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Item 7. Management’s Discussion and Analysis

2025-05-28 compared with 2024-03-25 · 656 added, 405 removed, 15 unchanged (99% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

As discussed elsewhere in this

Annual Report on Form 10-K for the year ended December 31, 2023 and below, Zeo became a publicly held entity in March 2024 upon the

completion of the Business Combination with ESGEN.

The following discussion and analysis is exclusively

attributable to the operations of ESGEN for the years ended December 31, 2023 and 2022, as well as certain activities up to

and including the effective date of the Business Combination, or March 13, 2024.

This discussion and analysis should be read in conjunction

with our financial statements for the years ended December 31, 2023 and 2022 and the related notes thereto, which have been

prepared in accordance with GAAP.

The preparation of these financial statements in conformity with GAAP requires management

to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities

at the date of the financial statements and the reported amounts of expenses during the reporting period.

Actual results could differ

from those estimates.

We were incorporated as a Cayman Islands exempted company on April

19, 2021 for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business

combination with one or more businesses or entities (the “Business Combination”).

We will not be limited to a particular industry

or geographic region in our identification and acquisition of a target company.

Our sponsor is ESGEN LLC, a Delaware limited liability company (the

The registration statement for our initial public offering (“initial

public offering”, “IPO” or “Public Offering”) was declared effective on October 19, 2021.

On October 22,

2021, we consummated our initial public offering of 27,600,000 units (the “Units” and, with respect to the ordinary shares

included in the Units being offered, the “public shares”) at $10.00 per Unit (which included the full exercise of the underwriters’

over-allotment option), and the sale of 14,040,000 warrants (the “Private Placement Warrants”) each exercisable to purchase

one Class A ordinary share at $11.50 per share, at a price of $1.00 per Private Placement Warrant in a private placement to our Sponsor

that closed simultaneously with the initial public offering.

Following the closing of our initial public offering on October 22,

2021, $281,520,000 ($10.20 per Unit) from the net proceeds sold in our initial public offering, including proceeds of the sale of the

Private Placement Warrants, was deposited in a trust account (“Trust Account”) and, until October 16, 2023, was only invested

in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity

of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which

invest only in direct U.S.

government treasury obligations.

To mitigate the risk of being deemed to have been operating as an unregistered

investment company under the Investment Company Act, on October 16, 2023, we instructed the Trustee with respect to the Trust Account,

to liquidate the U.S.

government securities or money market funds held in the Trust Account and thereafter to hold all funds in the Trust

Account in demand deposits (i.e., in one or more bank accounts) until the earliest of ESGEN’s completion of an initial business

combination or July 22, 2024 (assuming the Sponsor deposits the required amount into the Trust Account for each New Additional Extension

Date and unless the Company’s shareholders approve one or more further Additional Extensions), as applicable.

Prior to shareholder approval of the First Extension Charter Amendment

(as defined below), we had 15 months from the closing of our initial public offering to consummate the initial Business Combination.

we have not consummated the initial Business Combination within the Combination Period, we will:

(i) cease all operations except for the

purpose of winding up;

(ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares,

at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on

the funds held in the Trust Account and not previously released to us to pay income taxes, if any (less up to $100,000 of interest or

dividends to pay winding up and dissolution expenses) divided by the number of the then-outstanding public shares, which redemption will

completely extinguish public shareholders’ rights as shareholders (including the right to receive further liquidation distributions,

and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining shareholders

and board of directors, liquidate and dissolve, subject in the case of clauses (ii) and (iii), to our obligations under Cayman Islands

law to provide for claims of creditors and the requirements of other applicable law.

On January 18, 2023, the Company held an extraordinary general meeting

of shareholders to consider and vote upon, among other things, a proposal to amend the Company’s amended and restated memorandum

and articles of association (the “First Extension Charter Amendment”) to (i) extend the date by which the Company must consummate

its initial Business Combination (the “Termination Date”) from January 22, 2023 to April 22, 2023 and (ii) in the event that

the Company has not consummated an initial Business Combination by April 22, 2023, to allow the Company, by resolution of the Company’s

board of directors (the “Board”) and, without any approval of the Company’s shareholders, upon five days’ advance

notice prior to each Additional Extension, to extend the Termination Date up to six times (with each such extension being upon five days’

advance notice), each by one additional month (for a total of up to six additional months to complete a business combination) (each, an

“Additional Extension” and such date, an “Additional Extension Date”), provided that the Sponsor or the Sponsor’s

affiliates or permitted designees will deposit into the Trust Account for each Additional Extension Date the lesser of (a) $140,000 or

(b) $0.04 for each public share that is then-outstanding, in exchange for one or more non-interest bearing, unsecured promissory notes

issued by the Company to the Sponsor or the Sponsor’s affiliates or permitted designees (the “Lenders” and each a “Lender”).

In connection with the vote to approve the First Extension Charter Amendment, the holders of 24,703,445 Class A ordinary shares properly

exercised their right to redeem their shares for cash at a redemption price of approximately $10.35 per share, for an aggregate redemption

amount of $255,875,758.

The Company currently has until July 22, 2024 (assuming the Sponsor deposits the required amount into the Trust

Account for each New Additional Extension Date and unless the Company’s shareholders approve one or more further Additional Extensions)

to complete an initial Business Combination.

On October 20, 2023, the Company held an extraordinary general meeting

(the “Meeting”) and approved (i) (a) the extension (such proposal, the “Extension Proposal”) of the time period

the Company has to complete an initial Business Combination from October 22, 2023 to January 22, 2024 (the “Charter Amendment”)

and (b) in the event that the Company has not consummated an initial Business Combination by January 22, 2024, to allow the Company, by

resolution of the Board and, without any approval of the Company’s shareholders, upon five days’ advance notice prior to each

Additional Extension, to complete six Additional Extensions, provided that the Sponsor or the Sponsor’s affiliates or permitted

designees will deposit into the Trust Account for each Additional Extension Date the lesser of (x) $35,000 or (y) $0.0175 for each public

share that is then-outstanding, in exchange for one or more non-interest bearing, unsecured promissory notes issued by a Lender, and (ii)

the amendment of the Company’s amended and restated memorandum and articles of association to change certain provisions which restrict

the Class B ordinary shares, par value $0.0001, of the Company (the “Class B ordinary shares”) from converting to Class A

ordinary shares, par value $0.0001 (the “Class A ordinary shares”) prior to the consummation of an initial Business Combination

(such proposal, the “Conversion Proposal”).

As of the date of filing this report, the Company has deposited the requisite

amounts into the Trust Account for each Additional Extension Date until March 22, 2024.

In connection with the vote to approve the above proposals, the holders

of 1,488,000 Class A ordinary shares of ESGEN properly exercised their right to redeem their shares for cash at a redemption price of

approximately $11.21 per share, for an aggregate redemption amount of $16,679,055.

In connection with the approval of the Extension Proposal at the Meeting

and the adoption of the Charter Amendment, the Sponsor contributed into the Trust Account $0.0525 per share for each Class A ordinary

share that was not redeemed at the Meeting, for an aggregate contribution of $73,949.

In connection with the approval of the Conversion Proposal at the Meeting

and the adoption of the Charter Amendment, the Sponsor converted all of its 5,619,077 Class B ordinary shares into Class A ordinary shares

(the “Sponsor Share Conversion”).

As a result of the Sponsor Share Conversion and redemptions made in connection with the

Extension Proposal and Conversion Proposal, 7,027,632 Class A ordinary shares remain outstanding.

Notwithstanding the Sponsor Share Conversion,

the Sponsor will be not entitled to receive any funds held in the Trust Account with respect to any Class A ordinary shares issued to

the Sponsor as a result of the Sponsor Share Conversion and no additional amounts will be deposited into the Trust Account in respect

of shares of Class A ordinary shares held by the Sponsor in connection with the extension of the Termination Date to the Extended Date

or any Additional Extension Dates.

On March 13, 2024 (the “Closing Date”),

the registrant consummated its previously announced business combination (the “Closing”), pursuant to that certain Business

Combination Agreement, dated as of April 19, 2023 (as amended on January 24, 2024, the “Business Combination Agreement”),

by and among Zeo Energy Corp., a Delaware corporation (f/k/a ESGEN Acquisition Corporation, a Cayman Islands exempted company), ESGEN

OpCo, LLC, a Delaware limited liability company(“OpCo”), Sunergy Renewables, LLC, a Nevada limited liability company (“Sunergy”),

the Sunergy equityholders set forth on the signature pages thereto or joined thereto (collectively, “Sellers” and each, a

“Seller”, and collectively with Sunergy, the “Sunergy Parties”), for limited purposes, ESGEN LLC, a Delaware limited

liability company (the “Sponsor”), and for limited purposes, Timothy Bridgewater, an individual, in his capacity as the Sellers

Representative (collectively, the “Business Combination”).

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

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

of ESGEN (the “ESGEN Class A Ordinary Shares” and such conversion, the “ESGEN Share Conversion”);

and (ii) ESGEN

was domesticated into the State of Delaware so as to become a Delaware corporation (the “Domestication”).

In connection with

the Closing, the registrant changed its name from “ESGEN Acquisition Corporation” to “Zeo Energy Corp.”

Following, each then-outstanding ESGEN Class

A Ordinary Share was converted into one share of Class A common stock of the registrant, par value $0.0001 per share (“Zeo Class

A Common Stock”), and each then-outstanding ESGEN Public Warrant converted automatically into a warrant of the registrant, exercisable

for one share of Zeo Class A Common Stock.

Additionally, each outstanding unit of ESGEN was cancelled and separated into one share of

Zeo Class A Common Stock and one-half of one warrant of the registrant.

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 confer

on the holder any right to acquire, any equity interests of Sunergy or any subsidiary thereof (collectively, the “Sunergy Convertible

Interests”) existing immediately prior to the 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.

MANAGEMENT’S DISCUSSION

AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis summarizes

the significant factors affecting our operating results, financial condition, liquidity and cash flows as of and for the periods presented

The following discussion and analysis should be read in conjunction with our financial statements and the related notes thereto

included elsewhere in this Report.

The discussion contains forward-looking statements that are based on the beliefs of management, as

well as assumptions made by, and information currently available to, management.

Actual results could differ materially from those discussed

in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Report,

particularly in the sections titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.”

Unless the context otherwise requires, references

in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “Zeo,”

“we”, “us”, “our”, and the “Company” are intended to refer to (i) following the Business

Combination (as defined below), the business and operations of Zeo and its consolidated subsidiaries, and (ii) prior to the Business Combination,

Sunergy (the predecessor entity in existence prior to the consummation of the Business Combination) and its consolidated subsidiary.

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.

a vertically integrated company offering energy solutions and services that include sale, design, procurement, installation, and maintenance

of residential solar energy systems.

Many of our solar energy system customers also purchase other energy efficient-related equipment

or services or roofing services from us.

The majority of our customers are located in Florida, Texas, Arkansas, Missouri, Ohio, and Illinois,

and we have an expanding base of customers in California, Colorado, Minnesota, Missouri, Ohio, Utah, and Virginia.

Sunergy was created

on October 1, 2021 through the Contribution of Sun First Energy, LLC, a rapidly growing solar sales management company, and Sunergy Solar,

LLC, a large solar installation company based in Florida, to Sunergy Renewables, LLC.

We believe that we have built (and continue to

build) the infrastructure and capabilities necessary to rapidly acquire and serve customers in a low-cost and scalable manner.

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

We believe that this multi-channel model supports rapid sales and installation growth, allowing us to achieve capital-efficient

growth in the regional markets we serve.

Since our founding, we have continued to invest

in a platform of services and tools to enable large scale operations for us and our partner network, which includes sales partners, installation

partners and other strategic partners.

The platform includes processes and software, as well as the capacity for the fulfillment and acquisition

of marketing leads.

We believe our platform empowers our in-house sales team and external sales dealers to profitably serve our regional

and underpenetrated markets and helps us compete effectively against larger, more established industry players without making significant

investment in technology and infrastructure.

We have focused to date on a simple, capital light

business strategy utilizing, as of December 31, 2024, approximately 290 sales agents and approximately 22 independent sales dealers to

produce our sales pipeline.

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

install their systems and assist their connections to the local utility power grid.

Most of the equipment we install is drop-shipped to

the installation site by our regional distributors, requiring minimal inventory to be held by the Company during any given period.

depend on our distributors to timely handle logistics and related requirements in moving equipment to the installation sites.

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.

We believe that continued government policy support

of solar energy and increasing conventional utility costs provide the solar energy market with material headwinds for accelerating adoption

in the United States, which currently lags other international markets, including Australia and Europe.

The majority of our customers

are located in Florida, Texas, Arkansas, Missouri, Ohio and Illinois and we have an expanding base of customers in California, Colorado,

Minesota, Utah and Virginia.

We plan to continue to enter new markets selectively where favorable net metering policies or cost incentives

exist and we can implement efficient operations.

Most of our sales were generated in Florida in 2023 and were largely split between Florida

and Ohio in 2024.

We have focused on improving our operational efficiency to meet the decrease in revenues we faced in 2024

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.

customers finance their purchases with affordable loans or leases that require minimal or no upfront capital or down payment.

Recent Developments

On October 25, 2024, the Company closed an Asset

Purchase Agreement with Lumio Holdings, Inc., a Delaware corporation, and Lumio HX, Inc., a Delaware corporation, pursuant to which, subject

to the terms and conditions set forth in the Asset Purchase Agreement, the Company agreed to acquire certain assets of the Sellers on

an as-is, where-is basis, including uninstalled residential solar energy contracts, certain inventory, intellectual property and intellectual

property rights, equipment, records, goodwill and other intangible assets, free and clear of any liens other than certain specified liabilities

of the Sellers that are being assumed for a total purchase price of (i) $4 million in cash and (ii) 6,206,897 shares of the Company’s

Class A Common Stock, par value $0.0001, to be paid to LHX Intermediate, LLC, a Delaware limited liability company.

The Asset Purchase

Agreement contains customary representations, warranties and covenants of the parties for a transaction involving the acquisition of assets

from a debtor in bankruptcy, including the condition that the bankruptcy court enter an order authorizing and approving the Transaction.

Business Combination

On March 13, 2024, we consummated the Business

Combination with ESGEN Acquisition Corp.

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

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

and (ii) ESGEN was domesticated

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

In connection with the Closing, we changed our name from “ESGEN

Acquisition Corporation” to “Zeo Energy Corp.”

Following the Domestication, each then-outstanding

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

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

Additionally, each outstanding unit of ESGEN was

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

In accordance with the terms of the Business Combination

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

or its subsidiaries or securities (including debt securities) convertible into or exchangeable for, or that otherwise conferred on the

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

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

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

the Sunergy Convertible Interests.

At the Closing, ESGEN contributed to OpCo (1)

all of its assets (excluding its interests in OpCo, but including the amount of cash in ESGEN’s Trust Account (the “Trust

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

and (2) a number of newly issued shares (the “Seller Class V Shares”) of Class V common stock of the registrant, par value

$0.0001 per share(“Zeo 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 in exchange, OpCo issued to ESGEN (i) a number of Class A common units

of OpCo (the “Manager OpCo Units”) which equaled the total number of shares of the Zeo Class A Common Stock issued and outstanding

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

(as defined in the Business Combination Agreement) 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.

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%

9 unchanged sentences

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 (as defined below)) the exchange of

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

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

Grants under the

Management Incentive Plan will be made after Closing.

As of the Closing Date, upon consummation of the

Business Combination, the only outstanding shares of capital stock of the registrant were shares of Zeo Class A Common Stock and Zeo Class

V Common Stock.

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.

Common Stock and Class V Common Stock.

In connection with entering into the Business

Combination Agreement, ESGEN and the Sponsor entered into a subscription agreement, dated April 19, 2023, which ESGEN, the Sponsor and

OpCo subsequently amended and restated on January 24, 2024 (the “Sponsor Subscription Agreement”), pursuant to which, among

other things, the Sponsor agreed to purchase an aggregate of 1,000,000 preferred units of OpCo(“Convertible OpCo Preferred Unitrs”)

convertible into Exchangeable OpCo Unites (as defined below) (and be issued an equal number of shares of Zeo 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

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 Zeo Class

V Common Stock were issued to Sponsor pursuant to the Sponsor Subscription Agreement for aggregate consideration of $15,000,000.

On April 5, 2023, the Company issued an unsecured

promissory note (the “Note”) in the principal amount of up to $1,500,000 to the Sponsor, which may be drawn down by the Company

from time to time prior to the consummation of the Sunergy Business Combination.

The Note does not bear interest, matures on the date

of consummation of the Sunergy Business Combination and is subject to customary events of default.

As of December 31, 2023, there was

$1,238,449 outstanding under the Note.

On October 17, 2023, ESGEN issued an amended and restated promissory

note (the “October 2023 Promissory Note”) in the principal amount of up to $2,500,000 to the Sponsor.

The October 2023 Promissory

Note amends, restates, replaces and supersedes the Note dated April 5, 2023.

The October 2023 Promissory Note could be drawn down by ESGEN

from time to time prior to the consummation of ESGEN’s initial Business Combination.

The October 2023 Promissory Note did not bear

interest, matured on the date of consummation of the Business Combination and was subject to customary events of default.

2023 Promissory Note, as well as the promissory note issued on April 17, 2021 to the Sponsor (“April 2021 Promissory Note”),

was not repaid and was cancelled at the closing of the Business Combination.

On January 24, 2024, ESGEN issued a new promissory note (“January

2024 Promissory Note”) in the principal amount of up to $750,000 to the Sponsor.

The January 2024 Promissory Note could be drawn

down by ESGEN from time to time prior to the consummation of ESGEN’s initial Business Combination for specific uses as designated

The January 2024 Promissory Note did not bear interest, matured on the date of consummation of the Business Combination and was

subject to customary events of default.

The principal amount under the January 2024 Promissory Note was paid at the closing of the Business

Combination from the funds that ESGEN had available to it outside of its Trust Account.

On March 6, 2024, the Company and, following consummation of the Business

Combination, New PubCo held its extraordinary general meeting of shareholders (the “Meeting”) and adopted the following proposals.

To approve and adopt the Business Combination Agreement.

To approve an amendment to the Company’s

existing organizational documents to eliminate the requirement that the Company retain at least $5,000,001 of net tangible assets

following the redemption of Public Shares in connection with the Business Combination and to authorize ESGEN to redeem Public Shares

in amounts that would cause ESGEN’s net tangible assets to be less than $5,000,001.

To approve the domestication of the Company.

To approve and adopt the proposed charter and proposed

bylaws of New PubCo.

To approve the following material differences between

the Existing Organizational Documents and the Proposed Charter upon the Domestication.

Advisory Charter

Proposal 5A – the increase in the authorized share capital of ESGEN from $27,600 divided into 250,000,000 Class A ordinary shares,

25,000,000 Class B ordinary shares, and 1,000,000 preference shares, par value $0.0001 per share, to authorized capital stock of 410,000,000

shares, consisting of (i) 300,000,000 shares of Class A common stock, par value $0.0001 per share, of New PubCo (“New PubCo Class

A Common Stock”), (ii) 100,000,000 shares of Class V common stock, par value $0.0001 per share, of New PubCo (“New PubCo Class

V Common Stock” and, together with the New PubCo Class A Common Stock, the “New PubCo Common Stock”), and (iii) 10,000,000

shares of preferred stock, par value $0.0001 per share, of New PubCo.

Advisory Charter

Proposal 5B – To provide that the Proposed Charter may be amended by the affirmative vote of the holders of at least 66 2/3% of

the voting power of outstanding shares of New PubCo Common Stock entitled to vote at an election of directors, voting together as a single

class, in addition to the affirmative vote of any particular class that shall be entitled to vote separately upon any proposed amendment

to the Proposed Charter that would alter or change the powers, preferences or special rights of such class of New PubCo Common Stock in

a manner that is disproportionately adverse as compared to the other classes of New PubCo Common Stock.

Advisory Charter

Proposal 5C – To provide for (i) the filling of newly-created directorships or an vacancy on the New PubCo Board by a majority vote

of the remaining directors then in office, even if less than a quorum, and not by the stockholders and (ii) the removal of directors with

or without cause and only upon the affirmative vote of the holders of a majority in voting power of all the then outstanding shares of

stock entitled to vote generally in the election of directors, voting together as a single class.

Advisory Charter

Proposal 5D – To provide that, unless New PubCo consents in writing to the selection of an alternative forum, the Delaware Court

of Chancery and any appellate court thereof shall be the sole and exclusive forum for certain types of actions or proceedings under Delaware

statutory or common law.

Advisory Charter

Proposal 5E – To provide that each holder of record of New PubCo Class A Commo Stock and New PubCo Class V Common Stock shall be

entitled to one vote per share on all matters which stockholders generally are entitled to vote.

Advisory Charter

Proposal 5F – To provide that the Proposed Charter will not contain provisions related to blank check company status.

Advisory Charter

Proposal 5G – To provide that the stockholders of New PubCo may act by written consent for so long as the holders of shares of New

PubCo Class V Common Stock beneficially own, directly or indirectly, a majority of the total voting power of New PubCo Common Stock entitled

to vote generally in the election of directors of New PubCo:

To approve, for the purposes of complying with the

applicable provisions of Nasdaq Listing Rule 5635, the issuance of shares of New PubCo Class A Common Stock, New PubCo Class V Common

Stock and New PubCo Warrants.

To approve the 2024 Omnibus Incentive Equity Plan

of New PubCo.

To approve the election of six (6) directors who

will serve on the New PubCo Board upon consummation of the Business Combination until New PubCo’s next annual meeting of stockholders

and until their respective successors are duly elected and qualified, or until their earlier death, resignation, retirement or removal.

On March 11, 2024, the Company entered into a non-redemption agreement

(the “Non-Redemption Agreement”) with The K2 Principal Fund L.P.

(“K2”), pursuant to which K2 agreed (i) to purchase

at least 174,826 of the Company’s Class A ordinary shares, par value $0.0001 per share (the “Class A ordinary shares”),

in the open market from investors who had elected to redeem such shares in connection with the Company’s March 6, 2024 extraordinary

general meeting of shareholders and (ii) not to redeem and to validly rescind any redemption requests on such purchased Class A ordinary

In exchange for the foregoing commitments to purchase and not redeem

such Class A ordinary shares, the Company agreed to issue, for no consideration an aggregate of 225,174 shares of Class A common stock,

par value $0.0001 per share, of Zeo Energy Corp., a Delaware corporation and the successor to ESGEN following the transactions contemplated

by the Business Combination Agreement, at the consummation of the Business Combination.

RESULTS OF OPERATIONS

All of our activity from April 19, 2021 (inception) through December

31, 2023, was in preparation for our initial public offering, and since our initial public offering, including the effectuation of the

Charter Amendment and the negotiation and entry into the Business Combination Agreement.

We will not generate any operating revenues until

the closing and completion of our initial Business Combination.

For the year ended December 31, 2023, we had a net loss of $3,001,194,

which consisted of a change in fair value of warrant liabilities of $317,376 and operating costs of $5,059,125, partially offset by interest

and investment income on marketable securities and cash held in Trust Account of $1,950,267 and recovery of deferred offering costs allocated

to warrants of $425,040.

For the year ended December 31, 2022, we had a net income of $14,334,250,

which consisted of a change in the fair value of warrant liabilities of $13,179,936, interest and investment income on marketable securities

and cash held in Trust Account of $3,984,431, partially offset by a loss from operations of $2,830,117.

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

agreed to purchase an aggregate of 1,000,000 Convertible OpCo Preferred Units convertible into Exchangeable OpCo units (and be issued

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

an additional 500,000 Convertible OpCo Preferred Units (together with the concurrent issuance of an equal number of shares of Zeo Class

V Common Stock) during the six months after Closing if called for by Zeo.

Prior to the Closing, ESGEN informed the Sponsor that it wished

to call for the additional 500,000 Convertible OpCo Preferred Units at the Closing and, as a result, a total of 1,500,000 Convertible

OpCo Preferred Units and an equal number of shares of Class V Common Stock were issued to Sponsor in return for aggregate consideration

of $15,000,000.

Accounting for the Business Combination

Following the Business Combination, we are organized

in an “Up-C” structure, such that Sunergy and the subsidiaries of Sunergy hold and operate substantially all of the assets

and businesses of the registrant, and the registrant is a publicly listed holding company that holds a certain amount of equity interests

in OpCo, which holds all of the equity interests in Sunergy.

The Class A Common Stock and public warrants are traded on Nasdaq under the

ticker symbols “ZEO” and “ZEOWW,” respectively.

The Business Combination was accounted for as

a reverse recapitalization with ESGEN being treated as the acquired company since there was no change in control in accordance with the

guidance for common control transactions in ASC 805-50.

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

continuation of the financial statements of Sunergy with the business combination treated as the equivalent of Sunergy issuing stock for

the net assets of ESGEN, accompanied by a recapitalization.

The net assets of ESGEN were stated at historical cost, with no goodwill or

other intangible assets recorded.

Operations prior to the Business Combination were those of Sunergy.

Sunergy was determined to be the accounting acquirer

based on evaluation of the following facts and circumstances.

Based upon the evaluation of the OpCo A&R

LLC Agreement, the Sellers contributed their interests of Sunergy into OpCo.

OpCo’s members did not have substantive kickout or

participating rights and therefore OpCo is a VIE.

Consideration of OpCo as a VIE was necessary to determine the accounting treatment between

ESGEN and Sunergy.

Upon evaluation, ESGEN Acquisition Corp.

is considered to be the primary beneficiary through its membership interest

and manager powers conferred to it through the Class A Units.

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

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

however, further consideration of whether

the entities are under common control was required in order to determine whether there is an ultimate change in control and the acquisition

method of accounting is required under ASC 805.

While Sunergy did not control or have common ownership

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

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

to and subsequent to the consummation of the transaction.

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

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

EITF Issue 02-5 “Definition of ‘Common Control’ in Relation to FASB Statement No.

141” indicates that common control

would exist if a group of stockholders holds more than 50 percent of the voting ownership of each entity, and contemporaneous written

evidence of an agreement to vote a majority of the entities’ shares in concert exists.

Prior to the Business Combination, Sunergy

was majority owned by five entities (the “ Primary Sellers ”), who entered into a Voting Agreement, dated September

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

The consummation of the Business Combination

with ESGEN occurred within the term of the Voting Agreement.

Prior to the Business Combination and the contributions

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

Immediately following the Business Combination,

the Sellers now own 83.8% of the equity of the Company.

The Voting Agreement constitutes contemporaneous

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

Accordingly, the Primary

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

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

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

ESGEN prior to the Business Combination.

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

for common control transactions in ASC 805-50.

Additional factors that were considered include

the following:

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

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

The individual that was serving as the chief executive officer and chief financial officer of Sunergy’s management team immediately prior to the Business Combination continued 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

In essence, the Business Combination will be treated as a reverse recapitalization with ESGEN being treated as the acquired

company since there was no change in control.

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

of the financial statements of Sunergy with the business combination treated as the equivalent of Sunergy issuing equity for the net assets

of ESGEN, accompanied by a recapitalization.

Public Company Costs

Following the Business Combination, we have ongoing

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

We expect to see an increase

in general and administrative, compared to historical results, to support the legal and accounting requirements of the combined publicly

traded company.

We also expect to incur substantial additional expenses for, among other things, directors’ and officers’

liability insurance, director fees, internal control compliance, and additional costs for investor relations, accounting, audit, legal

and other functions.

Key Operating and Financial Metrics and Outlook

We regularly review a number of metrics, including

the following key operating and financial metrics, to evaluate our business, measure our performance, identify trends in our business,

prepare financial projections and make strategic decisions.

We believe the operating and financial metrics presented below are useful

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

analysts, institutional investors and other interested parties in analyzing operating performance and prospects.

Adjusted EBITDA and Adjusted

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

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

See “Non-GAAP

Financial Measures ” for additional information on non-GAAP financial measures and a reconciliation of these non-GAAP measures

to the most comparable GAAP measures.

The following table sets forth these metrics for

the periods presented:

Year Ended December 31,

(In thousands, except percentages)

Contribution profit

Contribution margin

(Loss) income from operations

Net (loss) income

Adjusted EBITDA

Adjusted EBITDA margin

Gross Profit and Gross Margin

We define gross profit as revenue, net less cost

of goods sold and depreciation and amortization related to cost of goods sold, and define gross margin, expressed as a percentage, as

the ratio of gross profit to revenue, net.

See “— Non-GAAP Financial Measures ” for a reconciliation of Gross

Profit and Gross Margin.

Contribution Profit and Contribution Margin

We define contribution profit as revenue, net

less direct costs of revenue, commissions expense and depreciation and amortization, and define contribution margin, expressed as a percentage,

as the ratio of contribution profit to revenue, net.

Contribution profit and margin can be used to understand our financial performance

and efficiency and allows investors to evaluate our pricing strategy and compare against competitors.

Our management uses these metrics

to make strategic decisions, identify areas for improvement, set targets for future performance and make informed decisions about how

to allocate resources going forward.

Contributions margin reflects our Contribution profit as a percentage of revenues.

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.

Tariffs and 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, which may continue to put pressure on our operating margins and increase our costs.

Increased tariffs will likely result in an increase in the cost of our raw materials which are sourced both domestically and abroad.

do not have information that allows us to quantify the specific amount of cost increases attributable to inflation or tariffs.

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.

As of December 31, 2024, we have operations in eight states and service customers in 16 states.

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 .

We offer 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 partnered with several third-party operators which

allows our customers to choose a leasing option to finance their systems.

We will continue to work with financing partners to find products

which best meet the needs of our customers and help them to reduce the cost of their energy consumption.

Adding New Customers and Expansion of Sales

with Existing Customers .

We intend to continue to grow our in-house sales force and external sales dealers.

Through 2024, our in-house

sales have been generated through a summer-sales effort.

In 2025, we will introduce a year-round sales team with sales representatives

who live in the markets where they sell.

Our efforts to increase sales will be focused on increasing the concentration of sales in the

markets where we operate, improving operational efficiency.

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

external sales dealers, which incentivizes the acquisition of new customers.

Interest rates.

Interest rate increases

for both short-term and long-term debt have stabilized but remain high.

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.

Lease financing products have become popular with our customers as the third-party

operators can offer a monthly payment lower than a loan product.

The company will continue to offer both loan and lease financing products

to our customers.

Managing our Supply Chain .

We rely on contract

manufacturers and suppliers to produce our components.

Our suppliers are generally meeting our materials needs and we are realizing a

decrease in pricing for our solar components compared to the prior year.

We do not anticipate continued decrease in pricing in the coming

Our ability to grow depends, in part, on the ability of our contract manufacturers and suppliers to provide high quality services

and deliver components and finished products on time and at reasonable costs.

In the event we are unable to mitigate the impact of delays

and/or price increases in raw materials, electronic components and freight, it could delay the manufacturing and installation of our systems,

which would adversely impact our cash flows and results of operations, including revenue and contribution margin.

Components of Condensed Consolidated Statements

of Operations

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.

When a customer uses

a third-party operator (TPO) lease to finance their system, the TPO is the contracted customer with ZEO.

Upon installation inspection,

we satisfy our performance obligation and recognize revenue.

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

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 year ended December 31, 2024, and 2023.

Our revenue is affected by changes in the volume

and average selling prices of our solutions and related accessories, supply and demand, sales incentives and fluctuating interest rates

that increase or decrease the monthly payments for customers purchasing systems through third party financing.

Approximately 5% of our

sales were paid in cash by the customer in each of the year ended December 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.

Cost of Goods Sold

Cost of goods sold consists primarily of product

costs (including solar panels, inverters, metal racking, connectors, shingles, wiring, warranty costs and logistics costs), installation

labor, vehicle costs, and permitting costs.

During 2024, costs of goods sold decreased in

association with a reduction in revenues.

Revenues declined because of the effect of higher interest rates on the consumer financing rates.

The increased cost of consumer lending has reduced the advantage provided by financed solar power relative to standard utility costs,

which has negatively affected the demand for our products.

Revenue, net less cost of goods sold may vary

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

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

the design and engineering of systems on customer sites.

Operating Expenses

Operating expenses consist of sales and marketing

and general and administrative expenses.

Personnel-related costs are the most significant component of each of these expense categories

and include salaries, benefits and payroll taxes.

In the future, the Company intends to provide more benefits to its employees, including

an employee stock purchase plan, which will increase operating expenses.

Sales and marketing expenses consist primarily

of personnel-related expenses including sales commissions, as well as advertising, travel, trade shows, marketing, customer support and

other indirect costs.

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

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

General and administrative expenses consist primarily

of personnel-related expenses for our executive, finance, human resources, information technology, operations support and software, facilities

costs and fees for professional services.

Fees for professional services consist primarily of outside legal, accounting and information

technology consulting costs.

Depreciation and amortization consist primarily

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

Other income (expenses), net

Other income (expenses), net primarily consists

of change in fair value of warrant liabilities and interest income.

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

interest on tariffs previously paid and approved for a refund.

Year Ended December 31, 2024, Compared to

Year Ended December 31, 2023

The following table sets forth a summary of our

consolidated statements of operations for the periods presented:

$ 109,691,001

$ (36,446,918 )

Costs and expenses:

Cost of goods sold (exclusive of depreciation and amortization)

(21,415,155 )

Depreciation and amortization

Sales and marketing

(10,736,986 )

General and administrative

Total operating expenses

(20,447,819 )

(Loss) income from operations

(10,829,772 )

(15,969,099 )

Other income (expense), net:

Other income (expense), net

Change in fair value of warrant liabilities

Interest expense

Total other income (expense), net

Net (loss) income before taxes

$ (10,861,160 )

$ (15,706,229 )

Revenue, net decreased by approximately $36.4

million, from $109.7 million for the year ended December 31, 2023 to $73.2 million for the year ended December 31, 2024.

was primarily due to the effect of higher interest rates on consumer financing.

The increased cost of consumer lending reduced the advantage

provided by financed solar power relative to standard utility costs, which negatively affected the demand for our products.

The more difficult

selling environment resulted in a decrease in sales from our sales force and dealer network.

Cost of Goods Sold

Cost of goods sold decreased by $21.4 million,

from $59.4 million for the year ended December 31, 2023 to $38.0 million for the year ended December 31, 2024.

The decrease was due to

the decrease in revenue.

As a percentage of revenue, the cost of goods sold was 52.4% for the year ended December 31, 2024, which was

consistent with the year ended December 31, 2023.

Depreciation and amortization

Depreciation and amortization increased by $3.0

million, from $1.8 million for the year ended December 31, 2023, to $4.8 million for the year ended December 31, 2024.

The increase was

due to an increase in the amortization of the cost of acquired contracts from the Lumio Asset Purchase Agreement.

Sales and Marketing

Sales and marketing expenses decreased by $10.7

million, from $30.3 million for the year ended December 31, 2023 to $19.6 million for the year ended December 31, 2024.

The decrease was

primarily due to a result of a reduction in commissions earned due to the decrease in revenue.

General and Administrative expenses

General and administrative expenses increased

by $8.7 million from $12.9 million for the year ended December 31, 2023 to $21.6 million for the year ended December 31, 2024.

was primarily due to $7.8 million of stock compensation expense in 2024 of which there was none in 2023.

Other income (expense), net

Other income (expense), net increased from $294,258

of other expense to $31,388 of income primarily due to a decrease in losses on the disposition of assets, a gain on fair value of warrant

liabilities and an increase in interest income partly offset by an increase in interest expense.

Liquidity and Capital Resources

As of December 31, 2023, we had cash of $60,518 and owe $5,669,349

in accounts payable and accrued expenses and an additional $2,122,937 payable to related parties.

Prior to the completion of our initial

public offering, our liquidity needs had been satisfied through a capital contribution from the Sponsor of $25,000 and a loan to us of

up to $300,000 by our Sponsor under an unsecured promissory note, which had an outstanding balance of $171,346 at December 31, 2023 and

The Sponsor has agreed to defer repayment of the loan until the close of the Business Combination.

On April 5, 2023, we issued the

Note in the principal amount of up to $1,500,000 to our Sponsor, which may be drawn down by us from time to time prior to the consummation

of the initial Business Combination.

As of December 31, 2023, there was $1,612,398 outstanding under the Note.

In addition, in order to finance transaction costs in connection with

a business combination, our Sponsor, an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to,

provide us Working Capital Loans.

As of December 31, 2023 and 2022, there were no amounts outstanding under any Working Capital Loans.

The Company anticipates that its cash will not be sufficient to allow

the Company to operate for at least the next 12 months from the issuance of the financial statements.

The Company has incurred and expects

to continue to incur significant costs in pursuit of its acquisition plans and the closing of the business combination described in Note

These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

The Company will seek additional capital through other financing alternatives.

There can be no assurance that new financings or other transactions will be available to the Company on commercially acceptable terms,

Should the Company fail to raise additional cash from outside sources, this would have a material adverse impact on its operations.

The accompanying financial statements have been prepared assuming the

Company will continue to operate as a going concern, which contemplates the realization of assets and settlement of liabilities in the

normal course of business, and do not include any adjustments to reflect the possible future effects on the recoverability and classification

of assets or the amounts and classifications of liabilities that may result from uncertainty related to its ability to continue as a going

Contractual Obligations

Other than the below, we do not have any long-term debt obligations,

capital lease obligations, operating lease obligations, purchase obligations or long- term liabilities.

Underwriting Agreement

The IPO underwriters were entitled to a deferred underwriters fee of

3.5% of the gross proceeds of our IPO upon the completion of our initial Business Combination.

In April 2023, the IPO underwriters waived

any right to receive such deferred underwriters fee and will therefore receive no additional underwriters fee in connection with the Closing.

Office Space, Secretarial and Administrative Services

Through the earlier of consummation of the initial Business Combination

or the liquidation, the Company incurs $10,000 per month for office space, utilities, secretarial support and administrative services

provided by the Sponsor.

For the year ended December 31, 2023 and 2022, the Company incurred $120,000, pursuant to this agreement.

amounts have been paid for these services.

As of December 31, 2023 and 2022, the Company has accrued and reported on the balance sheets

$264,193 and $144,193, respectively, pursuant to this agreement, and included in “Due to related party”.

Registration Rights

The holders of the Founder Shares, Private Placement Warrants and any

warrants that may be issued upon conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the exercise of the

Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans) are entitled to registration rights

pursuant to a registration and shareholder rights agreement signed at the closing of our initial public offering (the “IPO Registration

Rights Agreement”).

The holders of these securities are entitled to make up to three demands, excluding short form demands, that

we register such securities.

In addition, the holders have certain “piggy-back” registration rights with respect to registration

statements filed subsequent to our completion of the initial Business Combination.

However, the registration and shareholder rights agreement

provides that we will not permit any registration statement filed under the Securities Act of 1933, as amended (the “Securities

Act”) to become effective until termination of the applicable lock-up period, which occurs (i) in the case of the Founder Shares,

and (ii) in the case of the Private Placement.

Warrants and the respective Class A ordinary shares issuable upon exercise of the Private

Placement Warrants, 30 days after the completion of the initial Business Combination.

We will bear the expenses incurred in connection

with the filing of any such registration statements.

The holders of the Founder Shares, Private Placement Warrants and any warrants that

may be issued upon conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the exercise of the Working Capital

Loans and warrants that may be issued upon conversion of Working Capital Loans) will be entitled to registration rights pursuant to a

registration and expected shareholder rights agreement signed at the closing of our initial public offering.

The holders of these securities

are entitled to make up to three demands, excluding short form demands, that the company register such securities.

In addition, the holders have certain “piggy-back” registration

rights with respect to registration statements filed subsequent to the completion of its initial Business Combination.

However, the registration

and shareholder rights agreement provides that we will not permit any registration statement filed under the Securities Act to become

effective until termination of the applicable lockup period, which occurs (i) in the case of the Founder Shares, as described in the following

paragraph, and (ii) in the case of the Private Placement Warrants and the respective Class A ordinary shares underlying such warrants,

30 days after the completion of the initial Business Combination.

We will bear the expenses incurred in connection with the filing of

any such registration statements.

Except as described herein, the Sponsor and its directors and executive

officers have agreed not to transfer, assign or sell any of their Founder Shares until the earliest of (A) one year after the completion

of the initial Business Combination or (B) subsequent to the initial Business Combination, (x) if the closing price of the Class A ordinary

shares equals or exceeds $12.00 per share (as adjusted for share subdivisions, share capitalizations, reorganizations, recapitalizations

and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination,

or (y) the date on which we complete a liquidation, merger, share exchange or other similar transaction that results in all of the public

shareholders having the right to exchange their ordinary shares for cash, securities or other property.

Any permitted transferees would

be subject to the same restrictions and other agreements of the Sponsor and its directors and executive officers with respect to any founder

Any permitted transferees will be subject to the same restrictions and other agreements of the Sponsor with respect to any Founder

In addition, pursuant to the registration and shareholder rights agreement,

the Sponsor, upon and following consummation of an initial Business Combination, will be entitled to nominate three individuals for election

to the board of directors, as long as the Sponsor holds any securities covered by the registration and shareholder rights agreement.

A&R Registration Rights Agreement

The Amended Business Combination Agreement contemplates that, at the

Closing, Sunergy, Sunergy’s underlying equityholders and the Initial Shareholders (as defined below) (collectively, the “New

PubCo Holders”) and New PubCo will enter into an amended and restated IPO Registration Rights Agreement (the “A&R Registration

Rights Agreement”), pursuant to which, among other things, New PubCo and the Initial Shareholders will agree to amend and restate

the Registration and Shareholder Rights Agreement, dated as of October 22, 2021, entered into by them in connection with ESGEN’s

initial public offering.

Pursuant to the A&R Registration Rights Agreement, New PubCo will agree that, within 30 days following the

consummation of the Sunergy Business Combination, it will use its commercially reasonable efforts to file a resale shelf registration

statement on behalf of Sunergy, Sunergy’s underlying equityholders and the Initial Shareholders registering (i) New PubCo’s

private placement warrants, (ii) any outstanding shares of New PubCo Class A Common Stock held by the New PubCo Holders, (iii) any shares

of New PubCo Class A Common Stock issued or issuable upon exchange of an equivalent number of Class B units of OpCo and Class V common

stock of New PubCo, par value $0.0001 per share, issued to the Sellers pursuant to the Amended Business Combination Agreement, (iv) any

shares of New PubCo Class A Common Stock issued or to be issued to any of the New PubCo Holders in connection with the Sunergy Business

Combination and (v) any other equity security of New PubCo issued or issuable with respect to any of the foregoing by way of a stock dividend

or stock split or in connection of shares, recapitalization, merger, consolidation or reorganization (collectively, the “Registrable

Securities”);

provided, however, that as to any particular Registrable Securities, such securities shall cease to be Registrable

Securities when (A) a registration statement with respect to the sale of such Registrable Securities becomes effective under the Securities

Act and such Registrable Securities shall have been sold, transferred, disposed of or exchanged in accordance with such registration statement,

(B) such Registrable Securities shall have been otherwise transferred and such transferee is not entitled to the registration rights provided

in the A&R Registration Rights Agreement, (C) such Registrable Securities shall have ceased to be outstanding, or (D) such Registrable

Securities may be sold without registration pursuant to Rule 144 and Rule 145, as applicable, promulgated under the Securities Act (or

any successor rule promulgated thereto) (but with no volume or other restrictions or limitations).

Additionally, the A&R Registration Rights Agreement will also provide,

subject to certain underwriter cutbacks and suspension periods, (i) certain demand rights entitling the New PubCo Holders the right to

require New PubCo to effect an underwritten offering and (ii) certain piggyback rights entitling the New PubCo Holders the right to include

such New PubCo Holder’s Registrable Securities in any underwritten offering that New PubCo proposes to consummate for its own account

or for the account of its stockholders.

Concurrently with the execution of the Amended Business Combination

Agreement, the Sponsor, the independent directors of the board of directors of ESGEN and one or more client accounts of Westwood Group

Holdings, Inc.

(successor to Salient Capital Advisors, LLC) (collectively, the “Initial Shareholders”) entered into an amendment

(as amended, the “Amendment to the Letter Agreement”) to that certain Letter Agreement, dated as of October 22, 2021, by and

between the Initial Shareholders, pursuant to which, among other things, each of the Initial Shareholders agreed (i) not to transfer his,

her or its ESGEN Class B ordinary shares (or the ESGEN Class A Common Stock issuable in exchange for such ESGEN Class B ordinary shares

pursuant to the Amended Business Combination Agreement) prior to the earlier of (A) six months after the Closing or (B) subsequent to

the Closing (x) if the last sale price of the ESGEN Class A Common Stock quoted on Nasdaq is greater than or equal to $12 per share (as

adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-consecutive

trading day period commencing at least 90 days after Closing, or (y) the date on which ESGEN completes a liquidation, merger, share exchange

or other similar transaction that results in all of the Company’s shareholders having the right to exchange their ESGEN Class A

ordinary shares (including any shares of ESGEN Class A Common Stock issuable in exchange for such ESGEN Class A ordinary shares) for cash,

securities or other property and (ii) each Initial Shareholder agreed to waive any adjustment to the conversion ratio set forth in the

governing documents of ESGEN with respect to the ESGEN Class B ordinary shares prior to the earlier of the ESGEN Share Conversion or the

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 December 31, 2024 and 2023, our cash and

cash equivalents balance was approximately $5.6 million and $8.0 million, respectively.

The Company maintains its cash in checking and

savings accounts.

Our future capital requirements depend on many

factors, including our revenue growth rate, the timing and extent of our spending to support further sales and marketing, the degree to

which we are successful in launching new business initiatives and the cost associated with these initiatives, and the growth of our business

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.

In December of 2024, we entered

into a the Promissory Note for $2.4 million to help fund the creation of a year-round sales team.

While we believe that our cash and cash equivalents

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:

Year ended December 31,

Net cash (used in) provided by operating activities

$ (8,716,717 )

$ (20,693,851 )

Net cash (used in) investing activities

Net cash provided by (used in) financing activities

Cash flows from operating activities

Net cash used in operating activities was approximately

$8.7 million during the year ended December 31, 2024 compared to a net cash provided by operating activities of approximately $12.0 million

during year ended December 31, 2023.

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

Accounts receivable increased

as our customers transitioned to financing their systems through lease arrangements.

Revenues associated with lease arrangements were

64% of sales in 2024 compared to 21% in 2023.

In loan arrangements, 100% of the cash is received shortly after installation.

Loan arrangements

provide for a holdback of 20% of the cash due until the customer has received permission to operate from the utility, which delays full

payment of products by 90-120 days past installation.

Cash flows from investing activities

Net cash used in investing activities was approximately

$7.4 million for the year ended December 31, 2024.

The company used $4.0 million for the Lumio asset purchase, $3.0 million to issue debt

to a related party, and $0.4 million to purchase property and equipment.

Net cash used in investing activities for the year ended December

31, 2023 was approximately $1.0 million, relating to purchases of vehicles.

Cash flows from financing activities

Net cash provided by financing activities was

approximately $13.7 million for the year ended December 31, 2024, primarily relating to $9.2 million in net proceeds from the issuance

of convertible preferred stock at the time of the Business Combination, $2.7 million from a private placement to finance the Lumio asset

purchase and $2.4 million from a convertible promissory note with a related party, offset by principal payments on debt and dividends

paid on convertible preferred stock.

Net cash used in financing activities for the year ended December 31, 2023 was approximately $5.2

million, primarily relating to distributions to members.

Current Indebtedness

The Company has approximately $3.6 million in

trade-credit with solar equipment distributors, approximately $0.8 million of debt on service trucks and vehicles valued at approximately

$1.3 million, net of depreciation and $2.4 million in a convertible promissory note with a related party.

Non-GAAP Financial Measures

The non-GAAP financial measures below have not

been calculated in accordance with GAAP and should be considered in addition to results prepared in accordance with GAAP and should not

be considered as a substitute for, or superior to, GAAP results.

In addition, Adjusted EBITDA and Adjusted EBITDA Margin should not be

construed as indicators of our operating performance, liquidity or cash flows generated by operating, investing and financing activities,

as there may be significant factors or trends that they fail to address.

We caution investors that non-GAAP financial information, by

its nature, departs from traditional accounting conventions.

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

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

Our management uses these non-GAAP financial measures,

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

(i) monitor and

evaluate the performance of our business operations and financial performance;

(ii) facilitate internal comparisons of the historical

operating performance of our business operations;

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

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

(iv) review and assess

the operating performance of our management team;

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

operating investments;

and (vi) plan for and prepare future annual operating budgets and determine appropriate levels of operating investments.

We believe that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating

results and trends, and in comparing our financial results with other companies in our industry, many of which present similar non-GAAP

financial measures to investors.

Contribution Profit and Contribution Margin

We define contribution profit as revenue, net

less direct costs of revenue, commissions expense and depreciation and amortization, and define contribution margin, expressed as a percentage,

as the ratio of contribution profit to revenue, net.

Contribution profit and margin can be used to understand our financial performance

and efficiency and allows investors to evaluate our pricing strategy and compare against competitors.

Our management uses these metrics

to make strategic decisions, identify areas for improvement, set targets for future performance and make informed decisions about how

to allocate resources going forward.

Contributions margin reflects our Contribution profit as a percentage of revenues.

The following table provides a reconciliation

of gross profit to contribution profit for the periods presented:

Year ended December 31,

Total revenue

$ 109,691,001

Cost of goods sold (exclusive of depreciation and amortization shown below)

Depreciation and amortization related to Cost of goods sold

Depreciation and amortization

Commissions expense

Contribution Profit

Contribution margin

Adjusted EBITDA

We define Adjusted EBITDA, a non-GAAP financial

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

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

We utilize Adjusted EBITDA as an internal

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

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

Adjusted EBITDA should not be viewed as

a substitute for net (loss) income calculated in accordance with GAAP, and other companies may define Adjusted EBITDA differently.

EBITDA margin reflects our Adjusted EBITDA as a percentage of revenues.

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

to Adjusted EBITDA for the periods presented:

Year ended December 31,

Net (loss) income

$ (9,872,358 )

Other income, net

Change in fair value of warrant liabilities

Interest expense

Income tax benefit

Stock compensation

Depreciation and amortization

Adjusted EBITDA

Net (loss) income margin

Adjusted EBITDA margin

Critical Accounting Estimates

The preparation of these financial statements in conformity with GAAP

requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent

assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period.

results could differ from those estimates.

We have not identified any critical accounting estimates.

Recent Accounting Pronouncements

Refer to Note 2 (“Significant Accounting Policies”) in

the financial statements for the recent accounting pronouncements.

Off-Balance Sheet Financing Arrangements

As of December 31, 2023, we did not have any off-balance sheet arrangements

and did not have any commitments or contractual obligations.

The preparation of financial statements in conformity

with GAAP requires us to establish accounting policies and make estimates and assumptions that affect our reported amounts of assets and

liabilities at the date of the condensed consolidated financial statements.

These financial statements include some estimates and assumptions

that are based on informed judgments and estimates of management.

We evaluate our policies and estimates on an on-going basis and discuss

the development, selection and disclosure of critical accounting policies with those charged with governance.

Predicting future events

is inherently an imprecise activity and as such requires the use of judgment.

Our condensed consolidated financial statements may differ

based upon different estimates and assumptions.

We discuss our significant accounting policies

in Note 3, Summary of Significant Accounting Policies, to our condensed consolidated financial statements.

Our significant accounting

policies are subject to judgments and uncertainties that affect the application of such policies.

We believe these financial statements

include the most likely outcomes with regard to amounts that are based on our judgment and estimates.

Our financial position and results

of operations may be materially different when reported under different conditions or when using different assumptions in the application

of such policies.

In the event estimates or assumptions prove to be different from the actual amounts, adjustments are made in subsequent

periods to reflect more current information.

We believe the following accounting policies are critical to the preparation of our consolidated

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

Valuation of Business Combinations

The Company recognizes and measures the assets

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

Any excess or

surplus of the purchase consideration when compared to the fair value of the net tangible assets acquired, if any, is recorded as goodwill

or gain from a bargain purchase.

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

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

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.

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

unit is less than its carrying amount.

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

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

reporting unit with its carrying value.

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

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

exceeds the fair value of the reporting unit.

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

was no goodwill impairment recorded for the year ended December 31, 2024, and 2023.

Intangible assets subject to amortization

Intangible assets include tradename, customer

lists and non-compete agreements.

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

are subject to annual impairment consideration.

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

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

Intangible assets are reviewed for impairment

whenever events or changes in circumstances indicate the carrying amount of the intangible assets may not be recoverable.

Conditions that

would necessitate an impairment assessment include a significant decline in the observable market value of an asset, a significant change

in the extent or manner in which an asset is used, or any other significant adverse change that would indicate that the carrying amount

of an asset or group of assets may not be recoverable.

The Company evaluates the recoverability of intangible assets by comparing their

carrying amounts to future net undiscounted cash flows expected to be generated by the intangible assets.

If such intangible assets are

considered to be impaired, the impairment recognized is measured as the amount by which the carrying amount of the intangible assets exceeds

the fair value of the assets.

The Company determines fair value based on discounted cash flows using a discount rate commensurate with

the risk inherent in the Company’s current business model for the specific intangible asset being valued.

No impairment charges

were recorded for the year ended December 31, 2024, and 2023.

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-K

Item 7. Management’s Discussion and Analysis