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Item 2. Management’s Discussion and Analysis

2024-08-19 compared with 2024-05-16 · 583 added, 479 removed, 101 unchanged (91% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

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.

Note Regarding Forward-Looking Statements

Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as

amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

We have based these forward-looking statements on our current expectations and projections about future events.

These forward-looking

statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of

activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements

expressed or implied by such forward-looking statements.

In some cases, you can identify forward-looking statements by terminology such

as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,”

“believe,” “estimate,” and “continue,” or the negative of such terms or other similar expressions.

Such statements include, but are not limited to, possible business combinations and the financing thereof, and related matters, as well

as all other statements other than statements of historical fact included in this Form 10-Q.

Factors that might cause or contribute to

such a discrepancy include, but are not limited to, those described in our other SEC filings.

Except as expressly required by applicable

securities law, we disclaim any intention or obligation to update or revise any forward-looking statements whether as a result of new

information, future events or otherwise.

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 provider of residential solar energy systems, other energy efficient

equipment and related services currently serving customers in Florida, Texas, Arkansas and Missouri.

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.

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.

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 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.

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 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.

cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,”

“would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,”

and “continue,” or the negative of such terms or other similar expressions.

Such statements include, but are not limited to,

possible business combinations and the financing thereof, and related matters, as well as all other statements other than statements of

historical fact included in this Form 10-Q.

Factors that might cause or contribute to such a discrepancy include, but are not limited

to, those described in our other SEC filings.

Except as expressly required by applicable securities law, we disclaim any intention or

obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

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

provider of residential solar energy systems, other energy efficient equipment and related services currently serving customers in Florida,

Texas, Arkansas and Missouri.

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

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 fulfillment and acquisition of marketing leads.

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, 2024, approximately 337 sales agents and approximately 15 independent sales dealers to produce a growing sales

utilizing, as of June 30, 2024, approximately 170 sales agents and approximately 27 independent sales dealers to produce a growing sales

We engineer and design projects and process building permit applications on behalf of our customers to timely install their

13 unchanged sentences

exist and solar penetration is below 7% of the addressable residential market.

Most of our sales were generated in Florida through March

31, 2024 and 2023 with the remainder for each period generated in Texas, Arkansas, and Missouri.

We have focused on improving our operational

efficiency to meet the growing demand for our services and have increased our installation capacity by investing in new equipment and

We have also expanded our workforce by hiring more skilled technicians and training them extensively to ensure that they meet

our high standards for quality and safety.

core solar service offerings are generated by customer purchases and financing through third-party long-term lenders 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 from third-party lenders that require minimal or no upfront capital or down payment.

launched a leasing program where a third-party purchases the residential solar energy system that we install on the customer’s

We believe this leasing option may better suit some homeowners in a higher interest rate environment who may not have a need

for the investment tax credits associated with investing in renewable energy.

the Closing Date, we consummated the Business Combination.

Prior to the Closing, (i) except as otherwise specified in the Business Combination

Agreement, each issued and outstanding ESGEN Class B ordinary share was converted into one ESGEN Class A ordinary;

and (ii) ESGEN was

domesticated into the State of Delaware so as to become a Delaware corporation (.

In connection with the Closing, we changed our name

from “ESGEN Acquisition Corporation” to “Zeo Energy Corp.”

the Domestication, each then-outstanding ESGEN Class A ordinary share was converted into one share of Class A common stock, and each

then-outstanding ESGEN Public Warrant converted automatically into a Warrant, exercisable for one share of Zeo Class A Common Stock.

Additionally, each outstanding unit of ESGEN was cancelled and separated into one share of Class A Common Stock and one-half of one Warrant.

accordance with the terms of the Business Combination Agreement, Sunergy caused all holders of any options, warrants or rights to subscribe

for or purchase any equity interests of Sunergy or its subsidiaries or securities (including debt securities) convertible into or exchangeable

for, or that otherwise conferred on the holder any right to acquire, any equity interests of Sunergy or any subsidiary thereof (collectively,

the “Sunergy Convertible Interests”) existing immediately prior to the Closing to either exchange or convert all such holder’s

Sunergy Convertible Interests into limited liability interests of Sunergy (the “Sunergy Company Interests”) in accordance

with the governing documents of Sunergy or the Sunergy Convertible Interests.

the Closing, ESGEN contributed to OpCo (1) all of its assets (excluding its interests in OpCo, but including the amount of cash in ESGEN’s

Trust Account as of immediately prior to the Closing (after giving effect to the exercise of redemption rights by ESGEN stockholders)),

and (2) a number of newly issued shares of Class V common stock, which are non-economic, voting shares of Zeo, equal to the number of

Seller OpCo Units (as defined in the Business Combination Agreement) and (y) in exchange, OpCo issued to ESGEN (i) a number of Class

A common units of OpCo (the “OpCo Manager Units”) which equaled the total number of shares of Class A Common Stock issued

and outstanding immediately after the Closing and (ii) a number of warrants to purchase OpCo Manager Units which equaled the number of

Warrants issued and outstanding immediately after the Closing (the transactions described above in this paragraph, the “ESGEN Contribution”).

Immediately following the ESGEN Contribution, (x) the Sellers contributed to OpCo the Sunergy Company Interests and (y) in exchange therefor,

OpCo transferred to the Sellers the Seller OpCo Units and the Seller Class V Shares.

to the Closing, Sellers transferred 24.167% of their Sunergy Company Interests (which were thereafter exchanged for Seller OpCo Units

and Seller Class V Shares at the Closing, as described above) pro rata to Sun Managers, LLC, a Delaware limited liability company (“Sun

Managers”), in exchange for Class A Units (as defined in the Sun Managers limited liability company agreement (the “SM LLCA”))

in Sun Managers.

In connection with such transfer, Sun Managers executed a joinder to, and became a “Seller” for purposes

of, the Business Combination Agreement.

Sun Managers intends to grant Class B Units (as defined in the SM LLCA) in Sun Managers through

the Sun Managers, LLC Management Incentive Plan (the “Management Incentive Plan”) adopted by Sun Managers to certain eligible

employees or service providers of OpCo, Sunergy or their subsidiaries, in the discretion of Timothy Bridgewater, as manager of Sun Managers.

Such Class B Units may be subject to a vesting schedule, and once such Class B Units become vested, there may be an exchange opportunity

through which the grantees may request (subject to the terms of the Management Incentive Plan and the OpCo A&R LLC Agreement) the

exchange of their Class B Units into Seller OpCo Units (together with an equal number of Seller Class V Shares), which may then be converted

into Class A Common Stock (subject to the terms of the Management Incentive Plan and the OpCo A&R LLC Agreement).

Grants under the

Management Incentive Plan will be made after Closing.

of the Closing Date, upon consummation of the Business Combination, the only outstanding shares of capital stock of the registrant were

shares of Class A Common Stock and Class V Common Stock.

connection with entering into the Business Combination Agreement, ESGEN and the Sponsor entered the Sponsor Subscription Agreement, pursuant

to which, among other things, the Sponsor agreed to purchase an aggregate of 1,000,000 Convertible OpCo Preferred Units convertible into

Exchangeable OpCo units (and be issued an equal number of shares of Class V Common Stock) concurrently with the Closing at a cash purchase

price of $10.00 per unit and up to an additional 500,000 Convertible OpCo Preferred Units (together with the concurrent issuance of an

equal number of shares of Zeo Class V Common Stock) during the six months after Closing if called for by Zeo.

Prior to the Closing, ESGEN

informed the Sponsor that it wished to call for the additional 500,000 Convertible OpCo Preferred Units at the Closing and, as a result,

a total of 1,500,000 Convertible OpCo Preferred Units and an equal number of shares of Class V Common Stock were issued to Sponsor in

return for aggregate consideration of $15,000,000.

for the Business Combination

the Business Combination, we are organized in an “Up-C” structure, such that Sunergy and the subsidiaries of Sunergy hold

and operate substantially all of the assets and businesses of the registrant, and the registrant is a publicly listed holding company

that holds a certain amount of equity interests in OpCo, which holds all of the equity interests in Sunergy.

The Class A Common Stock

and public warrants are traded on Nasdaq under the ticker symbols “ZEO” and “ZEOWW,” respectively.

Business Combination was accounted for as a reverse recapitalization with ESGEN being treated as the acquired company since there was

no change in control in accordance with the guidance for common control transactions in ASC 805-50.

Accordingly, the financial statements

of the combined entity will represent a continuation of the financial statements of Sunergy with the business combination treated as

the equivalent of Sunergy issuing stock for the net assets of ESGEN, accompanied by a recapitalization.

The net assets of ESGEN were

stated at historical cost, with no goodwill or other intangible assets recorded.

Operations prior to the Business Combination were those

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

upon the evaluation of the OpCo A&R LLC Agreement, the Sellers contributed their interests of Sunergy into OpCo.

OpCo’s members

did not have substantive kickout or participating rights and therefore OpCo is a VIE.

Consideration of OpCo as a VIE was necessary to

determine the accounting treatment between ESGEN and Sunergy.

Upon evaluation, ESGEN Acquisition Corp.

is considered to be the primary

beneficiary through its membership interest and manager powers conferred to it through the Class A Units.

For VIEs, the accounting acquirer

is always considered to be the primary beneficiary.

As such, ESGEN will consolidate OpCo and is considered to the accounting acquirer;

however, further consideration of whether the entities are under common control was required in order to determine whether there is an

ultimate change in control and the acquisition method of accounting is required under ASC 805.

Sunergy did not control or have common ownership of ESGEN prior to the consummation of the Business Combination, the Company evaluated

the ownership of the new entity subsequent to the consummation of the transaction to determine if a change in control occurred by evaluating

whether Sunergy was under common control prior to and subsequent to the consummation of the transaction.

If the business combination

is between entities under common control, then the acquisition method of accounting is not applicable and the guidance in ASC 805-50

regarding common control should be applied instead.

EITF Issue 02-5 “Definition of ‘Common Control’ in Relation to

FASB Statement No.

141” indicates that common control would exist if a group of stockholders holds more than 50 percent of the

voting ownership of each entity, and contemporaneous written evidence of an agreement to vote a majority of the entities’ shares

in concert exists.

Prior to the Business Combination, Sunergy was majority owned by five entities (the “ Primary Sellers ”),

who entered into a Voting Agreement, dated September 7, 2023.

The term of the Voting Agreement is for five years from the date of the

Voting Agreement.

The consummation of the Business Combination with ESGEN occurred within the term of the Voting Agreement.

to the Business Combination and the contributions to Sun Managers as described above, the Primary Sellers had 98% ownership in Sunergy.

Immediately following the Business Combination, the Sellers now own 83.8% of the equity of the Company.

Voting Agreement constitutes contemporaneous written evidence of an agreement to vote a majority of the Primary Sellers’ shares

of the Company in concert.

Accordingly, the Primary Sellers retain majority control through the voting of their units in conjunction

with the Voting Agreement immediately prior to the Business Combination and their shares following the Business Combination and, therefore,

there was no change of control before or after the Business Combination.

This conclusion was appropriate even though there was no relationship

or common ownership or control between Sunergy and ESGEN prior to the Business Combination.

Accordingly, the Business Combination should

be accounted for in accordance with the guidance for common control transactions in ASC 805-50.

factors that were considered include the following:

the Business Combination, the Board has been comprised of one individual designated by ESGEN

and five individuals designated by Sunergy.

the Business Combination, management of the Company has been the existing management at Sunergy

immediately prior to the Business Combination.

The individual that was serving as the chief

executive officer and chief financial officer of Sunergy’s management team immediately

prior to the Business Combination continues substantially unchanged upon completion of the

Most of our sales were generated in Florida and Ohio through

June 30, 2024 and 2023 with the remainder for each period generated in Texas, Arkansas, Missouri and Illinois.

We have focused on improving

our operational efficiency to meet the growing demand for our services and have increased our installation capacity by investing in new

equipment and technology.

We have also expanded our workforce by hiring more skilled technicians and training them extensively to ensure

that they meet our high standards for quality and safety.

Our core solar service offerings are generated by customer purchases

and financing through third-party long-term lenders 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 from third-party lenders that

require minimal or no upfront capital or down payment.

We have also launched a leasing program where a third-party purchases the residential

solar energy system that we install on the customer’s property.

We believe this leasing option may better suit some homeowners in

a higher interest rate environment who may not have a need for the investment tax credits associated with investing in renewable energy.

Emerging Growth Company

We are an emerging growth company (“EGC”), as defined in

Section 2(a) of the Securities Act of 1933, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).

Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment

of the JOBS Act, until such time as those standards apply to private companies.

We have elected to use this extended transition period

for complying with new or revised accounting standards that have different effective dates for public and private companies until the

earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended

transition period provided in the JOBS Act.

As a result, the financial statements may not be comparable to companies that comply with

the new or revised accounting pronouncements as of public company effective dates.

Business Combination

common control transactions that include the transfer of a business, the reporting entity is required to account for the transaction

in accordance with the procedural guidance in ASC 805-50.

In essence, the Business Combination will be treated as a reverse recapitalization

with ESGEN being treated as the acquired company since there was no change in control.

Accordingly, the financial statements of the combined

entity will represent a continuation of the financial statements of Sunergy with the business combination treated as the equivalent of

Sunergy issuing equity for the net assets of ESGEN, accompanied by a recapitalization.

Company Costs

the Business Combination, we have ongoing reporting and other compliance requirements relating to our Exchange Act registration and Nasdaq

We expect to see an increase in general and administrative, compared to historical results, to support the legal and accounting

requirements of the combined publicly traded company.

We also expect to incur substantial additional expenses for, among other things,

directors’ and officers’ liability insurance, director fees, internal control compliance, and additional costs for investor

relations, accounting, audit, legal and other functions.

Operating and Financial Metrics and Outlook

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.

following table sets forth these metrics for the periods presented:

On the Closing Date, we consummated the Business Combination.

to the Closing, (i) except as otherwise specified in the Business Combination Agreement, each issued and outstanding ESGEN Class B ordinary

share was converted into one ESGEN Class A ordinary;

and (ii) ESGEN was domesticated into the State of Delaware so as to become a Delaware

corporation (.

In connection with the Closing, we changed our name from “ESGEN Acquisition Corporation” to “Zeo Energy

Following the Domestication, each then-outstanding ESGEN Class A ordinary

share was converted into one share of Class A common stock, and each then-outstanding ESGEN Public Warrant converted automatically into

a Warrant, exercisable for one share of Zeo Class A Common Stock.

Additionally, each outstanding unit of ESGEN was cancelled and separated

into one share of Class A Common Stock and one-half of one Warrant.

In accordance with the terms of the Business Combination Agreement,

Sunergy caused all holders of any options, warrants or rights to subscribe for or purchase any equity interests of Sunergy or its subsidiaries

or securities (including debt securities) convertible into or exchangeable for, or that otherwise conferred on the holder any right to

acquire, any equity interests of Sunergy or any subsidiary thereof (collectively, the “Sunergy Convertible Interests”) existing

immediately prior to the Closing to either exchange or convert all such holder’s Sunergy Convertible Interests into limited liability

interests of Sunergy (the “Sunergy Company Interests”) in accordance with the governing documents of Sunergy or the Sunergy

Convertible Interests.

At the Closing, ESGEN contributed to OpCo (1) all of its assets (excluding

its interests in OpCo, but including the amount of cash in ESGEN’s Trust Account as of immediately prior to the Closing (after giving

effect to the exercise of redemption rights by ESGEN stockholders)), and (2) a number of newly issued shares of Class V common stock,

which are non-economic, voting shares of Zeo, equal to the number of Seller OpCo Units (as defined in the Business Combination Agreement)

and (y) in exchange, OpCo issued to ESGEN (i) a number of Class A common units of OpCo (the “OpCo Manager Units”) which equaled

the total number of shares of Class A Common Stock issued and outstanding immediately after the Closing and (ii) a number of warrants

to purchase OpCo Manager Units which equaled the number of Warrants issued and outstanding immediately after the Closing (the transactions

described above in this paragraph, the “ESGEN Contribution”).

Immediately following the ESGEN Contribution, (x) the Sellers

contributed to OpCo the Sunergy Company Interests and (y) in exchange therefor, OpCo transferred to the Sellers the Seller OpCo Units

and the Seller Class V Shares.

Prior to the Closing, Sellers transferred 24.167% of their Sunergy

Company Interests (which were thereafter exchanged for Seller OpCo Units and Seller Class V Shares at the Closing, as described above)

pro rata to Sun Managers, LLC, a Delaware limited liability company (“Sun Managers”), in exchange for Class A Units (as defined

in the Sun Managers limited liability company agreement (the “SM LLCA”)) in Sun Managers.

In connection with such transfer,

Sun Managers executed a joinder to, and became a “Seller” for purposes of, the Business Combination Agreement.

intends to grant Class B Units (as defined in the SM LLCA) in Sun Managers through the Sun Managers, LLC Management Incentive Plan (the

“Management Incentive Plan”) adopted by Sun Managers to certain eligible employees or service providers of OpCo, Sunergy or

their subsidiaries, in the discretion of Timothy Bridgewater, as manager of Sun Managers.

Such Class B Units may be subject to a vesting

schedule, and once such Class B Units become vested, there may be an exchange opportunity through which the grantees may request (subject

to the terms of the Management Incentive Plan and the OpCo A&R LLC Agreement) the exchange of their Class B Units into Seller OpCo

Units (together with an equal number of Seller Class V Shares), which may then be converted into Class A Common Stock (subject to the

terms of the Management Incentive Plan and the OpCo A&R LLC Agreement).

Grants under the Management Incentive Plan will be made after

As of the Closing Date, upon consummation of the Business Combination,

the only outstanding shares of capital stock of the registrant were shares of Class A Common Stock and Class V Common Stock.

In connection with entering into the Business Combination Agreement,

ESGEN and the Sponsor entered the Sponsor Subscription Agreement, pursuant to which, among other things, the Sponsor agreed to purchase

an aggregate of 1,000,000 Convertible OpCo Preferred Units convertible into Exchangeable OpCo units (and be issued an equal number of

shares of Class V Common Stock) concurrently with the Closing at a cash purchase price of $10.00 per unit and up to an additional 500,000

Convertible OpCo Preferred Units (together with the concurrent issuance of an equal number of shares of Zeo Class V Common Stock) during

the six months after Closing if called for by Zeo.

Prior to the Closing, ESGEN informed the Sponsor that it wished to call for the additional

500,000 Convertible OpCo Preferred Units at the Closing and, as a result, a total of 1,500,000 Convertible OpCo Preferred Units and an

equal number of shares of Class V Common Stock were issued to Sponsor in return for aggregate consideration of $15,000,000.

Accounting for the Business Combination

Following the Business Combination, we are organized in an “Up-C”

structure, such that Sunergy and the subsidiaries of Sunergy hold and operate substantially all of the assets and businesses of the registrant,

and the registrant is a publicly listed holding company that holds a certain amount of equity interests in OpCo, which holds all of the

equity interests in Sunergy.

The Class A Common Stock and public warrants are traded on Nasdaq under the ticker symbols “ZEO”

and “ZEOWW,” respectively.

The Business Combination was accounted for as a reverse recapitalization

with ESGEN being treated as the acquired company since there was no change in control in accordance with the guidance for common control

transactions in ASC 805-50.

Accordingly, the financial statements of the combined entity will represent a continuation of the financial

statements of Sunergy with the business combination treated as the equivalent of Sunergy issuing stock for the net assets of ESGEN, accompanied

by a recapitalization.

The net assets of ESGEN were stated at historical cost, with no goodwill or other intangible assets recorded.

prior to the Business Combination were those of Sunergy.

Sunergy was determined to be the accounting acquirer based on evaluation

of the following facts and circumstances.

Based upon the evaluation of the OpCo A&R LLC Agreement, the Sellers

contributed their interests of Sunergy into OpCo.

OpCo’s members did not have substantive kickout or participating rights and therefore

OpCo is a VIE.

Consideration of OpCo as a VIE was necessary to determine the accounting treatment between ESGEN and Sunergy.

Upon evaluation,

ESGEN Acquisition Corp.

is considered to be the primary beneficiary through its membership interest and manager powers conferred to it

through the Class A Units.

For VIEs, the accounting acquirer is always considered to be the primary beneficiary.

As such, ESGEN will consolidate

OpCo and is considered to the accounting acquirer;

however, further consideration of whether the entities are under common control was

required in order to determine whether there is an ultimate change in control and the acquisition method of accounting is required under

While Sunergy did not control or have common ownership of ESGEN prior

to the consummation of the Business Combination, the Company evaluated the ownership of the new entity subsequent to the consummation

of the transaction to determine if a change in control occurred by evaluating whether Sunergy was under common control prior to and subsequent

to the consummation of the transaction.

If the business combination is between entities under common control, then the acquisition method

of accounting is not applicable and the guidance in ASC 805-50 regarding common control should be applied instead.

EITF Issue 02-5 “Definition

of ‘Common Control’ in Relation to FASB Statement No.

141” indicates that common control would exist if a group of stockholders

holds more than 50 percent of the voting ownership of each entity, and contemporaneous written evidence of an agreement to vote a majority

of the entities’ shares in concert exists.

Prior to the Business Combination, Sunergy was majority owned by five entities (the “ Primary

Sellers ”), who entered into a Voting Agreement, dated September 7, 2023.

The term of the Voting Agreement is for five years

from the date of the Voting Agreement.

The consummation of the Business Combination with ESGEN occurred within the term of the Voting

Prior to the Business Combination and the contributions to Sun Managers

as described above, the Primary Sellers had 98% ownership in Sunergy.

Immediately following the Business Combination, the Sellers now

own 83.8% of the equity of the Company.

The Voting Agreement constitutes contemporaneous written evidence of

an agreement to vote a majority of the Primary Sellers’ shares of the Company in concert.

Accordingly, the Primary Sellers retain

majority control through the voting of their units in conjunction with the Voting Agreement immediately prior to the Business Combination

and their shares following the Business Combination and, therefore, there was no change of control before or after the Business Combination.

This conclusion was appropriate even though there was no relationship or common ownership or control between Sunergy and ESGEN prior to

the Business Combination.

Accordingly, the Business Combination should be accounted for in accordance with the guidance for common control

transactions in ASC 805-50.

Additional factors that were considered include the following:

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

the Business Combination, management of the Company has been the existing management at Sunergy immediately prior to the Business Combination.

The individual that was serving as the chief executive officer and chief financial officer of Sunergy’s management team immediately

prior to the Business Combination continues substantially unchanged upon completion of the Business Combination.

For common control transactions that include the transfer of a business,

the reporting entity is required to account for the transaction in accordance with the procedural guidance in ASC 805-50.

the Business Combination will be treated as a reverse recapitalization with ESGEN being treated as the acquired company since there was

no change in control.

Accordingly, the financial statements of the combined entity will represent a continuation of the financial statements

of Sunergy with the business combination treated as the equivalent of Sunergy issuing equity for the net assets of ESGEN, accompanied

by a recapitalization.

Public Company Costs

Following the Business Combination, we have ongoing reporting and other

compliance requirements relating to our Exchange Act registration and Nasdaq listing.

We expect to see an increase in general and administrative,

compared to historical results, to support the legal and accounting requirements of the combined publicly traded company.

We also expect

to incur substantial additional expenses for, among other things, directors’ and officers’ liability insurance, director fees,

internal control compliance, and additional costs for investor relations, accounting, audit, legal and other functions.

Key Operating and Financial Metrics and Outlook

We regularly review a number of metrics, including the following key

operating and financial metrics, to evaluate our business, measure our performance, identify trends in our business, prepare financial

projections and make strategic decisions.

We believe the operating and financial metrics presented below are useful in evaluating our

operating performance, as they are similar to measures by our public competitors and are regularly used by security analysts, institutional

investors and other interested parties in analyzing operating performance and prospects.

Adjusted EBITDA and Adjusted EBITDA margin are

non-GAAP measures, as they are not financial measures calculated in accordance with GAAP and should not be considered as substitutes for

net (loss) income or net (loss) income margin, respectively, calculated in accordance with GAAP.

See “Non-GAAP Financial Measures ”

for additional information on non-GAAP financial measures and a reconciliation of these non-GAAP measures to the most comparable GAAP

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

Three Months Ended

Six Months Ended

(In thousands, except percentages)

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Adjusted EBITDA margin

Profit and Gross Margin

define gross profit as revenue, net less direct costs of revenue and depreciation and amortization, and define gross margin, expressed

as a percentage, as the ratio of gross profit to revenue, net.

Gross 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.

EBITDA and Adjusted EBITDA Margin

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 as adjusted to exclude merger transaction related expenses.

We define Adjusted EBITDA

margin, a non-GAAP financial measure, expressed as a percentage, as the ratio of Adjusted EBITDA to revenue, net.

See “ Non-GAAP

Financial Measures ” for a reconciliation of GAAP net loss to Adjusted EBITDA and a ratio of GAAP net loss to revenue, net.

Factors that May Influence Future Results of Operations

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.

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 and Missouri.

We primarily generate revenue

from our sales, product offerings and services in the residential housing market.

To continue our growth, we intend to expand our presence

in the residential market into additional states based on markets underserved by national sales and installation providers that also

have favorable incentives and net metering policies.

We believe that our entry into new markets will continue to facilitate revenue growth

and customer diversification.

of New Products and Services.

In 2024 we sold over $1.3 million in 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

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,

in 2023, we launched a program that allows customers to choose a leasing option to finance their systems from a third party.

selling systems utilizing third party leases under this and other similar programs to be a growing portion of our customer finance offerings

in the future.

Gross Profit and Gross Margin

We define gross profit as revenue, net less direct costs of revenue

and depreciation and amortization, and define gross margin, expressed as a percentage, as the ratio of gross profit to revenue, net.

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.

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.

We define Adjusted EBITDA margin, a non-GAAP financial measure, expressed

as a percentage, as the ratio of Adjusted EBITDA to revenue, net.

See “ Non-GAAP Financial Measures ” for a reconciliation

of GAAP net loss to Adjusted EBITDA and a ratio of GAAP net loss to revenue, net.

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 .

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 and Missouri.

We primarily generate revenue from our sales, product offerings and services in the

residential housing market.

To continue our growth, we intend to expand our presence in the residential market into additional states

based on markets underserved by national sales and installation providers that also have favorable incentives and net metering policies.

We believe that our entry into new markets will continue to facilitate revenue growth and customer diversification.

Expansion of New Products and Services .

In 2024 we have sold

over $2.1 million in 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.

to provide more financing options for our prospective residential solar energy customers, in 2023, we launched a program that allows customers

to choose a leasing option to finance their systems from a third party.

We expect selling systems utilizing third party leases under this

and other similar programs to be a growing portion of our customer finance offerings in the future.

Adding New Customers and Expansion of Sales with Existing Customers .

We intend to increase our in-house sales force and external sales dealers in 2024 in order to target new customers in the Southern

We intend to approximately double our in-house sales force and external sales dealers in 2024 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.

We are seeing an increase in the costs of labor and components as the result of higher inflation rates.

In particular, we are experiencing

an increase in raw material costs and supply chain constraints, and trade tariffs imposed on certain products from China, which may continue

to put pressure on our operating margins and increase our costs.

We do not have information that allows us to quantify the specific amount

of cost increases attributable to inflationary pressures.

Interest rate increases for both short-term and long-term debt have increased sharply.

Historically, most of our customers

have financed the purchase of their solar systems.

Higher interest rates have resulted in higher monthly costs to customers, which has

the effect of slowing the financing related sales of solar systems in the areas in which we sell and operate.

We do not have information

that allows us to quantify the adverse effects attributable to increased interest rates.

We provide competitive compensation packages to our in-house sales teams and external sales

dealers, which incentivizes the acquisition of new customers.

We are seeing an increase in the costs of labor and

components as the result of higher inflation rates.

In particular, we are experiencing an increase in raw material costs and supply chain

constraints, and trade tariffs imposed on certain products from China, which may continue to put pressure on our operating margins and

increase our costs.

We do not have information that allows us to quantify the specific amount of cost increases attributable to inflationary

Interest rates.

Interest rate increases for both short-term

and long-term debt have increased sharply.

Historically, most of our customers have financed the purchase of their solar systems.

interest rates have resulted in higher monthly costs to customers, which has the effect of slowing the financing-related sales of solar

systems in the areas in which we sell and operate.

We do not have information that allows us to quantify the adverse effects attributable

to increased interest rates.

Managing our Supply Chain .

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in 2022 and the beginning of 2023.

In the second half of 2023 purchases we saw a correction in the supply chain.

In the second half of 2023 purchases saw a correction in the supply chain.

Our suppliers are generally

6 unchanged sentences

cash flows and results of operations, including revenue and gross margin.

of Consolidated Statements of Operations

primary source of revenue is the sale of our residential solar systems.

Our systems are fully functional at the time of installation

and require an inspection prior to interconnection to the utility power grid.

We sell our systems primarily direct to end user customers

for use in their residences.

Upon installation inspection, we satisfy our performance obligation and recognize revenue.

Many of the Company’s

customers finance their obligations with third parties.

In these situations, the finance company deducts their financing fees and remits

the net amount to the Company.

Revenue is recorded net of these financing fees (and/or dealer fees).

The volume of sales and installations

of rooftop solar systems, our primary product, increase from April to September when a majority of our sales teams are most active in

our areas of service.

In addition to sales of solar systems, “adders” or accessories to a sale may include roofing, energy

efficient appliances, upgraded insulation and/or energy storage systems.

All adders consisted of less than 10% of the total revenue,

net in each of the three months ended March 31, 2024 and 2023.

Components of Consolidated Statements of Operations

Our primary source of revenue is the sale of our residential solar

Our systems are fully functional at the time of installation and require an inspection prior to interconnection to the utility

We sell our systems primarily direct to end user customers for use in their residences.

Upon installation inspection, we satisfy

our performance obligation and recognize revenue.

Many of the Company’s customers finance their obligations with third parties.

In these situations, the finance company deducts their financing fees and remits the net amount to the Company.

Revenue is recorded net

of these financing fees (and/or dealer fees).

The volume of sales and installations of rooftop solar systems, our primary product, increase

from April to September when a majority of our sales teams are most active in our areas of service.

In addition to sales of solar systems,

“adders” or accessories to a sale may include roofing, energy efficient appliances, upgraded insulation and/or energy storage

All adders consisted of less than 10% of the total revenue, net in each of the three and six months ended June 30, 2024 and 2023.

Our revenue is affected by changes in the volume and average selling

1 unchanged sentence

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, 2024 and 2023.

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.

of Goods Sold

of goods sold consists primarily of product costs (including solar panels, inverters, metal racking, connectors, shingles, wiring, warranty

costs and logistics costs), sales commissions, installation labor and permitting costs.

The Company uses primarily U.S.

suppliers for its materials and supplies.

However, these supplies may be originally sourced from outside of the United States, mainly China.

The supply chain and prices may be

impacted by changes in the geo-political environment.

net less cost of goods sold may vary from period-to-period and is primarily affected by our average selling prices, financing or dealer

fees, fluctuations in equipment costs and our ability to effectively and timely deploy our field installation teams to project sites

once permitting departments have approved the design and engineering of systems on customer sites.

expenses consist of sales and marketing and general and administrative expenses.

Personnel-related costs are the most significant component

of each of these expense categories and include salaries, benefits and payroll taxes.

In the future, the Company intends to provide more

benefits to its employees, including an employee stock purchase plan, which will increase operating expenses.

and marketing expenses consist primarily of personnel-related expenses, as well as advertising, travel, trade shows, marketing, customer

support and other indirect costs.

We expect to continue to make the necessary investments to enable us to execute our strategy to increase

our market penetration geographically and enter into new markets by expanding our base sales teams, installers and strategic sales dealer

and partner network.

and administrative expenses consist primarily of personnel-related expenses for our executive, finance, human resources, information

technology, and software, facilities costs and fees for professional services.

Fees for professional services consist primarily of outside

legal, accounting and information technology consulting costs.

and amortization consist primarily of deprecation of our vehicles, furniture and fixtures, internally developed software and amortization

of our acquired intangibles.

(expenses) income, net

(expenses) income, net primarily consist of interest expense and fees under our equipment and vehicle term loans.

It also includes interest

income on our cash balances, and accrued interest on tariffs previously paid and approved for refund.

of Operations

Months Ended March 31, 2024 Compared to Year Ended March 31, 2023

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

Approximately 5% of our sales were paid in cash by

the customer in each of the three and six months ended June 30, 2024 and 2023.

Our revenue growth is dependent on our ability to compete

effectively in the marketplace by remaining cost competitive, developing and introducing new sales teams within existing and new territories,

scaling our installation teams to keep up with demand and maintaining a strong internal operations team to process orders while working

with building departments and utilities to permit and interconnect our customers to the utility grid.

Cost of Goods Sold

Cost of goods sold consists primarily of product costs (including solar

panels, inverters, metal racking, connectors, shingles, wiring, warranty costs and logistics costs), sales commissions, installation labor

and permitting costs.

During 2023, supply chain challenges and an increase in demand for

our products resulted in increased equipment costs and delays.

As a result, our installation and sales growth were less than we had projected.

During 2024, the increase in interest rates has slowed customer interest in solar products.

In this environment, the sales process is

more challenging resulting in fewer sales people and sales dealers making sales.

As a result, our sales are less than we had projected.

Revenue, net less cost of goods sold may vary from period-to-period

and is primarily affected by our average selling prices, financing or dealer fees, fluctuations in equipment costs and our ability to

effectively and timely deploy our field installation teams to project sites once permitting departments have approved the design and engineering

of systems on customer sites.

Operating Expenses

Operating expenses consist of sales and marketing and general and administrative

Personnel-related costs are the most significant component of each of these expense categories and include salaries, benefits

and payroll taxes.

In the future, the Company intends to provide more benefits to its employees, including an employee stock purchase

plan, which will increase operating expenses.

Sales and marketing expenses consist primarily of personnel-related

expenses, as well as advertising, travel, trade shows, marketing, customer support and other indirect costs.

We expect to continue to

make the necessary investments to enable us to execute our strategy to increase our market penetration geographically and enter into new

markets by expanding our base sales teams, installers and strategic sales dealer and partner network.

General and administrative expenses consist primarily of personnel-related

expenses for our executive, finance, human resources, information technology, and software, facilities costs and fees for professional

Fees for professional services consist primarily of outside legal, accounting and information technology consulting costs.

Depreciation and amortization consist primarily of deprecation of our

vehicles, furniture and fixtures, internally developed software and amortization of our acquired intangibles.

Other (expenses) income, net

Other (expenses) income, net primarily consists of interest expense

and fees under our equipment and vehicle term loans.

It also includes interest income on our cash balances, and accrued interest on tariffs

previously paid and approved for a refund.

Results of Operations

Three Months Ended June 30, 2024 Compared to Year Ended June

The following table sets forth a summary of our consolidated statements

of operations for the periods presented:

Three Months ended

$ (15,367,539 )

Costs and expenses:

Cost of goods sold

(14,118,512 )

Depreciation and amortization

2 unchanged sentences

Total operating expenses

(12,343,552 )

(Loss) income from operations

4 unchanged sentences

Total other (expenses) income, net

Net (loss) income

Net (loss) income before taxes

$ (1,350,983 )

$ (2,148,231 )

Revenue, net increased by approximately $0.8 million as a result of

our increase in sales volume in 2023 compared 2022.

The Company's first quarter benefits from the sales made in the prior year where the

revenue recognition process is not yet complete.

The Company had more sales at the end of 2023 that were in the installation process and

completed the revenue recognition process in 2024 than they had at the end of 2022 and completed the revenue recognition process in the

first quarter of 2023.

of Goods Sold

Cost of goods sold increased by $2.4 million as a result of the increase

in revenues as noted above and an increase in the cost of labor and materials during the three months ended March 31, 2024 as compared

As a percentage of revenue, the cost of goods sold increased by 9.1%, from 79.1% for the three months ended March 31, 2023 to

88.2% for the three months ended March 31, 2024.

The increase was driven primarily by an increase in the costs associated with the growth

of the business in 2023 which are not as easily reduced when the Company has a decrease in revenue as we did in the first quarter compared

to the 2nd half of 2023.

and amortization

and amortization increased by a nominal amount, from $432,599 for the three months ended March 31, 2023 to $462,701 for the three months

ended March 31, 2024.

The increase was due to an increase in our vehicle fleet in 2023 and the associated depreciation of the new vehicles.

and Administrative expenses

Revenue, net decreased by approximately $15.4 million.

In the higher

interest environment, it is more challenging to make sales.

We are seeing less volume from our internal sales teams resulting in higher

attrition of sales personnel than in previous years.

We are also seeing less volume from our sales dealer partners.

Cost of Goods Sold

Cost of goods sold decreased by $14.1 million.

The decrease was a result

of the decrease in revenue.

As a percentage of revenue, cost of goods improved to 70% in 2024 from 81% in 2023.

This improvement was driven

by a decrease in the cost of materials and efficiencies in labor.

Depreciation and amortization

Depreciation and amortization decreased by a nominal amount, from $489,566

for the three months ended June 30, 2023 to $456,841 for the three months ended June 30, 2024.

The decrease was due to to a decrease in

the amortization of intangible assets which became fully depreciated..

General and Administrative expenses

General and administrative expenses increased by $2.1 million from

$1.3 million for the three months ended March 31, 2023 to $6.4 million for the three months ended March 31, 2024.

The increase in expenses

is related primarily to investments the company is making in customer support, technology and costs associated with operating a public

and Marketing

and marketing expenses increased by $0.4 million, from $0.5 million for the three months ended March 31, 2023 to $0.1 million for the

three months ended March 31, 2024.

The decrease was a result of efforts to drive the associated increase in revenues.

(expense) income, net

expense (income), net decreased from $10,544 to $175,054 was due an increase in interest expense due to the financing of additional vehicles

and Capital Resources

primary source of funding to support operations have historically been from cash flows from operations.

Our primary short-term requirements

for liquidity and capital are to fund general working capital and capital expenses.

Our principal long-term working capital uses include

ensuring revenue growth, expanding our sales and marketing efforts and potential acquisitions.

of March 31, 2024 and December 31, 2023, our cash and cash equivalents balance were approximately $7.7 million and $8.0 million, respectively.

$3.8 million for the three months ended June 30, 2023 to $5.9 million for the three months ended June 30, 2024.

The increase was primarily

due to $2.4 million in stock compensation recognized in 2024.

There was no stock compensation expense in 2023.

Sales and Marketing

Sales and marketing expenses decreased by $275,683, from $490,875 for

the three months ended June 30, 2023 to $215,192 for the three months ended June 30, 2024.

The decrease was a result of a reduction in

cost to support fewer sales people and less revenue.

Other (expense) income, net

Other (expense) income, net increased from an expense of $(31,168)

for the three months ended June 30, 2023 to income of $844,588 for the three months ended June 30, 2024.

The increase in income was due

primarily to a gain on fair value of warrant liabilities.

Six Months Ended June 30, 2024 Compared to Year Ended June 30,

The following table sets forth a summary of our consolidated statements

of operations for the periods presented:

Six Months ended

$ (14,235,238 )

Costs and expenses:

Cost of goods sold

(11,564,026 )

Depreciation and amortization

Sales and marketing

General and administrative

Total operating expenses

(Loss) income from operations

Other (expense) income, net:

Other expense, net

Change in fair value of warrant liabilities

Interest expense

Total other (expenses) income, net

Net (loss) income before taxes

$ (3,283,691 )

$ (5,683,878 )

Revenue, net decreased by approximately $14.2 million.

In the higher

interest environment, it is more challenging to make sales.

We are seeing less volume from our internal sales teams resulting in higher

attrition of sales personnel than in previous years.

We are also seeing less volume from our sales dealer partners.

Cost of Goods Sold

Cost of goods sold decreased by $11.6 million.

The decrease was a result

of the decrease in revenue.

As a percentage of revenue, cost of goods was consistent period to period at 80%.

Depreciation and amortization

Depreciation and amortization decreased by a nominal amount, from $922,165

for the six months ended June 30, 2023 to 919,542 for the six months ended June 30, 2024.

The decrease was due to a decrease in the amortization

of intangible assets which became fully depreciated.

General and Administrative expenses

General and administrative expenses increased by $4.4 million from

$5.2 million for the six months ended June 30, 2023 to $9.6 million for the six months ended June 30, 2024.

The increase was primarily

due to a $2.9 million increase in stock compensation and an increase in headcount, infrastructure-related expenses to support increased

revenues and expenses related to the Business Combination.

Sales and Marketing

Sales and marketing expenses decreased by $0.7 million, from $1.0 million

for the six months ended June 30, 2023 to $0.3 million for the six months ended June 30, 2024.

The decrease was a result of a reduction

in cost to support fewer sales people and less revenue.

Other (expense) income, net

Other expense (income), net decreased from a net expense of $(41,712)

to income of $669,534.

The improvement in income was due primarily to a gain on fair value of warrant liabilities of $690,000.

Liquidity and Capital Resources

Our primary source of funding to support operations have historically

been from cash flows from operations.

Our primary short-term requirements for liquidity and capital are to fund general working capital

and capital expenses.

Our principal long-term working capital uses include ensuring revenue growth, expanding our sales and marketing

efforts and potential acquisitions.

As of June 30, 2024 and December 31, 2023, our cash and cash equivalents

balance were approximately $5.3 million and $8.0 million, respectively.

The Company maintains its cash in checking and savings accounts.

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.

order to finance these opportunities and associated costs, it is possible that we will need to raise additional capital through either

debt or equity financing if the proceeds realized from the Business Combination are insufficient to support our business needs.

we believe that the proceeds realized through the Business Combination will be sufficient to meet our currently contemplated business

needs for the next twelve months, we cannot assure you that this will be the case.

If additional financing is required by us from outside

sources, we may not be able to raise it on terms acceptable to us or at all.

If we are unable to raise additional capital on acceptable

terms when needed, our business, results of operations and financial condition would be materially and adversely affected.

following table summarizes our cash flows for the periods presented:

For the three months ended

Our future capital requirements depend on many factors, including our

revenue growth rate, the timing and extent of our spending to support further sales and marketing, the degree to which we are successful

in launching new business initiatives and the cost associated with these initiatives, and the growth of our business generally.

In order to finance these opportunities and associated costs, it is

possible that we will need to raise additional capital through either debt or equity financing if the proceeds realized from the Business

Combination are insufficient to support our business needs.

While we believe that the proceeds realized through the Business Combination

will be sufficient to meet our currently contemplated business needs for the next twelve months, we cannot assure you that this will be

If additional financing is required by us from outside sources, we may not be able to raise it on terms acceptable to us or

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.

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

For the six months ended

Net cash (used in) provided by operating activities

1 unchanged sentence

$ (14,187,259 )

Net cash used in investing activities

Net cash provided by financing activities

Cash flows (used in) provided by operating activities

Net cash provided by (used in) investing activities

Net cash used in financing activities

Cash flows from operating activities

Net cash used in operating activities was approximately $12.3 million

during the three months ended March 31, 2024 compared to a net cash provided by operating activities of approximately $1.6 million during

three months March 31, 2024.

The decrease was primarily due to a decrease in net income due to the closing of the Business Combination.

Cash flows used in investing activities

during the six months ended June 30, 2024 compared to a net cash provided by operating activities of approximately $1.8 million during

six months June 30, 2024.

The decrease was due primarily to an increase in accounts receivable and contract liabilities.

Accounts receivables

have increased as our financing partners have become more conservative in how soon they fund a customer contract after completion.

liabilities decreased as a result of completing jobs in the first quarter for which we had received funding but deferred revenue because

we had not yet achieved the revenue recognition milestones.

Cash flows from investing activities

Net cash used in investing activities was approximately $0.3 million

for the three months ended March 31, 2024, primarily relating to purchases of property and equipment of $0.3 million.

Net cash used in

investing activities for the three months ended March 31, 2023 was approximately $0.6 million primarily relating to purchases of vehicles.

Cash flows provided by financing activities

for the six months ended June 30, 2024, primarily relating to the development of software of $0.3 million.

Net cash used in investing

activities for the six months ended June 30, 2023 was approximately $0.8 million primarily relating to purchases of vehicles.

Cash flows used in financing activities

Net cash provided by financing activities was approximately $10.0 million

for the three months ended March 31, 2024, primarily relating to cash acquired from the Business Combination of $10.4 million offset by

repayments of debt and distributions of stockholders.

Net cash provided by financing activities for the three months ended March 31, 2023

was approximately $0.2 million, primarily relating to proceeds from the issuance of debt offset by distributions to members.

for the six months ended June 30, 2024, primarily relating to the net proceeds from the issuance of convertible preferred stock.

provided by financing activities for the six months ended June 30, 2023 was approximately $0.1 million, primarily relating to proceeds

from the issuance of debt to purchase vehicles offset by distributions to members.

Current Indebtedness

The Company has utilized internally generated positive cashflow to

grow the business.

The Company has $3.0 million payable for professional services related to the business combination to be paid over

the next six quarters;

$2.8 million in trade credit with solar equipment distributors;

$1.7 million of debt related to service vehicles

valued at approximately $2.1 million net of depreciation.

Financial Measures

non-GAAP financial measures below have not been calculated in accordance with GAAP and should be considered in addition to results prepared

in accordance with GAAP and should not be considered as a substitute for, or superior to, GAAP results.

In addition, Adjusted EBITDA

and Adjusted EBITDA Margin should not be construed as indicators of our operating performance, liquidity or cash flows generated by operating,

investing and financing activities, as there may be significant factors or trends that they fail to address.

We caution investors that

non-GAAP financial information, by its nature, departs from traditional accounting conventions.

Therefore, its use can make it difficult

to compare our current results with our results from other reporting periods and with the results of other companies.

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.

Other than approximately $1.9 million in trade-credit with solar equipment distributors, the Company has only approximately

$1.6 million of debt on service trucks and vehicles valued at approximately $1.9 million net of depreciation.

Non-GAAP Financial Measures

The non-GAAP financial measures below have not been calculated in accordance

with GAAP and should be considered in addition to results prepared in accordance with GAAP and should not be considered as a substitute

for, or superior to, GAAP results.

In addition, Adjusted EBITDA and Adjusted EBITDA Margin should not be construed as indicators of our

operating performance, liquidity or cash flows generated by operating, investing and financing activities, as there may be significant

factors or trends that they fail to address.

We caution investors that non-GAAP financial information, by its nature, departs from traditional

accounting conventions.

Therefore, its use can make it difficult to compare our current results with our results from other reporting

periods and with the results of other companies.

Our management uses these non-GAAP financial measures, in conjunction

with GAAP financial measures, as an integral part of managing our business and to, among other things:

(i) monitor and evaluate the performance

of our business operations and financial performance;

(ii) facilitate internal comparisons of the historical operating performance of

our business operations;

(iii) facilitate external comparisons of the results of our overall business to the historical operating performance

of other companies that may have different capital structures and debt levels;

(iv) review and assess the operating performance of our

management team;

(v) analyze and evaluate financial and strategic planning decisions regarding future operating investments;

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.

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, and depreciation and amortization.

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 calculated in accordance with GAAP, and other companies may define Adjusted EBITDA differently.

following table provides a reconciliation of net income (loss) to Adjusted EBITDA for the periods presented:

(loss) before interest and other income (expenses), net, income tax expense, and depreciation and amortization, as adjusted to exclude

merger and acquisition expenses (“ M&A expenses ”).

We utilize Adjusted EBITDA as an internal performance

measure in the management of our operations because we believe the exclusion of these non-cash and non-recurring charges allow for a more

relevant comparison of our results of operations to other companies in our industry.

Adjusted EBITDA should not be viewed as a substitute

for net loss calculated in accordance with GAAP, and other companies may define Adjusted EBITDA differently.

The following table provides a reconciliation of net income (loss)

to Adjusted EBITDA for the periods presented:

Three Months Ended

Six Months Ended

Net income (loss)

$ (1,289,798 )

$ (3,181,873 )

Other income (expense), net

Income tax expense

Income tax benefit

Stock compensation

Depreciation and amortization

Adjusted EBITDA

EBITDA Margin

Adjusted EBITDA Margin

We define Adjusted EBITDA margin, a non-GAAP financial measure, expressed

7 unchanged sentences

results of operations to other companies in our industry.

following table sets forth our calculations of Adjusted EBITDA margin for the periods presented:

The following table sets forth our calculations of Adjusted EBITDA

margin for the periods presented:

Three Months Ended

Six Months Ended

Adjusted EBITDA

Ratio of Adjusted EBITDA to revenue, net

Accounting Estimates

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.

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

We discuss our significant accounting policies in Note 3, Summary of

9 unchanged sentences

to the estimation process and business judgment involved in their application:

of Business Combinations

Company recognizes and measures the assets acquired and liabilities assumed in a business combination based on their estimated fair values

at the acquisition date.

Any excess or surplus of the purchase consideration when compared to the fair value of the net tangible assets

acquired, if any, is recorded as goodwill or gain from a bargain purchase.

The fair value of assets and liabilities as of the acquisition

date are often estimated using a combination of approaches, including the income approach, which requires us to project future cash flows

and apply an appropriate discount rate;

and the market approach which uses market data and adjusts for entity-specific differences.

use all available information to make these fair value determinations and engage third-party consultants for valuation assistance.

estimates used in determining fair values are based on assumptions believed to be reasonable but which are inherently uncertain.

actual results may differ materially from the projected results used to determine fair value.

is recognized and initially measured as any excess of the acquisition-date consideration transferred in a business combination over the

acquisition-date amounts recognized for the net identifiable assets acquired.

is not amortized but is tested for impairment annually, or more frequently if an event occurs or circumstances change that would more

likely than not result in an impairment of goodwill.

First, the Company assesses qualitative factors to determine whether or not it is

more likely than not that the fair value of a reporting unit is less than its carrying amount.

If the Company concludes that it is more

likely than not that the fair value of a reporting unit is less than its carrying amount, the Company conducts a quantitative goodwill

impairment test comparing the fair value of the applicable reporting unit with its carrying value.

If the carrying amount of the reporting

unit exceeds the fair value of the reporting unit, the Company recognizes an impairment loss in the consolidated statements of operations

for the amount by which the carrying amount exceeds the fair value of the reporting unit.

The Company performs its annual goodwill impairment

test at December 31 of each year.

There was no goodwill impairment recorded for the three months ended March 31, 2024and 2023.

assets subject to amortization

assets include tradename, customer lists and non-compete agreements.

Amounts are subject to amortization on a straight-line basis over

the estimated period of benefit and are subject to annual impairment consideration.

Costs incurred to renew or extend the term of a recognized

intangible asset, such as the acquired trademark, are capitalized as part of the intangible asset and amortized over its revised estimated

assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of the intangible assets

Valuation of Business Combinations

The Company recognizes and measures the assets acquired and liabilities

assumed in a business combination based on their estimated fair values at the acquisition date.

Any excess or surplus of the purchase

consideration when compared to the fair value of the net tangible assets acquired, if any, is recorded as goodwill or gain from a bargain

The fair value of assets and liabilities as of the acquisition date are often estimated using a combination of approaches, including

the income approach, which requires us to project future cash flows and apply an appropriate discount rate;

and the market approach which

uses market data and adjusts for entity-specific differences.

We use all available information to make these fair value determinations

and engage third-party consultants for valuation assistance.

The estimates used in determining fair values are based on assumptions believed

to be reasonable, but which are inherently uncertain.

Accordingly, actual results may differ materially from the projected results used

to determine fair value.

Goodwill is recognized and initially measured as any excess of the

acquisition-date consideration transferred in a business combination over the acquisition-date amounts recognized for the net identifiable

assets acquired.

Goodwill is not amortized but is tested for impairment annually, or

more frequently if an event occurs or circumstances change that would more likely than not result in an impairment of goodwill.

the Company assesses qualitative factors to determine whether or not it is more likely than not that the fair value of a reporting unit

is less than its carrying amount.

If the Company concludes that it is more likely than not that the fair value of a reporting unit is

less than its carrying amount, the Company conducts a quantitative goodwill impairment test comparing the fair value of the applicable

reporting unit with its carrying value.

If the carrying amount of the reporting unit exceeds the fair value of the reporting unit, the

Company recognizes an impairment loss in the consolidated statements of operations for the amount by which the carrying amount exceeds

the fair value of the reporting unit.

The Company performs its annual goodwill impairment test at December 31 of each year.

no goodwill impairment recorded for the three months ended June 30, 2024 and 2023.

Intangible assets subject to amortization

Intangible assets include tradename, customer lists and non-compete

Amounts are subject to amortization on a straight-line basis over the estimated period of benefit and are subject to annual

impairment consideration.

Costs incurred to renew or extend the term of a recognized intangible asset, such as the acquired trademark,

are capitalized as part of the intangible asset and amortized over its revised estimated useful life.

Intangible assets are reviewed for impairment whenever events or changes

in circumstances indicate the carrying amount of the intangible assets may not be recoverable.

Conditions that would necessitate an impairment

assessment include a significant decline in the observable market value of an asset, a significant change in the extent or manner in which

an asset is used, or any other significant adverse change that would indicate that the carrying amount of an asset or group of assets

may not be recoverable.

Conditions that would necessitate an impairment assessment include a significant decline in the observable market

value of an asset, a significant change in the extent or manner in which an asset is used, or any other significant adverse change that

would indicate that the carrying amount of an asset or group of assets may not be recoverable.

The Company evaluates the recoverability

of intangible assets by comparing their carrying amounts to future net undiscounted cash flows expected to be generated by the intangible

If such intangible assets are considered to be impaired, the impairment recognized is measured as the amount by which the carrying

amount of the intangible assets exceeds the fair value of the assets.

The Company determines fair value based on discounted cash flows

using a discount rate commensurate with the risk inherent in the Company’s current business model for the specific intangible asset

being valued.

No impairment charges were recorded for the three months ended March 31, 2024 and 2023.

The Company evaluates the recoverability of intangible assets by comparing their carrying amounts to future net

undiscounted cash flows expected to be generated by the intangible assets.

If such intangible assets are considered to be impaired, the

impairment recognized is measured as the amount by which the carrying amount of the intangible assets exceeds the fair value of the assets.

The Company determines fair value based on discounted cash flows using a discount rate commensurate with the risk inherent in the Company’s

current business model for the specific intangible asset being valued.

No impairment charges were recorded for the three months ended

June 30, 2024 and 2023.

Quantitative and Qualitative Disclosures about Market Risk

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

As a smaller reporting company, we are not required to provide the

information required by this Item.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis