ZEO 10-K
Zeo Energy Corp. (ZEO)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the fiscal year ended
OR
For the transition period from to
Commission file number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
| | ||
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including
area code:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The | ||||
| The |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
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.
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | Smaller reporting company ☒ | 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
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report.
If securities are registered pursuant to Section
12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction
of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐
No
As of June 30, 2025, the last business day of
the registrant’s most recently completed second fiscal quarter, the aggregate market value of the Class A common stock outstanding,
other than shares held by persons who may be deemed affiliates of the registrant, computed by reference to the closing sales price for
the Class A common stock on June 30, 2025, as reported on Nasdaq, was approximately $
As of March 27, 2026,
TABLE OF CONTENTS
i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Report contains, and our officers and representatives may from time to time make, “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “anticipate,” “intend,” “plan,” “goal,” “seek,” “believe,” “project,” “estimate,” “expect,” “strategy,” “future,” “likely,” “may,” “should,” “will” and similar references to future periods. Examples of forward-looking statements include, among others, statements we make regarding:
| ● | the failure to realize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition, the ability of Zeo to grow and manage growth profitably, maintain relationships with customers and suppliers and retain key employees; |
| ● | Zeo’s success in retaining or recruiting its principal officers, key employees or directors; |
| ● | intense competition and competitive pressures from electric utilities and other companies in the industry in which Zeo operates; |
| ● | factors relating to the business, operations and financial performance of Zeo, including market conditions and global and economic factors beyond Zeo’s control; |
| ● | changes in general economic conditions, including unemployment, inflation (including the impact of tariffs) or deflation, U.S. and other countries’ tariffs or other trade restrictions, financial institution disruptions and geopolitical conflicts such as the conflict between Russia and Ukraine and the conflict in the Gaza Strip; |
| ● | the reduction or elimination of government economic incentives to the renewable energy market; |
| ● | the ability of Zeo to issue equity or equity-linked securities or obtain debt financing; |
| ● | the demand for renewable energy not being sustained or growing in size; |
| ● | impacts of climate change, changing weather patterns and conditions and natural disasters; |
| ● | increases in costs of solar energy system components and raw materials; |
| ● | loss of a supplier or other supply chain disruptions; |
| ● | problems with the quality or performance of the solar energy systems that Zeo sells; |
| ● | the effect of legal, tax and regulatory changes; and |
| ● | each of the other factors detailed under the section entitled “Risk Factors.” |
Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, those factors described under the heading “Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. You should not take any statement regarding past trends or activities as representation that the trends or activities will continue in the future. Accordingly, you should not put undue reliance on these statements.
Unless otherwise stated in this Annual Report on Form 10-K (this “Report”), references to “we,” “us,” “our,” “Company” or “our Company” are to Zeo Energy Corp., a Delaware corporation, and its consolidated subsidiaries.
ii
FREQUENTLY USED TERMS AND BASIS OF PRESENTATION
As used in this Report, unless otherwise noted or the context otherwise requires, references to:
| ● | “2024 Plan” refers to the 2024 Omnibus Incentive Equity Plan of Zeo. |
| ● | “A&R Registration Rights Agreement” refers to the Amended and Restated Registration Rights Agreement entered into at Closing, by Zeo, the Sponsor, Piper, the holders of ESGEN Class B ordinary shares and the Sellers pursuant to which, among other things, the Sponsor, Piper, the holders of ESGEN Class B ordinary shares and the Sellers were granted certain registration rights with respect to their respective shares of Common Stock, in each case, on the terms and subject to the conditions set forth therein. |
| ● | “affiliate” refers to, with respect to any Person, any other Person who directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. The term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlled” and “controlling” have meanings correlative thereto. |
| ● | “Amendment to the Letter Agreement” refers to the agreement entered into by the Sponsor, the independent directors of ESGEN and the Westwood Client Accounts, dated April 19, 2023, which was subsequently amended and restated on January 24, 2024 (as amended from time to time). |
| ● | “Board” refers to the board of directors of Zeo. |
| ● | “Business Combination” refers to the transactions contemplated by the Business Combination Agreement. |
| ● | “Business Combination Agreement” refers to the Business Combination Agreement dated as of April 19, 2023, as amended by the First Amendment thereto, dated as of January 24, 2024, by and among ESGEN, Sunergy, OpCo, the Sellers, the Sponsor, for the limited purposes set forth therein, and Timothy Bridgewater, an individual, in his capacity as the Sellers Representative. |
| ● | “Bylaws” refers to the new bylaws of Zeo adopted in connection with the Business Combination. |
| ● | “Charter” refers to the certificate of incorporation of Zeo adopted in connection with the Business Combination. |
| ● | “Class A Common Stock” refers to shares of Class A common stock, par value $0.0001 per share, of Zeo. |
| ● | “Class V Common Stock” refers to shares of Class V common stock, par value $0.0001 per share, of Zeo. |
| ● | “Closing” refers to the closing of the Business Combination. |
| ● | “Closing Date” refers to the date on which the Business Combination closed, March 13, 2024. |
| ● | “Common Stock” refers to the collective shares of Class A Common Stock and Class V Common Stock. |
| ● | “Convertible OpCo Preferred Unit Conversion” refers to a Convertible OpCo Preferred Unit Optional Conversion, Convertible OpCo Preferred Unit Maturity Date Conversion, and Convertible OpCo Preferred Unit Transaction Event Conversion, collectively. |
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| ● | “Convertible OpCo Preferred Unit Dividend Payment Date” refers to the last day of March, June, September and December of each calendar year during which the Convertible OpCo Preferred Units are outstanding. |
| ● | “Convertible OpCo Preferred Unit Maturity Date” means the date that is three (3) years following the Closing Date. |
| ● | “Convertible OpCo Preferred Unit Maturity Date Conversion” refers to the conversion of all, but not less than all, Convertible OpCo Preferred Units into an amount of Exchangeable OpCo Units as is determined by dividing the Convertible OpCo Preferred Unit Original Issue Price plus the aggregate accumulated and unpaid Convertible OpCo Preferred Unit Accruing Dividends with respect to such Convertible OpCo Preferred Units, if any, through the date the conversion occurs, by a weighted average of the daily market price of the Class A Common Stock during the five (5) trading days prior to the date thereof, upon the Convertible OpCo Preferred Unit Maturity Date, subject to certain restrictions set forth in the OpCo A&R LLC Agreement, followed by an immediate exchange of such Exchangeable OpCo Units (together with an equal number of shares of Class V Common Stock) into an equal number of shares of Class A Common Stock. |
| ● | “Convertible OpCo Preferred Unit Optional Conversion” refers to the conversion of all, but not less than all, Convertible OpCo Preferred Units, into an amount of Exchangeable OpCo Units as is determined by dividing the Convertible OpCo Preferred Unit Original Issue Price plus the aggregate accumulated and unpaid Convertible OpCo Preferred Unit Accruing Dividends with respect to such Convertible OpCo Preferred Units, if any, through the date the conversion occurs, by $11.00, at the option of Sponsor, subject to certain restrictions set forth in the OpCo A&R LLC Agreement, followed by an immediate exchange of such Exchangeable OpCo Units (together with an equal number of shares of Class V Common Stock) into an equal number of shares of Class A Common Stock. |
| ● | “Convertible OpCo Preferred Unit Redemption” refers to a Convertible OpCo Preferred Unit Required Redemption and Convertible OpCo Preferred Unit Put Option Redemption, collectively. |
| ● | “Convertible OpCo Preferred Unit Transaction Event Conversion” refers to, in the event of certain change of control transactions or qualified financings, the conversion of all, but not less than all, Convertible OpCo Preferred Units, into an amount of Exchangeable OpCo Units as is determined by dividing the Convertible OpCo Preferred Unit Original Issue Price plus the aggregate accumulated and unpaid Convertible OpCo Preferred Unit Accruing Dividends with respect to such Convertible OpCo Preferred Units, if any, through the date the conversion occurs, by $11.00, at the option of Sponsor, subject to certain restrictions set forth in the OpCo A&R LLC Agreement, followed by an immediate exchange of such Exchangeable OpCo Units (together with an equal number of shares of Class V Common Stock) into an equal number of shares of Class A Common Stock. |
| ● | “Convertible OpCo Preferred Unit Original Issue Price” refers to $10.00. |
| ● | “Convertible OpCo Preferred Units” refers to the Class A OpCo convertible preferred units issued to the Sponsor pursuant to the Sponsor Subscription Agreement. |
| ● | “CST” refers to Continental Stock Transfer & Trust Company. |
| ● | “DGCL” refers to the Delaware General Corporation Law. |
| ● | “Domestication” refers to the continuation of ESGEN by way of domestication of ESGEN into a Delaware corporation, with the ESGEN ordinary shares becoming shares of common stock of the Delaware corporation under the applicable provisions of the Cayman Islands Companies Act (As Revised) and the DGCL; the term includes all matters and necessary or ancillary changes in order to effect such Domestication, including the adoption of the Charter consistent with the DGCL and changing the name and registered office of ESGEN. |
| ● | “DTC” refers to Depository Trust Company. |
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| ● | “Early Lock-Up Termination” refers to the termination of the lock-up period under the Amendment to the Letter Agreement when, subsequent to Closing, the last sale price of 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. |
| ● | “Energy Spectrum” refers to Energy Spectrum Partners VIII LP. |
| ● | “ESGEN” refers to ESGEN Acquisition Corporation, a former blank check company incorporated as a Cayman Islands exempt company. |
| ● | “ESGEN Class A ordinary shares” refers to the Class A ordinary shares, par value $0.0001 per share, of ESGEN. |
| ● | “ESGEN Class B ordinary shares” refers to the Class B ordinary shares, par value $0.0001 per share, of ESGEN. |
| ● | “ESGEN ordinary shares” refers to ESGEN Class A ordinary shares and ESGEN Class B ordinary shares. |
| ● | “ESGEN Private Placement Warrants” refers to the warrants to purchase ESGEN Class A ordinary shares that were issued to the Initial Shareholders in a private placement concurrently with the IPO. |
| ● | “ESGEN Public Warrants” refers to the redeemable warrants issued in the IPO, entitling the holder thereof to purchase ESGEN Class A ordinary shares. |
| ● | “ESGEN Share Conversion” refers to the conversion of each ESGEN Class B ordinary share into one ESGEN Class A ordinary share prior to the Domestication. |
| ● | “ESGEN Warrants” refers collectively to the ESGEN Private Placement Warrants together with the ESGEN Public Warrants. |
| ● | “Exchange Act” refers to the Securities Exchange Act of 1934, as amended. |
| ● | “Exchangeable OpCo Units” refers to the Class B units of OpCo. |
| ● | “FASB” refers to the Financial Accounting Standards Board. |
| ● | “Heliogen” refers to Heliogen, Inc., a Delaware corporation. |
| ● | “Initial Shareholders” collectively refers to the Sponsor, ESGEN’s former four independent directors who held ESGEN Class B ordinary shares and the Westwood Client Accounts. |
| ● | “Investment Company Act” refers to the Investment Company Act of 1940, as amended. |
| ● | “IPO” refers to ESGEN’s initial public offering of its ESGEN Class A ordinary shares (the “Public Shares”) and ESGEN Public Warrants pursuant to the ESGEN’s Registration Statement on Form S-1, filed with the SEC (File No. 333-252730), on September 28, 2021, and completed on October 22, 2021. |
| ● | “Lock-Up Agreement” refers to the lock-up agreement entered into in connection with the Closing between the Sellers and Zeo. |
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| ● | “Mandatory Exchange” refers to Zeo’s right to require, (i) upon a Change of Control Transaction (as defined in the OpCo A&R LLC Agreement) or (ii) in the discretion of Zeo, with the consent of holders of the OpCo Units holding more than 72% of the OpCo Units (excluding OpCo Units held by Zeo), each holder of Exchangeable OpCo Units to exchange all of its Exchangeable OpCo Units. |
| ● | “Nasdaq” refers to the Nasdaq Stock Market. |
| ● | “OpCo” refers to ESGEN OpCo, LLC, a Delaware limited liability company. |
| ● | “OpCo A&R LLC Agreement” refers to the Amended and Restated Limited Liability Company Agreement of OpCo. |
| ● | “OpCo Exchange Right” refers to the rights of holders of Exchangeable OpCo Units 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 Seller Class V Common Stock, for shares of Class A Common Stock on a one-for-one basis, or, at the election of Zeo (as manager of OpCo), cash. |
| ● | “OpCo Manager Units” refers to the Class A units of OpCo issued to Zeo in connection with the Business Combination. |
| ● | “OpCo Units” refers to the Exchangeable OpCo Units and the OpCo Manager Units, collectively. |
| ● | “Organizational Documents” refers to the Charter and the Bylaws of Zeo. |
| ● | “Person” means an individual, corporation, partnership, limited partnership, limited liability company, person (including, without limitation, a “person” as defined in Section 13(d)(3) of the Exchange Act), trust, association or entity or government, political subdivision, agency or instrumentality of a government. |
| ● | “Sarbanes-Oxley Act” refers to the Sarbanes-Oxley Act of 2002. |
| ● | “SEC” refers to the U.S. Securities and Exchange Commission. |
| ● | “Securities Act” refers to the Securities Act of 1933, as amended. |
| ● | “Seller Class V Common Stock” refers to a number of newly issued shares of Class V Common Stock, equal to the number of Exchangeable OpCo Units, issued to the Sellers by OpCo in exchange for the Sellers’ contribution of the Sunergy Company Interests to OpCo in connection with the Business Combination. |
| ● | “Sellers” refers to the holders of the Sunergy Company Interests immediately prior to the Closing of the Business Combination. |
| ● | “Sponsor” refers to ESGEN LLC, a Delaware limited liability company. |
| ● | “Sponsor Forfeited Shares” refers to the 2,361,641 ESGEN ordinary shares forfeited by the Sponsor at Closing pursuant to the Letter Agreement Amendment. |
| ● | “Sponsor PIPE Investment” refers to the Sponsor’s commitment to purchase an aggregate of 1,000,000 Convertible OpCo Preferred Units concurrently with the Closing at a cash purchase price of $10.00 per share, and up to an additional 500,000 Convertible OpCo Preferred Units during the six months after Closing if called for by Zeo. |
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| ● | “Sponsor PIPE Securities” refers to the 1,000,000 Convertible OpCo Preferred Units and up to an additional 500,000 Convertible OpCo Preferred Units during the six months after Closing if called for by Zeo, to be sold to the Sponsor pursuant to the Sponsor Subscription Agreement. |
| ● | “Sponsor Subscription Agreement” refers to that certain subscription agreement, dated as of April 19, 2023, which was subsequently amended and restated on January 24, 2024, by and between ESGEN, OpCo and the Sponsor, entered into in connection with the Business Combination Agreement. |
| ● | “Sunergy” refers to Sunergy Renewables, LLC, a Nevada limited liability company. |
| ● | “Sunergy Company Interests” refers to the limited liability company interests of Sunergy. |
| ● | “Sunergy Convertible Interests” refers to any options, warrants or rights to subscribe for or purchase any equity interests of Sunergy or any subsidiary of Sunergy 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. |
| ● | “Tax Receivable Agreement” refers to the tax receivable agreement that Zeo entered into with the Sellers in connection with the Closing. |
| ● | “TRA Holders” refers to the persons from time to time that become a party to the Tax Receivable Agreement. |
| ● | “Trust Account” refers to the trust account of ESGEN which held the net proceeds from the IPO and certain of the proceeds received in respect of the sale of the ESGEN Private Placement Warrants, together with interest earned thereon, less amounts released to pay taxes. |
| ● | “U.S. Holder” has the meaning set forth in “Material U.S. Federal Income Tax Considerations — U.S. Holders.” |
| ● | “Warrants” refers to the redeemable warrants issued in the IPO, entitling the holder thereof following completion of the Domestication to purchase Class A Common Stock. |
| ● | “Westwood Client Accounts” refers to one or more client accounts of Westwood Holdings Group, Inc., a Delaware corporation, the successor to Salient Capital Partners, LLC, a Texas limited liability company, that purchased ESGEN Class B ordinary shares and ESGEN Private Placement Warrants concurrently with the IPO. |
| ● | “Zeo” or “Zeo Energy,” “we,” “us,” the “Company” or “our Company” refers to Zeo Energy Corp., a Delaware corporation. |
Unless specified otherwise, amounts in this Report are presented in U.S. dollars.
Defined terms in the financial statements contained in this Report have the meanings ascribed to them in the financial statements.
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SUMMARY RISK FACTORS
The following is a summary of the principal risks described below in Part I, Item 1A “Risk Factors” in this Report. We believe that the risks described in the “Risk Factors” section are material to investors, but other factors not presently known to us or that we currently believe are immaterial may also adversely affect us. The following summary should not be considered an exhaustive summary of the material risks facing us, and it should be read in conjunction with the “Risk Factors” section and the other information contained in this Report.
Risks Related to Zeo’s Business
| ● | The solar energy industry is an emerging market which is constantly evolving and additional demand for solar energy systems may not develop to the size or at the rate expected. |
| ● | A material reduction in the retail price of electricity charged by electric utilities or other retail electricity providers would harm Zeo’s business, financial condition and results of operations. |
| ● | Sales and installation of solar energy systems depends heavily on suitable meteorological and environmental conditions such that, if meteorological or environmental conditions are unexpectedly unfavorable, the electricity production from Zeo’s solar service offerings may be below its expectations, and Zeo’s ability to timely deploy new systems may be adversely impacted. |
| ● | Zeo’s business has benefited from the declining cost of solar energy and energy storage system components and may be harmed to the extent the cost of such components stabilize or increase in the future. |
| ● | Zeo’s growth depends in part on the success of its relationships with third parties, including its equipment suppliers, contractors and dealers, including dealers who market to customers and bring the resulting solar contracts to it for fulfillment. |
| ● | Zeo depends on a limited number of suppliers of solar energy system components and technologies to adequately meet demand for its solar energy systems and, due to the limited number of suppliers in Zeo’s industry, the acquisition of any of these suppliers by a competitor or any shortage, delay, price change, announcement or imposition of tariffs or duties or other limitation in Zeo’s ability to obtain components or technologies Zeo uses could result in sales and installation delays, cancelations and loss of customers. |
| ● | If Zeo fails to manage its recent and future growth effectively, it may be unable to execute its business plan, maintain high levels of customer service, or adequately address competitive challenges. |
| ● | Warranties provided by the manufacturers of equipment Zeo sells or services may be limited by the ability of a supplier and manufacturer to satisfy its warranty or performance obligations or by the expiration of applicable time or liability limits, which could reduce or void the warranty protections and increase Zeo’s costs to customers for the systems Zeo offers. |
| ● | Technical and regulatory limitations regarding the interconnection of solar energy systems to the electrical grid may significantly delay interconnections and customer in-service dates, harming Zeo’s growth rate and customer satisfaction. |
| ● | Zeo’s business is concentrated in certain markets, putting us at risk of region-specific disruptions, including hurricanes or other extreme weather events. |
| ● | Zeo’s expansion into new sales channels could be costly and time-consuming, and as Zeo enters new channels, it could be at a disadvantage relative to other companies who have more history in these spaces. |
viii
| ● | Zeo may not realize the anticipated benefits of past or future investments, strategic transactions, or acquisitions, and integration of these acquisitions may disrupt its business and management. |
| ● | Zeo’s rebranding involved substantial costs and may not produce the intended benefits if it is not favorably received by Zeo’s customers, contractors and dealers. |
| ● | Zeo has previously been, and may in the future be, subject to regulatory inquiries and litigation, all of which are costly, distracting to its core business and could result in an unfavorable outcome, or a material adverse effect on its business, financial condition, results of operations, or the trading price of our securities. |
| ● | Zeo’s business currently depends on the availability of utility rebates, tax credits and other benefits, tax exemptions and exclusions, and other financial incentives on the federal, state, and/or local levels that may be adversely affected by changes in, and application of these laws or other incentives to Zeo, and the expiration, elimination or reduction of these benefits could adversely impact Zeo’s business. |
| ● | Zeo relies on certain utility rate structures, such as net metering, to offer competitive pricing to customers, and changes to those policies may significantly reduce demand for Zeo’s solar energy systems. |
| ● | Electric utility policies, statutes, and regulations and changes to such statutes or regulations may present technical, regulatory and economic barriers to the purchase and use of Zeo’s solar energy offerings that may significantly reduce demand for such offerings. |
| ● | If we are unable to effectively manage Heliogen’s business, our reputation and operating results may be harmed. |
Risks Related to Zeo and Ownership of Zeo Securities
| ● | Sales, or the perception of sales, of a substantial number of our securities in the public market by our existing securityholders could cause the price of our shares of Class A Common Stock and Warrants to fall. |
| ● | Certain existing securityholders purchased, or may purchase, securities in the Company at a price below the current trading price of such securities, and may experience a positive rate of return based on the current trading price. Future investors in the Company may not experience a similar rate of return. |
| ● | Our management team has limited experience managing a public company, and regulatory compliance obligations may divert its attention from the day-to-day management of our businesses. |
| ● | We incur significant costs as a result of operating as a public company. |
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| ● | We have identified material weaknesses in our internal controls over financial reporting. If we are unable to remediate these material weaknesses, if management identifies additional material weaknesses in the future or if we otherwise fail to maintain effective internal controls over financial reporting, we may not be able to accurately or timely report our financial position or results of operations, which may adversely affect our business and stock price or cause our access to the capital markets to be impaired. |
| ● | Nasdaq may delist Zeo’s securities from trading on its exchange. |
| ● | An active, liquid market for Zeo’s securities may not develop, which would adversely affect the liquidity and price of Zeo’s securities. |
| ● | Warrants issued in the IPO are exercisable for Class A Common Stock, which would increase the number of shares eligible for future resale in the public market and result in dilution to the stockholders of Zeo. |
| ● | Zeo may redeem unexpired Warrants prior to their exercise at a time that is disadvantageous for holders of Warrants. |
| ● | We are a holding company. Our only material asset is our equity interest in OpCo, and we are accordingly dependent upon distributions from OpCo to pay taxes, make payments under the Tax Receivable Agreement and cover our corporate and other overhead expenses. |
| ● | If OpCo were to become a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, we and OpCo might be subject to potentially significant tax inefficiencies, and we would not be able to recover payments previously made by us under the Tax Receivable Agreement even if the corresponding tax benefits were subsequently determined to have been unavailable due to such status. |
| ● | In certain cases, payments under the Tax Receivable Agreement may be accelerated and/or significantly exceed the actual benefits that Zeo realizes in respect of the tax attributes subject to the Tax Receivable Agreement. |
| ● | Future sales (including potential sales of securities to White Lion pursuant to the White Lion Purchase Agreement), or the perception of future sales, by us or our stockholders in the public market could cause the market price for the common stock to decline. |
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PART I
ITEM 1. BUSINESS.
Mission
Our company and personnel are passionate about delivering cost savings and increased independence and reliability to energy consumers. Our mission is to expedite the U.S.’ transition to renewable energy by offering our customers an affordable and sustainable means of achieving energy independence.
Business Overview
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 efficiency-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.
We were originally incorporated under the name “ESGEN Acquisition Corp.” as a blank check company incorporated as a Cayman Islands exempted company and formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization, or similar business combination with one or more businesses. As discussed in this section, we completed a business combination with Sunergy Renewables, LLC, a Nevada limited liability company, which we refer to as Sunergy, on March 13, 2024 and changed our name to “Zeo Energy Corp.”
Sunergy was created through a business contribution of Sunergy Solar LLC (“Sunergy Solar”) and Sun First Energy, LLC (“Sun First Energy”) to Sunergy on October 1, 2021, which we refer to as the Contribution. Sunergy Solar, formed in 2005, and initially focused on providing heating, ventilation and air conditioning products and services in Florida, later expanded into installing residential solar energy systems sold directly by the company and third-party sales dealerships. Sun First Energy was established in 2019, and, from its formation to the date of the Contribution, it sold residential solar energy systems in Florida that were installed by other companies. Prior to the Contribution, Sunergy Solar and Sun First Energy had collaborated on residential solar energy system installations and shared a commitment to quality, integrity and customer satisfaction. The Contribution established our vertically integrated company offering residential solar energy solutions. Many of our solar energy system customers also purchase other energy efficiency-related equipment or services or roofing services from us.
In January 2022, we began selling and installing residential solar energy systems and other energy efficiency-related equipment in Texas, in January 2023, we expanded into Arkansas, in September 2023, we entered Missouri, and in February 2024, we entered Ohio and Illinois. In 2025, we expanded our services in California, Colorado, Minnesota, Utah, and Virginia. In November 2024, we also began serving customers for whom Lumio HX, Inc. (as described under Recent Developments below) had begun but not completed residential energy systems prior to completion of its bankruptcy, primarily in California, Maryland, New Jersey, North Carolina, Oklahoma, and South Carolina. The number of our installations, sales support, and administrative personnel was approximately 190 as of December 31, 2024.
Recent Developments
White Lion Transaction
On January 27, 2026, we entered into the Common Stock Purchase Agreement (the “White Lion Purchase Agreement”) with White Lion. We also entered into a Registration Rights Agreement with White Lion on January 27, 2026 (the “RRA”). Pursuant to the White Lion Purchase Agreement, the Company has the right, but not the obligation, to require White Lion to purchase, from time to time, up to $30.0 million in aggregate gross purchase price of newly issued shares of our Class A Common Stock, subject to certain limitations and conditions set forth in the White Lion Purchase Agreement. Subject to the satisfaction of certain customary conditions, the Company’s right to sell shares to White Lion commenced on the date of the execution of White Lion Purchase Agreement and extends until the earlier of (i) White Lion having purchased shares of Class A Common Stock equal to $30.0 million and (ii) January 27, 2029 (the “White Lion Commitment Period”).
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During the White Lion Commitment Period, subject to the terms and conditions of the White Lion Purchase Agreement, the Company may notify White Lion when the Company exercises its right to sell shares of its Class A Common Stock. The Company may deliver a Rapid Purchase Notice (as such term is defined in the White Lion Purchase Agreement), where the Company can require White Lion to purchase up to a number of shares of Class A Common Stock equal to the 20% of Average Daily Trading Volume (as such term is defined in the White Lion Purchase Agreement). The Company may also deliver a Accelerated Purchase Notice (as such term is defined in the White Lion Purchase Agreement), where the Company may require White Lion to purchase up to a number of shares of Class A Common Stock equal to 20% of the Average Daily Trading Volume. White Lion may waive such limits under any notice at its discretion and purchase additional shares.
The price to be paid by White Lion for any shares that the Company requires White Lion to purchase will depend on the type of purchase notice that the Company delivers. For shares being issued pursuant to Accelerated Purchase Notice, the purchase price per share will be equal to the lowest traded price of Class A Common Stock during one (1) hour period following the White Lion’s written consent of the acceptance of the notice. For shares being issued pursuant to a Rapid Purchase Notice, the purchase price per share will be equal to the average of the three (3) lowest traded prices on the date that the notice is delivered.
No purchase notice shall result in White Lion beneficially owning (as calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d-3 thereunder) more than 4.99% of the number of shares of the Class A Common Stock outstanding immediately prior to the issuance of shares of Class A Common Stock issuable pursuant to a purchase notice.
The Company may deliver purchase notices under the White Lion Purchase Agreement, subject to market conditions, and in light of our capital needs, from time to time and under the limitations contained in the White Lion Purchase Agreement. Any proceeds that the Company receives under the White Lion Purchase Agreement are expected to be used for working capital and general corporate purposes.
The White Lion Purchase Agreement may be terminated by the Company at any time and for any reason, in its sole discretion, subject to the Company having delivered the applicable Commitment Shares (as defined below). The White Lion Purchase Agreement will also terminate automatically upon the earlier of the expiration of the White Lion Commitment Period or the occurrence of certain bankruptcy or insolvency-related events involving the Company.
In consideration for the commitments of White Lion, as described above, the Company is contractually committed to issue to White Lion $100,000 worth of Class A Common Stock (the “Commitment Shares”). The Commitment Shares are deemed fully earned and non-refundable as of the execution date of the White Lion Purchase Agreement; however, if the White Lion Purchase Agreement is terminated by the Company as a result of a material breach by White Lion, the Company may pursue all remedies available at law or in equity, including reimbursement or recovery of such Commitment Shares, to the extent permitted by applicable law.
Concurrently with the White Lion Purchase Agreement, the Company entered into the RRA with White Lion. The Purchase Agreement and the RRA contain customary representations, warranties, conditions and indemnification obligations of the parties. The representations, warranties and covenants contained in such agreements were made only for purposes of such agreements and as of specific dates, were solely for the benefit of the parties to such agreements and may be subject to limitations agreed upon by the contracting parties.
White Horse Energy Transaction
On January 30, 2026, Sunergy, a subsidiary of the Company, increased the subordinated loan in the form of note receivable with White Horse Energy, LLC from $3.0 million to $6.15 million under the same terms as the original note.
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Products and Services
Residential Solar Energy Systems
Zeo Energy’s primary business activity is selling and installing residential solar energy systems that homeowners use to supplement the amount of usable electricity required to power their homes. We currently operate primarily in Florida, Texas, Arkansas, Missouri, Ohio, and Illinois, and have begun offering solutions and services in California, Colorado, Minnesota, Utah, and Virginia. We are additionally serving customers for whom Lumio HX, Inc. had begun but not completed residential energy systems prior to completion of its bankruptcy, in Maryland, New Jersey, North Carolina, Oklahoma, and South Carolina.
Other Energy Efficient Equipment and Services
In 2025, approximately 5% of our customers purchased one or more energy efficient products or services, including insulation services, such as adding insulation to a home’s attic or walls, hybrid electric water heaters or swimming pool pumps, and battery-based energy storage systems.
Roofing Services
We install roofs in Florida, where our subsidiary, Sunergy Roofing & Construction, Inc., is a licensed roofing contractor. In other states where we operate, for some solar energy system customers that need roofing services, we may contract with roofing companies for the services. We plan to continue growing our roofing operations, as we believe our roofing services complement our residential solar energy systems and for some customers helps to expedite solar system installations.
Subcontractors
We use subcontractors to install some of our residential solar energy systems at times when we do not have a sufficient number of our own installation teams to timely complete the project. We also use subcontractors to provide all of our insulation services and to install some of the roofing services and energy efficient equipment such as hybrid electric water heaters and pool pumps which we sell. Our subcontractor fees for residential solar energy system installations are typically based on total wattage installed, and our arrangements with installation subcontractors allow either party to terminate the agreement for convenience.
Marketing and Sales
We market our products and services to potential customers directly through in-home visits carried out by our internal sales agents and indirectly through external sales dealers. In the case of leases, a customer is approached by and communicates with the same sales personnel as if the customer were purchasing a system directly from Zeo. We also engage in digital marketing efforts on our own or through third-party marketing specialists, including search engine optimization and social media communications to strengthen our online marketing presence. Our code of conduct applies to our employees, independent contractors and dealers, and it requires adherence to high ethical standards when carrying out business activities.
Internal Direct Sales Force
We have established an internal team of sales agents that markets and sells directly to customers through door-to-door sales approaches. The team included approximately 260 sales agents as of both December 31, 2025 and December 31, 2024. Our sales agents are engaged through full-time contracts lasting from April through August, which is our primary selling season. Sales made through our internal sales team have lower customer acquisition costs than sales sourced through our external dealers. In 2025, approximately 89% of the total systems we installed were sold through our internal sales team.
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Sales Through External Dealers
We also install systems sold by external sales dealers that act as our sales representatives with potential customers. The number of active dealers that have entered into a current arrangement to sell our solar panel systems was approximately 10 as of December 31, 2025 compared to approximately 20 as of December 31, 2024. The percentage of sales that originate with our external dealers increases during the fall and winter months when our internal sales efforts are diminished. We provide field support and training to these dealers on our sales offerings, sales processes and other business processes, including our software sales platform.
Upon our selection of and engagement with a dealer, the dealer executes our dealer agreement. The majority of our dealer agreements require the dealers to exclusively represent our business with respect to the particular products or services we sell. Dealers have the option of choosing to execute a contract that does not require this exclusivity, and some select this option. Our dealer contracts are terminable for convenience by either party. For each residential solar energy system that we install for a customer that was sold by a dealer, after we receive payment, we compensate the dealer with a commission based on the number of watts of solar panels installed.
We recruit and select dealers based on their experience in the market, ability to produce sales and general reputation for ethical behavior within the industry. As part of our dealer contract, we require our dealers to agree in writing to comply with our code of conduct when carrying out their marketing and other activities.
Customer and Leasing Agreements
A homeowner becomes our customer typically by signing a contract with us to purchase and receive installation of a solar energy system. We also install solar energy systems that are leased by the customer under an agreement between the customer and a third-party leasing company under which the leasing company will own and lease to a customer a solar energy system. A customer that chooses our products and services typically signs the contract after meeting with one of our sales agents or dealers in the customer’s home and receiving a preliminary system design for their home and pricing for the system. Whether the customer decides to purchase or lease the solar energy system, the sales agent or dealer determines the pricing to be offered to the customer based on product and services price information stored in our sales software for the system components included in a customer’s proposed system. After the customer signs the contract, we schedule and conduct a site survey. If during the site survey we discover property code compliance or other complications with the planned design and installation, we may issue a change order; if required changes represent additional costs to us or the customer, the party that would be responsible for those costs may choose to cancel the contract. After the site survey, we prepare formal design and engineering documents and apply for applicable permits from local government authorities. After required permits are obtained, we schedule and install the solar energy system and any other equipment purchased on the customer’s home.
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Purchase Contract Warranties. As the owner of the residential solar energy system under the purchase and installation agreement, customers receive a manufacturer’s limited warranty for system components. For the principal components of solar panels, inverter, and racking, the manufacturer’s limited warranty typically lasts 25 years. Manufacturers control whether the warranty periods they offer will change for equipment purchased in the future. Though we are not responsible for a manufacturer’s compliance with warranty obligations, we assist customers in contacting the manufacturer if a warranty issue arises. We provide customers at least a ten-year limited warranty for our installation work and at least a five-year limited warranty against roof penetrations.
Purchase Contracts and Financed Sales. For the year ended December 31, 2025, approximately 8% of our customers who purchased residential solar energy systems from us entered into a loan arrangement with a third party to finance the purchase over an extended period of time. The loan agreement between the customer and the third-party lender typically has a repayment term of between 7 and 25 years and requires the customer to pay either a minimal or no down payment. The lender pays us our portion of the purchase payment after completion of system installation.
Purchase Contracts and Cash Sales. For the year ended December 31, 2025, an immaterial amount of our orders were from customers paying in cash for the purchase of residential solar energy systems. For those sales, our purchase contract typically requires the customer to pay 25% of the purchase price upon execution of the purchase agreement, 50% when we begin installation, and the final 25% on the last day of installation. Installation is usually commenced and completed either in a single day or within several days.
System Leases. In December 2022, we launched a program offering customers the option of leasing our solar energy systems from third-party leasing companies. The customer agrees to pay the leasing company a predetermined monthly fee for the electricity produced by the residential solar energy system. As of December 31, 2025, approximately 74% of the systems we installed in 2025 are leased by the customer. The lease term between the leasing company and the customer is 25 years. The customer agrees to pay the leasing company a predetermined monthly fee for the electricity produced by the solar energy system. The monthly fee generally increases annually over the lease term at a predetermined rate, and the customer typically has the option to renew the lease for five to ten years. The potential advantage to the customer of a lease agreement is that a third-party owner of the residential solar energy system may take more advantage of available government tax incentives for solar energy production, which may allow them to lease the system to the customer at monthly rates that are lower for the customer than if the customer were financing its own purchase of the system. We installed the first leased solar energy system in April 2023 and during the year ended December 31, 2025, we installed approximately 1,550 leased solar energy systems. In the lease model offered to our customers, the third-party leasing company contracts with the homeowner customer to install a solar energy system owned by the leasing company and leased to the customer. The leasing company contracts with Zeo to purchase system equipment and install the solar energy system. Some leasing companies may contract with Zeo to maintain and service the system on the leasing company’s behalf during the life of the lease.
Approximately 19% of Zeo’s customers who have entered into leasing agreements have done so with third-party leasing companies established and managed by White Horse Energy, LC (“White Horse Energy”), a holding company of which Mr. Bridgewater, Zeo’s Chairman and Chief Executive Officer is the owner and manager. Subject to investor and customer demand, White Horse Energy intends to attract more investors to form third-party leasing companies. No assurance can be given that White Horse Energy will be able to do so or that arrangements can be made with other funds to act as lessors of Zeo’s solar energy systems in the future. Zeo has entered into leasing arrangements with several other unrelated third parties to offer customers a choice of purchase or lease options, and continues to explore similar arrangements with other unrelated third-parties.
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Supply
The main components of our residential solar energy systems are solar panels, inverters and racking systems. Common related components or systems that we may additionally supply are battery-based energy storage systems, insulation, hybrid electric water heaters, swimming pool pumps and roofing. All of the products that we install are manufactured by third parties. We select products and system components, suppliers and distributors based on cost, reliability, warranty coverage, performance characteristics and ease of installation, among other factors.
While we procure products and components from multiple suppliers and distributors to reduce the likelihood that we experience an inability to procure those products and components, the primary supplier from which we purchase the equipment that we install is Consolidated Electrical Distributors, Inc. (d/b/a Greentech Renewables) (“Greentech”). Greentech also provides us inventory management services by holding equipment in its inventory until it delivers directly to the customer site for installation. We purchase from Greentech through a credit agreement under which Greentech extends us credit for purchases, and we are obligated to make payments by the 15th day of the month following each purchase. A purchase discount is available for early cash payment, and a service charge of 1.5% per month can be assessed for payments made more than 30 days after the invoice date. Our agreement with Greentech does not require either party to continue to conduct new business with the other party. During 2025, we purchased approximately 46% of the equipment that we installed through Greentech. We believe our relationship with Greentech, and the volume of business we do through them, has established us as a preferred customer and enables us to procure components at attractive terms. If our relationship with Greentech were to be terminated, there are other distributors of the same or similar equipment, and we believe we could readily obtain supplies from those other distributors, though they may take some time to develop the efficient logistics system Greentech employs now on our behalf delivering products to the customer installation sites.
Heightened inflation in the costs of labor and components beginning in 2020 and continuing today has contributed to fluctuating prices for solar energy equipment. At times, we have had to pay increased prices to obtain equipment. This has not yet prevented us from obtaining the products we need to install systems purchased by our customers, but there can be no assurance that this will continue. We do not have information that allows us to quantify the specific amount of cost increases attributable to inflationary pressures.
We have previously experienced price increases and temporary supply delays resulting from multiple market phenomena. The majority of the solar panels and other major system equipment components that we install are manufactured outside of the United States. Government tariffs on solar energy equipment, including tariffs placed on solar equipment manufactured in China, have also contributed to higher prices on solar equipment. Additionally, Russia’s war against Ukraine caused price and supply pressure on solar energy equipment, as the war has impacted fuel prices and has led to increased demand in European markets for solar energy equipment as consumers and governments in Europe have sought to establish greater energy independence. From 2020 through 2022, we experienced periods of temporary delay in obtaining supplies. We believe these delays reduced the number of installations in comparison to what we would have been able to install without the delays. In 2023 and 2024, we did not experience appreciable delays in supply. Following new tariffs introduced by the U.S. government in April 2025, as further detailed below, we expect to experience an increase in prices for solar system equipment. We have not experienced consequent delays in procuring equipment, but such delays may occur.
For more information on risks related to our supply chain, see “Risk Factors — Risks Related to Zeo Energy’s Operations — Due to the limited number of suppliers in our industry, the acquisition of any of these suppliers by a competitor or any shortage, delay, price change, announcement and imposition of tariffs or duties or other limitation in our ability to obtain components or technologies we use could result in sales and installation delays, cancellations and loss of customers” and “Risk Factors — Risks Related to Zeo Energy’s Operations — Increases in the cost or reductions in supply of solar energy system and energy storage system components due to tariffs or trade restrictions announced or imposed by the U.S. government could have an adverse effect on our business, financial condition and results of operations.”
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Seasonality
Historically, our sales volume and installation activity has been highest during late spring and summer. During this time, consumers in many locations see greater energy needs due to operating air conditioning systems and warm-weather appliances such as swimming pool pumps. Our door-to-door sales efforts are also aided during these months by daylight savings time providing increased daylight hours into the evening, and we have more sales personnel, many of whom are college students, working during these months, as described above. We typically have largely or entirely scaled down our internal sales efforts during the fall, winter, and early spring. Snow, cold weather or other inclement weather can also delay our installation of products and services.
Strategy
We plan to increase our market impact and grow our revenue and profits by pursuing the following strategic objectives:
Expand our operations into additional geographic markets. We plan to continue to expand in new geographic markets, both organically and through strategic M&A, considering factors such as the rates consumers pay for electricity, where favorable net metering policies or cost incentives exist, the percentage of the addressable residential market that already has residential solar energy systems, and where we believe the market is not already oversaturated with competitors.
Increase capacity for efficient growth by investing in people and systems. In 2025, we experienced a decrease in sales and installations that generally affected the solar industry during the same period. Prior to 2025, we have generally increased the number of solar energy systems we sell and install by growing and training our internal seasonal sales force, and we plan to continue to do so, as well as increasing our number of external dealers. We have also grown and plan to continue growing our installation capacity in markets we serve by hiring and training more skilled technicians and investing in technology. Where we do not yet have installation teams in place, we plan to continue to collaborate with subcontractors to fulfill our installation needs.
Continue to grow our external dealer sales channel. We plan to increase the number of external dealers working to bring us customers. We believe we will continue to have success in attracting dealers to our business because of our scalable business platform that allows dealers to participate in the residential solar energy sales and installation life cycle with limited investments in personnel and capital.
Expand customer options for buying affordable solar energy. We plan to expand our roofing business in certain markets we enter in the future. Roofing facilitates a faster processing time for our solar installations in cases where the residential customer is in need of a roof replacement prior to installing solar systems. We believe offering customers the option to lease a residential solar energy system installed on their home will increase the number of systems we can sell and install due to the potential savings for some customers that cannot otherwise take full advantage of certain tax incentives. As described above, in December 2022, we launched a program offering customers the option of leasing residential solar energy systems from third parties that we install on the customer’s home.
Diversify operations through acquisition. In August of 2025, we acquired Heliogen, Inc. (“Heliogen”). Heliogen had an expertise around commercial and utility scale long-duration storage solutions. We have retained a team of engineers to pursue opportunities to implement solar and long-duration storage solutions starting with data centers. We will continue to look for acquisition opportunities to grow and diversify the company.
Strengths
Lean Business Model. We have a lean business model that supported revenue growth and net income in each of the four years prior to 2024. During 2024 and 2025, in the face of a challenging economic environment across the residential solar industry, we believe our lean cost structure has enabled us to manage operating expenses and preserve liquidity while continuing to invest in our growth initiatives.
Our Sales Model. Our sales methodology produces a high volume of sales. We believe our internal sales process drives a high volume of sales per sales representative and results in low customer acquisition costs. The success of our sales processes starts with quality, hands-on training for each sales representative. Our self-produced digital learning platform presents our sales representatives with sample customer scenarios and guides them in learning effective communication techniques, as well as how to efficiently carry out administrative steps required for completing sales. Each sales representative’s responses to sample customer scenarios are reviewed and critiqued by managers of our internal sales team.
In our sales model, a majority of personnel knock on doors of potential customers and explain the benefits of solar energy and our offerings with the objective of scheduling a subsequent sales meeting. In the scheduled meetings, a more experienced sales representative or sales manager provides a homeowner additional information about system design, energy savings and other benefits, pricing, incentives and financing options.
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We believe that the key elements to our successful business model include (i) effective training and time spent with senior sales managers, (ii) our use of our customer relationship management software platform which concurrently tracks key performance indicators across the sales cycle, and (iii) our multi-step setter-closer sales model, which enables senior sales personnel to focus on greater sales success in presentations, while setters focus on developing and filtering quality, qualified leads, all of which then contributes to maximizing the percentage of leads converted into sales and sales into installations because of satisfied customers throughout the process.
Our vertical integration leads to customer satisfaction and personnel retention. We believe our vertically integrated business model, in which we market, design, sell, procure, install and service systems, has a major benefit of enhancing the speed of project completion after an initial sale is made. It also allows us to price projects strategically with information from both the sales and installation sides of the process. Our greater control over the total process and our resulting success rates in navigating the local municipal permit process is intended to increase customer satisfaction and reduce potential sales force frustration from losing many jobs due to delays in the installation process. Our ratio of sales converted to completed installations is higher for sales that come from our internal agents than that that come from our dealer sales. We believe this higher rate helps increase the job satisfaction and retention rate for our personnel, as it enhances commissions that are paid out to sales personnel and managers, and provides work for installation teams.
Our scalable business platform allows us to grow efficiently. We believe that we have established a scalable business platform for efficiently completing the life-cycle of tasks involved in offering and fulfilling customers’ residential solar power needs. This platform is principally: (a) software we use in designing, selling, installing and servicing systems, and in tracking key performance indicators across the sales cycle; and (b) the business processes of our employees that perform field work, system design, permitting, installation and back-office support tasks. This platform is intended to allow us to undergo rapid sales and installation growth by efficiently adding new personnel and collaborating effectively with external dealers who bring us additional customers. We have carefully designed these processes and our pre- and post-installation operations to be effective systems which can be easily explained to new employees and replicated in the new cities and regions in which we operate and expand.
Competition
The solar energy and renewable energy industries are both highly competitive and continually evolving as participants strive to distinguish themselves within their markets and compete with large electric utilities.
We consider our primary competitors to be electric utilities that supply electricity to our potential customers. We compete with these electric utilities primarily based on price (cents per kWh), predictability of future prices and the ease by which customers can switch to electricity generated by our residential solar energy systems. We may also compete with them based on other value-added benefits. These include reliability and carbon-friendly power, benefits which consumers have historically paid a premium to secure, but which customers can obtain by purchasing a solar energy system for monthly costs that are sometimes equal to or less than a traditional monthly power bill from the utility.
We also compete with retail electric providers and independent power producers that are not regulated like electric utilities, but which have access to the utilities’ electricity transmission and distribution infrastructure pursuant to state, territorial and local pro-competition and consumer choice policies. These retail electric providers and independent power producers can offer customers electricity solutions that are competitive with our residential solar energy system options on both price and usage of renewable energy technology while avoiding the physical installations that our current business model requires.
We compete with community solar products offered by solar companies or sponsored by local governments and municipal power companies, as well as utility companies that provide renewable power purchase programs. Some customers might choose to subscribe to a community solar project or renewable subscriber program instead of having a residential solar energy system installed on their home, which could affect our sales. Additionally, some utility companies (and some utility-like entities, such as community choice aggregators) have power generation portfolios that are increasingly renewable in nature. As utility companies offer increasingly renewable portfolios to retail customers, those customers might be less inclined to have a residential solar energy system installed on their home or business, which could adversely affect our growth.
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We also compete with solar energy companies with vertically integrated business models like our own, many of which are larger than we are. For example, some of our competitors offer their own consumer financing products to customers and/or produce one or more components of the residential solar energy system or energy storage system. In addition to financing and manufacturing, some other business models also include sales, engineering, installation, maintenance and monitoring services. Some of our competitors also have an established complementary construction, electrical contracting or roofing services.
Some competitors also offer customers the option of leasing a residential solar energy system installed on the customer’s residence. In such a scenario, the provider or a third party owns the residential solar energy system, and the customer typically pays a predetermined fee for the electricity produced by the residential solar energy system. The fee generally increases annually at a predetermined rate over the lease term, which is typically 20 to 25 years, with a renewal option. Such a lease program can take fuller advantage of some of the available tax incentives and, therefore, can reduce the customer’s monthly costs in comparison to owning the residential solar energy system.
We compete against companies that are not vertically integrated, such as companies that offer only installation services, or provide only equipment to be installed, or dealers that sell systems for which another entity or entities will provide and install equipment. Some of these entities finance products directly to consumers, inclusive of programs like Property-Assessed Clean Energy financing programs established by local governments. For example, we face competition from solar installation businesses that seek financing from external parties or utilize competitive loan products or state and local programs.
We expect the competition to evolve as the market continues to grow, evolve and attract new market entrants. We believe that with our business model and sales strategy, we can compete effectively and favorably within the industry.
For more information on risks relating to increased competition in our industry, see “Risk Factors — Risks Related to the Solar Industry — We face competition from electric utilities, retail electric providers, independent power producers, renewable energy companies and other market participants.”
Intellectual Property
We protect our intellectual property rights by relying on common law protections and through contractual arrangements. We typically require our personnel, consultants and third parties such as our suppliers with access to our proprietary information to execute confidentiality agreements. Our principal trade secrets and copyrighted materials consist of our sales methodologies and data regarding our personnel, customers and suppliers.
We also license third-party software and services that we use in operating our business. These third-party solutions include, among others, software that we use in selling and designing our products services, a customer relationship management system to actively track key performance indicators across the sales cycle and software to augment our sales and marketing efforts.
Heliogen
Heliogen is a renewable energy technology company focused on delivering round-the-clock, low-carbon U.S. energy production, using concentrated sunlight and thermal energy storage to deliver cost-effective, load-following, high-capacity factor thermal and electric energy.
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Heliogen continues to prioritize commercial deployment of its energy solutions with a technology-centric business model, by focusing on:
| ● | the development and implementation of its enhanced concentrated solar energy technology and thermal energy storage; |
| ● | providing engineering, maintenance and project development support to third parties seeking reliable, low-carbon energy and storage solutions; |
| ● | supporting owner-operators to deploy Heliogen’s technology (Heliogen will partner with engineering, procurement and construction companies for facility construction); and |
| ● | the long-term, licensing of Heliogen’s intellectual property and providing engineering and maintenance support to third parties interested in manufacturing and installing the hardware. |
Products & Services
Heliogen has developed innovations for concentrating sunlight which Heliogen believes enhance the fundamentally proven chassis technology for efficiently and cost-effectively capturing energy. Heliogen is among the leading technology providers capable of delivering cost-effective renewable energy solutions that complement traditional energy sources and facilitate a pragmatic reduction of carbon emissions for industrial operations.
Without storage, energy generation by traditional forms of renewable power such as wind and solar photovoltaic (“PV”) can rapidly fluctuate between over-supply and under-supply depending upon resource availability. As the grid penetration of intermittent resources increases, these fluctuations may become more extreme. Concentrated solar energy technology can address this challenge by integrating thermal energy storage, which is an integral part of Heliogen’s hybrid power solution. This stored energy can then be dispatched when needed, including during times without sunlight, to cost-effectively deliver near 24/7 carbon-free energy in the form of electric power and/or heat.
The energy solutions Heliogen offers are:
| ● | Hybrid & Tri-Brid Low-Carbon Power Generation — Heliogen’s hybrid approach integrates a steam turbine generator with CSP, PV and long-duration (thermal) energy storage (“LDES”) to achieve low-carbon emissions for electricity production, combining sustainability with practicality, while maintaining a low-cost solution. Heliogen’s tri-brid approach further integrates a natural gas-fired system capable of delivering up to 100% firm power for mission critical operations. |
| ● | Carbon-Free Steam Production — This baseline solution produces heat or steam for use in industrial processes, eliminating carbon emissions through innovative technology. |
The use of molten salt has been successfully demonstrated as a heat transfer and thermal energy storage medium in CSP plants worldwide, and is recognized as a mature, commercially deployable technology. Modern installations incorporate CSP, PV and thermal energy storage — which Heliogen refers to as its hybrid power solution. This hybrid power solution leverages the low cost of electricity generated by PV during the day and the cost-effective LDES during the night for dispatchable, near-continuous operation.
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For near-term projects, Heliogen’s designs aim to improve upon this established approach in two ways. First, Heliogen utilizes a modular architecture, deploying multiple smaller towers per project instead of a single large tower. This streamlines project engineering by allowing for smart replication across multiple projects, while enhancing efficiencies, improving land utilization, and providing redundancy for greater operational reliability and uptime. Second, Heliogen’s closed-loop software is designed to detect optical inaccuracies and automatically correct them, substantially improving upon the efficiency of existing CSP plants worldwide. Using Heliogen’s software on heliostats at the National Solar Thermal Test Facility (NSTTF) corrected the aim of the heliostats and reduced tracking error substantially compared to the current industry benchmark. The software also measures the alignment of the mirror facets to improve beam quality. The software’s automated correction of heliostat pointing inaccuracies is expected to reduce operational and maintenance costs by reducing the need for offline calibration and continuously optimizing system efficiency for maximum sunlight collection.
Concentrated solar energy technology is fundamentally a thermal energy collection system, which Heliogen believes is particularly well-suited to meeting the energy needs of industrial processes. For example, many industrial facilities use steam to supply energy to their process. Heliogen’s solution, in the form of a steam plant, can supply steam nearly 24/7 by collecting thermal energy while the sun is shining, storing it in a thermal energy storage system, and using that thermal energy to supply heat to a boiler when the industrial process needs steam.
Insurance
We maintain the types and amounts of insurance coverage and on terms deemed adequate by management based on our actual claims experience and expectations for future claims. However, future claims could exceed our applicable insurance coverage. Our insurance policies cover employee-and contractor-related accidents and injuries, property damage, business interruption, storm damage, inventory, vehicles, fixed assets, facilities, and crime and general liability deriving from our activities. We have also obtained insurance policies covering directors, officers, employment practices, auto liability, and commercial general liability. We may also be covered in some circumstances for certain liabilities by insurance policies owned by third parties, including, but not limited to, our dealers and vendors.
Government Regulation
U.S. tariffs, duties and other trade regulations impact the prices of components in the residential solar energy systems and energy storage systems we sell, in addition to the pricing pressures caused by supply chain factors as discussed above. As further discussed below, these U.S. government-based pricing influences currently include various tariffs, such as antidumping (“AD”) and countervailing duties (“CVD”) and other trade restrictions, applied to imported crystalline silicon PV cells and solar panels imported into the U.S. Also, China is a major producer of solar panels, inverters and other components that we use in the systems that we install, and the U.S. currently assesses various tariffs and antidumping and countervailing duties on equipment produced in China, including solar panels and inverters. The U.S. has also placed certain geographic, company-specific and other trade restrictions on Chinese sources of supply based on foreign policy and national security interests. The scope and timing of these regulatory efforts change over time, and the government may introduce new regulations as world events occur and public policy evolves. In response to the market uncertainty and price fluctuations caused by these government actions and other supply chain pressures, we carefully and periodically evaluate our suppliers of system components and make purchasing decisions based on our judgments of product quality, warranties, pricing and availability.
For more information on risks relating to government tariffs, duties or trade restrictions, see “Risk Factors — Risks Related to Zeo Energy’s Operations — Increases in the cost or reduction in supply of residential solar energy system and energy storage system components due to tariffs or trade restrictions announced or imposed by the U.S. government could have an adverse effect on our business, financial condition and results of operations.”
Our operations are subject to various national, state and local laws and regulations. These include regulations regarding license requirements for electricians or other professionals involved in the installation of residential solar energy systems and energy storage systems. Many states and/or local governments and utilities have regulated procedures for interconnecting residential solar energy systems and related energy storage systems to the utility’s local distribution system. There are also local building codes or other local regulations for installing the products we sell on a customer’s property. We employ or contract with licensed professionals as needed to comply with regulatory requirements, and as part of our process of installing residential solar energy systems and related equipment, we assist our customers in obtaining interconnection permission from the applicable local electric distribution utility, and applicable permits from other local offices.
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Our operations, as well as those of our suppliers and subcontractors, are subject to stringent and complex U.S. federal, state, territorial and local laws, including regulations governing the occupational health and safety of employees, wage regulations and environmental protection. For example, we and our suppliers and subcontractors are subject to the regulations OSHA, the U.S. Department of Transportation (“DOT”), the U.S. Environmental Protection Agency (“EPA”) and comparable state entities that protect and regulate employee health and safety and the protection of the environment. Various environmental, health and safety laws can result in the imposition of costs and liability in connection with system and equipment installation, the repair or replacement of parts, and disposal of hazardous substances (such as the disposal and recycling of batteries).
We and the dealers that supply us with sales opportunities or completed sales are also subject to laws and regulations related to interactions with consumers, including those applicable to sales and trade practices, privacy and data security, equal protection, consumer financial and credit transactions, consumer collections, mortgages and re-financings, home or business improvements, trade and professional licensing, warranties, and various means of customer solicitation, as well as specific regulations pertaining to solar installations.
Government Incentives
There are U.S. federal, state and local governmental bodies that provide incentives to owners, distributors, installers and manufacturers of solar energy systems and energy storage systems, to promote solar energy and energy resilience. These incentives include tax credits offered by the federal government under, among others, the Energy Policy Act of 2005, as amended, and the IRA, as amended by the new Pub. L. No. 119-21, as well as other tax credits, rebates and SRECs associated with solar energy generation. Commercial taxpayers, including solar energy system owners and tax-equity partners, may claim a federal investment tax credit equal to 30% of eligible project costs for solar and energy storage facilities that meet certain requirements. Under the terms of the new Pub. L. No. 119-21, for solar energy systems this credit will phase out and no longer be available for installations completed after December 31, 2027, with some exceptions, and higher domestic content percentages will be required for projects to qualify for the full credit. Qualified energy storage solutions are eligible for credits on projects starting construction by December 31, 2032.
Our business model also may benefit from tax exemptions offered at the state and local levels. For example, some states have property tax exemptions that exempt the value of residential solar energy systems in determining values for calculation of local and state real and personal property taxes, and there are some state and local tax exemptions that apply to the sale of equipment. State and local tax exemptions can have sunset dates or triggers for loss of the exemption, and the exemptions can be changed by state legislatures and other regulators.
A majority of states have adopted net metering policies, including our sales areas of Florida, Texas, Missouri, Ohio and Illinois. Net metering policies allow homeowners to serve their own energy load using on-site generation while avoiding the full retail volumetric charge for electricity. Electricity that is generated by a residential solar energy system and consumed on-site avoids a retail energy purchase from the applicable utility, and excess electricity that is exported back to the electric grid generates a retail credit within a homeowner’s monthly billing period. At the end of the monthly billing period, if the homeowner has generated excess electricity within that month, the homeowner typically carries forward a credit for any excess electricity to be offset against future utility energy purchases. At the end of an annual billing period or calendar year, utilities either continue to carry forward a credit or reconcile the homeowner’s final annual or calendar year bill using different rates (including zero credit) for the exported electricity.
Utilities, their trade associations, and other entities are currently challenging net metering policies in various locations by seeking to eliminate them, cap them, reduce the value of the credit provided to homeowners for excess generation or impose charges on homeowners that have net metering. States where we sell now or in the future may change, eliminate or reduce net metering benefits.
We rely on a mix of the incentives mentioned above to reduce the net price our customers that are eligible for incentives would otherwise pay for our solar offerings or per kilowatt hour used.
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Employees and Human Capital Management
As of December 31, 2025, we had approximately 190 full-time employees that work year-round processing orders, installing and servicing systems and fulfilling administrative tasks. We also engage sales agents as independent contractors as described in “Business - Internal Direct Sales Force” above. None of our employees are covered by collective bargaining agreements, and we have not experienced any work stoppages due to labor disputes.
Facilities
Our corporate headquarters are located in Florida under a lease that expires at the end of October 2026. In Florida, we maintain offices for operations personnel and warehouses, and we have warehouses in Texas and Ohio, and warehouse, sales, marketing, and executive offices in Utah. We currently lease the office and warehouse spaces that we use in our operations, and we do not own any real property. We believe that our facility space adequately meets our needs and that we will be able to obtain any additional operating space that may be required on commercially reasonable terms.
Litigation
We are not currently a party to any material litigation or governmental or other proceeding. However, from time to time, we have been, are and will likely continue to be involved in legal proceedings, administrative proceedings and claims that arise in the ordinary course of business with customers, subcontractors, suppliers, regulatory bodies or others. In general, litigation claims or regulatory proceedings can be expensive and time consuming to bring or defend against, which may result in the diversion of management’s attention and resources from our business and business goals and could result in settlement or damages that could significantly affect financial results and the conduct of our business.
Change of Accountants of Zeo Energy
Change in Independent Registered Accounting Firm April 2024
In connection with the closing of the Business Combination, Grant Thornton LLP (“GT”) became the independent registered public accounting firm for Zeo Energy. On April 16, 2024 (the “Dismissal Date”), Zeo Energy dismissed BDO USA P.C. (“BDO”) as the independent registered public accounting firm for Zeo Energy. The dismissal was approved by Zeo Energy’s Audit Committee. The change in independent registered public accounting firm is not the result of any disagreement with BDO.
BDO’s audit reports on the financial statements as of December 31, 2023 and 2022 of Zeo Energy did not provide an adverse opinion or disclaimer of opinion to Zeo Energy’s financial statements, nor did it modify its opinion as to uncertainty, audit scope or accounting principles, except that such reports contained an explanatory paragraph regarding Zeo Energy’s ability to continue as a going concern.
For Zeo Energy’s two most recent fiscal years, and in the subsequent interim period through the Dismissal Date, there were (i) no “disagreements” within the meaning of Item 304(a)(1)(iv) of Regulation S-K and the related instructions between Zeo Energy and BDO on any matters of accounting principles or practices, financial statement disclosures or auditing scope or procedures which, if not resolved to BDO’s satisfaction, would have caused BDO to make reference thereto in its reports on the financial statements of Zeo Energy for such periods, and (ii) no “reportable events” (as defined in Item 304(a)(1)(v) of Regulation S-K), except that material weaknesses in internal control over financial reporting were identified. Specifically, we did not design and maintain an effective control environment to prevent or detect material misstatements to the financial statements. We lacked a sufficient complement of personnel with an appropriate level of internal controls and accounting knowledge, training and experience commensurate with our financial reporting requirements. Our management did not design and maintain effective controls over the calculation of earnings per share (as disclosed in our 2023 and 2022 Annual Report on Form 10-K, and our September 30, 2023 and 2022, June 30, 2023 and 2022, and March 31, 2023 and 2022 Form 10-Qs), and classification of the reinvestment of interest and dividend income in the Trust Account in the statement of cash flows (as disclosed in our 2023 and 2022 Annual Report on Form 10-K, and our September 30, 2023, June 30, 2023, and March 31, 2023 Form 10-Qs).
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On the same date as the Dismissal Date, on April 16, 2024, as recommended and approved by Zeo Energy’s Audit Committee, Zeo Energy engaged GT as Zeo Energy’s independent public accounting firm to audit Zeo Energy’s consolidated financial statements for the fiscal year ending December 31, 2024 and to review Zeo Energy’s quarterly consolidated financial statements for each of the quarters ending April 30, 2024, June 30, 2024, and September 30, 2024. GT previously served as the independent registered public accounting firm of Sunergy prior to the Closing.
For Zeo Energy’s two most recent fiscal years, and in the subsequent interim period through the Dismissal Date, neither Zeo Energy nor anyone on its behalf consulted with GT regarding: (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on Zeo Energy’s financial statements, and neither a written report nor oral advice was provided to Zeo Energy that GT concluded was an important factor considered by Zeo Energy in reaching a decision as to any accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) or a reportable event (as described in Item 304(a)(1)(v) of Regulation S-K).
Change in Independent Registered Public Accounting Firm October 2025
On October 31, 2025, the Audit Committee and the Board, after discussion with the management of the Company, approved the dismissal of GT, the Company’s independent registered public accounting firm, and approved the appointment of Tanner as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2025, effective immediately.
GT’s reports on the Company’s consolidated financial statements as of and for the fiscal years ended December 31, 2024 and 2023 did not contain any adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principles.
During the period from April 16, 2024, the date GT was appointed, to October 31, 2025, the date of dismissal, there were no (a) disagreements (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) with GT on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of GT, would have caused GT to make reference to such disagreement in its report on the Company’s consolidated financial statements for the relevant year or (b) “reportable events” (as defined in Item 304(a)(1)(v) of Regulation S-K and the related instructions), except that there were material weaknesses in the Company’s internal control over financial reporting, related to ineffective controls over information and communication and 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 Company’s management also did not design and maintain effective controls over the calculation of earnings per share and the classification of the reinvestment of interest and dividend income in the statement of cash flows. These material weaknesses in internal control over financial reporting have been disclosed in the company’s quarterly reports on Form 10-Q for 2024 and 2025 and annual report on Form 10-K for the year ended December 31, 2024. The Audit Committee discussed the subject matter of each of these reportable events with GT, and the Company authorized GT to respond fully to the inquiries of the successor auditor concerning the subject matter of each of these reportable events.
During the fiscal years ended December 31, 2024 and 2023, and the subsequent interim period through October 31, 2025, the Company did not consult with Tanner regarding the application of accounting principles to a specific completed or contemplated transaction or regarding the type of audit opinions that might be rendered by Tanner on the Company’s financial statements, and Tanner did not provide any written or oral advice that was an important factor considered by the Company in reaching a decision as to any such accounting, auditing or financial reporting issue.
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Item 1A. Risk Factors
Risks Related to the Solar Industry
The solar energy industry is an emerging market which is constantly evolving and additional demand for solar energy systems may not develop to the size or at the rate we expect.
The solar energy industry is an emerging and constantly evolving market opportunity. We believe the solar energy industry is still developing and maturing, and we cannot be certain that additional demand for solar energy systems will grow to the size or at the rate we expect. Any future growth of the solar energy market and the success of our solar service offerings depend on many factors beyond our control, including recognition and acceptance of the solar service market by consumers, the pricing of alternative sources of energy, a favorable regulatory environment, the continuation of expected tax benefits and other incentives, and our ability to provide our solar service offerings cost effectively. If additional demand for solar energy systems does not develop to the size or at the rate we expect, our business may be adversely affected.
Solar energy has yet to achieve broad market acceptance and depends in part on continued support in the form of rebates, tax credits, and other incentives from federal, state and local governments or utilities. If support diminishes materially for solar policy related to rebates, tax credits and other incentives, demand for our products and services may decrease and our ability to obtain external financing on acceptable terms, or at all, could be materially adversely affected. These types of funding limitations could lead to inadequate financing support for the anticipated growth in our business. Furthermore, growth in residential solar energy depends in part on macroeconomic conditions, retail prices of electricity and customer preferences, each of which can change quickly. Declining macroeconomic conditions, including in the job markets and residential real estate markets, could contribute to instability and uncertainty among customers and impact their financial wherewithal, credit scores or interest in entering into long-term contracts, even if such contracts would generate immediate and/or long-term savings.
Furthermore, market prices of retail electricity generated by utilities or other energy sources could decline for a variety of reasons, as discussed further below. Any such declines in macroeconomic conditions, changes in retail prices of electricity or changes in customer preferences would adversely impact our business.
At the international level, the United Nations-sponsored Paris Agreement requires member states, including the United States, to submit non-binding, individually-determined greenhouse gas reduction goals known as “Nationally Determined Contributions” every five years after 2020. Former President Joe Biden committed the United States to a goal of reducing greenhouse gas emissions by 50 – 52% below 2005 levels by 2030, a target consistent with the Paris Agreement’s goal of “net-zero” greenhouse gas emissions by 2050. In contrast to the stated goals of President Biden’s administration, the administration of the newly-elected President Donald Trump, is less likely to create or support incentives to reduce greenhouse gas emissions. In January the newly-elected President Trump announced the United States will exit the Paris Agreement. As a result, support from the U.S. government for addressing climate change is likely to decrease, and as a result, consumer demand for clean energy may decrease. Additional international agreements or any legislation, regulation, or executive action within the U.S. addressing climate change, including any climate-related disclosure requirements and legislation or regulation.
We face competition from electric utilities, retail electric providers, independent power producers, renewable energy companies and other market participants.
The solar energy and renewable energy industries are both highly competitive and continually evolving as participants strive to distinguish themselves within their markets and compete with large electric utilities. We believe our primary competitors are the electric utilities that supply electricity to our potential customers. We compete with these electric utilities primarily based on price (cents per kWh), predictability of future prices (by providing pre-determined annual price escalations) and the ease by which customers can switch to electricity generated by our solar energy systems. We may also compete based on other value-added benefits, such as reliability and carbon-friendly power. If we cannot offer compelling value to our customers based on these factors, our business may not grow.
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Electric utilities generally have substantially greater financial, technical, operational and other resources than we do. As a result, these competitors may be able to devote more resources to the research, development, promotion and sale of their products or services or respond more quickly to evolving industry standards and changes in market conditions than we can. Electric utilities could also offer other value-added products or services that could help them to compete with us even if the cost of electricity they offer is higher than ours. In addition, a majority of utilities’ sources of electricity is non-solar, which may allow utilities to sell electricity more cheaply than electricity generated by our solar energy systems. Electric utilities could also offer customers the option of purchasing electricity obtained from renewable energy resources, including solar, which would compete with our offerings. Moreover, regulated utilities are increasingly seeking approval to “rate-base” their own solar energy system and energy storage system businesses. Rate-basing means that utilities would receive guaranteed rates of return for their solar energy system and energy storage system businesses. This is already commonplace for utility-scale solar projects and commercial solar projects. While few utilities to date have received regulatory permission to rate-base residential solar energy systems or energy storage systems, our competitiveness would be significantly harmed should more utilities receive such permission because we do not receive guaranteed profits for our solar service offerings.
We also compete with retail electric providers and independent power producers not regulated like electric utilities but which have access to the utilities’ electricity transmission and distribution infrastructure pursuant to state, territorial and local pro-competition and consumer choice policies. These retail electric providers and independent power producers are able to offer customers electricity supply-only solutions that are competitive with our solar energy system options on both price and usage of renewable energy technology while avoiding the physical installations our current business model requires. This may limit our ability to acquire new customers, particularly those who have an aesthetic or other objection to putting solar panels on their roofs.
We also compete with solar companies with vertically integrated business models like our own. For example, some of our competitors offer their own consumer financing products to customers and/or produce one or more components of the solar energy system or energy storage system. In addition to financing and manufacturing, some other business models also include sales, engineering, installation, maintenance and monitoring services. Many of our vertically integrated competitors are larger than we are and offer certain vertical services that we do not. As a result, these competitors may be able to devote more resources to the research, development, promotion and sale of their products or services or respond more quickly to evolving industry standards and changes in market conditions than we can. Solar companies with vertically integrated business models could also offer other value-added products or services that could help them to compete with us. Larger competitors may also be able to access financing at a lower cost of capital than we are able to obtain.
In addition, we compete with other residential solar companies who sell or finance products directly to consumers, inclusive of programs like Property-Assessed Clean Energy financing programs established by local governments. For example, we face competition from solar installation businesses that seek financing from external parties or utilize competitive loan products or state and local programs.
We also compete with solar companies that are marketed to potential customers by dealers, and we may also face competition from new entrants into the market as a result of the passage of the Inflation Reduction Act of 2022 (the “IRA”) and its impacts and benefits to the solar industry. Some of these competitors specialize in the distributed solar energy market and some may provide energy at lower costs than we do. Some of our competitors offer or may offer similar services and products as we do, such as direct outright sales of solar energy systems. Many of our competitors also have significant brand name recognition, lower barriers to entry into the solar market, greater capital resources than we have and extensive knowledge of our target markets. In addition, some of our competitors have an established business of providing construction, electrical contracting, or roofing services.
We also compete with community solar products offered by solar companies or sponsored by local governments and municipal power companies, as well as utility companies that provide renewable power purchase programs. Some customers might choose to subscribe to a community solar project or renewable subscriber programs instead of having a solar energy system installed on their home or business, which could affect our sales. Additionally, some utility companies (and some utility-like entities, such as community choice aggregators) have generation portfolios that are increasingly renewable in nature. As utility companies offer increasingly renewable portfolios to retail customers, those customers might be less inclined to have a solar energy system installed on their home or business, which could adversely affect our growth.
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We have historically provided our services only to residential customers, but we may expand to other markets, including commercial and industrial customers. There is intense competition in the solar energy sector in the markets in which we operate and the markets into which we may expand. As new entrants continue to enter into these markets, and as we enter into new markets, we may be unable to grow or maintain our operations and we may be unable to compete with companies that have already established themselves in both the residential market and non-residential market.
As the solar industry grows and evolves, we will also face new competitors and technologies who are not currently in the market (including those resulting from the consolidation of existing competitors). Our industry is characterized by low technological barriers to entry, and well-capitalized companies, including utilities and integrated energy companies, could choose to enter the market and compete with us. Our failure to adapt to changing market conditions and to compete successfully with existing or new competitors will limit our growth and will have a material adverse effect on our business, financial condition and results of operations.
A material reduction in the retail price of electricity charged by electric utilities or other retail electricity providers would harm our business, financial condition and results of operations.
Decreases in the retail price of electricity from electric utilities or from other retail electric providers, including other renewable energy sources such as larger-scale solar energy systems, could make our offerings less economically attractive. The price of electricity from utilities could decrease as a result of:
| ● | the construction of a significant number of new power generation plants, whether generated by natural gas, nuclear power, coal or renewable energy; |
| ● | the construction of additional electric transmission and distribution lines; |
| ● | a reduction in the price of natural gas or other natural resources as a result of increased supply due to new drilling techniques or other technological developments, a relaxation of associated regulatory standards or broader economic or policy developments; |
| ● | less demand for electricity due to energy conservation technologies and public initiatives to reduce electricity consumption or to recessionary economic conditions; and |
| ● | development of competing energy technologies that provide less expensive energy. |
A reduction in electric utilities’ rates or changes to peak hour pricing policies or rate design (such as the adoption of a fixed or flat rate) could also make our offerings less competitive with the price of electricity from the electrical grid. If the cost of energy available from electric utilities or other providers were to decrease relative to solar energy generated from solar energy systems or if similar events impacting the economics of our offerings were to occur, we may have difficulty attracting new customers. For example, large utilities in some states have started transitioning customers to time-of-use rates and also have adopted a shift in the peak period for time-of-use rates to later in the day. Unless grandfathered under a different rate, customers with solar energy systems may be required to take service under time-of-use rates with the later peak period. Moving utility customers to time-of-use rates or the shift in the timing of peak rates for utility-generated electricity to include times of day when solar energy generation is less efficient or non-operable could also make our offerings less competitive. Time-of-use rates could also result in higher costs for our customers whose electricity requirements are not fully met by our offerings during peak periods.
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Sales and installation of solar energy systems depend heavily on suitable meteorological and environmental conditions. If meteorological or environmental conditions are unexpectedly unfavorable, the electricity production from our solar service offerings may be below our expectations, and our ability to timely deploy new systems may be adversely impacted.
The energy produced and revenue and cash flows generated by a solar energy system depend on suitable solar and weather conditions, both of which are beyond our control. Furthermore, components of our systems, such as panels and inverters, could be damaged by severe weather or natural catastrophes, such as hailstorms, tornadoes, fires, or earthquakes. Homeowner insurance or homeowners generally bear the expense of repairing weather-related damage to solar energy systems. However, in these circumstances, we make our install teams available to remove, repair and reinstall the systems. Sustained unfavorable weather or environmental conditions also could unexpectedly delay the installation of our solar energy systems, leading to increased expenses and decreased revenue and cash flows in the relevant periods. Extreme weather conditions, including those associated with climate change, as well as the natural catastrophes that could result from such conditions, can severely impact our operations by delaying the installation of our systems, lowering sales, and causing a decrease in the output from our systems due to smoke or haze. Weather patterns could change, making it harder to predict the average annual amount of sunlight striking each location where our solar energy systems are installed. This could make our solar service offerings less economical overall or make individual systems less economical. Our economic model and projected returns on our solar energy systems require achievement of certain production results from our systems and, in some cases, we guarantee these results to our consumers. If the solar energy systems underperform for any reason, our business could suffer. Any of these events or conditions could harm our business, financial condition, and results of operations.
Climate change may have long-term impacts on our business, our industry, and the global economy.
Climate change poses a systemic threat to the global economy, and we believe it will continue to do so until our society transitions to renewable energy and decarbonizes. While our core business model seeks to accelerate this transition to renewable energy, there are inherent climate-related risks to our business operations. Warming temperatures throughout the United States, including Florida, our biggest market, have contributed to extreme weather, intense drought, and increased wildfire risks. These events have the potential to disrupt our business, the operations of our third-party suppliers, and our customers, and may cause us to incur additional operational costs. For instance, natural disasters and extreme weather events associated with climate change can impact our operations by delaying the installation of our systems, leading to increased expenses and decreased revenue and cash flows. They can also cause a decrease in the output from our systems due to smoke or haze. Additionally, if weather patterns significantly shift due to climate change, it may be harder to predict the average annual amount of sunlight striking each location where our solar energy systems are installed and energy output from our systems could be reduced in the short-term or long-term in certain areas. This could make our solar service offerings less economical overall, make individual systems less economical, or reduce demand for our products, as well as damage our reputation to the extent energy generation from our products does not meet customer expectations. For more information regarding risks posed by meteorological conditions, see “Risk Factors — Sales and installation of solar energy systems depend heavily on suitable meteorological and environmental conditions. If meteorological or environmental conditions are unexpectedly unfavorable, the electricity production from our solar service offerings may be below our expectations, and our ability to timely deploy new systems may be adversely impacted.”
Our business has benefited from the declining cost of solar energy systems and energy storage system components and may be harmed to the extent the cost of such components stabilizes or increases in the future.
Our business has benefited from the declining cost of solar energy system and energy storage system components, and to the extent such costs stabilize, decline at a slower rate or increase, our future growth rate may be negatively impacted. The declining cost of solar energy system and energy storage system components and the raw materials necessary to manufacture them has been a key driver in the price of solar energy systems and energy storage systems and customer adoption of solar energy. While historically solar energy system and energy storage system components and raw material prices have declined, the cost of these components and raw materials have recently increased and may continue to increase in the future, and such products’ availability could decrease, due to a variety of factors, including growth in the solar energy system and energy storage system industries and the resulting increase in demand for solar energy system and energy storage system components and the raw materials necessary to manufacture them, supply chain disruptions, tariff penalties, duties, and trade barriers, export regulations, regulatory or contractual limitations, industry market requirements and industry standards, changes in technology, the loss of or changes in economic governmental incentives, inflation or other factors. An increase in the prices of solar energy system components and raw materials could slow our growth and cause our business and results of operations to suffer. See “Risk Factors — Increases in the cost or reduction in supply of solar energy system and energy storage system components due to tariffs or trade restrictions announced or imposed by the U.S. government could have an adverse effect on our business, financial condition and results of operations.”
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Risks Related to Operations
We may be unable to sustain our net losses.
We may incur net losses as we increase our spending to finance the expansion of our operations, expand our installation, engineering, administrative, sales and marketing staffs, increase spending on our brand awareness and other sales and marketing initiatives, make significant investments to drive future growth in our business and implement internal systems and infrastructure to support our growth and operate as a publicly traded company. We do not know whether our revenue will grow rapidly enough to absorb these costs and our limited operating history makes it difficult to assess the extent of these expenses or their impact on our results of operations. Our ability to operate profitably depends on a number of factors, including but not limited to:
| ● | growing our customer base; |
| ● | reducing our operating costs by lowering our customer acquisition costs and optimizing our design and installation processes and supply chain logistics even as we expand into additional geographic markets; |
| ● | maintaining or further lowering our cost of capital; |
| ● | reducing the cost of components for our solar service offerings; |
| ● | growing and maintaining our sales network; |
| ● | maintaining high levels of product quality, performance, and customer satisfaction; and |
| ● | growing our direct-to-consumer business to scale. |
Even if we do operate profitably, we may be unable to achieve positive cash flows from operations in the future.
Our growth depends in part on the success of our relationships with third parties such as our equipment suppliers, subcontractors and dealers, including dealers who market to customers and bring the resulting solar contracts to us for fulfillment.
A key component of our growth strategy is to develop or expand our relationships with third parties, such as our equipment suppliers, subcontractors and dealers. A significant portion of our business depends on attracting and retaining new and existing sales dealers who market to customers and bring the resulting contracts to us for fulfillment. Negotiating relationships with subcontractors, dealers and other third parties, training such third parties, and monitoring them for compliance with our standards require significant time and resources and may present greater risks and challenges than expanding our direct sales and installation team. If we are unsuccessful in establishing or maintaining our relationships with these third parties, our ability to grow our business and address our market opportunity could be impaired. Even if we are able to establish and maintain these relationships, we may not be able to execute our goal of leveraging these relationships to meaningfully expand our business, brand recognition and customer base. This would limit our growth potential and our opportunities to generate significant additional revenue or cash flows.
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Due to the limited number of suppliers in our industry, the acquisition of any of these suppliers by a competitor or any shortage, delay, price change, announcement or imposition of tariffs or duties or other limitation in our ability to obtain components or technologies we use could result in sales and installation delays, cancellations and loss of customers.
We purchase solar panels, inverters, energy storage systems and other system components and instruments from a limited number of suppliers, qualified and approved by our engineering and design teams, making us susceptible to quality issues, shortages and price changes that may occur in the supply chain. There are a limited number of suppliers of solar energy system components, instruments and technologies, and our ability to obtain components or technologies we use could be affected by circumstances beyond our control, including:
| ● | Industry-wide shortages of key components and instruments, including batteries and inverters, in times of rapid industry growth. The manufacturing infrastructure for some of these components has a long lead-time, requires significant capital investment and relies on the continued availability of key commodity materials, potentially resulting in an inability to meet demand for these components. The solar industry is currently experiencing rapid growth and, as a result, shortages of key components or instruments, including solar panels, may be more likely to occur, which in turn may result in price increases for such components. Even if industry-wide shortages do not occur, suppliers may decide to allocate key components or instruments with high demand or insufficient production capacity to more profitable customers, customers with long-term supply agreements or customers other than us. As a result, our ability to originate solar energy systems and energy storage systems may be reduced. |
| ● | Natural disasters and other events beyond our control (such as earthquakes, wildfires, flooding, hurricanes, freezes, tsunamis, typhoons, volcanic eruptions, droughts, tornadoes, power outages or other natural disasters, the effects of climate change and related extreme weather, public health issues and pandemics, war, terrorism, government restrictions or limitations on trade, impediments to international shipping and geopolitical unrest and uncertainties). |
| ● | Human rights and forced labor issues in foreign countries and the U.S. government’s response to them. In particular, the withhold release order issued by U.S. Customs and Border Protection in June 2021 applicable to certain silica-based products manufactured in the Xinjiang Uyghur Autonomous Region (“XUAR”) of China, and any other allegations regarding forced labor in China and U.S. trade regulations to prohibit the importation of any goods derived from forced labor, has affected and may continue to affect our operations. Further, the Uyghur Forced Labor Prevention Act (“UFLPA”) that former President Biden signed into law on December 23, 2021, which took effect on June 21, 2022, has affected and may continue to affect our supply chain and operations. Intensive examinations, withhold release orders, and related governmental procedures have resulted in supply chain and operational delays throughout the industry. These and other similar trade restrictions that may be imposed in the future could cause delivery and installation delays and restrict the global supply of polysilicon and solar products. While we believe the items described above have contributed to price increases for components that we purchase, we believe that these increases to the cost of our components were also due to a combination of other factors including supply chain constraints, increased demand for solar systems in the U.S. and Europe, rising inflation, and higher labor, material, and shipping costs. We do not have information that allows us to quantify the specific amount of price increases attributable to the tariffs and trade regulations described. For more information regarding UFLPA and risks related thereto, see “Risk Factors — Increases in the cost or reduction in supply of solar energy system and energy storage system components due to tariffs or trade restrictions announced or imposed by the U.S. government could have an adverse effect on our business, financial condition and results of operations.” |
| ● | Russia’s war on Ukraine. We do not materially rely directly or indirectly on goods or services sourced in Russia, Ukraine or Belarus, or have any material business relationships, connections to, or assets in, Russia, Belarus, or Ukraine. While we believe Russia’s war on Ukraine has contributed to price increases for components that we purchase, we believe that the increases to the cost of our components were also due to a combination of other factors, including supply chain constraints, tariffs and trade regulations, increased demand for solar systems in the U.S. and Europe, U.S. tariffs, rising inflation, and higher labor, material, and shipping costs. We do not have information that allows us to quantify the specific amount of price increases attributable to Russia’s war on Ukraine. |
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| ● | Disruptions to global shipping. Historically, we have relied on foreign suppliers and manufacturers for a number of solar energy system components, instruments and technologies that we purchase. Our success in the future may be dependent on our ability to import or transport such products from overseas vendors in a timely and cost-effective manner. We may rely heavily on third parties, including ocean carriers and truckers, both of which are experiencing disruptions, shortages and rate increases, in that process. The global shipping industry has experienced and may continue to experience ocean shipping disruptions, trucking shortages, increased ocean shipping rates and increased trucking and fuel costs. There has been and may in the future be a shortage of shipping capacity from China and other parts of Asia, among other regions, and as a result, our receipt of imported products may be disrupted or delayed. The shipping industry has also experienced issues with port congestion and pandemic-related port closures and ship diversions. The global shipping industry also experienced unprecedented increases in shipping rates from the trans-Pacific and other ocean carriers due to various factors, including limited availability of shipping capacity. In 2024 and 2025, we did not experience any appreciable delays in supply. We may find it necessary to rely on an increasingly expensive spot market and other alternative sources to make up any shortfall in shipping needs. |
If we cannot obtain substitute materials or components on a timely basis or on acceptable terms, we could be prevented from installing our solar energy systems within the time frames required in our customer contracts. Any such delays could increase our overall costs, reduce our profit, delay the timing for solar energy systems to be placed in service and ultimately have a material adverse effect on our business, financial condition and results of operations.
We depend on a limited number of suppliers of solar energy system components and technologies to adequately meet demand for our solar energy systems. If we needed to identify alternative suppliers or to qualify alternative products on commercially reasonable terms, our ability to satisfy demand may be adversely affected.
Our primary supplier is Consolidated Electrical Distributors, Inc. (d/b/a Greentech Renewables) (“Greentech”), from which we purchased at least approximately 46% of the equipment that we installed in 2025. If Greentech or one or more of our other suppliers we rely upon to meet anticipated demand (i) ceases or reduces production due to its financial condition, acquisition by a competitor or otherwise, (ii) is unable to increase production as industry demand increases, (iii) raises their prices to an extent that cannot be passed on to our customers without affecting demand or (iv) is otherwise unable to allocate sufficient production to us, it may be difficult to quickly identify alternative suppliers or to qualify alternative products on commercially reasonable terms. As a result, our ability to satisfy demand may be adversely affected.
Although we buy the majority of our equipment through Greentech, we believe that if our relationship with Greentech were terminated, we could readily obtain supplies from other distributors of the same or similar equipment, though in some locations, replacement distributors may take some time to develop efficient logistics with respect to shipping equipment directly to job sites. This could result in additional costs and delays in acquiring and deploying our solar energy systems or energy storage systems.
Increased scrutiny of environmental, social, and governance (“ESG”) matters could have an adverse effect on our business, financial condition and results of operations and damage our reputation.
In recent years, companies across all industries are facing increasing scrutiny from a variety of stakeholders, including investor advocacy groups, proxy advisory firms, certain institutional investors and lenders, investment funds and other influential investors and rating agencies, related to their ESG and sustainability practices. If we do not adapt to or comply with investor or other stakeholder expectations and standards on ESG matters as they continue to evolve, or if we are perceived to have not responded appropriately or quickly enough to growing concern for ESG and sustainability issues, regardless of whether there is a regulatory or legal requirement to do so, we may suffer from reputational damage and our business, financial condition and/or stock price could be materially and adversely affected. In addition, organizations that provide information to investors on corporate governance and related matters have developed ratings processes for evaluating companies on their approach to ESG matters. Such ratings are used by some investors to inform their investment and voting decisions. Unfavorable ESG ratings could lead to increased negative investor sentiment toward us and our industry and to the diversion of investment to other industries, which could have a negative impact on our stock price and our access to and costs of capital.
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We and our suppliers and subcontractors are subject to risks associated with construction, cost overruns, delays, customer cancellations, regulatory compliance, and other contingencies, any of which could have a material adverse effect on our business and results of operations.
We are a licensed contractor in certain communities that we service, and we are ultimately responsible as the contracting party for every solar energy system installation we provide. We may be liable, either directly or through our subcontractors, to customers for any damage we or our subcontractors cause to them, their home, belongings or property during the installation of our systems. For example, we, either directly or through our subcontractors, frequently penetrate customers’ roofs during the installation process and may incur liability for the failure to adequately weatherproof such penetrations following the completion of construction. In addition, because the solar energy systems we or our subcontractors deploy are high voltage energy systems, we may incur liability for any failure to comply with electrical standards and manufacturer recommendations. Legal proceedings that are not resolved in our favor could potentially result in fines, public reprimand, probation, or the suspension or revocation of certain of our licenses.
Completing the sale and installation of a solar energy system requires many different steps including a site audit, completion of designs, permitting, installation, electrical sign-off and interconnection. Customers may cancel their customer agreement for a limited period, subject to certain conditions, and we have experienced increased customer cancellations in certain geographic markets during certain periods in our operating history. We or our dealers or subcontractors may face customer cancellations, delays or cost overruns, which may adversely affect our or our dealers’ or subcontractors’ ability to ramp up the volume of sales or installations in accordance with our plans. These cancellations, delays or overruns may be the result of a variety of factors, such as labor shortages or other labor issues, defects in materials and workmanship, adverse weather conditions, transportation constraints, construction change orders, site changes or roof conditions, geographic factors and other unforeseen difficulties, any of which could lead to increased cancellation rates, reputational harm and other adverse effects. For example, some customer orders are cancelled after a site visit if we determine that a customer needs to make repairs to or install a new roof, or that there is excessive shading on their property. If we continue to experience increased customer cancellations, our financial results may be materially and adversely affected.
In addition, the installation of solar energy systems and other energy-related products requiring building modifications are subject to oversight and regulation in accordance with national, state and local laws and ordinances relating to building, fire and electrical codes, safety, environmental protection, utility interconnection and metering, and related matters. We also rely on certain of our and our subcontractors’ employees to maintain professional licenses in many of the jurisdictions in which we operate, and our failure to employ properly licensed personnel could adversely affect our licensing status in those jurisdictions. It is difficult and costly to track the requirements of every individual authority having jurisdiction over our installations and to design solar energy systems to comply with these varying standards. Any new government regulations or utility policies pertaining to our systems may result in significant additional expenses to us and our customers and, as a result, could cause a significant reduction in demand for our solar service offerings.
As the demand for solar plus storage offerings grows, we anticipate facing additional operational challenges associated with the complexity of deploying storage solutions. For example, solar plus storage offerings tend to have longer cycle times due to factors such as lengthened permitting and inspection times and potential need of a main panel upgrade.
We have a variety of quality standards that we apply in the selection, supervision, and oversight of our third-party suppliers and subcontractors. However, because our suppliers and subcontractors are third parties, ultimately, we cannot guarantee that they will follow applicable laws and regulations, any standards we impose, or ethical business practices, such as fair wage practices and compliance with environmental, safety and other local laws, despite our efforts to hold them accountable to our standards. A lack of demonstrated compliance with contractual obligations, applicable laws and regulations or our standards could lead us to seek alternative suppliers or subcontractors, which could increase our costs and result in delayed delivery or installation of our products, product shortages or other disruptions of our operations. Violation of labor or other laws by our suppliers and subcontractors or the divergence of a supplier’s or subcontractor’s labor or other practices from those generally accepted as ethical in the United States or other markets in which we do business could also attract negative publicity for us and harm our business, brand and reputation in the market.
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We use subcontractors to perform certain services, which makes us vulnerable to the extent we rely on them.
We rely on subcontractors to install some of the solar energy systems we sell, as well as install energy efficiency equipment such as hybrid electric water heaters and pool pumps and provide roofing and insulation services. We currently do not have long term agreements with our subcontractors. In addition, either the subcontractor or Zeo can terminate the relationship for convenience. If a subcontractor terminates their relationship with us or refuses to continue working with us on reasonable terms, and we cannot find a suitable replacement subcontractor on a timely basis, our business may be adversely affected.
Compliance with occupational safety and health requirements and best practices can be costly, and noncompliance with such requirements may result in potentially significant penalties, operational delays and adverse publicity.
The installation and ongoing operations and maintenance of solar energy systems and energy storage systems requires our employees or those of third-party contractors to work with complicated and potentially dangerous electrical systems and/or at potentially dangerous heights. The evaluation and modification of buildings as part of the installation process requires these individuals to work in locations that may contain potentially dangerous levels of asbestos, lead, mold or other materials known or believed to be hazardous to human health. We also maintain large fleets of vehicles that these employees use in the course of their work. There is substantial risk of serious illness, injury, or death if proper safety procedures are not followed. Our operations are subject to regulation under the U.S. Occupational Safety and Health Act (“OSHA”), Department of Transportation (“DOT”) regulations, and equivalent state laws. Changes to such regulatory requirements, or stricter interpretation or enforcement of existing laws or regulations, could result in increased costs. If we fail to comply with applicable workplace safety and health regulations, even if no work-related serious illness, injury, or death occurs, we may be subject to civil or criminal enforcement and be required to pay substantial penalties, incur significant capital expenditures, or suspend or limit operations. Any accidents, citations, violations, illnesses, injuries or failure to comply with industry best practices may subject us to adverse publicity, damage our reputation and competitive position and adversely affect our business. Because individuals hired by us or on our behalf to perform installation and ongoing operations and maintenance of our solar energy systems and energy storage systems, including our third-party contractors, are compensated on a per project basis, they are incentivized to work more quickly than installers compensated on an hourly basis. While we have not experienced a high level of injuries to date, this incentive structure may result in higher injury rates than others in the industry and could accordingly expose us to increased liability.
If we fail to manage our recent and future growth effectively, we may be unable to execute our business plan, maintain high levels of customer service, or adequately address competitive challenges.
We have experienced significant growth in recent periods, and we intend to continue to expand our business within existing markets and in a number of new locations in the future. This growth has placed, and any future growth may continue to place, a significant strain on our management, operational and financial infrastructure. In particular, we have been in the past, and may in the future, be required to expand, train and manage our growing employee base and subcontractors. Our management will also be required to maintain and expand our relationships with customers, suppliers, and other third parties and attract new customers and suppliers, as well as to manage multiple geographic locations.
In addition, if customer growth results in a backlog of installation projects, our installation capacity may be outpaced by the growth of such backlog. An increase in backlog creates higher costs incurred in the period relative to completed installations. If we fail to appropriately manage our backlog in relation to the rate at which we install, it could adversely affect our financial performance and hinder our ability to compete effectively.
Our current and planned operations, personnel, systems and procedures might also be inadequate to support our future growth and may require us to make additional unanticipated investment in our infrastructure, including additional costs for the expansion of our employee base and our subcontractors as well as marketing and branding costs. Our success and ability to further scale our business will depend, in part, on our ability to manage these changes in a cost-effective and efficient manner. If we cannot manage our growth, we may be unable to take advantage of market opportunities, execute our business strategies or respond to competitive pressures. This could also result in declines in quality or customer satisfaction, increased costs, difficulties in introducing new solar service offerings or other operational difficulties. Any failure to effectively manage growth could adversely impact our business, operating results, financial condition and reputation.
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The execution of our growth strategy is dependent upon the continued availability of third-party financing arrangements for our customers’ purchases and is affected by general economic conditions and other factors.
Our growth strategy depends on third-party financing arrangements for our customers’ purchases. Most purchasers of our systems have entered into such third-party arrangements to finance their systems over an extended period of time.
Credit markets are unpredictable, and if they become more challenging, customers may be unable or unwilling to finance the cost of our products or the parties that have historically provided this financing may cease to do so, or only do so on terms that are substantially less favorable for our customers, either of which could materially and adversely affect our revenue and growth. In addition, a rise in interest rates would likely increase our customers’ cost of financing our products and could reduce their profits and expected returns on investment in our products. The general reduction in available credit to would-be borrowers or lessees, worldwide economic uncertainty, and the condition of worldwide housing markets could delay or reduce our sales of products to new homebuilders and authorized resellers.
The cost of maintenance or repair of solar energy systems or energy storage systems throughout the period for which we have offered warranties may be higher than projected today and adversely affect our financial performance and valuation.
Prior to 2023, we generally provided a 25-year workmanship warranty and 25-year roof penetration warranty to customers. Beginning in 2023, we generally provide a 10-year workmanship warranty and a roof penetration warranty of at least five and up to twenty-five years. For the first two years of the workmanship warranty, we cover all costs to repair failures covered by the warranty. After two years, the customer is responsible for certain “truck roll” or service fees, but we otherwise cover the costs of repair. For leases, we provide a twenty five-year limited workmanship warranty and cover all costs for repairs performed under such warranty.
If a solar system or energy storage system fails or malfunctions during the period for which we have offered our workmanship warranty and the failure is covered by such warranty, or if roof damage is covered by the roof penetration warranty, we will incur expenses for maintenance or repair. While our subcontractors provide warranties as to their workmanship, in the event such warranty providers file for bankruptcy, cease operations or otherwise become unable or unwilling to fulfill their warranty obligations, we may not be adequately protected by such warranty obligations. Even if such warranty providers fulfill their obligations, the warranty obligations may not be sufficient to protect us against all of our losses.
Furthermore, it is difficult to predict how future environmental regulations may affect the costs associated with the repair, removal, disposal or recycling of our solar energy systems. This could materially impair our future operating results.
Problems with product quality or performance may lower the residual value of our solar energy systems and may damage our market reputation and cause our financial results to decline.
Because of our limited operating history and the length of the term of our warranties, we have been required to make assumptions and apply judgments regarding a number of factors, including our anticipated rate of warranty claims and the durability, performance and reliability of our solar energy systems. Any widespread product failures or operating deficiencies may damage our market reputation and adversely impact our financial results.
Warranties provided by the manufacturers of equipment we sell or service may be limited by the ability of a supplier and manufacturer to satisfy its warranty or performance obligations or by the expiration of applicable time or liability limits, which could reduce or void the warranty protections of our customers and increase costs to customers for the systems we offer.
Manufacturers of the equipment we sell currently provide a manufacturer’s warranty for twenty-five years. If there is a covered failure of equipment, the manufacturer will pay for replacement or repair. These warranties are subject to liability and other limits. If a customer seeks warranty protection and a warranty provider is unable or unwilling to perform its warranty obligations, whether as a result of its financial condition or otherwise, or if the term of the warranty obligation has expired or a liability limit has been reached, there may be a reduction or loss of protection for the affected assets and an increase in costs to the customer. Any widespread product failures or operating deficiencies may damage our market reputation and adversely impact our financial results.
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Product liability claims against us or accidents could result in adverse publicity and potentially significant monetary damages.
It is possible the solar energy systems, energy storage systems or other current or anticipated products or systems we sell could injure our customers or other third parties or those systems or products could cause property damage as a result of product malfunctions, defects, improper installation, fire or other causes. We rely on third-party manufacturing warranties and our general liability insurance to cover product liability claims and have not obtained separate product liability insurance. Our solar energy systems, energy storage systems and other products or their components could be subject to recalls either due to production defects or malfunctions. Any product liability claim we face could be expensive to defend and may divert management’s attention. The successful assertion of product liability claims against us could result in potentially significant monetary damages, potential increases in insurance expenses, penalties or fines, subject us to adverse publicity, damage our reputation and competitive position and adversely affect sales of solar energy systems or energy storage systems. In addition, product liability claims, injuries, defects or other problems experienced by other companies in the solar industry could lead to unfavorable market conditions to the industry as a whole and may have an adverse effect on our ability to expand our portfolio of solar energy systems and energy storage systems, thus affecting our business, financial condition and results of operations.
Technical and regulatory limitations regarding the interconnection of solar energy systems to the electrical grid may significantly delay interconnections and customer in-service dates, harming our growth rate and customer satisfaction.
Technical and regulatory limitations regarding the interconnection of solar energy systems to the electrical grid may curb or slow our growth in key markets. Utilities throughout the country follow different rules and regulations regarding interconnection and regulators or utilities have or could cap or limit the amount of solar energy that can be interconnected to the grid. Our solar energy systems generally do not provide power to a customer’s site until they are interconnected to the grid.
With regard to interconnection limits, the Federal Energy Regulatory Commission (“FERC”), in promulgating the first form of small generator interconnection procedures, recommended limiting customer-sited intermittent generation resources, such as our solar energy systems, to a certain percentage of peak load on a given electrical feeder circuit. Similar limits have been adopted by many states as a de facto standard and could constrain our ability to market to customers in certain geographic areas where the concentration of solar installations exceeds this limit.
Furthermore, in certain areas, we benefit from policies that allow for expedited or simplified procedures related to connecting solar energy systems and energy storage systems to the electrical grid. We also are required to obtain interconnection permission for each solar energy system from the local utility. In many states and territories, by statute, regulations or administrative order, there are standardized procedures for interconnecting distributed solar energy systems and related energy storage systems to the electric utility’s local distribution system. However, approval from the local utility could be delayed as a result of a backlog of requests for interconnection or the local utility could seek to limit the number of customer interconnections or the amount of solar energy on the grid. If expedited or simplified interconnection procedures are changed or cease to be available, if interconnection approvals from the local utility are delayed or if the local utility seeks to limit interconnections, this could decrease the attractiveness of new solar energy systems and energy storage systems to distributed solar power companies, including us, and the attractiveness of solar energy systems and energy storage systems to customers. Delays in interconnections could also harm our growth rate and customer satisfaction scores. Such limitations or delays could also adversely impact our access to capital and reduce our willingness to pursue solar energy systems and energy storage systems due to higher operating costs. Such limitations would negatively impact our business, results of operations, future growth and cash flows.
As adoption of solar distributed generation rises, along with the increased operation of utility-scale solar generation, the amount of solar energy being contributed to the electrical grid may surpass the capacity anticipated to be needed to meet aggregate demand. If solar generation resources reach a level capable of producing an over-generation situation, some existing solar generation resources may have to be curtailed to maintain operation of the electrical grid. In the event such an over-generation situation were to occur, this could also result in a prohibition on the installation of new solar generation resources. The adverse effects of such a curtailment or prohibition without compensation could adversely impact our business, results of operations, future growth and cash flows.
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Our headquarters and other facilities, the facilities of certain subcontractors and suppliers, and our customers are concentrated in certain regions, putting us at risk of region-specific disruptions, including hurricanes or other extreme weather events.
For the year ended December 31, 2025, approximately 11% of our net revenues were generated in Florida, 32% in Ohio, and 32% in Virginia. For the year ended December 31, 2024, approximately 53% of our net revenues were generated in Florida. This concentration of our customer base and operational infrastructure could lead to our business and results of operations being particularly susceptible to adverse economic, regulatory, political, weather and other conditions in this market and in other markets that may become similarly concentrated.
In Florida, we maintain offices for operations personnel and warehouses, and we have warehouses in Texas and Ohio, and warehouse, sales, marketing, and executive offices in Utah. Any significant epidemic, hurricane, earthquake, flood, fire, or other natural disaster in these areas or in countries where our suppliers or the manufacturers of the products we sell are located could materially disrupt our operations, result in damage or destruction of all or a portion of our facilities or result in our experiencing a significant delay in delivery, or substantial shortage, of our products and services.
We may not have adequate insurance, including business interruption insurance, to compensate us for losses that may occur from any such significant events. A significant natural disaster such as a hurricane, a public health crisis such as a pandemic, or civil unrest could have a material adverse impact on our business, results of operations and financial condition. In addition, acts of terrorism or malicious computer viruses could cause disruptions in our or our subcontractors’ and suppliers’ businesses or the economy as a whole. To the extent that these disruptions result in delays or cancellations of installations or the deployment of our solar service offerings, our business, results of operations and financial condition would be adversely affected.
Expansion into new sales channels could be costly and time-consuming. As we enter new channels, we could be at a disadvantage relative to other companies who have more history in these spaces.
If we expand into new sales channels, such as direct-to-home, homebuilder, retail, and e-commerce channels, or adapt to a remote selling model, we may incur significant costs. In addition, we may not initially or ever be successful in utilizing these new channels. Furthermore, we may not be able to compete successfully with companies with a historical presence in such channels, and we may not realize the anticipated benefits of entering such channels, including efficiently increasing our customer base and ultimately reducing costs. Entering new channels also poses the risk of conflicts between sales channels. If we are unable to successfully compete in new channels, our operating results and growth prospects could be adversely affected.
Obtaining a sales contract with a potential customer does not guarantee that the potential customer will not decide to cancel or that we will not need to cancel due to a failed inspection, which could cause us to generate no revenue despite incurring costs and adversely affect our results of operations.
Even after we secure a sales contract with a potential customer, we (either directly or through our subcontractors) must perform an inspection to ensure the home, including the rooftop, meets our standards and specifications. If the inspection finds repairs to the rooftop are required in order to satisfy our standards and specifications to install the solar energy system, and a potential customer does not want to make such required repairs, we would lose that anticipated sale. In addition, per the terms of our customer agreements, a customer maintains the ability to cancel for a limited time after execution of the agreement, and in some other circumstances subject to specified conditions. An accumulation of delays or cancellations of anticipated sales could materially and adversely affect our financial results, as we may have incurred sales-related, design-related, and other expenses and generated no revenue.
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We may not realize the anticipated benefits of past or future investments, strategic transactions, or acquisitions, and integration of these acquisitions may disrupt our business and management.
We have in the past and may in the future acquire one or more companies, project pipelines, projects, solar renewable energy credits (“SRECs”), products, or technologies or enter into joint ventures or other strategic transactions. We may not realize the anticipated benefits of past or future investments, strategic transactions, or acquisitions, and these transactions involve numerous risks that are not within our control. These risks include the following, among others:
| ● | failure to satisfy the required conditions and otherwise complete a planned acquisition, joint venture or other strategic transaction on a timely basis or at all; |
| ● | legal or regulatory proceedings, if any, relating to a planned acquisition, joint venture or other strategic transaction and the outcome of such legal proceedings; |
| ● | difficulty in assimilating the operations, systems, and personnel of the acquired company; |
| ● | difficulty in effectively integrating the acquired technologies or products with our current products and technologies; |
| ● | difficulty in maintaining controls, procedures and policies during the transition and integration; |
| ● | disruption of our ongoing business and distraction of our management and employees from other opportunities and challenges due to integration issues; |
| ● | difficulty integrating the acquired company’s accounting, management information and other administrative systems; |
| ● | inability to retain key technical and managerial personnel of the acquired business; |
| ● | inability to retain key customers, vendors and other business partners of the acquired business; |
| ● | inability to achieve the financial and strategic goals for the acquired and combined businesses; |
| ● | incurring acquisition-related costs or amortization costs for acquired intangible assets that could impact our results of operations; |
| ● | significant post-acquisition investments that may lower the actual benefits realized through the acquisition; |
| ● | potential failure of the due diligence processes to identify significant issues with product quality, legal, and financial liabilities, among other things; |
| ● | moderating and anticipating the impacts of inherent or emerging seasonality in acquired customer agreements; |
| ● | potential inability to assert that internal controls over financial reporting are effective; and |
| ● | potential inability to obtain, or obtain in a timely manner, approvals from governmental authorities, which could delay or prevent such acquisitions. |
Our failure to address these risks, or other problems encountered in connection with our past or future investments, strategic transactions, or acquisitions, could cause us to fail to realize the anticipated benefits of these acquisitions or investments, cause us to incur unanticipated liabilities, and harm our business generally. Future acquisitions could also result in dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities, amortization expenses, incremental expenses or the write-off of goodwill, any of which could harm our financial condition or results of operations.
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Mergers and acquisitions are inherently risky, may not produce the anticipated benefits and could adversely affect our business, financial condition or results of operations.
Disruptions to solar production metering and energy storage solutions could negatively impact customer experiences, which could damage our market reputation and adversely impact our financial results.
Our customers’ ability to monitor solar energy production for various purposes depends on the operation of the metering solution. For example, some meters and/or inverters operate on either the 3G or 4G cellular data networks, which are expected to sunset in the near future, and newer technologies we use today may also become obsolete. Disruptions to solar production metering and energy storage solutions could negatively impact customer experiences, which could damage our market reputation and adversely impact our financial results.
Our business may be harmed if we fail to properly protect our intellectual property, or if we are required to defend against claims or indemnify others against claims that we infringe on the intellectual property rights of third parties.
We believe that the success of our business depends in part on our proprietary information, processes and know-how. We rely on copyright and trade secret protections to secure our intellectual property. We also typically require employees, consultants, and third parties, such as our vendors and customers, with access to our proprietary information to execute confidentiality agreements. Although we may incur substantial costs in protecting our intellectual property, we cannot be certain that we have adequately protected or will be able to adequately protect it because, among other reasons:
| ● | others may not be deterred from misappropriating our intellectual property despite the existence of laws or contracts prohibiting such misappropriation and information security measures designed to deter or prevent misappropriation of our intellectual property; |
| ● | we have not obtained intellectual property assignment agreements from our founders or from a contract developer of certain software that we intend to use; |
| ● | foreign intellectual property laws and associated foreign legal enforcement regimes may not adequately protect our intellectual property rights; and |
| ● | policing unauthorized use of our intellectual property may be difficult, expensive, and time-consuming, the remedy obtained may be inadequate to restore protection of our intellectual property, and moreover, we may be unable to determine the extent of any unauthorized use. |
In addition, we cannot be certain that our intellectual property provides us with a competitive advantage. Despite our precautions, it may be possible for third parties to develop similar intellectual property independently or obtain and use our intellectual property without our consent. Reverse engineering, unauthorized copying, or other misappropriation of our intellectual property could enable third parties to benefit from our intellectual property without compensating us for doing so. Unauthorized use of our intellectual property by third parties, any other inability to adequately protect our proprietary rights, and the expenses incurred in protecting our intellectual property rights may adversely affect our business.
In the future, we may also be required to defend against claims that we have infringed on the intellectual property of third parties, and we cannot be certain that we will prevail in any intellectual property dispute. Any future litigation required to enforce our intellectual property, to protect our trade secrets or know-how or to defend us or indemnify others against claimed infringement of the rights of third parties could harm our business, financial condition, and results of operations.
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We use “open source” software components in our solutions as well as other licensed software, which may require that we release the source code of certain software subject to open source licenses or subject us to possible litigation or other actions that could adversely affect our business.
We utilize software that is licensed under so-called “open source,” “free” or other similar licenses, or that contain components that are licensed in such manner. Our use of open source software may entail different or greater risks than use of third-party commercial software. Open source licensors sometimes do not provide warranties or other contractual protections regarding infringement claims or the quality of the code, and open source software is sometimes made available to the general public on an “as-is” basis under the terms of a non-negotiable license. In addition, if we combine our proprietary software with open source software in a certain manner, we could, under certain open source licenses, be required to release the source code of our proprietary software to the public. We do not believe we have combined any of our proprietary software with open source software in such a manner, but if that were to occur this would allow our competitors to create similar offerings with lower development effort and time.
We may also face claims alleging noncompliance with open source license terms or other license terms, or infringement or misappropriation of proprietary software. These claims could result in litigation, require us to purchase a costly license or require us to devote additional research and development resources to change our software, any of which would have a negative effect on our business and results of operations. Few courts have interpreted open source licenses and these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to use our proprietary software. We cannot guarantee that we have incorporated or will incorporate open source or other software in our software in a manner that will not subject us to liability or require us to release the source code of our proprietary software to the public.
Any security breach, unauthorized access or disclosure, or theft of data, including personal information, we, our third party service providers, and suppliers gather, store, transmit, and use, or other hacking, cyber-attack, phishing attack, and unauthorized intrusions into or through our systems or those of our third party service providers, could harm our reputation, subject us to claims, litigation, financial harm, and have an adverse impact on our business.
In the ordinary course of business, we, our third party providers upon which we rely and our suppliers receive, store, transmit and use data, including the personal information of customers, such as names, addresses, email addresses, credit information and other housing and energy use information, as well as the personal information of our employees. Unauthorized disclosure of such personal information, whether through a breach of our or our third party service providers’ and suppliers’ systems by an unauthorized party, including, but not limited to hackers, threat actors, sophisticated nation-states, nation-state-supported actors, personnel theft or misuse of information or otherwise, could harm our business. In addition, we, our third party service providers upon which we rely and our suppliers may be subject to a variety of evolving threats, such as computer malware (including as a result of advanced persistent threat intrusions), ransomware, malicious code (such as viruses or worms), social engineering (including spear phishing and smishing attacks), telecommunications failures, natural disasters and extreme weather events, general hacking and other similar threats. Cybersecurity incidents have become more prevalent. As of the date of this Report, we have not experienced a material cybersecurity incident. However, cybersecurity incidents could occur on our systems and those of our third parties in the future. Our team members who work remotely pose increased risks to our information technology systems and data, because many of them utilize less secure network connections outside our premises.
Inadvertent disclosure of confidential data, such as personal information, or unauthorized access to this type of data in our possession by a third party, could result in future claims or litigation arising from damages suffered by those affected, government enforcement actions (for example, investigations, fines, penalties, audits and inspections), additional reporting requirements and/or oversight, indemnification obligations, reputational harm, interruptions in our operations, financial loss and other similar harms. In addition, we could incur significant costs in complying with the multitude of federal, state and local laws, and applicable independent security control frameworks, regarding the unauthorized disclosure of personal information. Although to our knowledge we have not experienced a material information security breach, we cannot assure you that the systems and processes we have to prevent or detect security breaches and protect the confidential information we receive, store, transmit and use, will provide absolute security. Finally, any perceived or actual unauthorized disclosure of such information, unauthorized intrusion or other cyberthreat could harm our reputation, substantially impair our ability to attract and retain customers, interrupt our operations and have an adverse impact on our business.
Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages or claims related to our data privacy and security obligations.
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Terrorist attacks or cyberattacks against centralized utilities could adversely affect our business.
Assets owned by utilities such as substations and related infrastructure have been physically attacked in the past and will likely be attacked in the future. These facilities are often protected by limited security measures, such as perimeter fencing. Any such attacks may result in interruption to electricity flowing on the grid and consequently interrupt service to our solar energy systems not combined with an energy storage system, which could adversely affect our operations. Furthermore, cyberattacks, whether by individuals or nation states, against utility companies could severely disrupt their business operations and result in loss of service to customers, which would adversely affect our operations.
We may be subject to information technology system failures or network disruptions that could damage our business operations, financial conditions or reputation.
We may be subject to information technology system failures and network disruptions. These may be caused by natural disasters, accidents, power disruptions, telecommunications failures, acts of terrorism or war, computer viruses, physical or electronic break-ins, or similar events or disruptions. System redundancy may be ineffective or inadequate, and our disaster recovery planning may not be sufficient for all eventualities. Such failures or disruptions could result in delayed or cancelled orders. System failures and disruptions could also impede the manufacturing and shipping of products, delivery of online services, transactions processing and financial reporting. Such system failures or network disruptions could damage our business operations, financial conditions or reputation.
Damage to our brand and reputation or failure to expand our brand would harm our business and results of operations.
We depend significantly on our brand and reputation for high-quality solar service offerings, engineering and customer service to attract customers, contractors and dealers, and grow our business. If we fail to continue to deliver our solar service offerings within the planned timelines, if our solar service offerings do not perform as anticipated or if we damage any customers’ properties or cancel projects, our brand and reputation could be significantly impaired. We also depend greatly on referrals from customers for our growth. Therefore, our inability to meet or exceed customers’ expectations would harm our reputation and growth through referrals. We have at times focused particular attention on expeditiously growing our direct sales force and our contractors, leading us in some instances to hire personnel or contractors who we may later determine do not fit our company culture and standards.
Given the sheer volume of interactions our sales force, dealers and contractors have with customers and potential customers, it is also unavoidable that some interactions will be perceived by customers and potential customers as less than satisfactory and result in complaints. If we cannot manage our hiring and training processes to limit potential issues and maintain appropriate customer service levels, our brand and reputation may be harmed and our ability to grow our business would suffer. In addition, if we were unable to achieve a similar level of brand recognition as our competitors, some of which may have a broader brand footprint, more resources and longer operational history, we could lose recognition in the marketplace among prospective customers, suppliers and subcontractors, which could affect our growth and financial performance. Our growth strategy involves marketing and branding initiatives that will involve incurring significant expenses in advance of corresponding revenue. We cannot assure you that such marketing and branding expenses will result in the successful expansion of our brand recognition or increase our revenue. We are also subject to marketing and advertising regulations in various jurisdictions, and overly restrictive conditions on our marketing and advertising activities may inhibit the sales of the affected products.
The loss of one or more members of our senior management or key personnel may adversely affect our operations.
We depend on our experienced management team, and the loss of one or more key executives could have a negative impact on our business. With any change in leadership, there is a risk to organizational effectiveness and employee retention as well as the potential for disruption to our business. We may be unable to replace key members of our management team and key personnel in the event we lose their services. Integrating new personnel into our management team could prove disruptive to our operations, require substantial resources and management attention and ultimately prove unsuccessful. An inability to attract and retain sufficient managerial personnel who have critical industry experience and relationships could limit or delay our strategic efforts, which could have a material adverse effect on our business, financial condition and results of operations.
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A failure to hire and retain a sufficient number of employees and service providers in key functions would constrain our growth and our ability to timely complete customers’ projects and successfully manage customer accounts.
To support our growth, we need to hire, train, deploy, manage and retain a substantial number of skilled employees, engineers, design techs, installers, electricians, operations and sales managers and sales personnel.
Competition for qualified personnel in our industry is increasing, particularly for skilled personnel involved in the installation of solar energy systems. We have in the past been, and may in the future be, unable to attract or retain qualified and skilled installation personnel or installation companies to be our subcontractors, which would have an adverse effect on our business. We and our subcontractors also compete with the homebuilding and construction industries for skilled labor. As these industries grow and seek to hire additional workers, our cost of labor may increase. The unionization of the industry’s labor force could also increase our labor costs. Shortages of skilled labor could significantly delay a project or otherwise increase our costs. Because our profit on a particular installation is based in part on assumptions as to the cost of such project, cost overruns, delays or other execution issues may cause us to not achieve our expected margins or cover our costs for that project. Further, we need to continue to expand upon the training of our customer service team to provide high-end account management and service to customers before, during and following the point of installation of our solar energy systems. Identifying and recruiting qualified personnel and training them requires significant time, expense and attention. It can take several months before a new customer service team member is fully trained and productive at the standards that we have established. If we are unable to hire, develop and retain talented technical and customer service personnel, we may not be able to realize the expected benefits of this investment or grow our business.
In addition, to support the growth and success of our direct-to-consumer channel, we need to recruit, retain and motivate a large number of sales personnel on a continuing basis. We compete with many other companies for qualified sales personnel, and it could take many months before a new salesperson is fully trained on our solar service offerings. If we are unable to hire, develop and retain qualified sales personnel or if they are unable to achieve desired productivity levels, we may not be able to compete effectively.
If we or our subcontractors cannot meet our hiring, retention and efficiency goals, we may be unable to complete customers’ projects on time or manage customer accounts in an acceptable manner or at all. Any significant failures in this regard would materially impair our growth, reputation, business and financial results. If we are required to pay higher compensation than we anticipate, these greater expenses may also adversely impact our financial results and the growth of our business.
Regulators may limit the type of electricians qualified to install and service our solar and battery systems, or introduce other requirements on our installation staff, which may result in workforce shortages, operational delays, and increased costs.
Regulators may limit the type of electricians qualified to install and service our solar and battery systems, such as requiring that electricians installing such systems have a certain license, or introduce other requirements that would apply to our installation staff. While our workforce includes workers licensed to install and service our solar and battery systems, if we are unable to hire, develop and retain sufficient certified electricians, we may face operational delays and increased costs. In addition, our growth may be significantly constrained, which would negatively impact our operating results.
We have previously been subject to, and we may in the future be subject to, regulatory inquiries and litigation, all of which are costly, distracting to our core business and could result in an unfavorable outcome, or a material adverse effect on our business, financial condition, results of operations, or the trading price of our securities.
We have previously been subject to regulatory inquiries and litigation, and in the future, we may be involved in legal proceedings and receive inquiries from government and regulatory agencies from time to time. In the event that we are involved in significant disputes or are the subject of a formal action by a regulatory agency, we could be exposed to costly and time-consuming legal proceedings that could result in any number of outcomes. Although outcomes of such actions vary, any current or future claims or regulatory actions initiated by or against us, whether successful or not, could result in significant costs, costly damage awards or settlement amounts, injunctive relief, increased costs of business, fines or orders to change certain business practices, significant dedication of management time or diversion of significant operational resources, or otherwise harm our business.
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If we are not successful in any legal proceedings and litigation, we may be required to pay significant monetary damages, which could hurt our results of operations. Lawsuits are time-consuming and expensive to resolve and divert management’s time and attention. Although we carry general liability insurance, our insurance may not cover potential claims or may not be adequate to indemnify us for all liability that may be imposed. We cannot predict how the courts will rule in any potential lawsuit against us. Decisions in favor of parties that bring lawsuits against us could subject us to significant liability for damages, adversely affect our results of operations and harm our reputation.
If we are unsuccessful in selling new services and products, our business, financial condition and results of operations could be adversely affected.
In the future, we may offer new products or services. There is a risk that such products or services may not work as intended, or that the marketing of the products or services may not be as successful as anticipated. The sale of new products and services generally requires substantial investment. We intend to continue to make substantial investments in new products and services, and it is possible that we may not acquire new products or product enhancements that compete effectively within our target markets or differentiate our products based on functionality, performance or cost, and thus our new products may not result in meaningful revenue. In addition, any delays in releasing new or enhanced products or services could cause us to lose revenue opportunities and potential customers. Any technical flaws in product releases could diminish the innovative impact of our products and have a negative effect on customer adoption and our reputation. If we fail to introduce new products or services that meet the demands of our customers or target markets or do not achieve market acceptance, or if we fail to penetrate new markets, our business, financial conditions and results of operations could be adversely affected.
Our operating results and our ability to grow may fluctuate on a seasonal basis and from quarter to quarter and year to year, which could make our future performance difficult to predict and could cause our operating results for a particular period to fall below expectations.
Our quarterly and annual operating results and our ability to grow are difficult to predict and may fluctuate significantly in the future. Historically, our sales volume has been highest during late spring, summer, and early fall. During this time, consumers in many locations see greater energy needs due to operating air conditioning systems and warm-weather appliances such as swimming pool pumps. Our door-to-door sales efforts are also aided during these months by increased daylight hours, and we have more sales personnel working during these months. We typically have largely or entirely scaled down our sales efforts during the late fall, winter and early spring. Snow, cold weather or other inclement weather can delay our installation of products and services.
We have experienced seasonal and quarterly fluctuations in the past and expect to experience such fluctuations in the future. In addition to the other risks described in this “Risk Factors” section, the following factors could cause our operating results to fluctuate:
| ● | expiration or initiation of any governmental rebates or incentives; |
| ● | significant fluctuations in customer demand for our solar energy services, solar energy systems and energy storage systems; |
| ● | our subcontractors’ ability to complete installations in a timely manner; |
| ● | our and our subcontractors’ ability to gain interconnection permission for an installed solar energy system from the relevant utility; |
| ● | the availability, terms and costs of suitable financing; |
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| ● | our ability to continue to expand our operations and the amount and timing of expenditures related to this expansion; |
| ● | announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital-raising activities or commitments; |
| ● | changes in our pricing policies or terms or those of our competitors, including electric utilities; |
| ● | actual or anticipated developments in our competitors’ businesses, technology or the competitive landscape; and |
| ● | natural disasters or other weather or meteorological conditions. |
For these or other reasons, the results of any prior quarterly or annual periods should not be relied upon as indications of our future performance.
We may be unable to generate sufficient cash flows or obtain access to external financing necessary to fund our operations and make adequate capital investments as planned due to the general economic environment, cost inflation, and/or the market pressure driving down the average selling prices of our products and services, among other factors.
To acquire new products, support future growth, achieve operating efficiencies and maintain product quality, we may need to make significant capital investments in product and process technology as well as enhancing our digital capabilities. The delayed disposition of such projects, or the inability to realize the full anticipated value of such projects on disposition, could have a negative impact on our liquidity.
Certain municipalities where we install systems also require performance bonds in cash, issued by an insurance company or bonding agency, or bank guarantees or letters of credit issued by financial institutions, which are returned to us upon satisfaction of contractual requirements.
We manage our working capital requirements and fund our committed capital expenditures with our current cash and cash equivalents and cash generated from operations. If our capital resources are insufficient to satisfy our liquidity requirements, we may seek to sell additional equity investments or debt securities or obtain debt financing. Market conditions, however, could limit our ability to raise capital by issuing new equity or debt securities on acceptable terms, or at all, and lenders may be unwilling to lend funds on acceptable terms, or at all. The sale of additional equity investments may result in additional dilution to our equity holders. Debt financing would result in increased expenses and could impose new restrictive covenants. Financing arrangements may not be available to us or may not be available in amounts or on terms acceptable to us. If financing is not available, we may be forced to seek to sell assets or reduce or delay capital investments, any of which could adversely affect our business, results of operations, cash flows, and financial condition.
If we cannot generate sufficient cash flows, find other sources of capital to fund our operations and projects, make adequate capital investments to remain technologically and price competitive, or provide bonding or letters of credit required by our projects, we may need to sell additional equity investments or debt securities, or obtain debt financings. If adequate funds from these or other sources are not available on acceptable terms or at all, our ability to fund our operations, including making digital investments, develop and expand our distribution network, maintain our research and development efforts, meet any debt service obligations we take on in the future or otherwise respond to competitive pressures would be significantly impaired. Our inability to do any of the foregoing could have a material adverse effect on our business, results of operations, cash flows and financial condition.
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Inflation could result in decreased value from future contractual payments and higher expenses for labor and equipment, which, in turn, could adversely impact our reputation, business, financial condition, cash flows and results of operations.
Any future increase in inflation may adversely affect our costs, including our subcontractors’ cost of labor and equipment, and may result in a decrease in value in our future contractual payments. These factors could adversely impact our reputation, business, financial condition, cash flows and results of operations.
While we believe that inflationary pressures have contributed to increased costs of labor and components that we purchase, we believe that the increased cost of these items were also due to a combination of other factors, including supply chain constraints, increased demand for solar systems in the U.S. and Europe and tariffs and trade regulations. We do not have information that allows us to quantify the specific amount of cost increases attributable to inflationary pressures.
Fluctuations in interest rates could adversely affect our business and financial results.
We are exposed to interest rate risk because many of our customers depend on debt financing to purchase our solar power systems. An increase in interest rates could make it difficult for our customers to obtain the financing necessary to purchase our solar power systems on favorable terms, or at all, and thus lower demand for our solar power products, reduce revenue and adversely affect our results of operations and cash flow. An increase in interest rates could lower a customer’s return on investment in a system or make alternative investments more attractive relative to solar power systems, which, in each case, could cause our customers to seek alternative investments that promise higher returns or demand higher returns from our solar power systems, which could reduce our revenue and gross margin and adversely affect our financial results. While we believe that increases in interest rates have led to higher financing costs for our customers, lower demand for our products and lower revenue than we would have otherwise experienced, we do not have information that allows us to quantify the adverse effects attributable to increased interest rates.
We may incur additional debt in the future, which could introduce debt servicing costs and risks to our business.
We and our subsidiaries may incur additional debt in the future, and such debt arrangements may restrict our ability to incur additional indebtedness, including secured indebtedness. These restrictions could inhibit our ability to pursue our business strategies. Furthermore, there is no assurance that we will be able to enter into debt instruments on acceptable terms or at all. If we were unable to satisfy financial covenants and other terms under new instruments, or obtain waivers or forbearance from our lenders, or if we were unable to obtain refinancing or new financings for our working capital, equipment, and other needs on acceptable terms if and when needed, our business would be adversely affected.
So long as the Convertible OpCo Preferred Units of OpCo remain outstanding, the Sponsor holds certain consent rights over OpCo’s ability to incur indebtedness, which could adversely affect the future business and operations of OpCo and Zeo, including by decreasing its business flexibility.
The terms of the amended and restated limited liability company agreement of OpCo (the “OpCo A&R LLC Agreement”) grant Sponsor certain consent rights with respect to certain actions, including OpCo’s incurrence of indebtedness for borrowed money, subject to certain enumerated exceptions, so long as the Convertible OpCo Preferred Units remain outstanding. As a result, OpCo needs to obtain the prior written consent of Sponsor before incurring any additional indebtedness (subject to the terms of OpCo A&R LLC Agreement). Because Sponsor has interests that are different than, or in addition to and which may conflict with, the interests of OpCo and Zeo, there is no assurance that Sponsor will consent to any proposed future incurrence of debt. Therefore, Sponsor has the ability to influence the outcome of certain matters affecting OpCo and Zeo, and OpCo may be unable to raise additional debt financing to operate during general economic or business downturns, take advantage of new business opportunities, and/or pursue its business strategies.
We have suppliers that are based or manufacture the products we sell outside the United States, which may subject us to additional business risks, including logistical complexity and political instability.
A portion of our supply agreements are with manufacturers and equipment vendors located outside of the United States. Risks we face in conducting business internationally include:
| ● | multiple, conflicting and changing laws and regulations relating to employment, safety, environmental protection, international trade, and other government approvals, permits, and licenses and regulatory requirements; |
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| ● | financial risks, such as longer sales and payment cycles, greater difficulty enforcing rights and remedies and capital controls or other restrictions on the transfer of funds; |
| ● | currency fluctuations, government-fixed foreign exchange rates, the effects of currency hedging activity and the potential inability to hedge currency fluctuations; |
| ● | the effects of Russia’s war on Ukraine and other political and economic instability, including wars, acts of terrorism, political unrest, boycotts, curtailments of trade, nationalization of assets, and other business restrictions; |
| ● | trade barriers such as import and export requirements or restrictions, licensing requirements, tariffs, taxes and other restrictions and expenses for which we may have responsibility, which could increase the prices of our products; and |
| ● | liabilities associated with compliance with laws (for example, the Foreign Corrupt Practices Act in the United States and similar laws outside of the United States). |
| ● | the effects of Russia’s war on Ukraine, which, while we believe Russia’s war on Ukraine has contributed to price increases for components that we purchase, we believe that the increases to the cost of our components were also due to a combination of other factors, including supply chain constraints, increased demand for solar systems in the U.S. and Europe, tariffs and trade regulations, rising inflation, and higher labor, material, and shipping costs. We do not have information that allows us to quantify the specific amount of price increases attributable to Russia’s war on Ukraine and do not materially rely directly or indirectly on goods or services sources in Russia, Ukraine or Belarus or have any material business relationships, connections to, or assets in, Russia, Belarus or Ukraine. |
We must work with our suppliers to effectively manage the flow of products in light of these risks. If we fail to do so, our available inventory may not correspond with product demand. If we are unable to successfully manage any such risks, any one or more could materially and adversely affect our business, results of operations, cash flows and financial condition.
We are currently dependent on third-party leasing companies to offer customers the option of leasing our solar energy systems.
During 2024 and 2025, the majority of our customers who entered into leasing agreements have done so with third-party leasing companies such as Palmetto Solar, LLC d/b/a LightReach (“Solar”), Sunnova Energy Corporation (“Sunnova”), Goodleap LLC or a third party leasing company established and managed by White Horse Energy. Thus far, such companies have had sufficient assets to finance the purchase of systems for each of our customers who have signed agreements for leased solar energy systems to be installed on their home and for whom the installation processes have been completed. However, no assurance can be given that this will continue, and if such companies decide not to continue to provide financing for leases due to general market conditions, changes in tax benefits associated with our solar systems, concerns about their or our business or prospects, or any other reason, or if they materially change the terms under which they are willing to pay us to install and service leased solar energy systems, and we cannot timely replace them, this could have an adverse effect on our business, financial condition and results of operations. Additionally, such companies may fail to pay or delay the payment of amounts owed to us for several reasons, including financial difficulties resulting from macroeconomic conditions, and extended delays or defaults in payment could adversely affect our business, results of operations, cash flows and financial condition. To mitigate the foregoing risks, we have identified additional leasing partners and are negotiating business arrangements with them to increase the number of leasing parties we have the ability to work with.
We intend to seek out additional third-party investors to provide financing for customers wishing to lease their solar energy systems. However, no assurance can be given that we will be able to successfully do so.
System leases of our installations during the year ended December 31, 2025 and 2024, were approximately 98% and 64%, respectively. Approximately 44% of those leases are owned by Solar, and if (i) Solar terminates their relationship with us, (ii) Solar does not have sufficient assets in the future to provide financing for customers wishing to lease their solar energy systems, (iii) we cannot enter into new arrangements with other third-party investors to provide financing for customers wishing to lease their solar energy systems, or (iv) we cannot maintain current or enter into new arrangements with other third party leasing companies, we may be unable to continue to increase the size of our residential lease program, which could have a material, adverse effect on our business, results of operations, cash flows, and financial condition in the future.
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We typically bear the cost of maintenance and repair on solar energy systems we install that are owned and leased by third-party leasing companies.
We are obligated through a maintenance services agreement to provide maintenance and repair services for solar energy systems we install that are leased by third-party leasing companies to homeowners. In the maintenance services agreement, we have agreed to maintain the leased systems for a fixed fee that is calculated to cover our future expected maintenance costs. If our solar energy systems require an above-average amount of repairs or if the cost of repairing systems were higher than our estimate, we may need to perform such services without additional compensation.
Members of our management team have interests in or are employed by other business ventures that may divert their attention from our business.
Members of our management team presently have, and may in the future have additional, ownership interests in, employment by and/or fiduciary or contractual obligations to other entities with which they are affiliated with (such as Solar). Such other ventures and entities could divert the attention of our management from our business or create conflicts of interests.
Our transactions with related parties may create conflicts of interest that could adversely affect our business or financial condition.
We have entered into, and may in the future enter into, transactions with our executive officers, directors, and significant stockholders, notably White Horse Energy, a holding company of which Timothy Bridgewater, Zeo’s Chairman and Chief Executive Officer, is the owner and the manager. In particular, approximately 30% of Zeo’s customers who have entered into leasing agreements have done so with third-party leasing companies established and managed by White Horse Energy. These transactions may not be on terms as favorable to us as those we could have obtained from an unrelated third party. The existence of these transactions may create conflicts of interest for Mr. Bridgewater that may not be resolved on terms favorable to our company, if at all. If these transactions are not perceived as fair or are found to be improper, we could face increased regulatory scrutiny, shareholder litigation, or a loss of investor confidence, any of which could result in a decline in our stock price.
Risks Related to Regulation and Policy
Our business currently depends on the availability of utility rebates, tax credits and other benefits, tax exemptions and exclusions, and other financial incentives on the federal, state, and/or local levels. We may be adversely affected by changes in, and application of these laws or other incentives to us, and the expiration, elimination or reduction of these benefits could adversely impact our business.
Our business benefits from government policies that promote and support solar energy and enhance the economic viability of owning or leasing solar energy systems, energy storage, and certain other energy solutions. Certain U.S. federal, state and local governmental bodies provide incentives to owners, distributors, installers and manufacturers of solar energy systems to promote solar energy. These incentives include an investment tax credit and income tax credit offered by the federal government, as well as other tax credits, rebates and SRECs associated with solar energy generation. We rely on these incentives to lower our cost of capital and to attract investors, all of which enable us to lower the price we charge customers for our solar service offerings. These incentives could change at any time, as further described below. These incentives may also expire on a particular date, in some cases end when the allocated funding is exhausted, or may be reduced, terminated or repealed without notice. The financial value of certain incentives may also decrease over time.
The IRA modified prior law applicable to U.S. federal tax credits available for solar energy systems, energy storage, and other energy solutions. The IRA included a “Section 25D” 30% residential clean energy tax credit in connection with the installation of qualifying property that uses solar energy to generate electricity for residential use. On July 24, 2025, U.S. federal legislation Pub. L. No. 119-21, 139 Stat. 72 (“Pub. L. No. 119-21”) became effective. 2025 Pub. L. No. 119-21 removes the Section 25D credit for systems placed in service after December 31, 2025. More generally, Pub. L. No. 119-21 accelerated the phaseout or termination of certain energy tax credits that had been included in the IRA including the termination, with some exceptions, of certain tax credits for solar projects that are completed after 2027.
In December 2017, the Tax Cuts and Job Acts of 2017 (the “Tax Act”) was enacted. As part of the Tax Act, the corporate income tax rate was reduced, and there were other changes, including limiting or eliminating various other deductions, credits and tax preferences. The IRA implemented a corporate alternative minimum tax of 15% of financial statement income (subject to certain adjustments) for companies that report over $1 billion in profits to stockholders; similar to existing law, business credits (including solar energy credits) are limited to 75% of income in excess of $25,000 (with no limit against the first $25,000). We cannot predict whether and to what extent the U.S. corporate income tax rate will change in the future. The U.S. Congress is constantly considering changes to the tax code. Further limitations on, or elimination of, the tax benefits that support the financing of solar energy under current U.S. law could significantly and adversely impact our business.
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U.S. government bodies are preparing guidance on the application and implementation of Pub. L. No. 119-21, and the government may continue to seek to reduce the circumstances in which federal tax credits are available for energy projects. If this occurs, or if the federal government introduces other delays, reductions, or changes in policies that support the residential solar industry, including available tax credits, this could have an adverse effect on our business.
Additionally, the above-described changes in the government’s trade policy, and possible changes in tax policy have contributed to investor and consumer uncertainty, and could contribute to a higher interest rate environment, which may further negatively impact our operations and financing costs. While it is difficult to predict specific outcomes at this time, we expect a period of regulatory and policy uncertainty in the near term.
Our business model also benefits from tax exemptions offered at the state and local levels. For example, some states have property tax exemptions that exempt the value of solar energy systems in determining values for calculation of local and state real and personal property taxes. State and local tax exemptions can have sunset dates, triggers for loss of the exemption, and can be changed by state legislatures and other regulators, and if solar energy systems were not exempt from such taxes, the property taxes payable by customers would be higher, which could offset any potential savings our solar service offerings could offer. Similarly, if state or local legislatures or tax administrators impose property taxes on third-party owners of solar energy systems, solar companies like us would be subject to higher costs.
In general, we benefit from certain state and local tax exemptions that apply in some jurisdictions to the sale of equipment, sale of power, or both. These state and local tax exemptions can expire, can be changed by state legislatures, or their application to us can be challenged by regulators, tax administrators, or court rulings. Any changes to, or efforts to overturn, federal and state laws, regulations or policies that are supportive of solar energy generation or that remove costs or other limitations on other types of energy generation that compete with solar energy projects could materially and adversely affect our business.
We rely on certain utility rate structures, such as net metering, to offer competitive pricing to customers, and changes to those policies may significantly reduce demand for electricity from our solar energy systems.
As of December 31, 2025, a substantial majority of states had adopted net metering policies, including Florida, Texas, Missouri, Ohio and Illinois. Net metering policies allow homeowners to serve their own energy load using on-site generation while avoiding the full retail volumetric charge for electricity. Electricity that is generated by a solar energy system and consumed on-site avoids a retail energy purchase from the applicable utility, and excess electricity that is exported back to the electric grid generates a retail credit within a homeowner’s monthly billing period. At the end of the monthly billing period, if the homeowner has generated excess electricity within that month, the homeowner typically carries forward a credit for any excess electricity to be offset against future utility energy purchases. At the end of an annual billing period or calendar year, utilities either continue to carry forward a credit, or reconcile the homeowner’s final annual or calendar year bill using different rates (including zero credit) for the exported electricity.
Utilities, their trade associations, and fossil fuel interests in the country are currently challenging net metering policies, and seeking to eliminate them, cap them, reduce the value of the credit provided to homeowners for excess generation, or impose charges on homeowners that have net metering.
A few states have moved away from traditional full retail net metering and instead values excess generation by customers’ solar systems in various ways. For example, in 2017, Nevada enacted legislation to restore net metering at a reduced credit and guarantee new customers the net metering rate in effect at the time they applied for interconnection for 20 years. In 2016, the Arizona Corporation Commission replaced retail net metering with a net-feed in tariff (a fixed export rate). Some states set limits on the total percentage of a utility’s customers that can adopt net metering or set a timeline to evaluate net metering successor tariffs. For example, South Carolina passed legislation in 2019 that required review of net metering after two years. In 2021, the South Carolina Public Service Commission approved a portion of Duke Energy’s proposal that maintains the net metering framework with time-of-use rates and rejected a proposal from Dominion Energy to eliminate net metering altogether. In 2021 legislation, Illinois changed its net metering threshold from a percentage of customers to full retail net metering offered to a date certain (December 31, 2024) with a directed successor tariff that includes values that distributed resources provide to the distribution grid. New Jersey currently has no net metering cap; however, it has a threshold that triggers commission review of its net metering policy. States we serve now or in the future may adopt similar policies or net metering caps. If the net metering caps in these jurisdictions are reached without an extension of net metering policies, homeowners in those jurisdictions will not have access to the economic value proposition net metering provides. Our ability to sell our solar service offerings may be adversely impacted by the failure to extend existing limits to net metering or the elimination of currently existing net metering policies. The failure to adopt a net metering policy where it currently is not in place would pose a barrier to entry in those states. On April 26, 2022, Florida Governor DeSantis vetoed legislation that would have established a threshold date and percentage trigger when retail net metering would have faced declines in the immediate export rate.
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Additionally, the imposition of charges that only or disproportionately impact homeowners that have solar energy systems, or the introduction of rate designs mentioned above, would adversely impact our business. Because fixed charges cannot easily be avoided with the installation of an on-site battery, which can mitigate or eliminate the negative impacts of net metering changes, these fixed charges have the potential to cause a more significant adverse impact. In June of 2021, two of four commissioners of FERC, including its chairperson, issued a letter stating there was a “strong case” such fixed charges in Alabama “may be violating the Commission’s PURPA regulations, undermining the statute’s purpose of encouraging Qualifying Facilities,” which is the Commission’s term for on-site generation. Litigation regarding the legality of these charges is ongoing in federal court. Most recently, on April 26, 2022, Florida Governor DeSantis vetoed legislation that would have allowed investor-owned utilities to petition the Public Service Commission for the ability to add fixed charges on solar customers. As part of the California Public Utilities Commission (“CPUC”) final decision on December 15, 2022, the CPUC rejected a solar specific fixed charge on solar customers.
Electric utility policies, statutes, and regulations and changes to such statutes or regulations may present technical, regulatory and economic barriers to the purchase and use of our solar energy offerings that may significantly reduce demand for such offerings.
Federal, state and local government policies, statutes and regulations concerning electricity heavily influence the market for our solar energy offerings and are constantly evolving. These statutes, regulations, and administrative rulings relate to electricity pricing, net metering, consumer protection, incentives, taxation, competition with utilities and the interconnection of homeowner-owned and third party-owned solar energy systems to the electrical grid. These policies, statutes and regulations are constantly evolving. Governments, often acting through state utility or public service commissions, change and adopt different rates for residential customers on a regular basis and these changes can have a negative impact on our ability to deliver savings, or energy bill management, to customers.
In addition, many utilities, their trade associations, and fossil fuel interests in the country, which have significantly greater economic, technical, operational, and political resources than the residential solar industry, are currently challenging solar-related policies to reduce the competitiveness of residential solar energy. Any adverse changes in solar-related policies could have a negative impact on our business and prospects.
We are not currently regulated as a utility under applicable laws, but we may be subject to regulation as a utility in the future or become subject to new federal and state regulations for any additional solar service offerings we may introduce in the future.
Most federal, state, and municipal laws do not currently regulate us as a utility. As a result, we are not subject to the various regulatory requirements applicable to U.S. utilities. However, any federal, state, local or other applicable regulations could place significant restrictions on our ability to operate our business and execute our business plan by prohibiting or otherwise restricting our sale of electricity. These regulatory requirements could include restricting our sale of electricity, as well as regulating the price of our solar service offerings. If we become subject to the same regulatory authorities as utilities or if new regulatory bodies are established to oversee our business, our operating costs could materially increase.
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Changes to the applicable laws and regulations governing direct-to-home sales and marketing may limit or restrict our ability to effectively compete.
We utilize a direct-to-home sales model as a primary sales channel and are vulnerable to changes in laws and regulations related to direct sales and marketing that could impose additional limitations on unsolicited residential sales calls and may impose additional restrictions such as adjustments to our marketing materials and direct-selling processes, and new training for personnel. If additional laws and regulations affecting direct sales and marketing are passed in the markets in which we operate, it would take time to train our sales professionals to comply with such laws, and we may be exposed to fines or other penalties for violations of such laws. If we fail to compete effectively through our direct-selling efforts, our financial condition, results of operations and growth prospects could be adversely affected.
Increases in the cost or reduction in supply of solar energy system and energy storage system components due to tariffs or trade restrictions announced or imposed by the U.S. government could have an adverse effect on our business, financial condition and results of operations.
On April 2, 2025, the U.S. government introduced a baseline tariff on nearly all goods imported into the U.S and higher tariffs on specific countries. For example, certain proposed tariffs on goods imported from China and specific Southeast Asian countries that are sources of solar components have been announced at significant percentage rates.
The application and rates of these measures are being actively negotiated, have been in flux, and remain subject to government action and change. Shortly after the initial announcement, the U.S. government announced a delay in applying certain of these tariffs, while other measures, such as the baseline tariff and increased tariff on Chinese imports, remained in effect or were implemented as initially announced or modified. As of the date of this Report, the tariff rates on imports from China have been set at substantial levels, and rates for other countries remain subject to ongoing review and potential implementation. Less than 10% of the solar components and equipment we purchase for the solar systems we install are manufactured in the U.S.. The new tariffs are likely to result in price increases for domestic and imported solar panels, inverters, and related equipment. The tariffs may also result in decreased availability and/or increased procurement time for solar system equipment. Measures retaliating to the new tariffs have been announced by some countries, and other responses are likely.
Going forward, the tariff environment and effects on the supply chain are likely to remain in flux. As changes occur, we will continue to assess our procurement and pricing strategies. The new tariffs, and continued volatility in trade policy may impact our gross margins and growth, due to factors such as increased procurement and installation costs, profit margin compression or the need to pass increased costs to consumers, supply chain disruption, and competitive disadvantages relative to market participants with more favorable supply arrangements.
Trade policy may evolve further in ways that are adverse to our business. As examples, if current tariffs are extended or increased, or if retaliatory actions or supply shortages arise, our financial condition, results of operations, and future growth prospects could be materially and adversely affected. We continue to monitor these developments closely and revise our pricing models and sourcing strategies in response. However, there can be no assurance that such measures will be sufficient to mitigate the impact of the trade restrictions and their impacts on the supply chain and market demand for our products.
Additionally, China is a major producer of solar cells (the main components of solar panels) and other solar products. Certain solar cells, panels, laminates and panels from China are subject to various U.S. antidumping and countervailing duty rates, depending on the exporter supplying the product, imposed by the U.S. government as a result of determinations that the U.S. was materially injured as a result of such imports being sold at less than fair value and subsidized by the Chinese government. Historically, we and our subcontractors regularly surveyed the market to identify multiple alternative locations for product manufacturers. Nonetheless, many of the solar products we purchase are from manufacturers in China or from manufacturers in other jurisdictions who rely, in part, on products sourced in China. If alternative sources are not available on competitive terms in the future, we and our subcontractors may be required to purchase these products from manufacturers in China. In addition, tariffs on solar cells, panels and inverters in China may put upward pressure on prices of these products in other jurisdictions from which we or our subcontractors currently purchase equipment, which could reduce our ability to offer competitive pricing to potential customers.
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Pub. L. No. 119-21 became effective July 4, 2025, and, among other provisions, modified rules regarding federal tax credits and benefits available for clean energy projects. Pub. L. No. 119-21 law established new foreign entity of concern (“FEOC”) rules that apply in tax years beginning after July 4, 2025. The FEOC rules define Russia, North Korea, Iran, and China as foreign entities of concern, and require energy projects to meet certain levels of domestic ownership and domestic sourcing requirements to be eligible for energy-related tax credits. As examples, under the new FEOC rules, a U.S. energy project can only receive specific tax credits if the project’s equipment from certain FEOC-related entities does not exceed set amounts, and the rules disqualify other credits from applying to US-made products that contain too many inputs from certain FEOC-related entities. The rules also prevent a company from receiving specific tax credits if it relies too much on investment or material assistance from certain FEOC-related entities, including in circumstances where a contract, license, or other arrangement gives an FEOC-related entity effective control over the company or its projects or products. The FEOC rules may have the result of leading to pressure for increased supply chain costs, reduced supply chain options, and may lead to increased price pressure for energy products and projects.
The antidumping and countervailing duties discussed above are subject to annual review and may be increased or decreased. Furthermore, under Section 301 of the Trade Act of 1974, the Office of the USTR imposed tariffs on $200 billion worth of imports from China, including inverters and certain AC panels and non-lithium-ion batteries, effective September 24, 2018. In May 2019, the tariffs were increased from 10% to 25% and may be raised by the USTR in the future. Since these tariffs impact the purchase price of the solar products, these tariffs raise the cost associated with purchasing these solar products from China and reduce the competitive pressure on providers of solar cells not subject to these tariffs.
In August 2021, an anonymous trade group filed a petition with the U.S. Department of Commerce (the “Department of Commerce”) requesting an investigation into whether solar panels and cells imported from Malaysia, Thailand and Vietnam are circumventing antidumping and countervailing duties imposed on solar products manufactured in China. The group also requested the imposition of tariffs on such imports ranging from 50% – 250%. In November 2021, the Department of Commerce rejected the petition, citing the petitioners’ ongoing anonymity as one of the reasons for its decision. In March 2022, the Department of Commerce announced it is initiating country-wide circumvention inquiries to determine whether imports of solar cell and panels produced in Cambodia, Malaysia, Thailand and Vietnam that use components from China are circumventing antidumping and countervailing duty orders on solar cells and panels from China. The Department of Commerce’s inquiries were initiated pursuant to a petition filed by Auxin Solar, Inc. on February 8, 2022. In August 2023, the Department of Commerce issued a final affirmative determinations that certain solar products exported from Cambodia, Malaysia, Thailand, and Vietnam were circumventing antidumping or countervailing orders on imports from China, with the result that the Department of Commerce will treat certain solar products from those countries as of Chinese-origin and subject to the existing antidumping or countervailing order.
On June 6, 2022, the President of the U.S. issued an emergency declaration establishing a tariff exemption of two years for solar panels and cells imported from Cambodia, Malaysia, Thailand and Vietnam, delaying the possibility of the imposition of dumping duties until the end of such two-year period. As that two-year period has passed the exemption of products from these countries from the imposition of antidumping duties is no longer in place. Additional requests for investigations of entities that are alleged to circumvent antidumping and countervailing duties imposed on solar products, and affirmative determinations by the Department of Commerce, may lead to the addition of new antidumping duties, which would significantly disrupt the supply of solar cells and panels to customers in the U.S., as a large percentage of solar cells and panels used in the U.S. are imported from Cambodia, Malaysia, Thailand and Vietnam. If imposed, these or similar tariffs could put upward pressure on prices of these solar products, which could reduce our ability to offer competitive pricing to potential customers.
Furthermore, antidumping and countervailing duties petitions filed in April 2024, against solar cell and module exporters from Cambodia, Malaysia, Thailand, and Vietnam led to the Department of Commerce’s final affirmative determination in April 2025. As a result of Department of Commerce determinations, Importers must now post cash deposits at rates that differ markedly by country and by exporter or producer, with non-cooperating parties facing particularly high rates. These duties may be stacked on top of other existing tariffs. The Department of Commerce also upheld prior determinations that “critical circumstances” for certain importers, potentially exposing shipments made prior to the preliminary determinations subject to retroactive duty collection. This demonstrates that application of antidumping, countervailing duties, and other trade measures can be complex, potentially involving the stacking of multiple tariff rates on single imported products and applying liabilities retroactively. This uncertainty may trigger unplanned costs, affect profit margins, and slow growth for the Company.
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In December 2021, the U.S. International Trade Commission recommended the President extend tariffs initially imposed in 2018 on imported crystalline silicon PV cells and panels for another four years, until 2026. Under Presidential Proclamation 10339, published in February 2022, former President Biden extended the tariff beyond the scheduled expiration date of February 6, 2022, with an initial tariff of 14.75%, which will gradually be reduced to 14% by the eighth year of the measure. Since such actions, as they are and may further be modified or increased by subsequent U.S. government administrations, increase the cost of imported solar products, to the extent we or our subcontractors use imported solar products or domestic producers are able to raise their prices for their solar products, the overall cost of the solar energy systems will increase, which could inhibit our ability to offer competitive pricing in certain markets.
Additionally, the U.S. government has imposed various trade restrictions on Chinese entities determined to be acting contrary to U.S. foreign policy and national security interests. For example, the Department of Commerce’s Bureau of Industry and Security has added a number of Chinese entities to its entity list for enabling human rights abuses in the XUAR or for procuring U.S. technology to advance China’s military modernization efforts, thereby imposing severe trade restrictions against these designated entities. Moreover, in June 2021, U.S. Customs and Border Protection issued a Withhold Release Order pursuant to Section 307 of the Tariff Act of 1930 excluding the entry into U.S. commerce of silica-based products (such as polysilicon) manufactured by Hoshine and related companies, as well as goods made using those products, based on allegations related to Hoshine labor practices in the XUAR to manufacture such products. Additionally, in December 2021, Congress passed the UFLPA, which, with limited exception, prohibits the importation of all goods or articles mined or produced in whole or in part in the XUAR, or goods or articles mined or produced by entities working with the XUAR government to recruit, transport or receive forced labor from the XUAR. To date, intensive examinations, withhold release orders, and related governmental procedures have resulted in supply chain and operational delays throughout the industry. Although we maintain policies and procedures designed to maintain compliance with applicable governmental laws and regulations, these and other similar trade restrictions that may be imposed in the future may cause us to incur substantially higher compliance and due diligence costs in connection with procurement and have the effect of restricting the global supply of, and raising prices for, polysilicon and solar products, which could increase the overall cost of solar energy systems, reduce our ability to offer competitive pricing in certain markets and adversely impact our business and results of operations. Further, any operational delays or other supply chain disruption resulting from the human rights concerns or any of the supply chain risks articulated above, associated governmental responses, or a desire to source products, components, or materials from other manufacturers or regions could result in shipping, sales and installation delays, cancellations, penalty payments, or loss of revenue and market share, or may cause our key suppliers to seek to re-negotiate terms and pricing with us, any of which could have a material adverse effect on our business, results of operations, cash flows, and financial condition.
While we believe the tariffs and trade regulations described above have contributed to price increases for components that we purchase, we believe that these price increases are also due to a combination of other factors, including supply chain constraints, increased demand for solar systems in the U.S. and Europe, rising inflation, and higher labor, material, and shipping costs. We cannot predict what additional actions the U.S. may adopt with respect to tariffs or other trade regulations or what actions may be taken by other countries in retaliation for such measures.
The tariffs and other government actions described above, the adoption and expansion of trade restrictions, the occurrence of a trade war or other governmental action related to tariffs, trade agreements or related policies have the potential to adversely impact our supply chain and access to equipment, our costs and ability to economically serve certain markets. If additional measures are imposed or other negotiated outcomes occur, our ability or the ability of our subcontractors to purchase these products on competitive terms or to access specialized technologies from other countries could be further limited, which could adversely affect our business, financial condition and results of operations.
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Any failure to comply with laws and regulations relating to interactions by us or third parties (such as our dealers and subcontractors) with customers or with licensing requirements applicable to our business could result in negative publicity, claims, investigations and litigation, and may adversely affect our financial performance.
Our business involves transactions with customers. We and our subcontractors and dealers must comply with numerous federal, state and local laws and regulations that govern matters relating to our interactions with customers, including those pertaining to privacy and data security, home improvement contracts, warranties and direct-to-home solicitation, along with certain rules and regulations specific to the marketing and sale of residential solar products and services. These laws and regulations are dynamic and subject to potentially differing interpretations, and various federal, state and local legislative and regulatory bodies may expand current laws or regulations, or enact new laws and regulations, regarding these matters. Changes in these laws or regulations or their interpretation could dramatically affect how we do business, acquire customers, and manage and use information we collect from and about current and prospective customers and the costs associated therewith. We strive to comply with all applicable laws and regulations relating to our interactions with customers. It is possible, however, that these requirements may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. Noncompliance with any such laws or regulations, or the perception that we or our subcontractors or dealers have violated such laws or regulations or engaged in deceptive practices that could result in a violation, could also expose us to claims, proceedings, litigation and investigations by private parties and regulatory authorities, as well as substantial fines and negative publicity, each of which may materially and adversely affect our business. We have incurred, and will continue to incur, significant expenses to comply with such laws and regulations, and increased regulation of matters relating to our interactions with customers could require us to modify our operations and incur significant additional expenses, which could have an adverse effect on our business, financial condition, and results of operations.
Any investigations, actions, adoption or amendment of regulations relating to the marketing of our products could divert management’s attention from our business, require us to modify our operations and incur significant additional expenses, which could have an adverse effect on our business, financial condition, and results of operations or could reduce the number of our potential customers.
We cannot ensure that our sales professionals and other personnel will always comply with our standard practices and policies, as well as applicable laws and regulations. In any of the numerous interactions between our sales professionals or other personnel and our customers or potential customers, our sales professionals or other personnel may, without our knowledge and despite our efforts to effectively train them and enforce compliance, engage in conduct that is or may be prohibited under our standard practices and policies and applicable laws and regulations. Any such non-compliance, or the perception of non-compliance, may expose us to claims, proceedings, litigation, investigations or enforcement actions by private parties or regulatory authorities, as well as substantial fines and negative publicity, each of which may materially and adversely affect our business and reputation. We have incurred, and will continue to incur, significant expenses to comply with the laws, regulations and industry standards that apply to us.
In addition, our affiliations with third-party dealers and subcontractors may subject us to alleged liability in connection with actual or alleged violations of law by such third parties, whether or not actually attributable to us, which may expose us to significant damages and penalties, and we may incur substantial expenses in defending against legal actions related to third parties, whether or not we are ultimately found liable.
Compliance with environmental laws and regulations can be expensive, and noncompliance with these laws and regulations may result in adverse publicity and potentially significant monetary damages and fines.
We are required to comply with all applicable foreign, U.S. federal, state, and local laws and regulations regarding pollution control and protection of safety and the environment. These laws and regulations may include obligations relating to the release, emissions or discharge of materials into the air, water and ground, the generation, storage, handling, use, transportation and disposal of hazardous materials and wastes and the health and safety of our employees and other persons. Under some statutes and regulations, a government agency, or other parties, may seek recovery and response costs from owners or operators of property where releases of hazardous substances have occurred or are ongoing, even if the owner or operator was not responsible for such release or otherwise at fault. We use solar energy system and energy storage components that may contain toxic, volatile and otherwise hazardous substances in our operations. Any failure by us to control the use of, transport of, or to restrict adequately the discharge of, hazardous substances could subject us to, among other matters, potentially significant monetary damages and fines or liabilities or suspensions of our business operations. In addition, if more stringent laws and regulations are adopted in the future, the costs of compliance with these new laws and regulations could be substantial. If we fail to comply with present or future environmental laws and regulations, we may be required to pay substantial fines, suspend production or cease operations, or be subjected to other sanctions. Private parties may also have the right to pursue legal actions to enforce compliance as well as to seek damages for non-compliance with environmental laws and regulations or for personal injury or property damage.
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In addition, U.S. legislation includes disclosure requirements regarding the use of “conflict” minerals mined from the Democratic Republic of Congo and adjoining countries and procedures regarding a manufacturer’s efforts to prevent the sourcing of such “conflict” minerals. We have incurred and will incur additional costs to comply with the disclosure requirements, including costs related to determining the source of any of the relevant minerals and metals used in our products. The implementation of these requirements could affect the sourcing and availability of minerals used in the manufacture of solar products. As a result, there may only be a limited pool of suppliers who provide conflict-free minerals, and we cannot be certain that we will be able to obtain products in sufficient quantities or at competitive prices. Since our supply chain is complex, we have not been able to sufficiently verify, and in the future, we may not be able to sufficiently verify, the origins for these conflict minerals used in our products. As a result, we may face reputational challenges with our customers and other stakeholders if we are unable to sufficiently verify the origins for all conflict minerals used in our products.
Compliance with health and safety laws and regulations can be complex, and noncompliance with these laws and regulations may result in potentially significant monetary damages and fines.
We are subject to a number of federal and state laws and regulations, including the federal Occupational Safety and Health Act and comparable state statutes, establishing requirements to protect the health and safety of workers. The OSHA hazard communication standard, the US EPA community right-to-know regulations under Title III of the federal Superfund Amendment and Reauthorization Act, and comparable state statutes, require maintenance of information about hazardous materials used or produced in operations and provision of this information to employees, state and local government authorities, and citizens. Other OSHA standards regulate specific worker safety aspects of our operations. Substantial fines and penalties can be imposed, and orders or injunctions limiting or prohibiting certain operations may be issued, in connection with any failure to comply with these laws and regulations.
Our business is subject to complex and evolving U.S. and international privacy and data protection laws, rules, policies and other obligations. Many of these laws and regulations are subject to change and uncertain interpretation and could result in claims, increased cost of operations or otherwise harm our business.
Consumer personal privacy and data security have become significant issues and the subject of rapidly evolving regulation. Furthermore, federal, state and local government bodies or agencies have in the past adopted, and may in the future adopt, more laws and regulations affecting data privacy. For example, new California legislation and regulations afford California consumers an array of new rights, including the right to be informed about what kinds of personal information companies have collected and the purpose for the collection. Complying with such laws or regulations, including in connection with any future expansion into new states (e.g., California), may significantly impact our business activities and require substantial compliance costs that adversely affect our business, operating results, prospects and financial condition. To date, we have not experienced substantial compliance costs in connection with fulfilling the requirements with any such laws or regulations. However, we cannot be certain that compliance costs will not increase in the future with respect to such laws or regulations. Furthermore, if we expand to foreign markets we will be subject to additional privacy and data protection laws, such as the General Data Protection Regulation in the European Union.
We operate a call center that uses personal information to conduct follow-up marketing calls to prospective customers of our solar energy systems. The out-going marketing calls we make are subject to the Telephone Consumer Protection Act (“TCPA”) and any failure to comply with the TCPA could result in significant fines and potential litigation from consumers.
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Any inability to adequately address privacy and security concerns, even if unfounded, or comply with applicable privacy and data protection laws, regulations and policies, could result in additional cost and liability to us, damage our reputation, inhibit sales and adversely affect our business. Furthermore, the costs of compliance with, and other burdens imposed by, the laws, regulations and policies that are applicable to our business may limit the use and adoption of, and reduce the overall demand for, our solutions. If we are not able to adjust to changing laws, regulations and standards related to privacy or security, our business may be harmed.
A change in our effective tax rate could have a significant adverse impact on our business, and an adverse outcome resulting from examination of our income or other tax returns could adversely affect our results.
A number of factors may adversely affect our future effective tax rates, such as the jurisdictions in which our profits are determined to be earned and taxed; changes in the valuation of our deferred tax assets and liabilities; adjustments to estimated taxes upon finalization of various tax returns; adjustments to our interpretation of transfer pricing standards; changes in available tax credits, grants and other incentives; changes in stock-based compensation expense; the availability of loss or credit carryforwards to offset taxable income; changes in tax laws or the interpretation of such tax laws (for example federal and state taxes); and changes in U.S. generally accepted accounting principles (“GAAP”). A change in our effective tax rate due to any of these factors may adversely affect our future results from operations.
Significant judgment is required to determine the recognition and measurement attributes prescribed in the accounting guidance for uncertainty in income taxes. The accounting guidance for uncertainty in income taxes applies to all income tax positions, including the potential recovery of previously paid taxes, which if settled unfavorably could adversely affect our provision for income taxes. In addition, we are subject to examination of our income tax returns by various tax authorities. We regularly assess the likelihood of adverse outcomes resulting from any examination to determine the adequacy of our provision for income taxes. An adverse determination of an examination could have an adverse effect on our results of operations and financial condition.
Additionally, U.S. tax reform may lead to further changes in (or departure from) these norms. As these and other tax laws and related regulations change, our results of operations, cash flows, and financial condition could be materially impacted. Given the unpredictability of these possible changes and their potential interdependency, it is very difficult to assess whether the overall effect of such potential tax changes would be cumulatively positive or negative for our earnings and cash flow.
Risks Related to Ownership of Zeo Securities
Certain existing securityholders purchased, or may purchase, securities in the Company at a price below the current trading price of such securities, and may experience a positive rate of return based on the current trading price. Future investors in the Company may not experience a similar rate of return.
Certain stockholders in the Company acquired, or may acquire, shares of our Class A Common Stock at prices below the current trading price of our Class A Common Stock, and may experience a positive rate of return based on the current trading price.
For example, the Sponsor and the other Initial Shareholders can earn a positive rate of return on their investment if the trading price of Class A Common Stock is approximately $2.04 or more per share. Public stockholders may not be able to experience the same positive rates of return on securities they purchase due to the low price at which the Sponsor and the other Initial Stockholders purchased shares of our Class A Common Stock and Warrants.
Our management team has limited experience managing a public company, and regulatory compliance obligations may divert its attention from the day-to-day management of our businesses.
Most of the individuals who now constitute our management team have limited to no experience managing a publicly-traded company, interacting with public company investors and complying with the increasingly complex laws pertaining to public companies. Our management team may not successfully or efficiently manage our transition to being a public company subject to significant regulatory oversight and reporting obligations under federal securities laws and the continuous scrutiny of securities analysts and investors. These new obligations and constituents will require significant attention from our senior management and could divert their attention away from the day-to-day management of our businesses, which could adversely affect our businesses. It is probable that we will be required to expand our employee base and hire additional employees to support our operations as a public company, which would increase our operating costs in future periods.
We incur significant costs as a result of operating as a public company.
We are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, Nasdaq listing requirements and other applicable securities laws and regulations. The expenses incurred by public companies generally for reporting and corporate governance purposes are greater than those for private companies. For example, the Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business, financial condition, and results of operations. Compliance with these rules and regulations will increase our legal and financial compliance costs, and increase demand on our systems, particularly after we are no longer an emerging growth company. In addition, as a public company, we may be subject to stockholder activism, which can lead to additional substantial costs, distract management, and impact the manner in which we operate our business in ways we cannot currently anticipate. As a result of disclosure of information therein and in filings required of a public company, our business and financial condition will become more visible, which may result in threatened or actual litigation, including by competitors. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more difficult, time-consuming, and costly, although we are currently unable to estimate these costs with any degree of certainty.
We also expect that being a public company and being subject to new rules and regulations will make it more expensive for us to obtain directors and officers liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on the Board, committees of the Board or as our executive officers. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of Class A Common Stock, fines, sanctions, and other regulatory action and potentially civil litigation. These factors may therefore strain our resources, divert management’s attention, and affect our ability to attract and retain qualified board members and executive officers.
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As a public reporting company, we are subject to rules and regulations established from time to time by the SEC and Public Company Accounting Oversight Board regarding our internal control over financial reporting. If we fail to establish and maintain effective internal control over financial reporting and disclosure controls and procedures, we may not be able to accurately report our financial results or report them in a timely manner, which could adversely affect our business.
We are a public reporting company subject to the rules and regulations established from time to time by the SEC and the Public Company Accounting Oversight Board. These rules and regulations require, among other things, that we establish and periodically evaluate procedures with respect to our internal control over financial reporting. Reporting obligations as a public company are likely to place a considerable strain on our financial and management systems, processes, and controls, as well as on our personnel.
As a public company, we are required to document and test our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act so that our management can certify as to the effectiveness of our internal control over financial reporting by the time our second annual report is filed with the SEC and thereafter, which requires us to document and make significant changes to our internal control over financial reporting. As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as well as rules adopted, and to be adopted, by the SEC and Nasdaq, and other applicable securities rules and regulations, which impose various requirements on public companies, including the establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. Our management and other personnel need to devote a substantial amount of time to these public company requirements. Moreover, we expect these rules and regulations to substantially increase our legal and financial compliance costs and to make some activities more time-consuming and costly. We may need to hire additional legal, accounting and financial staff with appropriate public company experience and technical accounting knowledge and maintain an internal audit function.
Likewise, as a public company, we may lose our status as an “emerging growth company,” as defined in the JOBS Act, and become subject to the SEC’s internal control over financial reporting management and auditor attestation requirements in the year in which we are deemed to be a large accelerated filer, which would occur once we are subject to Exchange Act reporting requirements for 12 months, have filed at least one SEC annual report and the market value of our common equity held by non-affiliates equals or exceeds $700 million as of the end of the prior fiscal year’s second fiscal quarter. If we become subject to the SEC’s internal control reporting and attestation requirements, we might not be able to complete our evaluation, testing and any required remediation in a timely fashion. In addition, our current controls and any new controls that we develop may become inadequate because of poor design and changes in our business, including increased complexity resulting from any international expansion. Any failure to implement and maintain effective internal controls over financial reporting could adversely affect the results of assessments by our independent registered public accounting firm and their attestation reports.
We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we will file with the SEC is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers. We are also continuing to improve our internal control over financial reporting, which includes hiring additional accounting and financial personnel to implement such processes and controls. We expect to incur costs related to implementing an internal audit and compliance function in the upcoming years to further improve our internal control environment.
We have identified material weaknesses in our internal controls over financial reporting. If we are unable to remediate these material weaknesses, if management identifies additional material weaknesses in the future or if we otherwise fail to maintain effective internal controls over financial reporting, we may not be able to accurately or timely report our financial position or results of operations, which may adversely affect our business and stock price or cause our access to the capital markets to be impaired.
We have identified material weaknesses in our internal controls over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal controls over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
| ● | Specifically, 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. |
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These control deficiencies could result in a 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. |
Additionally, our management has considered and reviewed the errors which occurred in revenue and cost of revenues cutoff, accounts payable, accrued liabilities, stock compensation, expense classification, prepaid expenses, operating lease cash flow classification and finance lease arrangements. Our 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-Based 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 which should be included in the analysis. |
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| 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 Revenues Cutoff – Review revenue and related cost of revenues with executive team to determine if revenue and related cost of revenues is properly recognized. We cannot assure you that these measures will significantly improve or 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. |
We and our independent registered public accounting firm were not required to perform an evaluation of our internal control over financial reporting as of December 31, 2025 in accordance with the provisions of the Sarbanes-Oxley Act. Accordingly, we cannot assure you that we have identified all, or that we will not in the future have additional, material weaknesses. Material weaknesses may still exist when we report on the effectiveness of our internal control over financial reporting as required by reporting requirements under Section 404.
Implementing any appropriate changes to our internal controls may distract our officers and employees, entail substantial costs to modify our existing processes and take significant time to complete. These changes may not, however, be effective in maintaining the adequacy of our internal controls, and any failure to maintain that adequacy, or consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and harm our business. In addition, investors’ perceptions that our internal controls are inadequate or that we are unable to produce accurate financial statements on a timely basis may harm our stock price and make it more difficult for us to effectively market and sell our products and services to new and existing customers.
However, if we identify future deficiencies in our internal control over financial reporting or if we are unable to comply with the demands that are placed upon us as a public company, including the requirements of Section 404 of the Sarbanes-Oxley Act, in a timely or effective manner, we may be unable to accurately report our financial results, or report them within the timeframes required by the SEC. We also could become subject to sanctions or investigations by the SEC or other regulatory authorities. In addition, if we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting when required, investors may lose confidence in the accuracy and completeness of our financial reports, we may face restricted access to the capital markets and our stock price may be adversely affected.
Our current controls and any new controls that we develop may also become inadequate because of poor design or changes in our business, including increased complexity resulting from any international expansion, and weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could cause us to fail to meet our reporting obligations, result in a restatement of our financial statements for prior periods, undermine investor confidence in us and adversely affect the trading price of our Common Stock. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on Nasdaq.
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Changing laws and regulations could create uncertainty for Zeo regarding compliance matters and result in higher costs.
Changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs, and making some activities more time consuming. These laws, regulations and standards are subject to varying interpretations and may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. We cannot predict or estimate the amount or timing of additional costs it may incur to respond to these requirements. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us, and our business may be adversely affected.
The rules and regulations applicable to public companies make it more expensive for Zeo to obtain and maintain director and officer liability insurance, which could adversely affect its ability to attract and retain qualified officers and directors.
The rules and regulations applicable to public companies make it more expensive for Zeo to obtain and maintain director and officer liability insurance, and Zeo may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. We cannot predict or estimate the amount or timing of additional costs we may incur to respond to these requirements. The potential for increased personal liability could also make it more difficult for Zeo to attract and retain qualified members of the Board, particularly to serve on its audit committee and compensation committee, and qualified executive officers.
An active, liquid market for Zeo’s securities may not develop, which would adversely affect the liquidity and price of Zeo’s securities.
The price of Zeo’s securities may vary significantly due to factors specific to Zeo as well as to general market or economic conditions. Furthermore, an active, liquid trading market for Zeo’s securities may never develop, or, if developed, it may not be sustained. You may be unable to sell your securities without depressing the market price for the securities or at all unless an active, liquid market can be established and sustained. An inactive trading market may also impair Zeo’s ability to attract and motivate employees through equity incentive awards and to acquire other companies, products or technologies by using shares of capital stock as consideration.
The market price of the shares of Class A Common Stock may decline.
The market price of the shares of Class A Common Stock may decline for a number of reasons, including if:
| ● | investors react negatively to the prospects of Zeo’s business; |
| ● | Zeo’s business and prospects is not consistent with the expectations of financial or industry analysts; or |
| ● | Zeo does not achieve the perceived benefits of the Merger or the Business Combination as rapidly or to the extent anticipated by financial or industry analysts. |
The price of Class A Common Stock may change significantly, even if Zeo’s business is doing well, and you could lose all or part of your investment as a result.
The trading price of shares of Class A Common Stock is likely to be volatile. The stock market recently has experienced extreme volatility. This volatility often has been unrelated or disproportionate to the operating performance of particular companies. You may not be able to resell your shares of Class A Common Stock at an attractive price due to a number of factors such as the following:
| ● | results of operations that vary from the expectations of securities analysts and investors; |
| ● | results of operations that vary from those of Zeo’s competitors; |
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| ● | changes in expectations as to Zeo’s future financial performance, including financial estimates and investment recommendations by securities analysts and investors; |
| ● | declines in the market prices of stocks generally; |
| ● | strategic actions by Zeo or its competitors; |
| ● | announcements by Zeo or its competitors of significant contracts, acquisitions, joint ventures, other strategic relationships or capital commitments; |
| ● | any significant change in Zeo’s management; |
| ● | changes in general economic or market conditions (including changes in interest rates or inflation) or trends in Zeo’s industry or markets; |
| ● | changes in business or regulatory conditions, including new laws or regulations or new interpretations of existing laws or regulations applicable to Zeo’s business; |
| ● | future sales of Class A Common Stock or other securities; |
| ● | dilution as a result of future exercises of Warrants, conversion of the Convertible OpCo Preferred Units or exchanges of the Exchangeable OpCo Units; |
| ● | investor perceptions of the investment opportunity associated with Class A Common Stock relative to other investment alternatives; |
| ● | the public’s response to press releases or other public announcements by Zeo or third parties, including Zeo’s filings with the SEC; |
| ● | litigation involving Zeo, Zeo’s industry, or both, or investigations by regulators into the Board, Zeo’s operations or those of Zeo’s competitors; |
| ● | guidance, if any, that Zeo provides to the public, any changes in this guidance or Zeo’s failure to meet this guidance; |
| ● | the development and sustainability of an active trading market for Class A Common Stock; |
| ● | actions by institutional or activist stockholders; |
| ● | changes in accounting standards, policies, guidelines, interpretations or principles; and |
| ● | other events or factors, including those resulting from pandemics, natural disasters, war, acts of terrorism or responses to these events. |
These broad market and industry fluctuations may adversely affect the market price of Class A Common Stock, regardless of Zeo’s actual operating performance. In addition, price volatility may be greater if the public float and trading volume of Class A Common Stock is low.
In the past, following periods of market volatility, stockholders have instituted securities class action litigation. If Zeo were involved in securities litigation, it could have a substantial cost and divert resources and the attention of executive management from Zeo’s business regardless of the outcome of such litigation.
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Warrants issued in the IPO are exercisable for Class A Common Stock, which would increase the number of shares eligible for future resale in the public market and result in dilution to the stockholders of Zeo.
Outstanding Warrants to purchase an aggregate of 13,800,000 shares of Class A Common Stock are exercisable in accordance with the terms of the warrant agreement governing those securities. The exercise price of these Warrants is $11.50 per share. To the extent such Warrants are exercised, additional shares of Class A Common Stock will be issued, which will result in dilution to the then existing holders of Class A Common Stock and increase the number of shares eligible for resale in the public market.
Zeo stockholders may experience significant dilution as a result of a Convertible OpCo Preferred Unit Conversion.
Subject to the conditions described in the OpCo A&R LLC Agreement, the holder of the Convertible OpCo Preferred Units may, or OpCo may require the holder of such Convertible OpCo Preferred Units to, convert all of such holder’s Convertible OpCo Preferred Units into such number of Exchangeable OpCo Units as determined by the conversion ratio applicable to the respective Convertible OpCo Preferred Unit Conversion. Upon the occurrence of a conversion of Convertible OpCo Preferred Units into Exchangeable OpCo Units, all Exchangeable OpCo Units received as a result of such conversion shall be immediately exchanged (together with an equal number of shares of Class V Common Stock) into an equal number of shares of Class A Common Stock. Accordingly, if the Convertible OpCo Preferred Units are converted into Exchangeable OpCo Units and immediately thereafter exchanged for shares of Class A Common Stock, holders of Class A Common Stock could experience significant dilution. Further, if the holders of the shares of Class A Common Stock issued as a result of a Convertible OpCo Preferred Unit Conversion dispose of a substantial portion of such shares of Class A Common Stock in the public market, whether in a single transaction or series of transactions, it could adversely affect the market price for the Class A Common Stock. These sales, or the possibility that these sales may occur, could make it more difficult for Zeo or its stockholders to sell shares of Class A Common Stock in the future.
Zeo may be subject to securities class action litigation, which may harm its business and operating results.
Certain companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. Zeo may be the target of this type of litigation in the future. Securities litigation against Zeo could result in substantial costs and damages and divert Zeo’s management’s attention from other business concerns, which could seriously harm Zeo’s business, results of operations, financial condition or cash flows.
Zeo may also be called on to defend itself against lawsuits relating to its business operations. Some of these claims may seek significant damages amounts. Due to the inherent uncertainties of litigation, the ultimate outcome of any such proceedings cannot be accurately predicted. A future unfavorable outcome in a legal proceeding could have an adverse impact on Zeo’s business, financial condition and results of operations. In addition, current and future litigation, regardless of its merits, could result in substantial legal fees, settlements or judgment costs and a diversion of Zeo’s management’s attention and resources that are needed to successfully run Zeo’s business.
Because there are no current plans to pay cash dividends on shares of Class A Common Stock for the foreseeable future, you may not receive any return on investment unless you sell your shares of Class A Common Stock at a price greater than what you paid for them.
Zeo intends to retain future earnings, if any, for future operations, expansion (which may include potential acquisitions) and debt repayment, and there are no current plans to pay any cash dividends for the foreseeable future. The declaration, amount and payment of any future dividends on shares of Class A Common Stock will be at the sole discretion of the Board. The Board may take into account general and economic conditions, Zeo’s financial condition and results of operations, Zeo’s available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions, implications of the payment of dividends by Zeo to its stockholders or by its subsidiaries to it and such other factors as the Board may deem relevant. As a result, you may not receive any return on an investment in the shares of Class A Common Stock unless you sell such shares for a price greater than that which you paid for it.
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Zeo may issue additional shares of Class A Common Stock or other equity securities without seeking approval of its stockholders, which would dilute your ownership interests and may depress the market price of Class A Common Stock.
Zeo has Warrants outstanding to purchase up to an aggregate of approximately 13,800,000 shares of Class A Common Stock. Additionally, Zeo will issue shares of Class A Common Stock to (i) the holders of Convertible OpCo Preferred Units upon the occurrence of a Convertible OpCo Preferred Unit Conversion and (ii) the Sellers upon the conversion of Seller OpCo Units (together with an equal number of shares of Seller Class V Common Stock) into Class A Common Stock. Further, Zeo may choose to seek third-party financing to provide additional working capital for Zeo’s business, in which event Zeo may issue additional shares of Class A Common Stock or other equity securities. Zeo may also issue additional shares of Class A Common Stock or other equity securities of equal or senior rank in the future for any reason or in connection with, among other things, future acquisitions, the redemption of outstanding Warrants or repayment of outstanding indebtedness, without stockholder approval, in a number of circumstances.
The issuance of additional shares of Class A Common Stock or other equity securities of equal or senior rank would have the following effects:
| ● | Zeo’s existing stockholders’ proportionate ownership interest in Zeo will decrease; |
| ● | the amount of cash available per share, including for payment of dividends in the future, may decrease; |
| ● | the relative voting strength of each previously outstanding share of Class A Common Stock may be diminished; and |
| ● | the market price of the shares of Class A Common Stock may decline. |
If securities or industry analysts do not publish research or reports about Zeo’s business, if they change their recommendations regarding the shares of Class A Common Stock or if Zeo’s operating results do not meet their expectations, the price and trading volume of shares of Class A Common Stock could decline.
The trading market for shares of Class A Common Stock will depend in part on the research and reports that securities or industry analysts publish about Zeo or its businesses. If no securities or industry analysts commence coverage of Zeo, the trading price for shares of Class A Common Stock could be negatively impacted. In the event securities or industry analysts initiate coverage, if one or more of the analysts who cover Zeo downgrade its securities or publish unfavorable research about its businesses, or if Zeo’s operating results do not meet analyst expectations, the trading price of shares of Class A Common Stock would likely decline. If one or more of these analysts cease coverage of Zeo or fail to publish reports on Zeo regularly, demand for shares of Class A Common Stock could decrease, which might cause the share price and trading volume to decline. Accordingly, holders of Class A Common Stock may experience a loss as a result of a decline in the market price of Class A Common Stock. In addition, a decline in the market price of Class A Common Stock could adversely affect Zeo’s ability to issue additional securities and to obtain additional financing in the future.
If Zeo’s performance does not meet market expectations, the price of its securities may decline.
If Zeo’s performance does not meet market expectations, the price of the Class A Common Stock may decline. Fluctuations in the price of the Class A common Stock could contribute to the loss of all or part of your investment. The trading price of the Class A Common Stock could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control. Any of the factors listed below could have a material adverse effect on your investment in the Class A Common Stock and it may trade at prices significantly below the price you paid for them. Factors affecting the trading price of Class A Common Stock may include:
| ● | actual or anticipated fluctuations in Zeo’s quarterly financial results or the quarterly financial results of companies perceived to be similar to it; |
| ● | changes in the market’s expectations about its operating results; |
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| ● | success of competitors; |
| ● | its operating results failing to meet market expectations in a particular period; |
| ● | changes in financial estimates and recommendations by securities analysts concerning Zeo or the solar energy industry and market in general; |
| ● | operating and stock price performance of other companies that investors deem comparable to Zeo; |
| ● | its ability to market new and enhanced products on a timely basis; |
| ● | changes in laws and regulations affecting its business; |
| ● | commencement of, or involvement in, litigation involving Zeo; |
| ● | changes in its capital structure, such as future issuances of securities or the incurrence of additional debt; |
| ● | the volume of shares of its common stock available for public sale; |
| ● | any significant change in its board or management; |
| ● | sales of substantial amounts of common stock by its directors, executive officers or significant stockholders or the perception that such sales could occur; and |
| ● | general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism. |
Broad market and industry factors may depress the market price of the Class A Common Stock irrespective of Zeo’s operating performance. The stock market in general and the Nasdaq have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected.
The trading prices and valuations of these stocks, and of Zeo’s securities, may not be predictable. A loss of investor confidence in the market for solar energy or the stocks of other companies which investors perceive to be similar to Zeo could depress its stock price regardless of its business, prospects, financial conditions or results of operations. A decline in the market price of the Class A Common Stock also could adversely affect its ability to issue additional securities and its ability to obtain additional financing in the future.
Delaware law and our governing documents contain certain provisions, including anti-takeover provisions, that limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable.
Our governing documents and the DGCL contain provisions that could have the effect of rendering more difficult, delaying, or preventing an acquisition deemed undesirable by the Board and therefore depress the trading price of Class A Common Stock. These provisions could also make it difficult for stockholders to take certain actions, including electing directors who are not nominated by the current members of the Board or taking other corporate actions, including effecting changes in the management of Zeo. Among other things, our governing documents include provisions regarding:
| ● | the ability of the Board to issue shares of preferred stock, including “blank check” preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; |
| ● | the limitation of the liability of, and the indemnification of, Zeo’s directors and officers; |
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| ● | the exclusive right of the Board to elect a director to fill a vacancy created by the expansion of the Board or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on the Board; |
| ● | the requirement that, subject to the special rights of the holders of one or more series of preferred stock, special meetings of the stockholders may be called only (i) by or at the direction of the Board, the Chairperson of the Board or the Chief Executive Officer, in each case, in accordance with our bylaws or (ii) for so long as the holders of shares of the Class V Common Stock beneficially own, directly or indirectly, a majority of the total voting power of stock entitled to vote generally in election of directors, by or at the request of stockholders collectively holding shares of capital stock of Zeo representing a majority of the total voting power of stock entitled to vote generally in election of directors, which could delay the ability of stockholders to force consideration of a proposal or to take action, including the removal of directors; |
| ● | controlling the procedures for the conduct and scheduling of the Board and stockholder meetings; |
| ● | the requirement for the affirmative vote of holders of at least 2/3 of the voting power of all of the then outstanding shares of the voting stock, voting together as a single class, to amend, alter, change or repeal certain provisions of the Charter, which could preclude stockholders from bringing matters before annual or special meetings of stockholders, delay changes in Zeo and inhibit the ability of an acquirer to effect such amendments to facilitate an unsolicited takeover attempt; |
| ● | the ability of the Board to amend our bylaws, which may allow the Board to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend our bylaws to facilitate an unsolicited takeover attempt; and |
| ● | advance notice procedures with which stockholders must comply to nominate candidates to the Board or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders, delay changes in the Board and discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of Zeo. |
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in the Board or management.
Any provision of our governing documents or Delaware law that has the effect of delaying or preventing a change in control could limit the opportunity for stockholders to receive a premium for their shares of Class A Common Stock and could also affect the price that some investors are willing to pay for shares of Class A Common Stock.
We are a holding company. Our only material asset is our equity interest in OpCo, and we are accordingly dependent upon distributions from OpCo to pay taxes, make payments under the Tax Receivable Agreement and cover our corporate and other overhead expenses.
We are a holding company and have no material assets other than our equity interest in OpCo. We have no independent means of generating revenue. To the extent OpCo has available cash, we intend to cause OpCo to make generally pro rata distributions to the holders of OpCo Units, including us, in an amount sufficient to cause each OpCo unitholder to receive a distribution at least equal to (i) such OpCo unitholder’s allocable share of net taxable income as calculated with certain assumptions, multiplied by an assumed tax rate, and (ii) with respect to us, any payments required to be made by us under the Tax Receivable Agreement. The assumed tax rate for this purpose will be the combined maximum U.S. federal, state, and local rate of tax applicable to an individual resident in New York City, New York for the applicable taxable year. We intend to cause OpCo to make non-pro rata payments to us to reimburse us for our corporate and other overhead expenses. To the extent that we need funds and OpCo or its subsidiaries are restricted from making such distributions or payments under applicable law or regulation or under the terms of any current or future financing arrangements, or are otherwise unable to provide such funds, our liquidity and financial condition could be materially adversely affected.
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Moreover, because we have no independent means of generating revenue, our ability to make tax payments and payments under the Tax Receivable Agreement will be dependent on the ability of OpCo to make distributions to us in an amount sufficient to cover our tax obligations and obligations under the Tax Receivable Agreement. This ability, in turn, may depend on the ability of OpCo’s subsidiaries to make distributions to OpCo. We intend that such distributions from OpCo and its subsidiaries be funded with cash from operations or from future borrowings. The ability of OpCo, its subsidiaries and other entities in which it directly or indirectly hold an equity interest to make such distributions will be subject to, among other things, (i) the applicable provisions of Delaware law (or other applicable jurisdiction) that may limit the amount of funds available for distribution and (ii) restrictions in relevant debt instruments issued by OpCo or its subsidiaries and other entities in which it directly or indirectly holds an equity interest. To the extent that we are unable to make payments under the Tax Receivable Agreement for any reason, such payments will be deferred and will accrue interest until paid, and such failure to make payments may result in a breach under the Tax Receivable Agreement in certain cases. Because distributions of OpCo will be used to fund Tax Receivable Agreement payments by us, OpCo’s liquidity will be affected negatively by the Tax Receivable Agreement in a material respect.
We are required to make payments under the Tax Receivable Agreement for certain tax benefits that we may claim, and the amounts of such payments could be significant.
In connection with the Business Combination, we entered into the Tax Receivable Agreement with the TRA Holders. This agreement generally provides for the payment by us to the TRA Holders of 85% of the net cash savings, if any, in U.S. federal, state and local income tax and franchise tax (computed using simplifying assumptions to address the impact of state and local taxes) that we actually realize (or are deemed to realize in certain circumstances) in periods after the Business Combination as a result of certain increases in tax basis available to us pursuant to the exercise of the OpCo Exchange Rights or a Mandatory Exchange and certain benefits attributable to imputed interest. We will retain the benefit of the remaining 15% of any actual net cash tax savings that we realize.
The term of the Tax Receivable Agreement will continue until all tax benefits that are subject to the Tax Receivable Agreement have been utilized or expired, unless we experience a change of control (as defined in the Tax Receivable Agreement, which includes certain mergers, asset sales, or other forms of business combinations) or the Tax Receivable Agreement otherwise terminates early (at our election or as a result of our breach or the commencement of bankruptcy or similar proceedings by or against us), and we make the termination payments specified in the Tax Receivable Agreement in connection with such change of control or other early termination.
The payment obligations under the Tax Receivable Agreement are our obligations and not obligations of OpCo, and we expect that the payments required to be made under the Tax Receivable Agreement will be substantial. Payments under the Tax Receivable Agreement will reduce the amount of cash provided by the tax savings that would otherwise have been available to us for other uses. Estimating the amount and timing of payments that may become due under the Tax Receivable Agreement is by its nature imprecise. For purposes of the Tax Receivable Agreement, net cash tax savings generally are calculated by comparing our actual tax liability (determined by using the actual applicable U.S. federal income tax rate and an assumed combined state and local income and franchise tax rate) to the amount we would have been required to pay had we not been able to utilize any of the tax benefits subject to the Tax Receivable Agreement. The actual increases in tax basis covered by the Tax Receivable Agreement, as well as the amount and timing of any payments under the Tax Receivable Agreement, will vary depending on a number of factors, including the timing of any redemption of Exchangeable OpCo Units, the price of Class A Common Stock at the time of each redemption, the extent to which such redemptions are taxable transactions, the amount of the redeeming OpCo unitholder’s tax basis in its Exchangeable OpCo Units at the time of the relevant redemption, the depreciation and amortization periods that apply to the increase in tax basis, the amount and timing of taxable income we generate in the future, the U.S. federal income tax rates then applicable, and the portion of our payments under the Tax Receivable Agreement that constitute imputed interest or give rise to depreciable or amortizable tax basis. Any distributions made by OpCo to us in order to enable us to make payments under the Tax Receivable Agreement, as well as any corresponding pro rata distributions made to the OpCo unitholders, could have a substantial negative impact on our liquidity.
The payments under the Tax Receivable Agreement following the exercise of the OpCo Exchange Rights or a Mandatory Exchange will not be conditioned upon a TRA Holder having a continued ownership interest in us or OpCo.
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In certain cases, payments under the Tax Receivable Agreement may be accelerated and/or significantly exceed the actual benefits, if any, Zeo realizes in respect of the tax attributes subject to the Tax Receivable Agreement.
If we experience a change of control (as defined under the Tax Receivable Agreement, which includes certain mergers, asset sales and other forms of business combinations) or the Tax Receivable Agreement otherwise terminates early (at our election or as a result of our breach or the commencement of bankruptcy or similar proceedings by or against us), our obligations under the Tax Receivable Agreement would accelerate and we would be required to make an immediate payment equal to the present value of the anticipated future payments to be made by us under the Tax Receivable Agreement, and it is expected that such payment would be substantial. The calculation of anticipated future payments would be based upon certain assumptions and deemed events set forth in the Tax Receivable Agreement, including (i) that we have sufficient taxable income to fully utilize the tax benefits covered by the Tax Receivable Agreement, and (ii) that any OpCo Units (other than those held by us) outstanding on the termination date are deemed to be redeemed on the termination date. If we were to experience a change of control or the Tax Receivable Agreement was otherwise terminated as of the Closing, we estimate that the early termination payment would be approximately $18.6 million. The foregoing amount is merely an estimate, and the actual payment could differ materially. The aggregate amount of payments that are actually made under the Tax Receivable Agreement could substantially exceed the estimated termination payment described above.
Any early termination payment may be made significantly in advance of, and may materially exceed, the actual realization, if any, of the future tax benefits to which the termination payment relates. Moreover, the obligation to make an early termination payment upon a change of control could have a substantial negative impact on our liquidity and could have the effect of delaying, deferring or preventing certain mergers, asset sales, or other forms of business combinations or changes of control.
There can be no assurance that we will be able to satisfy our obligations under the Tax Receivable Agreement.
In the event that payment obligations under the Tax Receivable Agreement are accelerated in connection with a change of control, the consideration payable to holders of Class A Common Stock in connection with such change of control could be substantially reduced.
If we experience a change of control (as defined under the Tax Receivable Agreement, which includes certain mergers, asset sales and other forms of business combinations), we would be obligated to make a substantial immediate payment, and such payment may be significantly in advance of, and may materially exceed, the actual realization, if any, of the future tax benefits to which the payment relates. As a result of this payment obligation, holders of Class A Common Stock could receive substantially less consideration in connection with a change of control transaction than they would receive in the absence of such obligation. Further, any payment obligations under the Tax Receivable Agreement will not be conditioned upon the TRA Holders having a continued interest in us or OpCo. Accordingly, the TRA Holders’ interests may conflict with those of the holders of Class A Common Stock.
We will not be reimbursed for any payments made under the Tax Receivable Agreement in the event that any tax benefits are subsequently disallowed.
Payments under the Tax Receivable Agreement will be based on the tax reporting positions that we will determine. The IRS or another taxing authority may challenge all or part of the tax basis increases covered by the Tax Receivable Agreement, as well as other related tax positions we take, and a court could sustain such challenge. The TRA Holders will not be required to reimburse us for any payments previously made under the Tax Receivable Agreement if any tax benefits that have given rise to payments under the Tax Receivable Agreement are subsequently disallowed, except that excess payments made to any TRA Holder will be netted against future payments that would otherwise be made to such TRA Holder, if any, after our determination of such excess (which determination may be made a number of years following the initial payment and after future payments have been made). As a result, in such circumstances, we could make payments that are greater than our actual net cash tax savings, if any, and we may not be able to recoup those payments, which could have a substantial negative impact on our liquidity.
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If OpCo were to become a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, we and OpCo might be subject to potentially significant tax inefficiencies, and we would not be able to recover payments previously made by us under the Tax Receivable Agreement even if the corresponding tax benefits were subsequently determined to have been unavailable due to such status.
We intend to operate such that OpCo does not become a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes. A “publicly traded partnership” is a partnership the interests of which are traded on an established securities market or are readily tradable on a secondary market or the substantial equivalent thereof. Under certain circumstances, transfers of OpCo Units could cause OpCo to be treated as a publicly traded partnership. Applicable U.S. Treasury regulations provide for certain safe harbors from treatment as a publicly traded partnership, and we intend to operate such that redemptions or other transfers of OpCo Units qualify for one or more of such safe harbors. For example, we intend to limit the number of holders of OpCo Units, and the OpCo A&R LLC Agreement provides for certain limitations on the ability of holders of OpCo Units to transfer their OpCo Units and provides us, as the manager of OpCo, with the right to prohibit the exercise of an OpCo Exchange Right if we determine (based on the advice of counsel) there is a material risk that OpCo would be a publicly traded partnership as a result of such exercise.
If OpCo were to become a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, significant tax inefficiencies might result for us and for OpCo, including as a result of our inability to file a consolidated U.S. federal income tax return with OpCo. In addition, we might not be able to realize tax benefits covered under the Tax Receivable Agreement, and we would not be able to recover any payments previously made by us under the Tax Receivable Agreement, even if the corresponding tax benefits (including any claimed increase in the tax basis of OpCo’s assets) were subsequently determined to have been unavailable.
In certain circumstances, OpCo is required to make tax distributions to the OpCo unitholders, including us, and the tax distributions that OpCo is required to make may be substantial. The OpCo tax distribution requirement may complicate our ability to maintain our intended capital structure.
To the extent OpCo has available cash, we intend to cause OpCo to make generally pro rata distributions to the holders of OpCo Units, including us, in an amount sufficient to cause each OpCo unitholder to receive a distribution at least equal to (i) such OpCo unitholder’s allocable share of net taxable income as calculated with certain assumptions, multiplied by an assumed tax rate, and (ii) with respect to us, any payments required to be made by us under the Tax Receivable Agreement. The assumed tax rate for this purpose will be the combined maximum U.S. federal, state, and local rate of tax applicable to an individual resident in New York City, New York for the applicable taxable year. The amount of tax distributions to such unitholder for any year may be reduced by prior operating distributions made to that unitholder for such year. As a result of certain assumptions in calculating the tax distribution payments, including the assumed tax rate, we may receive tax distributions from OpCo that exceed our actual tax liability and our obligations under the Tax Receivable Agreement by a material amount.
The receipt of such excess distributions would complicate our ability to maintain certain aspects of our capital structure. Such cash, if retained, could cause the value of an OpCo Manager Unit to deviate from the value of a share of Class A Common Stock. If we retain such cash balances, the holders of Exchangeable OpCo Units would benefit from any value attributable to such accumulated cash balances as a result of their exercise of the OpCo Exchange Rights. We intend to take steps to eliminate any material cash balances. Such steps could include distributing such cash balances as dividends on the Class A Common Stock or reinvesting such cash balances in OpCo for additional OpCo Manager Units (with an accompanying stock dividend with respect to Class A Common Stock).
The tax distributions to the OpCo unitholders may be substantial and may, in the aggregate, exceed the amount of taxes that OpCo would have paid if it were a similarly situated corporate taxpayer. Funds used by OpCo to satisfy its tax distribution obligations will generally not be available for reinvestment in its business.
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The shares of Class A Common Stock being offered to White Lion represent a substantial percentage of our outstanding Class A Common Stock, and the sales of such shares, or the perception that these sales could occur, could cause the market price of our Class A Common Stock to decline significantly.
At our discretion, from time to time, we may offer and sell to White Lion or its permitted transferees up to 11,454,607 shares of Class A Common Stock pursuant to the White Lion Purchase Agreement. We will not receive any proceeds from the sale of shares of Class A Common Stock by White Lion.
The sale of shares of our Class A Common Stock by White Lion, or the perception that these sales could occur, could depress the market price of our Class A Common Stock. White Lion may still have an incentive to sell our Class A Common Stock because it may still experience a positive rate of return on the securities it purchased due to the differences in the purchase prices it paid for our Class A Common Stock and the public trading price of our Class A Common Stock. While White Lion may, on average, experience a positive rate of return based on the current market price of the Class A Common Stock it purchased, public securityholders may not experience a similar rate of return on the Class A Common Stock they purchased due to differences in the purchase prices and the current market price. While White Lion may, on average, experience a positive rate of return based on the current market price, public stockholders may not experience a similar rate of return on the Class A Common Stock they purchased if there is such a decline in price and due to differences in the purchase prices and the current market price. The sale of the Class A Common Stock by White Lion, or the perception that these sales could occur, could result in a significant decline in the public trading price of our Class A Common Stock.
It is not possible to predict the actual number of shares we will sell under the White Lion Purchase Agreement to White Lion, or the actual gross proceeds resulting from those sales.
Subject to certain limitations in the White Lion Purchase Agreement and compliance with applicable law, we have the discretion to deliver notices to White Lion at any time throughout the White Lion Commitment Period. The number of shares ultimately offered for sale to White Lion is dependent upon the number of shares we elect to sell to White Lion under the White Lion Purchase Agreement. The actual number of shares of Class A Common Stock that are sold to White Lion may depend based on a number of factors, including the market price of our Class A Common Stock during the sales period. Actual gross proceeds may be less than $30.0 million, which may impact our future liquidity. Because the price per share of each share sold to White Lion will fluctuate during the sales period, it is not currently possible to predict the number of shares that will be sold or the actual gross proceeds to be raised in connection with those sales, if any.
The issuance of Class A Common Stock to White Lion may cause substantial dilution to our existing shareholders, and the sale of such shares acquired by White Lion could cause the price of our Class A Common Stock to decline.
We are registering for resale by White Lion up to 11,454,607 shares of Class A Common Stock. After White Lion has acquired shares under the White Lion Purchase Agreement, it may sell all, some or none of those shares. Sales to White Lion by us pursuant to the White Lion Purchase Agreement may result in substantial dilution to the interests of other holders of our Class A Common Stock.
The sale of a substantial number of shares to White Lion could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise desire. The number of shares of our Class A Common Stock ultimately offered for resale by White Lion is dependent upon the number of shares of Class A Common Stock issued to White Lion pursuant to the White Lion Purchase Agreement. Depending on a variety of factors, including market liquidity of our Class A Common Stock, the issuance of shares to White Lion may cause the trading price of our Class A Common Stock to decline.
We have broad discretion in the use of the net proceeds we receive from the sale of shares to White Lion and may not use them effectively.
Our management will have broad discretion in the application of the proceeds we receive from White Lion, if any, and you will not have the opportunity as part of your investment decision to assess whether our management is using the proceeds appropriately. Because of the number and variability of factors that will determine our use of our proceeds from White Lion under the White Lion Purchase Agreement, their ultimate use may vary substantially from their currently intended use. The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business and cause the price of our Class A Common Stock to decline. Pending their use, we may invest the proceeds from White Lion in short-term, investment grade, interest-bearing securities. These investments may not yield a favorable return to our shareholders.
Future sales (including potential sales of securities to White Lion pursuant to the White Lion Purchase Agreement), or the perception of future sales, by us or our stockholders in the public market could cause the market price for the Class A Common Stock to decline.
The sale of shares of our Class A Common Stock in the public market, or the perception that such sales could occur, could harm the prevailing market price of shares of our Class A Common Stock. These sales, or the possibility that these sales may occur, also might make it more difficult for the us to sell equity securities in the future at a time and at a price that it deems appropriate. In the future, we may issue our securities to raise capital or in connection with investments or acquisitions. The amount of shares of Class A Common Stock issued or issuable upon exercise or conversion of securities issued in connection with a capital raise or an investment or acquisition could constitute a material portion of the then-outstanding shares of our Class A Common Stock. Any issuance of additional securities in connection with capital raising activities, investments or acquisitions may result in additional dilution to our stockholders.
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Risk Factors Relating to the Combined Company
We have incurred, and may continue to incur, substantial costs in connection with the Mergers, which could adversely affect our financial condition and results of operations.
We incurred a number of non-recurring costs associated with negotiating and completing the Mergers. These fees and costs were substantial and, in many cases, were borne entirely by us. A substantial majority of these non-recurring expenses consisted of transaction costs related to the Mergers, including, among others, fees paid to financial, legal, accounting and other advisors. We continue to assess the magnitude of these costs and may incur additional unanticipated expenses related to post-closing matters. The costs described above, as well as any such additional unanticipated costs and expenses, could have an adverse effect on our financial condition and operating results.
Zeo Energy may fail to realize all of the anticipated benefits of the Merger or those benefits may take longer to realize than expected.
Zeo Energy believes that there are significant benefits and synergies that may be realized through leveraging the products, scale and combined enterprise customer bases of Zeo Energy and Heliogen. However, the efforts to realize these benefits and synergies will be a complex process and may disrupt both companies’ existing operations if not implemented in a timely and efficient manner. The full benefits of the Transactions, including the anticipated sales or growth opportunities, may not be realized as expected or may not be achieved within the anticipated time frame, or at all. Failure to achieve the anticipated benefits of the Merger could adversely affect Zeo Energy’s results of operations or cash flows, cause dilution to the earnings per share of Zeo Energy, decrease or delay any accretive effect of the Merger and negatively impact the price of Class A Common Stock.
Zeo Energy’s success depends, in part, on its ability to manage its expansion, which poses numerous risks and uncertainties, including the need to integrate the operations and business of Heliogen into its existing business in an efficient and timely manner, to combine systems and management controls and to integrate relationships with industry contacts and business partners.
If the Combined Company is unable to compete effectively, the results of operations of the Combined Company will be materially and adversely affected.
The competitiveness of the Combined Company is based on factors including Zeo Energy’s and the Combined Company’s lean business model, sales model, vertical integration and scalable business platform, its combined ability to raise capital and enter into strategic transactions, and recruiting and retaining qualified management personnel. If the Combined Company is unable to compete based on such factors, the Combined Company’s results of operations and business prospects could be harmed.
The Combined Company will have multiple products and will need to prioritize and focus development on certain of its products. As a result, the Combined Company may forego or delay pursuit of opportunities for any future products that later prove to have greater commercial potential. The resource allocation decisions of the Combined Company may cause it to fail to capitalize on viable commercial products or profitable market opportunities. Such failure may result in the combine company being unable to raise additional capital to continue to fund its existing programs and operations, and could lead to stockholders losing all or substantially all of their investment in Zeo Energy.
Energy prospective financial information is not fact and should not be relied upon as being necessarily indicative of future results, and readers of this information statement are cautioned not to place undue reliance on this information. Unfavorable changes in any of these or other factors, most of which are beyond Zeo Energy’s or Heliogen’s control, could materially and adversely affect the Combined Company’s business, results of operations and financial results.
Combined company stockholders may experience dilution in the future.
From time to time in the future, the Combined Company may issue additional shares of Common Stock or securities convertible into Common Stock pursuant to a variety of transactions, including acquisitions. The issuance by the Combined Company of additional shares of Common Stock or securities convertible into Common Stock would dilute your ownership and the sale of a significant amount of such shares in the public market could adversely affect prevailing market prices of shares of Common Stock.
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In the future, the Combined Company may expect to obtain financing or to further increase its capital resources by issuing additional shares of Zeo Energy capital stock or offering debt or other equity securities, including additional shares of common stock or warrants to purchase common stock, senior or subordinated notes, debt securities convertible into equity, or shares of preferred stock. Issuing additional shares of Zeo Energy capital stock, other equity securities, or securities convertible into equity may dilute the economic and voting rights Zeo Energy’s existing stockholders, reduce the market price of shares of Common Stock, or both. Debt securities convertible into equity could be subject to adjustments in the conversion ratio pursuant to which certain events may increase the number of equity securities issuable upon conversion. Preferred stock, if issued, could have a preference with respect to liquidating distributions or a preference with respect to dividend payments that could limit Zeo Energy’s ability to pay dividends to the holders of Common Stock. Zeo Energy’s decision to issue securities in any future offering will depend on market conditions and other factors, which may adversely affect the amount, timing or nature of Zeo Energy’s future offerings. As a result, holders of Common Stock bear the risk that Zeo Energy’s future offerings may reduce the market price of shares of Common Stock and dilute their percentage ownership.
The Combined Company’s ability to use net operating loss (“NOL”) carryforwards and other tax attributes may be limited, including as a result of the Merger.
Each of Heliogen and Zeo Energy has incurred losses during its history, and the Combined Company does not expect to become profitable in the near future and may never achieve profitability. To the extent that the Combined Company continues to generate taxable losses, unused losses will carry forward to offset future taxable income, if any, until such unused losses expire, if at all. As of December 31, 2024, Heliogen had U.S. federal NOL carryforwards and state NOL carryforwards of $244.4 million and $265.7 million, respectively, and Zeo Energy had U.S. federal NOL carryforwards and state NOL carryforwards of $0.7 million and $0.9 million, respectively. Under current law, U.S. federal NOL carryforwards generated in taxable periods beginning after December 31, 2017, may be carried forward indefinitely, but the deductibility of such NOL carryforwards is limited to 80% of taxable income for such year determined without regard to such carryforwards. It is uncertain if and to what extent various states will conform to federal law and there may be periods during which the use of NOL carryforwards is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed. In addition, under Sections 382 and 383 of the Code, U.S. federal NOL carryforwards and other tax attributes may become subject to an annual limitation in the event of certain cumulative changes in ownership. An “ownership change” pursuant to Section 382 of the Code generally occurs if one or more stockholders or groups of stockholders who own at least 5% of a company’s stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. The Combined Company’s ability to utilize its NOL carryforwards and other tax attributes to offset future taxable income or tax liabilities may be limited as a result of ownership changes, including potential changes in connection with the Merger or other transactions. Similar rules may apply under state tax laws. If the Combined Company earns taxable income, such limitations could result in increased future income tax liability to the Combined Company, and the Combined Company’s future cash flows could be adversely affected.
The business operations of the Combined Company will be subject to various and changing federal, state, local and foreign laws and regulations that could result in costs or sanctions that adversely affect the business and results of operations of the Combined Company.
The Combined Company operates in an increasingly complex regulatory environment. Businesses in the jurisdictions in which the Combined Company operates are subject to local, legal and political environments and regulations including with respect to employment, tax, statutory supervision and reporting and trade restriction. These regulations and environments are also subject to change.
Adjusting business operations to changing environments and regulations may be costly and could potentially render the particular business operations uneconomical, which may adversely affect the profitability of the Combined Company or lead to a change in the business operations.
Notwithstanding the best efforts of the Combined Company, it may not be in compliance with all regulations in the countries in which it operates at all times and may be subject to sanctions, penalties or fines as a result. These sanctions, penalties or fines may materially and adversely impact the profitability of the combined.
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ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM 1C. CYBERSECURITY.
Cybersecurity Risk Management and Strategy
We have developed and implemented, and continue to implement, cybersecurity risk management processes intended to protect the confidentiality, integrity, and availability of our critical systems and information. Primary cybersecurity oversight responsibility is shared by our board of directors, our audit and compliance committee (“Audit Committee”), and senior management.
Our cybersecurity risk management program includes physical, technological, and administrative controls intended to support our cybersecurity and data governance framework, including protections designed to protect the confidentiality, integrity, and availability of our key information systems and customer, employee, partner, and other third-party information stored on those systems. These measures include access controls, encryption, data handling requirements, and internal policies that govern our cybersecurity risk management and data protection practices. Our program also includes cybersecurity risk assessment processes designed to help identify material cybersecurity risks to our critical systems and information.
Over the past fiscal year, we have
We will continue to monitor and assess our cybersecurity risk management program as well as seek to improve such systems and processes as appropriate. If we were to experience a material cybersecurity incident in the future, such incident may have a material effect, including on our operations, business strategy, operating results, or financial condition. For more information regarding cybersecurity risks that we face and potential impacts on our business related thereto, see the section titled “Risk Factors” in Part I, Item 1A of this Report.
Cybersecurity Governance
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The Audit Committee receives updates from members of management on our cybersecurity risks at its quarterly meetings, and reviews metrics about cyber threat response preparedness, program maturity, risk mitigation status, and the current and emerging threat landscape. In addition, management provides updates to the Audit Committee, as necessary, regarding any material cybersecurity threats or incidents, as well as any incidents with lesser impact potential.
The Audit Committee reports to our board of directors regarding its activities, including those related to key cybersecurity risks, mitigation strategies, and ongoing developments, on a quarterly basis, or more frequently as needed. The board of directors also receives updates from management on our cyber risk management program and other matters relating to our data privacy and cybersecurity approach, including risk mitigations to bolster and enhance our data protection and data governance framework.
Our management team is responsible for assessing and managing our material risks from cybersecurity threats and for our overall cybersecurity risk management program on a day-to-day basis. Our management team supervises our efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, including through briefings from internal IT personnel, which may include threat intelligence and other information obtained from governmental, public or private sources, and alerts and reports produced by security tools deployed in our IT environment.
ITEM 2. PROPERTIES.
Our corporate headquarters are located in Florida under a lease that expires at the end of October 2026. We maintain offices for operations in Texas and Arkansas, and we have sales, marketing and executive offices in Utah and throughout Florida. We currently lease the office and warehouse spaces that we use in our operations, and we do not own any real property. We believe that our facility space adequately meets our needs and that we will be able to obtain any additional operating space that may be required on commercially reasonable terms.
ITEM 3. LEGAL PROCEEDINGS.
To the knowledge of our management, there is no material litigation, arbitration or governmental proceeding currently pending against us or any members of our management team in their capacity as such.
However, from time to time, we have been, are and will likely continue to be involved in legal proceedings, administrative proceedings and claims that arise in the ordinary course of business with customers, subcontractors, suppliers, regulatory bodies or others. In general, litigation claims or regulatory proceedings can be expensive and time consuming to bring or defend against, which may result in the diversion of management’s attention and resources from our business and business goals and could result in settlement or damages that could significantly affect financial results and the conduct of our business.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
(a) Market Information
The Class A Common Stock and publicly traded warrants are traded on Nasdaq under the symbols “ZEO” and “ZEOWW,” respectively.
(b) Holders
On March 27, 2026, there were 692 holders of record of our Class A common stock and 18 holders of record of our public warrants. The number of holders of record does not include beneficial owners whose shares are held in street name by brokers and other nominees.
(c) Dividends
The Company has not paid any cash dividends on its shares of its common stock to date. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition. The payment of any dividends will be within the discretion of the Board.
(d) Recent Sales of Unregistered Securities; Use of Proceeds from Registered Offerings
None.
(e) Purchases of Equity Securities
None.
(f) Equity Compensation Plan
The following table summarizes information about our equity compensation plans as of December 31, 2025:
| Number of securities to be issued upon exercise of outstanding options and restricted stock awards | Weighted-average price of outstanding options and restricted stock awards | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | ||||||||||
| (a) | (b) | (c) | ||||||||||
| Equity compensation plans approved by security holders | 975,002 | $ | 2.97 | 1,945,400 | ||||||||
| Equity compensation plans not approved by security holders | – | – | – | |||||||||
| Total | 975,002 | $ | 2.97 | 1,945,400 | ||||||||
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ITEM 6. [RESERVED]
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis summarizes the significant factors affecting our operating results, financial condition, liquidity and cash flows as of and for the periods presented below. The following discussion and analysis should be read in conjunction with our financial statements and the related notes thereto included elsewhere in this Report. The discussion contains forward-looking statements that are based on the beliefs of management, as well as assumptions made by, and information currently available to, management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Report, particularly in the sections titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.”
Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “Zeo,” “we”, “us”, “our”, and the “Company” are intended to refer to (i) following the Business Combination (as defined below), the business and operations of Zeo and its consolidated subsidiaries, and (ii) prior to the Business Combination, Sunergy (the predecessor entity in existence prior to the consummation of the Business Combination) and its consolidated subsidiary.
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, 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 December 31, 2025, approximately 260 sales agents and approximately 10 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.
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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
Heliogen Acquisition
On May 28, 2025, we entered into a plan of merger and reorganization agreement with Heliogen, a renewable-energy technology company that provides solutions for delivering low-carbon energy production by combining commercially proven solar technologies with thermal systems and storage expertise. The transaction was completed on August 8, 2025, under which Heliogen became a wholly owned subsidiary of the Company.
The total consideration transferred consisted entirely of our Class A common stock, issued to Heliogen shareholders at an exchange ratio of 0.9591 shares of our Class A common stock for each share of Heliogen common stock, resulting in the issuance of 6,217,612 Class A common shares. No contingent consideration was included. In connection with the merger, all outstanding Heliogen SPAC warrants and RSUs were automatically accelerated and fully vested and were settled in the same equity consideration, net of applicable tax withholding. All stock options and commercial warrants were out-of-the-money and canceled with no value.
We accounted for the Heliogen acquisition using the acquisition method of accounting in accordance with ASC 805, “Business Combinations,” and allocated the purchase price to the assets acquired and liabilities assumed based on their estimated fair values at the acquisition date, with the excess of purchase price over the estimated fair value of the net assets acquired recorded as goodwill.
Note Conversion
On October 30, 2025, the outstanding balance of the Promissory Note totaling $2.5 million was converted into 1,851,851 shares of the Company’s Class A common stock. Upon conversion, the remaining unamortized debt discount was recognized and the carrying value of the Promissory Note was reclassified to equity. No balance remained outstanding under the Promissory Note as of December 31, 2025.
White Lion Transaction
On January 27, 2026, we entered into the White Lion Purchase Agreement with White Lion. We also entered into the RRA with White Lion on January 27, 2026. Pursuant to the White Lion Purchase Agreement, the Company has the right, but not the obligation, to require White Lion to purchase, from time to time, up to $30.0 million in aggregate gross purchase price of newly issued shares of our Class A Common Stock, subject to certain limitations and conditions set forth in the White Lion Purchase Agreement. Subject to the satisfaction of certain customary conditions, the Company’s right to sell shares to White Lion commenced on the date of the execution of White Lion Purchase Agreement and extends until White Lion Commitment Period.
During the White Lion Commitment Period, subject to the terms and conditions of the White Lion Purchase Agreement, the Company may notify White Lion when the Company exercises its right to sell shares of its Class A Common Stock. The Company may deliver a Rapid Purchase Notice (as such term is defined in the White Lion Purchase Agreement), where the Company can require White Lion to purchase up to a number of shares of Class A Common Stock equal to the 20% of Average Daily Trading Volume (as such term is defined in the White Lion Purchase Agreement). The Company may also deliver an Accelerated Purchase Notice (as such term is defined in the White Lion Purchase Agreement), where the Company may require White Lion to purchase up to a number of shares of Class A Common Stock equal to 20% of the Average Daily Trading Volume. White Lion may waive such limits under any notice at its discretion and purchase additional shares.
The price to be paid by White Lion for any shares that the Company requires White Lion to purchase will depend on the type of purchase notice that the Company delivers. For shares being issued pursuant to Accelerated Purchase Notice, the purchase price per share will be equal to the lowest traded price of Class A Common Stock during one (1) hour period following the White Lion’s written consent of the acceptance of the notice. For shares being issued pursuant to a Rapid Purchase Notice, the purchase price per share will be equal to the average of the three (3) lowest traded prices on the date that the notice is delivered.
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No purchase notice shall result in White Lion beneficially owning (as calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d-3 thereunder) more than 4.99% of the number of shares of the Class A Common Stock outstanding immediately prior to the issuance of shares of Class A Common Stock issuable pursuant to a purchase notice.
The Company may deliver purchase notices under the White Lion Purchase Agreement, subject to market conditions, and in light of our capital needs, from time to time and under the limitations contained in the White Lion Purchase Agreement. Any proceeds that the Company receives under the White Lion Purchase Agreement are expected to be used for working capital and general corporate purposes.
The White Lion Purchase Agreement may be terminated by the Company at any time and for any reason, in its sole discretion, subject to the Company having delivered the applicable Commitment Shares (as defined below). The White Lion Purchase Agreement will also terminate automatically upon the earlier of the expiration of the White Lion Commitment Period or the occurrence of certain bankruptcy or insolvency-related events involving the Company.
In consideration for the commitments of White Lion, as described above, the Company is contractually committed to issue to White Lion the Commitment Shares. The Commitment Shares are deemed fully earned and non-refundable as of the execution date of the White Lion Purchase Agreement; however, if the White Lion Purchase Agreement is terminated by the Company as a result of a material breach by White Lion, the Company may pursue all remedies available at law or in equity, including reimbursement or recovery of such Commitment Shares, to the extent permitted by applicable law.
Concurrently with the White Lion Purchase Agreement, the Company entered into the RRA with White Lion. The Purchase Agreement and the RRA contain customary representations, warranties, conditions and indemnification obligations of the parties. The representations, warranties and covenants contained in such agreements were made only for purposes of such agreements and as of specific dates, were solely for the benefit of the parties to such agreements and may be subject to limitations agreed upon by the contracting parties.
White Horse Energy Transaction
On January 30, 2026, Sunergy, a subsidiary of the Company, increased the subordinated loan in the form of a note receivable with White Horse Energy, LLC from $3.0 million to $6.15 million under the same terms as the original note.
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.
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The following table sets forth these metrics for the periods presented:
| Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Net revenues | $ | 69,349,938 | $ | 73,244,083 | ||||
| Gross profit | 30,166,265 | 31,481,987 | ||||||
| Gross margin | 43.5 | % | 43.0 | % | ||||
| Contribution profit | 12,858,818 | 14,512,599 | ||||||
| Contribution margin | 18.5 | % | 19.8 | % | ||||
| Loss from operations | (20,532,132 | ) | (10,804,760 | ) | ||||
| Net loss | (19,629,633 | ) | (9,872,358 | ) | ||||
| Adjusted EBITDA | (3,340,851 | ) | 3,954,726 | |||||
| Adjusted EBITDA margin | (4.8 | )% | 5.4 | % | ||||
Gross Profit and Gross Margin
We define gross profit as revenue, net less cost of revenues and depreciation and amortization related to cost of revenues, 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. Contribution 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, Virginia and Ohio. We primarily generate revenue from our 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.
The acquisition of Heliogen aligns with our strategy to expand our clean-energy platform beyond residential markets into large-scale commercial and industrial energy generation and storage. Additionally, Heliogen is expected to complement our existing solar operations, create operational synergies, and broaden market reach. With the acquisition of Heliogen, we intend to enter into agreements to provide engineering services to support long-duration energy storage projects.
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Adding New Customers and Expansion of Sales with Existing Customers. We intend to increase our in-house sales force and external sales dealers 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. We also see an increase in materials used to achieve the required minimum domestic content to maximize incentive tax credits. These increases in material and labor costs may continue to put pressure on our operating margins. We do not have information that allows us to quantify the specific amount of cost increases attributable to inflationary pressures.
Interest rates. Interest rates increased sharply in 2022 but have been relatively stable since. The majority of homeowners have opted to enter into a lease contract with a third-party operator as means of financing the installation of a solar system. The lease contract provides a lower monthly cost to the homeowner than a conventional loan product in a higher interest rate environment. 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. 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 installation of our systems, which would adversely impact our cash flows and results of operations, including revenue and contribution margin.
Components of Consolidated Statements of Operations
Net Revenues
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 passing installation inspection, we satisfy our performance obligation and recognize revenue. Most of the Company’s customers finance their obligations with third parties. Most finance arrangements are by way of a lease contract with a third-party operator. Some customers utilize debt financing. 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 revenues, net in the years ended December 31, 2025 and 2024.
Our revenue is affected by changes in the volume, system size 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. Less than 5% of our sales were paid in cash by the customer in each of the years ended December 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.
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Revenues declined during the year ended December 31, 2025 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.
Cost of Revenues
Cost of revenues 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 revenues decreased during the year ended December 31, 2025 in association with a reduction in revenues.
Net revenues less cost of revenues 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.
Sales and marketing expenses consist primarily of personnel-related expenses including sales commissions, as well as advertising, travel, trade shows, marketing, 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 non-direct labor operations, executive, finance, human resources, information technology, 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, 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.
Results of Operations
Year Ended December 31, 2025 Compared to the Year Ended December 31, 2024
The following table sets forth a summary of our consolidated statements of operations for the periods presented:
| Years Ended December 31, | Change | |||||||||||||||
| 2025 | 2024 | $ | % | |||||||||||||
| Net revenues | $ | 69,349,938 | $ | 73,244,083 | $ | (3,894,145 | ) | (5.3 | )% | |||||||
| Costs and expenses: | ||||||||||||||||
| Cost of revenues | 31,066,477 | 38,067,096 | (7,000,619 | ) | (18.4 | )% | ||||||||||
| Depreciation and amortization | 8,576,502 | 4,836,538 | 3,739,964 | 77.3 | % | |||||||||||
| Sales and marketing | 22,698,405 | 19,587,073 | 3,111,332 | 15.9 | % | |||||||||||
| General and administrative | 27,540,686 | 21,558,136 | 5,982,550 | 27.8 | % | |||||||||||
| Total operating expenses | 89,882,070 | 84,048,843 | 5,833,227 | 6.9 | % | |||||||||||
| Loss from operations | (20,532,132 | ) | (10,804,760 | ) | (9,727,372 | ) | (90.0 | )% | ||||||||
| Other income (expense): | ||||||||||||||||
| Other income | 363,918 | 141,467 | 222,451 | 157.2 | % | |||||||||||
| Interest expense | (155,490 | ) | (333,539 | ) | 178,049 | 53.4 | % | |||||||||
| Gain on disposal of property and equipment | – | 91,684 | 91,684 | – | ||||||||||||
| Gain on change in fair value of warrant liabilities | 957,720 | 69,000 | 888,720 | 1,288.0 | % | |||||||||||
| Total other income (expense) | 1,166,148 | (31,388 | ) | 1,197,536 | 3,815.3 | % | ||||||||||
| Net loss before taxes | $ | (19,365,984 | ) | $ | (10,836,148 | ) | $ | (8,529,836 | ) | (78.7 | )% | |||||
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Net Revenues
Net revenues decreased by approximately $3.9 million from $73.2 million for the year ended December 31, 2024 to $69.3 million for the year ended December 31, 2025. The primary reason for the decrease in revenue was a decrease in installations during the current period, offset by a new pricing agreement with Solar Leasing I, LLC (“SLI”), a related-party entity that provides lease financing of the Company’s customers (see Note 16—Related Party Transactions in the consolidated financial statements), entered into during the fourth quarter of 2024. The comparative period also benefited from deferred revenue at the end of 2023, that was recognized in the first quarter of 2024. During the year ended December 31, 2025, there were no revenues generated from Heliogen.
Cost of Revenues
Cost of revenues decreased by $7.0 million from $38.1 million for the year ended December 31, 2024 to $31.1 million for the year ended December 31, 2025, primarily driven by the decline in installation revenues over the same period. As a percentage of net revenues, cost of revenues improved from 52.0% for the year ended December 31, 2024 to 44.8% for the year ended December 31, 2025. The improvement in gross margin reflects lower per-installation costs in 2025 compared to 2024, as the first half of 2024 included elevated costs associated with a higher volume of lower-margin installations that originated from contracts entered into in 2023.
Depreciation and Amortization
Depreciation and amortization increased by $3.7 million, from $4.8 million for the year ended December 31, 2024 to $8.6 million for the year ended December 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.
Sales and Marketing
Sales and marketing expenses increased by $3.1 million from $19.6 million for the year ended December 31, 2024 to $22.7 million for the year ended December 31, 2025. The increase was primarily a result of increased stock-based compensation expense, sales commissions, and efforts to expand our selling process to include year-round sales through digital lead generation.
General and Administrative Expenses
General and administrative expenses increased by $6.0 million from $21.6 million for the year ended December 31, 2024 to $27.5 million for the year ended December 31, 2025. The increase was primarily due to an increase in payroll costs associated with additional staffing, increased bad debt expense, higher professional fees associated with being a public company, and new costs as a result of the acquisition of Heliogen offset by decreased stock-based compensation expense.
Other Income (Expense)
Other income, net increased by $1.2 million from other expense, net of $31,388 for the year ended December 31, 2024 to other income, net of $1.2 million for the year ended December 31, 2025. The increase was primarily a result of increased gain on change in fair value of warrant liabilities, other income, and less interest expense during the current period.
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Liquidity and Capital Resources
Our operations have historically been funded through a combination of cash on hand, proceeds from financing activities, and in 2025, net cash acquired in connection with the Heliogen acquisition (see Note 6—Business Combinations in the consolidated financial statements). 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 December 31, 2025 and December 31, 2024, our cash and cash equivalents balance were $6.1 million and $5.6 million, respectively. The Company maintains its cash in checking, savings, and money market 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.
We currently believe that our existing cash and working capital balances, anticipated future cash flows from operations and borrowings under our debt agreements will be sufficient to meet our currently contemplated business needs for the next twelve months. In the event we pursue and complete significant transactions or acquisitions in the future, additional funds may be required to meet our strategic needs, which may require us to raise additional funds in the debt or equity markets. 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:
| For the Years Ended December 31, | ||||||||||||
| 2025 | 2024 | Change | ||||||||||
| Net cash used in operating activities | $ | (8,691,421 | ) | $ | (8,716,717 | ) | $ | 25,296 | ||||
| Net cash provided by (used in) investing activities | 13,372,867 | (7,369,137 | ) | 20,742,004 | ||||||||
| Net cash provided by (used in) financing activities | (4,172,727 | ) | 13,697,663 | (17,870,390 | ) | |||||||
Cash Flows from Operating Activities
Net cash used in operating activities was approximately $8.7 million during the year ended December 31, 2025 compared to net cash used in operating activities of approximately $8.7 million during the year ended December 31, 2024. Despite an increase in net loss of $9.8 million, cash used in operations remained consistent year-over-year primarily due to higher non-cash charges including $8.6 million of depreciation and amortization, $6.4 million of stock-based compensation, and $3.4 million of provision for credit losses. Working capital was positively impacted by a $2.8 million increase in accounts payable and a $1.1 million increase in contract liabilities. These were partially offset by a $2.2 million increase in accounts receivable, a $1.1 million increase in prepaid expenses and other current assets, a $1.5 million increase in contract assets, a $2.0 million decrease in accrued expenses and other current liabilities, and a $3.3 million decrease in accrued expenses and other current liabilities – related parties.
Cash Flows from Investing Activities
Net cash provided by investing activities was approximately $13.4 million for the year ended December 31, 2025, relating to the cash acquired in the acquisition of Heliogen, offset by purchases of property and equipment. Net cash used in investing activities for the year ended December 31, 2024 was approximately $7.4 million, relating to the asset acquisition of Lumio, note receivable – related-party investment, and purchase of property and equipment.
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Cash Flows from Financing Activities
Net cash used in financing activities was approximately $4.2 million for the year ended December 31, 2025, primarily relating to the payment of dividends to OpCo Class A preferred unit holders and repayments of debt and finance leases. Net cash provided by financing activities was approximately $13.7 million for the year ended December 31, 2024, primarily relating to net cash acquired from the issuance of convertible preferred stock of $9.2 million and the private placement issuance of Class A common stock offset by repayments of debt and finance leases, and distributions of stockholders.
Current Indebtedness
As of December 31, 2025, the Company’s outstanding indebtedness consisted of approximately $79,112 of vehicle loans. The Company has historically funded its operations and growth through a combination of cash on hand, proceeds from financing activities, and in 2025, net cash acquired in connection with the Heliogen acquisition.
Non-GAAP Financial Measures
The non-GAAP financial measures in this Quarterly Report 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. Contribution margin reflects our Contribution profit as a percentage of revenues.
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The following table provides a reconciliation of gross profit to contribution profit for the periods presented:
| Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Net revenues | $ | 69,349,938 | $ | 73,244,083 | ||||
| Cost of revenues (exclusive of depreciation and amortization): | 31,066,477 | 38,067,096 | ||||||
| Less: depreciation and amortization related to cost of revenues | 8,117,196 | 3,695,000 | ||||||
| Total gross profit | $ | 30,166,265 | $ | 31,481,987 | ||||
| Adjustments: | ||||||||
| Depreciation and amortization | 459,306 | 1,141,538 | ||||||
| Commissions expense | 16,848,141 | 15,827,850 | ||||||
| Total contribution profit | $ | 12,858,818 | $ | 14,512,599 | ||||
| Gross margin | 43.5 | % | 43.0 | % | ||||
| Contribution margin | 18.5 | % | 19.8 | % | ||||
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, gain on change in fair value of warrant liabilities, stock-based compensation, and 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:
| Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Net loss | $ | (19,629,633 | ) | $ | (9,872,358 | ) | ||
| Adjustments: | ||||||||
| Other income | (363,918 | ) | (141,467 | ) | ||||
| Interest expense | 155,490 | 333,539 | ||||||
| Gain on disposal of property and equipment | – | (91,684 | ) | |||||
| Gain on change in fair value of warrant liabilities | (957,720 | ) | (69,000 | ) | ||||
| Income tax provision (benefit) | 263,649 | (963,790 | ) | |||||
| Stock-based compensation | 6,498,623 | 7,951,248 | ||||||
| Acquisition-related expenses | 2,116,156 | 1,971,700 | ||||||
| Depreciation and amortization | 8,576,502 | 4,836,538 | ||||||
| Adjusted EBITDA | $ | (3,340,851 | ) | $ | 3,954,726 | |||
| Net loss margin | (28.3 | )% | (13.5 | )% | ||||
| Adjusted EBITDA margin | (4.8 | )% | 5.4 | % | ||||
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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 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 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 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 consolidated financial statements due to the estimation process and business judgment involved in their application:
Allowance for Credit Losses
Accounts receivable are recorded at the invoiced amount, net of an allowance for current expected credit losses. In accordance with ASC 326, “Financial Instruments—Credit Losses,” the Company estimates expected credit losses on accounts receivable using an aging analysis that incorporates historical loss experience, customer creditworthiness, prevailing economic conditions, and reasonable and supportable forward-looking information. The Company also provides an allowance for customers determined to be insolvent. Accounts receivable balances are written off when they are determined to be uncollectible.
Business Combinations
The Company accounts for business combinations under the acquisition method of accounting in accordance with ASC 805, “Business Combinations.” The Company allocates the purchase price of an acquisition to the tangible and intangible assets acquired, liabilities assumed, and any NCI based on their estimated fair values at the acquisition date. The Company recognizes the amount by which the purchase price of an acquired entity exceeds the net of the fair values assigned to the assets acquired and liabilities assumed as goodwill. In determining the fair values of assets acquired and liabilities assumed, the Company uses various recognized valuation methods, including the income, cost, and market approaches, in accordance with ASC 820, “Fair Value Measurement.” The Company makes assumptions within certain valuation techniques, including discount rates, royalty rates, and the amount and timing of future cash flows.
The Company initially performs these valuations based on preliminary estimates and assumptions by management or, where appropriate, independent valuation specialists under the Company’s supervision. The Company may revise these estimates and assumptions as additional information becomes available during the measurement period, which may extend up to one year from the acquisition date. Acquisition-related expenses are recognized separately from business combinations and are expensed as incurred.
Intangible Assets
Acquired identifiable intangible assets are recorded at fair value at the acquisition date and are amortized on a straight-line basis over their estimated useful lives. Estimated useful lives are determined based on the period over which the assets are expected to contribute to future cash flows. The Company has no intangible assets with indefinite lives.
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Goodwill
In accordance with ASC 350, “Intangibles—Goodwill and Other,” goodwill is not amortized but is tested for impairment annually on December 31, or more frequently if events or circumstances indicate that goodwill may be impaired.
When assessing the recoverability of goodwill, the Company may first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The qualitative assessment considers factors including the current operating environment, industry and market conditions, cost factors, overall financial performance, and other relevant events. If the Company bypasses the qualitative assessment, or concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company performs a quantitative assessment by comparing the estimated fair value of the reporting unit with its carrying amount. The Company estimates the fair value of its reporting units based on the present value of estimated future cash flows. Considerable management judgment is required in evaluating operating and macroeconomic conditions and estimating future cash flows, including assumptions related to growth rates and discount rates.
If the carrying amount of a reporting unit exceeds its estimated fair value, an impairment loss is recognized for the amount of the excess, limited to the total amount of goodwill allocated to the reporting unit.
Long-Lived Assets
The Company reviews the carrying value of long-lived assets, including property and equipment, ROU assets, and definite-lived intangible assets, for impairment in accordance with ASC 360, “Property, Plant, and Equipment,” whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Such events or circumstances may include significant decreases in the market price of an asset, significant changes in the extent or manner in which an asset is used or in its physical condition, significant adverse changes in legal factors or in the business climate, a history or forecast of operating or cash flow losses, significant disposal activity, a significant decline in revenue, or other indicators that the carrying value of an asset may not be recoverable. If indicators of impairment are present, the Company evaluates recoverability by comparing the carrying amount of the asset or asset group to the estimated undiscounted future cash flows expected to result from the use and eventual disposition of the asset or asset group. If the carrying amount exceeds the estimated undiscounted future cash flows, an impairment loss is recognized for the amount by which the carrying amount exceeds the asset’s fair value.
Income Taxes
The Company accounts for income taxes in accordance with ASC 740, “Income Taxes.” Zeo is subject to U.S. federal, state, and local income taxes. OpCo is treated as a partnership for U.S. federal income tax purposes and generally does not pay U.S. federal income taxes. Instead, the OpCo unitholders, including Zeo, are liable for U.S. federal income taxes on their respective shares of OpCo’s taxable income. OpCo may be subject to certain state and local income or franchise taxes in jurisdictions that tax entities classified as partnerships. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the periods in which those temporary differences are expected to be recovered or settled. The effect of changes in tax rates on deferred tax assets and liabilities is recognized in the period that includes the enactment date.
The Company evaluates the realizability of deferred tax assets and records a valuation allowance when, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
The Company recognizes the tax benefit of uncertain tax positions only when it is more likely than not that the position will be sustained upon examination by taxing authorities, including resolution of any related appeals or litigation. The tax benefit recognized is measured as the largest amount that has a greater than 50 percent likelihood of being realized upon ultimate settlement. Interest and penalties related to unrecognized tax benefits are recognized as a component of income tax expense.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and are not required to provide the information otherwise required under this item.
ITEM 8. FINANCIAL STATEMENT AND SUPPLEMENTARY DATA.
This information appears following Item 15 of this Report and is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Report, is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our principal executive officer and principal financial and accounting officer, the effectiveness of our disclosure controls and procedures as of December 31, 2025, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our principal executive officer and principal financial and accounting officer concluded that, as of December 31, 2025, our disclosure controls and procedures were not effective because of the identification of a material weakness in our internal control over financial reporting described below. In light of this material weakness, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. generally accepted accounting principles.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Management’s Report on Internal Controls Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for us. Under the supervision and with the participation of our chief executive officer and chief financial officer, our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2025 based on criteria specified in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our assessment, our management, including our chief executive officer and chief financial officer, concluded that, as of December 31, 2025, our internal control over financial reporting was not effective as of December 31, 2025. 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.
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Notwithstanding the identified material weaknesses, discussed below, management, including the certifying officers, believes that the financial statements contained in this Report 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 Weaknesses
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 resulting in material adjustments that impacted revenue, expenses, assets, and liabilities in the financial statements, 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 plans include the following:
| ● | 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. |
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Management has considered and reviewed the errors which occurred in revenue and cost of revenues 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-Based 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 Revenues Cutoff – Review revenue and related cost of revenues with executive team to determine if revenue and related cost of revenues 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
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
ITEM 9B. OTHER INFORMATION.
Insider Trading Arrangements
During the quarter ended December 31, 2025, none
of our directors or officers
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
Not applicable.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Our officers and directors are as follows:
| Name | Age | Position | ||
| Timothy Bridgewater | 65 | Chief Executive Officer and Director | ||
| Cannon Holbrook | 54 | Chief Financial Officer | ||
| Kalen Larsen | 32 | Chief Operating Officer | ||
| Brandon Bridgewater | 31 | Chief Sales Officer | ||
| Stirling Adams | 61 | General Counsel and Secretary of the Board | ||
| Dr. Abigail M. Allen | 41 | Director | ||
| James P. Benson | 66 | Director | ||
| Neil Bush | 71 | Director | ||
| Mark M. Jacobs | 64 | Director |
Timothy Bridgewater. Mr. Bridgewater has served as Sunergy’s Chief Executive Officer and chairman of the board since its creation in October 2021. He previously served as the Company’s Chief Financial Officer from October 2021 until August 2024. Mr. Bridgewater also served as a founder and manager for Sunergy’s predecessor company Sun First Energy since October 2019 until the Contribution of Sun First Energy, LLC into Sunergy in October 2021. From July 2002 to the present, Mr. Bridgewater has been a founder and managing director of Capitol Financial Strategies, LLC (also known as Interlink Capital Strategies), an investment advisory services company, where he has advised on debt and private equity investments in industries ranging from mining, building materials, renewable energy, and automotive component manufacturing to electronics and software technologies in the U.S. and Asia. Mr. Bridgewater is the manager of Sunergy Solar LLC. From October 2018 to September 2020, Mr. Bridgewater held the position of manager at Micro Bolt, an energy development company. Since April 2020, he has served as a manager at Prometheus Power Partners, LLC, a commercial and utility-scale solar energy development company. From November 2019 to April 2021, Mr. Bridgewater served as the Chief Financial Officer of Tintic Consolidated Metals, LLC, a mining company, and from November 2019 to November 2021, he served as a Vice President for that company. Mr. Bridgewater earned his B.S. in Finance from Brigham Young University and completed graduate studies in International Economics from University of Utah. We believe that Mr. Bridgewater is qualified to serve both as a member of our management team and the Board because of his visionary leadership of Sunergy from inception to date, his experience in energy development, and his over 30 years of commercial and international banking, international finance and business development experience working in the U.S., Asia and Latin America.
Cannon Holbrook. Mr. Holbrook began serving as Zeo’s Chief Financial Officer on August 20, 2024. He initially joined the Company in March 2024, serving as advisor to the Chief Executive Officer during the Company’s de-SPAC process and, since that time, has lead its accounting, finance, and treasury functions as well as building out its external reporting processes. Mr. Holbrook brings over two decades of experience in finance and accounting to the Company. Throughout his career, he has demonstrated expertise in strategic planning, mergers and acquisitions, and capital raising. He has managed accounting operations for global entities, implemented shared services, and developed and driven process improvements that have yielded significant cost savings and operational efficiencies. Prior to joining the Company as CFO, Mr. Holbrook served as the advisor to the CEO from March to August 2024. While in this role, he led the Company’s accounting, finance, and treasury functions, helped the Company complete its de-SPAC combination in March 2024, and built out external reporting processes. Before joining our Company, Mr. Holbrook served as the CFO of Hawx Pest Control, a company in the business of residential pest services. While there, he led accounting, finance, and treasury functions, helped the company increase its revenue, and helped to close a major private equity financing. Prior to this, from September 2020 to December 2021, Mr. Holbrook served as the Head of Finance in Built Bar, a food manufacturer. In this role, he implemented key financial reporting functions and helped raise debt and equity financing. From July to September 2020, he was the Consulting CFO of Access CFO, a business that provides outsourced CFO services. While there, he drove company responses to quality of earnings processes and planned and drove preparation for a company audit. From December 2017 to July 2020, Mr. Holbrook was the VP of Accounting and Finance at HZO, Inc., a nanotechnology manufacturer. While there, he implemented accounting and finance systems and processes necessary to enable the company to meet needs through explosive growth, completed an audit, implemented automated accounting processes, and raised debt and equity financing.
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Kalen Larsen. Mr. Larsen serves as Zeo’s Chief Operating Officer, overseeing regional sales, dealer relations, operations, and process enhancements. He served as Sunergy’s Chief of Sales and Marketing from October 2021 until Closing. In September 2019, he co-founded Sun First Energy and co-managed sales and operations there until its Contribution that formed Sunergy in October 2021. Mr. Larsen began his solar career in October 2016 at Vivint Solar, LLC and worked there until October 2017. He worked at and co-managed a sales office at Vivint Inc. from October 2017 to March 2019, and subsequently, he managed a sales office for Atlantic Key Energy, LLC from March 2019 to October 2019. Mr. Larsen holds an associate degree from Weber State University with an emphasis in Spanish. We believe Mr. Larsen is qualified to serve as a member of our management team because of his sales and operations experience and proven track record in the solar energy industry.
Brandon Bridgewater. Mr. Bridgewater has served as Sunergy’s Chief Sales Officer since October, 2021 and is the son of Timothy Bridgewater, Zeo’s Chairman and Chief Executive Officer. Mr. Bridgewater co-founded Sun First Energy, LLC, as its President and Chief Sales Officer, in September 2019 until its Contribution that formed Sunergy in October 2021. From September 2017 to December 2018, Mr. Bridgewater served as a Sales Manager at Vivint Smart Home, Inc., a smart home company in the United States and Canada. From August 2015 to September 2017, he served as an Area Manager for Aptive Environmental, LLC, a pest control solution company. Mr. Bridgewater earned his Bachelor of Science in Business Finance (with an emphasis in Real Estate) from Brigham Young University’s Marriott School of Business in 2019. We believe that Mr. Bridgewater is qualified to serve as a member of our management team because of his track record in the solar energy industry and range of sales experience.
Stirling Adams. Mr. Adams serves as Zeo’s General Counsel and Secretary. Mr. Adams brings 30 years of legal experience to the executive team. Just prior to becoming General Counsel and Secretary, he worked as a sole practitioner attorney since November 2022, focusing on renewable energy and nuclear energy ventures and financing. From August 2016 to October 2022, he served as Vice President, Associate General Counsel, and Head of Intellectual Property at Micro Focus International plc (now owned by OpenText Corporation), where he oversaw the company’s efforts to develop and protect intellectual property. Prior to that, he spent 21 years as in-house counsel at Novell, Inc., which was acquired by Micro Focus in 2014 through The Attachmate Group, where he served in various roles, including at times supervising legal affairs for one or more of Novell’s business units, for its consulting services arm, and for its Latin American and emerging markets businesses. Throughout most of his career, Mr. Adams has been engaged in international business transactions, technology licensing, and M&A transactions. He has lived and worked in Europe, South America, and China. He has taught as an adjunct professor of law at Brigham Young University, and holds a J.D. degree from Boston University, along with a B.S. in Computer Science and Statistics from Brigham Young University. We believe that Mr. Adams is qualified to serve as a member of our management team because of his extensive legal expertise.
Dr. Abigail M. Allen. Dr. Allen serves as a director of Zeo. Dr. Allen is a tenured associate professor of accounting at the Marriott School of Management at Brigham Young University. Dr. Allen holds a doctorate in business administration from Harvard Business School, as well as undergraduate and master’s degrees in accounting from the University of Southern California. She is a licensed CPA. Prior to BYU, Dr. Allen was a Lecturer in the Accounting and Management Unit at Harvard Business School. Prior to academia, Dr. Allen worked as an external auditor for Deloitte. Dr. Allen’s research focuses on the political economy and economic consequences of accounting standard setting, as well as corporate governance and diversity. Her work has been published in the Journal of Accounting and Economics, the Journal of Accounting Research, Management Science and the Journal of Law Finance and Accounting and has been cited and discussed in Forbes Magazine, Harvard Business Review, Columbia Law School Blue Sky blog, and the Institute for Truth in Accounting.
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James P. Benson. Mr. Benson serves as a director of Zeo. Mr. Benson is a founding partner of Energy Spectrum, where he oversees Energy Spectrum’s efforts in sourcing investments, transaction evaluation, negotiation, executing and financing, monitoring of portfolio companies and the firm’s management and strategy. With approximately 37 years of venture capital and private equity, investment banking, financial advisory and commercial banking experience, Mr. Benson brings extensive relationships and his network across the energy industry to the company. Mr. Benson currently serves as a director on the boards of multiple Energy Spectrum portfolio companies and has been on two public boards in the past. Prior to co-founding Energy Spectrum in 1996, Mr. Benson served for ten years as a Managing Director at R. Reid Investments Inc., where his experience included energy-related private placements of debt and equity, acquisitions and divestitures. Mr. Benson began his career at InterFirst Bank Dallas, where he served for four years and was responsible for various energy financings and financial recapitalizations. Mr. Benson received his Bachelor of Science degree from the University of Kansas and his Master of Business Administration degree in Finance from Texas Christian University. Due to his extensive investment experience in the energy industry,we believe Mr. Benson is well qualified to serve on our board of directors.
Neil Bush. Mr. Bush serves as a director of Zeo. Mr. Bush has served on the board of directors of FutureTech II Acquisition Corp. since February 2022. Mr. Bush has been the sole member of Neil Bush Global Advisors, LLC since January 1998. Additionally, Mr. Bush has been on the board of directors for Hong Kong Finance Investment Holding Group since 2012. Mr. Bush has also served as the co-chairman for CIIC since 2006 and as an adviser to CP Group since 2015. Further, Mr. Bush has served as a partner for Asia & America Consultants since March 2016 and the chairman of Singhaiyi since April 2013. Mr. Bush served on the board of Greffex, Inc. since June 2020 and the Points of Light Foundation. Mr. Bush was appointed director of Rebound International, LLC in early 2022. Due to his extensive investment experience in the energy industry, we believe Mr. Bush is well qualified to serve on our board of directors.
Mark M. Jacobs. Mr. Jacobs serves as a director of Zeo. Mr. Jacobs brings more than 30 years of executive management, operations and investment banking experience across multiple segments within the broader energy industry. Since his retirement, Mr. Jacobs has served as an independent outside consultant serving the energy industry and privately-held entities undertaking a change in control as well as serving as board chair for a number of nonprofit organizations.
Mr. Jacobs previously served as CEO, President and Director of Reliant Energy, a publicly-traded, Fortune 500 energy company. During Mr. Jacobs tenure, he led the company through a series of crises including the impact of Hurricane Ike and the financial market crisis in 2008. He initiated and negotiated a merger-of-equals with Mirant Corporation to form GenOn Energy in 2010, where he served as President, Chief Operating Officer and a Director of the largest competitive generator in the U.S. Mr. Jacobs was originally recruited to Reliant Energy in 2002 to serve as Chief Financial Officer. In that role, Mr. Jacobs brokered a landmark $6.2B debt restructuring transaction, leading the company away from a potential bankruptcy filing and repositioned the company to compete in the emerging competitive electricity market. Prior to
Reliant Energy, Mr. Jacobs served as a Managing Director within the Natural Resources Group and Mergers & Acquisitions Department at Goldman Sachs & Co. where he provided strategic advice for large public and private corporations related to M&A and capital markets. Mr. Jacobs received a B.B.A. from Southern Methodist University and a Master of Management from the J.L. Kellogg Graduate School of Management at Northwestern University.
Family Relationships
Timothy Bridgewater is the father of Brandon Bridgewater. There are no other family relationships among our directors and executive officers.
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Corporate Governance
Composition of the Board of Directors
Zeo’s business affairs are managed under the direction of its board of directors, which consists of six members. Under our bylaws, each director will hold office until the expiration of the term of the class, if any, for which elected and until such director’s successor is elected and qualified or until such director’s earlier death, resignation, disqualification, or removal. Pursuant to our charter, the number of directors on the Board will be fixed exclusively by one or more resolutions adopted from time to time by the board. Any vacancies on the Board and any newly created directorships resulting from any increase in the number of directors will also be filled only by the affirmative vote of a majority of the directors then in office, even though less than a quorum, or by a sole remaining director.
Director Independence
As a result of Zeo’s Class A common stock being listed on Nasdaq, Zeo is required to comply with the applicable rules of such exchange in determining whether a director is independent. The Board has undertaken a review of the independence of the individuals named above and have determined that each of Dr. Abigail M. Allen, Neil Bush, James P. Benson and Mark M. Jacobs qualifies as “independent” as defined under the applicable Nasdaq rules.
Committees of the Board of Directors
The Board directs the management of its business and affairs, as provided by Delaware law, and conducts its business through meetings of the board of directors and standing committees. Zeo has a standing audit committee and compensation committee, each of which operates under a written charter.
In addition, from time to time, special committees may be established under the direction of the Board when it deems it necessary or advisable to address specific issues. Current copies of Zeo’s committee charters are posted on its website (investors.zeoenergy.com), as required by applicable SEC and Nasdaq rules. The information on or available through any of such website is not deemed incorporated in this Report and does not form part of this Report.
Audit Committee
Zeo has an audit committee consisting of Dr. Abigail M. Allen, James P. Benson and Mark M. Jacobs, and Dr. Allen serves as the chair of the audit committee. The Board has determined that each of these individuals meets the independence requirements of the Sarbanes-Oxley Act and Rule 10A-3 under the Exchange Act and the applicable listing standards of Nasdaq. Each member of Zeo’s audit committee is able to read and understand fundamental financial statements in accordance with Nasdaq audit committee requirements. In arriving at this determination, the board examined each proposed audit committee member’s scope of experience and the nature of their prior and/or current employment.
The Board has determined that Dr. Abigail M. Allen qualifies as an audit committee financial expert within the meaning of SEC regulations and meets the financial sophistication requirements of the Nasdaq rules. In making this determination, the Board considered formal education and previous and current experience in financial and accounting roles. Both Zeo’s independent registered public accounting firm and management periodically meet privately with Zeo’s audit committee.
The audit committee’s responsibilities include, among other things:
| ● | appointing, compensating, retaining, evaluating, terminating and overseeing Zeo’s independent registered public accounting firm; |
| ● | discussing with Zeo’s independent registered public accounting firm their independence from management; |
| ● | reviewing with Zeo’s independent registered public accounting firm the scope and results of their audit; |
| ● | pre-approving all audit and permissible non-audit services to be performed by Zeo’s independent registered public accounting firm; |
| ● | overseeing the financial reporting process and discussing with management and Zeo’s independent registered public accounting firm the interim and annual financial statements that Zeo files with the SEC; |
| ● | reviewing and monitoring Zeo’s accounting principles, accounting policies, financial and accounting controls and compliance with legal and regulatory requirements; and |
| ● | establishing procedures for the confidential anonymous submission of concerns regarding questionable accounting, internal controls or auditing matters. |
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Compensation Committee
Zeo has a compensation committee consisting of Neil Bush, James P. Benson and Mark M. Jacobs, and Mr. Bush serves as the chair of the compensation committee. All members are non-employee directors, as defined in Rule 16b-3 promulgated under the Exchange Act. The Board has determined that each proposed member is “independent” as defined under the applicable Nasdaq listing standards, including the standards specific to members of a compensation committee. The compensation committee’s responsibilities include, among other things:
| ● | reviewing and setting or making recommendations to the Board regarding the compensation of Zeo’s executive officers; |
| ● | making recommendations to the Board regarding the compensation of Zeo’s directors; |
| ● | reviewing and approving or making recommendations to the Board regarding Zeo’s incentive compensation and equity-based plans and arrangements; and |
| ● | appointing and overseeing any compensation consultants. |
We believe that the composition and functioning of Zeo’s compensation committee meets the requirements for independence under the current Nasdaq listing standards.
Director Nominations
Zeo does not have a nominating committee. However, Zeo will form a nominating committee as and when required to do so by law or Nasdaq rules. In accordance with Rule 5605(e)(2) of Nasdaq rules, a majority of the independent directors may recommend a director nominee for selection by the Board. The Board believes that the Zeo independent directors can satisfactorily carry out the responsibility of properly selecting or approving director nominees without the formation of a standing nominating committee. The directors who participate in the consideration and recommendation of director nominees are Dr. Abigail M. Allen, James P. Benson, Neil Bush and Mark M. Jacobs. In accordance with Rule 5605(e)(1)(A) of Nasdaq rules, all such directors are independent. As there is no standing nominating committee, we do not have a nominating committee charter in place.
The Board will also consider director candidates recommended for nomination by its stockholders during such times as they are seeking proposed nominees to stand for election at the next annual meeting of stockholders (or, if applicable, a special meeting of stockholders). Zeo’s stockholders that wish to nominate a director for election should follow the procedures set forth in our bylaws.
Zeo has not formally established any specific, minimum qualifications that must be met or skills that are necessary for directors to possess. In general, in identifying and evaluating nominees for director, the Board will consider educational background, diversity of professional experience, knowledge of our business, integrity, professional reputation, independence, wisdom, and the ability to represent the best interests of its stockholders.
Board Member Attendance at Annual Stockholder Meetings
Although we do not have a formal policy regarding director attendance at annual stockholder meetings, directors are encouraged to attend these annual meetings.
Number of Meetings
During the fiscal year ended December 31, 2025, our Board and audit committee met nine times, and the compensation committee met three times. During the year ended December 31, 2025, each of our directors attended at least 75% of the meetings of the Board and committees on which he or she served as a member.
Insider Trading Policy
We have
The foregoing description of the Insider Trading Policy does not purport to be complete and is qualified in its entirety by the terms and conditions of the Insider Trading Policy, a copy of which is filed with this Report as Exhibit 19 and is incorporated herein by reference.
Code of Ethics
Zeo has a code of ethics that applies to all of its executive officers, directors and employees, including its principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. The code of ethics is available on Zeo’s website (investors.zeoenergy.com).
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Compensation Committee Interlocks and Insider Participation
None of Zeo’s executive officers currently serves, or has served during the last year, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of the Board.
Communications with the Board
Any stockholder or any other interested party who desires to communicate with our Board, our non-management directors, or any specified individual director, may do so by directing such correspondence to the attention of the General Counsel, Zeo Energy Corp., 7625 Little Rd, Suite 200A, New Port Richey, FL 34654. The General Counsel will forward the communication to the appropriate director or directors as appropriate.
ITEM 11. EXECUTIVE COMPENSATION.
Executive and Director Compensation
The following table sets forth information concerning the compensation of the named executive officers for the years ended December 31, 2025 and 2024:
| Name and Principal Position | Year | Salary ($) | Stock Awards ($)(1) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||
| Timothy Bridgewater | 2025 | 390,000 | – | – | – | 390,000 | |||||||||||||||||
| Chairman, CEO | 2024 | 260,000 | 6,806,272 | – | 215,000 | (2) | 7,281,272 | ||||||||||||||||
| Cannon Holbrook CFO | 2025 | 225,000 | 578,250 | – | 25,000 | (3) | 828,250 | ||||||||||||||||
| 2024 | 135,577 | 26,250 | – | – | 161,827 | ||||||||||||||||||
| Stirling Adams GC | 2025 | 290,000 | 732,450 | – | – | 957,450 | |||||||||||||||||
| 2024 | 225,308 | 26,250 | – | 119,785 | (4) | 371,373 | |||||||||||||||||
| (1) | Amounts reflect the full grant-date fair value of stock awards granted during the applicable fiscal year computed in accordance with ASC 718, rather than the amounts paid to or realized by the named executive officer. |
| (2) | For 2025 and 2024, the amounts in this column represent the distributions paid in 2025 and 2024 to Mr. Bridgewater with respect to his partnership interests in Sunergy. |
| (3) | Amounts paid to Mr. Holbrook in 2025 in connection with the execution of his employment agreement. |
| (4) | Amounts paid to Mr. Adams in 2024 for legal services provided to the Company related to the ESGEN transaction prior to his joining the Company. |
Narrative to Executive Compensation Table
Employment Agreement with Timothy Bridgewater
The Company (or one of its subsidiaries) has entered into an Executive Employment Agreement (the “Bridgewater Agreement”) with Mr. Timothy Bridgewater, the Company’s Chief Executive Officer. The period of the Bridgewater Agreement commenced on the closing of the business combination between Sunergy Renewables, LLC and ESGEN Acquisition Corp. (the “Closing”) and continues through the third anniversary of the Closing, and is subject to automatic renewals for one (1) year periods, unless either party terminates employment or provides ninety (90) day notice of intent not to renew.
In recognition of Mr. Bridgewater’s responsibilities as the Company’s Chief Executive Officer, and based on comparison to peer organizations with similar activities and risk profiles, the Company agreed to pay Mr. Bridgewater a base salary of $390,000.
For each year the Bridgewater Agreement is in effect, the Compensation Committee of the Board may choose to provide a discretionary cash bonus to Mr. Bridgewater, and such bonus shall be performance based and the performance goals shall be as set forth by the Compensation Committee.
In addition, Mr. Bridgewater is eligible to receive certain grants of vested shares under the 2024 Plan in accordance with the following schedule (collectively, the “Retention Award”):
| ● | 50,000 vested shares to be granted on the date that is 12 months after the effective date of the Bridgewater Agreement; |
| ● | 50,000 vested shares to be granted on the date that is 24 months after the effective date of the Bridgewater Agreement; and |
| ● | 50,000 vested shares to be granted on the date that is 35 months after the effective date of the Bridgewater Agreement. |
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Further, if, within three (3) years of the effective date of the Bridgewater Agreement, (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 Mr. Bridgewater will be granted vested equity from the 2024 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 Mr. Bridgewater will be granted additional vested equity from the 2024 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 Mr. Bridgewater will be granted additional vested equity from the 2024 Plan equal to 1% of the total issued and outstanding capital stock of the Company.
In addition, Mr. Bridgewater is eligible to participate in the Company’s employee benefits plan for its senior executives or employees, including the Company’s medical plans. Mr. Bridgewater is also entitled to receive six (6) weeks of paid time off in accordance with the Company’s policy for its senior executives. In addition, Mr. Bridgewater is entitled to reimbursement by the Company for all reasonable expenses incurred by him in connection with this employment. Reimbursable expenses include, but are not limited to, business travel expenses.
The Company may terminate Mr. Bridgewater’s employment with or without Cause (as defined in the Bridgewater Agreement). The Company has agreed to provide thirty (30) days in notice to Mr. Bridgewater if he is terminated without Cause (or base salary in lieu of such notice), but no notice is required if he is terminated for Cause. For termination for Cause, Mr. Bridgewater (with his attorney) shall have the opportunity to respond to all relevant allegations upon which a contemplated termination for Cause is based.
Mr. Bridgewater may terminate his employment with or without Good Reason (as defined in the Bridgewater Agreement). If Mr. Bridgewater intends to terminate his employment without Good Reason, he has agreed to provide thirty (30) days’ written notice. For termination for Good Reason, Mr. Bridgewater has agreed that he will provide the Company with notice within thirty (30) days after receiving notice of a Good Reason event, after which the Company will have thirty (30) days to cure the Good Reason event, and, if not cured, Mr. Bridgewater will terminate employment within fifteen (15) days following the expiration of the cure period.
In the event of termination for any reason, Mr. Bridgewater shall continue to receive his full salary through the date of termination, any unreimbursed and approved business expenses, accrued but unused paid time off days, and any payments, benefits, or fringe benefits Mr. Bridgewater was entitled to under plan terms.
If the Company terminates Mr. Bridgewater without Cause or Mr. Bridgewater terminates for Good Reason, and there is no Change of Control (as defined in the Bridgewater Agreement), the Company has agreed to also provide Mr. Bridgewater the following:
| (i) | a lump sum cash payment, payable on the date of termination, equal to the sum of the following: (x) one year’s base salary, and (y) any unpaid annual bonus for the preceding calendar year, and the greater of (I) any annual target cash bonus opportunity for the year of termination or (II) the average annual cash bonus for the three preceding completed years (provided, however, that if Mr. Bridgewater has not been employed for at least three years in which an annual cash bonus was paid, such calculation will assume that an annual cash bonus equal to any target annual cash bonus opportunity was paid in the missing years), and (z) any other target long-term incentive award granted to Mr. Bridgewater for the year in which the termination occurs; |
| (ii) | accelerated vesting of any outstanding equity grants so that such equity grants vest completely as of the date of termination; and |
| (iii) | to the extent eligible, continuation health insurance coverage under COBRA for twelve (12) months following termination. |
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If the Company terminates Mr. Bridgewater without Cause or Mr. Bridgewater terminates for Good Reason, and such termination occurs within two (2) years following or six (6) months prior to a Change of Control (as defined in the Bridgewater Agreement), the Company has agreed to also provide Mr. Bridgewater the following:
| (i) | pro-rated, based on the number of days worked during the year in which the termination occurs, the greater of any annual target cash bonus opportunity for the year of termination or the highest actual annual cash bonus paid during the three preceding completed years; |
| (ii) | a lump sum cash payment equal to the sum of the following: (x) one year’s base salary, (y) any unpaid annual bonus for the preceding calendar year, and (z) the Retention Award and any other target long-term incentive award granted for the year in which termination occurs; |
| (iii) | accelerated vesting of any outstanding equity grants so that such equity grants vest completely as of the date of termination; and |
| (iv) | to the extent eligible, continuation health insurance coverage under COBRA for twelve (12) months following termination. |
Additionally, Mr. Bridgewater is subject to standard confidentiality and non-disparagement covenants, and covenants not to solicit the company’s customers or employees or compete with the company for the duration of Mr. Bridgewater’s employment and for the one year following his termination.
Employment Agreement with Cannon Holbrook
The Company (or one of its subsidiaries) entered into an employment agreement with Mr. Holbrook (the “Holbrook Agreement”) pursuant to which Mr. Holbrook will serve as the Chief Financial Officer of both Sunergy and the Company, reporting to the Company’s Chief Executive Officer.
The period of the Holbrook Agreement commenced on August 19, 2024 (the “Effective Date”) and continues through the third anniversary of the Holbrook Agreement Effective Date. The agreement is subject to automatic renewals for one (1) year periods unless either party terminates employment or provides ninety (90) day notice of intent not to renew.
In recognition of Mr. Holbrook’s responsibilities, the Company agreed to pay Mr. Holbrook a base salary of $225,000, which may be increased from time to time by the Compensation Committee (the “Committee”) of the Company’s Board in its sole discretion.
A one-time payment of $25,000 was paid to Mr. Holbrook in connection with the execution of the Holbrook Agreement. Though the agreement does not provide for a guaranteed annual target cash bonus, for each year the Holbrook Agreement is in effect, the Committee may choose to provide a discretionary cash bonus to Mr. Holbrook, based on meeting positive EBITDA targets, an evaluation of his performance and peer group compensation practices, taking into account the Company and individual performance objectives, and/or such criteria as determined by the Committee in its sole discretion from time to time.
In addition, Mr. Holbrook is eligible to receive certain grants of vested shares under the Company’s 2024 Omnibus Incentive Equity Plan, subject to the approval of the Board, in accordance with the following schedule:
| ● | 15,000 vested shares to be issued as soon as possible following the Effective Date; |
| ● | 75,000 vested shares to be granted on the date that is 12 months after the Effective Date; |
| ● | 75,000 vested shares to be granted on the date that is 24 months after the Effective Date; and |
| ● | 75,000 vested shares to be granted on the date that is 35 months after the Effective Date. |
The Company may terminate Mr. Holbrook’s employment with or without Cause (as defined in the Holbrook Agreement). The Company has agreed to provide thirty (30) days in notice to Mr. Holbrook if he is terminated without Cause (or base salary in lieu of such notice). The termination of Mr. Holbrook’s employment will not be deemed to be for Cause unless Mr. Holbrook (with his attorney) is given a reasonable opportunity to respond to all relevant allegations upon which a contemplated termination for Cause is based.
Mr. Holbrook may terminate his employment with or without Good Reason (as defined in the Holbrook Agreement). If Mr. Holbrook intends to terminate his employment without Good Reason, he has agreed to provide thirty (30) days’ written notice. For termination for Good Reason, Mr. Holbrook has agreed that he will provide the Company with notice within thirty (30) days after receiving notice of a Good Reason event, after which the Company will have thirty (30) days to cure the Good Reason event, and, if not cured, Mr. Holbrook will terminate employment within fifteen (15) days following the expiration of the cure period.
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In the event of termination for any reason, Mr. Holbrook shall continue to receive his full salary through the date of termination, any unreimbursed and approved business expenses, accrued but unused paid time off days, and any payments, benefits, or fringe benefits Mr. Holbrook was entitled to under plan terms.
If the Company terminates Mr. Holbrook without Cause or Mr. Holbrook terminates for Good Reason, and there is no Change of Control (as defined in the Holbrook Agreement), the Company has agreed to also provide Mr. Holbrook the following:
| (i) | a lump sum cash payment, payable on the date of termination, equal to the sum of the following: (x) one year’s base salary at the annualized rate then in effect (or the rate that should be in effect but for any base salary diminution), and (y) any unpaid annual bonus for the preceding calendar year and the greater of (I) any annual target cash bonus opportunity for the year of termination or (II) the average annual cash bonus for the three preceding calendar years in which an annual cash bonus was paid, and (z) the annual cash bonus and any other target long-term incentive award granted for the year of the date of termination; |
| (ii) | accelerated vesting of any outstanding equity grants so that such equity grants vest completely as of the date of termination; and |
| (iii) | to the extent eligible and Mr. Holbrook properly elects coverage, continued health insurance coverage under COBRA for twelve (12) months following termination at the same costs as applied to Mr. Holbrook prior to his termination, subject to early termination upon Mr. Holbrook becoming eligible for group health insurance coverage under another employer’s plan. |
If the Company terminates Mr. Holbrook without Cause or Mr. Holbrook terminates for Good Reason, and such termination occurs within two (2) years following or six (6) months prior to a Change of Control (as defined in the Holbrook Agreement), the Company has agreed to also provide Mr. Holbrook the following:
| (i) | severance payments pro-rated, based on the number of days worked during the year in which the termination occurs, equal to the greater of any annual target cash bonus opportunity for the year of termination or the highest actual annual cash bonus paid during the three preceding completed years; |
| (ii) | a lump sum cash payment equal to the sum of the following: (x) one year’s base salary at the annualized rate then in effect (or the rate that should be in effect but for any base salary diminution), (y) any unpaid annual bonus for the preceding calendar year, and any other target long-term incentive award granted for the year of the date of termination; |
| (iii) | accelerated vesting of any outstanding equity grants so that such equity grants vest completely as of the date of termination; and |
| (iv) | to the extent eligible, and Mr. Holbrook properly elects coverage, continued health insurance coverage under COBRA for twelve (12) months following termination at the same costs as applied to Mr. Holbrook prior to his termination, subject to early termination upon Mr. Holbrook becoming eligible for group health insurance coverage under another employer’s plan. |
Additionally, Mr. Holbrook is subject to standard confidentiality and non-disparagement covenants, and covenants not to solicit the company’s customers or employees or compete with the company for the duration of Mr. Holbrook’s employment and for the one year following his termination.
Employment Agreement with Stirling Adams
The Company (or one of its subsidiaries) entered into an employment agreement with Mr. Adams (the “Adams Agreement”), pursuant to which Mr. Adams will serve as the General Counsel and Secretary of both Sunergy and the Company, reporting to the Company’s Chief Executive Officer.
The period of the Adams Agreement commenced on the Closing and continues through the third anniversary of the Closing. The agreement is subject to automatic renewals for one (1) year periods unless either party terminates employment or provides ninety (90) day notice of intent not to renew.
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In recognition of Mr. Adams’ responsibilities, the Company agreed to pay Mr. Adams a base salary of $290,000, which may be increased from time to time by the Committee in its sole discretion.
Though the agreement does not provide for a guaranteed annual target cash bonus, for each year the Adams Agreement is in effect, the Committee may choose to provide a discretionary cash bonus to Mr. Adams, based on an evaluation of his performance and peer group compensation practices, taking into account the Company and individual performance objectives, and/or such criteria as determined by the Committee in its sole discretion from time to time.
In addition, Mr. Adams is eligible to receive certain grants of vested shares under the Company’s 2024 Omnibus Incentive Equity Plan, subject to the approval of the Board, in accordance with the following schedule:
| ● | 15,000 vested shares which were issued in September 2024; |
| ● | 85,000 vested shares to be granted on the date that is within 15 months after the Closing; |
| ● | 100,000 vested shares to be granted on the date that is on or about 24 months after the Closing; and |
| ● | 100,000 vested shares to be granted on the date that is on or about 35 months after the Closing. |
The Company may terminate Mr. Adams’ employment with or without Cause (as defined in the Adams Agreement). The Company has agreed to provide thirty (30) days in notice to Mr. Adams if he is terminated without Cause (or base salary in lieu of such notice). The termination of Mr. Adams’ employment will not be deemed to be for Cause unless Mr. Adams (with his attorney) is given a reasonable opportunity to respond to all relevant allegations upon which a contemplated termination for Cause is based.
Mr. Adams may terminate his employment with or without Good Reason (as defined in the Adams Agreement). If Mr. Adams intends to terminate his employment without Good Reason, he has agreed to provide thirty (30) days’ written notice. For termination for Good Reason, Mr. Adams has agreed that he will provide the Company with notice within thirty (30) days after receiving notice of a Good Reason event, after which the Company will have thirty (30) days to cure the Good Reason event, and, if not cured, Mr. Adams will terminate employment within fifteen (15) days following the expiration of the cure period.
In the event of termination for any reason, Mr. Adams shall continue to receive his full salary through the date of termination, any unreimbursed and approved business expenses, accrued but unused paid time off days, and any payments, benefits, or fringe benefits Mr. Adams was entitled to under plan terms.
If the Company terminates Mr. Adams without Cause or Mr. Adams terminates for Good Reason, and there is no Change of Control (as defined in the Adams Agreement), the Company has agreed to also provide Mr. Adams the following:
| (iv) | a lump sum cash payment, payable on the date of termination, equal to the sum of the following: (x) one year’s base salary at the annualized rate then in effect (or the rate that should be in effect but for any base salary diminution), and (y) any unpaid annual bonus for the preceding calendar year and the greater of (I) any annual target cash bonus opportunity for the year of termination or (II) the average annual cash bonus for the three preceding calendar years in which an annual cash bonus was paid, and (z) the annual cash bonus and any other target long-term incentive award granted for the year of the date of termination; |
| (v) | accelerated vesting of any outstanding equity grants so that such equity grants vest completely as of the date of termination; and |
| (vi) | (iii) to the extent eligible and Mr. Adams properly elects coverage, continued health insurance coverage under COBRA for twelve (12) months following termination at the same costs as applied to Mr. Adams prior to his termination, subject to early termination upon Mr. Adams becoming eligible for group health insurance coverage under another employer’s plan. |
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If the Company terminates Mr. Adams without Cause or Mr. Adams terminates for Good Reason, and such termination occurs within two (2) years following or six (6) months prior to a Change of Control (as defined in the Adams Agreement), the Company has agreed to also provide Mr. Adams the following:
| (v) | severance payments pro-rated, based on the number of days worked during the year in which the termination occurs, equal to the greater of any annual target cash bonus opportunity for the year of termination or the highest actual annual cash bonus paid during the three preceding completed years; |
| (vi) | a lump sum cash payment equal to the sum of the following: (x) one year’s base salary at the annualized rate then in effect (or the rate that should be in effect but for any base salary diminution), (y) any unpaid annual bonus for the preceding calendar year, and (z) any other target long-term incentive award granted for the year of the date of termination; |
| (vii) | accelerated vesting of any outstanding equity grants so that such equity grants vest completely as of the date of termination; and |
| (viii) | to the extent eligible, and Mr. Adams properly elects coverage, continued health insurance coverage under COBRA for twelve (12) months following termination at the same costs as applied to Mr. Adams prior to his termination, subject to early termination upon Mr. Adams becoming eligible for group health insurance coverage under another employer’s plan. |
Additionally, Mr. Adams is subject to standard confidentiality and non-disparagement covenants, and covenants not to solicit the company’s customers or employees or compete with the company for the duration of Mr. Adams’ employment and for the one year following his termination.
Retirement Benefits
Sunergy currently offers certain welfare benefits through a professional employer organization, Frank Crum, in which the named executive officers may participate. Sunergy does not currently offer any qualified retirement benefits, or any non-qualified defined contribution plans or other retirement benefits.
Potential Payments on Termination or Change in Control
Neither Zeo nor Sunergy has not previously offered or had in place for our named executive officers any formal retirement, severance or similar compensation programs providing for additional benefits or payments in connection with a termination of employment, change in job responsibility or change in control.
Outstanding Equity Awards at 2025 Fiscal Year-End
| Name | Grant Date | Number of Unvested Stock Awards (#) |
Market Value of Unvested Stock Awards ($)(1) |
Vesting Date | ||||||||
| Timothy Bridgewater | March 13, 2024 | 50,000 | $ | 54,500 | March 13, 2026 | |||||||
| March 13, 2024 | 50,000 | 54,500 | February 13, 2027 | |||||||||
| Cannon Holbrook | February 5, 2025 | 75,000 | 81,750 | August 5, 2026 | ||||||||
| February 5, 2025 | 75,000 | 81,750 | August 5, 2027 | |||||||||
| Stirling Adams | February 5, 2025 | 100,000 | 109,000 | August 5, 2026 | ||||||||
| February 5, 2025 | 100,000 | 109,000 | August 5, 2027 | |||||||||
| (1) | The market value of unvested restricted stock awards as of December 31, 2025, is calculated by multiplying the number of shares subject to such awards by the closing price of our Class A common stock on December 31, 2025, the last trading day of the year, which was $1.09 per share. |
2024 Omnibus Incentive Equity Plan
The purpose of the 2024 Omnibus Incentive Plan (the “2024 Plan”) is to provide a means whereby we can secure and retain the service of employees, directors and consultants, to provide incentives to such persons and to align the interests of such service providers with our stockholders. This section summarizes the material features of the 2024 Plan.
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Securities to be Offered
The aggregate number of shares of common stock that may be issued or used for reference purposes or with respect to which awards may be granted under the 2024 Plan at adoption was 3,220,400 (the “Initial Share Reserve”). The number of shares of Zeo Class A Common Stock available for issuance under the 2024 Plan is subject to an annual increase on the first day of each calendar year beginning January 1, 2025 and ending and including January 1, 2029, equal to the lesser of (i) 2% of the aggregate number of fully diluted shares of Zeo outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of shares as is determined by the administrator of the 2024 Plan. The aggregate number of shares of Zeo Class A Common Stock that may be issued or used under the 2024 Plan pursuant to incentive stock options shall not exceed an amount equal to the Initial Share Reserve. Shares of Zeo Class A Common Stock subject to an award that expires or is cancelled, forfeited or otherwise terminated without delivery of shares, tendered in payment of an option, covered by a stock-settled stock appreciation right or that were otherwise not issued upon settlement, and shares delivered or withheld to satisfy any tax withholding obligations will again be available for delivery pursuant to other awards under the 2024 Plan. No shares shall be deemed to have been issued in settlement of a SAR, restricted stock unit or other award that only provides for settlement in, and settles only in, cash. The number of shares of Zeo Class A Common Stock available for issuance under the 2024 Plan is not reduced by shares issued pursuant to awards issued or assumed in connection with a merger or acquisition as contemplated by applicable stock exchange rules, provided that any substitute awards issued in connection with the assumption of, or in substitution for, outstanding options intended to qualify as “incentive stock options” within the meaning of Section 422 of the Code shall be counted against the aggregate number of shares available for incentive stock option awards under the 2024 Plan).
Administration
The 2024 Plan is administered by a committee of the Zeo Board that has been authorized to administer the 2024 Plan, except if no such committee is authorized by the Zeo Board, the Zeo Board will administer the 2024 Plan (as applicable, the “Committee”). The Committee has broad discretion to administer the 2024 Plan, including the power to determine the eligible individuals to whom awards will be granted, the number and type of awards to be granted and the terms and conditions of awards.
Eligibility
Directors, officers, employees, consultants and advisors of Zeo and its affiliates and prospective officers, employees, consultants and advisors who have accepted offers of employment or consultancy with Zeo and its affiliates are eligible to receive awards under the 2024 Plan. As stated above, the basis for participation in the 2024 Plan is the Committee’s decision to select, in its sole discretion, participants from among those eligible.
Non-Employee Director Compensation Limits
The fair value of any awards granted under the 2024 Plan to a non-employee director as compensation for services on the Zeo Board, during any one fiscal year, taken together with any cash fees paid to such non-employee director during such period in respect of the non-employee director’s services as a member of the Zeo Board during such year, may not exceed any limits as outlined in any Zeo compensation policy, provided that the Zeo Board can make exceptions to this limit so long as the applicable non-employee director does not participate in the decision.
Types of Awards
The 2024 Plan provides for the grant of both incentive stock options (“ISOs”), which are intended to qualify for favorable tax treatment under Section 422 of the Code, and nonqualified stock options (“NSOs”), as well as the grant of restricted stock, restricted stock units (“RSUs”), stock appreciation rights (“SARs”), and other equity-based awards and substitute awards.
Options
Zeo may grant ISOs and NSOs to eligible persons, except that ISOs may only be granted to persons who are Zeo’s employees or employees of one of its subsidiaries or controlled affiliates, in accordance with Section 422 of the Code. The exercise price of an option cannot be less than 100% of the fair market value of a share of Zeo Class A Common Stock on the date on which the option is granted and the option must not be exercisable for longer than ten years following the date of grant. However, in the case of an ISO granted to an individual who owns (or is deemed to own) at least 10% of the total combined voting power of all classes of our capital stock, the exercise price of the option must be at least 110% of the fair market value of a share of Zeo Class A Common Stock on the date of grant and the option must not be exercisable more than five years from the date of grant. The aggregate fair market value, determined at the time of grant, of our Zeo Class A Common Stock with respect to ISOs that are exercisable for the first time by an award holder during any calendar year under all of our stock plans may not exceed $100,000. Options or portions thereof that exceed such limit will generally be treated as NSOs.
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Payment of the exercise price may be made in a manner approved by the Committee, which may include (i) immediately available funds in U.S. dollars, (ii) delivery of Zeo Class A Common Stock having a value equal to the exercise price, (iii) a broker assisted cashless exercise or (iv) any other means approved by the Committee.
Unless the Committee provides otherwise, options generally are not transferable except by will or the laws of descent and distribution.
Restricted Stock Awards
A restricted stock award is a grant of shares of Zeo Class A Common Stock subject to the restrictions on transferability and risk of forfeiture imposed by the Committee. Unless otherwise determined by the Committee and specified in the applicable award agreement, the holder of a restricted stock award has rights as a stockholder, including the right to vote the shares of Zeo Class A Common Stock subject to the restricted stock award or to receive dividends (or dividend equivalents) on such shares of Zeo Class A Common Stock subject to the restricted stock award during the restriction period. In the discretion of the Committee, dividends distributed prior to vesting may be subject to the same restrictions and risk of forfeiture as the restricted shares with respect to which the distribution was made.
Restricted Stock Units
An RSU is a right to receive cash, shares of Zeo Class A Common Stock or a combination of cash and shares of Zeo Class A Common Stock at the end of a specified period equal to the fair market value of one share of Zeo Class A Common Stock on the date of vesting. RSUs may be subject to the restrictions, including a risk of forfeiture, imposed by the Committee. The Committee may determine that a grant of RSUs will provide a participant a right to receive dividend equivalents, which entitles the participant to receive the equivalent value (in cash or shares of Zeo Class A Common Stock) of dividends paid on the underlying shares of Zeo Class A Common Stock. Dividend equivalent rights may be paid currently or credited to an account, settled in cash or shares, and may be subject to the same restrictions as the RSUs with respect to which the dividend equivalent rights are granted.
Stock Appreciation Rights
A SAR is the right to receive an amount equal to the excess of the fair market value of one share of common stock on the date of exercise over the grant price of the SAR. The grant price of a SAR cannot be less than 100% of the fair market value of a share of common stock on the date on which the SAR is granted. The term of a SAR may not exceed ten years. The Committee has the discretion to determine other terms and conditions of a SAR award.
Other Equity-Based Awards
Other equity-based awards are awards denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, the value of Zeo Class A Common Stock.
Substitute Awards
Awards may be granted under the 2024 Plan in substitution for similar awards held for individuals who become participants as a result of a merger, consolidation or acquisition of another entity by or with Zeo or one of its affiliates.
Certain Transactions
If any change is made to our capitalization, such as a stock split, stock combination, stock dividend, exchange of stock or other recapitalization, merger or otherwise, which results in an increase or decrease in the number of outstanding shares of common stock, appropriate adjustments will be made by the Committee in the shares subject to an award under the 2024 Plan. The Committee also has the discretion to make certain adjustments to awards in the event of a change in control of Zeo, such as the assumption or substitution of outstanding awards, the purchase of any outstanding awards in cash based on the applicable change in control price, the ability for participants to exercise any outstanding stock options upon the change in control (and if not exercised such awards will be terminated), and the acceleration of vesting or exercisability of any outstanding awards.
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Plan Amendment and Termination
The 2024 Plan allows the Committee to amend or terminate any award, award agreement or the 2024 Plan at any time, provided that the rights of a participant granted an award prior to such amendment or termination may not be impaired without such participant’s consent. In addition, stockholder approval will be required for any amendment to the extent necessary to comply with applicable law or exchange listing standards. The Committee does not have the authority, without the approval of stockholders, to amend any outstanding option or share appreciation right to reduce its exercise price per share. The 2024 Plan will remain in effect for a period of ten years (unless earlier terminated by the Zeo Board).
Material U.S. Federal Income Tax Consequences
The following is a general summary under current law of the principal U.S. federal income tax consequences related to awards under the 2024 Plan. This summary describes the general federal income tax principles that apply, as based on current law and interpretational authorities which are subject to change at any time, and is provided only for general information. This summary does not purport to be complete discussion of all potential tax effects relevant to recipients of awards under the 2024 Plan. No attempt has been made to discuss certain kinds of taxes, including any potential non-U.S., state, or local tax consequences. This summary is not intended as tax advice to participants, who should consult their own tax advisors.
Non-Qualified Stock Options and Stock Appreciation Rights
If a participant is granted a NSO or SAR under the 2024 Plan, the participant should not have taxable income as of the grant of the NSO or SAR. Upon the exercise of a NSO or SAR, a participant will recognize ordinary income equal to the excess, if any, of the fair market value of the shares acquired on the date of exercise over the exercise price. If the participant is employed by us or one of our affiliates at the time of exercise, such income will be subject to withholding taxes. The participant’s tax basis in the Zeo Class A Common Stock for purposes of determining gain or loss on a subsequent sale or disposition of such shares generally will be the fair market value of such Zeo Class A Common Stock on the date the participant exercises such option or SAR. When a participant sells the Zeo Class A Common Stock acquired as a result of the exercise of a NSO or SAR, any appreciation or depreciation in the value of the Zeo Class A Common Stock after the exercise date will be taxable as a long-term or short-term capital gain or loss for U.S. federal income tax purposes, depending on the holding period. The Zeo Class A Common Stock must be held for more than twelve (12) months to qualify for long-term capital gain treatment. Subject to the discussion under “- Tax Consequences to Zeo” below, Zeo and its subsidiaries or controlled affiliates generally should be entitled to a federal income tax deduction at the time and for the same amount as the participant recognizes ordinary income.
Incentive Stock Options
A participant receiving ISOs should not recognize taxable income upon grant. Additionally, if applicable holding period requirements are met, the participant should not recognize taxable income at the time of exercise. However, the excess of the fair market value of the shares of the Zeo Class A Common Stock received over the option exercise price is an item of tax preference income potentially subject to the alternative minimum tax. If stock acquired upon exercise of an ISO is held for a minimum of two years from the date of grant and one year from the date of exercise and otherwise satisfies the ISO requirements, the gain or loss (in an amount equal to the difference between the fair market value on the date of disposition and the exercise price) upon disposition of the stock will be treated as a long-term capital gain or loss, and we will not be entitled to any deduction. If the holding period requirements are not met, the ISO will be treated as one that does not meet the requirements of the Code for ISOs and the participant will recognize ordinary income at the time of the disposition equal to the excess of the amount realized over the exercise price, but not more than the excess of the fair market value of the shares on the date the ISO is exercised over the exercise price, with any remaining gain or loss being treated as capital gain or capital loss. Zeo and its subsidiaries or controlled affiliates generally are not entitled to a federal income tax deduction upon either the exercise of an ISO or upon disposition of the shares acquired pursuant to such exercise, except to the extent that the participant recognizes ordinary income on disposition of the shares.
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Restricted Stock
Generally, the recipient of a restricted stock award will recognize ordinary income at the time the stock is received equal to the excess, if any, of the fair market value of the stock received over any amount paid by the recipient in exchange for the stock. If, however, the stock is subject to restrictions constituting a substantial risk of forfeiture when it is received (for example, if the employee is required to work for a period of time in order to have the right to transfer or sell the stock), the recipient generally will not recognize income until the restrictions constituting a substantial risk of forfeiture lapse, at which time the recipient will recognize ordinary income equal to the excess, if any, of the fair market value of the stock on the date it becomes vested over any amount paid by the recipient in exchange for the stock. A recipient may, however, file an election with the Internal Revenue Service, within 30 days following the date of grant, to recognize ordinary income, as of the date of grant, equal to the excess, if any, of the fair market value of the stock on the date the award is granted over any amount paid by the recipient for the stock. The recipient’s basis for the determination of gain or loss upon the subsequent disposition of shares acquired from a restricted stock award will be the amount paid for such shares plus any ordinary income recognized either when the stock is received or when the restrictions constituting a substantial risk of forfeiture lapse. Subject to the discussion under “- Tax Consequences to Zeo” below, Zeo and its subsidiaries or affiliates generally should be entitled to a federal income tax deduction at the time and for the same amount as the participant recognizes ordinary income.
RSUs
Generally, the recipient of a restricted stock unit award will recognize ordinary income at the time the stock is delivered equal to the excess, if any, of (i) the fair market value of the stock received over any amount paid by the recipient in exchange for the stock or (ii) the amount of cash paid to the participant. The recipient’s basis for the determination of gain or loss upon the subsequent disposition of shares acquired from a restricted stock unit award will be the amount paid for such shares plus any ordinary income recognized when the stock is delivered, and the participant’s capital gain holding period for those shares will begin on the day after they are transferred to the participant. Subject to the discussion under “- Tax Consequences to Zeo” below, Zeo and its subsidiaries or affiliates generally should be entitled to a federal income tax deduction at the time and for the same amount as the participant recognizes ordinary income.
Clawback
On March 13, 2024, the Board of Directors adopted a clawback policy which provides for the recovery of certain executive compensation in the event of an accounting restatement resulting from material non-compliance with financial reporting requirements under the federal securities laws. Since the adoption of this policy, there have been no accounting restatements, nor is there any compensation to be recovered.
Tax Consequences to Zeo
Reasonable Compensation
In order for the amounts described above to be deductible by Zeo, such amounts must constitute reasonable compensation for services rendered or to be rendered by an individual service provider and must be ordinary and necessary business expenses.
Golden Parachute Payments
Zeo’s ability (or the ability of one of its subsidiaries) to obtain a deduction for future payments under the 2024 Plan could also be limited by the golden parachute rules of Section 280G of the Code, which prevent the deductibility of certain excess parachute payments made in connection with a change in control of an employer-corporation.
Compensation of Covered Employees
Zeo’s ability to obtain a deduction for amounts paid under the 2024 Plan could be limited by Section 162(m) of the Code. Section 162(m) of the Code limits our ability to deduct compensation, for federal income tax purposes, paid during any year to a “covered employee” (within the meaning of Section 162(m) of the Code) in excess of $1,000,000.
Zeo Compensation of Directors
Our directors did not receive any other fees for their service in 2025.
Director Compensation Table
| Name |
| Fees Earned or Paid in 2025 ($) | Stock Awards ($)(1) | Total ($) | ||||||||
| Dr. Abigail M. Allen | $ | — | $ | — | $ | — | ||||||
| Neil Bush | — | — | — | |||||||||
| Mark Jacobs | — | — | — |
| (1) | As of December 31, 2025, there were no outstanding stock option awards (exercisable and unexercisable) and unvested stock awards held by our directors. |
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS.
The following table sets forth information known to the Company regarding beneficial ownership of shares of the Company’s common stock as of March 27, 2026, by:
| ● | each person known by the Company to be the beneficial owner of more than 5% of the Company’s outstanding common stock; |
| ● | each of the Company’s named executive officers and directors; and |
| ● | all executive officers and directors as a group. |
Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security, including options, warrants and certain other derivative securities that are currently exercisable or will become exercisable within 60 days.
The percentage of beneficial ownership is based on 33,593,737 shares of Class A Common Stock issued and outstanding and 24,380,000 shares of Class V Common Stock issued and outstanding as of March 27, 2026.
In accordance with SEC rules, shares of our common stock which may be acquired upon exercise of stock options or warrants which are currently exercisable or which become exercisable within 60 days of the date of the Closing are deemed beneficially owned by the holders of such options and warrants and are deemed outstanding for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage of ownership of any other person.
Unless otherwise indicated, the business address of each of the entities, directors and executives in this table is 7625 Little Rd, Suite 200A, New Port Richey, FL 34654. Unless otherwise indicated and subject to community property laws and similar laws, except as otherwise indicated below, the Company believes that all parties named in the table below have sole voting and investment power with respect to all shares of common stock beneficially owned by them.
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| Name and Address of Beneficial Owners | Number of Shares of Class A Common Stock | % of Shares of Class A Common Stock | Number of Shares of Class V Common Stock | % of Shares of Class V Common Stock | % of total voting power | |||||||||||||||
| Directors and Executive Officers | ||||||||||||||||||||
| Directors and executive officers(1) | ||||||||||||||||||||
| Timothy Bridgewater(2) | 812,545 | 2.4 | % | 8,110,410 | 33.3 | % | 15.4 | % | ||||||||||||
| Brandon Bridgewater(3) | 2,827,346 | 8.4 | % | 2,515,664 | 10.3 | % | 9.2 | % | ||||||||||||
| Kalen Larsen(4) | 2,407,236 | 7.2 | % | 3,015,664 | 12.4 | % | 9.4 | % | ||||||||||||
| Stirling Adams | 256,847 | * | – | – | * | |||||||||||||||
| Cannon Holbrook | 75,675 | * | – | – | * | |||||||||||||||
| Dr. Abigail M. Allen | 10,000 | – | – | – | – | |||||||||||||||
| James P. Benson | – | – | – | – | – | |||||||||||||||
| Neil Bush | 10,000 | * | – | – | * | |||||||||||||||
| Mark Jacobs | 90,000 | * | – | – | * | |||||||||||||||
| All directors and executive officers as a group (9 individuals) | 6,489,649 | 19.3 | % | 13,641,738 | 56.0 | % | 34.7 | % | ||||||||||||
| Five Percent Holders | ||||||||||||||||||||
| Southern Crown Holdings, LLC | 1,061,700 | 3.2 | % | 4,400,478 | 18.0 | % | 9.4 | % | ||||||||||||
| LAMADD LLC | 1,236,817 | 3.7 | % | 4,400,478 | 18.0 | % | 9.7 | % | ||||||||||||
| ESGEN LLC(5) | 3,257,436 | 9.7 | % | 1,500,000 | 6.2 | % | 8.2 | % | ||||||||||||
| LHX Intermediate, LLC(6) | 9,931,851 | 29.6 | % | – | – | 17.1 | % | |||||||||||||
| * | Less than 1%. |
| (1) | Unless otherwise noted, the business address of each of the directors and officers is 7625 Little Rd, Suite 200A, New Port Richey, FL 34654. |
| (2) | The total number of shares of Class V Common Stock owned by Timothy Bridgewater comprise (i) 750,000 shares of Class A Common Stock and 1,558,883 shares of Class V Common Stock owned of record by LCB Trust, his family trust entity and (ii) 1,500,000 shares of Class A Common Stock and 6,651,527 shares of Class V Common Stock held of record by Sun Managers, LLC for which as the manager he has voting and investment power. Sun Managers, LLC is expected to use such shares in connection with a management equity program. Mr. Bridgewater disclaims beneficial ownership over any such shares held by Sun Managers, LLC. |
| (3) | Shares are held of record by Clarke Capital, LLC. Mr. Bridgewater exercises voting and dispositive power over the shares held by such entity. |
| (4) | Shares are held of record by JKAE Holdings, LLC. Mr. Larsen exercises voting and dispositive power over the shares held by such entity. |
| (5) | James P. Benson, Michael C. Mayon and Andrea Bernatova are the managers of ESGEN LLC, and each of them disclaims beneficial ownership over any securities owned by ESGEN LLC in which he or she does not have any pecuniary interest. The business address of ESGEN LLC is 5956 Sherry Lane, Suite 1400, Dallas, Texas 75225. |
| (6) | As reported on the Schedule 13D/A of LHX filed on December 27, 2024. Consists of 8,080,000 shares of Class A Common Stock held by LHX. This number does not take into account shares of stock of the Company held by other stockholders party to the Voting Agreement (described herein) or issuable under the Promissory Note (described herein), pursuant to which such stockholders have agreed, in certain circumstances, to vote (i) in favor of the nomination and appointment of LHX’s designee to the Board, (ii) in favor of the issuance to LHX of shares of Class A Common Stock in connection with an option that may be granted to LHX and (iii) the Share Issuance (described herein) pursuant to the Promissory Note. The business address of LHX is 5956 Sherry Lane, Suite 1400, Dallas, Texas 75225. |
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Sunergy Related Party Transactions
Approximately 19% of Zeo’s customers who have entered into leasing agreements have done so with a third-party leasing company established and managed by White Horse Energy, a holding company of which Timothy Bridgewater, Zeo’s Chairman and Chief Executive Officer, is the owner and manager. Mr. Bridgewater, through White Horse, holds 1% or less of the membership interests of the third-party leasing company established and managed by White Horse Energy that own installed solar energy systems leased by Zeo Customers, with the remainder of the membership interests being held by third parties. For the year ended December 31, 2025, the third-party leasing company managed by White Horse Energy had purchased approximately $18.1 million in solar energy systems from Zeo for their leasing customers. As of December 31, 2024, the third-party leasing company managed by White Horse Energy had purchased approximately $20.6 million in solar energy systems from Zeo for their leasing customers. As of December 31, 2025, the third-party leasing company had entered into leasing agreements with customers for an additional approximately $1.5 million in leased systems to be installed by Zeo, if the development and installation of all of those systems continued to completion. Subject to investor and customer demand, White Horse Energy intends to attract additional investors to form third-party leasing companies that will be able to fund additional installations of solar systems by Zeo.
ESGEN
ESGEN Class B Ordinary Shares
On April 27, 2021, the Sponsor paid $25,000, or approximately $0.004 per share, to cover certain of our offering and formation costs in consideration of 7,187,500 ESGEN Class B ordinary shares, par value $0.0001. The Sponsor transferred 138,000 ESGEN Class B ordinary shares to each of our independent directors and 866,923 ESGEN Class B ordinary shares to the Westwood Client Accounts.
ESGEN Private Placement Warrants
The Sponsor purchased an aggregate of 11,240,000 ESGEN Private Placement Warrants for a purchase price of $1.00 per whole warrant, or $11,240,000 in the aggregate, in a private placement that occurred simultaneously with the closing of our IPO. Each ESGEN Private Placement Warrant entitles the holder to purchase one Class A ordinary share at $11.50 per share, subject to adjustment. The ESGEN Private Placement Warrants (including the ESGEN Class A ordinary shares issuable upon exercise thereof) may not, subject to certain limited exceptions, be transferred, assigned or sold by the holder until 30 days after the completion of our initial business combination.
Pursuant to the Amended Letter Agreement entered into on January 24, 2024, the Sponsor and the other Initial Shareholders agreed to forfeit, for no consideration, all ESGEN Private Placement Warrants held by them in connection with Closing.
Promissory Notes
No compensation of any kind, including finder’s and consulting fees, were paid to the Sponsor, its officers and directors, or their respective affiliates, for services rendered prior to or in connection with the completion of our initial business combination. However, these individuals were reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee reviewed on a quarterly basis all payments that were made by us to the Sponsor, and our officers, directors or their affiliates and determined which expenses and the amount of expenses were reimbursed. There was no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in connection with activities on our behalf.
The Sponsor advanced $262,268 to cover expenses related to our IPO under the April 2021 Promissory Note. As of December 31, 2025, no covered expenses remained outstanding and due to the Sponsor.
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On April 5, 2023, ESGEN issued the April 2023 Promissory Note in the principal amount of up to $1,500,000 to the Sponsor, which was amended and restated by the October 2023 Promissory Note, which could be drawn down by ESGEN from time to time prior to the consummation of our initial business combination. The October 2023 Promissory Note, as well as the April 2021 Promissory Note was not be repaid and was cancelled at Closing. As of January 31, 2024, ESGEN had drawn $1,787,048 and $171,346 under the October 2023 Promissory Note and April 2021 Promissory Note, respectively.
On January 24, 2024, ESGEN issued the January 2024 Promissory Note in the principal amount of up to $750,000 to the Sponsor. The January 2024 Promissory Note could be drawn down by ESGEN from time to time prior to the consummation of our initial Business Combination for specific uses as designated therein. The January 2024 Promissory Note does not bear interest, matured on the date of consummation of the Business Combination and is subject to customary events of default. The principal amount under the January 2024 Promissory Note was paid at Closing from funds that ESGEN had available to it outside of its Trust Account.
Office Space, Secretarial and Administrative Services Until Closing
ESGEN incurred $10,000 per month for office space, utilities, secretarial support and administrative services provided by the Sponsor. No amounts were paid for these services. As of December 31, 2025, there are amounts due to ESGEN reported on the balance sheet pursuant to this agreement.
Amendment to the Letter Agreement
Concurrently with the execution of the Business Combination Agreement, the Initial Shareholders entered into the Amendment to the Letter Agreement, pursuant to which, among other things, each of the Initial Shareholders agreed (i) not to transfer his, her or its ESGEN Class B ordinary shares (or the New PubCo Class A Common Stock issuable in exchange for such ESGEN Class B ordinary shares pursuant to the Business Combination Agreement) 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 New PubCo 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 New PubCo completes a liquidation, merger, share exchange or other similar transaction that results in all of New PubCo’s stockholders having the right to exchange their New PubCo Class A Common Stock for cash, securities or other property, (ii) to waive any adjustment to the conversion ratio set forth in the governing documents of ESGEN with respect to the ESGEN Class B ordinary shares prior to the earlier of the ESGEN Share Conversion or the Closing, (iii) the Sponsor agreed to irrevocably surrender and forfeit 2,361,641 ESGEN ordinary shares, (iv) the Initial Shareholders other than Sponsor agreed to irrevocably surrender and forfeit 538,359 ESGEN ordinary shares, (v) the Initial Shareholders and Sponsor agreed to forfeit an additional 500,000 shares of New PubCo 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) and (vi) the Initial Shareholders agreed to forfeit all of their ESGEN Private Placement Warrants in connection with Closing.
Lock-Up Agreement
At the Closing, ESGEN and each of the Lock-Up Sellers entered into the Lock-Up Agreement, pursuant to which each of the Lock-Up Sellers agreed not to transfer any of its respective Exchangeable OpCo Units and corresponding shares of New PubCo Class V Common Stock received in connection with the Business Combination until the earlier of (i) six months after the Closing Date and (ii) subsequent to the Closing Date, (a) if the last sale price of New PubCo Class A Common Stock quoted on Nasdaq is greater than or equal to $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations, and the like) for any 20 trading days within any period of 30 consecutive trading days commencing at least 90 days after the Closing Date or (b) the date on which New PubCo completes a PubCo Sale (as defined in the Lock-Up Agreement).
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PIPE Financing
At Closing, the Sponsor purchased $15,000,000 of Convertible OpCo Preferred Units in the Sponsor PIPE Investment.
Policies and Procedures for Related Person Transactions
The Board has adopted a policy with respect to the review, approval and ratification of related party transactions. Under the policy, Zeo’s audit committee is responsible for reviewing and approving related person transactions. In the course of its review and approval of related party transactions, Zeo’s audit committee will consider the relevant facts and circumstances to decide whether to approve such transactions. In particular, Zeo’s policy requires Zeo’s audit committee to consider, among other factors it deems appropriate:
| ● | the related person’s relationship to Zeo and interest in the transaction; |
| ● | the material facts of the proposed transaction, including the proposed aggregate value of the transaction; |
| ● | the impact on a director’s or a director nominee’s independence in the event the related person is a director or director nominee or an immediate family member of the director or director nominee; |
| ● | the benefits to Zeo of the proposed transaction; |
| ● | if applicable, the availability of other sources of comparable products or services; and |
| ● | an assessment of whether the proposed transaction is on terms that are comparable to the terms available to an unrelated third party or to employees generally. |
Zeo’s audit committee will only approve those transactions that are in, or are not inconsistent with, Zeo’s best interests and those of Zeo’s stockholders, as Zeo’s audit committee determines in good faith. In addition, under Zeo’s code of business conduct and ethics, its employees, directors and director nominees have an affirmative responsibility to disclose any transaction or relationship that reasonably could be expected to give rise to a conflict of interest.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
On October 31, 2025, the audit committee of the Board and the Board, after discussion with the management of the Company, approved the dismissal of Grant Thornton LLP (“GT”), the Company’s independent registered public accounting firm, and approved the appointment of Tanner LLC (“Tanner”) as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2025, effective immediately.
GT’s reports on the Company’s consolidated financial statements as of and for the fiscal years ended December 31, 2024 and 2023 did not contain any adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principles.
During the period from April 16, 2024, the date GT was appointed, to October 31, 2025, the date of dismissal, there were no (a) disagreements (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) with GT on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of GT, would have caused GT to make reference to such disagreement in its report on the Company’s consolidated financial statements for the relevant year or (b) “reportable events” (as defined in Item 304(a)(1)(v) of Regulation S-K and the related instructions), except that there were material weaknesses in the Company’s internal control over financial reporting, related to ineffective controls over information and communication and 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 Company’s management also did not design and maintain effective controls over the calculation of earnings per share and the classification of the reinvestment of interest and dividend income in the statement of cash flows. These material weaknesses in internal control over financial reporting have been disclosed in the company’s quarterly reports on Form 10-Q for 2024 and 2025 and annual report on Form 10-K for the year ended December 31, 2024. The Audit Committee discussed the subject matter of each of these reportable events with GT, and the Company authorized GT to respond fully to the inquiries of the successor auditor concerning the subject matter of each of these reportable events.
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During the fiscal years ended December 31, 2024 and 2023, and the subsequent interim period through October 31, 2025, the Company did not consult with Tanner regarding the application of accounting principles to a specific completed or contemplated transaction or regarding the type of audit opinions that might be rendered by Tanner on the Company’s financial statements, and Tanner did not provide any written or oral advice that was an important factor considered by the Company in reaching a decision as to any such accounting, auditing or financial reporting issue.
Fees
Tanner served as the independent registered public accounting firm to audit our books and accounts for the fiscal year ended December 31, 2025.
The table below presents the aggregate fees billed for professional services rendered by Tanner for the year ended December 31, 2025.
| 2025 | ||||
| Audit fees | $ | 369,265 | ||
| Audit-related fees | – | |||
| Tax fees | – | |||
| All other fees | – | |||
| Total fees | $ | 369,265 | ||
In the above table, Audit fees consist of fees billed for professional services rendered for the audit of our year-end financial statements, reviews of our quarterly financial statements and services that are normally provided by our independent registered public accounting firm in connection with statutory and regulatory filings.
Our Audit Committee determined that the services provided by Tanner were compatible with maintaining the independence of Tanner as our independent registered public accounting firm.
The table below presents the aggregate fees billed for professional services rendered by GT for the years ended December 31, 2025 and 2024.
| 2025 | 2024 | |||||||
| Audit fees | $ | 80,000 | $ | 1,104,438 | ||||
| Audit-related fees | – | – | ||||||
| Tax fees | – | – | ||||||
| All other fees | 115,213 | – | ||||||
| Total fees | $ | 195,213 | $ | 1,104,438 | ||||
In the above table, Audit fees consist of fees billed for professional services rendered for the audit of our year-end financial statements and services that are normally provided by our independent registered public accounting firm in connection with statutory and regulatory filings.
Our Audit Committee determined that the services provided by GT were compatible with maintaining the independence of GT as our independent registered public accounting firm.
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PART IV
ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES.
The following documents are filed as part of this Report:
(1) Financial Statements: Our financial statements are listed in the “Index to Financial Statements” on page F-1.
(2) Financial Statement Schedules: None.
(3) Exhibits
We hereby file as part of this Report the exhibits listed in the attached Exhibit Index. Copies of such material can also be obtained on the SEC website at www.sec.gov.
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| * | Filed herewith |
| ** | Furnished herewith |
ITEM 16. FORM 10-K SUMMARY.
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized this date of March 31, 2026.
| Zeo Energy Corp. | ||
| By: | /s/ Timothy Bridgewater | |
| Name: | Timothy Bridgewater | |
| Title: | Chief Executive Officer and Director | |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 31, 2026.
| Name | Position | |
| /s/ Timothy Bridgewater | Chief Executive Officer and Director | |
| Timothy Bridgewater | (Principal Executive Officer) | |
| /s/ Cannon Holbrook | Chief Financial Officer | |
| Cannon Holbrook | (Principal Financial and Accounting Officer) | |
| /s/ Dr. Abigail M. Allen | Director | |
| Dr. Abigail M. Allen | ||
| /s/ James P. Benson | Director | |
| James P. Benson | ||
| /s/ Neil Bush | Director | |
| Neil Bush | ||
| /s/ Mark Jacobs | Director | |
| Mark Jacobs |
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ZEO ENERGY CORP.
INDEX TO FINANCIAL STATEMENTS
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of ZEO Energy Corp.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of Zeo Energy Corp. and subsidiaries (collectively, the Company) as of December 31, 2025, and the related consolidated statements of operations, changes in redeemable noncontrolling interests and stockholders’ equity (deficit), and cash flows for the year ended December 31, 2025, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025, and the results of its operations and its cash flows for the year ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/
We have served as the Company’s auditor since 2025.
March 31, 2026
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and
Stockholders of ZEO Energy Corp.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Zeo Energy Corp. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2024, the related consolidated statements of operations, changes in redeemable noncontrolling interests and stockholders’ equity (deficit), and cash flows for the year ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the year ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ GRANT THORNTON LLP
We served as the Company’s auditor from 2023 to 2025.
Kansas City, Missouri
May 27, 2025
F-3
ZEO ENERGY CORP.
CONSOLIDATED BALANCE SHEETS
| December 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Accounts receivable – related parties | ||||||||
| Inventories | ||||||||
| Contract assets | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total Current Assets | ||||||||
| Other assets | ||||||||
| Interest receivable – related parties | ||||||||
| Deferred tax asset, net | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Finance lease right-of-use assets | ||||||||
| Note receivable – related party | ||||||||
| Intangibles, net | ||||||||
| Goodwill | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses and other current liabilities | ||||||||
| Accrued expenses and other current liabilities – related parties | ||||||||
| Contract liabilities | ||||||||
| Contract liabilities – related parties | ||||||||
| Current portion of operating lease obligations | ||||||||
| Current portion of finance lease obligations | ||||||||
| Current portion of long-term debt | ||||||||
| Convertible promissory note, net | ||||||||
| Total Current Liabilities | ||||||||
| Operating lease obligations, net of current portion | ||||||||
| Finance lease obligations, net of current portion | ||||||||
| Long-term debt, net of current portion | ||||||||
| Warrant liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| Redeemable Noncontrolling Interests | ||||||||
| Class A convertible preferred units, |
||||||||
| Class B units, |
||||||||
| Stockholders’ Equity (Deficit) | ||||||||
| Class V common stock, $ |
||||||||
| Class A common stock, $ |
||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive loss | ( |
) | ||||||
| Accumulated deficit | ( |
) | ( |
) | ||||
| TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) | ( |
) | ||||||
| TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY (DEFICIT) | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-4
ZEO ENERGY CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Revenues | ||||||||
| Revenue, net | $ | $ | ||||||
| Related party revenue, net | ||||||||
| Total Net Revenues | ||||||||
| Operating Expenses | ||||||||
| Cost of revenues | ||||||||
| Depreciation and amortization | ||||||||
| Sales and marketing | ||||||||
| General and administrative | ||||||||
| Total Operating Expenses | ||||||||
| LOSS FROM OPERATIONS | ( | ) | ( | ) | ||||
| Other Income (Expense) | ||||||||
| Other income | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Gain on disposal of property and equipment | ||||||||
| Gain on change in fair value of warrant liabilities | ||||||||
| Total Other Income (Expense) | ( | ) | ||||||
| NET LOSS FROM OPERATIONS BEFORE INCOME TAXES | ( | ) | ( | ) | ||||
| Income tax benefit (provision) | ( | ) | ||||||
| NET LOSS | $ | ( | ) | $ | ( | ) | ||
| Less: Net loss attributable to Sunergy Renewables LLC prior to the business combination | $ | $ | ( | ) | ||||
| NET LOSS SUBSEQUENT TO THE BUSINESS COMBINATION | ( | ) | ( | ) | ||||
| Less: Net loss attributable to redeemable noncontrolling interests | ( | ) | ( | ) | ||||
| NET LOSS ATTRIBUTABLE TO CLASS A COMMON STOCKHOLDERS | $ | ( | ) | $ | ( | ) | ||
| LOSS PER CLASS A COMMON SHARE – BASIC AND DILUTED | $ | ( | ) | $ | ( | ) | ||
| WEIGHTED-AVERAGE CLASS A COMMON SHARES OUTSTANDING – BASIC AND DILUTED | ||||||||
| COMPREHENSIVE LOSS | ||||||||
| Foreign currency translation adjustments | ||||||||
| NET COMPREHENSIVE LOSS | $ | ( | ) | $ | ( | ) | ||
The accompanying notes are an integral part of these consolidated financial statements.
F-5
ZEO ENERGY CORP.
CONSOLIDATED STATEMENTS OF CHANGES
IN REDEEMABLE
NONCONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE YEAR ENDED DECEMBER 31, 2024
| Redeemable Noncontrolling Interests | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Class A Convertible Preferred Units | Class B Units | Common Units | Class V Common Stock | Class A Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||||||
| Units | Amount | Units | Amount | Units | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||||||||||||||
| Retroactive application of Business Combination | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2023 | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Stockholder distributions | – | – | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Net loss prior to the Business Combination | – | – | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Effects of Business Combination | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Class A Shares to third party advisors | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Class A Shares to backstop investor | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reverse Recapitalization | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Transaction costs | – | – | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Establishment of redeemable noncontrolling interests | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Activities subsequent to business combination | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Class A common stock issued for services | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Class A common stock issued in the asset acquisition of Lumio | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Class A common stock issued private placement | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends paid to preferred unit holders | – | ( | ) | – | – | – | – | |||||||||||||||||||||||||||||||||||||||||||||
| Subsequent measurement of redeemable noncontrolling interests | – | – | – | – | – | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | – | – | ( | ) | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||||||
F-6
ZEO ENERGY CORP.
CONSOLIDATED STATEMENTS OF CHANGES
IN REDEEMABLE
NONCONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE YEAR ENDED DECEMBER 31, 2025
| Redeemable Noncontrolling Interests | ||||||||||||||||||||||||||||||||||||||||||||||||
| Class
A Convertible Preferred Units | Class B Units | Class
V Common Stock | Class
A Common Stock | Additional Paid-in | Accumulated Other Comprehensive | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||||||||||||||||
| Units | Amount | Units | Amount | Shares | Amount | Shares | Amount | Capital | Loss | Deficit | (Deficit) | |||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||||||||||||||||||||||||||
| Class A common stock issued upon vesting of restricted stock awards | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Tax withholding paid related to stock-based compensation | – | – | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Class A common stock issued to employees for services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Class A common stock issued in exchange for OpCo class B units and corresponding class V common stock | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Class A common stock issued in the acquisition of Heliogen, Inc. | ||||||||||||||||||||||||||||||||||||||||||||||||
| Class A common stock issued in settlement of accrued advisory fees | ||||||||||||||||||||||||||||||||||||||||||||||||
| Class A common stock issued upon conversion of convertible note payable | ||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends paid to preferred unit holders | – | ( | ) | – | – | – | ||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation | – | – | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Subsequent measurement of redeemable noncontrolling interests | – | – | ( | ) | – | – | ||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | – | – | ( | ) | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2025 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-7
ZEO ENERGY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustment to reconcile net loss to net cash used in operating activities | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of debt discount | ||||||||
| Gain on change in fair value of warrant liabilities | ( | ) | ( | ) | ||||
| Gain on disposal of fixed assets | ( | ) | ||||||
| Stock-based compensation | ||||||||
| Class A common stock issued to employees for services | ||||||||
| Provision for credit losses | ||||||||
| Deferred taxes | ( | ) | ||||||
| Non-cash operating lease expense | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Accounts receivable – related parties | ( | ) | ||||||
| Inventories | ( | ) | ||||||
| Contract assets | ( | ) | ||||||
| Prepaids and other current assets | ( | ) | ( | ) | ||||
| Other assets | ( | ) | ( | ) | ||||
| Interest receivable – related parties | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses and other current liabilities | ( | ) | ( | ) | ||||
| Accrued expenses and other current liabilities – related parties | ( | ) | ||||||
| Contract liabilities | ( | ) | ||||||
| Contract liabilities – related parties | ( | ) | ( | ) | ||||
| Operating lease payments | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Investment in note receivable – related party | ( | ) | ||||||
| Cash paid in the asset acquisition of Lumio | ( | ) | ||||||
| Cash acquired in the acquisition of Heliogen | ||||||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Net proceeds from the issuance of convertible preferred stock | ||||||||
| Proceeds from the issuance of Class A common stock in a private placement | ||||||||
| Net proceeds from the issuance of convertible promissory note | ||||||||
| Repayments of finance lease liabilities | ( | ) | ( | ) | ||||
| Repayments of debt | ( | ) | ( | ) | ||||
| Dividends paid to OpCo Class A preferred unit holders | ( | ) | ( | ) | ||||
| Tax withholdings paid related to stock-based compensation | ( | ) | ||||||
| Distributions to members | ( | ) | ||||||
| Net cash (used in) provided by financing activities | ( | ) | ||||||
| Effect on foreign exchange on cash | ( | ) | ||||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS | ( | ) | ||||||
| Cash and cash equivalents, beginning of period | ||||||||
| Cash and cash equivalents, end of the period | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Net loss attributable to redeemable noncontrolling interest | $ | $ | ||||||
| OpCo Class A preferred dividends | $ | $ | ||||||
| Subsequent measurement of redeemable noncontrolling interest | $ | $ | ||||||
| Class A common stock issued upon vesting of restricted stock awards | $ | $ | ||||||
| Class A common stock issued in exchange for Class V common stock | $ | $ | ||||||
| Fair value of Class A common stock issued in exchange for OpCo Class B units | $ | $ | ||||||
| Class A common stock issued in settlement of accrued advisory fees | $ | $ | ||||||
| Class A common stock issued upon conversion of convertible note payable | $ | $ | ||||||
| Operating lease right-of-use asset and liability measurement | $ | $ | ||||||
| Accounts payable settled for loan payable | $ | $ | ||||||
| Net assets acquired in the acquisition of Heliogen | $ | $ | ||||||
| Class A common stock issued in the acquisition of Heliogen | $ | $ | ||||||
| Class A common stock issued in the asset acquisition of Lumio | $ | $ | ||||||
| Deferred equity issuance costs | $ | $ | ||||||
| Issuance of Class A common stock to vendors | $ | $ | ||||||
| Issuance of Class A common stock to backstop investors | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-8
Zeo Energy Corp.
Notes to the Consolidated Financial Statements
DECEMBER 31, 2025
NOTE 1—ORGANIZATION AND NATURE OF BUSINESS
Zeo Energy Corp. (“Zeo” or the “Company”)
was incorporated on
ESGEN OpCo, LLC (“OpCo”), a Delaware limited liability company, holds the operating businesses of Sunergy. The Company operates under an Up-C organizational structure in which Zeo’s principal asset is its equity interest in OpCo. Zeo is the managing member of OpCo and controls its management and operations, holding OpCo manager units representing its economic interest. Other members hold exchangeable OpCo units representing their economic interests, which are exchangeable into shares of the Company’s Class A common stock on a one-for-one basis.
On March 13, 2024, ESGEN Acquisition Corporation consummated a business combination with Sunergy and domesticated to the State of Delaware, changing its name to Zeo Energy Corp. The Sunergy business combination was accounted for as a reverse recapitalization, with Sunergy treated as the accounting acquirer. Accordingly, the consolidated financial statements for periods prior to March 13, 2024 represent the historical financial statements of Sunergy, with the equity structure retroactively adjusted to reflect the capital structure of Zeo. See Note 4—Reverse Recapitalization for additional information.
On August 8, 2025, Zeo completed the acquisition of Heliogen, Inc. and its subsidiaries (collectively, “Heliogen”), a provider of concentrated solar power and long-duration energy generation and storage technology solutions for commercial and industrial applications. Heliogen became a wholly owned subsidiary of Zeo. The acquisition was accounted for as a business combination. See Note 6—Business Combinations for additional information.
Zeo, together with OpCo and its subsidiaries, including Sunergy and Heliogen, is referred to collectively as the “Company.” The accompanying consolidated financial statements include the accounts of Zeo, OpCo and its subsidiaries, including Sunergy, and Heliogen. Ownership interests in OpCo held by members other than Zeo represent noncontrolling interests (“NCI”). All intercompany balances and transactions have been eliminated in consolidation. The Company’s Class A common stock and public warrants are listed on The Nasdaq Stock Market LLC (“Nasdaq”) under the symbols “ZEO” and “ZEOWW,” respectively.
NOTE 2—LIQUIDITY AND GOING CONCERN ASSESSMENT
As of December 31, 2025, the Company had cash
and cash equivalents of $
The Company has operational plans to increase revenue and profitability in 2026 which are expected to improve cash flows. The operational plan includes an increase in the number of sales agents to increase revenue and improved efficiency in the operations of the Company through centralization of field offices and labor and productivity improvement in the corporate operations through the implementation of a new CRM software.
F-9
The Company is also working with partners to see
to short-term cash needs through the use of the common stock purchase agreement with White Lion Capital LLC (the “White Lion ELOC”),
which provides the Company the right to sell up to $
The Company’s 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.
NOTE 3—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements of the Company are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) as codified in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). The accompanying consolidated financial statements include the results of operations of Heliogen subsequent to the acquisition date of August 8, 2025. See Note 6—Business Combinations for additional information.
Principles of Consolidation
The consolidated financial statements include the accounts of Zeo and its subsidiaries. Zeo consolidates OpCo because Zeo is the managing member of OpCo and controls its management and operations. Ownership interests in OpCo held by members other than Zeo represent NCI. Because these interests are redeemable at the option of the holders, they are classified as redeemable NCI and presented outside of permanent equity in the consolidated balance sheets. See Note 17—Redeemable Noncontrolling Interests and Equity for additional information. All intercompany balances and transactions have been eliminated in consolidation.
Variable Interest Entities
The Company evaluates its interests in other entities to determine whether those entities are variable interest entities (“VIEs”) and whether the Company is the primary beneficiary of any such VIE in accordance with ASC 810, “Consolidation.” An entity is considered a VIE if it lacks sufficient equity at risk to finance its activities without additional subordinated financial support, or if the equity holders, as a group, lack the characteristics of a controlling financial interest.
The Company is deemed the primary beneficiary of a VIE if it has both (a) the power to direct the activities that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. The Company performs this assessment at the inception of any arrangement that may involve a VIE and reassesses on an ongoing basis if certain reconsideration events occur. If the Company determines that it is the primary beneficiary of a VIE, the VIE is consolidated in the Company’s financial statements. If the Company holds a variable interest in a VIE but is not the primary beneficiary, the interest is not consolidated and is accounted for under other applicable guidance.
The Company has evaluated certain related party arrangements involving entities under common management and has concluded that it is not the primary beneficiary of those entities. See Note 5—Variable Interest Entities for additional information.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Significant estimates include, but are not limited to, revenue recognition for solar system installations, allowance for credit losses, reserves for excess and obsolete inventory, impairment evaluations of long-lived assets and goodwill, fair value measurements of warrant liabilities, fair value of assets acquired and liabilities assumed in business combinations, stock-based compensation, and assessments of contingent liabilities.
F-10
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand
and highly liquid investments with original maturities of three months or less. The Company maintains deposits in several financial institutions,
which may at times exceed amounts covered by insurance provided by the U.S. Federal Deposit Insurance Corporation (“FDIC”).
The Company has not experienced any losses related to amounts in excess of FDIC limits. As of December 31, 2025 and 2024, the Company
had $
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company maintains its cash balances with high-credit-quality financial institutions. At times, such balances may exceed federally insured limits provided by the FDIC. The Company has not experienced any losses related to these balances.
The Company’s accounts receivable are primarily due from third-party financing companies that provide financing to the Company’s customers for the purchase and installation of solar systems. The Company incurred losses due to the bankruptcy of two third-party financing companies in 2025. The Company makes efforts to monitor the credit worthiness of these companies through communication with the companies and discussions with peer companies who also do business with these third-party financing companies. The Company is regularly pursuing opportunities to diversify the third-party financing companies with who it works in an effort to minimize the concentration of risk.
During the year ended December 31, 2025, approximately
Accounts Receivable and Allowance for Credit Losses
Accounts receivable consist of trade receivables arising from credit sales to customers in the normal course of business. A significant portion of the Company’s customers lease or finance the purchase and installation of solar systems through third-party financing companies. These financing companies typically remit payment to the Company within three weeks following installation. The Company is not deemed a borrower under these financing arrangements and is not subject to the terms of the financing agreements between the financing companies and the customers.
Accounts receivable are recorded at the invoiced amount, net of an allowance for current expected credit losses. In accordance with ASC 326, “Financial Instruments—Credit Losses,” the Company estimates expected credit losses on accounts receivable using an aging analysis that incorporates historical loss experience, customer creditworthiness, prevailing economic conditions, and reasonable and supportable forward-looking information. The Company also provides an allowance for customers determined to be insolvent. Accounts receivable balances are written off when they are determined to be uncollectible. As of December 31, 2025, the Company has chosen not to write off the accounts receivable associated with bankrupt customers pending the outcome of the bankruptcy proceedings.
The following table presents activity in the allowance for current expected credit losses for the years ended December 31, 2025 and 2024:
| December 31, 2025 | December 31, 2024 | |||||||
| Allowance for credit losses – beginning balance | $ | $ | ||||||
| Provision for credit losses | ||||||||
| Write-offs | ( | ) | ( | ) | ||||
| Recoveries | ||||||||
| Allowance for credit losses – ending balance | $ | $ | ||||||
Revenue Recognition and Cost of Revenues
The Company recognizes revenue in accordance with ASC 606, “Revenue from Contracts with Customers.” Revenue is recognized when control of promised goods or services transfers to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.
The Company generates revenue primarily from the design, engineering, procurement, and installation of residential solar energy systems and related roofing services. Solar installation contracts typically include equipment and installation services that are highly integrated and combined to deliver a completed solar energy system. Because the individual goods and services are not distinct within the context of the contract and are significantly integrated, the Company accounts for each solar installation contract as a single performance obligation.
F-11
Revenue from roofing services is recognized at a point in time upon completion of the roofing project when control transfers to the customer.
The transaction price is generally fixed based on the contractual price specified in the installation agreement. The Company evaluates contracts for the existence of variable consideration and significant financing components. Variable consideration, if present, is included in the transaction price only to the extent that it is probable that a significant reversal of revenue will not occur. Due to the short duration of the Company’s installation projects, contracts generally do not contain significant financing components.
The Company satisfies its performance obligation and recognizes revenue at a point in time when control of the installed solar system transfers to the customer. Control transfers when installation of the system is complete and the system is capable of operating as intended (the “Installation Verified” milestone). At this stage, the system is fully installed, permanently affixed to the property, and no substantive construction or integration services remaining to be performed by the Company.
Following completion of installation, the system must receive Permission to Operate (“PTO”) from the local utility before electricity can be exported to the grid. PTO represents a regulatory authorization issued by the utility and does not represent a separate performance obligation. Accordingly, PTO does not constitute a separate performance obligation and does not affect the timing of revenue recognition.
Many customers finance the purchase and installation of solar systems through third-party financing companies. In these arrangements, the financing company remits payment to the Company upon completion of installation, typically net of financing-related fees. Revenue is recognized at the contractual amount with the customer, net of financing-related fees. Cash payments received from customers or third-party financing companies prior to completion of the Company’s performance obligation are recorded as contract liabilities and recognized as revenue when installation is complete and control of the system transfers to the customer.
Cost of revenues consists primarily of equipment, materials, subcontractor costs, and direct labor associated with the installation of solar energy systems and roofing projects. Costs incurred in connection with installation activities are generally expensed as incurred. Equipment and materials purchased prior to installation may be recorded as inventory or prepaid expenses and are recognized in cost of revenues when the related installation project is completed. See Note 8—Disaggregation of Revenues and Segment Reporting for additional information.
Segment Reporting
The Company reports segment information in accordance with ASC 280, “Segment Reporting.” Operating segments are defined as components of an enterprise for which separate financial information is available and whose operating results are regularly reviewed by the chief operating decision maker (“CODM”) to allocate resources and assess performance. The Company’s CODM is its (“CEO”).
Following the acquisition of Heliogen on August
8, 2025, the Company reassessed its segment structure and determined that it operates in
Prior to the acquisition of Heliogen, the Company operated as a single operating and reportable segment consisting of its solar installation and related services operations. See Note 8—Disaggregation of Revenues and Segment Reporting for additional information.
Notes 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 each reporting period under the current expected credit loss model in accordance with ASC 326. An allowance for expected credit losses is recorded when necessary to reflect estimated uncollectible amounts. See Note 16—Related Party Transactions for additional information.
Inventories
Inventories are primarily comprised of solar panels and other related components necessary for installations and service needs. Inventories are measured at the lower of cost or net realizable value, with cost determined using the 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 revenues in the consolidated statements of operations in the period identified.
As of December 31, 2025 and 2024, inventory was
$
F-12
Contract Assets and Liabilities
Contract assets represent revenue recognized in excess of amounts billed to customers when the Company has satisfied performance obligations but does not yet have an unconditional right to payment. Contract assets are reclassified to accounts receivable when the Company’s right to payment becomes unconditional. Contract liabilities represent payments received in advance of the satisfaction of performance obligations and are recognized as revenue when the related performance obligations are satisfied. Changes in contract asset and contract liability balances during the reporting period primarily result from the timing differences between the Company’s performance of services and customer billing or cash collections and are reflected in the corresponding balances within accounts receivable and deferred revenue in the accompanying consolidated balance sheets.
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist primarily of employee advances, advanced sales commissions, prepaid insurance, and other similar current assets.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the related asset. Maintenance and repairs are expensed as incurred. Expenditures that substantially extend the useful lives of existing assets or improve the efficiency or functionality of the assets are capitalized. Upon retirement or disposal, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the consolidated statements of operations.
Estimated useful lives of property and equipment are as follows:
| Description | Useful Life (Years) | |
| Leasehold improvements | ||
| Office furniture and equipment | ||
| Internally-developed software | ||
| Vehicles |
Internally-Developed Software
The Company capitalizes certain costs incurred in connection with the development of internally-developed software in accordance with ASC 350-40, “Intangibles—Internal-Use Software.” Costs incurred during the preliminary project stage and post-implementation stage are expensed as incurred. Costs incurred during the application development stage are capitalized once management authorizes and commits to funding the project and it is probable that the project will be completed and used as intended.
Capitalized internally-developed software costs include payroll and payroll-related costs for employees directly involved in the development of the software and external costs incurred in connection with the development of the software. Capitalization ceases when the software is substantially complete and ready for its intended use. Capitalized internally-developed software costs are amortized using the straight-line method over the estimated useful life of the software.
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Leases
The Company evaluates all contracts at inception or upon modification to determine whether the contract contains a lease in accordance with ASC 842, “Leases.” A contract is or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Control over the use of the identified asset exists when the lessee has both the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct the use of the asset. Contracts containing a lease are further evaluated for classification as operating or finance leases.
Operating leases
At the commencement of a lease, the Company recognizes right-of-use (“ROU”) assets and related lease liabilities on the consolidated balance sheets for leases with a term greater than one year. Lease liabilities and the corresponding ROU assets are initially measured at the present value of the unpaid lease payments as of the lease commencement date. If a lease contains renewal or termination options, the exercise of those options is included in the lease term when the Company is reasonably certain the option will be exercised. Because the Company’s leases generally do not provide an implicit rate, the Company uses an estimated incremental borrowing rate (“IBR”) based on information available at the lease commencement date to determine the present value of lease payments. The IBR represents the rate the Company would incur to borrow on a collateralized basis over a similar term in an amount equal to the lease payments.
When calculating the present value of lease payments, the Company accounts for lease and non-lease components as a single lease component. Variable lease payments are expensed as incurred. The Company does not recognize ROU assets and lease liabilities for short-term leases with an initial lease term of 12 months or less.
Finance Leases
Leases that transfer substantially all of the risks and benefits of ownership of the underlying asset to the Company are accounted for as finance leases. At lease commencement, the Company recognizes a ROU asset and a corresponding lease liability. Lease cost for finance leases consists of amortization of the ROU asset and interest expense on the lease liability. The ROU asset is amortized on a straight-line basis and recorded in depreciation and amortization, while interest on the lease liability is recognized using the effective interest method and recorded as interest expense in the consolidated statements of operations. Finance lease ROU assets are amortized over the shorter of the lease term or the estimated useful life of the underlying asset. If the Company is reasonably certain to exercise a purchase option, the ROU asset is amortized over the estimated useful life of the underlying asset.
Commitments and Contingencies
The Company accounts for commitments and contingencies in accordance with ASC 450, “Contingencies.” Liabilities for loss contingencies are recorded when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. If a range of loss is determined to be probable and no amount within the range is a better estimate than another, the minimum amount of the range is recorded. If a loss is reasonably possible but not probable, the Company discloses the nature of the contingency and an estimate of the possible loss or range of loss if such estimate can be made. Contingencies include, but are not limited to, litigation, regulatory matters, contractual obligations, and other claims arising in the normal course of business.
Business Combinations
The Company accounts for business combinations under the acquisition method of accounting in accordance with ASC 805, “Business Combinations.” The Company allocates the purchase price of an acquisition to the tangible and intangible assets acquired, liabilities assumed, and any NCI based on their estimated fair values at the acquisition date. The Company recognizes the amount by which the purchase price of an acquired entity exceeds the net of the fair values assigned to the assets acquired and liabilities assumed as goodwill. In determining the fair values of assets acquired and liabilities assumed, the Company uses various recognized valuation methods, including the income, cost, and market approaches, in accordance with ASC 820, “Fair Value Measurement.” The Company makes assumptions within certain valuation techniques, including discount rates, royalty rates, and the amount and timing of future cash flows.
The Company initially performs these valuations based on preliminary estimates and assumptions by management or, where appropriate, independent valuation specialists under the Company’s supervision. The Company may revise these estimates and assumptions as additional information becomes available during the measurement period, which may extend up to one year from the acquisition date. Acquisition-related expenses are recognized separately from business combinations and are expensed as incurred.
F-14
Intangible Assets
Acquired identifiable intangible assets are recorded at fair value at the acquisition date and are amortized on a straight-line basis over their estimated useful lives. Estimated useful lives are determined based on the period over which the assets are expected to contribute to future cash flows. The Company has no intangible assets with indefinite lives.
Goodwill
In accordance with ASC 350, “Intangibles—Goodwill and Other,” goodwill is not amortized but is tested for impairment annually on December 31, or more frequently if events or circumstances indicate that goodwill may be impaired.
When assessing the recoverability of goodwill, the Company may first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The qualitative assessment considers factors including the current operating environment, industry and market conditions, cost factors, overall financial performance, and other relevant events. If the Company bypasses the qualitative assessment, or concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company performs a quantitative assessment by comparing the estimated fair value of the reporting unit with its carrying amount. The Company estimates the fair value of its reporting units based on the present value of estimated future cash flows. Considerable management judgment is required in evaluating operating and macroeconomic conditions and estimating future cash flows, including assumptions related to growth rates and discount rates.
If the carrying amount of a reporting unit exceeds its estimated fair value, an impairment loss is recognized for the amount of the excess, limited to the total amount of goodwill allocated to the reporting unit.
Long-Lived Assets
The Company reviews the carrying value of long-lived assets, including property and equipment, ROU assets, and definite-lived intangible assets, for impairment in accordance with ASC 360, “Property, Plant, and Equipment,” whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Such events or circumstances may include significant decreases in the market price of an asset, significant changes in the extent or manner in which an asset is used or in its physical condition, significant adverse changes in legal factors or in the business climate, a history or forecast of operating or cash flow losses, significant disposal activity, a significant decline in revenue, or other indicators that the carrying value of an asset may not be recoverable. If indicators of impairment are present, the Company evaluates recoverability by comparing the carrying amount of the asset or asset group to the estimated undiscounted future cash flows expected to result from the use and eventual disposition of the asset or asset group. If the carrying amount exceeds the estimated undiscounted future cash flows, an impairment loss is recognized for the amount by which the carrying amount exceeds the asset’s fair value.
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. The Company applies the fair value hierarchy in accordance with ASC 820, which 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 and the lowest priority to unobservable inputs. The three levels of the fair value hierarchy are as follows:
Level 1 – Inputs based on unadjusted quoted 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, quoted prices for identical or similar instruments in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
Level 3 – Inputs that 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 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 based on the lowest level input that is significant to the fair value measurement. See Note 20—Fair Value Measurements for additional information.
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Warrant Liabilities
The Company accounts for warrants in accordance with ASC 480, “Distinguishing Liabilities from Equity,” and ASC 815-40, “Derivatives and Hedging—Contracts in Entity’s Own Equity.” The Company evaluates the terms of each warrant instrument to determine whether the warrants should be classified as equity or as liabilities. This evaluation includes an assessment of whether the warrants are freestanding financial instruments, whether the warrants are indexed to the Company’s own common stock, and whether the warrant terms could require net cash settlement or otherwise fail to meet the conditions for equity classification.
Warrants that meet the criteria for equity classification are recorded in additional paid-in capital and are not subsequently remeasured. Warrants that do not meet the criteria for equity classification are recorded as liabilities at fair value on the date of issuance. Liability-classified warrants are remeasured at fair value at each reporting date, with changes in fair value recognized in the consolidated statements of operations until the warrants are exercised, expire, or are otherwise settled.
Redeemable Noncontrolling Interests
Redeemable NCI represents the ownership interests in OpCo held by legacy OpCo unitholders other than Zeo. Zeo consolidates OpCo as the managing member; however, the legacy OpCo unitholders retain an economic interest in OpCo through their ownership of OpCo common units. In connection with the Sunergy business combination, legacy OpCo unitholders received OpCo common units together with a corresponding number of shares of Zeo’s Class V common stock. Each OpCo common unit, together with the cancellation of the paired share of Class V common stock, may be exchanged at the election of the holder for either (i) one share of Zeo’s Class A common stock or (ii) cash equal to the fair value of a share of Class A common stock, subject to the terms of the exchange agreement and approval of Zeo’s board of directors.
Because these exchange rights are not solely within the control of the Company, the related NCI is classified as redeemable NCI and is presented outside of permanent equity as temporary equity on the consolidated balance sheets.
Redeemable NCI were initially measured at the legacy OpCo unitholders’ proportionate share of OpCo’s net assets at the closing of the Sunergy business combination. Subsequently, the carrying value of the redeemable NCI is remeasured at each reporting date based on the fair value of the Company’s Class A common stock. Changes in the redemption value are recorded as deemed dividends, which reduce additional paid-in capital or, in the absence of additional paid-in capital, retained earnings.
Redeemable Convertible Preferred Units
Redeemable convertible preferred units represent preferred equity interests issued at the OpCo level. These units are presented as NCI in the Company’s consolidated financial statements because they are issued by OpCo and are not owned by Zeo. The redeemable convertible preferred units contain certain redemption features that are not solely within the control of the Company. As a result, these units are classified outside of permanent equity as temporary equity on the consolidated balance sheets. The redeemable convertible preferred units are initially recorded at fair value on the date of issuance, net of issuance costs. Subsequent adjustments to the carrying value are recorded in accordance with the terms of the applicable unit agreements and relevant accounting guidance. See Note 17—Redeemable Noncontrolling Interests and Equity for additional information.
Stock-based Compensation
The Company accounts for stock-based compensation in accordance with ASC 718, “Compensation—Stock Compensation.” Stock-based awards granted to employees, non-employee directors, and consultants are measured at the grant-date fair value of the award and recognized as compensation expense over the requisite service period, which is generally the vesting period.
Restricted stock awards are measured based on the closing market price of the Company’s common stock on the grant date. Compensation cost for awards with only service-based vesting conditions is recognized on a straight-line basis over the requisite service period. For awards with graded vesting features, the Company recognizes compensation expense for each separate vesting tranche over its respective service period.
For awards with market-based vesting conditions, the Company estimates grant-date fair value using a Monte Carlo simulation model. Compensation cost for market-condition awards is recognized over the derived service period regardless of whether the market condition is achieved. The Company has elected to recognize forfeitures as they occur rather than estimate expected forfeitures.
F-16
Income Taxes
The Company accounts for income taxes in accordance with ASC 740, “Income Taxes.” Zeo is subject to U.S. federal, state, and local income taxes. OpCo is treated as a partnership for U.S. federal income tax purposes and generally does not pay U.S. federal income taxes. Instead, the OpCo unitholders, including Zeo, are liable for U.S. federal income taxes on their respective shares of OpCo’s taxable income. OpCo may be subject to certain state and local income or franchise taxes in jurisdictions that tax entities classified as partnerships. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the periods in which those temporary differences are expected to be recovered or settled. The effect of changes in tax rates on deferred tax assets and liabilities is recognized in the period that includes the enactment date.
The Company evaluates the realizability of deferred tax assets and records a valuation allowance when, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
The Company recognizes the tax benefit of uncertain tax positions only when it is more likely than not that the position will be sustained upon examination by taxing authorities, including resolution of any related appeals or litigation. The tax benefit recognized is measured as the largest amount that has a greater than 50 percent likelihood of being realized upon ultimate settlement. Interest and penalties related to unrecognized tax benefits are recognized as a component of income tax expense.
Tax Receivable Agreement
In connection with the Sunergy business combination,
the Company entered into a Tax Receivable Agreement (“TRA”) with certain former equity holders of Sunergy. The TRA generally
provides for the payment by the Company to the TRA holders of
Loss Per Share
Basic loss per share is calculated by dividing net loss attributable to Zeo by the weighted average number of shares of Class A common stock outstanding during the period.
Diluted loss per share is calculated by adjusting the weighted average number of shares of Class A common stock outstanding for the potential dilutive effect of common stock equivalents, including warrants, stock options, restricted stock awards, and other convertible instruments, if applicable.
The Company uses the treasury stock method to determine the dilutive effect of certain potential common stock equivalents. Instruments that are convertible into shares of Class A common stock, including Exchangeable OpCo Units, are evaluated using the if-converted method, which assumes the conversion of such instruments at the beginning of the reporting period and adjusts the numerator and denominator of the earnings per share calculation accordingly.
Potential common stock equivalents whose effect would be anti-dilutive are excluded from the computation of diluted loss per share. See Note 22—Net Loss Per Share for additional information.
Advertising and Marketing Costs
Advertising and marketing costs are expensed as incurred and are included in sales and marketing expenses in the consolidated statements of operations.
F-17
Reclassifications
Certain prior period amounts have been reclassified to conform to the current period presentation of the consolidated financial statements. These reclassifications had no impact on previously reported net loss, total assets, total liabilities, stockholders’ deficit, or cash flows from operating activities.
Recently Adopted Accounting Pronouncements
In August 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-05, “Business Combinations—Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement,” which requires a newly-formed joint venture to apply a new basis of accounting to its contributed net assets, resulting in the joint venture initially measuring its contributed net assets at fair value on the formation date. ASU 2023-05 is effective for all joint venture formations with a formation date on or after January 1, 2025, with early adoption permitted. These amendments are to be applied prospectively, with retrospective application permitted for joint ventures formed before the effective date. The adoption of ASU 2023-05 did not have a material impact on the Company’s consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which enhances the transparency and decision usefulness of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. These amendments are to be applied prospectively, with retrospective application permitted. The adoption of ASU 2023-09 did not have a material impact on the Company’s consolidated financial statements.
Recently Issued Accounting Pronouncements Not Yet Adopted
In November 2024, the FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses,” which requires disaggregated disclosure of specific expense categories, including purchases of inventory, employee compensation, depreciation, and amortization included in each relevant expense caption presented on the statement of operations. The standard also requires a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively, as well as the total amount of selling expenses and an entity’s definition of selling expenses. ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.
In May 2025, the FASB issued ASU 2025-03, “Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity,” which requires entities to consider existing factors in ASC 805 when identifying the accounting acquirer in a transaction effected primarily by exchanging equity interests in which the legal acquiree is a variable interest entity that meets the definition of a business. ASU 2025-03 is effective for fiscal years beginning after December 15, 2026, with early adoption permitted. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.
In July 2025, the FASB issued ASU 2025-05, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets,” which introduces a practical expedient for the application of the current expected credit loss model to current accounts receivable and contract assets. The amendment is effective for interim and annual periods beginning after December 15, 2025, with early adoption permitted. This amendment is to be applied on a prospective basis. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.
In September 2025, the FASB issued ASU 2025-06, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software.” This guidance removes references to project stages throughout ASC 350-40 and clarifies the threshold entities apply to begin capitalizing costs. Under the new standard, cost capitalization should only commence when an entity has committed to funding a software project and it is probable the project will be completed and the software will be used for its intended purpose. The amendments are effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. Entities may apply the guidance using a prospective, retrospective or modified transition approach. Early adoption is permitted as of the beginning of an annual reporting period. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.
The Company currently believes there are no other issued and not yet effective accounting standards that are materially relevant to its consolidated financial statements.
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NOTE 4—REVERSE RECAPITALIZATION
On March 13, 2024, the Company consummated the Sunergy business combination described in Note 1—Organization and Nature of Business. Prior to the closing of the transaction, ESGEN domesticated from the Cayman Islands to the State of Delaware and changed its name to Zeo Energy Corp. In connection with the Sunergy business combination, Sunergy and its subsidiaries were contributed to OpCo, and ESGEN contributed substantially all of its assets, including cash held in its trust account after stockholder redemptions, to OpCo in exchange for OpCo common units. Following the transaction, the Company operates under an Up-C organizational structure in which the Company’s principal asset is its equity interest in OpCo.
Legacy OpCo unitholders received OpCo common units together with a corresponding number of shares of the Company’s Class V common stock. The Class V shares provide voting rights but no economic rights and are paired with OpCo common units. The OpCo common units are exchangeable, together with the cancellation of the paired Class V shares, for shares of the Company’s Class A common stock on a one-for-one basis or, at the Company’s election, cash equal to the fair value of such shares.
The Sunergy business combination was accounted for as a reverse recapitalization in accordance with U.S. GAAP, with Sunergy treated as the accounting acquirer and ESGEN treated as the acquired company for financial reporting purposes. As a result, the consolidated financial statements represent a continuation of the historical financial statements of Sunergy, with the net assets of ESGEN recorded at historical cost and no goodwill or other intangible assets recognized in connection with the transaction. The equity structure of the Company was retroactively adjusted to reflect the capital structure of Zeo Energy Corp. Operations prior to March 13, 2024 represent those of Sunergy. Earnings per share for periods prior to the Sunergy business combination have been retroactively adjusted to reflect the capital structure of Zeo Energy Corp.
Transaction Proceeds
Upon closing of the transaction, the Company received
gross proceeds of approximately $
The following table reconciles the elements of the transaction to the consolidated statements of cash flows and consolidated statements of changes in stockholders’ deficit for the year ended December 31, 2024:
| Amount | ||||
| Cash received from trust account, net of redemptions | $ | |||
| Transaction costs and other fees paid | ( | ) | ||
| Sponsor investment in OpCo preferred units | ||||
| Net proceeds from the Sunergy business combination | ||||
| Liabilities assumed | ( | ) | ||
| Reverse recapitalization, net | $ | ( | ) | |
Equity Issued
Immediately following the closing of the Sunergy business combination, the Company had the following shares of common stock outstanding:
| Class V Common Stock | Class A Common Stock | |||||||
| Legacy OpCo unitholders | ||||||||
| Public and founder shares | ||||||||
| Shares issued to advisors and backstop investors | ||||||||
| Sponsor – convertible OpCo preferred units and paired Class V shares | ||||||||
| Total shares outstanding after closing | ||||||||
Warrants
The
F-19
NOTE 5—VARIABLE INTEREST ENTITIES
The Company evaluates its involvement with other entities to determine whether those entities are VIEs and, if so, whether the Company is the primary beneficiary required to consolidate the entity under ASC 810. Based on this evaluation, the Company determined that it holds variable interests in White Horse Energy, LLC (“White Horse”) and Solar Leasing I, LLC (“SLI”). However, the Company concluded that it is not the primary beneficiary of either entity and therefore does not consolidate either entity in its consolidated financial statements.
White Horse Energy, LLC
White Horse is an entity wholly owned and controlled by Tim Bridgewater, the Company’s CEO. White Horse provides management and consulting services across several industries, including commercial solar and energy-related services. Although Tim Bridgewater serves as the Company’s CEO, the Company evaluated whether Mr. Bridgewater acts as a de facto agent of the Company with respect to White Horse under ASC 810-10-25-43 and concluded that he does not. White Horse maintains independent business activities outside of the Company’s operations, and Mr. Bridgewater’s economic interests in White Horse provide an incentive to act independently of the Company when directing White Horse’s activities.
Sunergy, a subsidiary of the Company, extended
a $
Solar Leasing I, LLC
SLI is an entity formed to acquire, own, and lease
residential solar energy systems to homeowners. SLI is owned primarily by third-party investors, including Second Century Ventures and
Nexus Capital Partners (the “investing members”), which collectively hold a
Sunergy provides engineering, procurement, and construction services to SLI. These services are provided at market-based terms consistent with arrangements Sunergy maintains with unrelated third-party customers.
The Company evaluated SLI under the VIE model and concluded that SLI is considered a VIE. SLI is considered a VIE because Tim Bridgewater, the Company’s CEO is also the manager of SLI through his company, White Horse. The Company evaluated whether it is the primary beneficiary of SLI and concluded that it is not the primary beneficiary because (i) the Company does not have the power to direct the activities that most significantly impact SLI’s economic performance, as the investing members hold substantive participating rights, including approval rights over significant expenditures and operating decisions, and (ii) the Company’s economic exposure to SLI includes service fees earned under the engineering, procurement, and construction agreement and related accounts receivable balances, which are at market terms and do not represent exposure to losses or rights to benefits that could potentially be significant to SLI. Accordingly, SLI is not consolidated in the Company’s consolidated financial statements.
Maximum Exposure to Loss
The Company’s maximum exposure to loss associated
with these variable interests is limited to its $
NOTE 6—BUSINESS COMBINATIONS
Heliogen Acquisition
On May 28, 2025, the Company entered into a plan of merger and reorganization agreement with Heliogen, a renewable-energy technology company that provides solutions for delivering low-carbon energy production by combining commercially proven solar technologies with thermal systems and storage expertise. The transaction was completed on August 8, 2025, at which time Heliogen became a wholly owned subsidiary of the Company. The acquisition of Heliogen aligns with the Company’s strategy to expand its clean-energy platform beyond residential markets into large-scale commercial and industrial energy generation and storage. The acquisition is expected to complement the Company’s existing solar operations, create operational synergies, and broaden the Company’s market reach.
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The total consideration transferred consisted
entirely of the Company’s Class A common stock, measured at fair value on the acquisition date. Shares were issued to Heliogen shareholders
at an exchange ratio of
The Company accounted for the acquisition using the acquisition method of accounting in accordance with ASC 805. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values at the acquisition date, with the excess of the purchase price over the fair value of the net assets acquired recorded as goodwill. Goodwill recognized in the transaction is not deductible for tax purposes. The goodwill recognized is primarily attributable to expected operational synergies and the anticipated future growth opportunities from integrating Heliogen’s technology platform with the Company’s existing operations.
The following table summarizes the purchase price allocation as of the acquisition date:
| Purchase Price Allocation | ||||
| Purchase consideration at fair value: | ||||
| Class A common stock | $ | |||
| Assets acquired and liabilities assumed at fair value: | ||||
| Cash | $ | |||
| Accounts receivable | ||||
| Prepaid expenses and other current assets | ||||
| Other assets | ||||
| Operating lease right-of-use assets | ||||
| Goodwill | ||||
| Accounts payable | ( | ) | ||
| Accrued expenses | ( | ) | ||
| Operating lease liabilities | ( | ) | ||
| Net assets acquired | $ | |||
The Company evaluated whether any identifiable intangible assets met the recognition criteria under ASC 805 and concluded that no separately identifiable intangible assets were recognized in connection with the transaction.
From the date of acquisition, Heliogen contributed
revenues of $
Pro Forma Information
The following unaudited pro forma results include the effects of the Heliogen acquisition as if it had been consummated on January 1, 2024. The unaudited pro forma information includes adjustments to give effect to pro forma events that are directly attributable to the acquisition.
| Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Net revenues | $ | $ | ||||||
| Net income (loss) | ( | ) | ||||||
| Net income (loss) attributable to Class A common stockholders | ( | ) | ||||||
| Earnings (loss) per share attributable to common stockholders – basic and diluted | $ | ( | ) | $ | ||||
These unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of the results of operations that would have occurred if the acquisition had been completed at the beginning of the period presented, nor are they indicative of the Company’s future results of operations.
NOTE 7—ASSET ACQUISITIONS
Lumio Asset Purchase
On October 25, 2024, the Company completed the acquisition of certain assets from Lumio Holdings, Inc. and Lumio HX, Inc. (collectively, the “Lumio Sellers”) pursuant to an asset purchase agreement. The assets acquired primarily consisted of uninstalled residential solar energy customer contracts, inventory, equipment, intellectual property rights, customer records, and other related assets associated with Lumio’s residential solar operations. The Lumio Sellers were debtors in a voluntary Chapter 11 bankruptcy proceeding before the United States Bankruptcy Court for the District of Delaware at the time of the transaction.
Total consideration transferred in the transaction
consisted of $
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Based on this evaluation, the Company concluded that the acquired assets did not meet the definition of a business under U.S. GAAP because the Company did not acquire an assembled workforce or a substantive process capable of producing outputs.
Accordingly, the transaction was accounted for as an asset acquisition rather than a business combination. Under asset acquisition accounting, the total purchase consideration was allocated to the assets acquired and liabilities assumed on a relative fair value basis. No goodwill was recognized in the transaction.
The allocation of the purchase consideration to the assets acquired and liabilities assumed is summarized below:
| Purchase Price Allocation | ||||
| Purchase consideration at fair value: | ||||
| Cash | $ | |||
| Class A common stock | ||||
| Liabilities assumed | ||||
| Amount of consideration | $ | |||
| Assets acquired: | ||||
| Accounts receivable | $ | |||
| Inventory | ||||
| Property and equipment | ||||
| Customer-related intangible (order backlog) | ||||
| Net assets acquired | $ | |||
The Company determined the fair value of the order
backlog intangible asset using the multi-period excess earnings method, which estimates the present value of the incremental after-tax
cash flows expected to be generated from the backlog over its remaining economic life. Key assumptions used in the valuation included
projected revenues from the underlying solar contracts, estimated probability of contract cancellation, and an appropriate discount rate.
The valuation applied an estimated weighted-average cost of capital of
NOTE 8—DISAGGREGATION OF REVENUES AND SEGMENT REPORTING
Disaggregation of Revenues
The Company’s revenues are disaggregated based on revenue type, including (i) solar system installations, (ii) roofing installations, and (iii) energy storage solutions.
The Company’s net revenues for the years ended December 31, 2025 and 2024 are disaggregated as follows:
| Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Solar system installations, net | $ | $ | ||||||
| Roofing installations | ||||||||
| Energy storage solutions | ||||||||
| Total net revenues | $ | $ | ||||||
For the years ended December 31, 2025 and 2024, the Company had three
customers that accounted for more than 10% of revenue. Aggregate revenue from these customers was $
F-22
Segment Reporting
The Company reports segment information in accordance with ASC 280. Operating segments are defined as components of an enterprise for which separate financial information is available and whose operating results are regularly reviewed by the Company’s CODM to allocate resources and assess performance.
Following the acquisition of Heliogen on August
8, 2025, the Company reassessed its segment structure and determined that it operates in
The CODM evaluates segment performance and allocates resources based on the operating results of each reportable segment, including revenues, cost of revenues, operating expenses, and net loss.
Prior to the acquisition of Heliogen on August 8, 2025, the Company operated as a single operating and reportable segment consisting of its solar installation and related services operations.
Corporate public company costs and other activities that are not allocated to Heliogen are included within the Sunergy segment.
Segment information for the years ended December 31, 2025 and 2024 is as follows:
| For the Year Ended December 31, 2025 | ||||||||||||
| Sunergy | Heliogen | Total | ||||||||||
| Net revenues | $ | $ | $ | |||||||||
| Less: cost of revenues (exclusive of depreciation and amortization shown below): | ||||||||||||
| Direct labor | ( | ) | ||||||||||
| Materials | ( | ) | ||||||||||
| Other | ||||||||||||
| Cost of revenues (exclusive of depreciation and amortization): | ( | ) | ||||||||||
| Less: depreciation and amortization related to cost of revenues | ||||||||||||
| Total gross profit | $ | $ | $ | |||||||||
| Depreciation and amortization | ||||||||||||
| Commissions expense | ||||||||||||
| Sales and marketing (exclusive of commissions expense above) | ||||||||||||
| General and administrative | ||||||||||||
| Other income | ( | ) | ( | ) | ( | ) | ||||||
| Interest expense | ||||||||||||
| Gain on change in fair value of warrant liabilities | ( | ) | ( | ) | ||||||||
| Total net loss before income taxes | ( | ) | ( | ) | ( | ) | ||||||
| Income tax benefit (provision) | ( | ) | ( | ) | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
F-23
| For the Year Ended December 31, 2024 | ||||||||||||
| Sunergy | Heliogen | Total | ||||||||||
| Net revenues | $ | $ | $ | |||||||||
| Less: cost of revenues (exclusive of depreciation and amortization shown below): | ||||||||||||
| Direct labor | ||||||||||||
| Materials | ||||||||||||
| Other | ||||||||||||
| Cost of revenues (exclusive of depreciation and amortization): | ||||||||||||
| Less: depreciation and amortization related to cost of revenues | ||||||||||||
| Total gross profit | $ | $ | $ | |||||||||
| Depreciation and amortization | ||||||||||||
| Commissions expense | ||||||||||||
| Sales and marketing (exclusive of commissions expense above) | ||||||||||||
| General and administrative | ||||||||||||
| Other income | ( | ) | ( | ) | ||||||||
| Interest expense | ||||||||||||
| Gain on disposal of property and equipment | ( | ) | ( | ) | ||||||||
| Gain on change in fair value of warrant liabilities | ( | ) | ( | ) | ||||||||
| Total net loss before income taxes | ( | ) | ( | ) | ||||||||
| Income tax benefit (provision) | ||||||||||||
| Net loss | $ | ( | ) | $ | $ | ( | ) | |||||
NOTE 9—PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets as of December 31, 2025 and 2024 consisted of the following:
| December 31, 2025 | December 31, 2024 | |||||||
| Prepaid expenses | $ | $ | ||||||
| Deferred installation material costs | ||||||||
| Receivable related to Lumio asset purchase | ||||||||
| Tax receivables | ||||||||
| Employee receivables and advances on sales commissions | ||||||||
| Lease deposit | ||||||||
| Total prepaid expenses and other current assets | $ | $ | ||||||
NOTE 10—PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 2025 and 2024 consisted of the following:
| December 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Internally-developed software | $ | $ | ||||||
| Office furniture and equipment | ||||||||
| Vehicles | ||||||||
| Leasehold improvements | ||||||||
| Total property and equipment | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Total property and equipment, net | $ | $ | ||||||
Depreciation expense for the years ended December
31, 2025 and 2024 was $
F-24
NOTE 11—INTANGIBLE ASSETS AND GOODWILL
Intangible assets as of December 31, 2025 and 2024 consisted of the following:
| December 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Trade names | $ | $ | ||||||
| Customer lists | ||||||||
| Non-compete agreements | ||||||||
| Order backlog | ||||||||
| Total intangible assets | ||||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| Total intangible assets, net | $ | $ | ||||||
Amortization expense for intangible assets for
the years ended December 31, 2025 and 2024 was $
The following table summarizes the changes in the carrying amount of goodwill for the years ended December 31, 2025 and 2024:
| Amount | ||||
| Balance as of December 31, 2023 | $ | |||
| Impairment losses | ||||
| Balance as of December 31, 2024 | $ | |||
| Goodwill recognized in connection with the acquisition of Heliogen | ||||
| Impairment losses | ||||
| Balance as of December 31, 2025 | $ | |||
NOTE 12—ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities as of December 31, 2025 and 2024 consisted of the following:
| December 31, 2025 | December 31, 2024 | |||||||
| Accrued payroll liabilities | $ | $ | ||||||
| Accrued commissions | ||||||||
| Accrued interest | ||||||||
| Accrued taxes | ||||||||
| Accrued credit cards | ||||||||
| Accrued transaction costs | ||||||||
| Other accrued liabilities | ||||||||
| Total accrued expenses and other current liabilities | $ | $ | ||||||
Accrued expenses and other current liabilities – related parties as of December 31, 2025 and 2024 consisted of the following:
| December 31, 2025 | December 31, 2024 | |||||||
| Customer advances | $ | $ | ||||||
| Total accrued expenses and other current liabilities – related parties | $ | $ | ||||||
F-25
NOTE 13—LEASES
Operating Leases
In November 2021, the Company entered into a lease
agreement for office space located in New Port Richey, Florida. The lease commenced on November 4, 2021 and is for a term of
In June 2023, the Company entered into a lease
agreement for office space located in Orlando, Florida. The lease commenced on June 1, 2023 and is for a term of
In July 2024, the Company entered into a lease
agreement for office space located in Provo, Utah. The lease commenced on July 1, 2024 and is for a term of
In October 2024, the Company entered into a lease
agreement for office space located in Euclid, Ohio. The lease commenced on October 1, 2024 and is for a term of
In June 2025, the Company entered into a lease
agreement for office space located in Richmond, Virginia. The lease commenced on June 1, 2025 and is for a term of
In July 2025, the Company entered into a lease
agreement for office space located in Sardinia, Ohio. The lease commenced on July 1, 2025 and is for a term of
In August 2025, in connection with the acquisition
of Heliogen, the Company entered into a lease agreement for office space located in Houston, Texas. The lease commenced on August 8, 2025
and is for a term of
Operating leases as of December 31, 2025 and 2024 consisted of the following:
| December 31, 2025 | December 31, 2024 | |||||||
| Operating lease right-of-use assets | $ | $ | ||||||
| Operating lease liabilities, current portion | ||||||||
| Operating lease liabilities, long-term | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
| Weighted-average remaining lease term (years) | ||||||||
| Weighted-average discount rate | % | % | ||||||
F-26
The components of operating lease expense consist of the following for the years ended December 31, 2025 and 2024:
| December 31, 2025 | December 31, 2024 | |||||||
| Fixed operating lease expense | $ | $ | ||||||
| Short-term and variable operating lease expense | ||||||||
| Total operating lease expense | ||||||||
| Sublease income | ( | ) | ||||||
| Total net operating lease expense | $ | $ | ||||||
For the years ended December 31, 2025 and 2024,
cash paid for amounts included in the measurement of operating lease liabilities totaled $
As of December 31, 2025, future minimum lease payments under operating lease liabilities were as follows:
| Year Ending December 31, | Amount | |||
| 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| Total | ||||
| Less: imputed interest | ( | ) | ||
| Total operating lease liabilities | $ | |||
Finance Leases
The Company leases vehicles for its operations
under finance leases. These leases generally have
Finance leases ROU assets and liabilities as of December 31, 2025 and 2024 consisted of the following:
| December 31, 2025 | December 31, 2024 | |||||||
| Finance lease right-of-use assets | $ | $ | ||||||
| Finance lease liabilities, current portion | ||||||||
| Finance lease liabilities, long-term | ||||||||
| Total finance lease liabilities | $ | $ | ||||||
| Weighted-average remaining lease term (years) | ||||||||
| Weighted-average discount rate | % | % | ||||||
Finance lease costs included in depreciation and
amortization in the consolidated statements of operations were $
As of December 31, 2025, future minimum lease payments under finance leases were as follows:
| Year Ending December 31, | Amount | |||
| 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| Total | ||||
| Less: imputed interest | ( | ) | ||
| Total finance lease liabilities | $ | |||
F-27
NOTE 14—DEBT
Vehicle Loans
The Company has financing arrangements for certain
vehicles used in its operations. These financing arrangements consist of direct loans associated with individual vehicles in the Company’s
fleet. Payments of debt obligations are based on equal monthly payments for 60 months and include interest rates ranging from
As of December 31, 2025, estimated future minimum principal payments of vehicle loans were as follows:
| Year Ending December 31, | Amount | |||
| 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| Total | ||||
| Less: current portion | ( | ) | ||
| Total long-term debt | $ | |||
Loan Payable
On July 1, 2025, the Company converted $
Convertible Note Payable
On December 24, 2024, the Company issued a convertible
promissory note (the “Promissory Note”) to LHX Intermediate LLC (“LHX”) with a maximum borrowing capacity of $
The Company received proceeds of $
On October 30, 2025, the outstanding balance of
the Promissory Note totaling $
F-28
NOTE 15—COMMITMENTS AND CONTINGENCIES
Workmanship and Warranties
The Company typically provides workmanship warranties
for solar energy systems installed for customers for periods ranging from one to ten years against defects in design and workmanship and
that installations will remain watertight. The manufacturers’ warranties on solar energy system components are generally passed
through to customers and typically include product warranty periods ranging from
Based on historical experience, the Company has not incurred significant warranty costs associated with these obligations. Accordingly, no warranty reserve was recorded as of December 31, 2025 and 2024. The Company continues to evaluate warranty claims on an ongoing basis and may, at its discretion, provide reimbursements to customers if certain solar equipment does not operate as intended.
Litigation
From time to time, the Company may be involved in various claims, lawsuits, and legal proceedings arising in the ordinary course of business. The Company records a liability for loss contingencies when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated in accordance with ASC 450.
As of December 31, 2025 and 2024, the Company was not aware of any pending or threatened legal proceedings that it believes would have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows. Legal costs associated with loss contingencies are expensed as incurred.
NOTE 16—RELATED PARTY TRANSACTIONS
Solar Leasing Arrangements
Certain customers of the Company finance their solar energy system purchases through SLI. These arrangements are substantially similar to those with unrelated third-party financing providers. Under these arrangements, SLI deducts financing fees and remits the net proceeds to the Company upon completion of the related solar installation.
For the years ended December 31, 2025 and 2024,
the Company recognized revenue of $
In August 2024, the Company entered into a guarantee
of SLI’s obligations under a Business Loan Agreement between SLI and a bank for borrowings up to $
Note Receivable
During 2024, SLI performed a fair-market-value
assessment of certain lease assets. As a result of this assessment, SLI paid a discretionary rebate of $
F-29
For the years ended December 31, 2025 and 2024,
the Company recognized interest income of $
Tax Receivable Agreement
In connection with the consummation of the Sunergy
business combination on March 13, 2024, the Company entered into a TRA with OpCo and certain OpCo members (the “TRA Holders”).
Pursuant to the TRA, the Company is required to pay the TRA Holders
As of December 31, 2025, the Company had not recorded
a liability related to the TRA because realization of the related tax benefits was not considered more likely than not. The estimated
unrecorded TRA liability was approximately $
NOTE 17—REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
The table below reflects share information about the Company’s capital stock as of December 31, 2025:
| Par Value | Authorized | Issued | Treasury Stock | Outstanding | ||||||||||||||||
| Class A common stock | $ | |||||||||||||||||||
| Class V common stock | $ | |||||||||||||||||||
| Preferred stock | $ | |||||||||||||||||||
| Class A convertible preferred units | $ | |||||||||||||||||||
| Class A units | $ | |||||||||||||||||||
| Class B units | $ | |||||||||||||||||||
| Total shares | ||||||||||||||||||||
Class A common stock, Class V common stock, and preferred stock represent capital stock of Zeo. Class A convertible preferred units, Class A units, and Class B units represent limited liability company interests of OpCo. Class A convertible preferred units are held by the Sponsor and are classified as redeemable noncontrolling interests on the consolidated balance sheet. Class B units are exchangeable for shares of Class A common stock on a one-for-one basis, together with cancellation of an equal number of shares of Class V common stock, and are classified as redeemable noncontrolling interests on the consolidated balance sheet. Class A units are held by Zeo as managing member of OpCo and are eliminated in consolidation.
Class A Common Stock
During the year ended December 31, 2025,
During the year ended December 31, 2025, an aggregate
of
On March 13, 2025,
F-30
On August 5, 2025,
On August 8, 2025, in connection with the acquisition
of Heliogen, the Company issued
On August 11, 2025, the Company issued
On October 30, 2025, the outstanding balance of
the Promissory Note totaling $
Redeemable Noncontrolling Interests
During the year ended December 31, 2025,
As of December 31, 2025 and 2024, the noncontrolling
interest holders owned approximately
The OpCo amended and restated agreement provides, among other things, for the issuance of corresponding economic, non-voting Class B units of OpCo. Holders of exchangeable OpCo units may cause OpCo to redeem one or more units, together with the cancellation of a corresponding number of shares of the Company’s Class V common stock, for shares of the Company’s Class A common stock on a one-for-one basis, subject to certain restrictions. Under certain circumstances, the Company may be required to redeem OpCo units. Subject to certain conditions, the Class A convertible preferred OpCo units may be redeemed by the Company following the first anniversary of closing and converted by the Sponsor into exchangeable OpCo units, which may then be exchanged for Class A common stock.
The Class A convertible preferred units accrue
distributions at a rate of
NOTE 18—STOCK-BASED COMPENSATION
2024 Omnibus Incentive Plan
On March 6, 2024, the shareholders of ESGEN approved
the Zeo 2024 Omnibus Incentive Equity Plan (the “Incentive Plan”), which became effective upon the closing of the Sunergy
business combination. A total of
The Plan Share Reserve automatically increases
on the first day of each fiscal year beginning in 2025 through 2029 by a number of shares equal to the lesser of (i)
F-31
March 2024 Grant
On March 13, 2024, the Company entered into an executive employment agreement with its CEO. In addition to the CEO’s annual salary and cash bonus, the CEO became eligible to receive certain equity awards under the Incentive Plan as follows:
| ● | ||
| ● | ||
| ● |
The Company determined the grant date fair value
to be $
Further, if, within three (
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:
| Fair Value Summary | Tranche 1 | Tranche 2 | Tranche 3 | |||||||||
| Tranche per unit fair value | $ | $ | $ | |||||||||
| Stock price on valuation date | $ | $ | $ | |||||||||
| Derived service period | ||||||||||||
During the years ended December 31, 2025 and 2024,
the Company recognized $
February 2025 Grants
On February 5, 2025, the Company granted an aggregate
of
| ● | One-third (1/3) | |
| ● | One-third (1/3) | |
| ● | One-third (1/3) |
F-32
On February 5, 2025, the Company granted an aggregate
of
| ● | One-third (1/3) | |
| ● | One-third (1/3) | |
| ● | One-third (1/3) |
The Company determined the grant date fair value
to be $
During the year ended December 31, 2025, the Company
recognized $
July 2025 Grants
On July 5, 2025, the Company granted an aggregate
of
| ● | One-third (1/3) | |
| ● | One-third (1/3) | |
| ● | One-third (1/3) |
The Company determined the grant date fair value
to be $
During the year ended December 31, 2025, the Company
recognized $
November 2025 Grants
On November 5, 2025, the Company granted an aggregate
of
| ● | One-third (1/3) | |
| ● | One-third (1/3) | |
| ● | One-third (1/3) |
The Company determined the grant date fair value
to be $
During the year ended December 31, 2025, the Company
recognized $
Sun Managers, LLC Management Incentive Plan
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 entirety (the “OpCo A&R LLC Agreement”)) the exchange of their Class B units into Seller OpCo Units (together with an equal number of Zeo 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.
F-33
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 LLC Agreement, the Company allocates
On March 31, 2025, Sun Managers granted an aggregate
of
On August 4, 2025, Sun Managers granted an aggregate
of
On August 13, 2025, Sun Managers granted an aggregate
of
On September 17, 2025, Sun Managers granted an
aggregate of
Seasonal Manager Stock Compensation Plan
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
The managers become eligible to receive certain grants of vested shares under the Seasonal Manager Stock Compensation Plan as follows:
| ● | ||
| ● | The remaining |
F-34
On March 31, 2025, Sun Managers granted an aggregate
of
| ● | One-half (1/2) immediately on the grant date; and | |
| ● | One-half (1/2) |
During the year ended December 31, 2025, the Company
recognized $
NOTE 19—WARRANTS
In connection with ESGEN’s initial public
offering (“IPO”), ESGEN issued public warrants to investors. Each public warrant entitles the holder to purchase
Simultaneously with the closing of the IPO, ESGEN
issued private placement warrants to the sponsor and certain investors. Each private warrant entitled the holder to purchase
The public warrants are accounted for as warrant liabilities in accordance with ASC 815. Accordingly, the Company recognized the warrants as liabilities at fair value on the date of the Sunergy business combination and remeasures the warrant liabilities to fair value at each reporting date. Changes in the fair value of the warrant liabilities are recognized in the consolidated statements of operations within changes in fair value of warrant liabilities. As of December 31, 2025 and 2024, the public warrants are presented as warrant liabilities in the consolidated balance sheets. See Note 20—Fair Value Measurements for additional information
NOTE 20—FAIR VALUE MEASUREMENTS
The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, inventories, prepaid expenses and other current assets, accounts payable, accrued expenses, and contract assets and liabilities, approximate fair value due to the short-term nature of these instruments.
The carrying amounts of lease liabilities and notes payable also approximate fair value as these instruments bear interest rates that are consistent with current market rates for similar instruments.
Recurring Fair Value Measurements
The Company measures certain financial instruments at fair value on a recurring basis. As of December 31, 2025, the Company’s financial instruments measured at fair value on a recurring basis consist of warrant liabilities. See Note 19—Warrants for additional information.
F-35
The fair value of financial instruments measured at fair value on a recurring basis as of December 31, 2025 consisted of the following:
| Fair Value Measurements as of December 31, 2025 | ||||||||||||||||
| Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Warrant liabilities | $ | $ | $ | $ | ||||||||||||
The following table presents changes in the Company’s warrant liabilities measured at fair value on a recurring basis:
| Amount | ||||
| Warrant Liabilities | ||||
| Balance as of December 31, 2023 | $ | |||
| Fair value of warrant liabilities upon issuance | ||||
| Gain on change in fair value of warrant liabilities | ( | ) | ||
| Extinguishment of warrant liabilities upon settlement | ||||
| Balance as of December 31, 2024 | $ | |||
| Gain on change in fair value of warrant liabilities | ( | ) | ||
| Extinguishment of warrant liabilities upon settlement | ||||
| Balance as of December 31, 2025 | $ | |||
NOTE 21—INCOME TAXES
The Company accounts for income taxes in accordance with ASC 740, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements. Deferred tax assets and liabilities are determined based on differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities and are measured using enacted tax rates expected to apply in the years in which those temporary differences are expected to reverse.
The Company’s effective tax rate from continuing
operations was a (
The Company evaluated the realizability of its deferred tax assets based on all available positive and negative evidence. Based on this evaluation, the Company determined that it is not more likely than not that certain deferred tax assets will be realized and therefore recorded a valuation allowance against those deferred tax assets as of December 31, 2025.
F-36
Due to the Company’s Up-C organizational structure, a portion of the Company’s earnings is attributable to noncontrolling interests in OpCo, which is treated as a partnership for U.S. federal income tax purposes. Accordingly, income attributable to these noncontrolling interests is generally not subject to corporate-level income taxes, which reduces the Company’s overall effective tax rate.
The components for the provision of income taxes include:
| December 31, 2025 | December 31, 2024 | |||||||
| Current Federal and State | $ | ( | ) | $ | ( | ) | ||
| Deferred Federal and State | ( | ) | ||||||
| Total benefit (provision) for income taxes | $ | ( | ) | $ | ||||
A reconciliation of the statutory US Federal income tax rate to the Company’s effective income tax rate is as follows:
| December 31, 2025 | December 31, 2024 | |||||||
| Federal tax | % | % | ||||||
| State tax | ( | )% | % | |||||
| Investment in OpCo | ( | )% | ( | )% | ||||
| Noncontrolling interest in OpCo | ( | )% | ( | )% | ||||
| Income attributable to Sunergy prior to business combination | ( | )% | ||||||
| Other | ( | )% | ( | )% | ||||
| Change in valuation allowance | ( | ) | ||||||
| Remeasurement of warrant liability | % | % | ||||||
| Effective income tax rate | ( | )% | % | |||||
The components of the deferred income tax assets and liabilities were as follows:
| December 31, 2025 | December 31, 2024 | |||||||
| Deferred tax assets: | ||||||||
| Net operating losses and tax credit carry-forward | $ | $ | ||||||
| Accrued stock compensation | ||||||||
| Accrued liabilities | ||||||||
| Section 743(b) | ||||||||
| Other | ||||||||
| Investment in Sunergy | ||||||||
| Total deferred tax assets | ||||||||
| Valuation allowance | ( | ) | ||||||
| Net deferred tax asset | $ | $ | ||||||
| Deferred tax liabilities: | ||||||||
| Investment in Sunergy | ( | ) | ||||||
| Total deferred tax liabilities | ( | ) | ||||||
| Net deferred tax assets | $ | $ | ||||||
In connection with the Sunergy business combination, the Company recorded deferred tax assets and liabilities related to the difference between the book carrying value of its investment in OpCo and the tax basis of that investment. The resulting deferred tax liability was partially offset by deferred tax assets generated in the transaction. The net impact resulted in the recognition of deferred tax benefits in the consolidated statement of operations and a corresponding adjustment to additional paid-in capital related to the reverse recapitalization accounting.
NOTE 22—NET LOSS PER SHARE
Basic net loss per share is calculated by dividing net loss attributable to Class A common stockholders by the weighted-average number of Class A common shares outstanding during the period. Diluted net loss per share is calculated by adjusting the weighted-average number of Class A common shares outstanding for the potentially dilutive effect of securities that could be converted into or settled in shares of Class A common stock. Potentially dilutive securities include exchangeable OpCo units and other instruments that may be settled in shares of Class A common stock.
F-37
The Company applies the treasury stock method to restricted stock awards and warrants, which assumes that all Class A common share equivalents have been exercised at the beginning of the period and that the proceeds from those exercises are assumed to be used to repurchase Class A common shares at the average closing market price during the period. The Company applies the if-converted method to securities that are convertible into Class A common shares.
For the years ended December 31, 2025 and 2024,
the Company reported a net loss. Accordingly, all potentially dilutive securities were excluded from the calculation of diluted net loss
per share because their effect would be anti-dilutive, and diluted net loss per share equals basic net loss per share. As of December
31, 2025 and 2024,
The following table presents the computation of the basic and diluted loss per share of Class A common stock for the years ended December 31, 2025 and 2024:
| Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Numerator | ||||||||
| Net loss attributable to Class A common stockholders | $ | ( | ) | $ | ( | ) | ||
| Denominator | ||||||||
| Weighted-average Class A common shares outstanding – basic and diluted | ||||||||
| Loss per Class A common share – basic and diluted | $ | ( | ) | $ | ( | ) | ||
NOTE 23—SUBSEQUENT EVENTS
On January 27, 2026, the Company entered into
the White Lion ELOC with White Lion Capital LLC (“White Lion”), pursuant to which the Company has the right, but not the obligation,
to sell to White Lion up to $
On January 30, 2026, the Company increased the
subordinated loan in the form of a note receivable with White Horse Energy, LLC from $
F-38