Eos Energy Enterprises, Inc. 10-K

ITEM 9A.CONTROLS AND PROCEDURES. Disclosure Controls and Procedures We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures. Because of inherent limitations, disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of disclosure controls and procedures are met. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were not effective due to material weaknesses in our internal control over financial reporting resulting from our lack of (i) a formalized internal control framework, (ii) segregation of duties in the financial reporting process, (iii) review and approval of journal entries, and (iv) management review controls. These deficiencies are a result of our previously smaller footprint as a private company and we are building our team to meet the requirements as a public company. Management’s Remediation Initiatives We have begun to take steps to remediate the identified material weaknesses and enhance our internal controls, and we are planning to do the following: We have hired additional personnel and are continuing to expand our team. We are further designing and implementing a formalized internal control framework, including over journal entries and management review controls, and appropriate measures to segregate duties in the financial reporting process. We are continuing our efforts to improve and strengthen our control processes and procedures to fully remediate these deficiencies. Our management and directors will continue to work with our auditors and other outside advisors to ensure that our controls and procedures are adequate and effective. Internal Control over Financial Reporting This Annual Report does not include a report of management’s assessment regarding internal control over financial reporting due to a transition period established by rules of the Securities and Exchange Commission for newly public companies. This Annual Report also does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. As a smaller reporting company, management’s report is not subject to attestation by our registered public accounting firm. Changes in Internal Control over Financial Reporting Other than the actions taken as described in Management's Remediation Initiatives above to improve the Company’s internal control over financial reporting, there have been no changes in our internal control over financial reporting during the fiscal year ended December 31, 2020 that materially affected, or which are reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION None. 49 Table of Contents PART III ITEM 10 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information required by this item is incorporated by reference to our Proxy Statement relating to our 2021 Annual Meeting of Stockholders. The Proxy Statement will be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2020. Codes of Business Conduct and Ethics Our board of directors has adopted a Code of Business Conduct and Ethics that applies to all officers, directors and employees, which is available on our website at (investors.eose.com) under "Governance Documents". We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding amendments to, or waiver from, a provision of our Code of Business Conduct and Ethics and by posting such information on the website address and location specified above. ITEM 11. Executive Compensation The information required by this item is incorporated by reference to our Proxy Statement relating to our 2021 Annual Meeting of Stockholders. The Proxy Statement will be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2020. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by this item, including Securities Authorized for Issuance Under Equity Plans, is incorporated by reference to our Proxy Statement relating to our 2021 Annual Meeting of Stockholders. The Proxy Statement will be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2020. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this item is incorporated by reference to our Proxy Statement relating to our 2021 Annual Meeting of Stockholders. The Proxy Statement will be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2020. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information required by this item is incorporated by reference to our Proxy Statement relating to our 2021 Annual Meeting of Stockholders. The Proxy Statement will be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2020. PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (1) Financial statement. The consolidated financial statements and Report of Independent Registered Accounting Firm are listed in the “Index to Financial Statements” beginning on page F-1. (2) Financial Statement Schedules and Other Financial Information. No financial statement schedules are submitted because either they are not applicable or because the required information is included in the consolidated financial statements or notes thereto. 50 Table of Contents (3) Exhibits. Filed as part of this Annual Report on Form 10-K are the following exhibits: Incorporated by Reference Exhibit Number Description of Document Schedule/Form File Number Exhibit Filing date 2.1 Agreement and Plan of Merger, dated as of September 7, 2020, by and among the Company, BMRG Merger Sub, LLC, BMRG Merger Sub II, LLC, Eos Energy Storage LLC, New Eos Energy LLC and AltEnergy Storage VI, LLC (incorporated by reference to Exhibit 2.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on September 8, 2020). Form 8-K File No. 001-39291 2.1 September 8, 2020 3.1 Third Amended and Restated Certificate of Incorporation of the Company Form 8-K File No. 001-39291 3.1 November 20, 2020 3.2 Amended and Restated Bylaws of the Company Form 8-K File No. 001-39291 3.2 November 20, 2020 4.1 Specimen Common Stock Certificate Form 8-K File No. 001-39291 4.1 November 20, 2020 4.2 Specimen Warrant Certificate Form 8-K File No. 001-39291 4.2 November 20, 2020 4.3 Warrant Agreement, dated May 19, 2020, by and between the Registrant and Continental Stock Transfer & Trust Company Form 8-K File No. 001-39291 4.1 May 22, 2020 4.4 * Description of Securities 10.1 Business Combination Marketing Agreement, dated as of May 19, 2020 by and between the Registrant and B. Riley FBR, Inc. Form 8-K File No. 001-39291 1.2 May 22, 2020 10.2 Letter Agreement, dated May 19, 2020, by and among the Registrant, its officers, its directors and B. Riley Principal Sponsor Co. II, LLC Form 8-K File No. 001-39291 10.1 May 22, 2020 10.3 Investment Management Trust Agreement, dated May 19, 2020, by and between the Registrant and Continental Stock Transfer & Trust Company Form 8-K File No. 001-39291 10.2 May 22, 2020 10.4 Registration Rights Agreement, dated May 19, 2020, by and between the Registrant, B. Riley Principal Sponsor Co. II, LLC and the Registrant’s independent directors Form 8-K File No. 001-39291 10.3 May 22, 2020 51 Table of Contents 10.5 Private Placement Units Purchase Agreement, dated May 19, 2020, by and between the Registrant and B. Riley Principal Sponsor Co. II, LLC Form 8-K File No. 001-39291 10.4 May 22, 2020 10.6 Administrative Support Agreement, dated May 19, 2020, by and between the Registrant and B. Riley Corporate Services, Inc. Form 8-K File No. 001-39291 10.6 May 22, 2020 10.7 Form of Subscription Agreement Form 8-K File No. 001-39291 10.7 November 20, 2020 10.8 Sponsor Earnout Letter Form 8-K File No. 001-39291 10.8 November 20, 2020 10.9 Registration Rights Agreement, dated November 16, 2020, by and among the Company and the securityholders party thereto. Form 8-K File No. 001-39291 10.9 November 20, 2020 10.10 Eos Energy Enterprises, Inc. 2020 Incentive Plan Form 8-K File No. 001-39291 10.10 November 20, 2020 10.11 Employment Agreement, dated June 22, 2020, by and between the Company and Joe Mastrangelo Form 8-K File No. 001-39291 10.11 November 20, 2020 10.12 Employment Agreement, dated June 1, 2020, by and between the Company and Mack Treece Form 8-K File No. 001-39291 10.12 November 20, 2020 10.13 Form of Indemnity Agreement Form 8-K File No. 001-39291 10.13 November 20, 2020 21.1 Subsidiaries of the Company Form 8-K File No. 001-39291 21.1 November 20, 2020 24.1* Power of Attorney (included on the signature page herein) 31.1* Certification of the Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2* Certification of the Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1*+ Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2*+ Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 52 Table of Contents † Certain of the exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). The Registrant agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request. * Filed herewith. + The certifications furnished in Exhibit 32.1 and Exhibit 32.2 hereto are deemed to accompany this Annual Report on Form 10-K and will not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference. 53 Table of Contents EOS ENERGY ENTERPRISES, INC Index to Financial statements PAGE Financial Statements Report of Independent Registered Public Accounting Firm F- 2 Consolidated Balance Sheets as of December 31, 2020 and 2019 F- 3 Consolidated Statements of Operations for the Years Ended December 31, 2020 and 2019 F- 5 Consolidated Statements of Shareholders ' Equity (Deficit) for the Years ended December 31, 2020 and 2019 F- 6 Consolidated Statements of Cash Flows for the Years Ended December 31, 2020 and 2019 F- 7 Notes to Consolidated Financial Statements F- 9 to F- 34 F-1 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of EOS Energy Enterprises, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of EOS Energy Enterprises, Inc. (the "Company") as of December 31, 2020 and 2019, the related consolidated statements of operations, changes in shareholders’ equity (deficit), and cash flows, for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Deloitte & Touche LLP New York, NY February 25, 2021 We have served as the Company's auditor since 2017. F-2 Table of Contents EOS ENERGY ENTERPRISES, INC CONSOLIDATED BALANCE SHEETS ($ IN THOUSANDS) As of December 31, 2020 and 2019 2020 2019 ASSETS Current assets Cash and cash equivalents $ 121,853 $ 862 Grants receivable 131 326 Inventory 214 — Receivable on sale of state tax attributes — 4,060 Vendor deposits 2,390 252 Prepaid and other current assets 2,779 484 Total current assets 127,367 5,984 Property and equipment, net 5,653 5,316 Intangible assets, net 320 360 Investment in joint venture 3,736 589 Security deposit 825 808 Other assets 363 $ — Total assets $ 138,264 $ 13,057 LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT) Current liabilities Accounts payable and accrued expenses $ 8,861 $ 6,987 Accounts payable and accrued expenses - related parties 2,517 1,194 Provision for firm purchase commitments 1,585 — Convertible notes payable – related party — 76,559 Capital lease, current portion 11 13 Embedded derivative liability — 1,681 Long term debt, current portion 1,071 — Contract liabilities, current portion 77 300 Total current liabilities 14,122 86,734 Long term liabilities Deferred rent 762 663 Capital lease 4 17 Long term debt 280 — Total long term liabilities 1,046 680 Total liabilities 15,168 87,414 COMMITMENTS AND CONTINGENCIES (NOTE 8) — — CONTINGENTLY REDEEMABLE PREFERRED UNITS (NOTE 14) (liquidation preference of $ — and, $ 136,816 as of December 31, 2020 and December 31, 2019, respectively) — 109,365 SHAREHOLDERS' EQUITY 1 1 See Note 1 for discussion of reverse capitalization given effect herein F-3 Table of Contents EOS ENERGY ENTERPRISES, INC CONSOLIDATED BALANCE SHEETS ($ IN THOUSANDS) As of December 31, 2020 and 2019 Common Stock, $ 0.0001 par value, 200,000,000 shares authorized, 48,943,082 and 3,930,336 shares outstanding at December 31, 2020 and 2019, respectively 5 — Contingently Issuable Common Stock 17,944 — Preferred stock, $ 0.0001 par value, 1,000,000 shares authorized, no shares outstanding at December 31, 2020 and 2019 — — Additional paid in capital 395,913 20,346 Accumulated deficit ( 290,766 ) ( 204,068 ) Total shareholders' equity (deficit) 123,096 ( 183,722 ) Total liabilities, contingently redeemable preferred units, and shareholders’ equity (deficit) $ 138,264 $ 13,057 The accompanying notes are an integral part of these financial statements. F-4 Table of Contents EOS ENERGY ENTERPRISES, INC CONSOLIDATED STATEMENTS OF OPERATIONS ($ IN THOUSANDS) For the years ended December 31, 2020 and 2019 2020 2019 Revenue Total revenue $ 219 $ 496 Costs and expenses Cost of sales 5,509 8,332 Research and development expenses 13,983 11,755 General and administrative expenses 18,883 7,710 Grant expense (income), net 913 ( 469 ) Total costs and expenses 39,288 27,328 Operating loss ( 39,069 ) ( 26,832 ) Other income (expense) Sale of state tax attributes — 4,060 Interest income (expense), net ( 115 ) 2 Interest expense – related party ( 23,706 ) ( 49,708 ) Loss on extinguishment of convertible notes — ( 6,111 ) Change in fair value, embedded derivative 2,092 ( 716 ) Change in fair value, Sponsor Earnout Shares ( 8,083 ) — Income (loss) from equity in unconsolidated joint venture 127 ( 178 ) Net loss $ ( 68,754 ) $ ( 79,483 ) Basic and diluted loss per share attributable to common shareholders 2 Basic $ ( 7.31 ) $ ( 20.22 ) Diluted $ ( 7.31 ) $ ( 20.22 ) Weighted average shares of Common Stock 3 Basic 9,408,841 3,930,336 Diluted 9,408,841 3,930,336 The accompanying notes are an integral part of these financial statements. 2 See Note 1 for discussion of reverse capitalization given effect herein 3 See Note 1 for discussion of reverse capitalization given effect herein F-5 Table of Contents EOS ENERGY ENTERPRISES, INC CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) ($ IN THOUSANDS) For the years ended December 31, 2020 and 2019 Common Stock 4 Additional Contingently Accumulated Total Shares Amount Paid in capital Issuable Common Stock Deficit Balance, December 31, 2018 3,930,336 $ — $ 20,211 $ — $ ( 124,585 ) $ ( 104,374 ) Stock-based compensation — 135 — — 135 Net loss — — — — ( 79,483 ) ( 79,483 ) Balance, December 31, 2019 3,930,336 $ — $ 20,346 $ — $ ( 204,068 ) $ ( 183,722 ) Conversion of contingently redeemable preferred units 14,727,844 2 121,123 — — 121,125 Conversion of convertible notes payable 10,886,336 1 108,862 — — 108,863 Net equity infusion from the Merger 18,364,805 2 126,024 — — 126,026 Contingently Issuable Common Stock — — — 17,944 ( 17,944 ) — Transaction cost incurred in the Merger — — ( 10,274 ) — — ( 10,274 ) Capital contribution - disgorgement of short swing profits — — 432 — — $ 432 Shares issued to Restricted Units holders 174,761 — — — — — Stock-based compensation — — 5,081 — — 5,081 Release of Block A Sponsor Earnout Shares from restriction 5 859,000 — 12,559 — — 12,559 Reclassification of Block B Sponsor earnout shares 6 — — 11,760 — — 11,760 Net loss — — — — ( 68,754 ) ( 68,754 ) Balance, December 31, 2020 48,943,082 $ 5 $ 395,913 $ 17,944 $ ( 290,766 ) $ 123,096 The accompanying notes are an integral part of these financial statements. 4 See Note 1 for discussion of reverse capitalization given effect herein 5 See Note 2 for discussion of Sponsor Earnout Shares 6 See Note 2 for discussion of Sponsor Earnout Shares F-6 Table of Contents EOS ENERGY ENTERPRISES, INC CONSOLIDATED STATEMENTS OF CASH FLOWS ($ IN THOUSANDS) For the years ended December 31, 2020 and 2019 2020 2019 Cash flows from operating activities Net loss $ ( 68,754 ) $ ( 79,483 ) Adjustment to reconcile net loss to net cash used in operating activities Stock-based compensation 5,081 135 Depreciation and amortization 1,558 2,123 Impairment of property and equipment — 1,590 Loss from disposal of property and equipment 31 — (Income) Loss from equity in unconsolidated joint venture ( 127 ) 178 Accreted interest on convertible notes payable – related party 23,706 49,708 Loss on extinguishment of convertible notes — 6,111 Provision for firm purchase commitment 1,585 — Change in fair value, embedded derivative ( 2,092 ) 716 Change in fair value, Sponsor Earnout Shares 8,083 — Other — ( 52 ) Changes in operating assets and liabilities: Receivable on sale of state tax attributes 4,060 ( 4,060 ) Prepaid and other assets ( 1,607 ) ( 462 ) Inventory ( 214 ) 634 Grants receivable 195 352 Vendor deposits ( 593 ) 109 Security deposit ( 17 ) ( 64 ) Accounts payable and accrued expenses 1,709 ( 2,210 ) Accounts payable and accrued expenses-related parties 1,323 1,140 Contract liabilities ( 223 ) ( 468 ) Deferred rent 99 169 Other assets ( 362 ) — Net cash used in operating activities ( 26,559 ) ( 23,834 ) Cash flows from investing activities Investment in joint venture ( 3,020 ) ( 601 ) Purchases of property and equipment ( 3,605 ) ( 2,299 ) Net cash used in investing activities ( 6,625 ) ( 2,900 ) Cash flows from financing activities Capital lease payments ( 15 ) ( 72 ) Proceeds from issuance of convertible notes payable – related party 9,009 19,346 Proceeds of short term notes payable 191 — Repayment of short term notes payable ( 97 ) ( 1,000 ) Proceeds from Paycheck Protection Program loan 1,257 — Proceeds attributable to beneficial conversion features of convertible notes payable – related party — 1,793 Proceeds from capital infusion in reverse recapitalization 142,345 — Transaction cost for the reverse recapitalization ( 10,274 ) — Issuance of contingently redeemable preferred units 11,759 2,031 Net cash provided by financing activities 154,175 22,098 F-7 Table of Contents EOS ENERGY ENTERPRISES, INC CONSOLIDATED STATEMENTS OF CASH FLOWS ($ IN THOUSANDS) For the years ended December 31, 2020 and 2019 Net increase (decrease) in cash and cash equivalents 120,991 ( 4,636 ) Cash and cash equivalents, beginning of year 862 5,498 Cash and cash equivalents, end of year $ 121,853 $ 862 Non-cash Investing and Financing Activities Contribution of inventory to joint venture $ — $ 167 Accrued and unpaid capital expenditures $ 374 $ 93 Conversion of convertible notes to common stock in connection with merger $ 108,863 $ — Conversion of contingently redeemable preferred stock to common stock in connection with merger $ 121,125 $ — Receivable from disgorgement of short swing profits $ 432 $ — Supplemental disclosures Cash paid for interest $ 118 $ 6 The accompanying notes are an integral part of these financial statements. F-8 Table of Contents EOS ENERGY ENTERPRISES, INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS) 1. Nature of Operations and Summary of Significant Accounting Policies Nature of Operations Eos Energy Enterprises, Inc. (f/k/a B. Riley Merger Corp. II) (the “Company” or "Eos") designs, develops, manufactures, and sells innovative energy storage solutions for the electric utilities, and commercial and industrial end users. Eos has developed and has received patents on an innovative battery design relying on a unique zinc oxidation/reduction cycle to generate output current and to recharge. The Battery Management System (“BMS”) software uses proprietary Eos-developed algorithms and includes ambient and battery temperature sensors, as well as voltage and current sensors for the strings and the system. Eos and their partners focus on a collaborative approach to jointly develop and sell safe, reliable, long-lasting low-cost turn-key alternating current (“AC”) integrated systems using Eos’s direct current (“DC”) Battery System. The Company is also an investor in an unconsolidated joint venture (“JV”) which has the exclusive rights to manufacture the DC Battery Systems integrated with the BMS for DC Battery Systems that are sold and delivered in North America, subject to meeting certain performance targets. The Company’s major markets are integration of battery storage with solar that is connected to the utility power grid or the customer’s solar system that is not connected to the utility power grid, battery storage systems to be used by utilities to relieve congestion in the power grids and battery storage systems to assist commercial and industrial customers in reducing their peak energy usage or participating in the utilities ancillary and demand response markets. The location of the Company’s major markets are seen in North America, Europe, Africa, and Asia. Reverse Recapitalization The Company was incorporated as a Delaware corporation on June 3, 2019 as a publicly held special purpose acquisition company (“SPAC”) in order to acquire, through a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination one or more businesses. On November 16, 2020 (the" Merger Date"), the Company consummated a reverse recapitalization (the "Merger") pursuant to which B. Riley Merger Corp. II ("BMRG") acquired Eos Energy Storage LLC pursuant to an agreement and plan for merger (the “Merger Agreement”) between the Company, BMRG Merger Sub, LLC, our wholly-owned subsidiary and a Delaware limited liability company (“Merger Sub I”), BMRG Merger Sub II, LLC, our wholly-owned subsidiary and a Delaware limited liability company (“Merger Sub II”), Eos Energy Storage LLC, a Delaware limited liability company (“EES”), New Eos Energy LLC, a wholly-owned subsidiary of EES and a Delaware limited liability company (“Newco”) and AltEnergy Storage VI, LLC, a Delaware limited liability company (“AltEnergy”). In connection with the Merger, (1) Merger Sub I merged with and into Newco (the “First Merger”), whereupon the separate existence of Merger Sub I ceased, and Newco continued as the surviving company (such company, in its capacity as the surviving company of the First Merger, is sometimes referred to as the “First Surviving Company”) and became our wholly owned subsidiary; and (2) immediately following the First Merger and as part of the same overall transaction as the First Merger, the First Surviving Company merged with and into Merger Sub II, whereupon the separate existence of the First Surviving Company ceased, and Merger Sub II continued as the surviving company and our wholly owned subsidiary. Upon the closing of the business combination (the “Closing”), the Company changed its name to “Eos Energy Enterprises, Inc.” Since BMRG was a non-operating public shell company, the current shareholders of EES have a relative majority of the voting power of the combined entity, the operations of EES prior to the acquisition comprises the only ongoing operations of the combined entity, and senior management of EES comprises the majority of the senior management of the combined entity, the Mergers have been accounted for as a capital transaction rather than a business combination. According to ASC 805 Business combination, the transaction was accounted for as a reverse recapitalization consisting of the issuance of Common Stock by Eos for the net monetary assets of BMRG accompanied by a recapitalization. Accordingly, the net monetary assets received by EES as a result of the Mergers with B. Riley have been treated as a capital infusion on the closing date. No goodwill or other intangible assets were recorded during the Merger. The consolidated assets, liabilities and results of operations of the Company are the historical financial statements of EES and the BMRG assets, liabilities and results of operations are consolidated with the Company beginning on the acquisition date. In order to reflect the change in capitalization, the historical capitalization related to EES common units have been retroactively restated based on the exchange ratio as if shares of B. Riley Common Stock had been issued as of the later of (i) the issuance date of the shares, or (ii) the earliest period presented in the accompanying consolidated financial statements. F-9 Table of Contents EOS ENERGY ENTERPRISES, INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS) 1. Nature of Operations and Summary of Significant Accounting Policies (cont.) Upon consummation of the Mergers, the former EES convertible notes and redeemable preferred units were converted to common stock of the Company. Refer to Note 12 and Note 14 for further discussion. Unless the context otherwise requires, the use of the terms “the Company”, “we,” “us,” and “our” in these notes to the consolidated financial statements refers to Eos Energy Enterprises, Inc. and its consolidated subsidiaries. Basis of Presentation The financial statements include the accounts of the Company and its 100% owned direct and indirect subsidiaries and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). All significant intercompany transactions and balances have been eliminated in the preparation of the consolidated financial statements. Reclassification of Prior Year Presentation Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. Adjustment has been made to the Consolidated Balance sheets for the year ended December 31, 2019, to reclassify account payable and accrued expense to related parties and vendor deposits from prepaid and other current assets. These changes in classification also affected cash flows from operating activities for the year ended December 31, 2019 in the Consolidated Statements of Cash Flows. Cash and Cash Equivalents Cash and cash equivalents include cash and highly liquid investments purchased with original maturities of three months or less. Concentration of Credit Risk The Company maintains cash balances at FDIC-insured institutions. However, the FDIC limits may be exceeded at times. The Company has not experienced any losses on such accounts. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. The most significant estimates in the accompanying financial statements include the valuation of Contingently Issuable Common stock , derivatives, the relative fair value allocation of Phase II bridge financing proceeds, the valuation of inventory, and estimated lives used for depreciation and amortization purposes. Income Taxes and Deferred Taxes The Company complies with the accounting and reporting requirements of FASB ASC Topic 740, Income Taxes (ASC 740). Income taxes are computed under the asset and liability method reflecting both current and deferred taxes, which reflect the tax impact of all events included in the financial statements. The balance sheet approach (i) reflects a current tax liability or asset recognized for estimated taxes payable or refundable on tax returns for the current and prior years, (ii) reflects a deferred tax liability or asset recognized for the estimated future tax effects attributable to temporary differences and carryforwards, (iii) measures current and deferred tax liabilities and assets using the enacted tax rate of which the effects of future changes in tax laws or rates are not anticipated, and (iv) reduces deferred tax assets, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realized. F-10 Table of Contents EOS ENERGY ENTERPRISES, INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS) 1. Nature of Operations and Summary of Significant Accounting Policies (cont.) ASC 740 prescribes a recognition threshold and a measurement attribute for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. Eos recognizes deferred tax assets only to the extent that management concludes these assets are more-likely-than-not to be realized. Significant judgement is required in assessing and estimating the more-likely-than-not tax consequences of the events included in the financial statements. Management considers all available positive and negative evidence, including future reversals of existing temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income tax expense. Eos records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (i) management determines whether it is more-likely-than-not that the tax position will be sustained on the technical merits of the position and (ii) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. The Company has determined that the uncertain income tax positions at December 31, 2020 and December 31, 2019 that do not meet the more-likely-than-not threshold under ASC 740 are $ 322 and $ — , respectively . See Note 10 for further information. Impairment of Long — Lived Assets The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. An assessment is performed to determine whether the depreciation and amortization of long-lived assets over their remaining lives can be recovered through projected undiscounted future cash flows. The amount of any long-lived asset impairment is measured based on fair value and is charged to operations in the period in which a long-lived assets impairment is determined by management. Intangible Assets Intangible assets are stated at their historical cost and amortized on a straight-line basis over their expected useful lives. Property and Equipment, net Equipment is stated at cost, less accumulated depreciation. Depreciation is computed on a straight-line basis over the estimate useful lives of the assets. Leasehold improvements are amortized on a straight-line basis over the shorter of the estimated useful lives of the improvements or the life of the lease. Maintenance and repair expenditures are expensed as incurred. Expenditures which significantly improve or extend the life of an asset are capitalized. Revenue from Contracts with Customers Revenue is earned from the sales, installation, and commissioning of energy storage systems and is derived from customer contracts. Revenue is recognized in an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring the promised goods and/or services to the customer, when or as the Company’s performance obligations are satisfied. For product sales of energy storage systems, the Company’s performance obligations are satisfied at the point in time when the customer obtains control of the system, which is either upon delivery of the goods at the customer’s designated location or upon the customer’s acceptance of the product after commissioning and testing at the customer’s site, depending on the specific terms of the respective contract with the customer. In addition, the corresponding installation and commissioning services related to the systems are performance obligations satisfied over time as the respective services are performed, based on an input measure of progress as labor costs relating to the installation and commissioning services are incurred. Further, extended warranties are offered by the Company and are identified as performance obligations that are satisfied over time, based on a time-lapsed measure of progress resulting in a ratable recognition of revenue over the respective warranty period. Payment terms generally include advance payments to reserve capacity and/or upon issuance of the F-11 Table of Contents EOS ENERGY ENTERPRISES, INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS) 1. Nature of Operations and Summary of Significant Accounting Policies (cont.) customer’s purchase order, shipment readiness, with the remainder upon delivery and commissioning of the system. Shipping and handling costs are included in cost of sales. Sales tax collected from customers are recorded on a net basis and therefore, not included in revenue. Sales tax is recorded as a liability (payable) until remitted to governmental authorities. The Company may enter into sales contracts that provide for performance obligations in addition to the sale of the product, including performance guarantees and service obligations. Under these sales contracts, transaction price is allocated to the various performance obligations based on the relative stand-alone selling prices of the promised goods and services. When the stand-alone selling price is not observable, revenue is determined based on a best estimate of selling price using cost plus a reasonable margin and is recognized ratably over the period of performance. Determination of Transaction Price The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring products or services to the customer. The Company includes any fixed charges within its contracts as part of the total transaction price. In addition, several contracts include variable consideration such as refunds, penalties, and the customer’s right to return. The Company has concluded that its estimation of variable consideration results in an adjustment to the transaction price such that it is probable that a significant reversal of cumulative revenue would not occur in the future. Assessment of Estimates of Variable Consideration Many of the Company’s contracts with customers contain some component of variable consideration. The Company estimates variable consideration, such as refunds, penalties, and the customer’s right to return, using the expected value method, and adjusts transaction price for its estimate of variable consideration. Throughout the year, we update our estimate of variable consideration on a monthly basis, and adjust transaction price accordingly by recording an adjustment to net revenue and refund liability with respect to variable consideration such as penalties, refunds, and credits to customers. Therefore, management applies the constraint in its estimation of variable consideration for inclusion in the transaction price such that it is probable that a significant reversal of cumulative revenue would not occur in the future. Practical Expedients and Exemptions As permitted by ASC 606, the Company elected to use certain practical expedients in connection with the implementation of ASC 606. The Company treats costs associated with obtaining new contracts as expenses when incurred if the amortization period of the asset the Company would recognize is one year or less. The Company does not adjust the transaction price for significant financing components, as the Company’s contracts typically do not span more than a one year period. The election of these practical expedients results in accounting treatments that the Company believes are consistent with historical accounting policies and, therefore, these elections of practical expedients do not have a material impact on the comparability of the financial statements as no revenue was earned during the year ended December 31, 2020 and December 31, 2019. Royalty Revenue The Company receives sales-based royalty payments related to the licensing of intellectual property to the Company’s JV. The Company recognizes royalty revenues when the licensee sells products to third parties. Product Warranty Warranty obligations are incurred in connection with the sale of the Company’s products. The Company generally provides a standard warranty for a period of one to two years , commencing upon commissioning. Costs to provide for warranty obligations are estimated and recorded as a liability at the time of recording the sale. Extended warranties are identified as performance obligations in the Company’s contracts with customers, and are discussed F-12 Table of Contents EOS ENERGY ENTERPRISES, INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS) 1. Nature of Operations and Summary of Significant Accounting Policies (cont.) as part of revenue from contracts with customers. Costs incurred in satisfying the Company’s performance obligations with respect to extended warranties are recognized as expense when incurred. Government Grants The Company records grants received or receivable from government agencies as an offset to the related costs for which the grants are intended to compensate the Company. The costs of satisfying the Company’s obligations under the respective grant agreements are recognized as expense when incurred. Once the expenses are approved by the government agencies the Company records the grant receivable and related grant income. Grants received from government agencies for which expenses have not been incurred are included within accrued expenses. Research and Development Expenses Research and development costs are expensed as incurred, which include materials, supplies, salaries, benefits and other costs related to research, development and testing of products. Rent Expense The Company records rent expense on a straight-line basis based on the total minimum lease payments over the term of the lease. Differences between cash paid for lease payments and rent expense are recorded as Deferred rent on the Balance Sheets. Accounts Receivable The Company evaluates the creditworthiness of its customers. If the collection of any specific receivable is doubtful, an allowance is recorded in the allowance for doubtful accounts. The Company had $ 35 and $ — of accounts receivable as of December 31, 2020 and 2019, with $ 35 and $ — of allowances for doubtful accounts recorded, respectively. Inventory Inventories are stated at the lower of cost, which approximates cost determined on a first-in, first-out basis, or net realizable value. The Company records inventory when it takes delivery and title to the product according to the terms of each supply contract. The Company evaluates its ending inventories for excess quantities and obsolescence. Inventories that management considers excess or obsolete are reserved. Management considers forecasted demand in relation to the inventory on hand, competitiveness of product offerings, market conditions and product life cycles when determining excess and obsolescence and net realizable value adjustments. Once inventory is written down and a new cost basis is established, it is not written back up if demand increases. Investment in unconsolidated joint venture The Company accounts for its investment in its unconsolidated joint venture using the equity method of accounting as it has been determined that the Company has the ability to exercise significant influence and is not otherwise required to consolidate. All significant decisions require unanimous consent of both joint venture members. Under the equity method, the investment is initially recorded at cost and subsequently adjusted for the Company’s share of equity in the joint venture’s income or loss. The Company reviews its investments for other-than-temporary impairment whenever events or changes in business circumstances indicate that the carrying value of the investment may not be fully recoverable. Investments identified as having an indication of impairment are subject to further analysis to determine if the impairment is other than temporary and to estimate the investment’s fair value. F-13 Table of Contents EOS ENERGY ENTERPRISES, INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS) 1. Nature of Operations and Summary of Significant Accounting Policies (cont.) Stock-Based Compensation Stock-based compensation is estimated at the grant date based on the fair value of the award and is recognized as expense over the requisite service period of the award. The Company uses the Black-Scholes option pricing model to estimate the fair value of awards, and generally these awards only have service conditions. The Company recognizes compensation cost on a straight-line basis over the requisite service period of the award, which is generally the award vesting term. For awards with performance conditions, we recognize compensation costs using an accelerated attribution method over the vesting period. Compensation costs are recognized only if it is probable that the performance condition will be satisfied. Determining the appropriate fair value model and related assumptions requires judgment, including estimating volatility of the Company’s common stock and expected terms. The expected volatility rates are estimated based on historical and implied volatilities of comparable publicly traded companies. The expected term represents the average time that the options that vest are expected to be outstanding based on the vesting provisions, which is determined through the simplified method, since the Company does not have sufficient historical experience regarding the exercise of options. The Company has elected to recognize forfeitures as incurred. Earnings (loss) Per Share In accordance with the provisions of FASB ASC Topic 260, Earnings per Share , basic earnings per share (“EPS”) is computed by dividing earnings available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Other potentially dilutive common shares, and the related impact to earnings, are considered when calculating EPS on a diluted basis. In computing diluted EPS, only potential common shares that are dilutive, those that reduce EPS or increase loss per share, are included. The effect of contingently issuable shares are not included if the result would be anti-dilutive, such as when a net loss is reported. Therefore, basic and diluted EPS are computed using the same number of weighted average shares for the years ended December 31, 2020 and 2019, as we incurred a net loss for such periods. The following potentially dilutive shares were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive for the periods presented: For the year ended December 31 2020 2019 Stock Options and Restricted Units 2,185,954 392,838 Warrants 9,075,000 — Block B Sponsor Earnout Shares subject to restrictions 859,000 — Contingently Issuable Common Stock 2,000,000 — Convertible Notes (if converted) — 7,655,908 Contingent redeemable preferred units — 12,964,231 Segments The Company’s chief operating decision-maker (“CODM”) is its Chief Executive Officer and President. Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the CODM in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. As such, the Company has determined that it operates in one operating and one reportable segment. F-14 Table of Contents EOS ENERGY ENTERPRISES, INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS) 1. Nature of Operations and Summary of Significant Accounting Policies (cont.) Fair Value of Financial Instruments The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, and notes payable — related party and long term debt. Accounting standards establish a hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three levels. The fair value hierarchy gives the highest priority to quoted market prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Accounting standards require financial assets and liabilities to be classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels. The carrying value of cash and cash equivalents, accounts receivable, and accounts payable are considered to be representative of their fair value due to the short maturity of these instruments. The fair value of both the Company’s convertible notes payable — related party (the “Convertible Notes”) and the embedded derivative liability are classified within Level 3 of the fair value hierarchy. The Company’s outstanding long term debt are deemed to be at fair value as the interest rates on these debt obligations are materially consistent with prevailing rates. The Company estimated the original fair value of the Contingently Issuable Common Stock based on a Monte Carlo simulation option-pricing model considering stock price of the Company, a risk free rate of 0.41 % and volatility of 60 % utilizing a peer group based on a five year term. This estimate was initially recorded as a distribution to shareholders and was presented as Contingently Issuable Common Stock. Upon the occurrence of a Triggering Event, any issuable shares would be transferred from Contingently Issuable Common Stock to common stock and Additional paid-in capital accounts. Pursuant to the guidance under ASC 815, Derivatives and Hedging , the Sponsor Earnout Shares was classified as a Level 3 fair value measurement liability, and the increase or decrease in the fair value during the reporting period is recognized as expense or income accordingly. The fair values of the Sponsor Earnout Shares on the Closing date were estimated using a Monte Carlo simulation based on stock price of the Company, a risk free rate of 0.41 % and volatility of 60 % utilizing a peer group based on a five year term. The fair value of the first tranche of Sponsor Earnout Shares ("Block A") that vested on December 16, 2020 was based on the closing share price of the Company’s publicly traded stock on that date. The fair values of the second tranche of the Sponsor Earnout Shares ("Block B) on December 16, 2020, when the Block B shares were reclassified from liability to equity, were estimated using a Monte Carlo simulation based on stock price of the Company, a risk free rate of 0.36 % and volatility of 60 % utilizing a peer group based on a five - year term. The estimated future cash flows of the Convertible Notes were discounted using a discount rate derived from an appropriate risk-free interest rate yield curve and credit spread, and the estimated repayment date. As the Company does not have a market observable credit spread, the Company obtained a range of potential credit spreads available from market observable information on entities with a comparable credit risk. As of December 31, 2019, the estimated fair value of the convertible notes payable — related party is approximately $ 65,942 , as compared to the carrying value of approximately $ 76,559 . The fair value of the embedded derivatives are determined using valuation techniques that require the use of assumptions concerning the amount and timing of future cash flows, discount rates, probability of future events and redemption dates that are beyond management’s control. As of December 31, 2019, the fair value of the embedded derivative liability was $ 1,681 . F-15 Table of Contents EOS ENERGY ENTERPRISES, INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS) 1. Nature of Operations and Summary of Significant Accounting Policies (cont.) As of December 31, 2020, all convertible notes have been converted to common stock in connection with the Merger. Refer to Note 12 for further discussion of the convertible notes payable — related party and the embedded derivatives. Recent Accounting Pronouncements Pursuant to the Jumpstart Our Business Startups Act (“ JOBS Act ”), an emerging growth company is provided the option to adopt new or revised accounting standards that may be issued by the FASB or the SEC either (i) within the same periods as those otherwise applicable to non-emerging growth companies or (ii) within the same time periods as private companies. The Company has elected to use the extended transition period for complying with any new or revised financial accounting standards. As a result, the Company’s financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective date for new or revised accounting standards that are applicable to public companies. We also intend to continue to take advantage of some of the reduced regulatory and reporting requirements of emerging growth companies pursuant to the JOBS Act so long as we qualify as an emerging growth company. In February 2016, the FASB issued ASU 2016-02, Leases , which will amend current lease accounting to require lessees to recognize (i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU 2016-02 does not significantly change lease accounting requirements applicable to lessors; however, certain changes were made to align, where necessary, lessor accounting with the lessee accounting model. The Company is an emerging growth company and would not be required to adopt this ASU No. 2016-02 until January 1, 2022. The Company is currently evaluating the impact of the adoption of this guidance on the Company’s consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments . The amendments in ASU 2016-13 will provide more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. In November 2019, the FASB issued ASU No. 2019-10 (“ASU 2019-10”), which extends the effective date for adoption of ASU 2016-13 for certain entities. As a result of the provisions in ASU 2019-10, and as the Company was a smaller reporting company as of December 31, 2020, the Company will not be required to adopt ASU 2016-13 until January 1, 2023. The Company is currently evaluating the impact of the adoption of this guidance on the Company’s consolidated financial statements. In December 2019, the FASB issued Accounting Standards Update No. 2019-12 – Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes , as part of its initiative to reduce complexity in the accounting standards. The amendments in ASU 2019-12 eliminate certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also clarifies and simplifies other aspects of the accounting for income taxes. This ASU is effective for public business entities for fiscal years and interim periods beginning after December 15, 2020. The adoption of this ASU does not have a material impact on the Company's consolidated financial statements. 2. Merger Agreement and Reverse Recapitalization Merger Agreement As discussed in Note 1, on November 16, 2020, BMRG and EES entered into the Merger Agreement, which has been accounted for as a reverse recapitalization. Pursuant to the Merger Agreement, the closing cash shall be no less than $ 110,000 minus the transaction cost incurred by BMRG and EES. On a special meeting of the shareholders of BMRG held on November 12, 2020, holders of 6,442,195 shares of BMRG’s common stock exercised their right to redeem those shares for cash at a price of $ 10.10 per share, for an aggregate of approximately $ 65,066 . The per share redemption price of $ 10.10 for holders of Public Shares electing redemption was paid out of BMRG’s Trust Account, which, after taking into account the redemption but before F-16 EOS ENERGY ENTERPRISES, INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS) 2. Merger Agreement and Reverse Recapitalization (cont.) payment of any transaction expenses, had a balance immediately prior to the Closing of approximately $ 111.6 million. On November 16, 2020, immediately prior to the Closing, BMRG issued to a number of purchasers (each, a “PIPE Investor”) an aggregate of 4,000,000 shares of BMRG’s common stock (the “PIPE Shares”), for a purchase price of $ 10.00 per share and an aggregate purchase price of $ 40,000 . In accounting for the reverse recapitalization, the total cash proceeds amounted to $ 142,345 and resulted in the issuance of 18,364,805 shares of Common Stock, as shown in the table below (dollars in thousands, expect per share amounts). Total Shares Available Cash Balance, November 15, 2020 22,525,000 $ 167,411 Less redemption of BMRG shares prior to the Merger 6,442,195 $ 65,066 Less Sponsor Earnout Shares subject to restriction 1,718,000 $ — Issuance of PIPE Shares 4,000,000 $ 40,000 Balance issued upon Merger with BMRG 18,364,805 $ 142,345 The aggregate purchase price for EES as set forth in the Merger Agreement was $ 300 million. The Merger consideration was settled through the conversion of EES’ Common Units into shares of BMRG Common Stock at an issuance price of $ 10.00 per share. Each issued and outstanding share of the EES’ common units was automatically converted into the applicable portion of the Merger consideration with the number of shares computed based on the exchange ratio, which is one BMRG share issued to 17.35 common units of EES. As per the 2012 plan (as defined in Note 15), outstanding options to purchase shares of EES’s common units granted under the 2012 Plan automatically converted into stock options for shares of BMRG Common Stock upon the same terms and conditions that were in effect with respect to such stock options immediately prior to the Merger, after giving effect to the exchange ratio as defined above. All convertible notes and preferred units have been converted to common stock in connection with the Merger. Refer to Note 12 for further discussion of the convertible notes payable — related party and Note 14 for the discussion of the preferred units. Contingently Issuable Common Stock Following the closing of the Merger, and as additional consideration for the transaction, the Company will issue within five years from the closing date to each unitholder of EES its pro-rata proportion of a one-time issuance of an aggregate of 2,000,000 Shares (the “Earnout Shares” or "Contingently Issuable Common Stock"), within five business days after (i) the closing share price of the Company's shares traded equaling or exceeding $ 16.00 per share for any 20 trading days within any consecutive 30 -trading day period during the Earnout Period or (ii) a Change of Control (or a definitive agreement providing for a Change of Control having been entered into) during the Earnout Period (each of clauses (i) and (ii), a “Triggering Event”). The Company estimated the original fair value of the contingently issuable shares to be $ 17,944 , which remains contingently issuable as of December 31, 2020. This balance was recorded as a distribution to shareholders and was presented as Contingently Issuable Common Stock. Upon the occurrence of a Triggering Event, any issuable shares would be transferred from Contingently Issuable Common Stock to common stock and Additional paid-in capital accounts. Any contingently issuable shares not issued as a result of a Triggering Event not being attained by the end of Earnout period will be cancelled. On January 22, 2021, the Triggering Event for the issuance of the Earnout Shares occurred as the Company's stock price exceeded $ 16.00 per share for 20 trading days within a consecutive 30 -trading day period during the Earnout Period. Sponsor Earnout shares Pursuant to the Sponsor Earnout letter signed in connection with the Merger, 1,718,000 shares of common stock issued and outstanding held by BMRG ("Sponsor Earnout Shares") were subject to certain transfer and other F-17 EOS ENERGY ENTERPRISES, INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS) 2. Merger Agreement and Reverse Recapitalization (cont.) restrictions, under which (a) 859,000 Sponsor Earnout Shares ("Block A Sponsor Earnout Shares") are restricted from being transferred unless and until either, for a period of five years after the Closing, (i) the share price of our common stock equals or exceeds $ 12.00 per share for any 20 trading days within any consecutive 30 -trading day period or (ii) a change of control occurs for a share price equaling or exceeding $ 12.00 per share, and (b) the remaining 859,000 Sponsor Earnout Shares ("Block B Sponsor Earnout Shares") are subject to similar restrictions except that the threshold is increased from $ 12.00 to $ 16.00 . If after the five year period, there are no triggering events, the Sponsor Earnout Shares will be forfeited and canceled for no consideration. If after the five year period, only the triggering event described in clause (a) above has occurred, the remaining 859,000 Sponsor Earnout Shares described in clause (b) will be forfeited and canceled for no consideration. The Sponsor Earnout Shares were classified as a Level 3 fair value measurement liability and $ 16,235 was recorded as initial liability on our Balance Sheet on the Merger Date. On December 16, 2020, the Company's stock price exceeded $ 12.00 per share for 20 trading days within a consecutive 30 -trading day period. On that date, the restrictions on all 859,000 shares of Block A Sponsor Earnout Shares were therefore lifted and the holders of these shares were no longer restricted from selling or transferring the shares under the Sponsor Earnout letter. Prior to transferring these Sponsor Earnout Shares to equity on that date, the associated liability was marked to market and the change in fair value was recorded in our Statements of Operations. The fair value of these shares was based on the closing share price of the Company’s publicly traded stock. In addition, Block B Sponsor Earnout Shares were also reclassified as equity instrument on that day due to the release of Block A Sponsor Earnout Shares from restriction. The fair value of the Block B Sponsor Earnout Shares was estimated using a Monte Carlo simulation based on the stock price of the Company, a risk free rate of 0.36 % and volatility of 60 % utilizing a peer group based on a five year term. For the year ended December 31, 2020, $ 8,083 was recorded as loss from change in fair value of Sponsor Earnout Shares in our Statements of Operations. On January 22, 2021, as the Company's stock price exceeded $ 16.00 per share for 20 trading days within a consecutive 30 -trading day period, Block B Sponsor Earnout Shares was released from restriction. 3. Revenue Recognition Contract Balances The following table provides information about contract liabilities from contracts with customers: December 31, 2020 December 31, 2019 December 31, 2018 Contract liabilities $ 77 $ 300 $ 718 Contract liabilities primarily relate to advance consideration received from customers and deferred revenue for which transfer of control occurs, and therefore revenue is recognized, as products are delivered or services are provided. Contract balances are reported in a net contract asset or liability position on a contract-by-contract basis at the end of each reporting period. During the year ended December 31, 2020, contract liabilities decreased $ 223 . The Company recognized $ 184 of revenue during the year ended December 31, 2020 that was included in the contract liability balance at the beginning of the period. During the year ended December 31, 2019, contract liabilities decreased $ 418 . The Company recognized $ 58 of revenue during the year ended December 31, 2019 that was included in the contract liability balance at the beginning of the period. Transaction Price Allocated to Remaining Performance Obligations The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period: F-18 Table of Contents EOS ENERGY ENTERPRISES, INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS) 3. Revenue Recognition (cont.) December 31, 2020 2021 2022 2023 2024 Thereafter Product Revenue $ 77 $ 0 $ 0 $ 0 $ 0 4. Inventory As of December 31, 2020 and 2019, we had finished goods of $ 214 and $ — . 5. Property and Equipment, Net As of December 31, 2020 and 2019, property and equipment, net consisted of the following: 2020 2019 Useful lives Equipment $ 7,055 $ 5,910 5 — 10 years Capital lease 201 201 5 years Furniture 211 125 5 — 10 years Leasehold Improvements 2,732 2,732 Lesser of useful life/remaining lease Tooling 523 150 2 — 3 years Total 10,722 9,118 Less: Accumulated Depreciation and Amortization ( 5,069 ) ( 3,802 ) $ 5,653 $ 5,316 Depreciation and amortization expense related to property and equipment was $ 1,518 and $ 2,083 , during the years ended December 31, 2020 and 2019, respectively. For the year ended December 31, 2020 and 2019, impairment loss charged to Statement of Operations were $ — and $ 1,590 , respectively, primarily related to obsolete equipment relating to its prior generation battery. These expenses are reflected in cost of sales, research and development expenses and general and administrative expenses in the Statements of Operations. 6. Intangible Assets Intangible assets consisted of various patents valued at $ 400 , which represents the cost to acquire the patents. These patents are determined to have useful lives and are amortized into the results of operations over ten years . During the years ended December 31, 2020 and 2019, the Company recorded amortization expenses of $ 40 and $ 40 , respectively, related to patents. Estimated future amortization expense of intangible assets as of December 31, 2020 are as follows: F-19 Table of Contents EOS ENERGY ENTERPRISES, INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS) 6. Intangible Assets (cont.) 2021 $ 40 2022 40 2023 40 2024 40 2025 40 Thereafter 120 $ 320 7. Investment in Unconsolidated Joint Venture In August 2019, the Company entered into an agreement with Holtec Power, Inc (“Holtec”) to form the unconsolidated joint venture HI-POWER LLC (“Hi-Power” or “JV”). The JV was formed in order to manufacture the products for all of the Company’s projects in North America. Accordingly, the Company will purchase battery storage systems and spare parts from the JV. The joint venture is in Turtle Creek, Pennsylvania. The Company’s financial commitment is $ 4,100 in the form of a combination of cash and special purpose manufacturing equipment. Eos’s initial ownership interest is 49 %. Both the Company and Holtec sell the products manufactured by Hi-Power. The Company will earn five percent of the product price for any products manufactured by Hi-Power and sold by Holtec or its affiliates. The joint venture commenced manufacturing activities in the fourth quarter of 2020. For the year ended December 31, 2020 and 2019, contribution made to the JV were $ 3,020 and $ 768 , respectively. The investment income (loss) recognized from the unconsolidated joint venture under the equity method of accounting was $ 127 and $( 178 ) for the year ended December 31, 2020 and 2019, respectively. Our investment in the unconsolidated joint venture as of December 31, 2020 and 2019 was $ 3,736 and $ 589 , respectively. 8. Commitments and Contingencies Commitments On June 24, 2016, Eos entered into a long-term non-cancelable operating lease for 45,000 sq. ft. of space for its current headquarters facility in Edison, New Jersey. On April 26, 2017, Eos entered into a lease for an additional 18,000 sq. ft. of adjoining space. These leases expire in September 2026 with renewal options up to 2036. Further, these leases require monthly rent payments along with executory costs, which include real estate taxes, repairs, maintenance and insurance. In addition, the terms of the leases contain cost escalations of approximately 10 % annually. The Company also has certain non-cancelable capital lease agreements for office equipment. Total rent expense was $ 914 and $ 930 , for the years ended December 31, 2020 and 2019, respectively, of which, $ — and $ 102 was recorded as Cost of sales; $ 713 and $ 430 as Research and development expenses; and $ 201 and $ 398 as General and administrative expenses in the Statement of Operations, respectively. Future minimum lease commitments as of December 31, 2020 are as follows: F-20 EOS ENERGY ENTERPRISES, INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS) 8. Commitments and Contingencies (cont.) Operating Capital 2021 $ 685 $ 14 2022 755 4 2023 825 — 2024 895 — 2025 966 — Later years 679 — Total minimum lease payments $ 4,805 $ 18 Less amounts representing interest 3 Present value of minimum lease payments $ 15 Firm Purchase Commitments — Related Party In July 2020, the Company entered into an $ 8,000 non-cancellable purchase contract with its unconsolidated joint venture partner, Hi-Power LLC, to supply batteries for existing and future sales orders. For the year ended December 31, 2020, the Company has made purchases totaling $ 5,496 , resulting in a remaining purchase commitment of $ 2,504 as of December 31, 2020 under this contract. At the end of each reporting period, the Company evaluates its non-cancellable firm purchase commitments and records a loss, if any, using a lower of cost or market approach. In assessing the potential loss provision, we use the stated contract price and expected production volume under the relevant sales contract. The Company records a purchase commitment loss if the market selling price of Gen 2.3 Battery Systems sold to customers is less than the cost to manufacture the product. As of December 31, 2020 , the Company recorded a provision for firm purchase commitments of $ 1,585 . The related expense has been included as a component of cost of sales in the statement of operations. Loan commitment In December 2020, we entered into a secured debt commitment with one of our customers to provide loan for $ 1,000 which matures on December 30, 2022. $ 100 were drawn on that commitment and recorded in other assets on the consolidated balance sheet as of December 31, 2020. 9. Grant Expense, Net Eos was approved for two grants by the California Energy Commission (CEC) totaling approximately $ 7,000 . In accordance with the grant agreements, Eos is responsible for conducting studies to demonstrate the benefits of certain energy-saving technologies to utility companies and consumers in the State of California, and is entitled to receive portions of the grants based upon expenses incurred. During the years ended December 31, 2020 and 2019, Eos recorded grant expense (income), net of $ 913 and $( 469 ), respectively, which comprised of grant income of $ 381 and $ 984 and grant costs of $ 1,294 and $ 515 , respectively. For the year ended December 31, 2020 and 2019, the Company has received payments totaling $ 1,531 and $ 3,209 . As of December 31, 2020 and 2019, the Company had $ 1,136 and $ — deferred grant income, respectively, which was recorded in account payable and accrued expense on the Balance Sheets, as we as a receivable in the amount of $ 131 and $ 326 , respectively. The expenses incurred by Eos relate to the performance of studies in accordance with the respective grant agreements, and the grants received or receivable from the CEC are recorded as an offset to the related expenses for which the grant is intended to compensate the Company. F-21 EOS ENERGY ENTERPRISES, INC NOTES TO FINANCIAL STATEMENTS ($ IN THOUSANDS) 10. Income Taxes Eos is subject to regulation under U.S. federal and U.S. state tax laws, regulations and policies. Changes to these laws or regulations may affect the Company’s tax liability, return on investments and business operations. Earnings before income taxes Net loss before income taxes for domestic operations for the years ended December 31, 2020 and 2019 was $( 68,754 ) and $( 79,483 ), respectively. Income expense (benefit) Income tax expense (benefit) for the years ended December 31, 2020 and 2019 was as follows: 2020 2019 Current expense (benefit): U.S. federal $ — $ — U.S. state and local — — Total current income tax (benefit) provision — — Deferred expense (benefit): U.S. federal $ — $ — U.S. state and local — — Total deferred income tax (benefit) provision — — Total income tax (benefit) provision $ — $ — Eos has no tax provision (benefit) for the periods ended December 31, 2020 and 2019 due the generation of taxable losses offset by a valuation allowance, discussed below, on the deferred tax assets. Reconciliation of US Federal Statutory income tax rate to actual income tax rate The reconciliation from the statutory U.S. federal income tax rate to the effective tax rate is as follows: 2020 2019 Income (loss) before income taxes ( 68,754 ) ( 79,483 ) Statutory U.S. federal income tax (21%) ( 14,439 ) ( 16,691 ) State and local income tax ( 3,149 ) 1,548 Disallowed interest expense 4,564 11,903 Non-deductible transaction cost 66 — Non-deductible equity cost 1,698 — Federal R&D credit 3,660 ( 1,002 ) Uncertain tax position 322 — Valuation allowance 7,360 4,215 Other ( 82 ) 27 Total income tax expense — — Effective tax rate — — The reported income tax provision differs from the amount computed by applying the statutory US federal income tax rate of 21% to the income before income taxes primarily due to pretax losses for which no tax benefit has been provided and nondeductible interest expense for US income tax purposes. F-22 Table of Contents EOS ENERGY ENTERPRISES, INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS) 10. Income Taxes (cont.) Deferred Income Taxes Eos records deferred income taxes to reflect the net tax effects of temporary differences, if any, between the carrying amounts of assets and liabilities for financial reporting and the amounts used for income tax purposes. The components of deferred tax assets and liabilities at December 31, 2020 and 2019 were as follows: 2020 2019 Deferred tax assets: NOL carryforwards $ 40,386 $ 30,540 Tax credit carryforwards 1,204 4,346 Employee compensation 1,478 187 Accruals and reserves 1,743 543 Organizational costs 179 194 Transaction costs 324 — Deferred tax assets, gross $ 45,314 35,810 Valuation allowance ( 43,895 ) ( 34,773 ) Total deferred tax assets, net $ 1,419 $ 1,037 Deferred tax liabilities: Fixed assets ( 1,358 ) ( 1,010 ) Investment in partnership ( 61 ) ( 27 ) Deferred tax liabilities ( 1,419 ) ( 1,037 ) Total deferred tax asset (liability) — — Eos’s net deferred tax balances consist primarily of federal and state net operating losses (“NOLs”) available for carry forward, and research and development credits for the years ended December 31, 2020 and 2019. The deferred tax balances and related disclosures above reflect the adjusted attribute carryforwards and associated deferred tax assets post-sale of the prior years’ attributes. During 2019, the Company participated in a tax certificate transfer program with the state of New Jersey and sold a portion of its available prior year New Jersey state NOLs, in varying amounts from tax years 2016, 2017 and 2018. The deferred tax balances and related disclosures above reflect the adjusted attribute carryforwards and associated deferred tax assets post-sale of the prior years’ attributes. The Company anticipates participating in the program for the tax year 2019, but as of the balance sheet date, no 2019 attributes had been sold. The Company maintains a valuation allowance where it is more-likely-than-not that all or a portion of a deferred tax asset may not be realized. Changes in the valuation allowance are included in the Company’s income tax provision in the period of change. In determining whether a valuation allowance is required, the Company evaluates factors such as prior earnings history, expected future earnings, reversal of existing taxable temporary differences, carry back and carry forward periods and tax planning strategies that could potentially enhance the likelihood of the realization of a deferred tax asset. Management has determined that it is more-likely-than not that Eos will not be able to utilize its deferred tax assets at December 31, 2020 and 2019 due to a history of cumulative losses. As such, Eos has a valuation allowance against its net deferred tax assets. The valuation allowance increased by $ 9,122 between December 31, 2020 and 2019. The increase was primarily attributable to an increase in NOL and tax credit carryforwards. At December 31, 2020, the valuation allowance is $ 43,895 , of which $ 1,762 will be allocated to additional paid-in capital when released. The remaining valuation allowance of $ 42,133 will be released through continuing operations. F-23 Table of Contents EOS ENERGY ENTERPRISES, INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS) 10. Income Taxes (cont.) Net Operating Losses & Tax Credits As of December 31, 2020 and 2019, Eos has federal research and development tax credits (“R&D credit”) of approximately $ 4,603 and $ 3,733 , which begin to expire in varying amounts from 2031 – 2040 and 2032 – 2039, respectively, subject to the annual limitation described below. In addition, Eos has state R&D credits of approximately $ 1,131 and $ 613 , which will expire in varying amounts from 2024 – 2027 and 2025 – 2026 for the years ended December 31, 2020 and 2019, respectively. The Company has NOL carryforwards for tax purposes and other deferred tax assets that are available to offset future taxable income, subject to the annual limitation described below. As of December 31, 2020 and 2019, Eos has gross federal NOL carryforwards of approximately $ 174,258 and $ 137,909 . As of December 31, 2020, Eos has state NOL carryforwards of $ 60,206 . Regarding the federal NOL for the year ended December 31, 2020, $ 89,051 begins to expire in varying amounts from 2032 through 2036, while $ 85,207 has an indefinite carryforward period. The state NOL carryforwards begin to expire in varying amounts from 2035 through 2040. The US (federal and state) operating loss carryforwards and credits may be subject to an annual limitation due to the “change in ownership” provisions of the Internal Revenue Code, and similar state provisions. The Company determined that the merger transaction (described further in Note 2 ), constitutes a change of ownership as defined under Internal Revenue Code Section 382 and Section 383. Based on management’s Section 382 Limitation Analysis, it is expected that all NOL carryforwards that existed as of the transaction date will be allowable under Section 382, however, the deferred tax asset on the Company’s NOL carryforward is offset by a full valuation allowance at December 31, 2020. Based on management’s Section 383 Limitation Analysis, it is expected that $ 4,530 of federal R&D credits will expire unused. As such, these credits have been written off as of December 31, 2020. In March and December, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and the Consolidated Appropriations Act of 2021 (the “CAA”) were signed into law in response to the Covid-19 pandemic. The CARES Act and the CAA provided several forms of tax law changes, though Eos does not anticipate that any will have a material impact on the financial statements. Unrecognized Tax Benefits The Company is subject to income taxes in the United States (federal and state). Significant judgment is required in evaluating the Company’s tax positions and determining Eos’s provision for income taxes. During the ordinary course of business, there are transactions and calculations for which the ultimate tax determination is uncertain. The Company records a liability for uncertain tax positions on the basis of a two-step process in which (i) management determines whether it is more-likely-than-not that the tax position will be sustained on the technical merits of the position and (ii) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. Eos has unrecognized tax benefits associated with uncertain tax positions as of December 31, 2020 and 2019 as follows: F-24 Table of Contents EOS ENERGY ENTERPRISES, INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS) 10. Income Taxes (cont.) 2020 2019 Gross unrecognized tax benefits as of January 1 — — Additions: Current year tax positions 722 Prior year tax positions — — Reduction of prior year tax positions — — Settlements — — Lapse of statute of limitations — — Gross unrecognized tax benefits as of December 31 722 — Included in the balance of unrecognized tax benefits at December 31, 2020 are potential benefits of nil that, if recognized, would affect the effective tax rate on income from continuing operations. The open tax years for federal and state tax returns are generally 2017 and forward. Net operating losses and R&D credits generated in closed years and utilized in open years are subject to adjustment by the tax authorities. Eos is not currently under examination by any taxing jurisdiction. The Company regularly assesses the adequacy of its provision for income tax contingencies in accordance with ASC 740. As a result, the Company may adjust the reserves for unrecognized tax benefits for the impact of new facts and developments, such as changes to interpretation of relevant tax law, assessments from taxing authorities, settlements with tax authorities and lapses of statute of limitations. 11. Related Party Transactions Convertible Notes Payable During the years ended December 31, 2020 and 2019, Eos issued convertible notes payable to certain members. Refer to Note 12 for further discussion. Management fee arrangement During the years ended December 31, 2020 and 2019, the Company incurred monthly management fees to an entity owned by a board member in relation to the use of a New York City office. Total costs incurred during the year amounted to $ 69 and $ 19 , respectively, which are included in General and administrative expense in the Statements of Operations. Unpaid management fees of $ — and $ 73 are included in Accounts payable and accrued expenses-related parties as of December 31, 2020 and 2019, respectively. Accounts Payable and Accrued Expenses Accounts payable and accrued expense-related parties as of December 31, 2020 contains $ 138 consultant fee payable to affiliate. This line further includes $ 2,382 and $ 1,121 accruals as of December 31, 2020 and December 31, 2019 for payments under the Joint Venture agreement. Receivable from disgorgement of short swing profits As of December 31, 2020, the Company had a receivable of $ 432 from its affiliated company B.Riley Securities, Inc resulting from disgorgement of short swing profits, which is included in Prepaid and other current assets. See Note 16 for a detailed discussion. Vendor deposits As of December 31, 2020, vendor deposits include a balance of $ 278 deposits made to Hi-Power. F-25 Table of Contents EOS ENERGY ENTERPRISES, INC NOTES TO FINANCIAL STATEMENTS ($ IN THOUSANDS) 12. Convertible Notes Payable Convertible Notes Payable -Related party During the year ended December 31, 2020 and December 31, 2019, the Company issued Convertible notes payable with aggregate principals of $ 5,469 and $ 19,524 , respectively (the “Convertible Notes”). The Convertible Notes are secured by all assets and intellectual property of the Company. AltEnergy Storage Bridge, LLC (“AltEnergy”) and its affiliates have combined beneficial ownership in the Company exceeding 10% and therefore constitute a related party of the Company, pursuant to ASC 850, Related Parties . As of December 31, 2020, AltEnergy owned approximately 14 % of the Company's Common Stock and as of December 31, 2019 AltEnergy owned approximately 20 % of the EES Common and Preferred Units. The remaining note holders do not meet the definition of a related party under ASC 850. However, the Convertible Notes were issued to each of the note holders under identical terms, and AltEnergy serves as the administrative agent of all note holders under the Convertible Note agreements. Therefore, the disclosures within Note 12 encompass all of the Convertible Notes. Phase I Convertible Notes Payable -related party The Convertible Notes were issued on various dates through two phases. The first phase with aggregate principal of $ 13,529 was issued from February 2019 to May 2019 (the “Phase I Notes”), of which $ 4,137 was issued to AltEnergy. The terms of the Phase I Notes are summarized as follows: • Maturity: On or after June 30, 2019. • Conversion Option: At any time, the Holder may elect to convert 1.15 times the outstanding principal balance into the preferred units of the Company at $ 1.75 per unit. • Liquidation Amount: Repayment shall be made at the applicable liquidation amount. The Liquidation Amount applies to all repayments, with the exception of early repayments made at the Company’s option. The Liquidation Amount applicable to repayments occurring prior to June 1, 2019 is 1.5 times the outstanding principal balance. At June 1, 2019 and August 1, 2019, the multiple increases to 2.0 and 3.0 times the outstanding principal balance, respectively. • Optional Prepayment: The Company may prepay the Phase I Notes prior to maturity at 3.0 times the outstanding principal balance. • Conversion upon Qualified Financing: In the event that the Company issues and sells any units to investors through a Qualified Financing, on or before the date the Phase I Notes are repaid in full, resulting in aggregate gross equity proceeds of at least $ 25,000 , the Company may at its sole option, force the Holders to convert the Liquidation Amount into the class of equity issued in the Qualified Financing. The number of units issued at conversion are variable and shall be based upon the price per unit paid in the financing. Alternatively, the Company may also elect to settle the 2019 Convertible Notes in cash. • Holders’ put options: If an Event of Default occurs, and at the direction of 25 % of the holders, repayment at the applicable Liquidation Amount becomes immediately due on demand. Any time prior to September 30, 2019, if Event of Default has not occurred, and at the direction of a majority of holders, the Liquidation Amount becomes due on demand. F-26 Table of Contents EOS ENERGY ENTERPRISES, INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS) 12. Convertible Notes Payable (cont.) In conjunction with the Phase II Note issuance, the Phase I maturity date was extended to October 31, 2019. The term extension was considered a troubled debt restructuring and did not result in a substantial modification and was accounted for as a continuation of the existing Phase I Notes. An extinguishment charge was no t recognized. 2019 Phase II Convertible Notes Payable -Related party Convertible Notes with aggregate principal of $ 5,995 were issued from June 2019 to December 2019 (the “2019 Phase II Notes”), of which $ 2,017 was issued to AltEnergy. The terms of the Phase II Notes are identical to the Phase I Notes, except as follows: • Maturity: On or after October 31, 2019. • At any time, the holder may elect to convert 1.15 times the outstanding principal balance into the Preferred Unites of the Company at $ 0.50 per unit. • The Liquidation Amount is 6.0 times the outstanding principal balance, regardless of the repayment date. • Holders’ put option: If an Event of Default occurs, and at the direction of 25 % of the holders, repayment at the applicable Liquidation Amount becomes immediately due on demand. If Event of Default has not occurred, Holders cannot accelerate repayment. • 2019 Phase II Notes are Senior to Phase I Notes : In the event that the Company is obligated, or elects, to repay the Convertible Notes and does not have sufficient funds to repay all Notes in full, payments shall be made in the following order: first, to the holders of Phase II Notes until each holder has received a repayment equal to 2.0 times (2.0x) the then outstanding principal balance of holder’s Phase II Notes; second, to the holders of Phase I Notes until each holder has received a repayment equal to 1.0 times (1.0x) the then outstanding principal balance of those holder’s Phase I Notes; and third, to all holders of the 2019 Convertible Notes, pro rata based on the remaining amount due to each holder pursuant to the terms and provisions of each 2019 Convertible Note held by that holder. Concurrent to issuance of the Phase II Notes, the Company entered into subscription agreements to sell Preferred Units to the Holders equal to the principal balance of the 2019 Phase II Notes at a price of $ 0.50 per unit. Phase II cash proceeds totaled $ 11,991 . The proceeds were allocated to the Phase II Notes and EES Preferred Units based on their relative fair values at the date of issuance. The Company recognized $ 2,031 attributable to the 2019 Phase II Preferred Units, which was recorded as a discount against the 2019 Phase II Notes. Refer to Note 14 for further discussion regarding the EES Preferred Units. 2020 Phase II Convertible Notes Payable - Related party During the year up to the Closing date, the Company issued Convertible Notes (the “2020 Phase II Notes”) concurrently with EES Preferred Units to certain investors for aggregate cash proceeds of $ 10,768 , including 2020 Phase II Notes of $ 10,598 with terms identical to the 2019 Phase II Notes, and $ 170 of Phase I Notes. The proceeds were allocated to the 2020 Phase II Notes and EES Preferred Units based on their relative fair values at the date of issuance. The Company recognized $ 1,759 attributable to the 2020 Phase II EES Preferred Units, which was recorded as a discount against the 2020 Phase II Notes. $ 1,075 of the 2020 Phase II Notes were issued to AltEnergy. Refer to Note 14 for further discussion regarding the EES Preferred Units. Beneficial Conversion Features The conversion option on the Phase I Notes generated a beneficial conversion feature (BCF). A BCF arises when a debt or equity security is issued with an embedded conversion option that is in the money at inception F-27 Table of Contents EOS ENERGY ENTERPRISES, INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS) 12. Convertible Notes Payable (cont.) because the conversion option has an effective strike price that is less than the fair value of the underlying equity security at the commitment date. The Company recognized this BCF by allocating the intrinsic value of the conversion option to the Preferred Units, which resulted in a discount on the Phase I Notes. The Company amortized the discount into interest expense on the commitment date, as the Convertible Notes are immediately puttable by investors. Embedded Derivatives Both the occurrence of a Qualified Financing and the exercise of the holders’ put options represent events that can accelerate repayment of the 2019 Convertible Notes and involve a significant discount. Therefore, these features constitute embedded derivatives that require bifurcation pursuant to ASC 815-15, Embedded Derivatives . In the event of a Qualified Financing occurring prior to July 31, 2019, the Phase I notes can be repaid at a 1.5 x or 2.0 x Liquidation Amount, thereby resulting in an embedded derivative at issuance. For the year ended December 31, 2020, embedded derivative assets with initial fair value of $ 411 was recognized. Embedded derivative assets with initial fair value of $ 181 and embedded derivative liabilities with initial fair value of $ 1,145 were recognized during 2019. These amounts were recorded as discounts on the Convertible Notes. As of December 31, 2019, the embedded derivatives were classified as current liabilities on the consolidated balance sheet and had fair values of $ 1,681 . The embedded derivatives were fair valued through the Merger date. During the year ended December 31, 2020 and 2019, a change in fair value of embedded derivative gain of $ 2,092 and a loss of $ 716 has been recognized, respectively. The fair value of the embedded derivative was zero as of December 31, 2020 as a result of the conversion of the notes in connection of the Merger. The Company accounted for the 2019 Convertible Notes as deeply discounted zero coupon debt instruments. The balances payable at maturity reflect liquidation multiples of 3.0 and 6.0 times the stated face value of the Phase I and 2019 Phase II Notes, respectively. The following balances were recognized upon issuance of the Convertible Notes during the years ended December 31, 2020 and 2019: For the year ended December 31 2019 2020 Phase I Phase II Phase I Phase II Total Convertible notes payable $ 40,587 $ 35,973 $ 510 $ 31,793 $ 108,863 Discount, original issuance ( 20,946 ) ( 23,982 ) ( 340 ) ( 21,196 ) $ ( 66,464 ) Premium (Discount), embedded derivative 181 ( 1,145 ) — ( 411 ) $ ( 1,375 ) Discount, fair value of preferred units — ( 2,031 ) — ( 1,759 ) $ ( 3,790 ) Discount, beneficial conversion features ( 1,799 ) — — — $ ( 1,799 ) Convertible notes payable, net $ 18,023 $ 8,815 $ 170 $ 8,427 $ 35,435 Subsequent Measurement With respect to the Phase I Notes, the holders’ put option is immediately exercisable at the 1.5 times the principal amount of the Notes. Pursuant to ASC 470-10, which states that notes with demand features should be stated at or near the amount of cash that could be required to satisfy, a corresponding portion of the discount was amortized into interest expense immediately following issuance. Additionally, the discount attributable to the BCF was immediately amortized into interest expense at issuance. The remaining discount on the Phase I Notes was amortized into interest expense using the effective interest method through July 31, 2019, the date at which the note becomes payable at 3.0 times the outstanding principal amount. Discounts on the Phase II Notes were amortized into interest expense using the effective interest method through the stated maturity date of October 31, 2019. On October 31, 2019, the Company defaulted under the Phase F-28 Table of Contents EOS ENERGY ENTERPRISES, INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS) 12. Convertible Notes Payable (cont.) II note agreements, at which time the note holders’ put option became exercisable. Accordingly, discounts on Phase II Notes issued subsequent to October 31, 2019 were immediately amortized into interest expense upon issuance. At issuance, the annual effective interest rates on the Phase I Notes were in excess of 400 %. The Phase II Notes were issued with annual effective interest rates in excess of 1,200 %. During the year ended December 31, 2020 and 2019, the Company recognized interest expense of $ 23,706 and $ 49,708 related to the Convertible Notes, respectively. In connection with the business combination, the convertible notes were then exchanged for the common stock of the Company per the “Conversion upon Qualified Financing” term discussed above. 10,886,300 shares of common stock were issued to the notes holders based on the liquidation amount of $ 108.9 million as of the Merger date and purchase price of $ 10 per shares agreed upon in the Merger agreement. The balances attributable to the Convertible Notes immediately prior to the Merger were as follows: Phase 1 Phase 2 Pre-Merger balance Convertible notes payable $ 41,097 $ 67,766 $ 108,863 Discount, original issuance ( 21,286 ) ( 45,178 ) ( 66,464 ) Discount, embedded derivative 181 ( 1,556 ) ( 1,375 ) Discount, fair value of preferred units — ( 3,790 ) ( 3,790 ) Discount, beneficial conversion features ( 1,799 ) — ( 1,799 ) Discount, accumulated amortization 22,904 50,524 73,428 Convertible notes payable, net $ 41,097 $ 67,766 $ 108,863 As of December 31, 2019, the total principal and accrued interest on the Phase I Notes, 2019 Phase II Notes, and 2020 Phase II Notes is equal to the applicable Liquidation Amount of 3.0 , 6.0 , and 6.0 times the outstanding principal, respectively. The balances attributable to the 2019 Convertible Notes on December 31, 2019 were as follows: Phase 1 Phase 2 December 31, 2019 Convertible notes payable $ 40,587 $ 35,973 $ 76,560 Discount, original issuance ( 20,946 ) ( 23,982 ) ( 44,928 ) Discount, embedded derivative 181 ( 1,145 ) ( 964 ) Discount, fair value of preferred units — ( 2,031 ) ( 2,031 ) Discount, beneficial conversion features ( 1,799 ) — ( 1,799 ) Discount, accumulated amortization 22,564 27,158 49,722 Convertible notes payable, net $ 40,587 $ 35,973 $ 76,560 As of December 31, 2019, aggregate Phase I and Phase II Notes attributable to AltEnergy totaled $ 24,415 . F-29 EOS ENERGY ENTERPRISES, INC NOTES TO FINANCIAL STATEMENTS ($ IN THOUSANDS) 13. Long-term Debt The following is a summary of the Company’s long-term indebtedness (in thousands): December 31, 2020 December 31, 2019 Paycheck Protection Program loan payable $ 1,257 $ — Other 94 — Total 1,351 — Less: long-term debt, current portion ( 1,071 ) — Long-term debt $ 280 $ — Paycheck Protection Program On April 7, 2020, the Company received $ 1,257 related to its filing under the Paycheck Protection Program and Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The payment terms of the note are as follows: • No payments during the deferral period, which is defined as the ten-month period beginning on the eight weeks after the cash from the loan was received. • Commencing one month after the expiration of the deferral period, and continuing on the same day of each month thereafter until the maturity date, the Company shall pay to JPMorgan Chase Bank, N.A. (the “Lender”), monthly payments of principal and interest, each in such equal amount required to fully amortize the principal amount outstanding on the note on the last day of the deferral period by the maturity date (twenty-four months from the date of the note, or April 7, 2022). . • On the maturity date, the Company shall pay the Lender any and all unpaid principal plus accrued and unpaid interest plus interest accrued during the deferral period. • The Company may prepay this note at any time without payment of any premium. The Lender is participating in the Paycheck Protection Program to help businesses impacted by the economic impact from COVID-19. Forgiveness of this loan is only available for principal that is used for the limited purposes that qualify for forgiveness under the Small Business Administration’s (the “SBA”) requirements. To obtain forgiveness, the Company must request it and must provide documentation in accordance with the Small Business Administration (the “SBA”) requirements, and certify that the amounts the Company is requesting to be forgiven qualify under those requirements. Forgiveness of the loan is dependent upon approval of the SBA. 14. Contingently Redeemable Preferred Units As of December 31, 2019, the Company had outstanding Series C, Series D, and 2019 Bridge Preferred Units ("EES Preferred Units), which were issued at $ 1.10 , $ 1.75 , and $ 0.50 per unit, respectively. Pursuant to the EES LLC Agreement, the rights and privileges of the EES Preferred Members were as follows: Voting — The EES Preferred Members are entitled to vote together with the holders of EES Common Units on all matters submitted for members’ vote. Additionally, the EES Preferred Members occupy a majority of the seats of the Board of Directors and can therefore control all decisions subject to the Board’s vote. The following actions require a majority vote of the Preferred Members: • Pay any dividend on any EES Units • Agree or enter into a merger, sale of a material portion of the Assets, or other corporate reorganization or acquisition or any other transaction resulting in a change of control of EES. F-30 Table of Contents EOS ENERGY ENTERPRISES, INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS) 14. Contingently Redeemable Preferred Units (cont.) • Create or authorize the creation of any debt security, guarantee, or instrument with similar effect in excess of $ 1,000,000 , outside the normal course of business. • Enter new lines of business or exit the current line of business. • Enter into an exclusive agreement or arrangement to manufacture or sell EES’s technology. • Sell, assign, transfer, pledge, or encumber material technology or material intellectual property. • Take any action which deviates from the current budget approved by the Board of Directors by more than 15 %. Preferred Liquidation Preference — In the event of the termination of EES or a Company Sale (as defined within the EES LLC agreement) the holders of the EES Preferred Units are entitled to receive for each outstanding unit an amount equal to the greater of: 1) the original issuance price per unit plus an 8 % liquidation preference, accrued from the issuance date and (2) the amount which would have been payable to such EES Preferred Member had the EES Preferred Units been converted into EES Common Units in connection with a termination or Company Sale. After payment of the Preferred Liquidation Preference, any remaining proceeds are distributed proportionally to the Common Unit holders. A Company Sale is defined as a sale of Units, sale of Assets, merger, recapitalization, reorganization or otherwise, pursuant to which one or more third parties (other than Voting Members) shall own in excess of fifty percent of the Voting Units or assets of the Company. As of December 31, 2019, the EES Preferred Liquidation Preference was $ 136,816 . Because the occurrence of a Company Sale was not probable, the Company concluded the EES Preferred Units were not probable of becoming redeemable. Therefore, the carrying value had not been remeasured to the Preferred Liquidation Preference. The occurrence of a Company Sale requires the approval of both the Board of Directors and Preferred Members. Therefore, the liquidation provisions are considered contingent redemption provisions as there are certain elements that are not solely within the control of the Company. Accordingly, the Preferred Units have been presented in the mezzanine section of the consolidated balance sheet. Conversion — The Preferred Units are convertible at any time, at the option of the holder, into EES Common Units of the Company. Upon an optional conversion, distributions payable on such EES Preferred Units that have been declared but remain unpaid, shall be converted into EES Common Units. Upon the closing of a Qualified Public Offering (as defined within the EES LLC Agreement), EES Preferred Units will automatically convert to common units. The EES Preferred Units are initially convertible on a one -to-one basis into EES Common Units, subject to certain adjustments for unit splits and combinations. The EES Preferred Units are also subject to full-ratchet, anti-dilution price protection (a “down round” provision). Under that provision, if the Company issues EES Common Units at an effective price that is less than the conversion price (the “Dilutive Price”), then the conversion price of the EES Preferred Units is automatically reduced to be equal to the Dilutive Price. The effect of that reduction is that, upon the issuance of either EES Common Units or securities convertible into EES Common Units, at a Dilutive Price, the EES Preferred Units would be convertible into a greater number of EES Common Units. Bridge Preferred Units As discussed at Note 12, the Company entered into subscription agreements to sell EES Preferred Units to the Holders at a price of $ 0.50 per unit concurrently with the issuance of the 2019 Phase II Notes, which resulted in the issuance of approximately 12,000,000 EES Preferred Units (the “2019 EES Bridge Preferred Units”). The Company recognized $ 2,031 attributable to the 2019 EES Bridge Preferred Units based on the allocated fair value of cash proceeds. F-31 Table of Contents EOS ENERGY ENTERPRISES, INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS) 14. Contingently Redeemable Preferred Units (cont.) Upon the issuance of 2019 EES Bridge Preferred Units, the down round provision was triggered for the Series C and Series D EES Preferred Units whereby the conversion price was adjusted from $ 1.10 and $ 1.75 , respectively to $ 0.50 per EES Common Unit, which resulted in approximately 144,200,000 additional EES Common Units being issuable upon conversion of the Series C and Series D EES Preferred Units. As the fair value a EES Common Unit was determined to be less than $ 0.50 on both 1) the original issuance date of the Series C and Series D EES Preferred Units and 2) immediately following the issuance of the EES Bridge Preferred Units, the down round did not trigger a BCF. Therefore, a deemed dividend was no t recognized. As of December 31, 2019, the Preferred Units were convertible into approximately 224,900,000 EES common units. Refer to Note 12 for further discussion regarding the fair value allocated to the EES Preferred Units. During the years ended December 31, 2020 and 2019, activities attributable to the EES Preferred Units was as follows: Preferred Units Units Amount Balance, December 31, 2018 68,716 $ 105,548 Contributions allocated to EES Preferred Units 11,991 2,031 Discount on convertible notes, beneficial conversion feature — 1,786 Balance, December 31, 2019 80,707 109,365 Contributions allocated to EES Preferred Units 10,598 1,759 Issuance of EES Preferred Units 20,000 10,000 Balance, November 16, 2020 111,305 $ 121,124 In connection with the Merger on November 16, 2020, the Preferred Units were converted to 255,523,120 EES common units. 14,727,844 shares of the Company's common stock were issued to the EES Preferred Units holders. 15. Stock-Based Compensation Since 2012, Eos has issued stock options to employees and certain service providers under the 2012 Eos Equity Incentive Plan (“2012 Plan”). In addition to stock options, the 2012 Plan provides for the issuance of other forms of stock-based compensation, including profit interests, unit appreciation rights and restricted units. Subsequent to the closing of the Merger, the Company approved the 2020 Equity Incentive Plan (the “2020 Incentive Plan”) and reserved 6,000,000 shares of common stock for issuance thereunder. The Incentive Plan became effective immediately upon the Closing of the Merger and all equity granted under the 2012 Plan were converted into equivalent equity under the 2020 Incentive Plan. As of December 31, 2020, the Company has stock options and restricted units issued under the 2020 Incentive Plan. F-32 Table of Contents EOS ENERGY ENTERPRISES, INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS) 15. Stock-Based Compensation (cont.) The following table summarizes stock option activity during the years ended December 31, 2020 and 2019. All stock option activity was retroactively restated to reflect the converted options. See Note 2 for the conversion in connection with the Merger. Shares Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (years) Options Outstanding at December 31, 2018 303,028 $ 26.20 2.8 Granted 254,882 $ 9.54 Cancelled/Forfeited ( 165,072 ) $ 27.24 Options Outstanding at December 31, 2019 392,838 $ 15.09 5.4 Granted 1,972,679 $ 9.07 Cancelled/Forfeited ( 221,881 ) $ 18.57 Options Outstanding at December 31, 2020 2,143,636 $ 9.19 9.5 Options Exercisable at December 31, 2020 15,859 $ 26.81 1.7 As of December 31, 2020 and 2019, 3,825,176 and 87,906 shares remain for future issuance, respectively. Options vest generally over three to five years and have a term of five to ten years . During the year ended December 31, 2020, the Company granted stock options with both service and performance conditions. Stock compensation is recognized on a straight-line basis over the requisite service period of the award, which is generally the award vesting term. For awards with performance conditions, compensation expense is recognized using an accelerated attribution method over the vesting period. The performance conditions primarily relate to the completion of project milestones, achievement of operational certifications, and the Company’s closing of financing rounds. The Company’s Restricted Units (RU) represent the right to receive one common share, subject to vesting and transferability restrictions. For the year ended December 31, 2020 and December 31, 2019, 123,478 and — RUs were granted. During the same periods, 174,761 and — common shares were issued for RUs that had fully vested during the current and prior periods. As of December 31, 2020, 42,318 RUs were outstanding and unvested. These unvested RUs include (1) 31,188 units issued to directors of our Board which will vest at the earlier of our next annual shareholders meeting or December 8, 2021 and (2) 11,130 units issued to a member of our senior management which will be vested on December 16, 2021. These RUs were measured at their grant-date fair value of $ 13.46 per unit and will be fully vested in 2021. The Company recorded stock compensation expense of $ 5,081 for the year ended December 31, 2020 which includes $ 977 from RUs and $ 4,104 from stock options, respectively. $ 135 of stock compensation was recorded for the year ended December 31, 2019, including $ 4 from RUs and $ 131 from stock options, respectively. The stock compensation has been recorded in cost of sales, R&D expense and general and administrative expenses in the Statements of Operations. Unrecognized stock compensation expenses amount to $ 7,416 and include $ 472 attributable to RUs, which is expected to be recognized within one year , and $ 6,944 attributable to stock option, which is expected to be recognized over the next four years . The weighted average assumptions used to determine the fair value of options granted in 2020 and 2019 are as follows: F-33 Table of Contents EOS ENERGY ENTERPRISES, INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS) 15. Stock-Based Compensation (cont.) 2020 2019 Volatility 52.99 % 58.20 % Risk free interest rate 0.39 % 1.89 % Expected life (years) 5.19 6.25 Dividend yield 0 % 0 % The weighted average grant date fair value of all options granted was $ 5.38 and $ 1.21 per option for the years ended December 31, 2020 and 2019, respectively. 16. Shareholder's Equity Preferred Shares The Company is authorized to issue 1,000,000 shares of preferred stock with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. At December 31, 2020 and 2019, there were no shares of preferred stock issued or outstanding. Common Stock The Company is authorized to issue 200,000,000 shares of common stock with $ 0.0001 par value. Holders of the Company’s common stock are entitled to one vote for each share. At December 31, 2020 and 2019, there were 48,943,082 and 3,930,336 common stocks issued and outstanding. Warrants The Company sold warrants to purchase 9,075,000 shares of the Company's common stock in the public offering and the private placement on May 22, 2020. One warrant entitles the holder to purchase one whole share of common stock at a price of $ 11.50 per share. At December 31, 2020, there were 9,075,000 warrants outstanding which will become exercisable on May 22, 2021. Disgorgement of short swing profits For the year ended December 31, 2020, the Company recognized $ 432 increase to Additional Paid in Capital as a capital contribution from a stockholder for the disgorgement of short swing profits under Section 16 (b) of the Exchange Act, from B. Riley Securities, Inc, which is affiliated with B. Riley Financial Inc, a shareholder owning more than 5% of our common stock. The Company received the full payment in January 2021. 17. Subsequent Events On January 22, 2021, the Triggering Event for the issuance of the Earnout Shares occurred as the Company's stock price exceeded $ 16.00 per share for 20 trading days within a consecutive 30 -trading day period during the Earnout Period as described in Note 2. This Triggering Event resulted in the issuance of 2,000,000 shares of the Company's common stock. In addition, the Block B Sponsor Earnout Shares (as defined in Note 2) of 859,000 shares were released upon the achievement of the daily milestone of $ 16.00 per share as discussed in Note 2. F-34 ITEM 16. FORM 10-K SUMMARY Not applicable. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Edison, State of New Jersey, on February 25, 2021. EOS ENERGY ENTERPRISES, Inc By: /s/ Sagar Kurada Chief Financial Officer KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Joseph Matrangelo and Sagar Kurada and each or any one of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the United States Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: Name Position Date /s/ Joe Mastrangelo Chief Executive Officer and Director February 25, 2021 Joe Mastrangelo (Principal Executive Officer) /s/ Sagar Kurada Chief Financial Officer February 25, 2021 Sagar Kurada (Principal Financial and Accounting Officer) /s/ Daniel Shribman Director February 25, 2021 Daniel Shribman /s/ Alex Dimitrief Director February 25, 2021 Alex Dimitrief /s/ Audrey Zibelman Director February 25, 2021 Audrey Zibelman