Form 4: Zeo Energy Secures $2.5M Convertible Note from 10% Owner

Zeo Energy Corp. has secured a $2.5 million promissory note from 10% owner LHX Intermediate, LLC, convertible into Class A Common Stock at $1.35 per share, pending stockholder approval.

Summary

• Zeo Energy Corp. issued a promissory note to LHX Intermediate, LLC, a 10% owner and director, on December 24, 2024.
• The initial outstanding principal amount of the loan is $2,500,000.
• The promissory note allows for borrowing up to an aggregate principal amount of $4,000,000, with an additional $1,500,000 available upon the achievement of certain milestones.
• The loan will be repaid by issuing Class A Common Stock to LHX or its designee, calculated by dividing the outstanding loan amount by $1.35 per share.
• The share issuance is subject to stockholder approval under the rules of The Nasdaq Stock Market LLC.
• The repayment will occur immediately following the later of December 24, 2025 (the first anniversary of the issue date) and the date of stockholder approval for the share issuance.
• LHX Intermediate, LLC directly holds 1,851,851 shares of Class A Common Stock following this reported transaction, derived from the initial $2,500,000 loan at a $1.35 conversion price.
• White Oak Global Advisors, LLC, as the manager of the funds and accounts that own LHX, disclaims beneficial ownership except to the extent of its pecuniary interest.

Sentiment

Score: 6

Explanation: The sentiment is moderately positive. The company secured needed capital, which is a positive for liquidity and operations. However, the future conversion to equity will result in dilution for existing shareholders, and the transaction is subject to stockholder approval, introducing some uncertainty.

Positives

• Zeo Energy Corp. has secured $2,500,000 in financing, providing immediate capital.
• The company has access to an additional $1,500,000 upon achieving specified milestones, offering potential future liquidity.
• The financing comes from a significant existing stakeholder (10% owner and director), indicating continued support.

Negatives

• The repayment of the loan through the issuance of Class A Common Stock will result in dilution for existing shareholders.
• The conversion of the loan into equity is contingent on stockholder approval, introducing an element of uncertainty.
• The conversion price of $1.35 per share may be below the current or future market price, potentially increasing dilution.

Risks

• Failure to obtain stockholder approval for the share issuance could impact the repayment terms and the company's financial structure.
• The issuance of a significant number of new shares (at least 1,851,851 shares for the initial $2.5M) could dilute the ownership percentage and earnings per share of existing shareholders.
• The achievement of milestones for the additional $1,500,000 borrowing is not guaranteed, potentially limiting future capital access.

Future Outlook

Zeo Energy Corp. anticipates repaying the promissory note through the issuance of Class A Common Stock, contingent on future stockholder approval. The company also has the potential to borrow an additional $1,500,000 upon achieving specified milestones.

Industry Context

This filing primarily details an insider financing transaction and changes in beneficial ownership, rather than providing broad industry context. It reflects a company securing capital from a significant existing investor.

Corporate Governance

Related Party Transactions

• Zeo Energy Corp. issued a promissory note to LHX Intermediate, LLC, which is identified as a Director and 10% Owner of the Issuer.

Stakeholder Impact

• Shareholders: Potential dilution of existing shareholdings due to the conversion of the promissory note into Class A Common Stock.
• Company: Improved liquidity and access to capital for operations and growth, with potential for further funding upon milestone achievement.
• LHX Intermediate, LLC: Becomes a significant equity holder upon conversion, strengthening its position as a major investor.

Next Steps

• Zeo Energy Corp. must seek and obtain stockholder approval for the issuance of Class A Common Stock to repay the promissory note.
• The company may pursue additional borrowing of up to $1,500,000 upon achieving certain specified milestones.

Key Dates

Keywords

Zeo Energy Corp., ZEO, Promissory Note, Convertible Debt, Capital Raise, Equity Financing, Share Dilution, LHX Intermediate LLC, White Oak Global Advisors LLC, Insider Transaction, SEC Form 4, Stockholder Approval, Class A Common Stock