Zeo Energy Corp. Fair Value Disclosure
NOTE 20—FAIR VALUE MEASUREMENTS
The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, inventories, prepaid expenses and other current assets, accounts payable, accrued expenses, and contract assets and liabilities, approximate fair value due to the short-term nature of these instruments.
The carrying amounts of lease liabilities and notes payable also approximate fair value as these instruments bear interest rates that are consistent with current market rates for similar instruments.
Recurring Fair Value Measurements
The Company measures certain financial instruments at fair value on a recurring basis. As of December 31, 2025, the Company’s financial instruments measured at fair value on a recurring basis consist of warrant liabilities. See Note 19—Warrants for additional information.
The fair value of financial instruments measured at fair value on a recurring basis as of December 31, 2025 consisted of the following:
| Fair Value Measurements as of December 31, 2025 | ||||||||||||||||
| Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Warrant liabilities | $ | 491,280 | $ | $ | $ | 491,280 | ||||||||||
The following table presents changes in the Company’s warrant liabilities measured at fair value on a recurring basis:
| Amount | ||||
| Warrant Liabilities | ||||
| Balance as of December 31, 2023 | $ | |||
| Fair value of warrant liabilities upon issuance | 1,518,000 | |||
| Gain on change in fair value of warrant liabilities | (69,000 | ) | ||
| Extinguishment of warrant liabilities upon settlement | ||||
| Balance as of December 31, 2024 | $ | 1,449,000 | ||
| Gain on change in fair value of warrant liabilities | (957,720 | ) | ||
| Extinguishment of warrant liabilities upon settlement | ||||
| Balance as of December 31, 2025 | $ | 491,280 | ||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Apr 1, 2026 | Showing above |
| 2024 | May 28, 2025 | |
| 2023 | Mar 25, 2024 | |
| 2022 | Mar 31, 2023 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.