What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2023-02-28 compared with 2022-02-25 · 1005 added, 1166 removed, 539 unchanged (80% of the section changed)

18 unchanged sentences

Based on this evaluation, our management concluded that our internal control over financial reporting was not effective as of December 31, 2022 due to the material weaknesses resulting from our lack of a formalized internal control framework in accordance with COSO, inadequate segregation of duties in the financial reporting process, lack of review and approval of journal entries, and a lack of management review controls.

The effectiveness of our internal control over financial reporting as of December 31, 2021 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report included in Part II, Item 8 of this Annual Report on Form 10-K.

Management’s Remediation Plan

16 unchanged sentences

OTHER INFORMATION

Delaware Section 205 Petition

On November 12, 2020, B.

Riley Principal Merger Corp.

II (“BMRG”), the predecessor to the Company, held a special meeting of stockholders (the “BMRG Special Meeting”) to approve certain matters relating to the business combination between BMRG and Eos Energy Storage LLC.

One of these matters was a proposal to amend and restate BMRG's certificate of incorporation in order to, among other things, increase the number of authorized shares of common stock from 125,000,000 shares of common stock, consisting of 100,000,000 shares of Class A common stock and 25,000,000 shares of Class B common stock, to 200,000,000 shares of common stock, and to reclassify all Class A common stock and Class B common stock as a single class of common stock (the “Charter Amendment Proposal”).

The Charter Amendment Proposal was approved by a majority of the outstanding shares of Class A common stock and Class B common stock of BMRG as of the record date for the BMRG Special Meeting, voting together as a single class, although voting records indicate that a majority of each of the shares of Class A common stock and Class B common stock also approved the Charter Amendment Proposal.

After the BMRG Special Meeting, BMRG and Eos Energy Storage LLC closed the business combination and the Company's certificate of incorporation, as amended to give effect to the Charter Amendment Proposal, became effective.

A recent ruling by the Delaware Court of Chancery introduced uncertainty as to whether Section 242(b)(2) of the Delaware General Corporation Law (the “DGCL”) would have required the Charter Amendment Proposal to be approved by separate votes of the majority of BMRG's then-outstanding shares of Class A common stock and Class B common stock.

The Company had been proceeding with the understanding that the Charter Amendment Proposal and the amendment and restated certificate of incorporation are valid.

In light of this recent ruling, however, to resolve potential uncertainty with respect to the Company's capital structure, the Company has filed a petition in the Delaware Court of Chancery under Section 205 of the DGCL to seek validation of the Charter Amendment Proposal.

Section 205 of the DGCL permits the Court of Chancery, in its discretion, to ratify and validate potentially defective corporate acts.

On February 27, 2023, the Court of Chancery approved the Company's request for relief and entered an order under Section 205 of the Delaware General Corporation Law (1) declaring the Company's Third Amended and Restated Certificate of Incorporation (the "Charter"), including the filing and effectiveness thereof, as validated and effective retroactive to the date of its filing with the Office of the Secretary of State of the State of Delaware on November 16, 2020, and all amendments effected thereby and (2) ordering that the Company's securities (and the issuance of the securities) described in the Petition and any other securities issued in reliance on the validity of the Charter are validated and declared effective, each as of the original issuance dates.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

23 unchanged sentences

(3) Exhibits.

Filed as part of this Annual Report on Form 10-K are the following exhibits:

Filed as part of this Annual Report are the following exhibits:

Incorporated by Reference

3 unchanged sentences

2.1 September 8, 2020

3.1 Third Amended and Restated Certificate of Incorporation of the Company

Form 8-K File No.

3.1 November 20, 2020

3.2 Amended and Restated Bylaws of the Company

3.1* Third Amended and Restated Certificate of Incorporation of the Company, as amended

3.2 Second Amended and Restated Bylaws of the Company

Form 8-K File No.

3.2 November 20, 2020

3.2 May 19, 2022

4.1 Specimen Common Stock Certificate

12 unchanged sentences

4.5 Description of Securities

Form 10-K File No.

001-39291 4.5 February 25, 2022

4.6 Indenture, dated April 7, 2022, between the Company and Wilmington Trust, National Association, as trustee (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on April 13, 2022)

Form 8-K File No.

001-39291 10.1 April 13, 2022

Incorporated by Reference

Exhibit Number Description of Document Schedule/Form File Number Exhibit Filing date

4.7 Convertible Promissory Note, dated as of June 13, 2022, between Eos Energy Enterprises, Inc.

and YA II PN, LTD.

Form 8-K File No.

001-39291 4.1 June 13, 2022

4.8 Convertible Promissory Note dated as of December 29, 2022 between Eos Energy Enterprises, Inc.

and YA II PN, LTD.

Form 8-K File No.

4.1 December 29, 2022

10.1 Sponsor Earnout Letter

5 unchanged sentences

10.10 November 20, 2020

10.3 Employment Agreement, dated June 22, 2020, by and between the Company and Jo s e ph Mastrangelo

Form 8-K File No.

10.11 November 20, 2020

Incorporated by Reference

Exhibit Number Description of Document Schedule/Form File Number Exhibit Filing date

10.4 Employment Agreement, dated June 1, 2020, by and between the Company and Mack Treece

Form 8-K File No.

10.12 November 20, 2020

10.3 Form of Indemnity Agreement

1 unchanged sentence

10.13 November 20, 2020

10.4 Employment Agreement, dated February 24, 2021, by and between the Company and Joseph Mastrangelo

Form 8-K File No.

99.1 March 2, 2021

10.5 Offer Letter, dated February 19, 2021, by and between the Company and Jody Markopoulos

4 unchanged sentences

001-39291 10.1 March 31, 2021

10.8 Unit Purchase Agreement , dated Apr il 8, 2021

10.7 Unit Purchase Agreement, dated April 8, 2021

Form 8-K File No.

001-39291 10.1 April 14, 2021

10.9 Form of Transition Services Agreement (Included in Exh i bit 10.

10.8 Form of Transition Services Agreement (Included in Exhibit 10.08)

Form 8-K File No.

8 unchanged sentences

001-39291 4.02 May 10, 2021

10.12 I nvestment Agreement , dated as of July 6, 2021 , by and among Eos Energy Enterprises, Inc.

Incorporated by Reference

Exhibit Number Description of Document Schedule/Form File Number Exhibit Filing date

10.11 Investment Agreement, dated as of July 6, 2021, by and among Eos Energy Enterprises, Inc.

and Spring Greek Capital, LLC

1 unchanged sentence

001-39291 10.1 July 7, 2021

10.13 Master Equipment Financing Agreemen t, dated September 30, 2021

10.12 Master Equipment Financing Agreement, dated September 30, 2021

Form 8-K File No.

6 unchanged sentences

001-39291 10.01 December 14, 2021

10.15 Employment Agreement, dated December 13, 2021, by and between the Company and Randall B.

Form 8-K File No.

001-39291 10.02 December 14, 2021

10.16 Employment Letter, dated December 29, 2021 by and between the Company and John Tedone.

(incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on February 14, 2022)

Form 8-K File No.

001-39291 10.1 February 14, 2022

10.17 Standby Equity Purchase Agreement, dated April 28, 2022, by and between Eos Energy Enterprises, Inc.

and YA II PN, Ltd.

(incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on April 28, 2022)

Form 8-K File No.

001-39291 10.1 April 28, 2022

10.18 Joinder to Investment Agreement, dated May 1, 2022 among Eos Energy Enterprises, Inc., Spring Creek Capital, LLC and Wood River Capital, LLC

Form 10-Q File No.

001-39291 10.3 May 9, 2022

10.19 Amendment No.

1 to the Standby Equity Purchase Agreement, dated as of April 28, 2022, between Eos Energy Enterprises, Inc.

and YA II PN, LTD.

Form 8-K File No.

001-39291 10.1 June 13, 2022

Incorporated by Reference

Exhibit Number Description of Document Schedule/Form File Number Exhibit Filing date

10.16 Employment Agreement , dated December 1 3 , 2021, by and between the Company and Randall B.

10.20 Supplemental Agreement, dated as of June 13, 2022, to the Standby Equity Purchase Agreement dated as of April 28, 2022 between Eos Energy Enterprises, Inc.

and YA II PN, LTD.

Form 8-K File No.

001-39291 10.2 June 13, 2022

10.21 Senior Secured Term Loan Credit Agreement, dated as of July 29, 2022, by and among Eos Energy Enterprises, Inc., the lenders party thereto, and ACP Post Oak Credit I LLC, as administrative agent and collateral agent.

Form 8-K File No.

001-39291 10.1 August 1, 2022

10.22 Guarantee and Collateral Agreement, dated as of July 29, 2022, by and among Eos Energy Enterprises, Inc., the other grantors named therein and ACP Post Oak Credit I LLC, as collateral agent

Form 8-K File No.

001-39291 10.2 August 1, 2022

10.23 Commitment Increase Agreement, dated as of August 4, 2022, by and among Eos Energy Enterprises, Inc., the guarantors party thereto, ACP Post Oak Credit I LLC, as administrative agent and lender, and certain other lenders party thereto

Form 8-K File No.

001-39291 10.1 August 5, 2022

10.24 Sales Agreement, dated August 5, 2022, by and between Eos Energy Enterprises, Inc.

and Cowen and Company, LLC

Form 8-K File No.

001-39291 10.2 August 5, 2022

10.25 Amended Director Compensation Policy, dated as of September 7, 2022

Form 8-K File No.

001-39291 10.1 September 9, 2022

10.26 Amendment No.

2 to the Standby Equity Purchase Agreement dated as of November 14, 2022 between Eos Energy Enterprises, Inc.

and YA II PN, LTD.

Form 8-K File No.

001-39291 10.1 November 14, 2022

Incorporated by Reference

Exhibit Number Description of Document Schedule/Form File Number Exhibit Filing date

10.27 Commitment Increase Agreement, dated as of December 7, 2022, by and among Eos Energy Enterprises, Inc.

the guarantors party thereto, and ACP Post Oak Credit LLC.

Form 8-K File No.

001-39291 10.1 December 8, 2022

10.28 Amendment No.

3 dated as of December 29, 2022 to the Standby Equity Purchase Agreement dated as of April 28, 2022 between Eos Energy Enterprises, Inc.

and YA II PN, LTD.

Form 8-K File No.

001-39291 10.1 December 29, 2022

10.29 Second Supplemental Agreement dated as of December 29, 2022 to the Standby Equity Purchase Agreement dated as of April 28, 2022 between Eos Energy Enterprises, Inc.

and YA II PN, LTD.

Form 8-K File No.

001-39291 10.1 December 29, 2022

10.30 Separation Agreement, dated January 20, 2023, by and between the Company and Randall Gonzales

Form 8-K File No.

001-39291 10.1 January 20, 203

10.31 Employment Agreement, dated January 20, 2023, by and between the Company and Nathan Kroeker

Form 8-K File No.

001-39291 10.2 January 20, 203

21.1* Subsidiaries of the Company

23.1* Consent of Independent Registered Public Accounting Firm

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

Incorporated by Reference

Exhibit Number Description of Document Schedule/Form File Number Exhibit Filing date

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

7 unchanged sentences

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

Incorporated by Reference

Exhibit Number Description of Document Schedule/Form File Number Exhibit Filing date

101.DEF XBRL Taxonomy Extension Definition Linkbase Document

7 unchanged sentences

Financial Statements

Report s of Independent Registered Public Accounting Firm (PCAOB ID No.

Report of Independent Registered Public Accounting Firm (PCAOB ID No.

Consolidated Balance Sheets as of December 31, 2022 and 2021

Consolidated Statements of Operations for the Years Ended December 31, 2021, 2020 and 2019

Consolidated Statements of Shareholders' Equity (Deficit) for the Years ended December 31, 2021, 2020, and 2019

Consolidated Statements of Operations and Comprehe nsive Loss for the Years Ended December 31, 2022 and 2021

Consolidated Statements of Shareholders' (Deficit) Equity for the Years E nded December 31, 2022 and 2021

Consolidated Statements of Cash Flows for the Years Ended December 31, 2022 and 2021

5 unchanged sentences

We have audited the accompanying consolidated balance sheets of Eos Energy Enterprises, Inc.

(the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations, shareholders’ equity (deficit), and cash flows, for each of the three years in the period ended December 31, 2021, 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, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 25, 2022, expressed an adverse opinion on the Company's internal control over financial reporting because of material weaknesses.

(the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, shareholders’ (deficit) equity, and cash flows, for each of the two years in the period ended December 31, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

10 unchanged sentences

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.

15 unchanged sentences

Our audit procedures related to the valuation of the embedded conversion feature in the 2021 Convertible Notes included the following, among others:

• We tested the effectiveness of controls over the Company’s determination of fair value of the embedded conversion feature.

• With the assistance of our fair value specialists, we evaluated the reasonableness of management’s valuation methodology and the significant assumptions used in determining the fair value of the embedded conversion feature by:

◦ Testing the source information underlying the fair value of the embedded conversion feature and the mathematical accuracy of the calculation.

◦ Developing a range of independent estimates and compared those to the fair value of the embedded conversion feature.

◦ Developing an independent estimate of the inputs and compared those to the inputs used in the fair value of the embedded conversion feature.

• We evaluated the competency and objectivity of management’s expert engaged by the Company to perform the valuation of the embedded conversion feature.

2 unchanged sentences

We have served as the Company's auditor since 2017.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Eos Energy Enterprises, Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Eos Energy Enterprises, Inc.

(the “Company”) as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, because of the effect of the material weaknesses identified below on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the financial statements as of and for the year ended December 31, 2021, of the Company and our report dated February 25, 2022, expressed an unqualified opinion on those financial statements and included an explanatory paragraph regarding the Company’s ability to continue as a going concern.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the 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 audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Material Weaknesses

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weaknesses have been identified and included in management's assessment:

deficiencies resulting from a lack of a formalized internal control framework in accordance with COSO, inadequate segregation of duties in the financial reporting process, a lack of review and approval of journal entries, and a lack of management review controls.

These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the financial statements as of and for the year ended December 31, 2021, of the Company, and this report does not affect our report on such financial statements.

/s/ Deloitte & Touche LLP

February 25, 2022

EOS ENERGY ENTERPRISES, INC.

1 unchanged sentence

(In thousands, except share and per share amounts)

As of December 31, 2021 and 2020

Current assets:

5 unchanged sentences

Notes receivable, net 36 103

Contract assets, current 1,859 1,369

Prepaid expenses 2,289 2,595

1 unchanged sentence

Total current assets 55,147 142,572

Property and equipment, net 12,890 5,653

Property, plant and equipment, net 27,169 12,890

Intangible assets, net 240 280

Goodwill 4,331 4,331

Investment in joint venture — 3,736

Security deposits, net 1,239 825

Notes receivable, long-term, net 3,547 100

Notes receivable, net 827 3,547

Operating lease right-of-use asset, net 4,316 3,468

Long-term restricted cash 11,422 —

Other assets, net 3,336 2,087

Total assets $ 106,788 $ 169,175

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

2 unchanged sentences

Accounts payable and accrued expenses - related parties — 1,200

Provision for firm purchase commitments - related parties — 1,585

Operating lease liability, current portion 1,084 —

Notes payable, current portion 4,926 —

Long-term debt, current portion 1,644 924

Operating lease liability, current 1,106 1,084

Note payable, current — 4,926

Long-term debt, current 2,872 1,644

Convertible notes payable - related party 2,688 —

Contract liabilities, current 3,850 849

Other current liabilities 32 9

1 unchanged sentence

Long-term liabilities:

Operating lease liability, long-term 3,224 —

Operating lease liability 4,130 3,224

Notes payable — 13,769

1 unchanged sentence

Convertible notes payable - related party 82,950 84,148

Warrants liability - related party 926 2,701

Contract liabilities, long-term 956 —

Warrants - related party 78 926

Other liabilities 3,488 17

Total long-term liabilities 178,923 106,811

Total liabilities 239,499 136,728

EOS ENERGY ENTERPRISES, INC.

1 unchanged sentence

(In thousands, except share and per share amounts)

As of December 31, 2021 and 2020

Total liabilities 136,728 17,479

Commitments and Contingencies (Note 17)

SHAREHOLDERS' EQUITY

Common Stock, $ 0.0001 par value, 200,000,000 shares authorized, 53,786,632 and 48,943,082 shares outstanding at December 31, 2021 and 2020, respectively

Contingently Issuable Common Stock — 17,600

SHAREHOLDERS' (DEFICIT) EQUITY

Common Stock, $ 0.0001 par value, 300,000,000 and 200,000,000 shares authorized, 82,653,781 and 53,786,632 shares outstanding at December 31, 2022 and 2021, respectively

Preferred stock, $ 0.0001 par value, 1,000,000 shares authorized, no shares outstanding at December 31, 2022 and 2021

1 unchanged sentence

Accumulated deficit ( 646,340 ) ( 416,527 )

Total shareholders' equity 32,447 120,785

Total liabilities and shareholders’ equity $ 169,175 $ 138,264

Accumulated other comprehensive income 6 —

Total shareholders' (deficit) equity ( 132,711 ) 32,447

Total liabilities and shareholders’ (deficit) equity $ 106,788 $ 169,175

The accompanying notes are an integral part of these consolidated financial statements.

EOS ENERGY ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share amounts)

For the years ended December 31, 2021, 2020 and 2019

2021 2020 2019

For the Years Ended December 31,

Total revenue $ 17,924 $ 4,598

4 unchanged sentences

Loss on pre-existing agreement — 30,368

Grant expense (income), net 269 913 ( 469 )

Loss from write-down of property, plant and equipment 6,846 50

Grant (income) expense, net ( 16 ) 269

Total costs and expenses 239,182 139,322

Operating loss ( 221,258 ) ( 134,724 )

Other income (expense)

Interest income (expense), net ( 604 ) ( 115 ) 2

Other (expense) income

Interest expense, net ( 7,915 ) ( 604 )

Interest expense – related party ( 10,898 ) ( 4,597 )

Remeasurement of equity method investment — ( 7,480 )

Loss on extinguishment of convertible notes - related party — — ( 6,111 )

Change in fair value, embedded derivative 17,507 2,092 ( 716 )

Change in fair value, warrants liability - related party 1,775 ( 2,142 ) —

Change in fair value, Sponsor Earnout Shares — ( 8,220 ) —

Income (loss) from equity in unconsolidated joint venture 440 127 ( 178 )

Gain on debt forgiveness 1,273 — —

Sale of state tax attributes 2,194 — 4,060

Gain on change in fair value of derivatives - related parties 11,728 19,282

Income from equity in unconsolidated joint venture — 440

(Loss) gain on debt (extinguishment)/forgiveness ( 942 ) 1,273

Other (expense) income ( 477 ) 2,194

Loss before income taxes $ ( 229,762 ) $ ( 124,216 )

Income tax expense 51 —

Net loss $ ( 229,813 ) $ ( 124,216 )

Other comprehensive income

Foreign currency translation adjustment, net of tax 6 —

Comprehensive loss $ ( 229,807 ) $ ( 124,216 )

Basic and diluted loss per share attributable to common shareholders

6 unchanged sentences

EOS ENERGY ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' (DEFICIT) EQUITY

(In thousands, except share and per share amounts)

For the years ended December 31, 2021, 2020 and 2019

Common Stock 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 2 125,680 — — 125,682

Contingently Issuable Common Stock — — — 17,600 ( 17,600 ) —

Transaction cost incurred in the Merger — — ( 10,274 ) — — ( 10,274 )

Capital contribution - disgorgement of short swing profits — — 432 — — 432

Shares issued to restricted stock units holders 174,761 — — — — —

Stock-based compensation — — 5,081 — — 5,081

Release of Block A Sponsor Earnout Shares from restriction 859,000 — 12,559 — — 12,559

Reclassification of Block B Sponsor earnout shares — — 11,682 — — 11,682

Net loss — — — — ( 70,643 ) ( 70,643 )

Balance, December 31, 2020

Common Stock Additional Paid in Capital Contingently Issuable Common Stock Accumulated Other Comprehensive Income Accumulated Deficit Total

Shares Amount

Balances on December 31, 2020

48,943,082 $ 5 $ 395,491 $ 17,600 $ — $ ( 292,311 ) $ 120,785

8 unchanged sentences

Net loss — — — — — ( 124,216 ) ( 124,216 )

Balance, December 31, 2021

Balances on December 31, 2021

53,786,632 $ 5 $ 448,969 $ — $ — $ ( 416,527 ) $ 32,447

Stock-based compensation — — 13,794 — — — 13,794

Exercise of warrants 600 — 7 — — — 7

Release of restricted stock units 704,178 — — — — — —

Cancellation of shares used to settle payroll tax withholding ( 203,951 ) — ( 978 ) — — — ( 978 )

Issuance of common stock under June 2022 Promissory Note 3,393,663 1 7,534 — — — 7,535

Issuance of common stock under ATM program 20,539,603 2 38,624 — — — 38,626

Issuance of common stock under SEPA 3,967,939 1 4,603 — — — 4,604

Commitment fee for SEPA settled by common stock 465,117 — 1,061 — — — 1,061

Foreign currency translation adjustment — — — — 6 — 6

Net loss — — — — — ( 229,813 ) ( 229,813 )

Balances on December 31, 2022

82,653,781 $ 9 $ 513,614 $ — $ 6 $ ( 646,340 ) $ ( 132,711 )

The accompanying notes are an integral part of these consolidated financial statements.

2 unchanged sentences

(In thousands, except share and per share amounts)

For the years ended December 31, 2021, 2020 and 2019

2021 2020 2019

Cash flows from operating activities

3 unchanged sentences

Depreciation and amortization 6,814 2,613

Impairment of property and equipment — — 1,590

Non-cash lease expense 924 — —

Loss from write-down of property, plant and equipment 6,846 50

Amortization of right-of-use assets 865 924

Remeasurement of equity method investment — 7,480

Loss (Income) from equity in unconsolidated joint venture ( 440 ) ( 127 ) 178

Accreted interest on convertible notes payable – related party 1,545 23,706 49,708

Amortization of debt issuance cost 1,405 — —

Loss on extinguishment of convertible notes- related party — — 6,111

Gain on debt forgiveness ( 1,273 ) — —

Change in fair value, embedded derivative ( 17,507 ) ( 2,092 ) 716

Change in fair value, warrants liability - related party ( 1,775 ) 2,142 —

Change in fair value, Sponsor Earnout Shares — 8,220 —

Income from equity in unconsolidated joint venture — ( 440 )

Interest accretion and amortization of debt issuance costs 1,886 —

Interest accretion and amortization of debt issuance costs - related party 4,584 2,950

Commitment fee for SEPA settled by common stock - related party 1,061 —

Loss (gain) on debt extinguishment/(forgiveness) 942 ( 1,273 )

Gain on change in fair value of derivatives - related parties ( 11,728 ) ( 19,282 )

Other 5,918 2,900

Changes in operating assets and liabilities (net of assets and liabilities acquired)

Receivable on sale of state tax attributes — 4,060 ( 4,060 )

Changes in operating assets and liabilities:

Prepaid expenses 304 ( 284 )

2 unchanged sentences

Vendor deposits 6,808 ( 7,419 )

Security deposits ( 414 ) ( 17 ) ( 64 )

Contract assets ( 631 ) ( 1,369 )

Accounts payable 19,516 5,823

3 unchanged sentences

Operating lease liabilities ( 785 ) ( 846 )

Notes payable 18,695 — —

Contract liabilities 3,957 772

Note payable ( 19,637 ) 18,695

Other ( 1,387 ) ( 2,060 )

5 unchanged sentences

Investment in joint venture — ( 4,000 )

Purchases of property and equipment ( 15,589 ) ( 3,605 ) ( 2,299 )

Purchases of property, plant and equipment ( 20,072 ) ( 15,589 )

Net cash used in investing activities ( 17,170 ) ( 23,336 )

Cash flows from financing activities

Principal payments on finance (capital) lease obligations ( 11 ) ( 15 ) ( 72 )

Proceeds from issuance of convertible notes payable – related party 100,000 9,009 19,346

Payment made for debt issuance cost ( 4,370 ) — —

Proceeds from other financing — 191 —

Repayment of other financing ( 94 ) ( 97 ) ( 1,000 )

Proceeds from Paycheck Protection Program loan — 1,257 —

Proceeds from issuance of convertible notes payable – related party, net of discount 9,310 100,000

EOS ENERGY ENTERPRISES, INC.

1 unchanged sentence

(In thousands, except share and per share amounts)

For the years ended December 31, 2021, 2020 and 2019

2021 2020 2019

Proceeds attributable to beneficial conversion features of convertible notes payable – related party — — 1,793

Payment of debt issuance costs - related party ( 304 ) —

Proceeds received from the Senior Secured Term Loan, net of discount 97,992 —

Payment of debt issuance costs ( 12,398 ) ( 4,370 )

Principal payments on finance lease obligations ( 14 ) ( 11 )

Repayment of other financing — ( 94 )

Proceeds from equipment financing facility 4,216 7,000

Repayment of equipment financing facility ( 1,913 ) ( 455 )

Proceeds from capital infusion in reverse recapitalization — 142,345 —

Issuance of common stock under ATM program, net of commissions 38,626 —

Issuance of common stock under SEPA 5,000 —

Proceeds from exercise of stock options — 1,074

1 unchanged sentence

Repurchase of shares from employees for income tax withholding purposes ( 978 ) ( 353 )

Transaction cost for the reverse recapitalization — ( 10,274 ) —

Issuance of contingently redeemable preferred units — 11,759 2,031

Other 432 — —

Net cash provided by financing activities 139,544 123,322

Net increase (decrease) in cash, cash equivalents and restricted cash ( 16,161 ) 120,991 ( 4,636 )

Effect of foreign exchange on cash, cash equivalents and restricted cash 14 —

Net decrease in cash, cash equivalents and restricted cash ( 74,469 ) ( 16,161 )

Cash, cash equivalents and restricted cash, beginning of year

3 unchanged sentences

Non-cash investing and financing activities:

Fixed assets acquired with finance lease $ 21 $ — $ —

Right-of-use operating lease assets in exchange for lease liabilities 2,112 4,351

Contribution of inventory to joint venture — — 167

Fixed assets acquired with finance lease 147 21

Accrued and unpaid capital expenditures 2,626 576

Issuance of convertible notes for interest paid-in-kind 6,267 2,900

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 $ —

Issuance of common stock under June 2022 Promissory Note 7,534 —

Accrued and unpaid debt issuance costs 5,536 —

Supplemental disclosures

Cash paid for interest $ 5,766 $ 157

The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the consolidated balance sheets.

December 31, 2021

December 31, 2020

Cash and cash equivalents $ 104,831 $ 121,853

Restricted cash 861 —

Total cash, cash equivalents and restricted cash $ 105,692 $ 121,853

The accompanying notes are an integral part of these consolidated financial statements.

EOS ENERGY ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Nature of Operations and Summary of Significant Accounting Policies

Nature of Operations

Eos Energy Enterprises, Inc.

Riley Principal Merger Corp.

II ("BMRG")) (the “Company” or "Eos") designs, develops, manufactures, and sells innovative energy storage solutions for electric utilities, and commercial and industrial (“C&I”) 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 focuses on developing and selling safe, reliable, long-lasting low-cost turn-key alternating current (“AC”) integrated systems using Eos’s direct current (“DC”) Battery System.

The Company has a manufacturing facility in Turtle Creek, Pennsylvania to manufacture the DC Battery Systems integrated with the BMS for DC Battery Systems.

The Company’s primary markets focus on integrating battery storage solutions with (1) solar systems that are connected to the utility power grid (2) solar systems that are not connected to the utility power grid (3) storage systems utilized to relieve congestion and (4) storage systems to assist C&I 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.

(the “Company,” “we,” “us,” “our,” and “Eos”) designs, develops, manufactures, and markets innovative energy storage solutions for utility-scale, microgrid, and commercial & industrial (“C&I”) applications.

Eos developed a broad range of intellectual property with multiple patents covering unique battery chemistry, mechanical product design, energy block configuration and a software operating system (Battery Management System).

The Company has only one operating and reportable segment.

Liquidity and Going Concern

The Company is in the early commercialization stage of its lifecycle and, as such, has limited revenue generating activities.

Accordingly, the Company has incurred significant recurring losses, and net operating cash outflows from operations since inception, which is attributable to its higher operating costs relative to its revenue base.

Operating expenses consist primarily of costs related to the Company’s sales of their product along with the associated research and development costs, as well as other recurring general and administrative expenses.

While management and the Company’s Board of Directors anticipate the Company will eventually reach a scale of profitability through the sale of battery energy systems and other complimentary products and services, the Company believes the current stage of the Company’s lifecycle justifies continued investment in the development and launch of products with outside capital at the expense of short-term profitability.

Accordingly, we expect to continue to incur significant losses, and net operating cash outflows from operations for the foreseeable future to fund its obligations as they become due, which includes necessary funding to scale up the Company’s operations to allow for the delivery of order backlog and additional order opportunities for its battery systems, and continued investment in research and development.

As of December 31, 2021, Eos had total assets of $ 169,175 , which includes total cash and cash equivalents of $ 104,831 , total liabilities of $ 136,728 , which includes the total amounts owed on the Company’s outstanding convertible notes payable of $ 84,148 (see Note 15), notes payable of $ 13,769 and other long-term debt of $ 6,371 and a total accumulated deficit of $( 416,527 ), which is primarily attributable to the significant recurring losses the Company has accumulated since inception.

The Company has historically relied on outside capital to fund its cost structure and expects this reliance to continue for the foreseeable future until the Company reaches a scale of profitability through its planned revenue generating activities.

However, as of the date of the accompanying financial statements were issued, management concluded that the Company did not have sufficient capital to support its current cost structure for one year after the date the accompanying financial statements were issued.

Management believes these uncertainties raise substantial doubt about the Company’s ability to continue as a going concern.

If the Company is unable to raise additional capital, the Company may have to significantly delay, scale back or discontinue the development or commercialization of its product.

The Company has passed Part I of the application under the U.S.

Department of Energy’s Loan Guarantee Solicitation for Applications for Renewable Energy Projects and Efficient Energy Projects (the “DOE Loan Program”).

There can be no assurance that we will successfully complete Part II of the DOE Loan Program or otherwise be able to obtain this new funding, or any other new funding, on terms acceptable to us, on a timely basis, or at all.

EOS ENERGY ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Nature of Operations and Summary of Significant Accounting Policies (cont.)

The accompanying consolidated financial statements have been prepared on the basis that we will continue to operate as a going-concern, which contemplates we will be able to realize assets and settle liabilities and commitments in the normal course of business for the foreseeable future.

The accompanying financial statements do not include any adjustments that may result from the outcome of these uncertainties.

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 Principal 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 Combinations , 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.

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 15 and Note 18 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.

As a growth company in the early commercialization stage of its lifecycle, Eos is subject to inherent risks and uncertainties associated with the development of an enterprise.

In this regard, substantially all of the Company’s efforts to date have been devoted to the development and manufacturing of battery energy storage systems and complimentary products and services, recruitment of management and technical staff, deployment of capital to expand the Company’s operations to meet customer demand and raising capital to fund the Company’s development.

As a result of these efforts, the Company has incurred significant losses and negative cash flows from operations since its inception and expects to continue to incur such losses and negative cash flows for the foreseeable future until such time that the Company can reach a scale of profitability to sustain its operations.

In order to execute its development strategy, the Company has historically relied on outside capital through the issuance of equity, debt, and borrowings under financing arrangements (collectively “outside capital”) to fund its cost structure and expects to continue to rely on outside capital for the foreseeable future.

While the Company believes it will eventually reach a scale of profitability to sustain its operations, there can be no assurance the Company will be able to achieve such profitability or do so in a manner that does not require its continued reliance on outside capital.

Moreover, while the Company has historically been successful in raising outside capital, there can be no assurance the Company will be able to continue to obtain outside capital in the future or do so on terms that are acceptable to the Company.

As of the date the accompanying consolidated financial statements were issued (the “issuance date”), management evaluated the significance of the following negative financial conditions in accordance with Accounting Standard Codification 205-40, Going Concern:

• Since its inception, the Company has incurred significant losses and negative cash from operations in order to fund its development.

During the year ended December 31, 2022, the Company incurred a net loss of $( 229,813 ), incurred negative cash flows from operations of $( 196,857 ), and had an accumulated deficit of $( 646,340 ) as of December 31, 2022.

• As of December 31, 2022, the Company had $ 17,076 of unrestricted cash and cash equivalents available to fund the Company’s operations, no additional borrowings available to fund its operations under pre-existing financing arrangements (see Note 13, Borrowings ) and negative working capital of $( 5,429 ), inclusive of $ 5,560 of outstanding debt that is currently scheduled to mature within the next twelve months beyond the issuance date.

• While the Company has available capacity under certain pre-existing arrangements to issue shares of the Company’s common stock, including under the SEPA and the ATM offering program, (see also Note 20, Shareholders’ Equity ) to aid in funding the Company’s operations, the Company’s ability to secure such funding is dependent upon certain conditions, such as investors’ willingness to purchase the Company’s common stock and at a price that is acceptable to the Company.

Accordingly, as of the issuance date there is no assurance the Company will be able to secure funding under these pre-existing arrangements or on terms that are acceptable to the Company.

EOS ENERGY ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Nature of Operations and Summary of Significant Accounting Policies (cont.)

Overview (cont.)

• Similarly, while the Company has historically been successful in raising additional outside capital to fund the Company’s operations, as of the issuance date no assurance can be provided the Company will be successful in obtaining additional outside capital or on terms that are acceptable to the Company.

In this regard, the Company is currently in the process of negotiating additional outside capital under the U.S.

Department of Energy’s (“DOE”) Loan Guarantee Solicitation for Applications for Renewable Energy Projects and Efficient Energy Projects (the “DOE Loan Program”).

As of the issuance date, the Company remains in the due diligence phase of negotiations with the DOE, however, there can be no assurance that the Company will be able to secure such loan or on terms that are acceptable to the Company.

• The Company is required to remain in compliance with a quarterly minimum financial liquidity covenant under its Senior Secured Term Loan.

While the Company was in compliance with this covenant as of December 31, 2022, and expects to remain in compliance as of March 31, 2023, absent the Company’s ability to secure additional outside capital, the Company may be unable to remain in compliance with this covenant beginning on June 30, 2023 and thereafter.

In the event the Company is unable to remain in compliance with the minimum financial liquidity covenant and the other nonfinancial covenants required by the Senior Secured Term Loan, and the Company is further unable to cure such noncompliance or secure a waiver, Atlas may, at its discretion, exercise any and all of its existing rights and remedies, which may include, among other things, entering into a forbearance agreement with the Company, and/or asserting its rights in the Company’s assets securing the loan.

Moreover, the Company’s other lenders may exercise similar rights and remedies under the cross-default provisions of their respective borrowing arrangements with the Company.

• Absent an ability to secure additional outside capital in the near term, the Company will be unable to meet its obligations as they become due over the next twelve months beyond the issuance date.

• In the event the Company’s ongoing efforts to raise additional outside capital prove unsuccessful, management will be required to seek other strategic alternatives, which may include, among others, a significant curtailment in the Company’s operations, a sale of certain of the Company’s assets, a sale of the entire Company to strategic or financial investors, and/or allowing the Company to become insolvent.

These uncertainties raise substantial doubt about the Company’s ability to continue as a going concern.

The accompanying consolidated financial statements have been prepared on the basis that the Company will continue to operate as a going concern, which contemplates that the Company will be able to realize assets and settle liabilities and commitments in the normal course of business for the foreseeable future.

Accordingly, the accompanying consolidated financial statements do not include any adjustments that may result from the outcome of these uncertainties.

Summary of Significant Accounting Policies

Principles of Consolidation

The Company follows accounting standards established by the Financial Accounting Standards Board (“FASB”) to ensure consistent reporting of financial condition, results of operations and cash flows.

References to accounting principles generally accepted in the United States (“GAAP”) in these notes are to the FASB Accounting Standards Codification™ (“ASC”) and related updates (“ASU”).

The financial statements include the accounts of the Company and its subsidiaries and have been prepared in accordance with GAAP.

All intercompany transactions and balances have been eliminated in consolidation.

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.

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Summary of Significant Accounting Policies (cont.)

Foreign Currency

The Company follows the provisions of ASC 830, Foreign Currency Matters .

The Company’s foreign subsidiaries use the local currency of their respective countries as their functional currency.

The assets and liabilities of foreign operations are translated at the exchange rates in effect at the balance sheet date.

The operating results of foreign operations are translated at weighted average exchange rates.

The related translation gains or losses are reported as a separate component of shareholders’ (deficit) equity in accumulated other comprehensive loss.

Gains and losses from foreign currency transactions, which were insignificant for years ended December 31, 2022 and 2021, are included as other income (expense) in the consolidated statements of operations and comprehensive loss.

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.

The preparation of financial statements in conformity with GAAP 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 consolidated financial statements include the warranty obligation, valuation of Contingently Issuable Common stock and Earnout shares, valuation of embedded derivatives, and fair value of consideration in business acquisition.

Cash and Cash Equivalents

Cash and cash equivalents include cash and highly liquid investments purchased with original maturities of three months or less.

Restricted cash

Restricted cash as of December 31, 2021 and December 31, 2020 was approximately $ 861 and $ — , respectively, on the Company's consolidated balance sheets.

All of the restricted cash on December 31, 2021 was held by the bank as collateral for the Company's corporate credit cards and subject to withdrawal restriction.

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.

Accounts Receivable, net

The most significant estimates in the consolidated financial statements include the calculation of the warranty liability and valuation of embedded derivatives within certain of our debt obligations.

Allowance for Expected Credit Losses

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 credit losses.

The Company had $ 1,925 and $ 35 of accounts receivable as of December 31, 2021 and 2020, with $ 9 and $ 35 of allowances for credit loss recorded, respectively.

The total allowance for credit losses was included in Accounts Receivable, Net on the consolidated balance sheets.

The activity in the allowance for credit losses was as follows:

December 31, 2021

December 31, 2020

Beginning of Period $ 35 $ —

Credit Loss Expense 9 35

Write-offs ( 35 ) —

End of Period $ 9 $ 35

Inventory, net

Inventories are stated at the lower of cost or net realizable value.

Cost is computed using standard cost which approximates actual cost on a first-in, first-out basis.

The Company records inventory when it takes delivery and title to the product according to the terms of each supply contract.

EOS ENERGY ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Nature of Operations and Summary of Significant Accounting Policies (cont.)

The Company evaluates its ending inventories for excess quantities and obsolescence.

A valuation allowance is recorded for inventories that management considers excess or obsolete.

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.

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.

If the collection of any specific receivable is doubtful, an allowance is recorded in the allowance for expected credit losses.

As of December 31, 2022 and 2021, the allowances for expected credit loss related to Accounts Receivable was $ 3 and $ 9 , respectively.

The Company also has an immaterial allowance related to its Notes Receivable, net, which is included on the accompanying consolidated balance sheets.

Business Combinations

1 unchanged sentence

The operating results of acquired businesses are included in the Company’s results of operations beginning as of their effective acquisition dates.

Additional information regarding the business acquisition can be found in Note 3.

Additional information regarding acquisitions can be found in Note 3, Acquisition .

Cash, Cash Equivalents, and Restricted Cash

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Cash and cash equivalents are recorded at cost, which approximates fair value.

Embedded derivatives

Some of our debt financings contain embedded derivatives, such as conversion features in our Convertible Notes- Related Party, as well as in our Yorkville Convertible Promissory Note.

The Company evaluates each debt agreement to determine whether the embedded derivative feature requires bifurcation from the host liability, in which case would require to be accounted for as a derivative liability.

The Company uses valuation models to estimate the fair value of the embedded derivatives.

The change in fair value of the embedded derivatives is presented separately on the consolidated statements of operations and comprehensive loss.

Earnings (loss) Per Share

In accordance with the provisions of 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.

See Note 20, Shareholders' Equity for further information.

EOS ENERGY ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Nature of Operations and Summary of Significant Accounting Policies (cont.)

The Company accounts for goodwill as the excess of the purchase price over the net amount of identifiable assets acquired and liabilities assumed in a business combination measured at fair value.

Goodwill is not subject to amortization;

rather, the Company tests goodwill for impairment annually or more frequently if an event occurs or circumstances change in the interim that would more likely than not reduce the fair value of the asset below the carrying amount.

The Company has the option to perform a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount.

If this is the case, the quantitative assessment is required.

If it is more likely than not that the fair value of the reporting unit is greater than its carrying amount, the quantitative goodwill impairment test is not required.

In performing a qualitative assessment, the Company first assesses relevant factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative goodwill impairment test.

The Company identifies and considers the significance of relevant key factors, events, and circumstances that could affect the fair value of the reporting unit.

These factors include external factors such as macroeconomic, industry, and market conditions, as well as entity-specific factors, such as actual and planned financial performance.

Summary of Significant Accounting Policies (cont.)

Fair Value of Financial Instruments

The carrying amounts for the Company’s financial instruments classified as current assets and liabilities, including cash and cash equivalents, restricted cash, accounts receivable, contract assets, contract liabilities and accounts payable approximate fair value due to their short maturities.

Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.

Goodwill consists of the excess of the purchase price over the fair value of identifiable net assets of businesses acquired.

Goodwill is reviewed for impairment each year using a qualitative or quantitative process that is performed at least annually or whenever events or circumstances indicate a likely reduction in the fair value of a reporting unit below its carrying amount.

Prior to performing a quantitative evaluation, an assessment of qualitative factors may be performed to determine whether it is more likely than not that the fair value of a reporting unit exceeds the carrying value.

If it is determined that it is unlikely that the carrying value exceeds the fair value, the Company is not required to complete the quantitative goodwill impairment evaluation.

If it is determined that the carrying value may exceed fair value when considering qualitative factors, a quantitative goodwill impairment evaluation is performed.

When performing the quantitative evaluation, if the carrying value of the reporting unit exceeds its fair value, an impairment loss equal to the difference will be recorded.

The Company completed the annual goodwill impairment test as of November 30, 2022, using a qualitative assessment for the reporting unit.

1 unchanged sentence

As a result of the annual assessment, there were no impairment charges for the year ended December 31, 2022.

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 upon shipment or delivery of the goods at the customer’s designated location and varies by contracts.

In addition, the corresponding installation and commissioning services related to the systems are performance obligations satisfied over time as the respective services are performed.

Further, extended warranties, maintenance and monitoring, and degradation guarantees 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 performance period.

Transaction price is allocated to the various performance obligations based on the relative stand-alone selling prices of the promised goods and services.

Stand-alone selling prices are either determined based on cost plus a reasonable margin or an adjusted market approach.

Payment terms generally include advance payments to reserve capacity and/or upon issuance of the 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 goods sold.

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.

Assessment of Estimates of Variable Consideration and Determination of Transaction Price

Many of the Company’s contracts with customers contain some component of variable consideration.

The Company estimates variable consideration, such as refunds, penalties including liquidated damages, 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 estimates of variable consideration on a monthly basis and adjust the 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.

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.

EOS ENERGY ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Nature of Operations and Summary of Significant Accounting Policies (cont.)

Practical Expedients and Exemptions

As permitted by ASC 606, the Company elected to use certain practical expedients.

The Company treats costs associated with obtaining new contracts as expenses when incurred if the amortization period of the asset recognized by the Company is one year or less.

The election of the practical expedients results in accounting treatments that the Company believes are consistent with historical accounting policies and, therefore, the election of practical expedients does not have a material impact on the comparability of the financial statements.

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 two years and optional 20-year degradation guarantee, commencing upon commissioning.

Costs to provide for warranty obligations are estimated and recorded as a liability at the time of recording the sale.

Warranty reserves include management’s best estimate of the projected costs to repair or to replace any items under warranty, which is based on various factors, including the use of actual claim data to date, results of lab testing, factory quality data, field monitoring, and data on industry averages for similar products.

Extended warranties and degradation guarantee are identified as performance obligations in the Company’s contracts with customers and are discussed 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

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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.

Right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.

The discount rate used to calculate the present value represents our incremental borrowing rate and is calculated based on the treasury yield curve that commensurate with the term of each lease, and a spread representative of our borrowing costs.

Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Leases may be classified as either operating leases or finance leases.

We have made an accounting policy election to not include leases with an initial term of 12 months or less on the balance sheets.

Prior to the adoption of ASC 842, Leases , the Company recorded 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 were recorded as Deferred rent, which is included in other liabilities on the balance sheets.

See Note 21 for additional 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.

During the fourth quarter of 2022, the Company recorded a loss from write-down of property, plant and equipment (see Note 7, Property, Plant & Equipment for further discussion) .

EOS ENERGY ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

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.

Summary of Significant Accounting Policies (cont.)

Income Taxes and Deferred Taxes

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The Company 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 included in the net operating loss at December 31, 2021 and December 31, 2020 that do not meet the more-likely-than-not threshold under ASC 740 are $ 348 and $ 322 , respectively.

See Note 12 for further information.

Earnings (loss) Per Share

Other potentially dilutive common shares, and the related impact to earnings, are considered when calculating EPS on a diluted basis.

See Note 23 for further information.

Intangible Assets, net

Intangible assets are stated at their historical cost and amortized on a straight-line basis over their expected useful lives.

Inventory, net

Inventories are stated at the lower of cost or net realizable value.

Cost is computed using standard cost which approximates actual cost on a first-in, first-out basis.

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.

A valuation allowance is recorded for inventories that management considers excess or obsolete.

Once inventory is written down and a new cost basis is established, it is not written back up if demand increases.

The Company accounts for its leases under ASU 2016-02, Leases (“ASC 842”).

Under ASC 842, the right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.

The discount rate used to calculate the present value represents our incremental borrowing rate and is calculated based on the treasury yield curve that is commensurate with the term of each lease, and a spread representative of our borrowing costs.

Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Leases may be classified as either operating leases or finance leases.

Leases with an initial term of 12 months or less are excluded from the scope of ROU assets and liabilities, as allowed by ASC 842.

EOS ENERGY ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Nature of Operations and Summary of Significant Accounting Policies (cont.)

Summary of Significant Accounting Policies (cont.)

The Company has lease agreements with lease and non-lease components.

The Company has elected the practical expedient to account for non-lease components as part of the lease component for all asset classes.

The majority of the Company's lease agreements are real estate leases.

Property, Plant and Equipment, net

Equipment is stated at cost, less accumulated depreciation.

Depreciation is computed on a straight-line basis over the estimated 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.

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.

Revenue Recognition

Revenue is earned from the sales, installation, and commissioning of BESS, the terms of which are dictated by supply agreements the Company enters into with its customers.

Revenue is recognized to depict the transfer of promised goods and/or services to customers 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.

As most contracts contain multiple goods delivered to the customer at different times, the transaction price is allocated to each good based on the relative standalone selling price and revenue is recognized when or as the performance obligation is satisfied.

The Company uses either the expected cost-plus margin approach or adjusted market assessment approach to estimate the standalone selling prices of its goods and services.

Product Revenue

Product revenue is comprised of revenue from the BESS, along with other products, including inverters and spare parts, and is recognized at the point in time at which control passes, the determination of which is made in accordance with ASC 606, based on indicators of control.

Generally, passage of control will be determined based upon the shipping terms, which vary by contract.

Many of the Company’s contracts with customers contain some component of variable consideration.

We update our estimates of variable consideration and adjust the 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.

Shipping and handling costs are included in cost of goods sold.

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.

Service Revenue

Service revenue includes commissioning, installation and engineering, procurement and construction revenue.

As the customer simultaneously receives and consumes the benefits provided by the Company’s performance, these performance obligations are satisfied over time.

The Company uses an input method to measure progress towards satisfaction.

If at any time management determines that in the case of a particular contract total costs will exceed total contract revenue, a provision for the entire anticipated contract loss is recorded at that time.

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Summary of Significant Accounting Policies (cont.)

Warranty related revenue

In addition to a standard two-year limited warranty against defects, the Company offers customers the option to purchase an extended warranty, a maintenance and monitoring service and/or a performance guarantee.

As the standard two-year limited warranty is classified as an assurance-type warranty, based on criteria set forth in ASC 606, it is not accounted for as a separate performance obligation.

The extended warranty, maintenance and monitoring service warranty and performance guarantee, however, represent distinct services and are accounted for as separate performance obligations based on a time-lapsed measure of progress resulting in a ratable recognition of revenue over the respective performance period.

For these performance obligations, at any time if management determines that in the case of a particular warranty that total costs will exceed total warranty revenue, a provision for the entire anticipated warranty loss is recorded at that time and included in warranty liability on the consolidated balance sheets.

Contract Assets and Contract Liabilities

The Company recognizes contract assets for certain contracts in which revenue recognition performance obligations have been satisfied, however invoicing to the customer has not yet occurred.

Contract liabilities primarily relate to advance consideration received from customers in advance of the Company’s satisfying performance obligations under contractual arrangements.

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.

Payment terms are generally aligned with meeting various contractual milestones, beginning with purchase order execution and extending through manufacturing release, ready to ship, delivery and commissioning.

Practical Expedients and Exemptions

As permitted by ASC 606, Revenue from Contracts with Customers (“ASC 606”) , the Company elected to use certain practical expedients.

The Company treats costs associated with obtaining new contracts as expenses when incurred if the amortization period of the asset recognized by the Company is one year or less.

The Company’s chief operating decision-maker (“CODM”) is its Chief Executive Officer and President.

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As such, the Company has determined that it operates in one operating and one reportable segment.

Fair Value of Financial Instruments

The carrying amounts for the Company’s financial instruments classified as current assets and liabilities, including cash and cash equivalents, restricted cash, trade accounts receivable and accrued expenses and accounts payable, approximate fair value due to their short maturities.

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 3 - Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.

Refer to Note 22 for additional information.

Recently Adopted Accounting Pronouncements

Under the Jumpstart Our Business Startups (“JOBS”) Act, the Company qualified as an emerging growth company (“EGC”) and as such, elected not to opt out of the extended transition period for complying with new or revised accounting pronouncements.

During the extended transition period, the Company was not subject to new or revised accounting standards applicable to public companies.

Based on our public float calculation at June 30, 2021, the Company is deemed a Large Accelerated Filer under the U.S.

Securities and Exchange Commission guidelines and ceased to qualify as an EGC effective December 31, 2021.

The loss of EGC status resulted in losing the reporting exemptions noted above, and in particular requires our independent registered public accounting firm to provide an attestation report on the effectiveness of our internal control over financial reporting as of and for the year ended December 31, 2021 under Section 404(b) of the Sarbanes-Oxley Act and requires the adoption of ASU 2016-02 and ASU 2016-13 for the year ended December 31, 2021.

On January 1, 2021, the Company adopted ASU 2016-02, Leases ("Topic 842"), using the transition method introduced by ASU 2018-11, which does not require revisions to comparative periods.

Adoption of the new standard resulted in the recording of lease assets and lease liabilities of $ 3,662 and $ 4,465 , respectively, as of January 1, 2021.

The difference between the lease assets and lease liabilities primarily relates to deferred rent recorded in accordance with the previous leasing guidance.

The new standard did not materially impact our consolidated statements of operations or statements of cash flows.

EOS ENERGY ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Nature of Operations and Summary of Significant Accounting Policies (cont.)

On January 1, 2021, the Company adopted ASU No.

2016-13, Financial Instruments-Credit Losses (Topic 326), and the subsequent amendments.

The standard sets forth an expected credit loss model which requires the measurement of expected credit losses for financial instruments based on historical experience, current conditions and reasonable and supportable forecasts.

This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost, and certain off-balance sheet credit exposures.

The adoption of this standard did not have a material impact on our consolidated financial statements.

On January 1, 2021, the Company adopted ASU No.

2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.

This ASU simplifies the accounting for convertible instruments by eliminating the cash conversion and beneficial conversion feature models used to separately account for embedded conversion features as a component of equity.

Instead, the entity will account for the convertible debt or convertible preferred stock securities as a single unit of account, unless the conversion feature requires bifurcation and recognition as derivatives.

Additionally, the guidance requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of potential share settlement for instruments that may be settled in cash or shares.

The adoption of this standard did not have a material impact on our 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.

The Company has adopted this ASU in the first quarter of 2021.

The adoption did not have an impact on our consolidated financial statements.

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 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, except per share amounts).

EOS ENERGY ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Merger Agreement and Reverse Recapitalization (cont.)

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 20), 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 15 for further discussion of the convertible notes payable — related party and Note 18 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 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 55 % 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.

The Company estimated the original fair value of the contingently issuable shares to be $ 17,944 , which remained 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