UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2026
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 001-40927
ZEO ENERGY CORP.
(Exact name of registrant as specified in its charter)
7625 Little Rd, Suite 200A,
New Port Richey, FL
Registrant’s telephone number, including area code: (727) 375-9375
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
As of May 13, 2026, 35,139,912 shares of Class A Common Stock, par value $0.0001, were issued and outstanding and 22,880,000 shares of Class V Common Stock, par value $0.0001, were issued and outstanding.
Quarterly Report on Form 10-Q
Period Ended March 31, 2026
TABLE OF CONTENTS
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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CONDENSED CONSOLIDATED BALANCE SHEETS
The accompanying notes are an integral part of these condensed consolidated financial statements.
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLENONCONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE MONTHS ENDED MARCH 31, 2025
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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLENONCONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2026
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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Zeo Energy Corp.
Notes to the CONDENSED Consolidated Financial Statements
March 31, 2026
NOTE 1—BASIS OF PRESENTATION AND OTHER INFORMATION
The accompanying unaudited condensed consolidated financial statements of Zeo Energy Corp. (the “Company” or “Zeo”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q of Regulation S-X. They do not include all the information and footnotes required by U.S. GAAP for complete financial statements. The December 31, 2025 consolidated balance sheet data was derived from audited financial statements but do not include all disclosures required by U.S. GAAP. The interim unaudited condensed consolidated financial statements should be read in conjunction with those consolidated financial statements included in the Form 10-K, as filed with the Securities and Exchange Commission on April 1, 2026. In the opinion of management, all adjustments considered necessary for a fair presentation of the financial statements, consisting solely of normal recurring adjustments, have been made. Operating results for the three months ended March 31, 2026 are not necessarily indicative of the results that may be expected for the year ending December 31, 2026.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current period presentation of the condensed consolidated financial statements. These reclassifications had no impact on previously reported net loss, total assets, total liabilities, stockholders’ equity, or cash flows from operating activities.
Recently Adopted Accounting Pronouncements
In November 2024, the FASB issued ASU 2024-04, “Debt—Debt with Conversion and Other Options,” which clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. The new guidance is effective for reporting annual periods beginning after December 15, 2025 and can be applied either prospectively or retrospectively. Early adoption is permitted. The adoption of ASU 2024-04 did not have a material impact on the Company’s condensed consolidated financial statements.
In July 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 adoption of ASU 2025-05 did not have a material impact on the Company’s condensed 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 ASU 2024-03 will have on its condensed 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 ASU 2025-03 will have on its condensed 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 ASU 2025-06 will have on its condensed consolidated financial statements.
In December 2025, the FASB issued ASU 2025-11, “Interim Reporting (Topic 270): Narrow-Scope Improvements.” ASU 2025-11 clarifies and improves existing interim reporting guidance by consolidating disclosure requirements within Topic 270 and introducing a disclosure principle requiring entities to disclose events and changes occurring after the most recent annual reporting period that are expected to have a material effect on the entity’s financial condition or results of operations. The ASU does not introduce significant changes to recognition or measurement guidance. The amendments in ASU 2025-11 are effective for interim reporting periods within fiscal years beginning after December 15, 2027, with early adoption permitted. ASU 2025-11 allows for either a prospective or retrospective approach on adoption. The Company is currently evaluating the impact ASU 2025-11 will have on its condensed consolidated financial statements.
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The Company currently believes there are no other issued and not yet effective accounting standards that are materially relevant to its condensed consolidated financial statements.
NOTE 2—LIQUIDITY AND GOING CONCERN ASSESSMENT
As of March 31, 2026, the Company had cash and cash equivalents of $1.7 million, positive working capital of $7.9 million, and total stockholders’ equity of $13.7 million. For the three months ended March 31, 2026, the Company incurred a net loss of $4.7 million and $0.9 million of cash used in operating activities. Management has assessed the going concern assumptions of the Company during the preparation of these condensed consolidated financial statements.
The Company has operational plans to increase revenue and move towards the goal of profitable operations in 2026, which plans 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.
The Company is also working internally and with third parties to address 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 $30.0 million in shares of Class A common stock, subject to market liquidity and contractual limitations. The White Lion ELOC is limited to selling shares equal to 4.99% of the outstanding shares at the time of sale and resets once White Lion Capital LLC liquidates their holdings in the open market (see Note 10—Redeemable Noncontrolling Interests and Equity for additional information). The Company also has other opportunities to raise capital, such as through revenue generating initiatives, private placements, public offerings or repricing of outstanding warrants. In addition, in June 2026 the Company will become eligible to utilize a universal shelf registration statement to raise funding for the Company.
The Company’s condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the generation of revenue, access to capital markets or other funding sources, realization of assets and the satisfaction of liabilities in the normal course of business.
NOTE 3—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 three months ended March 31, 2026 and 2025 are disaggregated as follows:
For the three months ended March 31, 2026 and 2025, the Company had two and four customers, respectively, that accounted for more than 10% of revenue. Aggregate revenue from these customers was $7,973,865and $7,276,203 for the three months ended March 31, 2026 and 2025, respectively.
Segment Reporting
The Company operates in two operating and reportable segments: (1) Sunergy, which includes the design, procurement, installation, and servicing of residential solar photovoltaic systems and related roofing services; and (2) Heliogen, which includes concentrated solar power and long-duration energy generation and storage technology solutions for commercial and industrial applications.
The Chief Operating Decision Maker (“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.
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Segment information for the three months ended March 31, 2026 and 2025 is as follows:
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NOTE 4—PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets as of March 31, 2026 and December 31, 2025 consisted of the following:
NOTE 5—PROPERTY AND EQUIPMENT
Property and equipment as of March 31, 2026 and December 31, 2025 consisted of the following:
Depreciation expense for the three months ended March 31, 2026 and 2025 was $1,047,410 and $219,259, respectively.
During the three months ended March 31, 2026, the Company committed to a plan to abandon certain internally-developed software that had been placed into service. In accordance with ASC 350-40, the Company reassessed the remaining useful life of the software and accelerated the amortization to reflect the shortened period of expected use. As a result, the Company recognized additional depreciation expense of $833,014 during the three months ended March 31, 2026, which reduced the net carrying value of the internally-developed software to zero. The gross cost of $1,286,879 and related accumulated depreciation were removed from the condensed consolidated balance sheet upon retirement of the asset.
NOTE 6—ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities as of March 31, 2026 and December 31, 2025 consisted of the following:
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Accrued expenses and other current liabilities – related parties as of March 31, 2026 and December 31, 2025 consisted of the following:
NOTE 7—LEASES
Operating Leases
Operating leases as of March 31, 2026 and December 31, 2025 consisted of the following:
The components of operating lease expense consist of the following for the three months ended March 31, 2026 and 2025:
For the three months ended March 31, 2026 and 2025, cash paid for amounts included in the measurement of operating lease liabilities totaled $192,763 and $180,784, respectively.
As of March 31, 2026, future minimum lease payments under operating lease liabilities were as follows:
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Finance Leases
Finance leases ROU assets and liabilities as of March 31, 2026 and December 31, 2025 consisted of the following:
Finance lease costs included in depreciation and amortization in the condensed consolidated statements of operations were $34,118 and $34,119 for the three months ended March 31, 2026 and 2025, respectively. Interest expense related to finance leases was $8,717 and $11,174 for the three months ended March 31, 2026 and 2025, respectively. For the three months ended March 31, 2026 and 2025, cash paid for amounts included in the measurement of finance lease liabilities and interest expense totaled $42,893 and $42,870, respectively.
As of March 31, 2026, future minimum lease payments under finance leases were as follows:
NOTE 8—RELATED PARTY TRANSACTIONS
Solar Leasing Arrangements
Certain customers of the Company finance their solar energy system purchases through Solar Leasing I, LLC (“SLI”). These arrangements are substantially similar to those with unrelated third-party financing providers.
For the three months ended March 31, 2026 and 2025, the Company recognized related party revenue of $1,029,423 and $2,567,304, respectively. As of March 31, 2026 and December 31, 2025, the Company had accounts receivable of $765,757 and $611,807, respectively, due from SLI related to these arrangements.
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 $10 million. The loan is also personally guaranteed by the Company’s CEO, who serves as the manager of SLI through White Horse Energy, LLC (“White Horse”). As of March 31, 2026 and December 31, 2025, the outstanding balance under the loan was $9,937,246 and $9,976,752, respectively.
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Note Receivable
During 2025, SLI performed a fair-market-value assessment of certain lease assets. As a result of this assessment, SLI paid a discretionary rebate of $3,150,000 to the Company based on the excess of fair value over the carrying value of the assets. The Company subsequently transferred the rebate proceeds as a subordinated loan, recorded as a note receivable from White Horse.
On January 30, 2026, 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.
For the three months ended March 31, 2026 and 2025, the Company recognized interest income of $39,584 and $37,656, respectively, related to the note receivable, which is included in other income in the condensed consolidated statements of operations. As of March 31, 2026, the outstanding principal balance of the loan was $6,150,000 with accrued interest of $193,069. As of December 31, 2025, the outstanding principal balance of the loan was $3,000,000 with accrued interest of $153,485. The outstanding principal and accrued interest balances are included in note receivable – related parties in the condensed consolidated balance sheets.
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 85% of the net cash savings, if any, in U.S. federal, state, and local income and franchise taxes that the Company actually realizes, or is deemed to realize in certain circumstances, as a result of increases in tax basis and certain other tax attributes arising from the Sunergy business combination and related transactions.
As of March 31, 2026, 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 $4.6 million as of March 31, 2026 and $5.7 million as of December 31, 2025. If realization of the related tax benefits becomes more likely than not in future periods, the Company will record a liability related to the TRA with a corresponding charge to expense in the condensed consolidated statements of operations.
NOTE 9—COMMITMENTS AND CONTINGENCIES
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.
On July 3, 2025, the Company filed a civil complaint in the California Superior Court, Riverside County, in an action captioned Zeo Energy Corp. v. SolWerks, Inc. and SolKraft, Inc., Case No. CVME2507379. The complaint asserts a claim for breach of contract and nonpayment of no less than $955,914 for residential solar installation services performed between 2020 and 2024. The Company is the successor-in-interest to Lift Energy Construction, Inc. and Lumio HX, Inc., having acquired all rights under the parties’ Master Installation Agreement and related accounts receivable pursuant to a November 1, 2024 bankruptcy sales order. The parties are currently engaged in discovery and the defendants have asserted no counterclaims at this time. The Company anticipates recovery from SolKraft; however, it is too early to assess the likely outcome or range of potential recovery as of March 31, 2026.
As of March 31, 2026 and December 31, 2025, the Company was not aware of any pending or threatened legal proceedings against the Company 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
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NOTE 10—REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
The table below reflects share information about the Company’s capital stock as of March 31, 2026:
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 condensed 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 condensed 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 three months ended March 31, 2026,1,500,000 shares of Class A common stock were issued in exchange for OpCo Class B units and the cancellation of corresponding shares of Class V common stock.
During the three months ended March 31, 2026,31,793 shares of Class A common stock were issued to an employee for services valued at $31,315.
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 $30.0 million in aggregate gross purchase price of newly issued shares of Class A common stock, subject to certain limitations and conditions, over a period ending on the earlier of January 27, 2029 or the purchase of the full commitment amount. The Company’s ability to issue shares under the White Lion ELOC is subject to certain limitations, including Nasdaq stockholder approval requirements and beneficial ownership limitations under the agreement. As a result, the actual amount available under the facility may be significantly less than the stated $30.0 million commitment amount depending on the Company’s stock price and shares available for issuance. Specifically, the White Lion ELOC is limited to selling shares equal to 4.99% of the outstanding shares at the time of sale and resets once White Lion Capital LLC liquidates their holdings in the open market. In consideration for the commitment, the Company agreed to issue 66,225 shares of Class A common stock to White Lion with a fair value of $100,000. Concurrently, the Company entered into a Registration Rights Agreement with White Lion. During the three months ended March 31, 2026, the Company sold 241,000 shares of Class A common stock under the White Lion ELOC for gross proceeds of $272,020. Offering costs of $258,565, including registration and legal costs associated with the facility, were offset against the proceeds, resulting in net proceeds of $13,455.
On March 13, 2026, 46,175 shares of Class A common stock, net of tax withholding, were issued upon vesting of restricted stock awards granted in March 2024. See Note 11—Stock-Based Compensation for additional information.
On February 5, 2026, 73,876 shares of Class A common stock, net of tax withholding, were issued upon vesting of restricted stock awards granted in February 2025. See Note 11—Stock-Based Compensation for additional information.
Redeemable Noncontrolling Interests
During the three months ended March 31, 2026,1,500,000 OpCo units were exchanged for shares of the Company’s Class A common stock. As a result, as of March 31, 2026, 21,380,000OpCo units remained outstanding. The prior investors’ interests in OpCo represent redeemable noncontrolling interests. Holders of OpCo units may exchange their units, together with the cancellation of a corresponding number of shares of Class V common stock, for shares of the Company’s Class A common stock on a one-for-one basis, or cash proceeds of equal value at the time of redemption. Any redemption of OpCo units for cash must be funded through a private or public offering of Class A common stock and is subject to approval by the Company’s Board of Directors. Future exchanges of OpCo units may generate incremental tax attributes and related cash tax savings for the Company. Pursuant to the TRA, the Company is generally required to pay the TRA holders 85% of the net cash tax savings realized as a result of increases in tax basis and certain other tax attributes arising from such exchanges. See Note 8—Related Party Transactionsfor additional information regarding the TRA.
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As of March 31, 2026 and December 31, 2025, the noncontrolling interest holders owned approximately 37.8% and 40.8%, respectively, of the outstanding OpCo common units.
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 10% per annum. During the three months ended March 31, 2026, the Company recognized $432,398 of preferred unit distributions and paid cash distributions of $160,153 to holders of the Class A preferred units. The financial results of OpCo are consolidated with those of the Company, with the redeemable noncontrolling interests’ share of net loss presented separately in the condensed consolidated financial statements.
NOTE 11—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 3,220,400 shares of Class A common stock were initially reserved for issuance under the Incentive Plan (the “Plan Share Reserve”). Each award granted under the Incentive Plan reduces the Plan Share Reserve by the number of shares underlying the award.
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) 2% of the outstanding shares of common stock on the last day of the immediately preceding fiscal year or (ii) a lesser number of shares determined by the Board of Directors. The purpose of the Incentive Plan is to enable the Company and its subsidiaries to attract and retain key personnel and to align the interests of directors, officers, employees, consultants, and advisors with those of the Company’s stockholders through equity-based compensation.
The following table summarizes restricted stock unit activity under the Incentive Plan for the three months ended March 31, 2026:
The following table summarizes equity compensation expense and remaining unrecognized compensation cost for grants outstanding under the Incentive Plan during the three months ended March 31, 2026 and 2025:
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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.
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 100% of all related expense and deduction items to Sun Managers. These compensatory payments are accounted for as capital contributions from Sun Managers to the Company, with no new equity units issued in return.
On March 31, 2026, Sun Managers granted an aggregate of 527,953 restricted shares of Zeo Class A common stock under the Management Incentive Plan to five employees. The restricted shares vested immediately upon grant. During the three months ended March 31, 2026, the Company recognized $303,045 in equity compensation expense related to these awards.
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 40 shares per kW installed for projects sold by the manager’s organization, provided they exceed 1,500 kW installed during a calendar year, and as long as the manager sells 700kW the subsequent calendar year. The number of shares awarded may be reduced if the average price for Zeo stock during the quarter in which installations are completed exceeds $5 per share, the number of shares granted per kW will be correspondingly decreased.
The managers become eligible to receive certain grants of vested shares under the Seasonal Manager Stock Compensation Plan as follows:
On March 31, 2026, Sun Managers granted an aggregate of 355,264 restricted shares of Zeo Class A common stock under the Management Incentive Plan to six sales managers. The restricted shares vest in two equal installments as follows.
The following table summarizes equity compensation expense and remaining unrecognized compensation cost for grants outstanding under the Seasonal Manager Compensation Plan during the three months ended March 31, 2026 and 2025:
The negative compensation expense for the three months ended March 31, 2026 reflects the forfeiture and recapture of previously recognized compensation cost resulting from the termination of three sales managers prior to vesting.
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NOTE 12—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 March 31, 2026, the Company’s financial instruments measured at fair value on a recurring basis consist of warrant liabilities.
The fair value of financial instruments measured at fair value on a recurring basis as of March 31, 2026 consisted of the following:
The following table presents changes in the Company’s warrant liabilities measured at fair value on a recurring basis:
NOTE 13—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 condensed 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 was a 2.3% benefit and (3.9)% provision for the three months ended March 31, 2026 and 2025, respectively. The effective tax rate differs from the U.S. federal statutory tax rate primarily due to the noncontrolling interest ownership in OpCo, which is treated as a partnership for U.S. federal income tax purposes, as well as changes in the valuation allowance on deferred tax assets.
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 March 31, 2026 and December 31, 2025.
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.
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The components of the deferred income tax assets and liabilities were as follows:
NOTE 14—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.
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 three months ended March 31, 2026 and 2025, 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 March 31, 2026 and 2025, 37,495,002 and 43,221,852 potential common share equivalents, respectively, consisting of convertible OpCo Class A Preferred Units, exchangeable OpCo Class B units, convertible notes, warrants, and restricted stock awards, were excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive.
The following table presents the computation of the basic and diluted loss per share of Class A common stock for the three months ended March 31, 2026 and 2025:
NOTE 15—SUBSEQUENT EVENTS
On April 23, 2026, the Company received a letter from the Listing Qualifications Staff of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that, based upon the closing bid price of the Company’s Class A common stock for the last 30 consecutive business days, the Company no longer meets Nasdaq Listing Rule 5550(a)(2), which requires listed companies to maintain a minimum bid price of at least $1 per share. Nasdaq Listing Rule 5810(c)(3)(A) provides a compliance period of 180 calendar days, or until October 20, 2026, in which to regain compliance with the minimum bid price requirement. If the Company evidences a closing bid price of at least $1 per share for a minimum of 10 consecutive business days during the 180-day compliance period, the Company will automatically regain compliance. In the event the Company does not regain compliance with the $1 bid price requirement by October 14, 2026, the Company may be eligible for consideration of a second 180-day compliance period if it meets the continued listing requirement for market value of publicly held shares and all other initial listing standards for Nasdaq’s Capital Market, other than the minimum bid price requirement. In addition, the Company would also be required to notify Nasdaq of its intent to cure the minimum bid price deficiency.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References to the “Company,” “our,” “us” or “we” refer to Zeo Energy Corp. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto contained elsewhere in this Quarterly Report on Form 10-Q (this “Quarterly Report”). Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “aim,” “goal” and “continue,” or the derivatives of such terms or other similar expressions about the future. Such statements include, but are not limited to, our expectations regarding revenue generation, our ability to obtain financing when needed, or ability to source and financing our growth and expansion, including via acquisitions, and all other statements other than statements of historical fact included in this Form 10-Q. Factors that might cause or contribute to such a discrepancy include, but are not limited to, the risk factors detailed in our SEC filings. Except as expressly required by applicable securities law, we disclaim any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
Our company and personnel are passionate about delivering cost savings and increased independence and reliability to energy consumers. Our mission is to expedite the country’s transition to renewable energy by offering our customers an affordable and sustainable means of achieving energy independence. We are a vertically integrated company offering energy solutions and services that include sale, design, procurement, installation, and maintenance of residential solar energy systems. Many of our solar energy system customers also purchase other energy efficient-related equipment or services or roofing services from us. The majority of our customers are located in Florida, Texas, Ohio, Illinois, and Virginia. We have an expanding base of customers in California, Colorado, Minnesota, Utah, and Pennsylvania. Sunergy was created on October 1, 2021 through the Contribution of Sun First Energy, LLC, a rapidly growing solar sales management company, and Sunergy Solar, LLC, a large solar installation company based in Florida, to Sunergy Renewables, LLC.
We believe that we have built (and continue to build) the infrastructure and capabilities necessary to rapidly acquire and serve customers in a low-cost and scalable manner. Today, our scalable regional operating platform provides us with a number of advantages, including the marketing of our solar service offerings through multiple channels, including our diverse sales partner network and direct-to-consumer vertically integrated sales and installation operations. We believe that this multi-channel model supports rapid sales and installation growth, allowing us to achieve capital-efficient growth in the regional markets we serve.
Since our founding, we have continued to invest in a platform of services and tools to enable large scale operations for us and our partner network, which includes sales partners, installation partners and other strategic partners. The platform includes processes and software, as well as the capacity for the fulfillment and acquisition of marketing leads. We believe our platform empowers our in-house sales team and external sales dealers to profitably serve our regional and underpenetrated markets and helps us compete effectively against larger, more established industry players without making significant investment in technology and infrastructure.
We have focused to date on a simple, capital light business strategy utilizing, as of March 31, 2026, 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
White Lion Financing Transaction
On January 27, 2026, we entered into the White Lion Purchase Agreement with White Lion. We also entered into a Registration Rights Agreement (“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.
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.
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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.
Nasdaq Listing Rule Notice
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:
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 primarily in Florida, Texas, 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 2026, 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.
Following the acquisition of Heliogen in August 2025, the Company has been working to integrate Heliogen’s concentrated solar power and energy storage technology into its clean-energy platform to complement its existing solar operations, create operational synergies, and broaden market reach. The Company continues to pursue engineering services agreements to support long-duration energy storage projects.
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.
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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 Condensed 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 for the three months ended March 31, 2026 and 2025.
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 three months ended March 31, 2026 and 2025. 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.
Revenues improved during the three months ended March 31, 2026 compared to the three months ended March 31, 2025, driven by increased solar system installation activity. While higher consumer financing rates continue to present headwinds for the residential solar industry broadly, the Company has managed these pressures through expanded sales efforts and continued growth in its installation volume.
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 increased during three months ended March 31, 2026 in association with the increase 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.
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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 (Expense)
Other income (expense) 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 and note receivable balances.
Results of Operations
Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025
The following table sets forth a summary of our condensed consolidated statements of operations for the periods presented:
Net revenues increased by approximately $4.4 million from $8.8 million for the three months ended March 31, 2025 to $13.2 million for the three months ended March 31, 2026. The increase in revenue was primarily driven by growth in solar system installations during the current period, partially offset by a decrease in related party revenue from Solar Leasing I, LLC (“SLI”). There were no revenues generated from the Heliogen segment during the three months ended March 31, 2026 and 2025.
Cost of revenues increased by $2.8 million from $4.8 million for the three months ended March 31, 2025 to $7.6 million for the three months ended March 31, 2026, primarily driven by the increase in solar system installation activity during the current period. As a percentage of net revenues, cost of revenues increased slightly from 54.5% for the three months ended March 31, 2025 to 57.5% for the three months ended March 31, 2026, reflecting a compression in gross margin year-over-year.
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Depreciation and Amortization
Depreciation and amortization decreased by $3.8 million, from $4.9 million for the three months ended March 31, 2025 to $1.1 million for the three months ended March 31, 2026. The decrease was primarily related to $4.6 million in amortization of the customer-related intangible asset acquired in connection with the Lumio asset acquisition, which was fully amortized during 2025. This was offset by the $0.8 million of accelerated depreciation associated with the abandonment of software during the three months ended March 31, 2026.
Sales and Marketing
Sales and marketing expenses decreased by $0.1 million from $3.1 million for the three months ended March 31, 2025 to $3.0 million for the three months ended March 31, 2026. The decrease was primarily driven by lower stock-based compensation expense, offset by higher sales commissions, consistent with the increase in installation revenues during the period.
General and Administrative Expenses
General and administrative expenses decreased by $3.2 million from $9.5 million for the three months ended March 31, 2025 to $6.3 million for the three months ended March 31, 2026. The decrease was primarily driven by significant reductions in bad debt expense and stock-based compensation expense compared to the prior period.
Other income (expense), net decreased by $0.7 million from other income, net of $0.7 million for the three months ended March 31, 2025 to other expense, net of $18,316 for the three months ended March 31, 2026. The decrease was primarily a result of a significant gain on change in fair value of warrant liabilities for the three months ended March 31, 2025 and a loss on change in fair value of warrant liabilities for the three months ended March 31, 2026.
Liquidity and Capital Resources
Our operations have historically been funded through a combination of revenue generation, proceeds from financing activities, and in 2025, net cash acquired in connection with the Heliogen acquisition. Our primary short-term requirements for liquidity and capital are to fund general working capital and capital expenses, including through our common stock purchase agreement with White Lion Capital LLC (the “White Lion ELOC”). Our principal long-term working capital uses include ensuring revenue growth, expanding our sales and marketing efforts and potential acquisitions.
As of March 31, 2026 and December 31, 2025, our cash and cash equivalents balance were $1.7 million and $6.1 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, the costs associated with these initiatives, the growth of our business generally and our access to third party financing.
We have operational plans to increase revenue and move towards the goal of profitable operations in 2026, which plans are expected to improve cash flows. Our operational plan includes an increase in the number of sales agents to increase revenue and improved efficiency in our operations through centralization of field offices and labor and productivity improvement in the corporate operations through the implementation of a new CRM software.
We are also working internally and with third parties to address short-term cash needs, including through the use of the White Lion ELOC, which provides us with the right to sell up to $30.0 million in shares of our Class A common stock, subject to market liquidity and contractual limitations. The White Lion ELOC is limited to selling shares equal to 4.99% of the outstanding shares at the time of sale and resets once White Lion Capital LLC (i.e., once White Lion Capital liquidates their holdings in the open market). We believe we also have other opportunities to raise capital, such as through revenue generating initiatives, private placements, public offerings or repricing of outstanding warrants. In addition, in June 2026, we will become eligible to utilize a universal shelf registration statement to raise funding for our company.
We currently believe that our existing cash and working capital balances, anticipated future cash flows from operations, borrowings under our debt agreements, and access to equity capital markets (including the White Lion ELOC) 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 will be required to meet our strategic needs, which will require us to raise additional funds in the debt or equity markets.
While our plan and expectation is to raise additional capital in 2026, and while we are routinely active in discussions and planning for financing, there can be no assurance that we will be successful in such pursuits, and our fundraising efforts are subject to a variety of uncertainties. Moreover, even if we are able to raise additional capital, other than the While Lion ELOC, we do not know with precision what the terms of any such financing would be. Any future sale of our equity securities would dilute the ownership and control of your shares and could be at prices below prices at which investors acquired our shares or at which our shares currently trade. The sale of convertible debt securities or additional equity securities could result in additional dilution to our shareholders. Also, the incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations and liquidity and ability to pay dividends. Our inability to raise capital, coupled with our inability to generate adequate cash from operations, could require us to significantly modify our operational plans, and any failure to raise additional funds on favorable terms when needed could have a material adverse effect on our business, liquidity and financial condition.
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Cash Flows
The following table summarizes our cash flows for the periods presented:
Cash Flows from Operating Activities
Net cash used in operating activities was approximately $0.9 million during the three months ended March 31, 2026 compared to approximately $2.3 million during the three months ended March 31, 2025. The $1.4 million improvement in operating cash flows was driven primarily by favorable working capital changes, including a $1.3 million increase in accounts payable and a $3.8 million increase in accrued expenses and other current liabilities – related parties, and a $0.2 million decrease in prepaid expenses and other current assets. These improvements were partially offset by a $2.4 million increase in accounts receivable, a $0.7 million decrease in contract liabilities, and a $0.5 million decrease in accrued expenses and other current liabilities. Non-cash charges also decreased significantly year-over-year, with depreciation and amortization of $1.1 million, stock-based compensation of $0.7 million, and provision for credit losses of $0.2 million in the current period, compared to $4.9 million, $2.2 million, and $3.5 million, respectively, in the prior year period, reflecting the significant reduction in operating activity from the prior year period. In addition to the previously mentioned changes in operating cash flows, the Heliogen segment that was acquired in the quarter ended September 30, 2025, incurred a net loss of $0.9 million for the three months ended March 31, 2026 that is included in net loss compared to no impact on net loss for the three months ended March 31, 2025.
Cash Flows from Investing Activities
Net cash used in investing activities was approximately $3.4 million for the three months ended March 31, 2026 relating to the note receivable – related-party investment and purchases of property and equipment. Net cash used in investing activities was approximately $0.4 million for the three months ended March 31, 2025, relating to purchases of property and equipment.
Cash Flows from Financing Activities
Net cash used in financing activities was approximately $0.2 million for the three months ended March 31, 2026 relating to the payment of dividends to OpCo Class A preferred unit holders, repayments of debt and finance leases, and tax withholding paid related to stock-based compensation, offset by net proceeds received in connection with the White Lion RRA. Net cash used in financing activities was approximately $0.1 million for the three months ended March 31, 2025, relating to repayments of debt and finance leases.
Current Indebtedness
As of March 31, 2026, the Company’s outstanding indebtedness consisted of approximately $73,471 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.
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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.
The following table provides a reconciliation of contribution profit for the periods presented:
Adjusted EBITDA
We define Adjusted EBITDA, a non-GAAP financial measure, as net income (loss) before interest and other income (expense), net, income tax provision (benefit), depreciation and amortization, gain (loss) on change in fair value of warrant liabilities, stock-based compensation, and non-recurring transaction-related 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 income (loss) 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 income (loss) to Adjusted EBITDA for the periods presented:
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Critical Accounting Estimates
For a description of our critical accounting policies and estimates, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on April 1, 2026. There have been no material changes to our critical accounting policies and estimates since our Annual Report on Form 10-K for the year ended December 31, 2025.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
As a smaller reporting company, we are not required to provide the information required by this Item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of March 31, 2026, as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”). As a result of this evaluation, our principal executive officer and principal financial officer have concluded that there were material weaknesses 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.
These material weaknesses in internal control over financial reporting have been disclosed in the company’s quarterly reports on Form 10-Q for 2026 and annual report on Form 10-K for the year ended December 31, 2025. We are still in the process of remediating, our disclosure controls and procedures continued not to be effective as of March 31, 2026. Notwithstanding the identified material weaknesses, management, including our principal executive officer and principal financial officer, believes the condensed consolidated financial statements included in this report fairly represent, in all material respects, our financial condition, results of operations and cash flows as of and for the periods presented in accordance with GAAP.
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the period covered by this report that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting. Please refer to our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on April 1, 2026.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
The risks described under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025 could materially and adversely affect our business, financial condition, results of operations, cash flows, future prospects, and the trading price of our Class A common stock. The risks and uncertainties described therein are not the only ones we face. Additional risks and uncertainties that we are unaware of or that we currently deem immaterial may also become important factors that adversely affect our business.
You should carefully read and consider such risks, together with all of the other information in our Annual Report on Form 10-K for the year ended December 31, 2025, in this Quarterly Report on Form 10-Q (including the disclosures in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in our interim condensed consolidated financial statements and related notes), and in the other documents that we file with the SEC.
Item 2. Unregistered Sale of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
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Item 6. Exhibits.
The following exhibits are filed as part of, or incorporated by reference into, this Form 10-Q.
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SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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