Zeo Energy Corp. Debt Disclosure

NOTE 14—DEBT

 

Vehicle Loans

 

The Company has financing arrangements for certain vehicles used in its operations. These financing arrangements consist of direct loans associated with individual vehicles in the Company’s fleet. Payments of debt obligations are based on equal monthly payments for 60 months and include interest rates ranging from 4.94% to 11.09%. As of December 31, 2025, the weighted-average interest rate on the Company’s vehicle loan obligations was 11.09%. Amounts outstanding under these arrangements are presented in the consolidated balance sheets as the current portion of long-term debt and long-term debt. The Company does not have debt covenants associated with these vehicle loan arrangements.

 

As of December 31, 2025, estimated future minimum principal payments of vehicle loans were as follows:

 

Year Ending December 31,		Amount
2026		$	23,526
2027			26,264
2028			29,322
Total			79,112
Less: current portion			(23,526	)
Total long-term debt		$	55,586

 

Loan Payable

 

On July 1, 2025, the Company converted $2,547,877 of outstanding accounts payable to a vendor into a loan payable with the same vendor. The loan bears interest at an annual rate of 18% (1.5% monthly) and provided for scheduled principal payments beginning in July 2025, with maturity on August 22, 2025. As a result of the transaction, the related accounts payable balance was reclassified to a loan payable in the consolidated balance sheet. The loan, including accrued interest, was repaid during the period.

 

Convertible Note Payable

 

On December 24, 2024, the Company issued a convertible promissory note (the “Promissory Note”) to LHX Intermediate LLC (“LHX”) with a maximum borrowing capacity of $4.0 million. The Promissory Note allowed the Company to draw funds in multiple tranches upon the achievement of specified operational milestones or upon waiver of such milestones by LHX. The Promissory Note did not bear interest and was required to be repaid through the issuance of the Company’s Class A common stock at a fixed conversion price of $1.35 per share. The conversion was scheduled to occur upon the later of (i) the first anniversary of the issuance date or (ii) the date the Company’s stockholders approved the issuance of the shares required to settle the obligation.

 

The Company received proceeds of $2.5 million under the Promissory Note. The Company evaluated the embedded conversion feature under ASC 815 and concluded that the conversion option did not require bifurcation as a derivative liability because the instrument was indexed to the Company’s own stock and qualified for the scope exception. The Promissory Note was initially recorded at its estimated fair value, and the difference between the proceeds received and the fair value of the shares issuable upon conversion was recorded as a debt discount. The debt discount was amortized to interest expense over the expected term of the note using the effective interest method.

 

On October 30, 2025, the outstanding balance of the Promissory Note totaling $2.5 million was converted into 1,851,851 shares of the Company’s Class A common stock. Upon conversion, the remaining unamortized debt discount was recognized and the carrying value of the Promissory Note was reclassified to equity. No balance remained outstanding under the Promissory Note as of December 31, 2025.