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,” “aim,” “goal” and “continue,” or the derivatives of such terms or other similar expressions about the future. Such statements include, but are not limited to, our expectations regarding revenue generation, our ability to obtain financing when needed, or ability to source and financing our growth and expansion, including via acquisitions, and all other statements other than statements of historical fact included in this Form 10-Q. Factors that might cause or contribute to such a discrepancy include, but are not limited to, the risk factors detailed in our SEC filings. Except as expressly required by applicable securities law, we disclaim any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. Overview Our company and personnel are passionate about delivering cost savings and increased independence and reliability to energy consumers. Our mission is to expedite the country’s transition to renewable energy by offering our customers an affordable and sustainable means of achieving energy independence. We are a vertically integrated company offering energy solutions and services that include sale, design, procurement, installation, and maintenance of residential solar energy systems. Many of our solar energy system customers also purchase other energy efficient-related equipment or services or roofing services from us. The majority of our customers are located in Florida, Texas, Ohio, Illinois, and Virginia. We have an expanding base of customers in California, Colorado, Minnesota, Utah, and Pennsylvania. Sunergy was created on October 1, 2021 through the Contribution of Sun First Energy, LLC, a rapidly growing solar sales management company, and Sunergy Solar, LLC, a large solar installation company based in Florida, to Sunergy Renewables, LLC. We believe that we have built (and continue to build) the infrastructure and capabilities necessary to rapidly acquire and serve customers in a low-cost and scalable manner. Today, our scalable regional operating platform provides us with a number of advantages, including the marketing of our solar service offerings through multiple channels, including our diverse sales partner network and direct-to-consumer vertically integrated sales and installation operations. We believe that this multi-channel model supports rapid sales and installation growth, allowing us to achieve capital-efficient growth in the regional markets we serve. Since our founding, we have continued to invest in a platform of services and tools to enable large scale operations for us and our partner network, which includes sales partners, installation partners and other strategic partners. The platform includes processes and software, as well as the capacity for the fulfillment and acquisition of marketing leads. We believe our platform empowers our in-house sales team and external sales dealers to profitably serve our regional and underpenetrated markets and helps us compete effectively against larger, more established industry players without making significant investment in technology and infrastructure. We have focused to date on a simple, capital light business strategy utilizing, as of March 31, 2026, approximately 260 sales agents and approximately 10 independent sales dealers to produce our sales pipeline. We engineer and design projects and process building permit applications on behalf of our customers to timely install their systems and assist their connections to the local utility power grid. Most of the equipment we install is drop-shipped to the installation site by our regional distributors, requiring minimal inventory to be held by the Company during any given period. We depend on our distributors to timely handle logistics and related requirements in moving equipment to the installation sites. In addition to our main offering of residential solar energy systems, we sell and install products such as roofing, insulation, energy efficient appliances and battery storage systems for the residential market. 19 Our core solar service offerings are paid for by customer purchases and financed through either third-party long-term lenders or third-party operators who offer leasing products that provide customers with simple, predictable pricing for solar energy that is insulated from rising retail electricity prices. Most of our customers finance their purchases with affordable loans or leases that require minimal or no upfront capital or down payment. Recent Developments White Lion Financing Transaction On January 27, 2026, we entered into the White Lion Purchase Agreement with White Lion. We also entered into a Registration Rights Agreement (“RRA”) with White Lion on January 27, 2026. Pursuant to the White Lion Purchase Agreement, the Company has the right, but not the obligation, to require White Lion to purchase, from time to time, up to $30.0 million in aggregate gross purchase price of newly issued shares of our Class A Common Stock, subject to certain limitations and conditions set forth in the White Lion Purchase Agreement. Subject to the satisfaction of certain customary conditions, the Company’s right to sell shares to White Lion commenced on the date of the execution of White Lion Purchase Agreement and extends until White Lion Commitment Period. During the White Lion Commitment Period, subject to the terms and conditions of the White Lion Purchase Agreement, the Company may notify White Lion when the Company exercises its right to sell shares of its Class A Common Stock. The Company may deliver a Rapid Purchase Notice (as such term is defined in the White Lion Purchase Agreement), where the Company can require White Lion to purchase up to a number of shares of Class A Common Stock equal to the 20% of Average Daily Trading Volume (as such term is defined in the White Lion Purchase Agreement). The Company may also deliver an Accelerated Purchase Notice (as such term is defined in the White Lion Purchase Agreement), where the Company may require White Lion to purchase up to a number of shares of Class A Common Stock equal to 20% of the Average Daily Trading Volume. White Lion may waive such limits under any notice at its discretion and purchase additional shares. The price to be paid by White Lion for any shares that the Company requires White Lion to purchase will depend on the type of purchase notice that the Company delivers. For shares being issued pursuant to Accelerated Purchase Notice, the purchase price per share will be equal to the lowest traded price of Class A Common Stock during one (1) hour period following the White Lion’s written consent of the acceptance of the notice. For shares being issued pursuant to a Rapid Purchase Notice, the purchase price per share will be equal to the average of the three (3) lowest traded prices on the date that the notice is delivered. No purchase notice shall result in White Lion beneficially owning (as calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d-3 thereunder) more than 4.99% of the number of shares of the Class A Common Stock outstanding immediately prior to the issuance of shares of Class A Common Stock issuable pursuant to a purchase notice. The Company may deliver purchase notices under the White Lion Purchase Agreement, subject to market conditions, and in light of our capital needs, from time to time and under the limitations contained in the White Lion Purchase Agreement. Any proceeds that the Company receives under the White Lion Purchase Agreement are expected to be used for working capital and general corporate purposes. The White Lion Purchase Agreement may be terminated by the Company at any time and for any reason, in its sole discretion, subject to the Company having delivered the applicable Commitment Shares (as defined below). The White Lion Purchase Agreement will also terminate automatically upon the earlier of the expiration of the White Lion Commitment Period or the occurrence of certain bankruptcy or insolvency-related events involving the Company. 20 In consideration for the commitments of White Lion, as described above, the Company is contractually committed to issue to White Lion the Commitment Shares. The Commitment Shares are deemed fully earned and non-refundable as of the execution date of the White Lion Purchase Agreement; however, if the White Lion Purchase Agreement is terminated by the Company as a result of a material breach by White Lion, the Company may pursue all remedies available at law or in equity, including reimbursement or recovery of such Commitment Shares, to the extent permitted by applicable law. Concurrently with the White Lion Purchase Agreement, the Company entered into the RRA with White Lion. The Purchase Agreement and the RRA contain customary representations, warranties, conditions and indemnification obligations of the parties. The representations, warranties and covenants contained in such agreements were made only for purposes of such agreements and as of specific dates, were solely for the benefit of the parties to such agreements and may be subject to limitations agreed upon by the contracting parties. White Horse Energy Transaction On January 30, 2026, Sunergy, a subsidiary of the Company, increased the subordinated loan in the form of a note receivable with White Horse Energy, LLC from $3.0 million to $6.15 million under the same terms as the original note. Nasdaq Listing Rule Notice On April 23, 2026, the Company received a letter from the Listing Qualifications Staff of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that, based upon the closing bid price of the Company’s Class A common stock for the last 30 consecutive business days, the Company no longer meets Nasdaq Listing Rule 5550(a)(2), which requires listed companies to maintain a minimum bid price of at least $1 per share. Nasdaq Listing Rule 5810(c)(3)(A) provides a compliance period of 180 calendar days, or until October 20, 2026, in which to regain compliance with the minimum bid price requirement. If the Company evidences a closing bid price of at least $1 per share for a minimum of 10 consecutive business days during the 180-day compliance period, the Company will automatically regain compliance. In the event the Company does not regain compliance with the $1 bid price requirement by October 14, 2026, the Company may be eligible for consideration of a second 180-day compliance period if it meets the continued listing requirement for market value of publicly held shares and all other initial listing standards for Nasdaq’s Capital Market, other than the minimum bid price requirement. In addition, the Company would also be required to notify Nasdaq of its intent to cure the minimum bid price deficiency. 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. 21 The following table sets forth these metrics for the periods presented: Three Months Ended March 31, 2026 2025 Net revenues $ 13,184,944 $ 8,783,695 Contribution profit 2,242,129 (2,770,825 ) Contribution margin 17.0 % (31.5 )% Loss from operations (4,765,124 ) (13,511,398 ) Net loss (4,691,311 ) (13,319,363 ) Adjusted EBITDA (2,850,505 ) (5,507,671 ) Adjusted EBITDA margin (21.6 )% (62.7 )% Contribution Profit and Contribution Margin We define contribution profit as revenue, net less direct costs of revenue, commissions expense and depreciation and amortization, and define contribution margin, expressed as a percentage, as the ratio of contribution profit to revenue, net. Contribution profit and margin can be used to understand our financial performance and efficiency and allows investors to evaluate our pricing strategy and compare against competitors. Our management uses these metrics to make strategic decisions, identify areas for improvement, set targets for future performance and make informed decisions about how to allocate resources going forward. Contribution margin reflects our Contribution profit as a percentage of revenues. See “— Non-GAAP Financial Measures ” for a reconciliation of Gross Profit to Contribution Profit and Contribution Margin. Adjusted EBITDA and Adjusted EBITDA Margin We define Adjusted EBITDA, a non-GAAP financial measure, as earnings (loss) before interest expense, income tax expense (benefit), depreciation and amortization, other income (expenses), net, and stock compensation, as adjusted to exclude merger transaction related expenses. Adjusted EBITDA margin reflects our Adjusted EBITDA as a percentage of revenues. See “— Non-GAAP Financial Measures ” for a reconciliation of GAAP net loss to Adjusted EBITDA and Adjusted EBITDA Margin. Key Factors that May Influence Future Results of Operations Our financial results of operations may not be comparable from period to period due to several factors. Key factors affecting the results of our operations are summarized below. Expansion of Residential Sales into New Markets. Our future revenue growth is, in part, dependent on our ability to expand our product offerings and services in the select residential markets where we operate primarily in Florida, Texas, Illinois, Virginia and Ohio. We primarily generate revenue from our product offerings and services in the residential housing market. To continue our growth, we intend to expand our presence in the residential market into additional states based on markets underserved by national sales and installation providers that also have favorable incentives and net metering policies. We believe that our entry into new markets will continue to facilitate revenue growth and customer diversification. Expansion of New Products and Services . In 2026, we continued our roofing replacements to facilitate our solar installations and to repair rooftops on homes in Florida damaged by severe weather. We plan to expand our roofing business in all markets we enter in the future. Roofing facilitates a faster processing time for our solar installations in cases where the customer is in need of a roof replacement prior to installing a solar system. In addition, to provide more financing options for our prospective residential solar energy customers, we have programs in place that allow our customers to choose a leasing option to finance their systems from a third party. Following the acquisition of Heliogen in August 2025, the Company has been working to integrate Heliogen’s concentrated solar power and energy storage technology into its clean-energy platform to complement its existing solar operations, create operational synergies, and broaden market reach. The Company continues to pursue engineering services agreements to support long-duration energy storage projects. Adding New Customers and Expansion of Sales with Existing Customers . We intend to increase our in-house sales force and external sales dealers in order to target new customers in the Southern U.S. regional residential markets. We provide competitive compensation packages to our in-house sales teams and external sales dealers, which incentivizes the acquisition of new customers. 22 Inflation. We are seeing an increase in the costs of labor and components as the result of higher inflation rates. In particular, we are experiencing an increase in raw material costs and supply chain constraints, and trade tariffs imposed on certain products from China. We also see an increase in materials used to achieve the required minimum domestic content to maximize incentive tax credits. These increases in material and labor costs may continue to put pressure on our operating margins. We do not have information that allows us to quantify the specific amount of cost increases attributable to inflationary pressures. Interest rates. Interest rates increased sharply in 2022 but have been relatively stable since. The majority of homeowners have opted to enter into a lease contract with a third-party operator as means of financing the installation of a solar system. The lease contract provides a lower monthly cost to the homeowner than a conventional loan product in a higher interest rate environment. We do not have information that allows us to quantify the adverse effects attributable to increased interest rates. Managing our Supply Chain . We rely on contract manufacturers and suppliers to produce our components. Our suppliers are generally meeting our materials needs. Our ability to grow depends, in part, on the ability of our contract manufacturers and suppliers to provide high quality services and deliver components and finished products on time and at reasonable costs. In the event we are unable to mitigate the impact of delays and/or price increases in raw materials, electronic components and freight, it could delay the installation of our systems, which would adversely impact our cash flows and results of operations, including revenue and contribution margin. Components of Condensed Consolidated Statements of Operations Net Revenues Our primary source of revenue is the sale of our residential solar systems. Our systems are fully functional at the time of installation and require an inspection prior to interconnection to the utility power grid. We sell our systems primarily direct to end user customers for use in their residences. Upon passing installation inspection, we satisfy our performance obligation and recognize revenue. Most of the Company’s customers finance their obligations with third parties. Most finance arrangements are by way of a lease contract with a third-party operator. Some customers utilize debt financing. In these situations, the finance company deducts their financing fees and remits the net amount to the Company. Revenue is recorded net of these financing fees (and/or dealer fees). The volume of sales and installations of rooftop solar systems, our primary product, increase from April to September when a majority of our sales teams are most active in our areas of service. In addition to sales of solar systems, “adders” or accessories to a sale may include roofing, energy efficient appliances, upgraded insulation and/or energy storage systems. All adders consisted of less than 10% of the total revenues, net for the three months ended March 31, 2026 and 2025. Our revenue is affected by changes in the volume, system size and average selling prices of our solutions and related accessories, supply and demand, sales incentives and fluctuating interest rates that increase or decrease the monthly payments for customers purchasing systems through third party financing. Less than 5% of our sales were paid in cash by the customer in each of the three months ended March 31, 2026 and 2025. Our revenue growth is dependent on our ability to compete effectively in the marketplace by remaining cost competitive, developing and introducing new sales teams within existing and new territories, scaling our installation teams to keep up with demand and maintaining a strong internal operations team to process orders while working with building departments and utilities to permit and interconnect our customers to the utility grid. Revenues improved during the three months ended March 31, 2026 compared to the three months ended March 31, 2025, driven by increased solar system installation activity. While higher consumer financing rates continue to present headwinds for the residential solar industry broadly, the Company has managed these pressures through expanded sales efforts and continued growth in its installation volume. Cost of Revenues Cost of revenues consists primarily of product costs (including solar panels, inverters, metal racking, connectors, shingles, wiring, warranty costs and logistics costs), installation labor and permitting costs. Cost of revenues increased during three months ended March 31, 2026 in association with the increase in revenues. Net revenues less cost of revenues may vary from period-to-period and is primarily affected by our average selling prices, financing or dealer fees, fluctuations in equipment costs and our ability to effectively and timely deploy our field installation teams to project sites once permitting departments have approved the design and engineering of systems on customer sites. 23 Operating Expenses Operating expenses consist of sales and marketing and general and administrative expenses. Personnel-related costs are the most significant component of each of these expense categories and include salaries, benefits and payroll taxes. Sales and marketing expenses consist primarily of personnel-related expenses including sales commissions, as well as advertising, travel, trade shows, marketing, and other indirect costs. We expect to continue to make the necessary investments to enable us to execute our strategy to increase our market penetration geographically and enter into new markets by expanding our base sales teams, installers and strategic sales dealer and partner network. General and administrative expenses consist primarily of personnel-related expenses for our non-direct labor operations, executive, finance, human resources, information technology, software, facilities costs and fees for professional services. Fees for professional services consist primarily of outside legal, accounting and information technology consulting costs. Depreciation and amortization consist primarily of depreciation of our vehicles, furniture and fixtures, software and amortization of our acquired intangibles. Other Income (Expense) Other income (expense) primarily consists of change in fair value of warrant liabilities and interest expense and fees under our equipment and vehicle term loans. It also includes interest income on our cash and note receivable balances. Results of Operations Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025 The following table sets forth a summary of our condensed consolidated statements of operations for the periods presented: Three Months Ended March 31, Change 2026 2025 $ % Net revenues $ 13,184,944 $ 8,783,695 $ 4,401,249 50.1 % Operating expenses Cost of revenues 7,580,046 4,789,679 2,790,367 58.3 % Depreciation and amortization 1,081,528 4,900,729 (3,819,201 ) (77.9 )% Sales and marketing 3,011,770 3,112,799 (101,029 ) (3.2 )% General and administrative 6,276,724 9,491,886 (3,215,162 ) (33.9 )% Total operating expenses 17,950,068 22,295,093 (4,345,025 ) (19.5 )% Loss from operations (4,765,124 ) (13,511,398 ) 8,746,274 64.7 % Other income (expense): Other income 68,437 82,363 (13,926 ) (16.9 )% Interest expense (10,853 ) (30,277 ) 19,424 64.2 % Gain (loss) on change in fair value of warrant liabilities (75,900 ) 663,449 (739,349 ) (111.4 )% Total other income (expense) (18,316 ) 715,535 (733,851 ) (102.6 )% Net loss before taxes $ (4,783,440 ) $ (12,795,863 ) $ 8,012,423 62.6 % Net Revenues Net revenues increased by approximately $4.4 million from $8.8 million for the three months ended March 31, 2025 to $13.2 million for the three months ended March 31, 2026. The increase in revenue was primarily driven by growth in solar system installations during the current period, partially offset by a decrease in related party revenue from Solar Leasing I, LLC (“SLI”). There were no revenues generated from the Heliogen segment during the three months ended March 31, 2026 and 2025. Cost of Revenues Cost of revenues increased by $2.8 million from $4.8 million for the three months ended March 31, 2025 to $7.6 million for the three months ended March 31, 2026, primarily driven by the increase in solar system installation activity during the current period. As a percentage of net revenues, cost of revenues increased slightly from 54.5% for the three months ended March 31, 2025 to 57.5% for the three months ended March 31, 2026, reflecting a compression in gross margin year-over-year. 24 Depreciation and Amortization Depreciation and amortization decreased by $3.8 million, from $4.9 million for the three months ended March 31, 2025 to $1.1 million for the three months ended March 31, 2026. The decrease was primarily related to $4.6 million in amortization of the customer-related intangible asset acquired in connection with the Lumio asset acquisition, which was fully amortized during 2025. This was offset by the $0.8 million of accelerated depreciation associated with the abandonment of software during the three months ended March 31, 2026. Sales and Marketing Sales and marketing expenses decreased by $0.1 million from $3.1 million for the three months ended March 31, 2025 to $3.0 million for the three months ended March 31, 2026. The decrease was primarily driven by lower stock-based compensation expense, offset by higher sales commissions, consistent with the increase in installation revenues during the period. General and Administrative Expenses General and administrative expenses decreased by $3.2 million from $9.5 million for the three months ended March 31, 2025 to $6.3 million for the three months ended March 31, 2026. The decrease was primarily driven by significant reductions in bad debt expense and stock-based compensation expense compared to the prior period. Other Income (Expense) Other income (expense), net decreased by $0.7 million from other income, net of $0.7 million for the three months ended March 31, 2025 to other expense, net of $18,316 for the three months ended March 31, 2026. The decrease was primarily a result of a significant gain on change in fair value of warrant liabilities for the three months ended March 31, 2025 and a loss on change in fair value of warrant liabilities for the three months ended March 31, 2026. Liquidity and Capital Resources Our operations have historically been funded through a combination of revenue generation, proceeds from financing activities, and in 2025, net cash acquired in connection with the Heliogen acquisition. Our primary short-term requirements for liquidity and capital are to fund general working capital and capital expenses, including through our common stock purchase agreement with White Lion Capital LLC (the “White Lion ELOC”). Our principal long-term working capital uses include ensuring revenue growth, expanding our sales and marketing efforts and potential acquisitions. As of March 31, 2026 and December 31, 2025, our cash and cash equivalents balance were $1.7 million and $6.1 million, respectively. The Company maintains its cash in checking, savings, and money market accounts. Our future capital requirements depend on many factors, including our revenue growth rate, the timing and extent of our spending to support further sales and marketing, the degree to which we are successful in launching new business initiatives, the costs associated with these initiatives, the growth of our business generally and our access to third party financing. We have operational plans to increase revenue and move towards the goal of profitable operations in 2026, which plans are expected to improve cash flows. Our operational plan includes an increase in the number of sales agents to increase revenue and improved efficiency in our operations through centralization of field offices and labor and productivity improvement in the corporate operations through the implementation of a new CRM software. We are also working internally and with third parties to address short-term cash needs, including through the use of the White Lion ELOC, which provides us with the right to sell up to $30.0 million in shares of our Class A common stock, subject to market liquidity and contractual limitations. The White Lion ELOC is limited to selling shares equal to 4.99% of the outstanding shares at the time of sale and resets once White Lion Capital LLC (i.e., once White Lion Capital liquidates their holdings in the open market). We believe we also have other opportunities to raise capital, such as through revenue generating initiatives, private placements, public offerings or repricing of outstanding warrants. In addition, in June 2026, we will become eligible to utilize a universal shelf registration statement to raise funding for our company. We currently believe that our existing cash and working capital balances, anticipated future cash flows from operations, borrowings under our debt agreements, and access to equity capital markets (including the White Lion ELOC) will be sufficient to meet our currently contemplated business needs for the next twelve months. In the event we pursue and complete significant transactions or acquisitions in the future, additional funds will be required to meet our strategic needs, which will require us to raise additional funds in the debt or equity markets. While our plan and expectation is to raise additional capital in 2026, and while we are routinely active in discussions and planning for financing, there can be no assurance that we will be successful in such pursuits, and our fundraising efforts are subject to a variety of uncertainties. Moreover, even if we are able to raise additional capital, other than the While Lion ELOC, we do not know with precision what the terms of any such financing would be. Any future sale of our equity securities would dilute the ownership and control of your shares and could be at prices below prices at which investors acquired our shares or at which our shares currently trade. The sale of convertible debt securities or additional equity securities could result in additional dilution to our shareholders. Also, the incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations and liquidity and ability to pay dividends. Our inability to raise capital, coupled with our inability to generate adequate cash from operations, could require us to significantly modify our operational plans, and any failure to raise additional funds on favorable terms when needed could have a material adverse effect on our business, liquidity and financial condition. 25 Cash Flows The following table summarizes our cash flows for the periods presented: For the Three Months Ended March 31, 2026 2025 Change Net cash used in operating activities $ (852,842 ) $ (2,263,438 ) $ 1,410,596 Net cash used in investing activities (3,355,342 ) (372,578 ) (2,982,764 ) Net cash used in financing activities (198,124 ) (103,996 ) (94,128 ) Cash Flows from Operating Activities Net cash used in operating activities was approximately $0.9 million during the three months ended March 31, 2026 compared to approximately $2.3 million during the three months ended March 31, 2025. The $1.4 million improvement in operating cash flows was driven primarily by favorable working capital changes, including a $1.3 million increase in accounts payable and a $3.8 million increase in accrued expenses and other current liabilities – related parties, and a $0.2 million decrease in prepaid expenses and other current assets. These improvements were partially offset by a $2.4 million increase in accounts receivable, a $0.7 million decrease in contract liabilities, and a $0.5 million decrease in accrued expenses and other current liabilities. Non-cash charges also decreased significantly year-over-year, with depreciation and amortization of $1.1 million, stock-based compensation of $0.7 million, and provision for credit losses of $0.2 million in the current period, compared to $4.9 million, $2.2 million, and $3.5 million, respectively, in the prior year period, reflecting the significant reduction in operating activity from the prior year period. In addition to the previously mentioned changes in operating cash flows, the Heliogen segment that was acquired in the quarter ended September 30, 2025, incurred a net loss of $0.9 million for the three months ended March 31, 2026 that is included in net loss compared to no impact on net loss for the three months ended March 31, 2025. Cash Flows from Investing Activities Net cash used in investing activities was approximately $3.4 million for the three months ended March 31, 2026 relating to the note receivable – related-party investment and purchases of property and equipment. Net cash used in investing activities was approximately $0.4 million for the three months ended March 31, 2025, relating to purchases of property and equipment. Cash Flows from Financing Activities Net cash used in financing activities was approximately $0.2 million for the three months ended March 31, 2026 relating to the payment of dividends to OpCo Class A preferred unit holders, repayments of debt and finance leases, and tax withholding paid related to stock-based compensation, offset by net proceeds received in connection with the White Lion RRA. Net cash used in financing activities was approximately $0.1 million for the three months ended March 31, 2025, relating to repayments of debt and finance leases. Current Indebtedness As of March 31, 2026, the Company’s outstanding indebtedness consisted of approximately $73,471 of vehicle loans. The Company has historically funded its operations and growth through a combination of cash on hand, proceeds from financing activities, and in 2025, net cash acquired in connection with the Heliogen acquisition. Non-GAAP Financial Measures The non-GAAP financial measures in this Quarterly Report have not been calculated in accordance with GAAP and should be considered in addition to results prepared in accordance with GAAP and should not be considered as a substitute for, or superior to, GAAP results. In addition, Adjusted EBITDA and Adjusted EBITDA Margin should not be construed as indicators of our operating performance, liquidity or cash flows generated by operating, investing and financing activities, as there may be significant factors or trends that they fail to address. We caution investors that non-GAAP financial information, by its nature, departs from traditional accounting conventions. Therefore, its use can make it difficult to compare our current results with our results from other reporting periods and with the results of other companies. Our management uses these non-GAAP financial measures, in conjunction with GAAP financial measures, as an integral part of managing our business and to, among other things: (i) monitor and evaluate the performance of our business operations and financial performance; (ii) facilitate internal comparisons of the historical operating performance of our business operations; (iii) facilitate external comparisons of the results of our overall business to the historical operating performance of other companies that may have different capital structures and debt levels; (iv) review and assess the operating performance of our management team; (v) analyze and evaluate financial and strategic planning decisions regarding future operating investments; and (vi) plan for and prepare future annual operating budgets and determine appropriate levels of operating investments. We believe that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends, and in comparing our financial results with other companies in our industry, many of which present similar non-GAAP financial measures to investors. 26 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. The following table provides a reconciliation of contribution profit for the periods presented: Three Months Ended March 31, 2026 2025 Net revenues $ 13,184,944 $ 8,783,695 Cost of revenues 7,580,046 4,789,679 Total gross profit $ 5,604,898 $ 3,994,016 Adjustments: Depreciation and amortization 1,081,528 4,900,729 Commissions expense 2,281,241 1,864,112 Total contribution profit $ 2,242,129 $ (2,770,825 ) Gross margin 42.5 % 45.5 % Contribution margin 17.0 % (31.5 )% Adjusted EBITDA We define Adjusted EBITDA, a non-GAAP financial measure, as net income (loss) before interest and other income (expense), net, income tax provision (benefit), depreciation and amortization, gain (loss) on change in fair value of warrant liabilities, stock-based compensation, and non-recurring transaction-related expenses. We utilize Adjusted EBITDA as an internal performance measure in the management of our operations because we believe the exclusion of these non-cash and non-recurring charges allow for a more relevant comparison of our results of operations to other companies in our industry. Adjusted EBITDA should not be viewed as a substitute for net income (loss) calculated in accordance with GAAP, and other companies may define Adjusted EBITDA differently. Adjusted EBITDA margin reflects our Adjusted EBITDA as a percentage of revenues. The following table provides a reconciliation of net income (loss) to Adjusted EBITDA for the periods presented: Three Months Ended March 31, 2026 2025 Net loss $ (4,691,311 ) $ (13,319,363 ) Adjustments: Other income (68,437 ) (82,363 ) Interest expense 10,853 30,277 (Gain) loss on change in fair value of warrant liabilities 75,900 (663,449 ) Income tax provision (benefit) (92,129 ) 523,500 Stock-based compensation 694,368 2,257,139 Non-recurring transaction-related expenses 138,723 845,859 Depreciation and amortization 1,081,528 4,900,729 Adjusted EBITDA $ (2,850,505 ) $ (5,507,671 ) Net loss margin (35.6 )% (151.6 )% Adjusted EBITDA margin (21.6 )% (62.7 )% 27 Critical Accounting Estimates For a description of our critical accounting policies and estimates, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on April 1, 2026. There have been no material changes to our critical accounting policies and estimates since our Annual Report on Form 10-K for the year ended December 31, 2025. Item 3. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, we are not required to provide the information required by this Item.