UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark one)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File Number: 001-40927

ZEO ENERGY CORP.

(Exact name of registrant as specified in its charter)

Delaware

98-1601409

(State or other jurisdiction

of incorporation or organization)

(IRS Employer

Identification No.)

7625 Little Rd, Suite 200A, New Port Richey, FL 34654

(Address of principal executive offices and Zip Code)

(727) 375-9375

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $0.0001 per share	ZEO	The Nasdaq Stock Market LLC
Warrants, each exercisable for one share of Class A Common Stock at a price of $11.50, subject to adjustment	ZEOWW	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒

As of August 19, 2024, the registrant had 5,805,345 shares of Class A common stock, par value $0.0001 outstanding, and 35,230,000 shares of Class V common stock, par value $0.0001, outstanding.

	Page
PART 1 – FINANCIAL INFORMATION	1
Item 1. Financial Statements (Unaudited)	1
Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023	1
Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2024 and 2023	2
Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2024 and 2023	3
Condensed Statements of Cash Flows for the six months ended June 30, 2024 and 2023	5
Notes to Condensed Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3. Quantitative and Qualitative Disclosures about Market Risk	40
Item 4. Control and Procedures	40
PART II – OTHER INFORMATION	41
Item 1. Legal Proceedings	41
Item 1A. Risk Factors	41
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3. Defaults Upon Senior Securities	41
Item 4. Mine Safety Disclosures	41
Item 5. Other Information	41
Item 6. Exhibits	42
SIGNATURES	43

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

ZEO ENERGY CORP.

CONDENSED CONSOLIDATED BALANCE SHEET

	As of June 30,			As of December 31,
	2024			2023
Assets
Current assets
Cash and cash equivalents	$	5,342,120		$	8,022,306
Accounts receivable, including $819,212 and $396,488 from related parties, net of allowance for credit losses of $1,112,580 and $862,580, as of June 30, 2024 and December 31, 2023, respectively		7,207,854			2,905,205
Inventories		436,859			350,353
Prepaid installation costs		865,327			4,915,064
Prepaid expenses and other current assets		4,043,640			40,403
Total current assets		17,895,800			16,233,331
Other assets		235,442			62,140
Property, equipment and other fixed assets, net		2,843,624			2,918,320
Operating lease right of use assets		828,447			1,135,668
Intangibles, net		257,011			771,028
Goodwill		27,010,745			27,010,745
Total assets	$	49,071,069		$	48,131,232

Liabilities, mezzanine equity and stockholders’ equity
Current liabilities
Accounts payable	$	3,389,656		$	4,699,855
Accrued expenses and other current liabilities, including $784,527 and $2,415,966 with related parties at June 30, 2024 and December 31, 2023, respectively		3,759,367			4,646,365
Current portion of long-term debt		420,745			404,871
Current operating lease liabilities		384,415			539,599
Contract liabilities, including $9,900 and $1,160,848 with related parties as of June 30, 2024 and December 31, 2023, respectively		279,901			5,223,518
Total current liabilities		8,234,084			15,514,208
Non-current operating lease liabilities		468,796			636,414
Other liabilities		1,500,000			-
Warrant liabilities		828,000			-
Long-term debt		1,175,047			1,389,545
Total liabilities		12,205,927			17,540,167
Commitments and contingencies (Note 14)

Redeemable noncontrolling interests
Convertible preferred units		15,463,555			-
Class B Units		72,519,500			-

Stockholders’ equity
Class V common stock		3,523			3,373
Class A common stock		503			-
Additional paid in capital		2,033,500			31,152,491
Accumulated deficit		(53,155,439	)		(564,799	)
Total stockholders’ equity		(51,117,913	)		30,591,065
Total liabilities, mezzanine equity and stockholders’ equity	$	49,071,069		$	48,131,232

The accompanying notes are an integral part of these consolidated financial statements.

ZEO ENERGY CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
Revenue, net of financing fees of $1,439,725 and $12,533,767 for the three months ended June 30, 2024 and 2023, respectively and $5,521,083 and $18,784,295 for the six months ended June 30, 2024 and 2023, respectively	$	7,714,200		$	30,079,365		$	18,765,221		$	48,810,854
Related party revenue, net of financing fees of $3,127,622 and $0 for the three months ended June 30, 2024 and 2023, respectively and $6,983,841 and $0 for the six months ended June 30, 2024 and 2023, respectively		6,997,626			-			15,810,395			-
Total revenue		14,711,826			30,079,365			34,575,616			48,810,854
Operating costs and expenses:
Cost of goods sold (exclusive of depreciation and amortization shown below)		10,325,979			24,444,491			27,689,680			39,253,706
Depreciation and amortization		456,841			489,566			919,542			922,165
Sales and marketing		215,192			490,875			334,175			1,040,480
General and administrative		5,909,385			3,826,017			9,585,444			5,152,604
Total operating expenses		16,907,397			29,250,949			38,528,841			46,368,955
(Loss) income from operations		(2,195,571	)		828,416			(3,953,225	)		2,441,899
Other (expenses) income, net:
Other income, net		50,821			(7,169	)		50,821			(2,169	)
Change in fair value of warrant liabilities		828,000			-			690,000			-
Interest expense		(34,233	)		(23,999	)		(71,287	)		(39,543	)
Total other expense, net		844,588			(31,168	)		669,534			(41,712	)
Net (loss) income before taxes		(1,350,983	)		797,248			(3,283,691	)		2,400,187
Income tax benefit		61,185			-			101,818			-
Net (loss) income		(1,289,798	)		797,248			(3,181,873	)		2,400,187
Less: Net loss attributable to Sunergy Renewables LLC prior to the Business Combination		-			-			(523,681	)		-
Net loss subsequent to the Business Combination		(1,289,798	)		-			(2,658,192	)		-
Less: Net loss attributable to redeemable non-controlling interests		(1,457,036	)		-			(1,581,239	)		-
Net income (loss) attributable to Class A common stock	$	167,238		$	-		$	(1,076,953	)	$	-

Basic and diluted net income (loss) per common unit	$	0.03		$	-		$	(0.36	)	$	-
Weighted average units outstanding, basic and diluted		5,026,964			-			3,010,654			-

The accompanying notes are an integral part of these consolidated financial statements.

ZEO ENERGY CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2024 AND 2023

	Redeemable noncontrolling interests																								Retained			Total
	Convertible Preferred Units				Class B			Common Units						Class V Common Stock				Class A Common Stock				Additional Paid in			Earnings (Accumulated			Stockholders’ Equity
	Shares		Amount		units			Units			Amount			Shares		Amount		Shares		Amount		Capital			Deficit)			(Deficit)
Balance, December 31, 2023		-	$	-	$	-			1,000,000		$	31,155,864			-	$	-		-	$	-	$	-		$	(564,799	)	$	30,591,065
Retroactive application of Business Combination (Note 1)		-		-		-			(1,000,000	)		(31,155,864	)		33,730,000		3,373		-		-		31,152,491			-			-
Balance, December 31, 2023		-		-		-			-			-			33,730,000		3,373		-		-		31,152,491			(564,799	)		30,591,065
Stockholder distributions		-		-		-			-			-			-		-		-		-		-			(90,000	)		(90,000	)
Net loss prior to the Business Combination									-			-			-		-		-		-		-			(523,681	)		(523,681	)
Effects of Business Combination
Issuance of Class A Shares to third party advisors		-		-		-			-			-			-		-		553,207		55		2,765,980			-			2,766,035
Issuance of Class A Shares to backstop investor		-		-		-			-			-			-		-		225,174		23		1,569,440			-			1,569,463
Reverse Recapitalization (Note 3)		1,500,000		6,855,076		-			-			-			1,500,000		150		4,248,583		425		(1,677,860	)		-			(1,677,285	)
Transaction costs		-		-		-			-			-			-		-		-		-		(2,890,061	)		-			(2,890,061	)
Establishment of redeemable noncontrolling interest		-		-		26,089,174			-			-			-		-		-		-		(26,089,174	)		-			(26,089,174	)
Activities subsequent to business combination
Stock-based compensation		-		-		-			-			-			-		-		-		-		504,834			-			504,834
Subsequent measurement of redeemable noncontrolling interest		-		-		174,520,120			-			-			-		-		-		-		(5,335,650	)		(169,184,470	)		(174,520,120	)
Net income		-		8,224,091		(8,348,294	)		-			-			-		-		-		-		-			(1,244,191	)		(1,244,191	)
Balance, March 31, 2024		1,500,000		15,079,167		192,261,000			-			-			35,230,000		3,523		5,026,964		503		-			(171,607,141	)		(171,603,115	)
Stock-based compensation		-		-		-			-			-			-		-		-		-		2,417,888			-			2,417,888
Subsequent measurement of redeemable noncontrolling interest		-		-		(118,284,464	)		-			-			-		-		-		-		-			118,284,464			118,284,464
Net income		-		384,388		(1,457,036	)		-			-			-		-		-		-		(384,388	)		167,238			(217,150	)
Balance, June 30, 2024		1,500,000	$	15,463,555	$	72,519,500			-		$	-			35,230,000	$	3,523		5,026,964	$	503	$	2,033,500		$	(53,155,439	)	$	(51,117,913	)

The accompanying notes are an integral part of these consolidated financial statements.

ZEO ENERGY CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2024 AND 2023

	Redeemable noncontrolling interests																						Retained			Total
	Convertible Preferred Units				Class B		Common Units						Class V Common Stock				Class A Common Stock				Additional Paid in		Earnings (Accumulated			Stockholders’ Equity
	Shares		Amount		units		Units			Amount			Units		Amount		Units		Amount		Capital		Deficit)			(Deficit)
Balance, December 31, 2022		-	$	-	$	-		1,000,000		$	31,155,864			-	$	-		-	$	-	$	-	$	119,982		$	31,275,846
Retroactive application of Business Combination (Note 1)		-		-		-		(1,000,000	)		(31,155,864	)		33,730,000		3,373		-		-		31,152,491		-			-
Balance, December 31, 2022		-		-		-		-			-			33,730,000		3,373		-		-		31,152,491		119,982			31,275,846
Stockholder distributions		-		-		-		-			-			-		-		-		-		-		(166,323	)		(166,323	)
Net income		-		-		1,602,939		-			-			-		-		-		-		-		-			-
Balance, March 31, 2023		-		-		1,602,939		-			-			33,730,000		3,373		-		-		31,152,491		(46,341	)		31,109,523
Stockholder distributions		-		-		-		-			-			-		-		-		-		-		(361,319	)		(361,319	)
Net income		-		-		797,249		-			-			-		-		-		-		-		-			-
Balance, June 30, 2023		-	$	-	$	2,400,188		-		$	-			33,730,000	$	3,373		-	$	-	$	31,152,491	$	(407,660	)	$	30,748,204

The accompanying notes are an integral part of these consolidated financial statements.

ZEO ENERGY CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six Months Ended June 30,
	2024			2023
Cash Flows from Operating Activities
Net (loss) income	$	(3,181,873	)	$	2,400,187
Adjustment to reconcile net (loss) income to cash (used in) provided by operating activities
Depreciation and amortization		919,542			922,165
Change in fair value of warrant liabilities		(690,000	)		-
Gain on preferred stock forward		-			-
PPP loan forgiveness		-			-
Provision for credit losses		250,000			452,541
Noncash lease expense		307,221			-
Stock based compensation expense		2,922,722			-
Stock issued to vendors		-			-
Changes in operating assets and liabilities:
Accounts receivable		(1,859,808	)		(1,834,200	)
Accounts receivable due from related parties		(2,692,841	)		-
Inventories		(86,506	)		34,530
Prepaid installation costs		4,049,737			-
Prepaids and other current assets		(1,459,636	)		(992,377	)
Other assets		(111,993	)		(127,500	)
Accounts payable		(2,459,688	)		50,288
Accrued expenses and other current liabilities		(829,506	)		2,083,766
Accrued expenses and other current liabilities due to related parties		(2,148,960	)		-
Due to officers		-			(94,056	)
Contract liabilities		(3,889,354	)		-
Contract liabilities due to related parties		(1,054,263	)		-
Operating lease payments		(322,802	)		(1,046,093	)
Net cash (used in) provided by operating activities		(12,338,008	)		1,849,251

Cash flows from Investing Activities
Purchases of property, equipment and other assets		(330,829	)		(784,209	)
Net cash used in investing activities		(330,829	)		(784,209	)

Cash flows from Financing Activities
Proceeds from the issuance of debt		-			745,975
Proceeds from the issuance of convertible preferred stock, net of transaction costs		10,277,275			-
Repayments of debt		(198,624	)		(138,347	)
Distributions to members		(90,000	)		(527,642	)
Net cash provided by financing activities		9,988,651			79,986
Net (decrease) increase in cash and cash equivalents		(2,680,186	)		1,145,028
Cash and cash equivalents, beginning of period		8,022,306			2,268,306
Cash and cash equivalents, end of the period	$	5,342,120		$	3,413,334

Supplemental Cash Flow Information
Cash paid for interest	$	70,284		$	37,851

Non-cash transactions
Transaction costs	$	3,269,039		$	-
Issuance of Class A common stock to vendors	$	2,478,480		$	-
Issuance of Class A common stock to backstop investors	$	1,569,440		$	-
Preferred dividends	$	8,224,091		$	-

The accompanying notes are an integral part of these consolidated financial statements.

Zeo Energy Corp.

Notes to the Condensed Consolidated Financial Statements

June 30, 2024

NOTE 1 - ORGANIZATION AND BUSINESS OPERATION

Zeo Energy Corp. (formerly known as ESGEN Acquisition Corporation or “ESGEN”), collectively with its subsidiaries (the “Company” or “Zeo”) is in the business of marketing, sales and installation, warranty coverage and maintenance of solar panel technology to individual households within the United States. As part of this, the Company may also provide roofing repairs and construction.

Zeo Energy Corp. was a blank check company originally incorporated on April 19, 2021 as a Cayman Islands exempted company for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. On October 22, 2021, ESGEN consummated an initial public offering, after which its securities began trading on the Nasdaq Stock Market LLC (“Nasdaq”).

Business Combination

On March 13, 2024 (the “Closing Date”), the Company consummated its previously announced business combination (the “Closing”), pursuant to that certain Business Combination Agreement, dated as of April 19, 2023 (as amended on January 24, 2024, the “Business Combination Agreement”), by and among Zeo Energy Corp., a Delaware corporation (f/k/a ESGEN Acquisition Corporation, a Cayman Islands exempted company), ESGEN OpCo, LLC, a Delaware limited liability company(“OpCo”), Sunergy Renewables, LLC, a Nevada limited liability company (“Sunergy”), the Sunergy equity holders set forth on the signature pages thereto or joined thereto (collectively, “Sellers” and each, a “Seller”, and collectively with Sunergy, the “Sunergy Parties”), for limited purposes, ESGEN LLC, a Delaware limited liability company (the “Sponsor”), and for limited purposes, Timothy Bridgewater, an individual, in his capacity as the Sellers Representative (collectively, the “Business Combination”). Prior to the Closing, (i) except as otherwise specified in the Business Combination Agreement, each issued and outstanding Class B ordinary share of ESGEN was converted into one Class A ordinary share of ESGEN (the “ESGEN Class A Ordinary Shares” and such conversion, the “ESGEN Share Conversion”); and (ii) ESGEN was domesticated into the State of Delaware so as to become a Delaware corporation (the “Domestication”). In connection with the Closing, the registrant changed its name from “ESGEN Acquisition Corporation” to “Zeo Energy Corp.”

Upon the Domestication, each then-outstanding ESGEN Class A Ordinary Share was cancelled and converted into one share of Class A common stock of the Company, par value $0.0001 per share (“Zeo Class A Common Stock”), and each then-outstanding ESGEN Public Warrant was assumed and converted automatically into a warrant of the registrant, exercisable for one share of Zeo Class A Common Stock. Additionally, each outstanding unit of ESGEN was cancelled and converted into one share of Zeo Class A Common Stock and one-half of one warrant of the Company.

In accordance with the terms of the Business Combination Agreement, Sunergy caused all holders of any options, warrants or rights to subscribe for or purchase any equity interests of Sunergy or its subsidiaries or securities (including debt securities) convertible into or exchangeable for, or that otherwise confer on the holder any right to acquire, any equity interests of Sunergy or any subsidiary thereof (collectively, the “Sunergy Convertible Interests”) existing immediately prior to the Closing to either exchange or convert all such holder’s Sunergy Convertible Interests into limited liability interests of Sunergy (the “Sunergy Company Interests”) in accordance with the governing documents of Sunergy or the Sunergy Convertible Interests.

At the Closing, ESGEN contributed to OpCo (1) all of its assets (excluding its interests in OpCo, but including the amount of cash in ESGEN’s Trust Account (the “Trust Account”) as of immediately prior to the Closing (after giving effect to the exercise of redemption rights by ESGEN stockholders), and (2) a number of newly issued shares of Class V common stock of the registrant, par value $0.0001 per share, which generally have only voting rights (the “Zeo Class V Common Stock”), equal to the number of Seller OpCo Units (as defined in the Business Combination Agreement) (the “Seller Class V Shares”). In exchange, OpCo issued to ESGEN (i) a number of Class A common units of OpCo (the “Manager OpCo Units”) which equaled the number of total shares of the Zeo Class A Common Stock issued and outstanding immediately after the Closing and (ii) a number of warrants to purchase Manager OpCo Units which equaled the number of SPAC Warrants (as defined in the Business Combination Agreement) issued and outstanding immediately after the Closing (the transactions described above in this paragraph, the “ESGEN Contribution”). Immediately following the ESGEN Contribution, (x) the Sellers contributed to OpCo the Sunergy Company Interests and (y) in exchange therefor, OpCo transferred to the Sellers the Seller OpCo Units and the Seller Class V Shares.

Zeo Energy Corp.

Notes to the Condensed Consolidated Financial Statements

June 30, 2024

Prior to the Closing, the Sellers transferred 24.167% of their Sunergy Company Interests (which were thereafter exchanged for Seller OpCo Units and Seller Class V Shares at the Closing, as described above) pro rata to Sun Managers, LLC, a Delaware limited liability company (“Sun Managers”), in exchange for Class A Units (as defined in the Sun Managers limited liability company agreement (the “SM LLCA”) in Sun Managers. In connection with such transfer, Sun Managers executed a joinder to, and became a “Seller” for purposes of, the Business Combination Agreement. Sun Managers intends to grant Class B Units (as defined in the SM LLCA) in Sun Managers through the Sun Managers, LLC Management Incentive Plan (the “Management Incentive Plan”) adopted by Sun Managers to certain eligible employees or service providers of OpCo, Sunergy or their subsidiaries, in the discretion of Timothy Bridgewater, as manager of Sun Managers. Such Class B Units may be subject to a vesting schedule, and once such Class B Units become vested, there may be an exchange opportunity through which the grantees may request (subject to the terms of the Management Incentive Plan and the OpCo A&R LLC Agreement (as defined below)) the exchange of their Class B Units into Seller OpCo Units (together with an equal number of Seller Class V Shares), which may then be converted into Zeo Class A Common Stock (subject to the terms of the Management Incentive Plan and the OpCo A&R LLC Agreement). Grants under the Management Incentive Plan will be made after Closing. As of June 30, 2024, no such grants have occurred.

As of the Closing Date, upon consummation of the Business Combination, the only outstanding shares of capital stock of the registrant were shares of Zeo Class A Common Stock and Zeo Class V Common Stock.

In connection with entering into the Business Combination Agreement, ESGEN and the Sponsor entered into a subscription agreement, dated April 19, 2023, which ESGEN, the Sponsor and OpCo subsequently amended and restated on January 24, 2024 (the “Sponsor Subscription Agreement”), pursuant to which, among other things, the Sponsor agreed to purchase an aggregate of 1,000,000 OpCo preferred units (and be issued an equal number of shares of Zeo Class V Common Stock) (“Convertible OpCo Preferred Units”) concurrently with the Closing at a cash purchase price of $10.00 per unit and up to an additional 500,000 Convertible OpCo Preferred Units (together with the concurrent issuance of an equal number of shares of Zeo Class V Common Stock) during the six months after Closing if called for by Zeo (the “Sponsor PIPE Investment”). Prior to the Closing, ESGEN informed the Sponsor that it wished to call for the additional 500,000 Convertible OpCo Preferred Units at the Closing and, as a result, a total of 1,500,000 Convertible OpCo Preferred Units were issued to Sponsor in return for aggregate consideration of $15,000,000.

Accounting for the Business Combination

The Business Combination was accounted for as a reverse recapitalization with ESGEN being treated as the acquired company since there was no change in control in accordance with the guidance for common control transactions in Accounting Standards Codification (“ASC”) 805-50, Business Combinations – Related Issues (“ASC 805-50”). Accordingly, the financial statements of the combined entity will represent a continuation of the financial statements of Sunergy with the Business Combination treated as the equivalent of Sunergy issuing stock for the net assets of ESGEN, accompanied by a recapitalization. The net assets of ESGEN were stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination were those of Sunergy.

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

Based upon the evaluation of the OpCo A&R LLC Agreement, OpCo is considered to be a Variable Interest Entity (“VIE”) and ESGEN is considered to be the primary beneficiary through its membership interest and manager powers conferred to it through the Class A Units. For VIEs, the accounting acquirer is always considered to be the primary beneficiary. As such, Zeo will consolidate OpCo and will be considered to the accounting acquirer; however, further consideration of whether the entities are under common control was required in order to determine whether there is an ultimate change in control and the acquisition method of accounting is required under ASC 805.

While Sunergy did not control or have common ownership of ESGEN prior to the consummation of the Business Combination, the Company evaluated the ownership of the new entity subsequent to the consummation of the transaction to determine if common control existed. If the business combination is between entities under common control, then the acquisition method of accounting is not applicable and the guidance in ASC 805-50 regarding common control should be applied instead. The Financial Accounting Standards Board (“FASB”) ASC does not include a definition of common control. In practice, entities with a common parent entity, as determined under ASC 810, Consolidation, are generally considered to be under common control. Emerging Issues Task force (“EITF”) Issue 02-5, “Definition of ‘Common Control’ in Relation to FASB Statement No. 141 (“EITF Issue 02-5”)”, which was never finalized or codified, has also been applied in practice to determine when entities are under common control. EITF Issue 02-5 indicates that common control would exist in any of the following situations:

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An individual (including trusts in which the individual is the beneficial owner) or entity holds more than 50 percent of the voting ownership of each entity.

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Immediate family members hold more than 50 percent of the voting ownership interest of each entity, and there is no evidence that those family members would vote their shares in any way other than in concert. Immediate family members include a married couple and their children, but not the married couple’s grandchildren. Entities might be owned in varying combinations among living siblings and their children. Those situations require careful consideration of the substance of the ownership and voting relationships.

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group of stockholders holds more than 50 percent of the voting ownership of each entity, and contemporaneous written evidence of an agreement to vote a majority of the entities’ shares in concert exists.

Zeo Energy Corp.

Notes to the Condensed Consolidated Financial Statements

June 30, 2024

Prior to the Business Combination and the contributions to Sun Managers, Sunergy was majority owned by 5 entities (the “Primary Sellers”):

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Southern Crown Holdings, LLC (wholly owned by Anton Hruby) — 230,000 Common Units (23%)

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LAMADD LLC (wholly owned by Gianluca Guy) — 230,000 Common Units (23%)

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JKae Holdings, LLC (wholly owned by Kalen Larsen) — 215,000 Common Units (21.5%)

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Clarke Capital, LLC (wholly owned by Brandon Bridgewater) — 215,000 Common Units (21.5%)

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White Horse Energy, LC (wholly owned by Timothy Bridgewater) — 90,000 Common Units (9%)

Each of the above parties entered into a Voting Agreement, dated September 7, 2023. The term of the Voting Agreement is for five years from the date of the Voting Agreement. The consummation of the Business Combination with ESGEN occurred within the term of the Voting Agreement.

Prior to the Business Combination and the contributions to Sun Managers, the Primary Sellers had 98% ownership in Sunergy. Immediately following the Business Combination, they owned

SEC Form 10-Q filed by Zeo Energy Corporation