Zeo Energy Corp. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations References to the “Company,” “our,” “us” or “we” refer to Zeo Energy Corp. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto contained elsewhere in this Quarterly Report on Form 10-Q (this “Quarterly Report”). Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. Cautionary Note Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” and “continue,” or the negative of such terms or other similar expressions. Such statements include, but are not limited to, possible business combinations and the financing thereof, and related matters, as well as all other statements other than statements of historical fact included in this Form 10-Q. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other SEC filings. Except as expressly required by applicable securities law, we disclaim any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. Overview Our company and personnel are passionate about delivering cost savings and increased independence and reliability to energy consumers. Our mission is to expedite the country’s transition to renewable energy by offering our customers an affordable and sustainable means of achieving energy independence. We are a vertically integrated company offering energy solutions and services that include sale, design, procurement, installation, and maintenance of residential solar energy systems. Many of our solar energy system customers also purchase other energy efficient-related equipment or services or roofing services from us. The majority of our customers are located in Florida, Texas, Arkansas, Missouri, Ohio, and Illinois, and we have an expanding base of customers in California, Colorado, Minnesota, Utah, and Virginia. Sunergy was created on October 1, 2021 through the Contribution of Sun First Energy, LLC, a rapidly growing solar sales management company, and Sunergy Solar, LLC, a large solar installation company based in Florida, to Sunergy Renewables, LLC. We believe that we have built (and continue to build) the infrastructure and capabilities necessary to rapidly acquire and serve customers in a low-cost and scalable manner. Today, our scalable regional operating platform provides us with a number of advantages, including the marketing of our solar service offerings through multiple channels, including our diverse sales partner network and direct-to-consumer vertically integrated sales and installation operations. We believe that this multi-channel model supports rapid sales and installation growth, allowing us to achieve capital-efficient growth in the regional markets we serve. Since our founding, we have continued to invest in a platform of services and tools to enable large scale operations for us and our partner network, which includes sales partners, installation partners and other strategic partners. The platform includes processes and software, as well as the capacity for the fulfillment and acquisition of marketing leads. We believe our platform empowers our in-house sales team and external sales dealers to profitably serve our regional and underpenetrated markets and helps us compete effectively against larger, more established industry players without making significant investment in technology and infrastructure. 21 We have focused to date on a simple, capital light business strategy utilizing, as of September 30, 2025, approximately 280 sales agents and approximately 12 independent sales dealers to produce our sales pipeline. We engineer and design projects and process building permit applications on behalf of our customers to timely install their systems and assist their connections to the local utility power grid. Most of the equipment we install is drop-shipped to the installation site by our regional distributors, requiring minimal inventory to be held by the Company during any given period. We depend on our distributors to timely handle logistics and related requirements in moving equipment to the installation sites. In addition to our main offering of residential solar energy systems, we sell and install products such as roofing, insulation, energy efficient appliances and battery storage systems for the residential market. Our core solar service offerings are paid for by customer purchases and financed through either third-party long-term lenders or third-party operators who offer leasing products that provide customers with simple, predictable pricing for solar energy that is insulated from rising retail electricity prices. Most of our customers finance their purchases with affordable loans or leases that require minimal or no upfront capital or down payment. Recent Developments On July 1, 2025, the Company converted $2,547,877 of outstanding accounts payable with a vendor into a loan payable with the same vendor. The loan bears interest at an annual rate of 18% (1.5% monthly) and provides for scheduled principal payments beginning in July 2025, with maturity on August 22, 2025. The transaction reduced the Company’s accounts payable and established a formal financing arrangement under the stated terms. The loan, including accrued interest, was repaid during the period. Heliogen Acquisition On May 28, 2025, we entered into a plan of merger and reorganization agreement with Heliogen, a renewable-energy technology company that provides solutions for delivering low-carbon energy production by combining commercially proven solar technologies with thermal systems and storage expertise. The transaction was completed on August 8, 2025, under which Heliogen became a wholly owned subsidiary of the Company. The total consideration transferred consisted entirely of our class A common stock, issued to Heliogen shareholders at an exchange ratio of 0.9591 shares of our class A common stock for each share of Heliogen common stock, resulting in the issuance of 6,217,612 class A common shares. No contingent consideration was included. In connection with the merger, all outstanding Heliogen SPAC warrants and RSUs were automatically accelerated and fully vested and were settled in the same equity consideration, net of applicable tax withholding. All stock options and commercial warrants were out-of-the-money and canceled with no value. We accounted for the Heliogen acquisition using the acquisition method of accounting in accordance with ASC Topic 805, “ Business Combinations ,” and allocated the purchase price to the assets acquired and liabilities assumed based on their estimated fair values at the acquisition date, with the excess of purchase price over the estimated fair value of the net assets acquired recorded as goodwill. 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. 22 The following table sets forth these metrics for the periods presented: Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Net revenues $ 23,896,448 $ 19,657,905 $ 50,782,073 $ 54,596,333 Gross profit 13,707,389 9,587,229 28,085,826 23,176,906 Gross margin 57.4 % 48.8 % 55.3 % 42.5 % Contribution profit 7,627,568 4,477,319 7,593,178 9,714,754 Contribution margin 31.9 % 22.8 % 15.0 % 17.8 % Loss from operations (1,980,509 ) (2,982,851 ) (18,345,413 ) (9,694,269 ) Net loss (1,869,472 ) (2,872,424 ) (17,868,299 ) (8,736,845 ) Adjusted EBITDA 1,956,127 (241,712 ) (1,924,958 ) 89,270 Adjusted EBITDA margin 8.2 % (1.2 )% (3.8 )% 0.2 % 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. Contribution margin reflects our Contribution profit as a percentage of revenues. See “— Non-GAAP Financial Measures ” for a reconciliation of Gross Profit to Contribution Profit and Contribution Margin. Adjusted EBITDA and Adjusted EBITDA Margin We define Adjusted EBITDA, a non-GAAP financial measure, as earnings (loss) before interest expense, income tax expense (benefit), depreciation and amortization, other income (expenses), net, and stock compensation, as adjusted to exclude merger transaction related expenses. Adjusted EBITDA margin reflects our Adjusted EBITDA as a percentage of revenues. See “— Non-GAAP Financial Measures ” for a reconciliation of GAAP net loss to Adjusted EBITDA and Adjusted EBITDA Margin. Key Factors that May Influence Future Results of Operations Our financial results of operations may not be comparable from period to period due to several factors. Key factors affecting the results of our operations are summarized below. Expansion of Residential Sales into New Markets . Our future revenue growth is, in part, dependent on our ability to expand our product offerings and services in the select residential markets where we operate in Florida, Texas, Arkansas, Missouri, Illinois, Virginia and Ohio. We primarily generate revenue from our product offerings and services in the residential housing market. To continue our growth, we intend to expand our presence in the residential market into additional states based on markets underserved by national sales and installation providers that also have favorable incentives and net metering policies. We believe that our entry into new markets will continue to facilitate revenue growth and customer diversification. 23 Expansion of New Products and Services . In 2025, we continued our roofing replacements to facilitate our solar installations and to repair rooftops on homes in Florida damaged by severe weather. We plan to expand our roofing business in all markets we enter in the future. Roofing facilitates a faster processing time for our solar installations in cases where the customer is in need of a roof replacement prior to installing a solar system. In addition, to provide more financing options for our prospective residential solar energy customers, we have programs in place that allow our customers to choose a leasing option to finance their systems from a third party. The acquisition of Heliogen aligns with our strategy to expand our clean-energy platform beyond residential markets into large-scale commercial and industrial energy generation and storage. Additionally, Heliogen is expected to complement our existing solar operations, create operational synergies, and broaden market reach. With the acquisition of Heliogen, we intend to enter into agreements to provide engineering services to support long-duration energy storage projects. Adding New Customers and Expansion of Sales with Existing Customers . We intend to increase our in-house sales force and external sales dealers in order to target new customers in the Southern U.S. regional residential markets. We provide competitive compensation packages to our in-house sales teams and external sales dealers, which incentivizes the acquisition of new customers. Inflation. We are seeing an increase in the costs of labor and components as the result of higher inflation rates. In particular, we are experiencing an increase in raw material costs and supply chain constraints, and trade tariffs imposed on certain products from China. We also see an increase in materials used to achieve the required minimum domestic content to maximize incentive tax credits. These increases in material and labor costs may continue to put pressure on our operating margins. We do not have information that allows us to quantify the specific amount of cost increases attributable to inflationary pressures. Interest rates. Interest rates increased sharply in 2022 but have been relatively stable since. The majority of homeowners have opted to enter into a lease contract with a third-party operator as means of financing the installation of a solar system. The lease contract provides a lower monthly cost to the homeowner than a conventional loan product in a higher interest rate environment. We do not have information that allows us to quantify the adverse effects attributable to increased interest rates. Managing our Supply Chain . We rely on contract manufacturers and suppliers to produce our components. Our suppliers are generally meeting our materials needs. Our ability to grow depends, in part, on the ability of our contract manufacturers and suppliers to provide high quality services and deliver components and finished products on time and at reasonable costs. In the event we are unable to mitigate the impact of delays and/or price increases in raw materials, electronic components and freight, it could delay the installation of our systems, which would adversely impact our cash flows and results of operations, including revenue and contribution margin. Components of Condensed Consolidated Statements of Operations Net Revenues Our primary source of revenue is the sale of our residential solar systems. Our systems are fully functional at the time of installation and require an inspection prior to interconnection to the utility power grid. We sell our systems primarily direct to end user customers for use in their residences. Upon installation inspection, we satisfy our performance obligation and recognize revenue. Most of the Company’s customers finance their obligations with third parties. Most finance arrangements are by way of a lease contract with a third-party operator. Some customers utilize debt financing. In these situations, the finance company deducts their financing fees and remits the net amount to the Company. Revenue is recorded net of these financing fees (and/or dealer fees). The volume of sales and installations of rooftop solar systems, our primary product, increase from April to September when a majority of our sales teams are most active in our areas of service. In addition to sales of solar systems, “adders” or accessories to a sale may include roofing, energy efficient appliances, upgraded insulation and/or energy storage systems. All adders consisted of less than 10% of the total revenues, net in the nine months ended September 30, 2025 and 2024. 24 Our revenue is affected by changes in the volume, system size and average selling prices of our solutions and related accessories, supply and demand, sales incentives and fluctuating interest rates that increase or decrease the monthly payments for customers purchasing systems through third party financing. Less than 5% of our sales were paid in cash by the customer in each of the nine months ended September 30, 2025 and 2024. Our revenue growth is dependent on our ability to compete effectively in the marketplace by remaining cost competitive, developing and introducing new sales teams within existing and new territories, scaling our installation teams to keep up with demand and maintaining a strong internal operations team to process orders while working with building departments and utilities to permit and interconnect our customers to the utility grid. Revenues declined during the nine months ended September 30, 2025 because of the effect of higher interest rates on the consumer financing rates. The increased cost of consumer lending has reduced the advantage provided by financed solar power relative to standard utility costs, which has negatively affected the demand for our products. Cost of Revenues Cost of revenues consists primarily of product costs (including solar panels, inverters, metal racking, connectors, shingles, wiring, warranty costs and logistics costs), installation labor and permitting costs. Cost of revenues decreased during the nine months ended September 30, 2025 in association with a reduction in revenues. Net revenues less cost of revenues may vary from period-to-period and is primarily affected by our average selling prices, financing or dealer fees, fluctuations in equipment costs and our ability to effectively and timely deploy our field installation teams to project sites once permitting departments have approved the design and engineering of systems on customer sites. Operating Expenses Operating expenses consist of sales and marketing and general and administrative expenses. Personnel-related costs are the most significant component of each of these expense categories and include salaries, benefits and payroll taxes. Sales and marketing expenses consist primarily of personnel-related expenses including sales commissions, as well as advertising, travel, trade shows, marketing, and other indirect costs. We expect to continue to make the necessary investments to enable us to execute our strategy to increase our market penetration geographically and enter into new markets by expanding our base sales teams, installers and strategic sales dealer and partner network. General and administrative expenses consist primarily of personnel-related expenses for our non-direct labor operations, executive, finance, human resources, information technology, software, facilities costs and fees for professional services. Fees for professional services consist primarily of outside legal, accounting and information technology consulting costs. Depreciation and amortization consist primarily of depreciation of our vehicles, furniture and fixtures, software and amortization of our acquired intangibles. Other income (expenses), net Other income (expenses), net primarily consists of change in fair value of warrant liabilities and interest expense and fees under our equipment and vehicle term loans. It also includes interest income on our cash balances, and accrued interest 25 Results of Operations Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024 The following table sets forth a summary of our condensed consolidated statements of operations for the periods presented: Three Months ended September 30, Change 2025 2024 $ % Net revenues $ 23,896,448 $ 19,657,905 $ 4,238,543 21.6 % Costs and expenses: Cost of revenues 10,053,666 9,787,350 266,316 2.7 % Depreciation and amortization 249,447 499,876 (250,429 ) (50.1 )% Sales and marketing 9,588,385 5,202,525 4,385,860 84.3 % General and administrative 5,985,459 7,151,005 (1,165,546 ) (16.3 )% Total operating expenses 25,876,957 22,640,756 3,236,201 14.3 % Loss from operations (1,980,509 ) (2,982,851 ) (1,002,342 ) (33.6 )% Other income (expense): Other income, net 165,308 137,508 27,800 20.2 % Interest expense (129,719 ) (209,227 ) (79,508 ) (38.0 )% Gain on change in fair value of warrant liabilities 124,200 138,000 (13,800 ) (10.0 )% Total other income 159,789 66,281 93,508 141.1 % Net loss before taxes $ (1,820,720 ) $ (2,916,570 ) $ (1,095,850 ) (37.6 )% Net Revenues Net revenues increased by approximately $4.2 million from $19.7 million for the three months ended September 30, 2024 to $23.9 million for the three months ended September 30, 2025. The primary reason for the increase is due to increased installations during the current period and a new pricing agreement with Solar Leasing entered into during the fourth quarter of 2024. During the three months ended September 30, 2025, there were no revenues generated from Heliogen. Cost of Revenues Cost of revenues increased by $0.3 million from $9.8 million for the three months ended September 30, 2024 to $10.1 million for the three months ended September 30, 2025. The increase was a result of the increase in installation revenues. As a percentage of revenue, cost of revenues declined from 49.8% for the three months ended September 30, 2024 to 42.1% for the three months ended September 30, 2025. This decline was driven by an increase in the average selling price of our contracts to our customers compared to the prior year as a result of a new pricing agreement with Solar Leasing entered into during the fourth quarter of 2024. Depreciation and Amortization Depreciation and amortization decreased by $0.3 million, from $0.5 million for the three months ended September 30, 2024 to $0.2 million for the three months ended September 30, 2025. The decrease was primarily due to less amortization of intangible assets during the current period. General and Administrative Expenses General and administrative expenses decreased by $1.2 million from $7.2 million for the three months ended September 30, 2024 to $6.0 million for the three months ended September 30, 2025. The decrease was primarily due to decreased stock-based compensation expenses and bad debt expense offset by increased payroll costs associated with additional staffing, higher professional fees associated with being a public company, and new costs as a result of the acquisition of Heliogen. Sales and Marketing Sales and marketing expenses increased by $4.4 million from $5.2 million for the three months ended September 30, 2024 to $9.6 million for the three months ended September 30, 2025. The increase was primarily a result of increased stock-based compensation expense and efforts to expand our selling process to include year-round sales through digital lead generation. 26 Other Income (Expense), net Other income (expense), net increased by $0.1 million from $0.1 million for the three months ended September 30, 2024 to $0.2 million for the three months ended September 30, 2025. The increase was primarily due to increased other income, offset by less interest expense during the current period. Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024 The following table sets forth a summary of our condensed consolidated statements of operations for the periods presented: Nine Months ended September 30, Change 2025 2024 $ % Net revenues $ 50,782,073 $ 54,596,333 $ (3,814,260 ) (7.0 )% Costs and expenses: Cost of revenues 22,127,832 30,805,155 (8,677,323 ) (28.2 )% Depreciation and amortization 8,325,628 1,413,074 6,912,554 489.2 % Sales and marketing 17,354,517 16,178,375 1,176,142 7.3 % General and administrative 21,319,509 15,893,998 5,425,511 34.1 % Total operating expenses 69,127,486 64,290,602 4,836,884 7.5 % Loss from operations (18,345,413 ) (9,694,269 ) 8,651,144 89.2 % Other income (expense): Other income, net 300,999 188,329 112,670 59.8 % Interest expense (130,007 ) (294,257 ) (164,250 ) (55.8 )% Gain on change in fair value of warrant liabilities 691,380 828,000 (136,620 ) (16.5 )% Total other income 862,372 722,072 140,300 19.4 % Net loss before taxes $ (17,483,041 ) $ (8,972,197 ) $ 8,510,844 94.9 % Net Revenues Net revenues decreased by approximately $3.8 million from $54.6 million for the nine months ended September 30, 2024 to $50.8 million for the nine months ended September 30, 2025. The primary reason for the decrease in revenue was a decrease in installations during the current period, offset by a new pricing agreement with Solar Leasing entered into during the fourth quarter of 2024. The comparative period also benefited from deferred revenue at the end of 2023, that was recognized in the first quarter of 2024. During the nine months ended September 30, 2025, there were no revenues generated from Heliogen. Cost of Revenues Cost of revenues decreased by $8.7 million from $30.8 million for the nine months ended September 30, 2024 to $22.1 million for the nine months ended September 30, 2025. The decrease was primarily a result of the decrease in installation revenues. As a percentage of revenue, cost of revenues improved from 56.4% for the nine months ended September 30, 2024 to 43.6% for the nine months ended September 30, 2025. This decline was driven by an increase in the average selling price of our contracts to our customers compared to the prior year as a result of a new pricing agreement with Solar Leasing entered into during the fourth quarter of 2024 and another third-party pricing agreement entered into during the second quarter of 2024. Depreciation and Amortization Depreciation and amortization increased by $6.9 million, from $1.4 million for the nine months ended September 30, 2024 to $8.3 million for the nine months ended September 30, 2025. The increase was primarily due to an increase in the amortization of the cost of acquired contracts from the Lumio Asset Purchase Agreement. 27 General and Administrative Expenses General and administrative expenses increased by $5.4 million from $15.9 million for the nine months ended September 30, 2024 to $21.3 million for the nine months ended September 30, 2025. The increase was primarily due to an increase in payroll costs associated with additional staffing, increased bad debt expense, higher professional fees associated with being a public company, and new costs as a result of the acquisition of Heliogen offset by decreased stock-based compensation expense. Sales and Marketing Sales and marketing expenses increased by $1.2 million from $16.2 million for the nine months ended September 30, 2024 to $17.4 million for the nine months ended September 30, 2025. The increase was primarily a result of increased stock-based compensation expense and efforts to expand our selling process to include year-round sales through digital lead generation. Other Income, net Other income, net increased by $0.2 million from $0.7 million for the nine months ended September 30, 2024 to $0.9 million for the nine months ended September 30, 2025. The increase was primarily due to increased other income and less interest expense during the current period. Liquidity and Capital Resources Our primary source of funding to support operations have historically been from cash flows from operations and financing activities. 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 September 30, 2025 and December 31, 2024, our cash and cash equivalents balance were $3,915,900 and $5,634,115, respectively. The Company maintains its cash in checking, savings, and money market accounts. Our future capital requirements depend on many factors, including our revenue growth rate, the timing and extent of our spending to support further sales and marketing, the degree to which we are successful in launching new business initiatives and the cost associated with these initiatives, and the growth of our business generally. We currently believe that our existing cash and working capital balances, anticipated future cash flows from operations and financing activities will be sufficient to meet our currently contemplated business needs for the next twelve months. In the event we pursue and complete significant transactions or acquisitions in the future, additional funds may be required to meet our strategic needs, which may require us to raise additional funds in the debt or equity markets. If we are unable to raise additional capital on acceptable terms when needed, our business, results of operations and financial condition would be materially and adversely affected. Cash Flows The following table summarizes our cash flows for the periods presented: For the Nine Months Ended September 30, 2025 2024 Change Net cash used in operating activities $ (11,132,921 ) $ (12,189,535 ) $ (1,056,614 ) Net cash provided by (used in) investing activities 13,548,606 (285,067 ) 13,833,673 Net cash provided by (used in) financing activities (4,129,005 ) 8,782,358 (12,911,363 ) 28 Cash Flows from Operating Activities Net cash used in operating activities was approximately $11.1 million during the nine months ended September 30, 2025 compared to a net cash used in operating activities of approximately $12.2 million during nine months ended September 30, 2024. The $1.1 million decrease in cash used was primarily driven by positive cash flows from accounts receivable ($4.7 million), prepaids and other current assets ($1.7 million), accounts payable ($2.9 million), contract liabilities ($4.5 million), and contract liabilities – related parties ($1.2 million) offset by negative cash flows from a change in contract assets ($5.7 million), contract assets – related parties ($3.6 million), accrued expenses and other current liabilities – related parties ($1.4 million), increase in net loss ($9.1 million) and less stock compensation expense ($0.8 million), offset by increases in non-cash expenses for depreciation and amortization ($6.9 million) and the provision for credit losses ($0.3 million). Cash Flows from Investing Activities Net cash provided by investing activities was approximately $13.5 million for the nine months ended September 30, 2025, relating to the cash acquired in the acquisition of Heliogen, offset by purchases of property and equipment. Net cash used in investing activities for the nine months ended September 30, 2024 was approximately $0.3 million, relating to purchases of property and equipment. Cash Flows from Financing Activities Net cash used in financing activities was approximately $4.1 million for the nine months ended September 30, 2025, primarily relating to the payment of dividends to OpCo class A preferred unit holders and repayments of debt and finance leases. Net cash provided by financing activities was approximately $8.8 million for the nine months ended September 30, 2024, primarily relating to net cash acquired from the issuance of convertible preferred stock of $9.2 million offset by repayments of debt and finance leases, and distributions of stockholders. Current Indebtedness The Company has utilized internally generated positive cashflow to grow the business. Other than approximately $2.5 million convertible note, the Company has only approximately $0.1 million of debt on service trucks and vehicles. Non-GAAP Financial Measures The non-GAAP financial measures in this Quarterly Report have not been calculated in accordance with GAAP and should be considered in addition to results prepared in accordance with GAAP and should not be considered as a substitute for, or superior to, GAAP results. In addition, Adjusted EBITDA and Adjusted EBITDA Margin should not be construed as indicators of our operating performance, liquidity or cash flows generated by operating, investing and financing activities, as there may be significant factors or trends that they fail to address. We caution investors that non-GAAP financial information, by its nature, departs from traditional accounting conventions. Therefore, its use can make it difficult to compare our current results with our results from other reporting periods and with the results of other companies. Our management uses these non-GAAP financial measures, in conjunction with GAAP financial measures, as an integral part of managing our business and to, among other things: (i) monitor and evaluate the performance of our business operations and financial performance; (ii) facilitate internal comparisons of the historical operating performance of our business operations; (iii) facilitate external comparisons of the results of our overall business to the historical operating performance of other companies that may have different capital structures and debt levels; (iv) review and assess the operating performance of our management team; (v) analyze and evaluate financial and strategic planning decisions regarding future operating investments; and (vi) plan for and prepare future annual operating budgets and determine appropriate levels of operating investments. We believe that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends, and in comparing our financial results with other companies in our industry, many of which present similar non-GAAP financial measures to investors. 29 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: Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Net revenues $ 23,896,448 $ 19,657,905 $ 50,782,073 $ 54,596,333 Cost of revenues (exclusive of depreciation and amortization): 10,053,666 9,787,350 22,127,832 30,805,155 Less: depreciation and amortization related to cost of revenues 135,393 283,326 568,415 614,272 Total gross profit $ 13,707,389 $ 9,587,229 $ 28,085,826 $ 23,176,906 Adjustments: Depreciation and amortization 114,054 216,550 7,757,213 798,802 Commissions expense 5,965,767 4,893,360 12,735,435 12,663,350 Total Contribution profit $ 7,627,568 $ 4,477,319 $ 7,593,178 $ 9,714,754 Gross margin 57.4 % 48.8 % 55.3 % 42.5 % Contribution margin 31.9 % 22.8 % 15.0 % 17.8 % Adjusted EBITDA We define Adjusted EBITDA, a non-GAAP financial measure, as net income (loss) before interest and other income (expenses), net, income tax expense, depreciation and amortization, as adjusted to exclude merger and acquisition expenses (“ M&A expenses ”). We utilize Adjusted EBITDA as an internal performance measure in the management of our operations because we believe the exclusion of these non-cash and non-recurring charges allow for a more relevant comparison of our results of operations to other companies in our industry. Adjusted EBITDA should not be viewed as a substitute for net (loss) income calculated in accordance with GAAP, and other companies may define Adjusted EBITDA differently. Adjusted EBITDA margin reflects our Adjusted EBITDA as a percentage of revenues. The following table provides a reconciliation of net (loss) income to Adjusted EBITDA for the periods presented: Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Net loss $ (1,869,472 ) $ (2,872,424 ) $ (17,868,299 ) $ (8,736,845 ) Adjustments: Other income, net (165,308 ) (137,508 ) (300,999 ) (188,329 ) Interest expense 129,719 209,227 130,007 294,257 Gain on change in fair value of warrant liabilities (124,200 ) (138,000 ) (691,380 ) (828,000 ) Income tax provision (benefit) 48,752 (44,146 ) 385,258 (235,352 ) Stock-based compensation 2,733,674 1,503,129 6,069,014 7,101,818 Acquisition-related expenses 953,515 738,134 2,025,813 1,268,647 Depreciation and amortization 249,447 499,876 8,325,628 1,413,074 Adjusted EBITDA $ 1,956,127 $ (241,712 ) $ (1,924,958 ) $ 89,270 Net loss margin (7.8 )% (14.6 )% (35.2 )% (16.0 )% Adjusted EBITDA margin 8.2 % (1.2 )% (3.8 )% 0.2 % 30 Critical Accounting Estimates For a description of our critical accounting policies and estimates, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on May 28, 2025. There have been no material changes to our critical accounting policies and estimates since our Annual Report on Form 10-K for the year ended December 31, 2024. Item 3. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, we are not required to provide the information required by this Item.