | (523681) |
| **Net loss subsequent to the Business Combination** | (13319363) | (3583421) |
| &nbsp;&nbsp;&nbsp;Less: Net loss attributable to redeemable non-controlling interests | (6958098) | (2051930) |
| **Net loss attributable to Class A common stock** | $(6361265) | $(1531491) |
| &nbsp;&nbsp;&nbsp;Basic and diluted net loss per common share | $(0.48) | $(1.54) |
| &nbsp;&nbsp;&nbsp;Weighted average units outstanding, basic and diluted | 13252964 | 994345 |

---

*The accompanying notes are an integral part of these condensed consolidated financial statements.*

**ZEO ENERGY CORP.**

**CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS' DEFICIT**

**FOR THE THREE MONTHS ENDED MARCH 31, 2025**

**(UNAUDITED)**

---

| | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Redeemable noncontrolling interests** | **Redeemable noncontrolling interests** | **Redeemable noncontrolling interests** | | | | | | | |
|  | **Class A Convertible<br> Preferred Units** | **Class A Convertible<br> Preferred Units** | **Class B** | **Class V<br> Common Stock** | **Class V<br> Common Stock** | **Class A<br> Common Stock** | **Class A<br> Common Stock** | | | |
|  | **Units** | **Amount** | **Units** | **Shares** | **Amount** | **Shares** | **Amount** |<br>**Additional<br> Paid-in**<br>**Capital** |<br>**Accumulated**<br>**Deficit** | **Total**<br>**Stockholders'<br> Equity**<br>**(Deficit)** |
| **Balance, December 31, 2024** | 1500000 | $16130871 | $115693900 | 35230000 | $3523 | 13252964 | $1326 | $14523963 | $(103440891) | $(88912079) |
| Stock-based compensation |  |  |  |  |  | 43500 | 4 | 2200752 |  | 2200756 |
| Reverse recapitalization related deferred taxes and adjustments |  |  |  |  |  |  |  | (238491) |  | (238491) |
| Conversion of Class V common stock to Class A common stock |  |  |  | (8500000) | (850) | 8500000 | 850 |  |  |  |
| Subsequent measurement of redeemable noncontrolling interests |  |  | (70233264) |  |  |  |  |  | 70233264 | 70233264 |
| Net income (loss) | - | 405237 | (7363336) | - | - | - | - | - | (6361265) | (6361265) |
| **Balance, March 31, 2025** | 1500000 | 16536108 | 38097300 | 26730000 | 2673 | 21796464 | 2180 | 16486224 | (39568892) | (23077815) |

---

*The accompanying notes are an integral part of these condensed consolidated financial statements.*

**ZEO ENERGY CORP.**

**CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS' EQUITY**

**FOR THE THREE MONTHS ENDED MARCH 31, 2024**

**(UNAUDITED)**

---

| | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Redeemable noncontrolling interests** | **Redeemable noncontrolling interests** | **Redeemable noncontrolling interests** | | | | | | | | | |
|  | **Class A Convertible<br> Preferred Units** | **Class A Convertible<br> Preferred Units** | **Class B** | **Common Units** | **Common Units** | **Class V<br> Common Stock** | **Class V<br> Common Stock** | **Class A<br> Common Stock** | **Class A<br> Common Stock** | | | |
|  | **Units** | **Amount** | **Units** | **Units** | **Amount** | **Shares** | **Amount** | **Shares** | **Amount** |<br>**Additional<br> Paid-in**<br>**Capital** |<br>**Accumulated**<br>**Deficit** | **Total**<br>**Stockholders'<br> Equity**<br>**(Deficit)** |
| **Balance, December 31, 2023** |  | $- | $- | 1000000 | $31155864 |  | $- |  | $- | $- | $(533345) | $30622519 |
| Retroactive application of Business Combination (Note 1) | - | - | - | (1000000) | (31155864) | 33730000 | 3373 | - | - | 31152491 | - | - |
| **Balance, December 31, 2023** |  |  |  |  |  | 33730000 | 3373 |  |  | 31152491 | (533345) | 30622519 |
| Stockholder distributions |  |  |  |  |  |  |  |  |  |  | (90000) | (90000) |
| Net loss prior to the Business Combination |  |  |  |  |  |  |  |  |  |  | (523681) | (523681) |
| **Effects of Business Combination** |  |  |  |  |  |  |  |  |  |  |  |  |
| Issuance of Class A Shares to third party advisors |  |  |  |  |  |  |  | 178207 | 18 | 891017 |  | 891035 |
| Issuance of Class A Shares to backstop investor |  |  |  |  |  |  |  | 225174 | 23 | 1569440 |  | 1569463 |
| Reverse Recapitalization (Note 4) | 1500000 | 6855076 |  |  |  | 1500000 | 150 | 4248583 | 425 | (1677860) |  | (1677285) |
| Transaction costs |  |  |  |  |  |  |  |  |  | (2890061) |  | (2890061) |
| Establishment of redeemable noncontrolling interests |  |  | 26116548 |  |  |  |  |  |  | (26116548) |  | (26116548) |
| **Activities subsequent to business combination** |  |  |  |  |  |  |  |  |  |  |  |  |
| Stock-based compensation |  |  |  |  |  |  |  | 375000 | 37 | 3118547 |  | 3118584 |
| Subsequent measurement of redeemable noncontrolling interests |  |  | 176420473 |  |  |  |  |  |  | (6047026) | (170373447) | (176420473) |
| Net income (loss) | - | 8224091 | (10276021) | - | - | - | - | - | - | - | (1531429) | (1531491) |
| **Balance, March 31, 2024** | 1500000 | 15079167 | 192261000 | - | - | 35230000 | 3523 | 5026964 | 503 | - | (173051964) | (173047938) |

---

*The accompanying notes are an integral part of these condensed consolidated financial statements.*

**ZEO ENERGY CORP.**

**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(UNAUDITED)**

---

| | | |
|:---|:---|:---|
|  | **Three Months Ended<br> March 31,** | **Three Months Ended<br> March 31,** |
|  | **2025** | **2024** |
| **Cash Flows from Operating Activities** |  |  |
| Net loss | $(13319363) | $(4107102) |
| Adjustment to reconcile net loss to cash used in operating activities |  |  |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization | 4900729 | 459529 |
| &nbsp;&nbsp;&nbsp;Change in fair value of warrant liabilities | (663449) | 138000 |
| &nbsp;&nbsp;&nbsp;Provision for credit losses | 3538569 | 150000 |
| &nbsp;&nbsp;&nbsp;Non-cash operating lease expense | 180643 | 152717 |
| &nbsp;&nbsp;&nbsp;Stock-based compensation | 2257139 | 3118584 |
| Changes in operating assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable | 1742908 | (2297517) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable due from related parties | (94441) | (2692841) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories | 25075 | (28968) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Contract assets | 32609 | 4448953 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaids and other current assets | 1138288 | (1420528) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other assets from related parties | (37656) | (109443) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | 788747 | (400861) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued expenses and other current liabilities | (1465222) | (691316) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued expenses and other current liabilities due to related parties | (1038972) | (2148960) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Contract liabilities | (82190) | (3508323) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Contract liabilities due to related parties | (2000) | (1054263) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating lease payments | (164851) | (159650) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net cash used in operating activities** | (2263438) | (10151989) |
| **Cash flows from Investing Activities** |  |  |
| Purchases of property, equipment and other assets | (372578) | (226076) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net cash used in investing activities** | (372578) | (226076) |
| **Cash flows from Financing Activities** |  |  |
| Repayments of finance lease liabilities | (31696) | (28537) |
| Proceeds from the issuance of convertible preferred stock, net of transaction costs | - | 10277275 |
| Repayments of debt | (72300) | (71855) |
| Distributions to members | - | (90000) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net cash (used in) provided by financing activities** | (103996) | 10086883 |
| Net decrease in cash and cash equivalents | (2740012) | (291182) |
| Cash and cash equivalents, beginning of period | 5634115 | 8022306 |
| **Cash and cash equivalents, end of the period** | $2894103 | $7731124 |
| **Supplemental Cash Flow Information** |  |  |
| Cash paid for interest | $25785 | $34060 |
| Cash paid for income taxes | $- | $- |
| Noncash finance lease expense | $34119 | $34118 |
| **Non-cash transactions** |  |  |
| Deferred equity issuance costs | $- | $3269039 |
| Issuance of Class A common stock to vendors | $- | $891035 |
| Issuance of Class A common stock to backstop investors | $- | $1569463 |
| Preferred dividends | $405237 | $8224091 |

---

*The accompanying notes are an integral part of these condensed consolidated financial statements.*

**Zeo Energy Corp.**

**Notes to the Condensed Consolidated Financial Statements**

**March 31, 2025**

**NOTE 1 - ORGANIZATION AND BUSINESS OPERATION**

Zeo Energy Corp. (formerly known as ESGEN Acquisition Corporation or "ESGEN"), collectively with its subsidiaries (the "Company" or "Zeo") is in the business of marketing, sales and installation, and maintenance of solar panel technology to individual households within the United States. As part of this, the Company may also provide roofing repairs and construction.

Zeo Energy Corp. was a blank check company originally incorporated on April 19, 2021 as a Cayman Islands exempted company for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. On October 22, 2021, ESGEN consummated an initial public offering, after which its securities began trading on the Nasdaq Stock Market LLC ("Nasdaq").

 ****

***ESGEN Business Combination***

On March 13, 2024 (the "Closing Date"), the Company consummated its previously announced business combination (the "ESGEN Closing"), pursuant to that certain Business Combination Agreement, dated as of April 19, 2023 (as amended on January 24, 2024, the "ESGEN Business Combination Agreement"), by and among Zeo Energy Corp., a Delaware corporation (f/k/a ESGEN Acquisition Corporation, a Cayman Islands exempted company), ESGEN OpCo, LLC, a Delaware limited liability company("OpCo"), Sunergy Renewables, LLC, a Nevada limited liability company ("Sunergy"), the Sunergy equity holders set forth on the signature pages thereto or joined thereto (collectively, "Sellers" and each, a "Seller", and collectively with Sunergy, the "Sunergy Parties"), for limited purposes, ESGEN LLC, a Delaware limited liability company (the "Sponsor"), and for limited purposes, Timothy Bridgewater, an individual, in his capacity as the Sellers Representative (collectively, the "ESGEN Business Combination"). Prior to the ESGEN Closing, (i) except as otherwise specified in the ESGEN Business Combination Agreement, each issued and outstanding Class B ordinary share of ESGEN was converted into one Class A ordinary share of ESGEN (the "ESGEN Class A Ordinary Shares" and such conversion, the "ESGEN Share Conversion"); and (ii) ESGEN was domesticated into the State of Delaware so as to become a Delaware corporation (the "Domestication"). In connection with the ESGEN Closing, the registrant changed its name from "ESGEN Acquisition Corporation" to "Zeo Energy Corp."

Upon the Domestication, each then-outstanding ESGEN Class A Ordinary Share was cancelled and converted into one share of Class A common stock of the Company, par value $0.0001 per share ("Zeo Class A Common Stock"), and each then-outstanding ESGEN Public Warrant was assumed and converted automatically into a warrant of the registrant, exercisable for one share of Zeo Class A Common Stock. Additionally, each outstanding unit of ESGEN was cancelled and converted into one share of Zeo Class A Common Stock and one-half of one warrant of the Company.

In accordance with the terms of the ESGEN Business Combination Agreement, Sunergy caused all holders of any options, warrants or rights to subscribe for or purchase any equity interests of Sunergy or its subsidiaries or securities (including debt securities) convertible into or exchangeable for, or that otherwise confer on the holder any right to acquire, any equity interests of Sunergy or any subsidiary thereof (collectively, the "Sunergy Convertible Interests") existing immediately prior to the ESGEN Closing to either exchange or convert all such holder's Sunergy Convertible Interests into limited liability interests of Sunergy (the "Sunergy Company Interests") in accordance with the governing documents of Sunergy or the Sunergy Convertible Interests.

At the ESGEN Closing, ESGEN contributed to OpCo (1) all of its assets (excluding its interests in OpCo, but including the amount of cash in ESGEN's Trust Account (the "Trust Account") as of immediately prior to the ESGEN Closing (after giving effect to the exercise of redemption rights by ESGEN stockholders), and (2) a number of newly issued shares of Class V common stock of the registrant, par value $0.0001 per share, which generally have only voting rights (the "Zeo Class V Common Stock"), equal to the number of Seller OpCo Units (as defined in the ESGEN Business Combination Agreement) (the "Seller Class V Shares"). In exchange, OpCo issued to ESGEN (i) a number of Class A common units of OpCo (the "Manager OpCo Units") which equaled the number of total shares of the Zeo Class A Common Stock issued and outstanding immediately after the ESGEN Closing and (ii) a number of warrants to purchase Manager OpCo Units which equaled the number of SPAC Warrants (as defined in the ESGEN Business Combination Agreement) issued and outstanding immediately after the ESGEN Closing (the transactions described above in this paragraph, the "ESGEN Contribution"). Immediately following the ESGEN Contribution, (x) the Sellers contributed to OpCo the Sunergy Company Interests and (y) in exchange therefor, OpCo transferred to the Sellers the Seller OpCo Units and the Seller Class V Shares.

Prior to the ESGEN Closing, the Sellers transferred 24.167% of their Sunergy Company Interests (which were thereafter exchanged for Seller OpCo Units and Seller Class V Shares at the ESGEN Closing, as described above) pro rata to Sun Managers, LLC, a Delaware limited liability company ("Sun Managers"), in exchange for Class A Units (as defined in the Sun Managers limited liability company agreement (the "SM LLCA") in Sun Managers. In connection with such transfer, Sun Managers executed a joinder to, and became a "Seller" for purposes of, the ESGEN Business Combination Agreement. Sun Managers intends to grant Class B Units (as defined in the SM LLCA) in Sun Managers through the Sun Managers, LLC Management Incentive Plan (the "Management Incentive Plan") adopted by Sun Managers to certain eligible employees or service providers of OpCo, Sunergy or their subsidiaries, in the discretion of Timothy Bridgewater, as manager of Sun Managers. Such Class B Units may be subject to a vesting schedule, and once such Class B Units become vested, there may be an exchange opportunity through which the grantees may request (subject to the terms of the Management Incentive Plan and the OpCo amended and restated limited liability company agreement in its entirely (the "OpCo A&R LLC Agreement")) the exchange of their Class B Units into Seller OpCo Units (together with an equal number of Seller Class V Shares), which may then be converted into Zeo Class A Common Stock (subject to the terms of the Management Incentive Plan and the OpCo A&R LLC Agreement). Grants under the Management Incentive Plan will be made after ESGEN Closing.

As of the ESGEN Closing Date, upon consummation of the ESGEN Business Combination, the only outstanding shares of capital stock of the registrant were shares of Zeo Class A Common Stock and Zeo Class V Common Stock.

In connection with entering into the ESGEN Business Combination Agreement, ESGEN and the Sponsor entered into a subscription agreement, dated April 19, 2023, which ESGEN, the Sponsor and OpCo subsequently amended and restated on January 24, 2024 (the "Sponsor Subscription Agreement"), pursuant to which, among other things, the Sponsor agreed to purchase an aggregate of 1,000,000 OpCo preferred units (and be issued an equal number of shares of Zeo Class V Common Stock) ("Convertible OpCo Preferred Units") concurrently with the ESGEN Closing at a cash purchase price of $10.00 per unit and up to an additional 500,000 Convertible OpCo Preferred Units (together with the concurrent issuance of an equal number of shares of Zeo Class V Common Stock) during the nine months after ESGEN Closing if called for by Zeo (the "Sponsor PIPE Investment"). Prior to the ESGEN Closing, ESGEN informed the Sponsor that it wished to call for the additional 500,000 Convertible OpCo Preferred Units at the Closing and, as a result, a total of 1,500,000 Convertible OpCo Preferred Units were issued to Sponsor in return for aggregate consideration of $15,000,000.

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***Accounting for the ESGEN Business Combination***

The ESGEN Business Combination was accounted for as a reverse recapitalization with ESGEN being treated as the acquired company since there was no change in control in accordance with the guidance for common control transactions in Accounting Standards Codification ("ASC") 805-50, *Business Combinations – Related Issues* ("ASC 805-50"). Accordingly, the financial statements of the combined entity will represent a continuation of the financial statements of Sunergy with the ESGEN Business Combination treated as the equivalent of Sunergy issuing stock for the net assets of ESGEN, accompanied by a recapitalization. The net assets of ESGEN were stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the ESGEN Business Combination were those of Sunergy.

Sunergy was determined to be the accounting acquirer based on evaluation of the following facts and circumstances:

Based upon the evaluation of the OpCo A&R LLC Agreement, OpCo is considered to be a Variable Interest Entity ("VIE") and ESGEN is considered to be the primary beneficiary through its membership interest and manager powers conferred to it through the Class A Units. For VIEs, the accounting acquirer is always considered to be the primary beneficiary. As such, Zeo will consolidate OpCo and will be considered the accounting acquirer; however, further consideration of whether the entities are under common control was required in order to determine whether there is an ultimate change in control and the acquisition method of accounting is required under ASC 805.

While Sunergy did not control or have common ownership of ESGEN prior to the consummation of the ESGEN Business Combination, the Company evaluated the ownership of the new entity subsequent to the consummation of the transaction to determine if common control existed. If the business combination is between entities under common control, then the acquisition method of accounting is not applicable and the guidance in ASC 805-50 regarding common control should be applied instead. The Financial Accounting Standards Board ("FASB") ASC does not include a definition of common control. In practice, entities with a common parent entity, as determined under ASC 810, *Consolidation*, are generally considered to be under common control. Emerging Issues Task force ("EITF") Issue 02-5, "Definition of 'Common Control' in Relation to FASB Statement No. 141 ("EITF Issue 02-5")", which was never finalized or codified, has also been applied in practice to determine when entities are under common control. EITF Issue 02-5 indicates that common control would exist in any of the following situations:

● An individual (including trusts in which the individual is the beneficial owner) or entity holds more than 50 percent of the voting ownership of each entity.

● Immediate family members hold more than 50 percent of the voting ownership interest of each entity, and there is no evidence that those family members would vote their shares in any way other than in concert. Immediate family members include a married couple and their children, but not the married couple's grandchildren. Entities might be owned in varying combinations among living siblings and their children. Those situations require careful consideration of the substance of the ownership and voting relationships.

● Group of stockholders holds more than 50 percent of the voting ownership of each entity, and contemporaneous written evidence of an agreement to vote a majority of the entities' shares in concert exists.

Prior to the ESGEN Business Combination and the contributions to Sun Managers, Sunergy was majority owned by 5 entities (the "Primary Sellers"):

● Southern Crown Holdings, LLC (wholly owned by Anton Hruby) — 230,000 Common Units (23%)

● LAMADD LLC (wholly owned by Gianluca Guy) — 230,000 Common Units (23%)

● JKae Holdings, LLC (wholly owned by Kalen Larsen) — 215,000 Common Units (21.5%)

● Clarke Capital, LLC (wholly owned by Brandon Bridgewater) — 215,000 Common Units (21.5%)

● White Horse Energy, LC (wholly owned by Timothy Bridgewater) — 90,000 Common Units (9%)

Each of the above parties entered into a Voting Agreement, each dated September 7, 2023 (the "Voting Agreement"). The term of the Voting Agreement is for five years from the date of the Voting Agreement. The consummation of the ESGEN Business Combination occurred within the term of the Voting Agreement.

Prior to the ESGEN Business Combination and the contributions to Sun Managers, the Primary Sellers had 98% ownership in Sunergy. Immediately following the ESGEN Business Combination, the Primary Sellers owned 83.8% of the Common Stock of the registrant through their Zeo Class V Common Stock that have voting interests. The Voting Agreement constitutes contemporaneous written evidence of an agreement to vote a majority of the Primary Sellers' shares of the registrant in concert. Accordingly, the Primary Sellers retain majority control through the voting of their units in conjunction with the Voting Agreement immediately prior to the ESGEN Business Combination and their shares following the ESGEN Business Combination and, therefore, there is no change of control before or after the ESGEN Business Combination. This conclusion is appropriate even though there was no relationship or common ownership or control between Sunergy and ESGEN prior to the ESGEN Business Combination. Accordingly, the ESGEN Business Combination should be accounted for in accordance with the guidance for common control transactions in ASC 805-50.

Additional factors that were considered include the following:

● Since the ESGEN Business Combination, the Board has been comprised of one individual designated by ESGEN and five individuals designated by Sunergy.

● Since the ESGEN Business Combination, management of the Company has been the existing management at Sunergy immediately prior to the ESGEN Business Combination. The individual that was serving as the chief executive officer and chief financial officer of Sunergy's management team immediately prior to the ESGEN Business Combination continues substantially unchanged upon completion of the ESGEN Business Combination.

For common control transactions that include the transfer of a business, the reporting entity is required to account for the transaction in accordance with the procedural guidance in ASC 805-50. The C Corporation (ESGEN) is considered to be a substantive entity, the LLC (OpCo) is a business and VIE, and the C Corporation is considered to be the accounting acquirer since it is the primary beneficiary of the LLC. In a transaction that is a combination of entities under common control, the acquirer (ESGEN) should recognize the acquired entity (OpCo and Sunergy) on the same basis as the entities' common parent.

**NOTE 2 - LIQUIDITY AND GOING CONCERN**

As of March 31, 2025, the Company had approximately $3.5 million of working capital including $2.9 million of cash and cash equivalents. Management has assessed the going concern assumptions of the Company during the preparation of these condensed consolidated financial statements.

The Company's condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Historically, the Company's primary source of funding to support operations has been cash flows from operations.

**NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

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***Basis of Presentation and principles of Consolidation***

The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and the rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. These statements should be read in conjunction with Zeo's audited financial statements for the fiscal year ended December 31, 2024 as included with the Company's Form 10-K filed with the SEC on May 27, 2025. The results reported in these unaudited condensed consolidated financial statements are not necessarily indicative of results for the full fiscal year.

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***Reclassification***

Certain amounts from prior period financial statements have been reclassified to align with the presentation used in the current condensed consolidated financial statements for comparative purposes. These reclassifications had no effect on the Company's previously reported results of operations. An adjustment has been made to the condensed consolidated statements of cash flows for the three months ended March 31, 2024, to match this current year's presentation of noncash financing lease expense. This change in classification does not affect previously reported cash flows from operating activities in the condensed consolidated statements of cash flows.

***Use of Estimates***

The preparation of the Company's consolidated financial statements in conformity with US GAAP requires it to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses for the reporting period. Some of the more significant estimates include fair value of preferred shares, fair value of assets acquired and liabilities assumed in asset acquisitions, share-based compensation, fair value of warrant liabilities, redemption value of non-controlling interest, realizability of deferred tax assets, subsequent realizability of intangible assets, depreciation and amortization periods and collectability of accounts receivable. Due to the uncertainty involved in making estimates, actual results could differ from those estimates which could have a material effect on the financial condition and results of operations in future periods.

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The Company bases its estimates and assumptions on historical experience and other factors, including the current economic environment and on various other judgements that it believes to be reasonable under the circumstances. The Company adjusts such estimates and assumptions when facts and circumstances dictate. Changes in those estimates resulting from continuing changes in the economic environment could have a material effect on the financial condition and results of operations in future periods.

***Segment Information***

Operating segments are defined as components of an enterprise for which separate discrete financial information is evaluated regularly by the chief operating decision maker ("CODM"), in deciding how to allocate resources and assess performance. The CODM reviews financial information presented on a consolidated basis for the purposes of allocating resources and evaluating financial performance. Accordingly, the Company operates and manages its business as one operating and reportable segment. (See Note 19)

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***Cash and Cash Equivalents***

The Company considers all highly liquid investments purchased with original maturities of three months or less from the purchase date to be cash equivalents. The Company maintains its cash in checking and savings accounts. Income generated from cash held in savings accounts is recorded as interest income. The carrying value of the Company's savings accounts is included in cash and cash equivalents and approximates the fair value.

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***Accounts receivable, net of allowance for credit losses***

Accounts receivable is presented at the invoiced receivable amounts, less any allowance for any potential expected credit loss amounts, and do not bear interest. The Company estimates allowance for credit losses based on the creditworthiness of each customer, historical collections experience, forward looking information and other information including the aging of the receivables. The majority of our customers lease or finance their purchase and installation of solar panels through various financing companies. The financing companies remit payment to the Company typically within 3 weeks after installation. The Company is not deemed a borrower with these financing agreements and as a result is not subject to any of the terms of the financing transaction between the financing company and the customer.

The following represents a roll forward of the allowance for credit losses as of March 31, 2025 and December 31, 2024:

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| | | |
|:---|:---|:---|
|  | **March 31,<br> 2025** | **December 31,<br> 2024** |
| Allowance for credit losses, beginning of the period | $1165336 | $862580 |
| Provision for credit losses | 3538569 | 2815633 |
| Write offs | - | (2525100) |
| Recoveries | - | 12223 |
| Allowance for credit losses, as of the end of the period | $4703905 | $1165336 |

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Significant judgement is involved in determination of the collectability of accounts receivable. Management assesses the reasonability of collectability of accounts receivable on a quarterly basis to record the allowance for credit losses.

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***Contract assets***

Contract assets costs include prepaid installation costs incurred prior to completion of installations of solar systems and accrued revenues for which the invoicing criteria have not been met. Contact assets include the cost of engineering, permits, governmental fees, other related solar installation costs and accrued revenues of $577,398 and $64,202 as of March 31, 2025 and December 31, 2024, respectively. These costs are charged to Cost of goods sold when each installation is completed. The following table summarizes the change in contract assets:

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| | | |
|:---|:---|:---|
|  | **March 31,<br> 2025** | **December 31,<br> 2024** |
| Contract asset, beginning of the period | $64202 | $4915064 |
| Cost of goods sold recognized during the period | (64202) | (4915064) |
| Additions to contract assets prior to completion of performance obligation | 577398 | 64202 |
| Contract assets, as of the end of the period | $**577398** | $**64202** |

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***Prepaid expenses and other current assets***

Prepaid expenses and other current assets consist of employee advances, advanced sales commissions, prepaid insurance, and other current assets.

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***Note receivable***

The Company records notes receivable when it extends credit or financing to related parties or third parties. The Company evaluates notes receivable for collectability at each reporting period under the current expected credit loss (CECL) model, in accordance with ASC 326, *Financial Instruments - Credit Losses* ("ASC 326"). If necessary, an allowance for doubtful accounts is recorded to reflect potential losses. As of December 31, 2024, we evaluated the need for an allowance for credit loss using the guidelines set forth in ASC 326, and have determined this note is fully collectible and, therefore, we have not recorded an allowance against the note receivable balance.

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***Concentration of credit risk***

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents and trade accounts receivable. The Company maintains its cash and cash equivalent balances in highly rated financial institutions, which at times may exceed federally insured limits. The amounts over these insured limits as of March 31, 2025, and December 31, 2024 were $2,644,103 and $5,384,115, respectively. The Company mitigates this concentration of credit risk by monitoring the credit worthiness of the financial institutions. No losses have been incurred to date on any deposits.

The Company performs periodic credit evaluations of its customers' financial condition and also monitors the financial condition of the financial counterparties that finance customer transactions and generally does not require collateral. For customers who finance their systems through a lease product, the Third Party Operator (TPO) of the lease product is the contracted customer with the Company. Where the Company has a concentration of credit risk, it is with these TPO customers. At March 31, 2025, the Company had one customer who exceeded 10% of accounts receivable. Their balances were $2,481,952. At December 31, 2024, the Company had two customers who exceeded 10% of accounts receivable. Their balances were $3,192,077 and $2,306,096. For the three months ended March 31, 2025 and 2024, the Company had four and two customers, respectively, who exceeded 10% of revenue recognized. Their revenue recognized was $2,125,281, $1,318,939, $2,021,499 and $1,810,484 for the three months ended March 31, 2025 and $12,022,995 and $2,549,042 for the three months ended March 31, 2024, respectively.

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***Advertising and Marketing***

The Company charges the costs of advertising to expense as incurred. For the three months ended March 31, 2025 and 2024, the Company incurred $54,686 and $45,268, respectively, of advertising and marketing costs.

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***Inventories***

Inventories are primarily comprised of solar panels and other related items necessary for installations and service needs. Inventories are accounted for on a first-in-first-out basis and are measured at the lower of cost or net realizable value, where cost is determined using a weighted-average cost method. When evidence exists that the net realizable value of inventory is lower than its cost, the difference is recognized as cost of goods sold in the condensed consolidated statements of operations in the period identified. As of March 31, 2025 and December 31, 2024, inventory was $847,395 and $872,470, respectively.

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***Property, equipment and other fixed assets, net***

Property, equipment and other fixed assets are carried at cost less accumulated depreciation and includes expenditures that substantially increase the useful lives of existing property and equipment. Maintenance, repairs, and minor renovations are charged to expense as incurred. When property and equipment is retired or otherwise disposed of, the related costs and accumulated depreciation are removed from their respective accounts, and any difference between the sale proceeds and the carrying amount of the asset is recognized as a gain or loss on disposal in the condensed consolidated Statements of Operations.

Software that is developed for internal use and is accounted for accordance with ASC 350*, Intangibles, Goodwill and Other-Internal-Use Software*. Qualifying costs incurred to develop internal-use software are capitalized when (i) the preliminary project stage is completed, (ii) management has authorized further funding for the completion of the project and (iii) it is probable that the project will be completed and perform as intended. These capitalized costs include compensation for employees who develop internal-use software and external costs related to development of internal-use software. Capitalization of these costs ceases once the project is substantially complete and the software is ready for its intended purpose. Internally developed software is amortized using the straight-line method over an estimated useful life. All other expenditures, including those incurred to maintain an internal-use software's current level of performance, are expensed as incurred. When these assets are retired or disposed of, the cost and accumulated amortization thereon are removed, and any resulting gain or losses are included in the condense consolidated statements of operations.

Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which is five years, across all asset classes.

The estimated useful lives and depreciation methods are reviewed at each year-end, with the effect of any changes in estimates accounted for prospectively. All depreciation expense is included with depreciation and amortization in the condensed consolidated statements of operations.

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***Impairment of long-lived assets***

Management reviews each asset or asset group for impairment whenever events or circumstances indicate that the carrying value of an asset or asset group may not be recoverable, and at least annually. No impairment charges were recorded by the Company during the three months ended March 31, 2025, and 2024.

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***Business Combinations***

The Company accounts for an acquisition as a business combination if the assets acquired and liabilities assumed in the transaction constitute a business in accordance with ASC Topic 805. Such acquisitions are accounted using the acquisition method by recognizing the identifiable tangible and intangible assets acquired and liabilities assumed, and any non-controlling interest in the acquired business, measured at their acquisition date fair values.

Where the set of assets acquired and liabilities assumed doesn't constitute a business, it is accounted for as an asset acquisition and the individual assets and liabilities are recorded at their respective relative fair values corresponding to the consideration transferred.

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***Goodwill***

Goodwill is recognized and initially measured as any excess of the acquisition-date consideration transferred in a business combination over the acquisition-date amounts recognized for the net identifiable assets acquired. Goodwill is not amortized but is tested for impairment annually, or more frequently if an event occurs or circumstances change that would more likely than not result in an impairment of goodwill. First, the Company assesses qualitative factors to determine whether or not it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company conducts a quantitative goodwill impairment test comparing the fair value of the applicable reporting unit with its carrying value. If the carrying amount of the reporting unit exceeds the fair value of the reporting unit, the Company recognizes an impairment loss in the condensed consolidated statements of operations for the amount by which the carrying amount exceeds the fair value of the reporting unit. The Company performs its annual goodwill impairment test at December 31 of each year. There was no goodwill impairment for the three months ended March 31, 2025, and 2024.

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***Intangible assets subject to amortization***

Intangible assets include tradenames, customer lists, order backlog and non-compete agreements. Amounts are subject to amortization on a straight-line basis over the estimated period of benefit and are subject to annual impairment consideration. Costs incurred to renew or extend the term of a recognized intangible asset, such as the acquired tradename, are capitalized as part of the intangible asset and amortized over its revised estimated useful life.

Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of the intangible assets may not be recoverable. Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset, a significant change in the extent or manner in which an asset is used, or any other significant adverse change that would indicate that the carrying amount of an asset or group of assets may not be recoverable. The Company evaluates the recoverability of intangible assets by comparing their carrying amounts to future net undiscounted cash flows expected to be generated by the intangible assets. If such intangible assets are considered to be impaired, the impairment recognized is measured as the amount by which the carrying amount of the intangible assets exceeds the fair value of the assets. The Company determines fair value based on discounted cash flows using a discount rate commensurate with the risk inherent in the Company's current business model for the specific intangible asset being valued. No impairment charges were recorded for the three months ended March 31, 2025, and 2024.

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***Leases***

The Company evaluates the contracts it enters into to determine whether such contracts contain leases at inception. A contract contains a lease if the contract conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. At commencement, contracts containing a lease are further evaluated for classification as an operating or finance lease where the Company is a lessee. When the arrangements include lease and non-lease components, the Company accounts for them as a single lease component.

 

*Operating Leases*

A lease for which substantially all the benefits and risks incidental to ownership remain with the lessor is classified by the lessee as an operating lease. Operating leases are included in the line items right-of-use ("ROU") operating lease asset, current portion of obligations under operating leases, and obligations under operating leases, non-current in the condensed consolidated balance sheets. ROU assets represent the Company's right to use an underlying asset for the lease term and obligations under lease represents its obligation to make lease payments arising from the lease. For operating leases, the Company measures its lease obligations based on the present value of the total lease payments not yet paid. These payments are then discounted based on the more readily determinable of the rate implicit in the lease or the Company's incremental borrowing rate, which is the estimated rate the Company would be required to pay for a collateralized borrowing equal to the total lease payments over the term of the lease. The Company uses its incremental borrowing rate based on the information available at lease commencement date in determining the present value of lease payments. The Company measures ROU assets based on the corresponding lease obligation adjusted for payments made to the lessor at or before the commencement date, and initial direct costs it incurs under the lease. The Company begins recognizing lease expense when the lessor makes the underlying asset available to the Company. Lease expenses for lease payments is recognized on a straight-line basis over the lease term.

For leases with a lease term of less than one year (short-term leases), the Company has elected not to recognize an obligation or ROU asset on its condensed consolidated balance sheet. Instead, it recognizes the lease payments as expenses on a straight-line basis over the lease term. Short-term lease costs are immaterial to its condensed consolidated statements of operations and cash flows.

 

 

*Finance leases*

Leases that transfer substantially all of the benefits and risks incidental to the ownership of assets are accounted for as finance leases as if there was an acquisition of an asset and incurrence of an obligation at the inception of the lease. Lease cost for finance leases where the Company is the lessee includes the amortization of the ROU asset, which is amortized on a straight-line basis and recorded to depreciation and amortization and interest expense on the finance lease obligation, which is calculated using the effective interest method and recorded to interest expense on the accompanying condensed consolidated statements of operations. Finance lease ROU assets are amortized over the shorter of their estimated useful lives or the terms of the respective leases. If the Company is reasonably certain to exercise the option to purchase the underlying asset at the end of lease term, the finance lease ROU assets are amortized to the end of useful life of the assets on a straight-line basis.

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***Warrant Liabilities***

The Company evaluates all of its financial instruments, including issued share purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 815-40, *Derivatives and Hedging* ("ASC 815-40"). The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period. The Company accounts for the Public Warrants (as defined in Note 12) in accordance with the guidance contained in ASC 815-40 under which the Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies the Warrants as liabilities at their fair value and adjusts the Warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the condensed consolidated statements of operations. The quoted market price is utilized as the fair value as of each relevant date.

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***Revenue Recognition***

The Company accounts for revenue in accordance with ASC 606, *Revenue from Contracts with Customers* ("ASC 606"). The Company applies judgment in the determination of performance obligations in accordance with ASC 606. Performance obligations in a contract are identified based on the services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract. In addition, a single performance obligation may comprise a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer. This principle is achieved through applying the following five-step approach:

● Step 1 - Identification of the contract, or contracts, with a customer.

● Step 2 - Identification of the performance obligations in the contract.

● Step 3 - Determination of the transaction price.

● Step 4 - Allocation of the transaction price to the performance obligations in the contract

● Step 5 - Recognition of revenue when, or as, the Company satisfies a performance obligation.

The Company recognizes and records revenue from its operations upon completion of installation for both solar system installations and roofing installations. In connection with the sales and installation, a signed contract between the Company and the purchaser defines the duties and obligations of each party. The contract is specific as to the duties and responsibilities which govern the accounting for these transactions. Once the Company's performance obligations are met with installation completed, according to the signed contract, the Company's obligations are completed, and title is transferred to the buyer. The Company believes its performance obligation is completed once the installation of the solar panels is completed, which is prior to the customer receiving permission to operate the solar panels from the local utility company. The Company records sales revenue at this point in time. Many of the Company's customers finance their obligations with third parties. In these situations, the finance company deducts their financing fees and remits the net amount to the Company. Revenue recorded is equal to the contract amount signed by the purchaser, net of the financing fees. The Company incurs several costs associated with the installation prior to its completion. In accordance with ASC 340, *Other Assets and Deferred Costs,* installation-related costs are recorded as prepaid expenses and other current assets and in turn are expensed when installation is completed. Thus, revenue recognition is in turn matched with the installation equipment costs and expense associated with the completion of each project.

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| | | |
|:---|:---|:---|
|  | **Three months ended<br> March 31,** | **Three months ended<br> March 31,** |
|  | **2025** | **2024** |
| Solar systems installations, net | 8374912 | 19043775 |
| Roofing installations | 408783 | 1098381 |
| &nbsp;&nbsp;&nbsp;**Total net revenues** | $**8783695** | $**20142156** |

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*Contract liabilities*

The Company receives both customer advances and may receive lender advances from third-party financing company's on behalf of customers. These amounts are recorded on the condensed consolidated balance sheets as contract liabilities and are considered a liability of the Company until the installation is completed. When the permission to turn on ("PTO") the solar panels from the local municipality is significantly delayed, the lender may withdraw their previous payments for a customer account until the PTO is completed. The contract liabilities amounts are expected to be recognized as revenue within a twelve months of the Company's receipt of the funds. The following table summarizes the change in contract liabilities:

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| | | |
|:---|:---|:---|
|  | **March 31,<br> 2025** | **December 31,<br> 2024** |
| Contract liabilities, beginning of the period | $203607 | $5223518 |
| Revenue recognized from amounts included in contract liabilities at the beginning of the period | (203607) | (5223518) |
| Cash received prior to completion of performance obligation | 119417 | 203607 |
| Contract liabilities, end of the period | $**119417** | $**203607** |

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*Contract acquisition costs*

The Company pays sales commissions to sales representatives based on a percentage of the value of sales contracts entered into by the customer and the Company. Payment is made to the sales representative once installation is completed. Such costs are included as sales and marketing on the condensed consolidated statements of operations. Since sales commission payments are subject to completion of the installation, payment is made commensurate with the recognition of revenue from the sale, and therefore the full expense is incurred as the Company does not have any remaining performance obligations.

Costs to obtain a contract are not considered to be incremental or material, and project duration generally does not span more than one year. Accordingly, the Company applies a practical expedient for these types of costs and as such, they are expensed in the period incurred.

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***Earnings per share***

The Company reports both basic and diluted earnings per share. Basic earnings per share is calculated based on the weighted average number of shares of Class A Common Stock outstanding and excludes the dilutive effect of warrants, stock options, and other types of convertible securities. Diluted earnings per share is calculated based on the weighted average number of shares of Class A Common Stock outstanding and the dilutive effect of warrants and other types of participating securities are included in the calculation. Dilutive securities are excluded from the diluted earnings per share calculation if their effect is anti-dilutive, such as in periods where a net loss is reported.

Prior to the ESGEN Business Combination, the membership structure of Sunergy Renewables, LLC included membership units. In conjunction with the closing of the ESGEN Business Combination, the Company effectuated a recapitalization whereby all membership units were converted to common units of ESGEN OpCo, LLC, and Zeo Energy Corp. implemented a revised class structure including Class A Common Stock having one vote per share and economic rights and Class V Common Stock having one vote per share and no economic rights.

***Stock-based Compensation***

The Company recognizes an expense for stock-based compensation awards based on the estimated fair value of the award on the date of grant. The Company has elected to account for restricted stock awards with market conditions using a graded vesting method. This method recognizes the compensation cost in the condensed consolidated statements of operations over the requisite service period for each separately vesting tranche of awards. The Company has elected to recognize forfeitures as they occur rather than estimate expected forfeitures.

***Fair value of Financial Instruments***

Fair value is the price that would be received to sell an asset, or the amount paid to transfer a liability in an orderly transaction between market participants at the measurement date. There is a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). We classify fair value balances based on the observability of those inputs. The three levels of the fair value hierarchy are as follows:

Level 1 — Inputs based on unadjusted quoted market prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical or similar instruments in markets that are not active or for which all significant inputs are observable or can be corroborated by observable market data.

Level 3 — Inputs reflect management's best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are both unobservable for the asset and liability in the market and significant to the overall fair value measurement.

In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement. The recorded amounts of certain financial instruments, including cash and cash equivalents, accounts receivable, accrued expenses, advanced funding, accounts payable, and debt approximate fair value due to their relatively short maturities.

 ****

 **

***Redeemable Noncontrolling Interests***

 **

Noncontrolling interests represent the portion of OpCo that Zeo Energy Corp. controls and consolidates but does not own. The noncontrolling interests were created as a result of the ESGEN Business Combination and represent 33,730,000 common units issued by Zeo Energy Corp. to the prior investors. As of the close of the ESGEN Business Combination, Zeo Energy Corp. held a 13.0% interest in OpCo with the remaining 87.0% interest held by OpCo's prior investors. At December 31, 2024, Zeo Energy Corp. held a 28.2% interest in ESGEN OpCo, LLC with the remaining 71.8% interest held by OpCo's prior investors. During the three months ended March 31, 2025, 8,500,000 units were converted to Class A common stock. As a result, as of March 31, 2025, 25,230,000 units are outstanding. The prior investors' interests in OpCo represent a redeemable noncontrolling interest. At its discretion, the members have the right to exchange their common units in OpCo (along with the cancellation of the paired shares of Zeo Energy Corp. or the Class V Common Stock) for either shares of Class A Common Stock on a one-to-one basis or cash proceeds of equal value at the time of redemption. Any redemption of OpCo common units in cash must be funded through a private or public offering of Class A Common Stock and is subject to the Company's Board's approval. As of March 31, 2025, the prior investors of OpCo hold the majority of the voting rights on the Board.

 ****

As the redeemable noncontrolling interests are redeemable upon the occurrence of an event that is not solely within the Company's control, the Company classifies redeemable noncontrolling interests as temporary equity. The redeemable noncontrolling interests in common units were initially measured at the OpCo prior investors' share in the net assets of the Company upon consummation of the ESGEN Business Combination. Subsequent remeasurements of the Company's redeemable noncontrolling interests are recorded as a deemed dividend each reporting period, which reduces retained earnings, if any, or additional paid-in capital of Zeo Energy Corp. Remeasurements of the Company's redeemable noncontrolling interests are based on the fair value of our Class A Common Stock.

 **

***Redeemable Convertible Preferred Units***

 **

The Company records redeemable convertible preferred units at fair value on the dates of issuance, net of issuance costs. The redeemable convertible preferred units have been classified outside of stockholders' (deficit) equity as temporary equity on the accompanying condensed consolidated balance sheets because the shares contain certain redemption features that are not solely within the control of the Company. See Note 10 – Redeemable Noncontrolling Interests and Equity. Because the redeemable convertible preferred units are held by the Sponsor at the OpCo level, the preferred units are presented as a noncontrolling interests on the condensed consolidated balance sheets.

 **

***Income Taxes***

 **

Zeo Energy Corp. is a corporation and thus is subject to United States ("U.S.") federal, state and local income taxes. OpCo is a partnership for U.S. federal income tax purposes and therefore does not pay U.S. federal income tax. Instead, the OpCo unitholders, including Zeo Energy Corp., are liable for U.S. federal income tax on their respective shares of OpCo's taxable income. OpCo is liable for income taxes in those states which tax entities classified as partnerships for U.S. federal income tax purposes.

 ****

We use the asset and liability method of accounting for income taxes for the Company. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and net operating loss ("NOL") and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in income tax rates is recognized in the results of operations in the period that includes the enactment date. The realizability of deferred tax assets is evaluated quarterly based on a "more likely than not" standard and, to the extent this threshold is not met, a valuation allowance is recorded.

 ****

ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. Management has evaluated the Company's tax positions, including its previous status as a pass-through entity for federal and state tax purposes, and has determined that the Company has taken no uncertain tax positions that require adjustment to the condensed consolidated financial statements. The Company's reserve related to uncertain tax positions was zero as of March 31, 2025 and December 31, 2024. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of March 31, 2025 and December 31, 2024. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.

 ****

Interest and penalties associated with tax positions are recorded in the period assessed as general and administrative expenses. The open tax years for U.S. federal and state income tax purposes are 2021 and forward.

 **

***Tax Receivable Agreement***

 **

In conjunction with the consummation of the ESGEN Business Combination, Zeo Energy Corp entered into a Tax Receivable Agreement (the "TRA") with Opco and certain Opco members (the "TRA Holders"). Pursuant to the TRA, Zeo Energy Corp. is required to pay the TRA Holders 85% of the net cash savings, if any, in U.S. federal, state and local income and franchise tax (computed using simplifying assumptions to address the impact of state and local taxes) that the Company actually realizes (or is deemed to realize in certain circumstances) in periods after the ESGEN Business Combination as a result of, as applicable to each such TRA Holder, (i) certain increases in tax basis that occur as a result of the acquisition (or deemed acquisition for U.S. federal income tax purposes) of all or a portion of such TRA Holder's Exchangeable OpCo Units pursuant to the exercise of the OpCo Exchange Rights or a Mandatory Exchange and (ii) imputed interest deemed to be paid by the Company as a result of, and additional tax basis arising from, any payments it makes under the TRA. All such payments to the TRA Holders are the obligations of Zeo Energy Corp., and not that of Opco. As of March 31, 2025, there was 8,500,000 exchanges of Opco units for Class A Common Stock of Zeo Energy Corp. Payments under the TRA are not considered probable as of March 31, 2025.. Future exchanges will result in incremental tax attributes and potential cash tax savings for Zeo Energy Corp. The associated liability for the TRA will be recorded as a decrease to additional paid-in capital in the condensed consolidated statement of changes in stockholders' deficit. As of March 31, 2025, the total unrecorded TRA liability is approximately $8.3 million, of which $3.5 million related to actual exchanges and $4.8 million related to hypothetical sale. In accordance with ASC Topic 450, Contingencies, any changes to an existing TRA liability, including changes to the fair value measurement or to re-establish a TRA liability related to prior year exchanges, will be recorded as tax receivable agreement in other income (expense), net in the condensed consolidated statement of operations. Similarly, if utilization of the deferred tax assets subject to the TRA becomes more likely than not in the future, the Company will record a liability related to the TRA which will be recorded in the condensed consolidated statement of operations. See Note 13 – Related Party Transactions.

 ****

 ****

***New Accounting Pronouncements***

 

*Recently Adopted Accounting Pronouncements* 

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting-Improvements to Reportable Segment Disclosures (Topic 280) ("ASU 2023-07"), which requires an enhanced disclosure of segments on an annual and interim basis, including the title of the chief operating decision maker, significant segment expenses, and the composition of other segment items for each segment's reported profit or loss. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The adoption of ASU 2023-07 did not have a material impact on the condensed consolidated financial statements. Refer to Note 17, Segment Reporting.

 

*Recently Issued Accounting Pronouncements Not Yet Adopted*

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740) - Improvements to income tax disclosures ("ASU 2023-09"), expanding the disclosures requirement for income taxes primarily by requiring more detailed disclosure for income taxes paid and the effective tax rate reconciliation. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. Early adoption is permitted, and adoption of ASU 2023-09 can be applied prospectively or retrospectively. The Company is currently evaluating the impact of this standard.

In November 2024, the FASB issued ASU 2024-03, "*Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):Disaggregation of Income Statement Expenses*" ("ASU 2024-03"). The standard requires additional disclosure of certain costs and expenses within the notes to the financial statements. The provisions of the standard are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. This accounting standards update may be applied either prospectively or retrospectively. The Company is currently evaluating the impact this standard will have on its condensed consolidated financial statements.

**NOTE 4 - REVERSE RECAPITALIZATION**

As discussed in Note 1, "Organization and Business Operation", the ESGEN Business Combination was consummated on March 13, 2024, which, for accounting purposes, was treated as the equivalent of Zeo issuing stock for the net assets of ESGEN, accompanied by recapitalization. Under this method of accounting, ESGEN was treated as the acquired company for financial accounting and reporting purposes under US GAAP.

 

*Transaction Proceeds*

Upon closing of the ESGEN Business Combination, the Company received gross proceeds of $17.7 million from the ESGEN Business Combination, offset by total transaction costs and other fees totaling $7.4 million. The following table reconciles the elements of the ESGEN Business Combination to the condensed consolidated statements of cash flows and the condensed consolidated statements of changes in stockholders' deficit for the period ended March 31, 2024:

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| | |
|:---|:---|
| Cash-trust and cash, net of redemptions | $2714091 |
| Less: transaction costs, promissory note and professional fees, paid | (7350088) |
| Proceeds from Sponsor PIPE Investment | 15000000 |
| Net proceeds from the ESGEN Business Combination | 10364003 |
| Less: liabilities assumed | (12861808) |
| Reverse recapitalization, net | $**(2497805)** |

---

The number of shares of Common Stock issued immediately following the consummation of the ESGEN Business Combination was:

---

| | | |
|:---|:---|:---|
|  | **Class V Common Stock** | **Class A Common Stock** |
| ESGEN Class A common stock, outstanding prior to the ESGEN Business Combination | - | 7027636 |
| Forfeiture of Class A founder shares | - | (2900000) |
| Less redemptions | - | (1159976) |
| Class A common stock of ESGEN | - | 2967660 |
| ESGEN Class B common stock, outstanding prior to the ESGEN Business Combination | - | 1280923 |
| **ESGEN Business Combination shares** | **-**  | **4248583** |
| Sunergy Shares | 33730000 | - |
| Issuance of Class A Shares to third party advisors | - | 553207 |
| Issuance of Class A Shares to backstop investor | - | 225174 |
| Shares issued to sponsor | 1500000 | - |
| **Common Stock immediately after the ESGEN Business Combination** | **35230000** | **5026964** |

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*Public and private placement warrants*

The 13,800,000 Public Warrants issued at the time of ESGEN's initial public offering remained outstanding and became warrants for the Company and the 14,040,000 private placement warrants were forfeited.

 

*Redemption*

Prior to the closing of the ESGEN Business Combination, certain ESGEN public stockholders exercised their right to redeem certain of their outstanding shares for cash, resulting in the redemption of 1,159,976 shares of ESGEN Class A common stock for an aggregate payment from the Trust of $13,336,056.

**NOTE 5 - PROPERTY, EQUIPMENT, AND OTHER FIXED ASSETS**

Property, equipment and other fixed assets, net consisted of the following:

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| | | |
|:---|:---|:---|
|  | **As of<br> March 31,**<br>**2025** | **As of<br> December 31,**<br>**2024** |
| Internally-developed software | $1360803 | $988225 |
| Furniture | 384368 | 384368 |
| Equipment and vehicles | 2477034 | 2477034 |
| Leasehold improvements | 10000 | 10000 |
| Property and equipment | 4232205 | 3859627 |
| Accumulated depreciation | (1602922) | (1383664) |
|  | $2629283 | $2475963 |

---

Depreciation expense related to the Company's property and equipment was $219,258 and $168,403 for the three months ended March 31, 2025, and 2024, respectively, which are included in depreciation and amortization expense on the accompanying condensed consolidated statements of operations.

 **NOTE 6 - INTANGIBLE ASSETS**

The following is a summary of the Company's intangible assets, net as of March 31, 2025 and December 31, 2024:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | | **March 31, 2025** | **March 31, 2025** | **March 31, 2025** |
|  | **Weighted**<br>**Average Useful<br> Life Remaining**<br>**(in years)** | **Gross Carrying**<br>**Amount** | **Accumulated**<br>**Amortization** |<br>**Total** |
| Trade names |  | $3084100 | $3084100 | $- |
| Customer lists |  | 496800 | 496800 | - |
| Non-compete |  | 224000 | 224000 | - |
| Order backlog | 0.6 | 10808821 | 7870017 | 2938804 |
|  |  | $14613721 | 11674917 | $2938804 |

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| | | | | |
|:---|:---|:---|:---|:---|
|  | | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** |
|  | **Weighted**<br>**Average Useful<br> Life Remaining**<br>**(in years)** | **Gross Carrying**<br>**Amount** | **Accumulated**<br>**Amortization** |<br>**Total** |
| Trade names |  | $3084100 | $3084100 | $- |
| Customer lists |  | 496800 | 496800 | - |
| Non-compete |  | 224000 | 224000 | - |
| Order backlog | 0.6 | 10808821 | 3237665 | 7571156 |
|  |  | $14613721 | 7042565 | $7571156 |

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The Company periodically reviews the estimated useful lives of its identifiable intangible assets, taking into consideration any events or circumstances that might result in either a diminished fair value or revised useful life. Management has determined there have been no indicators of impairment or change in useful life for the three months ended March 31, 2025, and 2024. Amortization expense relating to the Company's intangible assets was $4,632,352 and $257,008 for the three months ended March 31, 2025, and 2024, respectively, which is included in depreciation and amortization expenses on the accompanying condensed consolidated statements of operations.

As of March 31, 2025, all of the intangible asset for order backlog will be amortized in 2025.

**NOTE 7 - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES**

The following table summarizes accrued expenses and other current liabilities:

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| | | |
|:---|:---|:---|
|  | **March 31,**<br>**2025** | **December 31,**<br>**2024** |
| Accrued payroll | 537214 | 421825 |
| Accrued commissions | 106616 | 290969 |
| Accrued dealer fees | 1670544 | 3359101 |
| Accrued interest | 72997 | 84425 |
| Transaction costs | 2208288 | 3208288 |
| Taxes payable | 532400 | - |
| Professional fees | 383114 | 383114 |
| Accrued Other | 524821 | 792466 |
|  | $6035994 | $8540188 |

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**NOTE 8 - LEASES**

The Company leases both office space and warehouse space for its operations. Lease maturities vary from 2 to 5 years. These leases are recorded as operating leases and as such periodic payments (monthly) are expensed according to the period for which payment is made.

Operating lease costs recorded in general and administrative expenses in the condensed consolidated statements of operations were $196,574 and $163,965 for the three months ended March 31, 2025, and 2024, respectively.

The Company also leases multiple vehicles for its operations. The leases on vehicles generally have a 5-year term and are recorded as finance leases.

Finance lease costs recorded in depreciation and amortization in the condensed consolidated statements of operations were $34,119 and $34,118 for the three months ended March 31, 2025, and 2024, respectively. Finance lease costs recorded in interest expense in the condensed consolidated statements of operations were $11,174 and $14,332 for the three months ended March 31, 2025, and 2024, respectively.

The following amounts were recorded in the Company's condensed consolidated balance sheets relating to its operating and finance lease and other supplemental information:

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| | | |
|:---|:---|:---|
| **Other supplemental information:** | | |
| Weighted average remaining lease term (years) |  |  |
| &nbsp;&nbsp;&nbsp;Operating leases | 2.25 | 2.39 |
| &nbsp;&nbsp;&nbsp;Finance leases | 3.03 | 3.28 |
| Weighted average discount rate |  |  |
| &nbsp;&nbsp;&nbsp;Operating leases | 5.03% | 4.97% |
| &nbsp;&nbsp;&nbsp;Finance leases | 9.76% | 9.76% |

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The following tables present the maturity of operating and finance lease liabilities as of December 31, 2024:

<u>Operating leases</u>

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| | |
|:---|:---|
| **Years** | **Operating Leases** |
| 2025 | 455442 |
| 2026 | 572098 |
| 2027 | 200061 |
| 2028 | 58565 |
| Total lease payments | 1286166 |
| Less interest | 68203 |
| Present value of lease liabilities | 1217963 |

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<u>Finance leases</u>

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| | |
|:---|:---|
| <br>**Years** | **Finance Leases** |
| 2025 | 128607 |
| 2026 | 171476 |
| 2027 | 171476 |
| 2028 | 47607 |
| Total lease payments | 519166 |
| Less interest | 71591 |
| Present value of lease liabilities | 447575 |

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The Company has deposited security payments related to the facility leases of $75,135 included in the accompanying condensed consolidated balance sheets as other assets.

**NOTE 9 - DEBT**

*Vehicle Loans*

The Company has financing arrangements for many of the vehicles in its fleet. The financing includes direct loans for each vehicle being financed. The Company entered into new vehicle financing arrangements totaling $0 and $311,029 for the three months ended March 31, 2025, and 2024, respectively. Payments of debt obligations are based on equal monthly payments for 60 months and include interest rates ranging from 4.94% - 11.09%. As of March 31, 2025, the weighted average interest rate on the Company's short debt obligations was 6.75%. The combined amounts of these financial obligations are included in the condensed consolidated balance sheets as current portion of long-term debt and Long-term debt. The Company does not have debt covenants associated with these arrangements.

The following table presents the maturity analysis of the long-term debt as of March 31, 2025:

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| | |
|:---|:---|
| **Years** | |
| 2025 | $223745 |
| 2026 | 299254 |
| 2027 | 135976 |
| 2028 | 56384 |
| Total debt | 715359 |
| Less current portion | 301091 |
| Long-term debt | $414268 |

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*Notes payable*

On December 24, 2024 (the "Issue Date"), the Company, issued a Promissory Note (the "Promissory Note") to LHX Intermediate LLC ("LHX"), pursuant to which the Company could borrow up to an aggregate principal amount of $4,000,000 (the "Loan"). Subject to the terms and conditions set forth in the Promissory Note, the Loan shall be provided to the Company in three tranches: (i) $2,500,000 upon execution of the Promissory Note (the "Initial Advance"), (ii) $750,000 if the Company achieves the Tranche 2 Milestone within 60 days from the Initial Advance (the "Tranche 2 Advance") and (iii) $750,000 if the Company achieves the Tranche 3 Milestone within 60 days from the Tranche 2 Advance. "Tranche 2 Milestone" means the submission by the Company to the applicable regulatory bodies at least 340 permits to install solar energy systems sold through the Company's year-round sales program. "Tranche 3 Milestone" means the completion by the Company of the installation of at least 296 solar energy systems sold through the Company's year-round sales program." LHX may also waive any milestone described above and advance the applicable amounts to the Company. As of March 31, 2025, $2.5 million has been advanced and the balance of $2.5 million, net of debt discount is included in Convertible Promissory Note on the accompanying condensed consolidated balance sheet. On April 15, 2025, the Promissory Note was amended with the result that the Tranche 2 Advance would be delivered if a Tranche 2 Milestone is met within 120 days of the Initial Advance, and the Tranche 3 Advance would be delivered if a Tranche 3 Milestone is met within 120 days of the Tranche 2 Advance.

No interest shall be charged or accrue on the balance outstanding on the loan. The Loan will be repaid in full (the "Repayment") by issuing to LHX or its designee of a number of the Company's shares of Class A common stock ("Class A Common Stock") equal to the quotient of (i) the outstanding and unpaid amount of the Loan, divided by (ii) $1.35 (the "Share Issuance"). The Repayment shall take place immediately following the later of: (x) the day falling on the first anniversary of the Issue Date (or the immediately previous business day) and (y) the date on which the stockholders of the Company approve the Share Issuance. Due to this provision, the Company considered whether the embedded conversion option qualifies for derivative accounting under ASC 815-15 "Derivatives and Hedging." As the note is not convertible until maturity, no derivative liability was recognized as of March 31, 2025. Based on the Company's stock price on the date the note was entered into, the computed effective interest rate on the loan was 58.0%. Based on the Company's stock price at March 31, 2025, the computed effective interest rate on the loan was 11.9%.

In connection with the Promissory Note, on December 24, 2024, LHX entered into a voting agreement with the Company and certain stockholders of the Company (the "LHX Voting Agreement"), pursuant to which such stockholders agreed to vote (or cause to be voted), in person or by proxy, all the shares of Class A Common Stock and Class V common stock owned by such stockholders (i) in favor of the nomination and appointment of LHX's designee to the board of directors of the Company (ii) in favor of the issuance by the Company to LHX of shares of Class A Common Stock in connection with an option that may be granted to LHX to purchase up to 4,000,000 shares of Class A Common Stock, subject to the terms and conditions therein and (iii) in favor of the Share Issuance, when required pursuant to the Promissory Note.

**NOTE 10 - REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY**

 

*ESGEN Business Combination*

The condensed consolidated statements of changes in stockholders' deficit reflect the reverse recapitalization and ESGEN Business Combination as described in Note 1 – Organization and Business Operation and Note 4 – Reverse Recapitalization. As Sunergy was deemed to be the accounting acquirer in the ESGEN Business Combination, all periods prior to the consummation of the ESGEN Business Combination reflect the balances and activity of Sunergy Renewables, LLC. The condensed consolidated balances as of December 31, 2023 from the financial statements of Sunergy Renewables, LLC as of that date and membership unit activity in the condensed consolidated statements of change in stockholders' equity, prior to the consummation of the ESGEN Business Combination have not been retroactively adjusted.

Upon consummation of the ESGEN Business Combination, the Company's capital stock consisted of (i) 3,257,436 shares of Class A Common Stock held by the Sponsor, (ii) 1,026,960 shares of Class A Common Stock issued to public stockholders, net of redemptions as well as certain service providers, (iii) 742,568 shares of Class A Common Stock issued to Sunergy Renewables, LLC initial Stockholders other than Sponsor, (iv) 32,230,000 shares of Class V Common Stock issued to Sun Managers and other prior investors of Sunergy; and (v) 1,500,000 shares of Series A Preferred Stock and 1,500,000 shares of Class V Common Stock issued to Sponsor investors pursuant to the Sponsor PIPE Investment.

 

 

*Private Placement*

As described in Note 1- Organization and Business Operation, pursuant to the Sponsor Subscription Agreement, at the Closing, a total of 1,500,000 Convertible OpCo Preferred Units (including an equal number of shares of the Company's Class V Common Stock) were issued to the Sponsor in return for aggregate consideration of $15,000,000.

 

*Lock-Up Agreements*

Concurrently with the execution of the ESGEN Business Combination Agreement, on April 19, 2023, the Sponsor, ESGEN's independent directors at the time of its initial public offering ("IPO") and one or more client accounts of Westwood Group Holdings, Inc. (successor to Salient Capital Advisors, LLC) (the "Westwood Client Accounts" and, together with the Sponsor and certain independent directors of ESGEN, the "Initial Shareholders"), entered into an amendment to that certain Letter Agreement, dated as of October 22, 2021 (the "Letter Agreement") (and as further amended on January 24, 2024, the "Letter Agreement Amendment"), pursuant to which, among other things, (i) the Initial Shareholders agreed not to transfer his, her or its ESGEN Class B ordinary shares (or the Class A Common Stock) prior to the earlier of (a) six months after the Closing or (b) subsequent to the Closing (A) if the last sale price of the Zeo Class A Common Stock quoted on Nasdaq is greater than or equal to $12 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-consecutive trading day period commencing at least 90 days after Closing, or (B) the date on which Zeo completes a liquidation, merger, share exchange or other similar transaction that results in all of Zeo's stockholders having the right to exchange their Zeo Class A Common Stock for cash, securities or other property; and (ii) the Initial Shareholders and Sponsor agreed to forfeit an additional 500,000 shares of Zeo Class A Common Stock if, within two years of Closing, the Convertible OpCo Preferred Units are redeemed or converted (with such shares subject to a lock-up for two years after Closing).

On March 13, 2024, concurrently with the Closing, the Sellers entered into the Lock-Up Agreement, pursuant to which each of the Sellers agreed not to transfer its Exchangeable OpCo Units, as defined below, and corresponding shares of Zeo Class V Common Stock received in connection with the ESGEN Business Combination until the earlier of (i) six months after the Closing and (ii) subsequent to the Closing, (a) satisfaction of the Early Lock-Up Termination or (b) the date on which Zeo completes a PubCo Sale (as defined in the Lock-Up Agreement).

 

*Registration Rights*

Also concurrent with the Closing, on March 13, 2024, the Sellers, the Initial Shareholders, Piper (the "New PubCo Holders") and Zeo entered into the Amended and Restated Registration Rights Agreement (the "A&R Registration Rights Agreement"), pursuant to which, among other things, Zeo will provide the stockholders certain registration rights with respect to certain shares of Class A Common Stock held by them or otherwise issuable to them pursuant to the ESGEN Business Combination Agreement, the OpCo A&R LLC Agreement (as defined below) or the Company's certificate of incorporation filed on March 13, 2024 (the "Zeo Charter").

The table below reflects share information about the Company's capital stock as of March 31, 2025.

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Par Value** | **Authorized** | **Issued** | **Treasury Stock** | **Outstanding** |
| Class A Common Stock | $0.0001 | 300000000 | 21796464 |  | 21796464 |
| Class V Common Stock | $0.0001 | 100000000 | 26730000 |  | 26730000 |
| Class A convertible preferred units | $0.0001 | 1500000 | 1500000 |  | 1500000 |
| &nbsp;&nbsp;&nbsp;Total shares |  | 401500000 | 50026464 |  | 50026464 |

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The table below reflects share information about the Company's capital stock as of December 31, 2024.

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Par Value** | **Authorized** | **Issued** | **Treasury <br> Stock** | **Outstanding** |
| Class A Common Stock | $0.0001 | 300000000 | 13252964 |  | 13252964 |
| Class V Common Stock | $0.0001 | 100000000 | 35230000 |  | 35230000 |
| Class A convertible preferred units | $0.0001 | 1500000 | 1500000 |  | 1500000 |
| &nbsp;&nbsp;&nbsp;Total shares |  | 401500000 | 49982964 |  | 49982964 |

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*Class A Common Stock*

Each holder of Class A Common Stock is entitled to one vote for each share of Class A Common Stock held of record in person or by proxy on all matters which stockholders generally are entitled to vote, except that, in each case, to the fullest extent permitted by law, each holder has no voting power with respect to, and will not be entitled to vote on, any amendment to its Certificate of Incorporation (including any certificate of designations relating to any series of Preferred Stock) that relates solely to the terms of any outstanding Preferred Stock if the holders of such Preferred Stock are entitled to vote as a separate class thereon (including any certificate of designations relating to any series of Preferred Stock) or under the General Corporation Law of the State of Delaware (the "<u>DGCL</u>"). The holders of the outstanding shares of Class A Common Stock shall be entitled to vote separately upon any amendment to its Certificate of Incorporation (including by merger, consolidation, reorganization or similar event) that would alter or change the powers, preferences or special rights of such class of Common Stock in a manner that is disproportionately adverse as compared to the Class V Common Stock. Except as otherwise required in its Certificate of Incorporation or by applicable law, the holders of Common Stock will vote together as a single class on all matters (or, if any holders of Preferred Stock are entitled to vote together with the holders of Common Stock, as a single class with the holders of Preferred Stock).

Class A Common Stockholders have rights to the economics of the Company and to receive dividend distributions, subject to applicable laws and the rights and preferences of holders of Series A Preferred Stock or any other series of stock having preference over or participation rights with Class A Common Stock. In the event of liquidation, dissolution or winding up of the affairs of Company, Class A Common Stock has rights to assets and funds of the Company available for distribution after making provisions for preferential and other amounts to the holders of Series A Preferred Stock or any other series of stock having preference over or participation rights with Class A Common Stock.

*Class V Common Stock*

Each holder of Class V Common Stock is entitled to one vote for each share of Class V Common Stock held of record in person or by proxy on all matters which stockholders generally are entitled to vote, except that, in each case, to the fullest extent permitted by law, each holder has no voting power with respect to, and will not be entitled to vote on, any amendment to its Certificate of Incorporation (including any certificate of designations relating to any series of Preferred Stock) that relates solely to the terms of any outstanding Preferred Stock if the holders of such Preferred Stock are entitled to vote as a separate class thereon (including any certificate of designations relating to any series of Preferred Stock) or under the DGCL. The holders of the outstanding shares of Class V Common Stock are entitled to vote separately upon any amendment to its Certificate of Incorporation (including by merger, consolidation, reorganization or similar event) that would alter or change the powers, preferences or special rights of such class of Common Stock in a manner that is disproportionately adverse as compared to the Class A Common Stock. Except as otherwise required in its Certificate of Incorporation or by applicable law, the holders of Common Stock will vote together as a single class on all matters (or, if any holders of Preferred Stock are entitled to vote together with the holders of Common Stock, as a single class with the holders of Preferred Stock).

Class V Common Stockholders do not have rights to the economics of the Company nor to receive dividend distributions, and would not be entitled to receive, with respect to such shares, any assets of the Corporation, in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation.

On March 31, 2025, 8,500,000 shares of Class V Common Stock were converted into 8,500,000 Class A Common Stock.

 

*Class A Convertible Preferred Units (Mezzanine Equity)*

The Class A Convertible Preferred Unitholders have no voting rights and only have certain consent rights. However, as outlined above, the Preferred Units were issued in conjunction with Class V Common Stock, which entitle the holders to voting rights. The Class A Convertible Preferred Unitholders are to be paid dividends, quarterly in arrears at the rate of 10% per annum of the original price per share, plus the amount of previously accrued, but unpaid dividends, compounded monthly On each Dividend Payment Date, the Company must: (i) pay the Sponsor an amount equal to 30% of the Preferred Unit Dividends that have accrued for such Dividend Period (or portion of a Dividend Period, as applicable) and (ii) may elect to either (A) pay the remainder of the Preferred Unit Dividends that have accrued for the applicable Dividend Period in cash or (B) to the extent the remaining portion of any such Preferred Unit Dividends are not paid on the Dividend Payment Date in cash, the remaining portion of the Preferred Unit Dividends will continue to accrue and compound, as described above.

Following the first anniversary of the date on which the first Class A Convertible Preferred Unit was issued (the "Class A Convertible Preferred Unit Original Issue Date") and continuing until the earlier of (A) March 13, 2027, the "Maturity Date," (B) a Required Redemption (as described in the OpCo A&R LLC Agreement), (C) the date the Sponsor elects for a Put Option Redemption, or (D) a Transaction Event Conversion (as described in the OpCo A&R LLC Agreement) , the Sponsor has the option to convert all, but not less than all, of the outstanding Class A Convertible Preferred Units into such number of Class B Units (an "<u>Optional</u> Conversion") as is determined by dividing the Class A Convertible Preferred Unit Original Issue Price plus the aggregate accumulated and unpaid Class A Convertible Preferred Unit Accruing Dividends with respect to such Class A Convertible Preferred Units, if any, through the date the conversion occurs, by $11.00 (the "<u>Optional Conversion Price</u>"). The Sponsor must elect to convert all, but not less than all, of the outstanding Class A Convertible Preferred Units.

Each Class A Convertible Preferred Unit that is outstanding on the Maturity Date will be converted into such number of Class B Units (a "<u>Maturity Date Conversion</u>") as is determined by dividing the Class A Convertible Preferred Unit Original Issue Price plus the aggregate accumulated and unpaid Class A Convertible Preferred Unit Accruing Dividends with respect to such Class A Convertible Preferred Units, if any, through and until the Maturity Date, by the Market Price (the "<u>Maturity Date Conversion Price</u>"). The "<u>Market Price</u>" shall mean the average of the daily VWAP of the Class A Common Stock during the five (5) Trading Days prior to the Maturity Date. The "<u>VWAP</u>" means, for any Trading Day, the per share daily volume weighted average price of the Class A Common Stock for such Trading Day on the principal trading exchange or market for the Common Stock (the "<u>Principal Market</u>") from 9:30 a.m. Eastern Time through 4:00 p.m. Eastern Time (the "<u>Measurement Period</u>") or, if such price is not available, "<u>VWAP</u>" shall mean the market value per share of Class A Common Stock on such Trading Day as determined, using a volume-weighted average method, by an independent investment banking firm or other similar party chosen by the Company. A "<u>Trading Day</u>" means any days during the course of which the Principal Market on which the Class A Common Stock is listed or admitted to trading is open for the exchange of securities.

If, after the Class A Convertible Preferred Unit Original Issue Date, the Company (i) makes a distribution on its Class B Units in securities (including Class B Units), (ii) subdivides or splits its outstanding Class B Units into a greater number of Class B Units, (iii) combines or reclassifies its Class B Units into a smaller number of Class B Units or (iv) issues by reclassification of its Class B Units any securities (including any reclassification in connection with a merger, consolidation or business combination in which the Company is the surviving person), then the Conversion Price in effect at the time of the record date for such distribution or of the effective date of such subdivision, split, combination, or reclassification shall be proportionately adjusted so that the Conversion of the Class A Convertible Preferred Units after such time shall entitle the Sponsor to receive the aggregate number of Class B Units that such holder would have been entitled to receive if the Class A Convertible Preferred Units had been converted into Class B Units immediately prior to such record date or effective date, as the case may be. An adjustment made pursuant to the applicable section of the OpCo A&R LLC Agreement shall become effective immediately after the record date in the case of a distribution and shall become effective immediately after the effective date in the case of a subdivision, combination, reclassification (including any reclassification in connection with a merger, consolidation or business combination in which the Company is the surviving person) or split. Such adjustment shall be made successively whenever any event described above shall occur. The Company and the ESGEN OpCo, LLC, as the case may be, agree that it will act in good faith to make any adjustment(s) required by the applicable sections of the OpCo A&R LLC Agreement equitably and in such a manner as to afford the Sponsor the benefits of the provisions hereof, and will not intentionally take any action to deprive such holders of the express benefit hereof.

<u>Redemption</u>

The Class A Convertible Preferred Units are redeemable in whole but not in part, at the then-applicable rate of return (" Required Return"), at the option of the Company (subject to the OpCo A&R LLC Agreement<u>)</u>, at any time prior to the Maturity Date (a **"**<u>Required Redemption</u>"), or (ii) if required by the Company upon the Sponsor's delivery to the Company of a notice in accordance with the Sponsor electing a Put Option Redemption.

Upon the occurrence of a Liquidating Event (as defined in the OpCo A&R LLC Agreement), the Preferred Units will be entitled to distributions as follows:

● Following the satisfaction of all of the Company's debts and liabilities to creditors, and the satisfaction of all of the Company's Liabilities to Members in satisfaction of liabilities for previously declared distributions, the Sponsor is entitled to an amount equal to the then-remaining Required Return with respect to each Preferred Unit then outstanding (the "Liquidation Redemption").

● The Sponsor does not participate in further distributions following the receipt of the Required Return (i.e., the Preferred Units are non-participating instruments).Upon any liquidation or deemed liquidation event, the holders of Class A Convertible Preferred Units will be entitled to receive out of the available proceeds, before any distribution is made to holders of Common Stock or any other junior securities, an amount per share equal to the greater of (i) 100% of the Accrued Value (as defined in the Certificate of Designation) or (ii) such amount per share as would have been payable had all shares of Series A Preferred Stock been converted into Class A Common Stock immediately prior to the liquidation event.

*Redeemable Noncontrolling Interests*

As of March 31, 2025, the prior investors of Sunergy own 71.8% of the common units of the Company. The OpCo A&R LLC Agreement provides among other things, a holder of corresponding economic, non-voting Class B units of OpCo (the "Exchangeable OpCo Units") has the right to cause OpCo to redeem one or more of such Exchangeable OpCo Units, together with the cancellation of an equal number of shares of such holder's Zeo Class V Common Stock, for shares of Zeo Class A Common Stock on a one-for-one basis, or, at the election of Zeo (as manager of OpCo), cash, in each case, subject to certain restrictions set forth in the OpCo A&R LLC Agreement and the Charter. The OpCo A&R LLC Agreement also provides for mandatory OpCo Unit Redemptions in certain limited circumstances, including in connection with certain changes of control. Subject to certain conditions, the Class A Convertible OpCo Preferred Units are redeemable by Zeo and following the first anniversary of the Closing may be converted by the Sponsor into Exchangeable OpCo Units (and then would be immediately exchanged on a one-for-one basis, together with an equal number of accompanying shares of Zeo Class V Common Stock, for shares Zeo Class A Common Stock). The Convertible OpCo Preferred Units have accruing distributions of 10% per annum and the Sponsor as holder thereof has certain consent rights over the taking of certain actions of OpCo and its subsidiaries.

The financial results of OpCo, LLC are consolidated with the Company with the redeemable noncontrolling interests' share of our net loss separately allocated.

**NOTE 11 - STOCK-BASED COMPENSATION**

<u>2024 Omnibus Incentive Plan</u>

On March 6, 2024, the shareholders of ESGEN approved the Zeo Energy Corp. 2024 Omnibus Incentive Equity Plan (the "Incentive Plan"), which became effective upon the Closing. 3,220,400 of the outstanding shares of Class A Common Stock of the Company (the "Plan Share Reserve") shall be available for awards under the Incentive Plan. Each Award granted under the Plan will reduce the Plan Share Reserve by the number of shares of Common Stock underlying the Award. Notwithstanding the foregoing, the Plan Share Reserve shall be automatically increased on the first day of the 2025 fiscal year through the 2029 fiscal year by a number of shares of Common Stock equal to the lesser of (i) the positive difference, if any, between 2% of the then-outstanding shares of Common Stock on the last day of the immediately preceding fiscal year, and (ii) a lower number of shares of Common Stock as may be determined by the Board.

The purpose of the Incentive Plan is to provide a means through which the Company and the other members of the Company and its subsidiaries (the "Company Group") may attract and retain key personnel and to provide a means whereby directors, officers, employees, consultants and advisors of the Company and the other members of the Company Group can acquire and maintain an equity interest in the Company, or be paid incentive compensation measured by reference to the value of Common Stock, thereby strengthening their commitment to the welfare of the Company Group and aligning their interests with those of the Company's stockholders.

 

 

*March 2024 Grant*

On the Closing Date the Company entered into an Executive Employment Agreement with the Company's CEO. In addition to the CEO's annual salary and cash bonus, the CEO became eligible to receive certain grants of vested shares under the Incentive Plan as follows:

● 50,000 vested shares to be granted on the date that is 12 months after the Closing Date.

● 50,000 vested shares to be granted on the date that is 24 months after the Closing Date.; and

● 50,000 vested shares to be granted on the date that is 35 months after the after the Closing Date.

The Company determined the grant date fair value per share was $6.97, a Level 1 measurement, by reference to the publicly traded stock price on March 13, 2024.

Further, if, within three (3) years of the effective date of the Closing, (i) the volume-weighted average price of shares of the publicly traded stock of the Company exceeds $7.50 for 20 or more days of any consecutive 30-day period, then the CEO will be granted vested equity from the Incentive Plan equal to 1% of the total issued and outstanding capital stock of the Company, (ii) the volume-weighted average price of shares of the publicly traded stock of the Company exceeds $12.50 for 20 or more days of any consecutive 30-day period, then the CEO will be granted additional vested equity from the Incentive Plan equal to 1% of the total issued and outstanding capital stock of the Company, (iii) and the volume-weighted average price of shares of the publicly traded stock of the Company exceeds $15.00 for 20 or more days of any consecutive 30-day period, then the CEO will be granted additional vested equity from the Incentive Plan equal to 1% of the total issued and outstanding capital stock of the Company.

The per unit fair value and derived service period for each Tranche of Performance Based Executive Shares is included in the Valuation of Performance-based Equity Bonus Awards as of March 13, 2024, as follows:

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| | | | |
|:---|:---|:---|:---|
| **Fair Value Summary** | **Tranche 1** | **Tranche 2** | **Tranche 3** |
| Tranche per unit fair value | $5.96 | $4.53 | $3.82 |
| Stock price on valuation date | $6.97 | $6.97 | $6.97 |
| Derived service period | 0.35 years | 1.19 years | 1.47 years |

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During the three months ended March 31, 2025, the Company recognized $718,674 in equity compensation expense related to these awards. As of March 31, 2025, the remaining unrecognized compensation expense was $1,340,614 under the Incentive Plan and is expected to be recognized over the remaining 1.9-year vesting period.

*<u>February 2025 Grants</u>*

On February 5, 2025, the Company granted an aggregate of 740,000 restricted shares of Class A Common Stock under the Incentive Plan to 11 employees/consultants. The restricted shares vest in three equal installments as follows.

● One-third (1/3) on the date that is six months following the grant date;

● One-third (1/3) on the date that is 18 months following the grant date; and

● One-third (1/3) on the date that is 30 months following the grant date.

On February 5, 2025, the Company granted an aggregate of 250,000 restricted shares of Class A Common Stock under the Incentive Plan to seven employees/consultants. The restricted shares vest in three equal installments as follows.

● One-third (1/3) on the date that is 12 months following the grant date;

● One-third (1/3) on the date that is 24 months following the grant date; and

● One-third (1/3) on the date that is 36 months following the grant date.

The Company determined the grant date fair value per share was $2.57, a Level 1 measurement, by reference to the publicly traded stock price on February 5, 2025.

During the three months ended March 31, 2025, the Company recognized $189,499 in equity compensation expense related to these awards. As of March 31, 2025, the remaining unrecognized compensation expense was $2,354,801 and is expected to be recognized over the remaining 2.9-year vesting period.

*<u>Sun Managers, LLC Management Incentive Plan</u>*

Sun Managers intends to grant Class B Units (as defined in the SM LLCA) in Sun Managers through the Sun Managers, LLC Management Incentive Plan (the "Management Incentive Plan") adopted by Sun Managers to certain eligible employees or service providers of OpCo, Sunergy or their subsidiaries, in the discretion of Timothy Bridgewater, as manager of Sun Managers. Such Class B Units may be subject to a vesting schedule, and once such Class B Units become vested, there may be an exchange opportunity through which the grantees may request (subject to the terms of the Management Incentive Plan and the OpCo amended and restated limited liability company agreement in its entirely (the "OpCo A&R LLC Agreement")) the exchange of their Class B Units into Seller OpCo Units (together with an equal number of Seller Class V Shares), which may then be converted into Zeo Class A Common Stock (subject to the terms of the Management Incentive Plan and the OpCo A&R LLC Agreement). Grants under the Management Incentive Plan will be made after ESGEN Closing.

Although Sun Managers is the legal issuer of the awards, all compensatory payments made by Sun Managers to individuals providing services to or for the benefit of the Company or its subsidiaries (including equity interests in Sun Managers) are treated as compensation paid by the Company under *ASC 718*. In accordance with the OpCo A&R LLCA, the Company allocates 100% of all related expense and deduction items to Sun Managers. These compensatory payments are accounted for as capital contributions from Sun Managers to the Company, with no new equity units issued in return.

On March 31, 2025, Sun Managers LLC granted an aggregate of 525,000 restricted shares of Zeo Class A Common Stock under the Management Incentive Plan to four employees/consultants. The restricted shares vested immediately upon grant. During the three months ended March 31, 2025, the Company recognized $792,750 in equity compensation expense related to these awards.

 

*<u>Seasonal Manager Stock Compensation Plan</u>*

Beginning January 1, 2025, certain eligible sales managers may earn shares of the Company's Class A Common Stock under the Seasonal Manager Stock Compensation Plan, which operates under the umbrella of the Management Incentive Plan. Managers are eligible to earn 40 shares per kW installed for Projects sold by the manager's organization, provided they exceed 1,500 kW installed during a calendar year, and as long as the manager sells 700kW the subsequent calendar year. The number of shares awarded may be reduced if the average price for Zeo stock during the quarter in which an Installations are completed exceeds $5 per share, the number of shares granted per kW will be correspondingly decreased.

The managers become eligible to receive certain grants of vested shares under the Seasonal Manager Stock Compensation Plan as follows:

● 50% of the shares for which Manager becomes eligible during a calendar year will be granted in Q1 (prior to the end of March) of the following calendar year (the "Tranche 1 Grant") if Manager remains eligible at the time of the grant.

● The remaining 50% of the shares for which Manager becomes eligible during a calendar year are granted in the Q1 of the second year following the calendar year in which eligibility is earned (the "Tranche 2 Grant") if Manager remains eligible at the time of the grant.

On March 31, 2025, Sun Managers LLC granted an aggregate of 577,910 restricted shares of Zeo Class A Common Stock under the Management Incentive Plan to 10 sales managers. The restricted shares vest in two equal installments as follows.

● One-half (1/2) immediately on the grant date; and

● One-half (1/2) on the date that is 12 months following the grant date.

During the three months ended March 31, 2025, the Company recognized $436,323 in equity compensation expense related to these awards. As of March 31, 2025, the remaining unrecognized compensation expense of $436,323 and is expected to be recognized over the remaining one-year vesting period.

**NOTE 12 - WARRANT LIABILITIES**

As part of ESGEN's IPO, as defined in Note 11, ESGEN issued warrants to third-party investors where each whole warrant entitles the holder to purchase one share of the Company's common stock at an exercise price of $11.50 per share (the "Public Warrants"). Simultaneously with the closing of the IPO, ESGEN completed the private sale of warrants where each warrant allows the holder to purchase one share of the Company's Class A Common Stock at $11.50 per share (the "Private Warrants")(together with the Public warrants, the "Warrants"). Upon the closing of the ESGEN Business Combination the 14,040,000 Private Warrants were forfeited. As of March 31, 2025 and December 31, 2024, there are 13,800,000 Public Warrants and no private placement warrants outstanding.

These warrants expire on the fifth anniversary of the ESGEN Business Combination or earlier upon redemption or liquidation and are exercisable commencing 30 days after the ESGEN Business Combination, provided that the Company has an effective registration statement under the Securities Act covering the shares of common stock issuable upon exercise of the warrants and a current prospectus relating to them is available (or the Company permits holders to exercise their warrants on a cashless basis under the circumstances specified in the warrant agreement) and registered, qualified or exempt from registration under the securities, or blue sky, laws of the state of residence of the holder.

Once the warrants become exercisable, the Company may redeem the outstanding warrants:

● in whole and not in part;

● at a price of $0.01 per warrant;

● upon not less than 30 days' prior written notice of redemption given after the warrants become exercisable to each warrant holder; and

● if, and only if, the reported last sale price of the Class A Common Stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period commencing once the warrants become exercisable and ending three business days before the Company sends the notice of redemption to the warrant holders.

The Public Warrants are recognized as derivative liabilities in accordance with ASC 815, *Derivatives and Hedging* ("ASC 815"). Accordingly, the Company recognized the warrant instruments as liabilities at fair value as of the Closing Date, with an offsetting entry to additional paid-in capital and adjusts the carrying value of the instruments to fair value through other income (expense) on the condensed consolidated statements of operations at each reporting period until they are exercised. As of March 31, 2025 and December 31, 2024, the Public Warrants are presented as warrant liabilities on the accompanying condensed consolidated balance sheets.

**NOTE 13 - RELATED PARTY TRANSACTIONS**

There was one operating lease with a related party, which expired by December 31, 2024 and was not renewed. Operating lease cost relating to this lease was $0 and $7,464 for the three month ended March 31, 2025 and 2024, respectively.

In 2023, some of the Company's customers financed their obligations with a related party, Solar Leasing, whose CEO is also the CEO of the Company. These arrangements are similar to those with other third-party lenders. As such, Solar Leasing deducts their financing fees and remits the net amount to the Company. For the three months ended March 31, 2025, and 2024, the Company recognized $2,567,304 and $8,812,769 of revenue, net of financing fees of $974,833 and $3,856,219, respectively, from these arrangements. As of March 31, 2025, and December 31, 2024, the Company had $286,103 and $191,662 of accounts receivable, $545,805 and $0 of contract assets, $2,320,129 and $3,359,101 of accrued expenses and $0 and $2,000 of contract liabilities due to related parties relating to these arrangements, respectively.

On December 24, 2024, the Company entered into a Promissory Note with LHX (See Note 10). LHX owns 14.1% of the Company's Class A Common Stock.

During the year ended December 31, 2024, Solar Leasing performed a fair-market-value assessment of its lease assets. As a result, Solar Leasing paid a discretionary rebate to the Company of $3,000,000 based on the excess of fair-market-value over the carrying value of its assets, primarily to optimize certain tax positions for its owners. The Company agreed to transfer the received rebate to White Horse Energy, LC ("White Horse Energy"), a entity wholly owned by the Company's CEO, in the form of convertible debt. Additionally, the Company guarantees the outstanding indebtedness of Solar Leasing (approximately $10 million) which results in the Company having a variable interest in Solar Leasing. The Company determined it was not the primary beneficiary as defined in ASC 810-10-25-38A. Although the Company's CEO, wholly owns White Horse Energy, the Company does not have any control over White Horse Energy or Solar Leasing, nor any obligation to absorb losses from Solar leasing. Based on the Company's reassessment, the flow of funds resulting from the discretionary rebate does not transfer control or economic exposure to the Company in a manner that would require consolidation under ASC 810-10. White Horse Energy remains the primary beneficiary, and no changes to the Company's financial statement presentation are required. For the three months ended March 31, 2025, the Company recorded interest income of $37,656 included in other income, net in the accompanying condensed consolidated statements of operations. As of March 31, 2025, the balance of $3,037,656 is included in note receivable – related party in the accompanying condensed consolidated balance sheet.

As described in Note 3, Zeo Energy Corp. entered into the TRA with the TRA Holders. As of March 31, 2025, the Company has not recorded a liability related to the tax savings it may realize from utilization of such deferred tax assets. As of March 31, 2025, the total unrecorded TRA liability is approximately $48.8 million. If utilization of the deferred tax assets subject to the TRA becomes more likely than not in the future, the Company will record a liability related to the TRA which will be recognized as expense within its condensed consolidated statements of operations.

**NOTE 14 - FAIR VALUE MEASUREMENTS**

Items Measured at Fair Value on a Recurring Basis:

The Company accounts for certain liabilities at fair value on a recurring basis and classifies these liabilities within the fair value hierarchy (Level 1, Level 2, or Level 3).

Liabilities subject to fair value measurements are as follows:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **March 31, 2025** | **March 31, 2025** | **March 31, 2025** | **March 31, 2025** |
|  | **Level 1** | **Level 2** | **Level 3** | **Total** |
| Liabilities: |  |  |  |  |
| Warrant liabilities | $785551 | $- | $- | $785551 |

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** |
|  | **Level 1** | **Level 2** | **Level 3** | **Total** |
| Liabilities: |  |  |  |  |
| Warrant liabilities | $1449000 | $- | $- | $1449000 |

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The Company's Public Warrants are traded on the Nasdaq. As such, the Warrant valuation is based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. The fair value of the Warrant liabilities is classified within Level 1 of the fair value hierarchy.

**NOTE 15 - NET LOSS PER SHARE**

Basic net loss per share of Class A common stock is computed by dividing net loss attributable to Class A common stockholders from March 13, 2024, or the Closing Date, to December 31, 2024, by the weighted-average number of shares of Class A common stock outstanding for the same periods.

Diluted net loss per share is the same as basic net loss per share as the inclusion of potentially issuable shares that would be anti-dilutive.

Prior to the ESGEN Business Combination, the membership structure of Sunergy Renewables, LLC included membership units. In conjunction with the closing of the ESGEN Business Combination, the Company effectuated a recapitalization whereby all membership units were converted to common units of OpCo and the Company implemented a revised class structure including Class A Common Stock having one vote per share and economic rights, and Class V Common Stock having one vote per share and no economic rights. Shares of the Company's Class V Common Stock do not participate in the earnings or losses of the Company and are therefore not participating securities. The basic and diluted net income per share for the year ended December 31, 2024 represents only the period of March 13, 2024 to December 31, 2024.

The following table presents the computation of the basic and diluted income per share of Class A Common Stock for the three months ended March 31, 2025 and the period of March 13, 2024 (the Closing Date) to December 31, 2024:

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| | | |
|:---|:---|:---|
|  | **Three months ended**<br>**March 31, 2025** | **The period of March 13, 2024 to**<br>**March 31, 2024** |
| **Numerator** | | |
| Net income attributable to Class A common shareholders | $(6361265) | $(1722607) |
| **Denominator** |  |  |
| Basic and diluted weighted-average shares of Class A common stock outstanding | 13252964 | 994345 |
| Net income per share of Class A common stock - basic and diluted | $(0.48) | $(1.73) |

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The following table presents potentially dilutive securities, as of the end of the period, excluded from the computation of diluted net earnings per share of Class A Common Stock.

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| | | |
|:---|:---|:---|
|  | **Three months ended**<br>**March 31,<br> 2025** | **The period of March 13, 2024 to**<br>**March 31, 2024** |
| Warrants(1) | 13800000 | 13800000 |
| Series A Preferred Stock (2) | 1500000 | 1500000 |
| Convertible promissory notes (3) | 1851852 | - |

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(1) Represents number of instruments outstanding at the end of the period that were evaluated under the treasury stock method for potentially dilutive effects and were determined to be anti-dilutive.

(2) Represents number of Preferred Units outstanding at the end of the period that were excluded using the if-converted method.

(3) Represents number of shares that would be issued to settle the convertible promissory note as of the end of the period

**NOTE 16 – INCOME TAX**

The Company has calculated the provision for income taxes during the interim reporting period by applying an estimate of the Annual Effective Tax Rate (AETR) for the full fiscal year to "ordinary" income or loss (pretax income or loss excluding unusual or infrequently occurring discrete items) for the reporting period. Our effective tax rate (ETR) from continuing operations was 3.9% expense on loss for the three months ended March 31, 2025, and 2.7% percent expense on loss for the three months ended March 31, 2024. The ETR for the three months ended March 31, 2025 differs from statutory rates primarily due to the non-controlling interest portion of ESGEN Opco, LLC, which is a partnership for federal tax purposes and a change in valuation allowance. During the first quarter of 2025, the Company exchanged corporate stock for additional ownership interests in ESGEN Opco, LLC. This greatly increased the investment in partnership deferred tax asset. Additionally, the Company determined that the deferred tax assets are not more likely than not to be realized based on all available evidence as of the current quarter and recorded a valuation allowance on deferred tax assets. The ETR for the three months ended March 31, 2024 differs from statutory rates primarily due to the non-controlling interest portion of ESGEN Opco, LLC, which is a partnership for federal tax purposes.

The components of the deferred income tax assets and liabilities were as follows:

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| | | |
|:---|:---|:---|
|  | **December 31,<br> 2024** | **December 31,<br> 2023** |
| **Other Asset assets:** | | |
| Deferred tax assets | $5914920 | $661904 |
| Valuation allowance | (5914920) | - |
| **Net deferred tax asset** | $**-**  | $**661904** |
| Deferred tax liabilities | - | (423413) |
| **Net deferred tax assets and liabilities** | $**-**  | $**238491** |

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 **

**NOTE 17 - COMMITMENTS AND CONTINGENCIES**

 

***Risks and Uncertainties - Weather Conditions***

A significant portion of the Company's business is conducted in the state of Florida. During recent years, there have been several hurricanes that impacted our marketing, sales and installation activities. Future hurricane storms can have an adverse impact of our sales installations.

 ****

***Workmanship and Warranties***

The Company typically warrants solar energy systems sold to customers for periods of one to ten years against defects in design and workmanship, and that installations will remain watertight.

The manufacturers' warranties on the solar energy system components, which are typically passed through to the customers, typically have product warranty periods of 10 to 20 years and a limited performance warranty period of 25 years. As of March 31, 2025, and December 31, 2024, the Company did not record a warranty reserve as the historical costs incurred that the Company is required to pay have not been significant or indicative of the Company performing warranty work in the future. The Company, at its discretion, may provide certain reimbursements to customers if certain solar equipment is not operating as intended during future periods.

 ****

***Litigation***

In the normal course of business, the Company may become involved in various lawsuits and legal proceedings. While the ultimate results of these matters cannot be predicted with certainty, management does not expect them to have a material adverse effect on the financial position or results of operations of the Company.

 ****

***Accrual for Probable Loss Contingencies***

In the normal course of business, the Company is involved in various claims and legal proceedings. A liability is recorded for such matters when it is probable that a loss has been incurred and the amounts can be reasonably estimated. When only a range of possible loss can be established, the most probable amount in the range is accrued. If no amount within this range is a better estimate than any other amount within the range, the minimum amount in the range is accrued. Legal costs associated with loss contingencies are expensed as incurred.

**NOTE 18 - SEGMENT REPORTING**

The Company has one operating segment and one reportable segment, the business of sales and installation of solar panel technology to individual households within the United States. The Company's chief operating decision-maker ("CODM") is the chief executive officer. The CODM reviews and evaluates consolidated net income (loss) for purposes of evaluating financial performance, making operating decisions, allocating resources, and planning and forecasting for future periods.

All the Company's long-lived assets and revenues are maintained in the U.S. Refer to Note 3 for further information on revenues.

The following presents the significant financial information with respect to the Company's reportable segment for the three months ended March 31, 2025 and 2024:

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| | | |
|:---|:---|:---|
|  | **Three months ended March 31,** | **Three months ended March 31,** |
|  | **2025** | **2024** |
| Total revenue | $8783695 | $20142156 |
| Less: Cost of goods sold (exclusive of depreciation and amortization shown below): |  |  |
| &nbsp;&nbsp;&nbsp;Direct labor | 1719462 | 3112285 |
| &nbsp;&nbsp;&nbsp;Materials | 2224562 | 9409074 |
| &nbsp;&nbsp;&nbsp;Other | 845655 | 1436607 |
| Less: Cost of goods sold (exclusive of depreciation and amortization shown below): | 4789679 | 13957966 |
| Less: Depreciation and amortization related to Cost of goods sold | 219259 | 168403 |
| Gross Profit | $3774757 | $6015787 |
| Depreciation and amortization | 4681470 | 291126 |
| Commissions expense | 1864112 | 3652591 |
| Sales and marketing (exclusive of Commissions expense above) | 273668 | 2901196 |
| General and administrative | 10467593 | 3219422 |
| Other income, net | (82363) | - |
| Change in fair value of warrant liabilities | (663449) | 138000 |
| Interest expense | 30277 | 35222 |
| Net loss before taxes | (12795863) | (4221770) |
| Income tax (expense) benefit | (523500) | 114668 |
| **Net loss** | (13319363) | (4107102) |

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**NOTE 19 - SUBSEQUENT EVENTS**

On April 15, 2025, the Promissory Note, as described in Note 9, was amended with the result that the Tranche 2 Advance would be delivered if a Tranche 2 Milestone is met within 120 days of the Initial Advance, and the Tranche 3 Advance would be delivered if a Tranche 3 Milestone is met within 120 days of the Tranche 2 Advance.

On April 17, 2025, the Company received a notice (the "Notice") from Nasdaq notifying the Company that it is not in compliance with the periodic filing requirements for continued listing set forth in Nasdaq Listing Rule 5250(c)(1) because the Company's Annual Report on Form 10-K for the year ended December 31, 2024 ("Fiscal Year 2024 10-K") was not filed with the Securities and Exchange Commission (the "SEC") by the required due date of March 31, 2025. This Notice received from Nasdaq has no immediate effect on the listing or trading of the Company's shares. Nasdaq has provided the Company with 60 calendar days, until Sunday, June 16, 2025, to submit a plan to regain compliance. If Nasdaq accepts the Company's plan, then Nasdaq may grant the Company an exception until October 13, 2025 to regain compliance with the Nasdaq Listing Rules.

On May 28, 2025, the Company entered into an Agreement and Plan of Merger and Reorganization (the "Merger Agreement") by and among Heliogen, Inc., a Delaware corporation ("Heliogen"), Zeo Energy, Hyperion Merger Corp., a Delaware corporation and a direct, wholly-owned subsidiary of Zeo Energy ("Merger Sub I") and Hyperion Acquisition LLC, a Delaware limited liability company and a direct, wholly-owned subsidiary of Zeo Energy ("Merger Sub II" and, together with Merger Sub I, the "Merger Subs"). Pursuant to the Merger Agreement, and upon the terms and subject to the satisfaction or waiver of the conditions therein: (i) in accordance with the General Corporation Law of the State of Delaware ("DGCL"), at the effective time of the First Merger (the "Effective Time"), Merger Sub I will merge with and into Heliogen (the "First Merger"), with Heliogen surviving the First Merger (Heliogen, as the surviving entity of the First Merger, the "First Surviving Corporation") and immediately following the First Merger, the First Surviving Corporation will be a direct, wholly owned subsidiary of Zeo Energy; and (ii) in accordance with the DGCL and Delaware Limited Liability Company Act, immediately after the Effective Time, the First Surviving Corporation will merge with and into Merger Sub II (the "Second Merger" and, together with the First Merger, the "Mergers"), with Merger Sub II surviving the Second Merger (Merger Sub II, as the surviving entity of the Second Merger, the "Surviving Company"). The Merger Agreement and the consummation of the transactions contemplated thereby have been approved by each of the board of directors of Heliogen ("Heliogen's Board of Directors") and the board of directors of Zeo Energy, and Heliogen's Board of Directors has resolved to recommend to the stockholders of Heliogen to approve the transactions contemplated by the Merger Agreement, including the Mergers, and adopt the Merger Agreement, subject to its terms and conditions.

 

*Consideration to Heliogen Stockholders*. Subject to the terms and conditions of the Merger Agreement, at the Effective Time, by virtue of the First Merger, each issued and outstanding share of common stock, par value $0.0001 per share, of Heliogen ("Heliogen Common Stock") (other than shares of Heliogen Common Stock held by Zeo Energy, Heliogen or their respective subsidiaries immediately prior to the Effective Time) will be cancelled and automatically converted into the right to receive (i) a number of shares of class A common stock, par value $0.0001 per share, of Zeo Energy ("Zeo Energy Class A Common Stock") equal to the Exchange Ratio (as defined below), without interest (the "Share Merger Consideration"), and (ii) if applicable, an amount in cash, rounded to the nearest cent, in lieu of any fractional share interest in Zeo Energy Class A Common Stock to which such holder otherwise would have been entitled (the "Fractional Share Consideration" and together with the Share Merger Consideration, the "Merger Consideration"), subject to any required tax withholding.

As set forth in the Merger Agreement, the "Exchange Ratio" is the quotient obtained by dividing (i) the quotient of (A) the Total Merger Consideration divided by (B) the fully diluted share count of Heliogen Common Stock outstanding (including shares underlying outstanding shares of Heliogen's preferred stock (if any), In-the-Money Options (as defined below), Heliogen's restricted stock units ("RSUs"), and the Commercial Warrants (as defined below) but excluding shares underlying SPAC Warrants (as defined below)) (the "Fully-Diluted Shares," which as of May 16, 2025 was equal to 6,616,949), by (ii) $1.5859 (the "Parent Stock Price"); and the "Total Merger Consideration" is $10.0 million, less (x) 50% of any amount by which Heliogen's Net Cash at the closing of the First Merger (the "Closing") is less than $13.0 million (the "Net Cash Collar Floor"), or plus (y) 50% of any amount by which Heliogen's Net Cash at the Closing is more than $16.0 million (the "Net Cash Collar Ceiling"); and "Net Cash" is the cash and cash equivalents and other current assts of Heliogen and its subsidiaries as of the Closing, less certain specified liabilities of Heliogen and its subsidiaries as of the Closing, including unpaid transaction expenses.

The shares of Zeo Energy Class A Common Stock to be issued in connection with the Mergers will be listed on the Nasdaq Stock Market LLC ("Nasdaq"). The Mergers, taken together, are intended to constitute a single integrated transaction that qualifies as a reorganization for U.S. federal income tax purposes.

Under the terms of the Merger Agreement, the completion of the Mergers is subject to certain customary closing conditions, including, among others: (i) the approval of the Mergers and adoption of the Merger Agreement by the affirmative vote of the holders of a majority of the outstanding shares of Heliogen Common Stock entitled to vote thereon; (ii) the approval for listing on Nasdaq of the Zeo Energy Class A Common Stock to be issued in the Mergers; (iii) the effectiveness of a registration statement on Form S-4 (the "Registration Statement") to be filed by Zeo Energy with the Securities and Exchange Commission (the "SEC") registering the Zeo Energy Class A Common Stock to be issued in connection with the Mergers; (iv) the accuracy of the parties' respective representations and warranties in the Merger Agreement, subject to specified materiality qualifications; (v) compliance by the parties with their respective covenants in the Merger Agreement in all material respects; (vi) the absence of any law or order restraining, enjoining or otherwise prohibiting the consummation of the Mergers; and (vii) the receipt by each party of opinions of counsel to the effect that the Mergers, taken together, will constitute a single integrated transaction that qualifies as a reorganization for U.S. federal income tax purposes. Zeo Energy has the following additional conditions to its obligations to consummate the Closing: (A) the absence of a material adverse effect with respect to Heliogen and its subsidiaries on or after the date of the Merger Agreement that is continuing as of immediately prior to the Closing; and (B) the effective amendment of that certain Rights Agreement, dated April 16, 2023 by and between Heliogen and Continental Stock Transfer and Trust Company, as amended on April 16, 2024, December 17, 2024 and April 14, 2025 (the "Rights Agreement"); and (C) Heliogen's Net Cash at the Closing being equal to or greater than $10.0 million.

On June 8, 2025, Sunnova, one of the Company's financing partners, voluntarily filed for protection under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court. As of the date of this report, Sunnova owes the Company an outstanding amount of $3,113,019 related to completed customer projects. The Company is actively monitoring the proceedings and has recorded a full reserve against this receivable.

On June 9, 2025, Mosaic, one of the Company's financing partners, voluntarily filed for protection under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court. As of the date of this report, Mosaic owes the Company an outstanding amount of $734,140 related to completed customer projects. The Company is actively monitoring the proceedings, and no impairment has been recorded related to this receivable as of the balance sheet date, as management believes the amount remains collectible.

**Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (as restated)**

References to the "Company," "our," "us" or "we" refer to Zeo Energy Corp. The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto contained elsewhere in this Quarterly Report on Form 10-Q (this "Quarterly Report"). Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

**Cautionary Note Regarding Forward-Looking Statements**

 

*This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "should," "could," "would," "expect," "plan," "anticipate," "believe," "estimate," and "continue," or the negative of such terms or other similar expressions. Such statements include, but are not limited to, possible business combinations and the financing thereof, and related matters, as well as all other statements other than statements of historical fact included in this Form 10-Q. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other SEC filings. Except as expressly required by applicable securities law, we disclaim any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.*

**Overview**

Our company and personnel are passionate about delivering cost savings and increased independence and reliability to energy consumers. Our mission is to expedite the country's transition to renewable energy by offering our customers an affordable and sustainable means of achieving energy independence. We are a vertically integrated company offering energy solutions and services that include sale, design, procurement, installation, and maintenance of residential solar energy systems. Many of our solar energy system customers also purchase other energy efficient-related equipment or services or roofing services from us. The majority of our customers are located in Florida, Texas, Arkansas, Missouri, Ohio, and Illinois, and we have an expanding base of customers in California, Colorado, Minnesota, Missouri, Ohio, Utah, and Virginia. Sunergy was created on October 1, 2021 through the Contribution of Sun First Energy, LLC, a rapidly growing solar sales management company, and Sunergy Solar, LLC, a large solar installation company based in Florida, to Sunergy Renewables, LLC.

We believe that we have built (and continue to build) the infrastructure and capabilities necessary to rapidly acquire and serve customers in a low-cost and scalable manner. Today, our scalable regional operating platform provides us with a number of advantages, including the marketing of our solar service offerings through multiple channels, including our diverse sales partner network and direct-to-consumer vertically integrated sales and installation operations. We believe that this multi-channel model supports rapid sales and installation growth, allowing us to achieve capital-efficient growth in the regional markets we serve.

Since our founding, we have continued to invest in a platform of services and tools to enable large scale operations for us and our partner network, which includes sales partners, installation partners and other strategic partners. The platform includes processes and software, as well as the capacity for the fulfillment and acquisition of marketing leads. We believe our platform empowers our in-house sales team and external sales dealers to profitably serve our regional and underpenetrated markets and helps us compete effectively against larger, more established industry players without making significant investment in technology and infrastructure.

We have focused to date on a simple, capital light business strategy utilizing, as of March 31, 2025, approximately 290 sales agents and approximately 22 independent sales dealers to produce our sales pipeline. We engineer and design projects and process building permit applications on behalf of our customers to timely install their systems and assist their connections to the local utility power grid. Most of the equipment we install is drop-shipped to the installation site by our regional distributors, requiring minimal inventory to be held by the Company during any given period. We depend on our distributors to timely handle logistics and related requirements in moving equipment to the installation sites. In addition to our main offering of residential solar energy systems, we sell and install products such as roofing, insulation, energy efficient appliances and battery storage systems for the residential market.

Our core solar service offerings are paid for by customer purchases and financed through either third-party long-term lenders or third-party operators who offer leasing products that provide customers with simple, predictable pricing for solar energy that is insulated from rising retail electricity prices. Most of our customers finance their purchases with affordable loans or leases that require minimal or no upfront capital or down payment.

**Recent Developments**

On May 28, 2025, the Company entered into an Agreement and Plan of Merger and Reorganization (the "**Merger Agreement**") by and among Heliogen, Inc., a Delaware corporation ("**Heliogen**"), Zeo Energy, Hyperion Merger Corp., a Delaware corporation and a direct, wholly-owned subsidiary of Zeo Energy ("**Merger Sub I**") and Hyperion Acquisition LLC, a Delaware limited liability company and a direct, wholly-owned subsidiary of Zeo Energy ("**Merger Sub II**" and, together with Merger Sub I, the "**Merger Subs**"). Pursuant to the Merger Agreement, and upon the terms and subject to the satisfaction or waiver of the conditions therein: (i) in accordance with the General Corporation Law of the State of Delaware ("**DGCL**"), at the effective time of the First Merger (the "**Effective Time**"), Merger Sub I will merge with and into Heliogen (the "**First Merger**"), with Heliogen surviving the First Merger (Heliogen, as the surviving entity of the First Merger, the "**First Surviving Corporation**") and immediately following the First Merger, the First Surviving Corporation will be a direct, wholly owned subsidiary of Zeo Energy; and (ii) in accordance with the DGCL and Delaware Limited Liability Company Act, immediately after the Effective Time, the First Surviving Corporation will merge with and into Merger Sub II (the "**Second Merger**" and, together with the First Merger, the "**Mergers**"), with Merger Sub II surviving the Second Merger (Merger Sub II, as the surviving entity of the Second Merger, the "**Surviving Company**"). The Merger Agreement and the consummation of the transactions contemplated thereby have been approved by each of the board of directors of Heliogen ("**Heliogen's Board of Directors**") and the board of directors of Zeo Energy, and Heliogen's Board of Directors has resolved to recommend to the stockholders of Heliogen to approve the transactions contemplated by the Merger Agreement, including the Mergers, and adopt the Merger Agreement, subject to its terms and conditions.

*Consideration to Heliogen Stockholders*. Subject to the terms and conditions of the Merger Agreement, at the Effective Time, by virtue of the First Merger, each issued and outstanding share of common stock, par value $0.0001 per share, of Heliogen ("**Heliogen Common Stock**") (other than shares of Heliogen Common Stock held by Zeo Energy, Heliogen or their respective subsidiaries immediately prior to the Effective Time) will be cancelled and automatically converted into the right to receive (i) a number of shares of class A common stock, par value $0.0001 per share, of Zeo Energy ("**Zeo Energy Class A Common Stock**") equal to the Exchange Ratio (as defined below), without interest (the "**Share Merger Consideration**"), and (ii) if applicable, an amount in cash, rounded to the nearest cent, in lieu of any fractional share interest in Zeo Energy Class A Common Stock to which such holder otherwise would have been entitled (the "**Fractional Share Consideration**" and together with the Share Merger Consideration, the "**Merger Consideration**"), subject to any required tax withholding.

As set forth in the Merger Agreement, the "**Exchange Ratio**" is the quotient obtained by dividing (i) the quotient of (A) the Total Merger Consideration divided by (B) the fully diluted share count of Heliogen Common Stock outstanding (including shares underlying outstanding shares of Heliogen's preferred stock (if any), In-the-Money Options (as defined below), Heliogen's restricted stock units ("**RSUs**"), and the Commercial Warrants (as defined below) but excluding shares underlying SPAC Warrants (as defined below)) (the "**Fully-Diluted Shares**," which as of May 16, 2025 was equal to 6,616,949), by (ii) $1.5859 (the "**Parent Stock Price**"); and the "**Total Merger Consideration**" is $10.0 million, less (x) 50% of any amount by which Heliogen's Net Cash at the closing of the First Merger (the "**Closing**") is less than $13.0 million (the "**Net Cash Collar Floor**"), or plus (y) 50% of any amount by which Heliogen's Net Cash at the Closing is more than $16.0 million (the "**Net Cash Collar Ceiling**"); and "**Net Cash**" is the cash and cash equivalents and other current assts of Heliogen and its subsidiaries as of the Closing, less certain specified liabilities of Heliogen and its subsidiaries as of the Closing, including unpaid transaction expenses.

The shares of Zeo Energy Class A Common Stock to be issued in connection with the Mergers will be listed on the Nasdaq Stock Market LLC ("**Nasdaq**"). The Mergers, taken together, are intended to constitute a single integrated transaction that qualifies as a reorganization for U.S. federal income tax purposes.

Under the terms of the Merger Agreement, the completion of the Mergers is subject to certain customary closing conditions, including, among others: (i) the approval of the Mergers and adoption of the Merger Agreement by the affirmative vote of the holders of a majority of the outstanding shares of Heliogen Common Stock entitled to vote thereon; (ii) the approval for listing on Nasdaq of the Zeo Energy Class A Common Stock to be issued in the Mergers; (iii) the effectiveness of a registration statement on Form S-4 (the "**Registration Statement**") to be filed by Zeo Energy with the Securities and Exchange Commission (the "**SEC**") registering the Zeo Energy Class A Common Stock to be issued in connection with the Mergers; (iv) the accuracy of the parties' respective representations and warranties in the Merger Agreement, subject to specified materiality qualifications; (v) compliance by the parties with their respective covenants in the Merger Agreement in all material respects; (vi) the absence of any law or order restraining, enjoining or otherwise prohibiting the consummation of the Mergers; and (vii) the receipt by each party of opinions of counsel to the effect that the Mergers, taken together, will constitute a single integrated transaction that qualifies as a reorganization for U.S. federal income tax purposes. Zeo Energy has the following additional conditions to its obligations to consummate the Closing: (A) the absence of a material adverse effect with respect to Heliogen and its subsidiaries on or after the date of the Merger Agreement that is continuing as of immediately prior to the Closing; and (B) the effective amendment of that certain Rights Agreement, dated April 16, 2023 by and between Heliogen and Continental Stock Transfer and Trust Company, as amended on April 16, 2024, December 17, 2024 and April 14, 2025 (the "**Rights Agreement**"); and (C) Heliogen's Net Cash at the Closing being equal to or greater than $10.0 million.

**Business Combination**

On March 13, 2024 (the "Closing Date"), we consummated the Business Combination of Sunergy Renewables with ESGEN Acquisition Corp. Prior to the Closing, (i) except as otherwise specified in the Business Combination Agreement, each issued and outstanding ESGEN Class B ordinary share was converted into one ESGEN Class A ordinary; and (ii) ESGEN was domesticated into the State of Delaware so as to become a Delaware corporation. In connection with the Closing, we changed our name from "ESGEN Acquisition Corporation" to "Zeo Energy Corp."

Following the Domestication, each then-outstanding ESGEN Class A ordinary share was converted into one share of Class A common stock, and each then-outstanding ESGEN Public Warrant converted automatically into a Warrant, exercisable for one share of Zeo Class A Common Stock. Additionally, each outstanding unit of ESGEN was cancelled and separated into one share of Class A Common Stock and one-half of one Warrant.

In accordance with the terms of the Business Combination Agreement, Sunergy caused all holders of any options, warrants or rights to subscribe for or purchase any equity interests of Sunergy or its subsidiaries or securities (including debt securities) convertible into or exchangeable for, or that otherwise conferred on the holder any right to acquire, any equity interests of Sunergy or any subsidiary thereof (collectively, the "Sunergy Convertible Interests") existing immediately prior to the Closing to either exchange or convert all such holder's Sunergy Convertible Interests into limited liability interests of Sunergy (the "Sunergy Company Interests") in accordance with the governing documents of Sunergy or the Sunergy Convertible Interests.

At the Closing, ESGEN contributed to OpCo (1) all of its assets (excluding its interests in OpCo, but including the amount of cash in ESGEN's Trust Account as of immediately prior to the Closing (after giving effect to the exercise of redemption rights by ESGEN stockholders)), and (2) a number of newly issued shares of Class V common stock, which are non-economic, voting shares of Zeo, equal to the number of Seller OpCo Units (as defined in the Business Combination Agreement) and (y) in exchange, OpCo issued to ESGEN (i) a number of Class A common units of OpCo (the "OpCo Manager Units") which equaled the total number of shares of Class A Common Stock issued and outstanding immediately after the Closing and (ii) a number of warrants to purchase OpCo Manager Units which equaled the number of Warrants issued and outstanding immediately after the Closing (the transactions described above in this paragraph, the "ESGEN Contribution"). Immediately following the ESGEN Contribution, (x) the Sellers contributed to OpCo the Sunergy Company Interests and (y) in exchange therefor, OpCo transferred to the Sellers the Seller OpCo Units and the Seller Class V Shares.

Prior to the Closing, Sellers transferred 24.167% of their Sunergy Company Interests (which were thereafter exchanged for Seller OpCo Units and Seller Class V Shares at the Closing, as described above) pro rata to Sun Managers, LLC, a Delaware limited liability company ("Sun Managers"), in exchange for Class A Units (as defined in the Sun Managers limited liability company agreement (the "SM LLCA")) in Sun Managers. In connection with such transfer, Sun Managers executed a joinder to, and became a "Seller" for purposes of, the Business Combination Agreement. Sun Managers intends to grant Class B Units (as defined in the SM LLCA) in Sun Managers through the Sun Managers, LLC Management Incentive Plan (the "Management Incentive Plan") adopted by Sun Managers to certain eligible employees or service providers of OpCo, Sunergy or their subsidiaries, in the discretion of Timothy Bridgewater, as manager of Sun Managers. Such Class B Units may be subject to a vesting schedule, and once such Class B Units become vested, there may be an exchange opportunity through which the grantees may request (subject to the terms of the Management Incentive Plan and the OpCo A&R LLC Agreement) the exchange of their Class B Units into Seller OpCo Units (together with an equal number of Seller Class V Shares), which may then be converted into Class A Common Stock (subject to the terms of the Management Incentive Plan and the OpCo A&R LLC Agreement). Grants under the Management Incentive Plan will be made after Closing.

As of the Closing Date, upon consummation of the Business Combination, the only outstanding shares of capital stock of the registrant were shares of Class A Common Stock and Class V Common Stock.

In connection with entering into the Business Combination Agreement, ESGEN and the Sponsor entered the Sponsor Subscription Agreement, pursuant to which, among other things, the Sponsor agreed to purchase an aggregate of 1,000,000 Convertible OpCo Preferred Units convertible into Exchangeable OpCo units (and be issued an equal number of shares of Class V Common Stock) concurrently with the Closing at a cash purchase price of $10.00 per unit and up to an additional 500,000 Convertible OpCo Preferred Units (together with the concurrent issuance of an equal number of shares of Zeo Class V Common Stock) during the six months after Closing if called for by Zeo. Prior to the Closing, ESGEN informed the Sponsor that it wished to call for the additional 500,000 Convertible OpCo Preferred Units at the Closing and, as a result, a total of 1,500,000 Convertible OpCo Preferred Units and an equal number of shares of Class V Common Stock were issued to Sponsor in return for aggregate consideration of $15,000,000.

**Accounting for the Business Combination**

Following the Business Combination, we are organized in an "Up-C" structure, such that Sunergy and the subsidiaries of Sunergy hold and operate substantially all of the assets and businesses of the registrant, and the registrant is a publicly listed holding company that holds a certain amount of equity interests in OpCo, which holds all of the equity interests in Sunergy. The Class A Common Stock and public warrants are traded on Nasdaq under the ticker symbols "ZEO" and "ZEOWW," respectively.

The Business Combination was accounted for as a reverse recapitalization with ESGEN being treated as the acquired company since there was no change in control in accordance with the guidance for common control transactions in ASC 805-50. Accordingly, the financial statements of the combined entity will represent a continuation of the financial statements of Sunergy with the business combination treated as the equivalent of Sunergy issuing stock for the net assets of ESGEN, accompanied by a recapitalization. The net assets of ESGEN were stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination were those of Sunergy.

Sunergy was determined to be the accounting acquirer based on evaluation of the following facts and circumstances.

Based upon the evaluation of the OpCo A&R LLC Agreement, the Sellers contributed their interests of Sunergy into OpCo. OpCo's members did not have substantive kickout or participating rights and therefore OpCo is a VIE. Consideration of OpCo as a VIE was necessary to determine the accounting treatment between ESGEN and Sunergy. Upon evaluation, ESGEN Acquisition Corp. is considered to be the primary beneficiary through its membership interest and manager powers conferred to it through the Class A Units. For VIEs, the accounting acquirer is always considered to be the primary beneficiary. As such, ESGEN will consolidate OpCo and is considered to the accounting acquirer; however, further consideration of whether the entities are under common control was required in order to determine whether there is an ultimate change in control and the acquisition method of accounting is required under ASC 805.

While Sunergy did not control or have common ownership of ESGEN prior to the consummation of the Business Combination, the Company evaluated the ownership of the new entity subsequent to the consummation of the transaction to determine if a change in control occurred by evaluating whether Sunergy was under common control prior to and subsequent to the consummation of the transaction. If the business combination is between entities under common control, then the acquisition method of accounting is not applicable and the guidance in ASC 805-50 regarding common control should be applied instead. EITF Issue 02-5 "Definition of 'Common Control' in Relation to FASB Statement No. 141" indicates that common control would exist if a group of stockholders holds more than 50 percent of the voting ownership of each entity, and contemporaneous written evidence of an agreement to vote a majority of the entities' shares in concert exists. Prior to the Business Combination, Sunergy was majority owned by five entities (the "***Primary Sellers***"), who entered into a voting agreement, dated September 7, 2023 (the "Voting Agreement"). The term of the Voting Agreement is for five years from the date of the Voting Agreement. The consummation of the Business Combination with ESGEN occurred within the term of the Voting Agreement.

Prior to the Business Combination and the contributions to Sun Managers as described above, the Primary Sellers had 98% ownership in Sunergy. Immediately following the Business Combination, the Sellers now own 83.8% of the equity of the Company.

The Voting Agreement constitutes contemporaneous written evidence of an agreement to vote a majority of the Primary Sellers' shares of the Company in concert. Accordingly, the Primary Sellers retain majority control through the voting of their units in conjunction with the Voting Agreement immediately prior to the Business Combination and their shares following the Business Combination and, therefore, there was no change of control before or after the Business Combination. This conclusion was appropriate even though there was no relationship or common ownership or control between Sunergy and ESGEN prior to the Business Combination. Accordingly, the Business Combination should be accounted for in accordance with the guidance for common control transactions in ASC 805-50.

Additional factors that were considered include the following:

● Since the Business Combination, the Board has been comprised of one individual designated by ESGEN and five individuals designated by Sunergy.

● Since the Business Combination, management of the Company has been the existing management at Sunergy immediately prior to the Business Combination. The individual that was serving as the chief executive officer and chief financial officer of Sunergy's management team immediately prior to the Business Combination continues substantially unchanged upon completion of the Business Combination.

For common control transactions that include the transfer of a business, the reporting entity is required to account for the transaction in accordance with the procedural guidance in ASC 805-50. In essence, the Business Combination will be treated as a reverse recapitalization with ESGEN being treated as the acquired company since there was no change in control. Accordingly, the financial statements of the combined entity will represent a continuation of the financial statements of Sunergy with the business combination treated as the equivalent of Sunergy issuing equity for the net assets of ESGEN, accompanied by a recapitalization.

**Public Company Costs**

Following the Business Combination, we have ongoing reporting and other compliance requirements relating to our Exchange Act registration and Nasdaq listing. We expect to see an increase in general and administrative, compared to historical results, to support the legal and accounting requirements of the combined publicly traded company. We also expect to incur substantial additional expenses for, among other things, directors' and officers' liability insurance, director fees, internal control compliance, and additional costs for investor relations, accounting, audit, legal and other functions.

**Key Operating and Financial Metrics and Outlook**

We regularly review a number of metrics, including the following key operating and financial metrics, to evaluate our business, measure our performance, identify trends in our business, prepare financial projections and make strategic decisions. We believe the operating and financial metrics presented below are useful in evaluating our operating performance, as they are similar to measures by our public competitors and are regularly used by security analysts, institutional investors and other interested parties in analyzing operating performance and prospects. Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP measures, as they are not financial measures calculated in accordance with GAAP and should not be considered as substitutes for net (loss) income or net (loss) income margin, respectively, calculated in accordance with GAAP. See *"Non-GAAP Financial Measures*" for additional information on non-GAAP financial measures and a reconciliation of these non-GAAP measures to the most comparable GAAP measures.

The following table sets forth these metrics for the periods presented:

 

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| | | |
|:---|:---|:---|
| | **Three Months Ended March 31,** | **Three Months Ended March 31,** |
| <br>**(In thousands, except percentages)** | **2025** | **2024** |
| Revenue, net | $8784 | $20142 |
| Gross Profit | 3775 | 6016 |
| Gross Margin | 43.0% | 29.9% |
| Contribution profit | $(2771) | $2072 |
| Contribution margin | (31.5)% | 10.3% |
| Income from operations | $(13511) | $(4049) |
| Net loss | $(13319) | $(4107) |
| Adjusted EBITDA | $(6354) | $(470) |
| Adjusted EBITDA margin | (72.3)% | (2.3)% |

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*Gross Profit and Gross Margin*

 

We define gross profit as revenue, net less cost of goods sold and depreciation and amortization related to cost of goods sold, and define gross margin, expressed as a percentage, as the ratio of gross profit to revenue, net. See "— *Non-GAAP Financial Measures*" for a reconciliation of Gross Profit and Gross Margin.

*Contribution Profit and Contribution Margin*

We define contribution profit as revenue, net less direct costs of revenue, commissions expense and depreciation and amortization, and define contribution margin, expressed as a percentage, as the ratio of contribution profit to revenue, net. Contribution profit and margin can be used to understand our financial performance and efficiency and allows investors to evaluate our pricing strategy and compare against competitors. Our management uses these metrics to make strategic decisions, identify areas for improvement, set targets for future performance and make informed decisions about how to allocate resources going forward. Contributions margin reflects our Contribution profit as a percentage of revenues. See "— *Non-GAAP Financial Measures*" for a reconciliation of Gross Profit to Contribution Profit and Contribution Margin.

 

*Adjusted EBITDA and Adjusted EBITDA Margin*

We define Adjusted EBITDA, a non-GAAP financial measure, as earnings (loss) before interest expense, income tax expense (benefit), depreciation and amortization, other income (expenses), net, and stock compensation, as adjusted to exclude merger transaction related expenses. Adjusted EBITDA margin reflects our Adjusted EBITDA as a percentage of revenues. See "— *Non-GAAP Financial Measures*" for a reconciliation of GAAP net loss to Adjusted EBITDA and Adjusted EBITDA Margin.

**Key Factors that May Influence Future Results of Operations**

Our financial results of operations may not be comparable from period to period due to several factors. Key factors affecting the results of our operations are summarized below.

*Expansion of Residential Sales into New Markets*. Our future revenue growth is, in part, dependent on our ability to expand our product offerings and services in the select residential markets where we operate in Florida, Texas, Arkansas, Missouri, Illinois and Ohio. We primarily generate revenue from our sales, product offerings and services in the residential housing market. To continue our growth, we intend to expand our presence in the residential market into additional states based on markets underserved by national sales and installation providers that also have favorable incentives and net metering policies. We believe that our entry into new markets will continue to facilitate revenue growth and customer diversification.

*Expansion of New Products and Services*. In 2025, we continued our roofing replacements to facilitate our solar installations and to repair rooftops on homes in Florida damaged by severe weather. We plan to expand our roofing business in all markets we enter in the future. Roofing facilitates a faster processing time for our solar installations in cases where the customer is in need of a roof replacement prior to installing a solar system. In addition, to provide more financing options for our prospective residential solar energy customers, we have programs in place that allow our customers to choose a leasing option to finance their systems from a third party. We expect selling systems utilizing third party leases under this and other similar programs to be a growing portion of our customer finance offerings in the future.

*Adding New Customers and Expansion of Sales with Existing Customers*. We intend to increase our in-house sales force and external sales dealers in 2025 in order to target new customers in the Southern U.S. regional residential markets. We provide competitive compensation packages to our in-house sales teams and external sales dealers, which incentivizes the acquisition of new customers.

*Inflation.* We are seeing an increase in the costs of labor and components as the result of higher inflation rates. In particular, we are experiencing an increase in raw material costs and supply chain constraints, and trade tariffs imposed on certain products from China, which may continue to put pressure on our operating margins and increase our costs. We do not have information that allows us to quantify the specific amount of cost increases attributable to inflationary pressures.

*Interest rates.* Interest rate increases for both short-term and long-term debt have increased sharply. Historically, most of our customers have financed the purchase of their solar systems. Higher interest rates have resulted in higher monthly costs to customers, which has the effect of slowing the financing-related sales of solar systems in the areas in which we sell and operate. We do not have information that allows us to quantify the adverse effects attributable to increased interest rates.

*Managing our Supply Chain*. We rely on contract manufacturers and suppliers to produce our components. Our suppliers are generally meeting our materials needs and we are realizing a decrease in pricing for our solar components compared to the prior year. Our ability to grow depends, in part, on the ability of our contract manufacturers and suppliers to provide high quality services and deliver components and finished products on time and at reasonable costs. In the event we are unable to mitigate the impact of delays and/or price increases in raw materials, electronic components and freight, it could delay the manufacturing and installation of our systems, which would adversely impact our cash flows and results of operations, including revenue and contribution margin.

**Components of Condensed Consolidated Statements of Operations**

***Revenue, net***

Our primary source of revenue is the sale of our residential solar systems. Our systems are fully functional at the time of installation and require an inspection prior to interconnection to the utility power grid. We sell our systems primarily direct to end user customers for use in their residences. Upon installation inspection, we satisfy our performance obligation and recognize revenue. Many of the Company's customers finance their obligations with third parties. In these situations, the finance company deducts their financing fees and remits the net amount to the Company. Revenue is recorded net of these financing fees (and/or dealer fees). The volume of sales and installations of rooftop solar systems, our primary product, increase from April to September when a majority of our sales teams are most active in our areas of service. In addition to sales of solar systems, "adders" or accessories to a sale may include roofing, energy efficient appliances, upgraded insulation and/or energy storage systems. All adders consisted of less than 10% of the total revenue, net in the three months ended March 31, 2025, and 2024.

Our revenue is affected by changes in the volume and average selling prices of our solutions and related accessories, supply and demand, sales incentives and fluctuating interest rates that increase or decrease the monthly payments for customers purchasing systems through third party financing. Approximately 5% of our sales were paid in cash by the customer in each of the three months ended March 31, 2025, and 2024. Our revenue growth is dependent on our ability to compete effectively in the marketplace by remaining cost competitive, developing and introducing new sales teams within existing and new territories, scaling our installation teams to keep up with demand and maintaining a strong internal operations team to process orders while working with building departments and utilities to permit and interconnect our customers to the utility grid.

 ****

***Cost of Goods Sold***

Cost of goods sold consists primarily of product costs (including solar panels, inverters, metal racking, connectors, shingles, wiring, warranty costs and logistics costs), installation labor and permitting costs.

Cost of goods sold decreased in association with a reduction in revenues. Revenues declined because of the effect of higher interest rates on the consumer financing rates. The increased cost of consumer lending has reduced the advantage provided by financed solar power relative to standard utility costs, which has negatively affected the demand for our products.

Revenue, net less cost of goods sold may vary from period-to-period and is primarily affected by our average selling prices, financing or dealer fees, fluctuations in equipment costs and our ability to effectively and timely deploy our field installation teams to project sites once permitting departments have approved the design and engineering of systems on customer sites.

 ****

***Operating Expenses***

Operating expenses consist of sales and marketing and general and administrative expenses. Personnel-related costs are the most significant component of each of these expense categories and include salaries, benefits and payroll taxes. In the future, the Company intends to provide more benefits to its employees, including an employee stock purchase plan, which will increase operating expenses.

Sales and marketing expenses consist primarily of personnel-related expenses including sales commissions, as well as advertising, travel, trade shows, marketing, customer support and other indirect costs. We expect to continue to make the necessary investments to enable us to execute our strategy to increase our market penetration geographically and enter into new markets by expanding our base sales teams, installers and strategic sales dealer and partner network.

General and administrative expenses consist primarily of personnel-related expenses for our executive, finance, human resources, information technology, and software, facilities costs and fees for professional services. Fees for professional services consist primarily of outside legal, accounting and information technology consulting costs.

Depreciation and amortization consist primarily of depreciation of our vehicles, furniture and fixtures, internally developed software and amortization of our acquired intangibles.

***Other income (expenses), net***

Other income (expenses), net primarily consists of change in fair value of warrant liabilities and interest expense and fees under our equipment and vehicle term loans. It also includes interest income on our cash balances, and accrued interest on tariffs previously paid and approved for a refund.

***Results of Operations***

 ****

***Three Months Ended March 31, 2025, Compared to Three Months Ended March 31, 2024***

The following table sets forth a summary of our condensed consolidated statements of operations for the periods presented:

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| | | | |
|:---|:---|:---|:---|
|  | **Three Months ended<br> March 31,** | **Three Months ended<br> March 31,****Change** | **Change** |
|  | **2025** | **2024** | **%** |
| Revenue, net | $8783695 | $20142156) | (56.4)% |
| Costs and expenses: |  |  |  |
| &nbsp;&nbsp;&nbsp;Cost of goods sold (exclusive of depreciation and amortization) | 4789679 | 13957966) | (65.7)% |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization | 4900729 | 459529 | 966.5% |
| &nbsp;&nbsp;&nbsp;Sales and marketing | 2137092 | 6553787) | (67.4)% |
| &nbsp;&nbsp;&nbsp;General and administrative | 10467593 | 3219422 | 225.1% |
| Total operating expenses | 22295093 | 24190704) | (7.8)% |
| **Loss from operations** | (13511398) | (4048548) | 233.7% |
| Other income (expense), net: |  |  |  |
| &nbsp;&nbsp;&nbsp;Other income, net | 82363 |  | 100% |
| &nbsp;&nbsp;&nbsp;Change in fair value of warrant liabilities | 663449 | (138000) | (580.8)% |
| &nbsp;&nbsp;&nbsp;Interest expense | (30277) | (35222) | (14.0)% |
| Total other income (expense), net | 715535 | (173222) | (5131)% |
| **Net loss before taxes** | $(12795963) | $(4221770) | 203.1% |

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*Revenue, net*

Revenue, net decreased by approximately $11.4 million. Several factors affected the reduction in sales. The primary reason is due to the effect of higher interest rates on the consumer financing rates. This increased cost of consumer lending has reduced the advantage provided by financed solar power relative to standard utility costs, which has negatively affected the demand for our products. The second factor affecting revenue is a decreases in sales volume from sales by our dealer network.

*Cost of Goods Sold*

Cost of goods sold decreased by $9.2 million. The decrease was a result of the decrease in revenue as noted above offset by an increase in the cost of labor and materials during the three months ended March 30, 2025 as compared to 2024. As a percentage of revenue, cost of goods sold improved from 69.3% for the three months ended March 31, 2024 to 58.1% for the three months ended March 31, 2025. This improvement was driven by a decrease in the cost of materials and efficiencies in labor.

 

*Depreciation and amortization*

Depreciation and amortization increased by $4.4 million, from $459,529 for the three months ended March 31, 2024 to $4,894,544 for the three months ended March 31, 2025. The increase was primarily due to an increase in the amortization of the cost of acquired contracts from the Lumio Asset Purchase Agreement.

 

*General and Administrative expenses*

General and administrative expenses increased by $7.2 million from $3.2 million for the three months ended March 31, 2024 to $10.5 million for the three months ended March 31, 2025. The increase was primarily due to an increase in payroll costs associated with additional staffing, including stock compensation and higher professional fees associated with being a public company. The Company also recorded an additional reserve for bad debt pf $3 million related to one finance partner who has discontinued making payments.

*Sales and Marketing*

Sales and marketing expenses decreased by $4.4 million. The decrease was a result of a reduction in commissions earned due to the decrease in revenue.

 

*Other income (expense), net*

 

Other income (expense), net increased from expense of $173,222 for the three months ended March 31, 2024 to income of $715,535 for the three months ended March 31, 2025. The increase was primarily due to a gain on fair value of warrant liabilities.

**Liquidity and Capital Resources**

Our primary source of funding to support operations have historically been from cash flows from operations. Our primary short-term requirements for liquidity and capital are to fund general working capital and capital expenses. Our principal long-term working capital uses include ensuring revenue growth, expanding our sales and marketing efforts and potential acquisitions.

As of March 31, 2025 and December 31, 2024, our cash and cash equivalents balance were approximately $2.9 million and $5.6 million, respectively. The Company maintains its cash in checking and savings accounts.

Our future capital requirements depend on many factors, including our revenue growth rate, the timing and extent of our spending to support further sales and marketing, the degree to which we are successful in launching new business initiatives and the cost associated with these initiatives, and the growth of our business generally.

In order to finance these opportunities and associated costs, it is possible that we will need to raise additional capital through either debt or equity financing if the proceeds realized from the Business Combination are insufficient to support our business needs.

While we believe that the proceeds realized through the Business Combination will be sufficient to meet our currently contemplated business needs for the next twelve months, we cannot assure you that this will be the case. If additional financing is required by us from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital on acceptable terms when needed, our business, results of operations and financial condition would be materially and adversely affected.

 ****

***Cash Flows***

The following table summarizes our cash flows for the periods presented:

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| | | | |
|:---|:---|:---|:---|
|  | **For the three months ended<br> March 31,** | **For the three months ended<br> March 31,** | **For the three months ended<br> March 31,** |
|  | **2025** | **2024** | **Change** |
| Net cash used in operating activities | $(2263438) | $(10151989) | $7888551 |
| Net cash used in investing activities | (372578) | (226076) | (146502) |
| Net cash (used in) provided by financing activities | (103996) | 10086883 | (10190879) |

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***Cash flows from operating activities***

Net cash used in operating activities was approximately $2.3 million during the three months ended March 31, 2025 compared to a net cash used in operating activities of approximately $10.2 million during three months ended March 31, 2024. The increase was primarily due to a increase in accounts receivable collected during the period.

***Cash flows from investing activities***

Net cash used in investing activities was approximately $0.4 million for the three months ended March 31, 2025, relating to purchases of property and equipment. Net cash used in investing activities for the three months ended March 31, 2024 was approximately $0.2 million, relating to purchases of property and equipment.

***Cash flows used in financing activities***

Net cash used in financing activities was approximately $104,000 for the three months ended March 31, 2025, primarily relating to the repayment of debt and finance leases. Net cash provided by financing activities for the three months ended March 30, 2024 was approximately $10.1 million for the three months ended March 31, 2024, primarily relating to cash acquired from the Business Combination of $10.4 million offset by repayments of debt and distributions of stockholders.

***Current Indebtedness***

The Company has utilized internally generated positive cashflow to grow the business. Other than approximately $2.5 million in trade-credit with solar equipment distributors, Sunergy has only approximately $0.9 million of debt on service trucks and vehicles valued at approximately $1.3 million, net of depreciation.

**Non-GAAP Financial Measures**

The non-GAAP financial measures below have not been calculated in accordance with GAAP and should be considered in addition to results prepared in accordance with GAAP and should not be considered as a substitute for, or superior to, GAAP results. In addition, Adjusted EBITDA and Adjusted EBITDA Margin should not be construed as indicators of our operating performance, liquidity or cash flows generated by operating, investing and financing activities, as there may be significant factors or trends that they fail to address. We caution investors that non-GAAP financial information, by its nature, departs from traditional accounting conventions. Therefore, its use can make it difficult to compare our current results with our results from other reporting periods and with the results of other companies.

Our management uses these non-GAAP financial measures, in conjunction with GAAP financial measures, as an integral part of managing our business and to, among other things: (i) monitor and evaluate the performance of our business operations and financial performance; (ii) facilitate internal comparisons of the historical operating performance of our business operations; (iii) facilitate external comparisons of the results of our overall business to the historical operating performance of other companies that may have different capital structures and debt levels; (iv) review and assess the operating performance of our management team; (v) analyze and evaluate financial and strategic planning decisions regarding future operating investments; and (vi) plan for and prepare future annual operating budgets and determine appropriate levels of operating investments. We believe that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends, and in comparing our financial results with other companies in our industry, many of which present similar non-GAAP financial measures to investors.

 

*Contribution Profit and Contribution Margin*

 

We define contribution profit as revenue, net less direct costs of revenue, commissions expense and depreciation and amortization, and define contribution margin, expressed as a percentage, as the ratio of contribution profit to revenue, net. Contribution profit and margin can be used to understand our financial performance and efficiency and allows investors to evaluate our pricing strategy and compare against competitors. Our management uses these metrics to make strategic decisions, identify areas for improvement, set targets for future performance and make informed decisions about how to allocate resources going forward. Contributions margin reflects our Contribution profit as a percentage of revenues.

The following table provides a reconciliation of gross profit to contribution profit for the periods presented:

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| | | |
|:---|:---|:---|
|  | **Three Months Ended<br> March 31,** | **Three Months Ended<br> March 31,** |
|  | **2025** | **2024** |
| Total revenue | $8783695 | $20142156 |
| Less: Cost of goods sold (exclusive of depreciation and amortization shown below) | 4789679 | 13957966 |
| Less: Depreciation and amortization related to Cost of goods sold | 219259 | 168403 |
| Gross Profit | $3774757 | $6015787 |
| Adjustment: |  |  |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization | 4681470 | 291126 |
| &nbsp;&nbsp;&nbsp;Commissions expense | 1864112 | 3652591 |
| &nbsp;&nbsp;&nbsp;Contribution Profit | (2770825) | 2072070 |
| **Gross Margin** | 43.0% | 29.9 |
| **Contribution margin** | (31.5)% | 10.3% |

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*Adjusted EBITDA*

We define Adjusted EBITDA, a non-GAAP financial measure, as net income (loss) before interest and other income (expenses), net, income tax expense, depreciation and amortization, as adjusted to exclude merger and acquisition expenses ("***M&A expenses***"). We utilize Adjusted EBITDA as an internal performance measure in the management of our operations because we believe the exclusion of these non-cash and non-recurring charges allow for a more relevant comparison of our results of operations to other companies in our industry. Adjusted EBITDA should not be viewed as a substitute for net (loss) income calculated in accordance with GAAP, and other companies may define Adjusted EBITDA differently. Adjusted EBITDA margin reflects our Adjusted EBITDA as a percentage of revenues. The following table provides a reconciliation of net (loss) income to Adjusted EBITDA for the periods presented:

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| | | |
|:---|:---|:---|
|  | **Three Months Ended<br> March 31,** | **Three Months Ended<br> March 31,** |
|  | **2025** | **2024** |
| Net (loss) income | $(13319363) | $(4107102) |
| Adjustment: |  |  |
| &nbsp;&nbsp;&nbsp;Other income, net | (82363) |  |
| &nbsp;&nbsp;&nbsp;Change in fair value of warrant liabilities | (663449) | 138000 |
| &nbsp;&nbsp;&nbsp;Interest expense | 30277 | 35222 |
| &nbsp;&nbsp;&nbsp;Income tax expense (benefit) | 523500 | (114668) |
| &nbsp;&nbsp;&nbsp;Stock compensation | 2257139 | 3118584 |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization | 4900729 | 459529 |
| **Adjusted EBITDA** | (6353530) | (470435) |
| **Net loss margin** | (151.6)% | (20.4)% |
| **Adjusted EBITDA margin** | (72.3)% | (2.3)% |

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**Critical Accounting Estimates**

The preparation of financial statements in conformity with GAAP requires us to establish accounting policies and make estimates and assumptions that affect our reported amounts of assets and liabilities at the date of the condensed consolidated financial statements. These financial statements include some estimates and assumptions that are based on informed judgments and estimates of management. We evaluate our policies and estimates on an on-going basis and discuss the development, selection and disclosure of critical accounting policies with those charged with governance. Predicting future events is inherently an imprecise activity and as such requires the use of judgment. Our condensed consolidated financial statements may differ based upon different estimates and assumptions.

We discuss our significant accounting policies in Note 3, Summary of Significant Accounting Policies, to our condensed consolidated financial statements. Our significant accounting policies are subject to judgments and uncertainties that affect the application of such policies. We believe these financial statements include the most likely outcomes with regard to amounts that are based on our judgment and estimates. Our financial position and results of operations may be materially different when reported under different conditions or when using different assumptions in the application of such policies. In the event estimates or assumptions prove to be different from the actual amounts, adjustments are made in subsequent periods to reflect more current information. We believe the following accounting policies are critical to the preparation of our condensed consolidated financial statements due to the estimation process and business judgment involved in their application:

***Valuation of Business Combinations***

The Company recognizes and measures the assets acquired and liabilities assumed in a business combination based on their estimated fair values at the acquisition date. Any excess or surplus of the purchase consideration when compared to the fair value of the net tangible assets acquired, if any, is recorded as goodwill or gain from a bargain purchase. The fair value of assets and liabilities as of the acquisition date are often estimated using a combination of approaches, including the income approach, which requires us to project future cash flows and apply an appropriate discount rate; and the market approach which uses market data and adjusts for entity-specific differences. We use all available information to make these fair value determinations and engage third-party consultants for valuation assistance. The estimates used in determining fair values are based on assumptions believed to be reasonable, but which are inherently uncertain. Accordingly, actual results may differ materially from the projected results used to determine fair value.

***Goodwill***

Goodwill is recognized and initially measured as any excess of the acquisition-date consideration transferred in a business combination over the acquisition-date amounts recognized for the net identifiable assets acquired.

Goodwill is not amortized but is tested for impairment annually, or more frequently if an event occurs or circumstances change that would more likely than not result in an impairment of goodwill. First, the Company assesses qualitative factors to determine whether or not it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company conducts a quantitative goodwill impairment test comparing the fair value of the applicable reporting unit with its carrying value. If the carrying amount of the reporting unit exceeds the fair value of the reporting unit, the Company recognizes an impairment loss in the condensed consolidated statements of operations for the amount by which the carrying amount exceeds the fair value of the reporting unit. The Company performs its annual goodwill impairment test at December 31 of each year. There was no goodwill impairment recorded for the three months ended March 31, 2025, and 2024.

***Intangible assets subject to amortization***

Intangible assets include tradename, customer lists and non-compete agreements. Amounts are subject to amortization on a straight-line basis over the estimated period of benefit and are subject to annual impairment consideration. Costs incurred to renew or extend the term of a recognized intangible asset, such as the acquired tradename, are capitalized as part of the intangible asset and amortized over its revised estimated useful life.

Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of the intangible assets may not be recoverable. Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset, a significant change in the extent or manner in which an asset is used, or any other significant adverse change that would indicate that the carrying amount of an asset or group of assets may not be recoverable. The Company evaluates the recoverability of intangible assets by comparing their carrying amounts to future net undiscounted cash flows expected to be generated by the intangible assets. If such intangible assets are considered to be impaired, the impairment recognized is measured as the amount by which the carrying amount of the intangible assets exceeds the fair value of the assets. The Company determines fair value based on discounted cash flows using a discount rate commensurate with the risk inherent in the Company's current business model for the specific intangible asset being valued. No impairment charges were recorded for the three months ended March 31, 2025, and 2024.

**Item 3. Quantitative and Qualitative Disclosures about Market Risk**

As a smaller reporting company, we are not required to provide the information required by this Item.

**Item 4. Controls and Procedures**

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

*Evaluation of Disclosure Controls and Procedures*

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer (the "Certifying Officers") carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2025. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of March 31, 2025 due to a material weaknesses in our internal controls over financial reporting ("ICFR"). As previously disclosed, a material weakness exists in the Company's internal control over financial reporting related to ineffective controls over period end financial disclosure and reporting processes, including not timely performing certain reconciliations and the completeness and accuracy of those reconciliations, and lack of effectiveness of controls over accurate accounting and financial reporting and reviewing the underlying financial statement elements, and recording incorrect journal entries that also did not have the sufficient review and approval.

Notwithstanding the identified material weaknesses, management, including the Certifying Officers, believes that the financial statements contained in this Form 10-Q filing fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented in conformity with GAAP.

*Material Weakness*

A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

As previously disclosed, a material weakness exists in the Company's internal control over financial reporting related to ineffective controls over period end financial disclosure and reporting processes, including not timely performing certain reconciliations and the completeness and accuracy of those reconciliations, and lack of effectiveness of controls over accurate accounting and financial reporting and reviewing the underlying financial statement elements, and recording incorrect journal entries that also did not have the sufficient review and approval. The control deficiencies resulted in and could result in a future misstatement in our accounts or disclosures that would result in a material misstatement to our financial statements that would not be prevented or detected. Accordingly, we determined that these control deficiencies constitute material weaknesses.

We are in the early stages of designing and implementing a plan to remediate the material weaknesses identified. . Our plan includes the below:

● Designing and implementing a risk assessment process supporting the identification of risks.

● Implementing systems and controls to enhance our review of significant accounting transactions and other new technical accounting and financial reporting issues and preparing and reviewing accounting memoranda addressing these issues.

● Improving our internal control policies and procedures to specifically address controls around segregation of duties, cybersecurity, user access reviews, and changes in management.

● Implementing specific user access, segregation of duties and change management controls within our financial reporting IT systems.

● Hiring additional experienced accounting, financial reporting and internal control personnel and changing roles and responsibilities of our personnel as we transition to being a public company and are required to comply with Section 404 of the Sarbanes-Oxley Act ("  ***Section 404*** "). We are in the process of hiring additional resources and we are engaging with a third-party consulting firm to assist us with our formal internal control plan and to provide accounting services related to complex accounting transactions.

● Implementing controls to enable an effective and timely review of period-end close procedures.

● Implementing controls to enable an accurate and timely review of accounting records that support our accounting processes and maintain documents for internal accounting reviews.

Management has considered and reviewed the errors which occurred in revenue and cost of goods sold cutoff, accounts payable, accrued liabilities, stock compensation, expense classification, prepaid expenses, operating lease cash flow classification and accounting for finance lease arrangements. Management has determined that controls are not designed effectively in these areas. To mitigate future misstatements in these areas management will implement the following procedures at the end of each reporting period:

1. Accounts Payable - Review the accounts payable with the executive team to inquire about any invoices not sent to accounts payable.

2. Accrued Liabilities - Review the accrued liabilities detail with the executive team to determine if there are any expenses/liabilities for which the company should accrue an expense which has not yet been recognized.

3. Stock Compensation - Review with the CEO and legal counsel the list of stock grants which have been made and ask if there have been any other grants made (paper issued to employees or vendors) which should be included in the analysis.

4. Classification of expenses - Review the expense classification with the executive team to determine all expenses are properly classified.

5. Classification of financing agreements - Review the financing agreements with the executive team to determine proper classification of the agreements as debt or finance lease.

6. Prepaid
 expenses - Review prepaid expenses with the executive team to determine if all prepaid expenses have been properly recorded for
 future services to be rendered and subsequently amortized.

7. Revenue and cost of goods sold cut off - Review revenue and related cost of goods sold with executive team to determine if revenue and related cost of goods sold is properly recognized.

We cannot assure you that these measures will remediate the material weaknesses described above. The implementation of these remediation measures is in the early stages and will require validation and testing of the design and operating effectiveness of our internal controls over a sustained period of financial reporting cycles and, as a result, the timing of when we will be able to fully remediate the material weaknesses is uncertain. If the steps we take do not remediate the material weaknesses in a timely manner, there could be a reasonable possibility that these control deficiencies or others may result in a material misstatement of our annual or interim financial statements that would not be prevented or detected on a timely basis. This, in turn, could jeopardize our ability to comply with our reporting obligations, limit our ability to access the capital markets and adversely impact our stock price.

 

*Changes in Internal Control Over Financial Reporting*

Other than the above, there was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarterly period ending March 31, 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Subsequent to June 30, 2024, the Company began working on their remediation plan as described above.

**PART II - OTHER INFORMATION**

**Item 1. Legal Proceedings.**

None.

**Item 1A. Risk Factors.**

The risks described under the heading "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2024 could materially and adversely affect our business, financial condition, results of operations, cash flows, future prospects, and the trading price of our Class A common stock. The risks and uncertainties described therein are not the only ones we face. Additional risks and uncertainties that we are unaware of or that we currently deem immaterial may also become important factors that adversely affect our business.

You should carefully read and consider such risks, together with all of the other information in our Annual Report on Form 10-K for the year ended December 31, 2024, in this Quarterly Report on Form 10-Q (including the disclosures in the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations" and in our interim condensed consolidated financial statements and related notes), and in the other documents that we file with the SEC.

Except for the additional risk factors set forth below, there have been no material changes from the risk factors previously disclosed under the heading "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2024.

***The transactions contemplated by the Merger Agreement are subject to conditions that may not be satisfied on a timely basis or at all. Failure to complete the transactions contemplated by the Merger Agreement could have material and adverse effects on us.***

Completion of the Mergers is subject to a number of conditions, including the accuracy of the parties' representations in the Merger Agreement and the receipt of stockholder approvals. Such conditions, some of which are beyond our control, may not be satisfied or waived in a timely manner or at all and therefore make the completion and timing of the completion of the Mergers uncertain. In addition, the Merger Agreement contains certain termination rights for both Heliogen and us, which if exercised will also result in the Mergers not being consummated.

If the transactions contemplated by the Merger Agreement are not completed, our business may be adversely affected and, without realizing any of the benefits of having completed the Mergers, we will be required to pay our costs relating to the Mergers, such as legal, accounting, and financial advisory fees. In addition, time and resources committed by our management to matters relating to the Mergers could otherwise have been devoted to pursuing other beneficial opportunities; and the market price of our common stock could be impacted to the extent that the current market price reflects a market assumption that the Mergers will be completed.

***We will be subject to business uncertainties while the Mergers are pending, which could adversely affect our business.***

It is possible that certain persons with whom we have a business relationship may delay certain business decisions relating to us, or seek to terminate, change or renegotiate their relationships with us, in connection with the pendency of the Mergers. This could negatively affect our revenues, earnings and cash flows, as well as the market price of our common stock, regardless of whether the Mergers are completed.

 ****

***We expect to incur significant transaction costs in connection with the Mergers.***

We expect to incur a number of non-recurring costs associated with negotiating and completing the Mergers. These fees and costs have been, and will continue to be, substantial and, in many cases, will be borne by us whether or not the Mergers is completed. A substantial majority of our non-recurring expenses will consist of transaction costs related to the Mergers and include, among others, fees paid to financial, legal, accounting and other advisors. We will continue to assess the magnitude of these costs, and we may incur additional unanticipated costs. The costs described above and any unanticipated costs and expenses, many of which will be borne by us even if the Mergers are not completed, could have an adverse effect on our financial condition and operating results.

***If we are unable to effectively manage Heliogen's business, our reputation and operating results may be harmed.***

Following the Mergers, we are required to integrate the products and businesses of Heliogen into the operations of the Company. We may be unable to successfully integrate these into our business operations. If we are unable to do so for any reason, our reputation and operating results may be harmed and we would be unable to realize the business-related benefits of the transaction.

***There can be no assurance that we will be able to comply with the continued listing standards of Nasdaq.***

 ****

Our continued eligibility for listing on Nasdaq depends on our ability to comply with Nasdaq's continued listing requirements.

On January 24, 2025, we received a letter from the Listing Qualifications Staff of Nasdaq notifying us that we are not in compliance with periodic requirements for continued listing set forth in Nasdaq Listing Rule 5250(c)(1) (the "Reporting Rule") because our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 was not filed with the Securities and Exchange Commission by the required due date of March 31, 2025. The letter received from Nasdaq has no immediate effect on the listing or trading of our shares. We have filed our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 on May 28, 2025.

On May 22, 2025, we received a deficiency notice from the Nasdaq that the Company was not in compliance with the Reporting Rule given the Company's failure to timely file its Quarterly Report on Form 10-Q for the three months ended March 31, 2025, and that this matter serves as an additional basis for delisting the Company's securities from Nasdaq.

Under Nasdaq rules, we have until Monday, June 16, 2025 to submit a plan to regain compliance with Nasdaq Listing Rules. If Nasdaq accepts our plan, Nasdaq may grant an exception until Monday, October 13, 2025 to regain compliance with the Reporting Rule.

If Nasdaq delists our common stock from trading on its exchange for failure to meet the Reporting Rule or any other listing standards, we and our stockholders could face significant material adverse consequences including:

● a limited availability of market quotations for our securities;

● a determination that our common stock is a "penny stock," which will require brokers trading in our common stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our common stock;

● a limited amount of analyst coverage; and

● a decreased ability to issue additional securities or obtain additional financing in the future.

**Item 2. Unregistered Sale of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities.**

None.

**Item 3. Defaults Upon Senior Securities.**

None.

**Item 4. Mine Safety Disclosures.**

Not Applicable.

**Item 5. Other Information.**

During the quarterly period ended March 31, 2025, none of our directors or officers (as defined in Rule 16a-1(f) promulgated under the Exchange Act) adopted or terminated any "Rule 10b5-1 trading arrangement" or any "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408 of Regulation S-K.

**Item 6. Exhibits.**

The following exhibits are filed as part of, or incorporated by reference into, this Form 10-Q.

---

| | | | | |
|:---|:---|:---|:---|:---|
| | | **Incorporated by Reference** | **Incorporated by Reference** | **Incorporated by Reference** |
| **Exhibit**<br>**Number** | <br>**Description** | **Form** | **Exhibit** | **Filing Date** |
| 2.1 | [Agreement and Plan of Merger and Reorganization, dated as of May 28, 2025, by and among Zeo Energy Corp., Heliogen, Inc., Hyperion Merger Corp. and Hyperion Acquisition LLC](http://www.sec.gov/Archives/edgar/data/0001865506/000121390025048509/ea024349301ex2-1_zeo.htm) | 8-K | 2.1 | May 29, 2025 |
| 3.1 | [Certificate of Incorporation of Zeo Energy Corp.](http://www.sec.gov/Archives/edgar/data/1865506/000121390024024166/ea020202901ex3-1_zeoenergy.htm) | 8-K | 3.1 | March 20, 2024 |
| 3.2 | [Bylaws of Zeo Energy Corp.](http://www.sec.gov/Archives/edgar/data/1865506/000121390024024166/ea020202901ex3-2_zeoenergy.htm) | 8-K | 3.2 | March 20, 2024 |
| 10.1 | [Form of Voting and Support Agreement.](http://www.sec.gov/Archives/edgar/data/1865506/000121390025048509/ea024349301ex10-1_zeo.htm) | 8-K | 10.1 | May 29, 2025 |
| 31\*\* | [Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002](ea024537301ex31_zeo.htm) |  |  |  |
| 32\*\* | [Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002](ea024537301ex32_zeo.htm) |  |  |  |
| 101.INS | Inline XBRL Instance Document |  |  |  |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. |  |  |  |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |  |  |  |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. |  |  |  |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. |  |  |  |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. |  |  |  |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |  |  |  |

---

\* Filed herewith. <br> \*\* Furnished herewith.

**SIGNATURES**

Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

---

| | | |
|:---|:---|:---|
|  | **ZEO Energy Corp.** | **ZEO Energy Corp.** |
| Date: June 16, 2025 |  | */s/ Timothy Bridgewater* |
|  | Name: | Timothy Bridgewater |
|  | Title: | Chief Executive Officer |
| Date: June 16, 2025 |  | */s/ Cannon Holbrook* |
|  | Name: | Cannon Holbrook |
|  | Title: | Chief Financial Officer |

---

## Ex-31

**Exhibit 31.1**

**CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER**

**PURSUANT TO RULE 13A-14(A)/15(D)-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002**

I, Timothy Bridgewater, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Zeo Energy Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the period presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;a) Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;b) Designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;c) Evaluated
the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
and

&nbsp;&nbsp;&nbsp;&nbsp;d) Disclosed
in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;a) All
significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;b) Any
fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal
control over financial reporting.

---

| | |
|:---|:---|
| Date: June 16, 2025 |  |
|  | /s/ Timothy Bridgewater |
|  | Timothy Bridgewater |
|  | Chief Executive Officer |
|  | (Principal Executive Officer |

---

**Exhibit 31.2**

**CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER**

**PURSUANT TO RULE 13A-14(A)/15(D)-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002**

I, Cannon Holbrook, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Zeo Energy Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the period presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;a) Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;b) Designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;c) Evaluated
the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
and

&nbsp;&nbsp;&nbsp;&nbsp;d) Disclosed
in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;a) All
significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;b) Any
fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal
control over financial reporting.

---

| | |
|:---|:---|
| Date: June 16, 2025 |  |
|  | /s/ *Cannon Holbrook* |
|  | Cannon Holbrook |
|  | Chief Financial Officer |

---

## Ex-32

**Exhibit 32.1**

**CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350**

**AS ADOPTED PURSUANT TO SECTION 906**

**OF THE SARBANES-OXLEY ACT OF 2002**

In connection with the Quarterly Report of Zeo Energy Corp. (the "Company") on Form 10-Q for the quarterly period ended March 31, 2025, as filed with the Securities and Exchange Commission (the "Report"), I, Timothy Bridgewater, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report.

---

| | |
|:---|:---|
| Date: June 16, 2025 |  |
|  | /s/ Timothy Bridgewater |
|  | Timothy Bridgewater |
|  | Chief Executive Officer |

---

**Exhibit 32.2**

**CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350**

**AS ADOPTED PURSUANT TO SECTION 906**

**OF THE SARBANES-OXLEY ACT OF 2002**

In connection with the Quarterly Report of Zeo Energy Corp. (the "Company") on Form 10-Q for the quarterly period ended March 31, 2025, as filed with the Securities and Exchange Commission (the "Report"), I, Cannon Holbrook, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report.

---

| | |
|:---|:---|
| Date: June 16, 2025 |  |
|  | /s/ *Cannon Holbrook* |
|  | Cannon Holbrook |
|  | Chief Financial Officer |

---