Zeo Energy Corp. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Unless the context requires otherwise, references herein to the “Company,” “our,” “us” or “we” refer to Zeo Energy Corp. and its consolidated subsidiaries. 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 solar sales management company, and Sunergy Solar, LLC, a solar installation company based in Florida, to Sunergy Renewables, LLC. Through our Heliogen segment, acquired in August 2025, we are also developing concentrated solar power and long-duration energy generation and storage technology solutions for commercial and industrial applications. 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 June 30, 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. 26 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 Convertible Note On June 9, 2026, we entered into a Note Purchase Agreement (the “Note Purchase Agreement”) with White Lion Capital LLC (“White Lion”), pursuant to which we agreed to issue, and White Lion agreed to purchase, at one or more closings, unsecured convertible promissory notes in an aggregate funded amount of up to $7,500,000 (each a “Convertible Note”). At the first closing on June 9, 2026, we issued to White Lion a Convertible Note in the principal amount of $1,670,000, reflecting an original issue discount of $170,000, for gross proceeds of $1,500,000. We incurred $57,132 of debt issuance costs, resulting in net proceeds of $1,442,868. Additional closings for up to $6,000,000 of gross proceeds may occur at any time prior to June 9, 2027 upon the mutual written agreement of us and White Lion, subject to customary closing conditions. The Convertible Note matures on June 9, 2028 and accrues interest at 5% per annum. The Convertible Note is convertible, in whole or in part, into shares of Class A common stock at the option of White Lion at a conversion price per share equal to the greater of (i) $0.50 (the “Floor Price”) and (ii) the lesser of (A) the Nasdaq Minimum Price (as defined under Nasdaq rules, $0.80 as of the issuance date) and (B) 95% of the lowest daily volume-weighted average price of the Class A common stock during the five trading days ending on the latest complete trading day prior to conversion. The conversion price is subject to customary adjustments for stock splits and similar events and to adjustment upon certain dilutive issuances below the then-effective conversion price. The Floor Price will no longer apply if (i) we complete a subsequent equity raise with a party other than White Lion at a price below $0.50, (ii) the average of the daily volume-weighted average prices of the Class A common stock for thirty consecutive trading days is less than $0.50, or (iii) an event of default occurs. Conversions are subject to a beneficial ownership limitation of 4.99% (or, at White Lion’s election, 9.99%) and, pursuant to applicable Nasdaq rules, shares issuable upon conversion may not exceed 19.99% of our outstanding Class A common stock immediately prior to the first closing (the “Conversion Cap”) unless stockholder approval is obtained. We were obligated to seek stockholder approval for issuances above the Conversion Cap within 60 days of June 9, 2026. At our annual meeting of stockholders held on August 7, 2026, stockholders approved the issuance of shares of Class A common stock in excess of the Conversion Cap in accordance with Nasdaq Listing Rule 5635(d). The Convertible Note is subject to customary events of default; upon an event of default, subject to applicable cure periods, the principal amount would automatically increase to 120% of the then-outstanding principal, plus accrued and unpaid interest, and would become immediately due and payable. We may prepay the Convertible Note at any time, in whole or in part, without premium or penalty, upon at least five business days’ written notice, during which period White Lion may exercise its conversion rights. We are also subject to a “most favored nation” provision in favor of White Lion and restrictions on entering into variable rate transactions and equity lines of credit with parties other than White Lion without White Lion’s consent. In addition, White Lion has the right to require that up to 20% of the proceeds from sales under the White Lion ELOC, warrant exercises, or other securities issuances be applied to repay the Convertible Note. Concurrently with the Note Purchase Agreement, we entered into a Registration Rights Agreement with White Lion, pursuant to which we agreed to file, within 30 days following the first closing, a registration statement covering the resale by White Lion of the shares issuable upon conversion, and which contains customary damages provisions for failure to file or to have the registration statement declared effective within the specified periods. We did not file the registration statement within the 30-day period. White Lion subsequently waived this covenant with the expectation that the registration statement will be filed no later than August 31, 2026. Nasdaq Listing Rule Notice On April 23, 2026, we 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, we no longer meet 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 we evidence a closing bid price of at least $1 per share for a minimum of 10 consecutive business days during the 180-day compliance period, we will automatically regain compliance. In the event we do not regain compliance with the $1 bid price requirement by October 14, 2026, we may be eligible for consideration of a second 180-day compliance period if the continued listing requirement for market value of publicly held shares and all other initial listing standards for Nasdaq’s Capital Market is met, other than the minimum bid price requirement. In addition, we would also be required to notify Nasdaq of our 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 accounting principles generally accepted in the United States of America (“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 ” below for additional information on non-GAAP financial measures and a reconciliation of these non-GAAP measures to the most comparable GAAP measures. 27 The following table sets forth these metrics for the periods presented: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Net revenues $ 16,169,463 $ 18,101,930 $ 29,354,407 $ 26,885,625 Contribution profit 3,408,450 2,736,435 5,650,579 (34,390 ) Contribution margin 21.1 % 15.1 % 19.2 % (0.1 )% Loss from operations (2,988,955 ) (2,853,506 ) (7,754,079 ) (16,364,904 ) Net loss (2,749,966 ) (2,679,464 ) (7,441,277 ) (15,998,827 ) Adjusted EBITDA (2,106,556 ) 1,626,586 (4,957,061 ) (3,881,085 ) Adjusted EBITDA margin (13.0 )% 9.0 % (16.9 )% (14.4 )% 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. 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 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 derivative liability, gain (loss) on change in fair value of warrant liabilities, stock-based compensation, and 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, Ohio, Illinois, and Virginia. 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, and where homeowners have favorable financing options. 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. We will continue to provide roofing services in all markets in which we install solar systems. 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, we have been working to integrate Heliogen’s concentrated solar power and energy storage technology into our clean-energy platform to complement our existing solar operations, create operational synergies, and broaden market reach. We continue 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 external sales dealers in order to target new customers in the markets we serve. We provide competitive compensation packages to our in-house sales teams and external sales dealers, which incentivizes the acquisition of new customers. 28 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 a 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, increases 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, smart home security systems, upgraded insulation and/or energy storage systems. Adders represented less than 10% of total net revenues for each of the six months ended June 30, 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 six months ended June 30, 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 six months ended June 30, 2026 compared to the six months ended June 30, 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 the six months ended June 30, 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. 29 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 changes in fair value of our warrant liabilities and the embedded derivative liability related to the Convertible Note, interest expense on the Convertible Note (including amortization of the debt discount) and under our equipment and vehicle term loans, and interest income on our cash and note receivable balances. Results of Operations Three Months Ended June 30, 2026 Compared to Three Months Ended June 30, 2025 The following table sets forth a summary of our condensed consolidated statements of operations for the periods presented: Three Months Ended June 30, Change 2026 2025 $ % Net revenues $ 16,169,463 $ 18,101,930 $ (1,932,467 ) (10.7 )% Operating expenses Cost of revenues 8,545,576 7,284,487 1,261,089 17.3 % Depreciation and amortization 248,171 3,175,452 (2,927,281 ) (92.2 )% Sales and marketing 4,416,419 5,629,040 (1,212,621 ) (21.5 )% General and administrative 5,948,252 4,866,457 1,081,795 22.2 % Total operating expenses 19,158,418 20,955,436 (1,797,018 ) (8.6 )% Loss from operations (2,988,955 ) (2,853,506 ) (135,449 ) (4.7 )% Other income (expense): Other income 101,200 53,328 47,872 89.8 % Interest expense (32,429 ) 29,989 (62,418 ) 208.1 % Gain on change in fair value of derivative liability 232,500 – 232,500 – Gain (loss) on change in fair value of warrant liabilities 34,500 (96,269 ) 130,769 135.8 % Total other income (expense) 335,771 (12,952 ) 348,723 2,692.4 % Net loss before income taxes $ (2,653,184 ) $ (2,866,458 ) $ 213,274 7.4 % Net Revenues Net revenues decreased by approximately $1.9 million from $18.1 million for the three months ended June 30, 2025 to $16.2 million for the three months ended June 30, 2026. The decrease in revenue was primarily driven by a decrease in related party revenue from Solar Leasing I, LLC (“SLI”), partially offset by an increase in revenue from unrelated third-party customers. There were no revenues generated from the Heliogen segment during the three months ended June 30, 2026 or 2025. Cost of Revenues Cost of revenues increased by $1.2 million from $7.3 million for the three months ended June 30, 2025 to $8.5 million for the three months ended June 30, 2026, primarily driven by an increase in labor costs in the markets in which we operate and an increase in the cost of materials to conform to domestic content requirements of our customers during the current period. As a percentage of net revenues, cost of revenues increased from 40.2% for the three months ended June 30, 2025 to 52.9% for the three months ended June 30, 2026, reflecting a compression in gross margin year-over-year primarily driven by higher material costs, offset by some improvements to labor and other costs. 30 Depreciation and Amortization Depreciation and amortization decreased by $3.0 million, from $3.2 million for the three months ended June 30, 2025 to $0.2 million for the three months ended June 30, 2026. The decrease was primarily related to $2.9 million in amortization of the customer-related intangible asset acquired in connection with the Lumio asset acquisition, which was fully amortized during 2025. Sales and Marketing Sales and marketing expenses decreased by $1.2 million from $5.6 million for the three months ended June 30, 2025 to $4.4 million for the three months ended June 30, 2026. The decrease was primarily driven by lower sales commissions, reflecting both the decrease in installation revenues and changes to the Company’s commission structure, as well as lower payroll and lead generation costs following the elimination of the inside sales team early in the second quarter of 2026. General and Administrative Expenses General and administrative expenses increased by $1.1 million from $4.9 million for the three months ended June 30, 2025 to $5.9 million for the three months ended June 30, 2026. The increase was primarily driven by increased bad debt expense and professional fees, offset by decreased stock-based compensation expense and transaction-related expenses compared to the prior period. Other Income (Expense) Other income (expense), net increased by $0.3 million from other expense, net of $12,952 for the three months ended June 30, 2025 to other income, net of $0.3 million for the three months ended June 30, 2026. The increase was primarily a result of a gain on change in fair value of derivative liability and warrant liabilities during the three months ended June 30, 2026, compared to a loss on change in fair value of warrant liabilities during the three months ended June 30, 2025. Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025 The following table sets forth a summary of our condensed consolidated statements of operations for the periods presented: Six Months Ended June 30, Change 2026 2025 $ % Net revenues $ 29,354,407 $ 26,885,625 $ 2,468,782 9.2 % Operating expenses Cost of revenues 16,125,622 12,074,166 4,051,456 33.6 % Depreciation and amortization 1,329,699 8,076,181 (6,746,482 ) (83.5 )% Sales and marketing 7,428,189 7,766,132 (337,943 ) (4.4 )% General and administrative 12,224,976 15,334,050 (3,109,074 ) (20.3 )% Total operating expenses 37,108,486 43,250,529 (6,142,043 ) (14.2 )% Loss from operations (7,754,079 ) (16,364,904 ) 8,610,825 52.6 % Other income (expense): Other income 169,637 135,691 33,946 25.0 % Interest expense (43,282 ) (288 ) (42,994 ) 14,928.5 % Gain on change in fair value of derivative liability 232,500 – 232,500 – Gain (loss) on change in fair value of warrant liabilities (41,400 ) 567,180 (608,580 ) (107.3 )% Total other income (expense) 317,455 702,583 (385,128 ) (54.8 )% Net loss before income taxes $ (7,436,624 ) $ (15,662,321 ) $ 8,225,697 52.5 % 31 Net Revenues Net revenues increased by approximately $2.5 million from $26.9 million for the six months ended June 30, 2025 to $29.4 million for the six months ended June 30, 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 SLI. There were no revenues generated from the Heliogen segment during the six months ended June 30, 2026 and 2025. Cost of Revenues Cost of revenues increased by $4.0 million from $12.1 million for the six months ended June 30, 2025 to $16.1 million for the six months ended June 30, 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 from 44.9% for the six months ended June 30, 2025 to 54.9% for the six months ended June 30, 2026, reflecting a compression in gross margin year-over-year primarily driven by higher material costs, offset by some improvements to labor and other costs. Depreciation and Amortization Depreciation and amortization decreased by $6.7 million, from $8.1 million for the six months ended June 30, 2025 to $1.3 million for the six months ended June 30, 2026. The decrease was primarily related to $7.6 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 partially offset by $0.8 million of accelerated depreciation associated with the abandonment of internally developed software during the six months ended June 30, 2026. Sales and Marketing Sales and marketing expenses decreased by $0.4 million from $7.8 million for the six months ended June 30, 2025 to $7.4 million for the six months ended June 30, 2026. The decrease was primarily driven by lower sales commissions, reflecting changes to the Company’s commission structure, as well as lower payroll and lead generation costs following the elimination of the inside sales team early in the second quarter of 2026, notwithstanding the increase in installation revenues during the period. General and Administrative Expenses General and administrative expenses decreased by $3.1 million from $15.3 million for the six months ended June 30, 2025 to $12.2 million for the six months ended June 30, 2026. The decrease was primarily driven by decreased bad debt expense, stock-based compensation expense and transaction-related expenses compared to the prior period, offset by increased professional fees during the current period. Other Income (Expense) Other income, net decreased by $0.4 million from $0.7 million for the six months ended June 30, 2025 to $0.3 million for the six months ended June 30, 2026. The decrease was primarily a result of a significant gain on change in fair value of warrant liabilities during the six months ended June 30, 2025, compared to a loss on change in fair value of warrant liabilities during the six months ended June 30, 2026, partially offset by a gain on change in fair value of derivative liability recognized during the current period. 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 (the “White Lion ELOC”). Our principal long-term working capital uses include ensuring revenue growth, expanding our sales and marketing efforts and potential acquisitions. 32 In June 2026, we issued a convertible promissory note to White Lion in the principal amount of $1.7 million for net proceeds of approximately $1.4 million, and up to $6 million of additional gross proceeds may be funded at one or more additional closings, although any additional closing requires the mutual written agreement of us and White Lion. See Note 8—Debt to the condensed consolidated financial statements. As of June 30, 2026 and December 31, 2025, our cash and cash equivalents balances were $2.5 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 the foreseeable future, 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 this limitation resets once White Lion liquidates its holdings in the open market. The amount we can raise under the White Lion ELOC in any period is practically limited by the trading volume and market price of our Class A common stock and the number of shares registered for resale; based on the shares currently registered and recent market prices, we estimate that approximately $6.5 million is currently accessible under the facility. 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, we may utilize a universal shelf registration statement to gain access to 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 White 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. 33 Cash Flows The following table summarizes our cash flows for the periods presented: For the Six Months Ended June 30, 2026 2025 Change Net cash used in operating activities $ (1,314,288 ) $ (4,549,934 ) $ 3,235,646 Net cash used in investing activities (3,556,315 ) (807,025 ) (2,749,290 ) Net cash provided by (used in) financing activities 1,185,387 (208,465 ) 1,393,852 Cash Flows from Operating Activities Net cash used in operating activities was approximately $1.3 million during the six months ended June 30, 2026 compared to approximately $4.5 million during the six months ended June 30, 2025. The $3.2 million improvement in operating cash flows was driven primarily by the lower net loss in the current period and favorable working capital changes, including a $3.7 million increase in customer advances – related party and a $1.0 million increase in accounts payable. These improvements were partially offset by a $2.0 million increase in accounts receivable, including accounts receivable – related party, and a $1.1 million decrease in contract liabilities. Non-cash charges also decreased significantly year-over-year, with depreciation and amortization of $1.3 million, stock-based compensation of $1.3 million, and provision for credit losses of $0.5 million in the current period, compared to $8.1 million, $3.3 million, and $3.3 million, respectively, in the prior year period. In addition, the Heliogen segment, which was acquired in the quarter ended September 30, 2025, incurred a net loss of $1.8 million for the six months ended June 30, 2026 that is included in net loss, compared to no impact on net loss for the six months ended June 30, 2025. Cash Flows from Investing Activities Net cash used in investing activities was approximately $3.6 million for the six months ended June 30, 2026, relating to a $3.2 million investment in the note receivable – related party and $0.4 million of purchases of property and equipment. Net cash used in investing activities was approximately $0.8 million for the six months ended June 30, 2025, relating to purchases of property and equipment. Cash Flows from Financing Activities Net cash provided by financing activities was approximately $1.2 million for the six months ended June 30, 2026, consisting primarily of $1.4 million of net proceeds from the Convertible Note, partially offset by dividends paid to OpCo Class A preferred unit holders, repayments of debt and finance lease liabilities, and tax withholdings paid related to stock-based compensation. Net cash used in financing activities was approximately $0.2 million for the six months ended June 30, 2025, relating to repayments of debt and finance lease liabilities. Current Indebtedness As of June 30, 2026, our outstanding indebtedness consisted of the Convertible Note in the principal amount of $1.7 million (with a net carrying amount of $0.5 million after unamortized debt discount), vehicle loans of less than $0.1 million, and finance lease liabilities of $0.3 million. See Note 8—Debt to the condensed consolidated financial statements for additional information regarding the Convertible Note. 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. 34 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. The following table provides a reconciliation of contribution profit for the periods presented: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Net revenues $ 16,169,463 $ 18,101,930 $ 29,354,407 $ 26,885,625 Cost of revenues 8,545,576 7,284,487 16,125,622 12,074,166 Gross profit $ 7,623,887 $ 10,817,443 $ 13,228,785 $ 14,811,459 Adjustments: Depreciation and amortization 248,171 3,175,452 1,329,699 8,076,181 Commissions expense 3,967,266 4,905,556 6,248,507 6,769,668 Total contribution profit $ 3,408,450 $ 2,736,435 $ 5,650,579 $ (34,390 ) Gross margin 47.1 % 59.8 % 45.1 % 55.1 % Contribution margin 21.1 % 15.1 % 19.2 % (0.1 )% 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 derivative liability, gain (loss) on change in fair value of warrant liabilities, stock-based compensation, and 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 items allows 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 June 30, Six Months Ended June 30, 2026 2025 2026 2025 Net loss $ (2,749,966 ) $ (2,679,464 ) $ (7,441,277 ) $ (15,998,827 ) Adjustments: Other income (101,200 ) (53,328 ) (169,637 ) (135,691 ) Interest expense 32,429 (29,989 ) 43,282 288 Gain on change in fair value of derivative liability (232,500 ) – (232,500 ) – (Gain) loss on change in fair value of warrant liabilities (34,500 ) 96,269 41,400 (567,180 ) Income tax provision (benefit) 96,782 (186,994 ) 4,653 336,506 Stock-based compensation 634,228 1,078,202 1,328,596 3,335,340 Transaction-related expenses – 226,438 138,723 1,072,298 Depreciation and amortization 248,171 3,175,452 1,329,699 8,076,181 Adjusted EBITDA $ (2,106,556 ) $ 1,626,586 $ (4,957,061 ) $ (3,881,085 ) Net loss margin (17.0 )% (14.8 )% (25.3 )% (59.5 )% Adjusted EBITDA margin (13.0 )% 9.0 % (16.9 )% (14.4 )% 35 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, besides the following: Embedded Derivative Liabilities We evaluate the embedded features of our financial instruments, including convertible notes payable, in accordance with ASC 480, “ Distinguishing Liabilities from Equity,” and ASC 815, “ Derivatives and Hedging .” Certain conversion options and redemption features are required to be bifurcated from their host instrument and accounted for separately as derivative financial instruments when certain criteria are met. We apply significant judgment to identify and evaluate complex terms and conditions for our financial instruments to determine whether such instruments are derivatives or contain features that qualify as embedded derivatives. Bifurcated embedded derivatives are recognized at fair value, with changes in fair value recognized in the condensed consolidated statements of operations each period. The fair value of the bifurcated embedded derivative liability related to the Convertible Note is estimated using a Monte Carlo simulation model. The model requires significant judgment, including assumptions regarding expected volatility of our Class A common stock, the risk-free interest rate, the expected timing of the commencement and pace of conversion, and the simulated path of the conversion price, which is subject to the Floor Price and a pricing ceiling and may vary with the market price of our Class A common stock. Changes in these assumptions, particularly expected volatility and the assumed timing of conversion, could materially affect the estimated fair value of the derivative liability and the related change in fair value recognized in our condensed consolidated statements of operations. As of June 30, 2026, the estimated fair value of the embedded derivative liability was $699,100, and the change in fair value recognized for the three and six months ended June 30, 2026 was a gain of $232,500. See Note 8—Debt and Note 9—Fair Value Measurements for additional information. 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.