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Related Party Transactions
 6 Months Ended
Jun. 30, 2022
Related Party Transactions [Abstract]  
Related Party Transactions Related Party Transactions
2021 Convertible Notes Payable
In July 2021, the Company issued $100,000 aggregate principal amount of convertible notes to Spring Creek Capital, LLC, a wholly-owned, indirect subsidiary of Koch Industries, Inc. (the “2021 Convertible Notes”). In connection with the 2021 Convertible Notes, the Company paid $3,000 to B. Riley Securities, Inc., a related party, who acted as a placement agent. This transaction was reviewed and approved as a related party transaction.
For the three and six months ended June 30, 2022, interest expense of $2,558 and $4,731 was recorded for the 2021 Convertible Notes, respectively. The change in fair value of the embedded derivative of $3,978 and $11,673 was recorded for the three and six months ended June 30, 2022 on the condensed consolidated statements of operations, respectively. Refer to Note 14 for more information.
Loss on pre-existing agreement
For the three and six months ended June 30, 2021, $22,516 and $30,368 was charged to loss on pre-existing agreement in connection with the acquisition of Hi-Power, respectively. Refer to Note 2 for the acquisition details.
Disgorgement of short swing profits
For the six months ended June 30, 2021, the Company received $432 from its then affiliated company B. Riley Securities, Inc. resulting from disgorgement of short swing profits under Section 16 (b) of the Exchange Act. This amount was recognized as an increase to Additional Paid in Capital as a capital contribution from stockholder when it was earned.
Warrants liability
The Company has private warrants issued to an affiliated company owned by B. Riley Financial, Inc. as of June 30, 2022 and December 31, 2021. Refer to Note 17 for details.
Settlement Agreement
As disclosed at the time of the Merger Agreement, prior to the execution and delivery of the Merger Agreement, certain unitholders (“Hellman Parties”) of Eos Energy Storage LLC (“EES”), a subsidiary of the Company, asserted claims (“Threatened Claims”) against another director and affiliated investors, including AltEnergy Storage VI, LLC (the "Securityholder Representative"), questioning the dilutive effect of certain historical security issuances on the former EES common unitholders.
Under the Merger Agreement, the Securityholder Representative had the obligation to defend against the Threatened Claims, and the Company had the obligation to advance or cause to be advanced to the Securityholder Representative up to $5,000 of defense costs, subject to a deductible of $2,000 (the "Deductible"), in connection with the investigation, defense, or settlement of any Threatened Claims. The Deductible was to be borne by the Company, and any additional amounts advanced were reimbursable by the former unitholders of EES.
On December 1, 2021, a Settlement Agreement was entered into between Hellman Parties and the Securityholder Representative pursuant to which, 300,000 Eos Shares (“Settlement Shares”) were to be transferred to the Hellman parties from the EES unitholders at the time of merger.
On December 28, 2021, the independent members of the Company’s Board of Directors approved a contribution of $1,200 towards the Settlement based on their determination that, among other reasons, this contribution (i) would ensure that the Company would not have to spend the entire $2,000 Deductible towards the costs of defense if the litigation were to continue, (ii) would avoid the distraction, uncertainty, and overhang of litigation relating to the Mergers, (iii) would benefit the Company’s future relationships with its long-term investors, and (iv) would generate future goodwill with such investors during an important growth stage of the Company. Because the Company’s contribution benefited certain Eos shareholders at the time of the Merger Agreement, including AltEnergy LLC and B. Riley Financial, Inc., this transaction was reviewed and approved as a related party transaction. On December 29, 2021, an amendment to the Settlement Agreement was entered into, pursuant to which, $1,200 of the value represented by the Settlement Shares was to be paid in cash, representing the equivalent of 140,023 of the Settlement Shares.
The Company accrued $1,200 in accounts payable and accrued expenses - related party on December 31, 2021, which has been paid on January 4, 2022. The remaining 159,977 in Settlement Shares were transferred to the Hellman Parties from the former EES unitholders, on a pro rata basis, on December 29, 2021.
Standby Equity Purchase Agreement (SEPA)
On April 28, 2022, the Company entered into the SEPA with YA II PN, Ltd. (“Yorkville”). Pursuant to the SEPA, the Company has the right, but not the obligation, to sell to Yorkville up to $200,000 of shares of its common stock at the Company’s request at any time during the commitment period, which commenced on April 28, 2022 and will end on the earlier of (i) May 1, 2024, or (ii) the date on which Yorkville shall have made payment of advances requested by the Company totaling up to the commitment amount of $200,000. Each sale the Company requests under the SEPA (an “Advance”) may be for a number of shares of common stock with an aggregate value of up to $20,000. The SEPA provides for shares to be sold to Yorkville at 97.0% of the Market Price (as defined below) and further provides that Yorkville cannot purchase any shares that would result in it owning more than 9.99% of the Company’s outstanding common stock at the time of an Advance (the "Ownership Limitation") or 19.99% of the Company's outstanding common stock as of the date of the SEPA (the "Exchange Cap"). The Exchange Cap will not apply under certain circumstances, including if the Company’s stockholders approve issuances in excess of the Exchange Cap. On June 28, 2022, shareholder approval was obtained to issue shares under the SEPA in excess of the Exchange Cap. “Market Price” is defined in the SEPA as the average of the VWAPs (as defined below) during each of the three consecutive trading days commencing on the trading day following the Company’s submission of an Advance notice to Yorkville. “VWAP” is defined in the SEPA to mean, for any trading day, the daily volume weighted average price of the Company’s common stock for such date on the Nasdaq Capital Market as reported by Bloomberg L.P. during regular trading hours.
In addition, subject to Yorkville’s consent, the Company may request one or more pre-advance loans in amounts not to exceed $50,000 (each, a “Pre-Advance Loan”) from Yorkville. Pursuant to the terms and conditions set forth in the SEPA and the accompanying promissory note, Pre-Advance Loans must be repaid with the proceeds from sales of equity to Yorkville, to the extent outstanding at the time of an Advance, or otherwise in cash. 465,117 shares were issued as consideration for its irrevocable commitment to purchase the Common Shares upon the terms and subject to the satisfaction of the conditions set forth in the SEPA.
As the Company has right, but not the obligation, to sell up to $200,000 of common stock to Yorkville, subject to certain limitations, at the time of our choosing during the term of the agreement, the Company determined that SEPA represents a derivative financial instrument under ASC 815, Derivatives and Hedging, which should be recorded at fair value at inception and each reporting date thereafter. The financial instrument was classified as a derivative asset with a fair value of zero at the inception of the SEPA and as of June 30, 2022. For the three and six months ended June 30, 2022, the Company has received cash of $5,000 from the issuance of 3,967,939 shares. Yorkville owned 4,433,056 shares of common stock or approximately 8% of the Company’s outstanding common stock after this issuance.
Supplemental Agreement to the SEPA and Promissory Note Issuance
On June 13, 2022, the Company issued and sold a convertible promissory note with an aggregate principal amount of $7,500 (the “Promissory Note” or “Yorkville Convertible Notes”) in a private placement to Yorkville under a supplemental agreement dated as of June 13, 2022 (the “Supplemental Agreement”) to the SEPA between the Company and Yorkville. The Supplemental Agreement gave Yorkville the right to deliver notices (each, an “Investor Notice”) requiring the Company to deliver an Advance notice under the SEPA for the issuance and sale of common stock for so long as there was an outstanding balance owed under the Promissory Note. The proceeds of any issuance of common stock pursuant to such Investor Notice will be used to repay amounts owed under the Promissory Note. For the three and six months ended June 30, 2022, interest expense of $108 was recorded for the Yorkville Convertible Notes. Refer to Note 14 for detail.