What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2024-03-04 compared with 2023-02-28 · 574 added, 510 removed, 1034 unchanged (51% of the section changed)

2 unchanged sentences

Our management, under the supervision of our Chief Executive Officer (CEO) and our Chief Financial Officer (CFO), has carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2023.

Based upon that evaluation, the CEO and CFO have concluded, as of December 31, 2022, that our disclosure controls and procedures were not effective as of such date due to the material weaknesses in internal control over financial reporting described in “Management’s Report on Internal Control Over Financial Reporting” below.

As initially disclosed in our Annual Report on Form 10-K filed with the SEC on February 25, 2021, our management identified material weaknesses in our internal control over financial reporting.

As described below, while our management, with the oversight of the Audit Committee of our Board of Directors, has made progress towards remediating the material weaknesses, our management determined that the material weaknesses have not yet been remediated.

Accordingly, based on our management evaluation, the CEO and CFO have concluded that our disclosure controls and procedures were not effective as of December 31, 2023 due to the material weaknesses in internal control over financial reporting described in “Management’s Report on Internal Control Over Financial Reporting” below.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

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Management’s Remediation Plan

We have identified and implemented, and continue to implement, certain remediation efforts to improve the effectiveness of our internal control over financial reporting and disclosure controls and procedures.

These remediation efforts are ongoing.

The following remedial actions have been identified and initiated as of December 31, 2022:

• We hired several full-time accounting resources with appropriate levels of experience and reallocated responsibilities across the finance organization.

This measure provides for segregation of duties to ensure the appropriate level of knowledge and experience is applied based on risk and complexity of transactions and tasks under review.

• We engaged a professional accounting services firm to assist us in the design and documentation of our formal policies, processes and internal controls for complying with the Sarbanes-Oxley Act.

• We developed a project plan for the implementation of internal controls over financial reporting across the organization and have begun executing on that plan.

Specifically, we have designed certain controls across all of our business cycles and are currently integrating these controls into our processes.

In response to the material weaknesses, management, with oversight of the Audit Committee has identified and begun to implement steps to remediate the material weaknesses.

The Company hired an independent accounting firm to assist with the remediation efforts.

While the Company has made progress with the remediation of these material weaknesses during 2023, the remediation efforts are ongoing, because additional time is needed to complete the remediation and allow for the internal controls to be tested by management.

Our continued internal control remediation efforts include the following:

• Developed a framework to identify risks of material misstatement to our consolidated financial statements and made progress towards designing appropriate controls to mitigate those risks.

• Made progress towards enhancing existing policies and procedures and developing new policies and procedures to assist our finance organization in recording transactions appropriately.

• We are in the process of designing accounting processes to provide a more timely and detailed review of complex and non-routine areas.

• Engaged external experts to complement internal resources and to provide support related to more complex applications of GAAP, tax, and internal controls.

We will continue to utilize outside resources, as necessary, to supplement our internal team.

• Redesigning accounting period-end close control activities over reconciliations and journal entries, including review and approval controls, and the implementation of an automated financial close solution.

• Designed general information technology controls and in the process of implementing such controls.

• Enhanced communications with the Audit Committee of the Board of Directors related to the Company’s progress on the remediation of these material weaknesses.

The Company also continues to formally report quarterly to the Audit Committee and the Board regarding progress against the remediation plan.

The process of implementing an effective financial reporting system is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a financial reporting system that is adequate to satisfy our reporting obligations.

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We will continue to devote significant time and attention to these remedial efforts.

However, the material weakness cannot be considered remediated until the applicable remedial controls are fully implemented, have operated for a sufficient period of time and management has concluded that these controls are operating effectively.

However, the material weaknesses cannot be considered remediated until the applicable remedial controls are fully implemented, have operated for a sufficient period of time and management has concluded that these controls are operating effectively.

Changes in Internal Control over Financial Reporting

Other than the actions taken as described in Management's Remediation Initiatives above to improve the Company’s internal control over financial reporting, there have been no changes in our internal control over financial reporting during the quarter ended December 31, 2022 that materially affected, or which are reasonably likely to materially affect, our internal control over financial reporting.

Other than the actions taken as described in Management's Remediation Plan above to improve the Company’s internal control over financial reporting, there have been no changes in our internal control over financial reporting during the quarter ended December 31, 2023 that materially affected, or which are reasonably likely to materially affect, our internal control over financial reporting.

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.

On February 28, 2024, Audrey Zibelman notified the board of directors (the “Board”) of the Company of her decision not to stand for reelection to the Board at the expiration of her current term at the Company’s 2024 Annual Meeting of Stockholders (the “2024 Annual Meeting”).

Zibelman’s decision not to stand for reelection is not the result of any disagreement with the Company on any matter relating to its operations, policies, practices or otherwise.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

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

Form 10-K File No.

001-39291 3.1 February 28, 2023

3.2 Second Amended and Restated Bylaws of the Company

30 unchanged sentences

4.1 December 29, 2022

4.9 Form of Note (including Indenture incorporated by reference therein)

Form 8-K File No.

001-39291 4.1 January 19, 2023

4.10 Convertible Promissory Note dated as of February 1, 2023 made by Eos Energy Enterprises, Inc.

in favor of YA II PN, LTD

Form 8-K File No.

001-39291 4.1 February 02, 2023

4.11 Convertible Promissory Note dated as of March 17, 2023 between Eos Energy Enterprises, Inc.

and YA II PN, LTD

Form 8-K File No.

001-39291 4.1 March 17, 2023

4.12 Convertible Promissory Note dated as of April 10, 2023 between Eos Energy Enterprises, Inc.

and YA II PN, LTD

Form 8-K File No.

001-39291 4.1 April 11, 2023

4.13 Form of Common Stock Purchase Warrant, dated as of April 12, 2023

Form 8-K File No.

001-39291 4.1 April 14, 2023

4.14 Form of Common Stock Purchase Warrant, dated as of May 15, 2023

Form 8-K File No.

001-39291 4.1 May 17, 2023

4.15 Indenture, dated May 25, 2023, between the Company and Wilmington Trust, National Association, as trustee

Form 8-K File No.

001-39291 4.1 May 25, 2023

4.16 Form of Note, dated as of May 25, 2023

Form 8-K File No.

001-39291 4.2 May 25, 2023

4.17 Form of Common St ock Purchase Warrant

Form 8-K File No.

001-39291 4.1 December 15, 2023

10.1 Sponsor Earnout Letter

1 unchanged sentence

10.8 November 20, 2020

Incorporated by Reference

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

10.2 Eos Energy Enterprises, Inc.

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001-39291 4.02 May 10, 2021

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.

8 unchanged sentences

001-39291 10.2 October 5, 2021

Incorporated by Reference

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

10.14 Separation Agreement, dated December 13, 2021, by and between the Company and Sagar Kurada

5 unchanged sentences

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.

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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.

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001-39291 10.1 June 13, 2022

Incorporated by Reference

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

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.

5 unchanged sentences

001-39291 10.1 August 1, 2022

Incorporated by Reference

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

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

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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.

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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

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001-39291 10.2 January 20, 203

10.32 Investment Agreement, dated January 18, 2023, by and among Eos Energy Enterprises, LLC and the purchasers listed therein

Form 8-K File No.

001-39291 10.1 January 19, 2023

Incorporated by Reference

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

10.33 Limited Consent Agreement, dated as of January 17, 2023, among Eos Energy Enterprises, LLC, the lenders party thereto, and ACP Post Oak Credit I LLC, as administrative agent

Form 8-K File No.

001-39291 10.2 January 19, 2023

Form of Securities Purchase Agreement, dated as of April 12, 2023

Form 8-K File No.

001-39291 10.1 April 14, 2023

Form of Securities Purchase Agreement, dated as of May 15, 2023

Form 8-K File No.

001-39291 10.1 May 17, 2023

10.40 Amendment No.

1 to Common Stock Sales Agreement, dated August 23, 2023, by and between Eos Energy Enterprises, Inc.

and Cowen and Company, LLC

Form 8-K File No.

001-39291 10.1 August 23, 2023

10.41 Master Supply Agreement, dated August 23, 2023, by and between HI-POWER, LLC and ACRO Automation Systems, Inc.

Form 8-K File No.

001-39291 10.2 August 23, 2023

10.42 Employment Agreement, dated August 27, 2023, by and between the Company and Sumeet Puri

Form 8-K File No.

001-39291 10.1 August 28, 2023

Separation Agreement, dated January 19 , 2024, by and between the Company and Melissa Berube

Employment Agreement, dated January 17 , 202 4 , by and between the Company and Michael Silberman

Subsidiaries of the Company

001-39291 21.1 February 28, 2023

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

31.1* Certification of the Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2* Certification of the Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

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Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Policy relating to recovery of compensation

101.SCH XBRL Taxonomy Extension Schema Document

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104* Inline XBRL for the cover page of this Annual Report on Form 10-K, included in the Exhibit 101 Inline XBRL Document Set

Incorporated by Reference

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

† Certain of the exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5).

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Consolidated Balance Sheets as of December 31, 2023 and 2022

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 Operations and Comprehensive Loss for the Years Ended December 31, 2023 and 2022

Consolidated Statements of Shareholders' (Deficit) Equity for the Years Ended December 31, 2023 and 2022

Consolidated Statements of Cash Flows for the Years Ended December 31, 2023 and 2022

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The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations that raise substantial doubt about its ability to continue as a going concern.

As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and may be unable to remain in compliance with a financial covenant required by a borrowing arrangement absent the Company’s ability to secure additional outside capital, which raises substantial doubt about its ability to continue as a going concern.

Management’s plans in regard to these matters are also described in Note 1.

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The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Convertible Notes Payable - Refer to Note 13 to the financial statements

Convertible Notes Payable and Warrants Liability - Refer to Notes 12 and 13 to the financial statements

Critical Audit Matter Description

The Company’s 2021 Convertible Notes contain an embedded conversion feature that is required to be bifurcated from the 2021 Convertible Notes and measured at fair value at each reporting period.

The Company’s 2021 Convertible Notes and AFG Convertible Notes (collectively "the Convertible Notes") contain embedded conversion features that are required to be bifurcated from the Convertible Notes and measured at fair value at each reporting period.

The Company estimates the fair value of the embedded conversion feature using a binomial lattice model at the inception and on subsequent valuation dates.

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The effective debt yield and the expected volatility involve unobservable inputs.

Unlike the fair value of financial instruments that are readily observable and therefore more easily independently corroborated, the valuation of the embedded conversion feature is inherently subjective and involves the use of complex modeling tools.

Auditing the embedded conversion feature fair value requires a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

The Company’s April 2023 Transaction, May 2023 Transaction, and the December 2023 Public Offering include warrants that are required to be measured at fair value at each reporting period.

The Company estimates the fair value of the warrants using a Black-Scholes model at the inception and on subsequent valuation dates.

This model incorporates inputs such as the stock price of the Company, exercise price, risk-free interest rate, expected volatility, and time to expiration.

The expected volatility involves unobservable inputs.

Unlike the fair value of financial instruments that are readily observable and therefore more easily independently corroborated, the valuation of the embedded conversion features and warrants is inherently subjective and involves the use of complex modeling tools.

Auditing the fair value of the embedded conversion features and warrants requires a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

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

• 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 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.

Our audit procedures related to the valuation of (1) the embedded conversion features in the Convertible Notes and (2) warrants included the following, among others:

◦ Testing the source information underlying the fair value of the embedded conversion features and warrants and the mathematical accuracy of the calculations.

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

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

/s/ Deloitte & Touche LLP

February 28, 2023

March 4, 2024

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

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Vendor deposits 7,161 4,789

Notes receivable, net 36 103

Contract assets, current 6,386 1,859

Prepaid expenses 1,082 2,289

Grant receivable

Other receivables

Other current assets 3,577 1,220

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Goodwill 4,331 4,331

Notes receivable, net 827 3,547

Operating lease right-of-use asset, net 4,033 4,316

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Accrued expenses 32,332 15,359

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

Operating lease liability, current 1,496 1,106

Note payable, current — 4,926

Long-term debt, current 3,332 2,872

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Operating lease liability 3,350 4,130

Notes payable — 13,769

Long-term debt 88,002 87,321

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Contract liabilities, long-term 3,540 956

Warrants - related party 78 926

Other liabilities

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COMMITMENTS AND CONTINGENCIES (NOTE 16)

SHAREHOLDERS' (DEFICIT) EQUITY

SHAREHOLDERS' DEFICIT

Common Stock, $ 0.0001 par value, 300,000,000 and 300,000,000 shares authorized, 199,133,827 and 82,653,781 shares outstanding at December 31, 2023 and 2022, respectively

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Accumulated other comprehensive income 7 6

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

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

Total shareholders' deficit

( 110,800 ) ( 132,711 )

Total liabilities and shareholders’ deficit

$ 186,492 $ 106,788

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

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Selling, general and administrative expenses 53,650 60,623

Loss on pre-existing agreement — 30,368

Loss from write-down of property, plant and equipment 7,159 6,846

Grant (income) expense, net ( 16 ) 269

Grant income, net

Total costs and expenses 169,315 239,182

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Interest expense – related party ( 37,466 ) ( 10,898 )

Remeasurement of equity method investment — ( 7,480 )

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

Change in fair value of warrants

( 24,980 ) 848

Change in fair value of derivatives - related parties

Loss on debt extinguishment

( 3,510 ) ( 942 )

Other expense

( 1,795 ) ( 477 )

Loss before income taxes $ ( 229,475 ) $ ( 229,762 )

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(In thousands, except share and per share amounts)

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

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

Shares Amount

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

Release of sponsor earnout shares from restriction 859,000 — — — — — —

Issuance of earnout shares 1,999,185 — 17,600 ( 17,600 ) — — —

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

Exercise of options 123,837 — 1,074 — — — 1,074

Exercise of warrants 600 — 7 — — 7

2 unchanged sentences

( 203,951 ) — ( 978 ) — — ( 978 )

Issuance of common stock

27,901,205 4 50,761 — — 50,765

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 )

2 unchanged sentences

Stock-based compensation — — 14,057 — — 14,057

Exercise of warrants 600 — 7 — — — 7

Exercise of stock options 262,500 — 353 — — 353

Release of restricted stock units 1,707,292 — — — — —

Cancellation of shares used to settle payroll tax withholding ( 331,559 ) — ( 633 ) — — ( 633 )

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

Issuance of common stock 114,841,813 12 237,627 — — 237,639

Foreign currency translation adjustment — — — 1 — 1

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Amortization of right-of-use assets 1,023 865

Remeasurement of equity method investment — 7,480

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

Non-cash interest expense

Non-cash interest expense - related party

36,903 10,899

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 )

Loss on debt extinguishment

Change in fair value of warrants

24,980 ( 848 )

Change in fair value of derivatives - related parties

( 9,983 ) ( 10,880 )

Other 1,850 ( 397 )

5 unchanged sentences

Contract assets ( 6,322 ) ( 631 )

Grant receivable

Accounts payable ( 11,475 ) 19,516

1 unchanged sentence

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

Provision for firm purchase commitments — ( 5,475 )

Operating lease liabilities ( 1,130 ) ( 785 )

1 unchanged sentence

Note payable — ( 19,637 )

Other receivables

Other ( 4,774 ) ( 1,387 )

3 unchanged sentences

Proceeds from notes receivable — 3,163

Business acquisition, net of cash acquired — ( 160 )

Investment in joint venture — ( 4,000 )

Purchases of intangible assets

Purchases of property, plant and equipment ( 29,323 ) ( 20,072 )

2 unchanged sentences

Proceeds from issuance of convertible notes payable – related party, net of discount 48,050 9,310

EOS ENERGY ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, except share and per share amounts)

Payment of debt issuance costs - related party ( 1,116 ) ( 304 )

1 unchanged sentence

Payment of debt issuance costs ( 3,046 ) ( 12,398 )

EOS ENERGY ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, except share and per share amounts)

Principal payments on finance lease obligations ( 96 ) ( 14 )

Repayment of other financing — ( 94 )

Proceeds from equipment financing facility — 4,216

Repayment of equipment financing facility ( 2,867 ) ( 1,913 )

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

Issuance of common stock under SEPA 5,000 —

Issuance of common stock and warrants

192,167 43,626

Payment of equity issuance costs

Proceeds from exercise of stock options 462 —

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Effect of foreign exchange on cash, cash equivalents and restricted cash 5 14

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

Net increase (decrease) in cash, cash equivalents and restricted cash

53,444 ( 74,469 )

Cash, cash equivalents and restricted cash, beginning of year

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Issuance of convertible notes for interest paid-in-kind 10,327 6,267

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

Issuance of common stock upon settlement of Yorkville Convertible Notes

Accrued and unpaid debt issuance costs — 5,536

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During the year ended December 31, 2023, the Company incurred a net loss of $ 229,506 , incurred negative cash flows from operations of $ 145,018 , and had an accumulated deficit of $ 875,846 as of December 31, 2023.

• 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.

• As of December 31, 2023, the Company had $ 69,473 of unrestricted cash and cash equivalents available to fund the Company’s operations, and working capital of $ 61,461 , inclusive of $ 3,332 of outstanding debt that is currently scheduled to mature within the next twelve months.

Additionally, the Company has no additional borrowings available under pre-existing financing arrangements to fund its operations (see Note 12, Borrowings ).

• The Company has available capacity under its ATM offering program to issue shares of the Company’s common stock, (see also Note 19, Shareholders’ Deficit ) to aid in funding the Company’s operations.

However, 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.

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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.

• 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 that the Company will be successful in obtaining additional outside capital or on terms that are acceptable to the Company.

In this regard, the Company continues to progress through the Department of Energy (“DOE”) Loan Program Office's (“LPO”) process for its Title XVII loan.

In August 2023, the DOE issued a conditional commitment letter to the Company for a loan of an aggregate principal amount up to $ 398,600 through the DOE's Clean Energy Financing Program.

Certain technical, legal, and financial conditions must be met and due diligence to the satisfaction of the DOE must be completed before the DOE enters into definitive financing documents with the Company and funds the loan.

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.

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Actual results could differ from those estimates.

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

2 unchanged sentences

As of December 31, 2023 and 2022, the allowances for expected credit loss related to Accounts Receivable was $ 26 and $ 3 , 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

The Company accounts for the acquisition of a business using the acquisition method of accounting and allocates the purchase price of acquired entities to the underlying tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values, with any excess recorded as goodwill.

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 acquisitions can be found in Note 3, Acquisition .

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

Cash, Cash Equivalents, and Restricted Cash

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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.

Some of our debt financings contain embedded derivatives, such as conversion features.

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.

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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.

See Note 19, Shareholders' Deficit for further information.

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, restricted cash, accounts receivable, notes receivable, contract assets, accounts payable, warrants, convertible notes payable — related party, contract liabilities and long-term debt.

The carrying value of cash and cash equivalents, restricted cash, accounts receivable, contract assets, contract liabilities and accounts payable are considered to be representative of their fair value due to the short maturity of these instruments.

EOS ENERGY ENTERPRISES, INC.

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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:

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Government Grants

The Company records grants received or receivable from government agencies as an offset to the related costs for which the grants are intended to compensate the Company.

The costs of satisfying the Company’s obligations under the respective grant agreements are recognized as expense when incurred.

Once the expenses are approved by the government agencies the Company records the grant receivable and related grant income.

Grants received from government agencies for which expenses have not been incurred are included within accrued expenses.

The Company recognizes a grant receivable once it is probable that (1) the Company is eligible to receive the grant and (2) the Company is able to comply with the relevant conditions of the grant.

The grant money shall be recognized on a systematic basis over the periods in which the entity recognizes the related expenses or losses for which the grant money is intended to compensate.

Impairment of Long-Lived Assets

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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.

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Expenditures which significantly improve or extend the life of an asset are capitalized.

Construction in Progress

Included in property, plant, and equipment is construction in progress.

Costs related to the design, development, and construction of large capital projects are accumulated in construction in progress until the project is complete.

A construction project is considered substantially complete upon the cessation of construction and development activities.

Once the project is substantially complete and ready for its intended use these costs are amortized on a straight-line basis over the asset's estimated useful life.

A portion of construction in progress also includes capitalized interest.

Interest costs incurred during construction of large capital projects are capitalized as construction in progress until the underlying asset is ready for its intended use, at which point the interest costs are amortized as depreciation expense over the life of the underlying asset.

Interest is capitalized using a weighted average effective interest rate applicable to borrowings outstanding during the period to which it is applied.

Research and Development Expenses

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Sales tax is recorded as a liability (payable) until remitted to governmental authorities.

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Summary of Significant Accounting Policies (cont.)

Service Revenue

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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

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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.

For stock option awards, the Company uses the Black-Scholes option pricing model to estimate the fair value.

For restricted stock units awards ("RSU") the Company uses the Company's stock price on date of grant to estimate fair value.

EOS ENERGY ENTERPRISES, INC.

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Summary of Significant Accounting Policies (cont.)

The Company recognizes compensation cost on a straight-line basis over the requisite service period of the award, which is generally the award vesting period.

Stock options generally have a term of five to ten years and vest over periods ranging from three months to two years .

Restricted Stock Units ("RSU") generally vest over periods from one to three years .

For awards with performance conditions, stock-based compensation expense is recognized on a straight-line basis based on management’s estimation of achievement of performance conditions.

The estimated performance conditions primarily relate to achievement of sales and financing targets.

The Company recognizes forfeitures as incurred.

Warranty liability

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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, and field monitoring.

Recently Adopted Accounting Pronouncements

In November 2021, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2021-10, Disclosures by Business Entities about Government Assistance (“Topic 832”).

The amendments in this Update require disclosures about transactions with a government that have been accounted for by analogizing to a grant or contribution accounting model to increase transparency about (1) the types of transactions, (2) the accounting for the transactions, and (3) the effect of the transactions on an entity's financial statements.

The Company adopted this standard prospectively as of January 1, 2022.

The adoption of this standard update did not have a material impact on the Company’s consolidated financial statements.

Accounting Pronouncements Not Yet Adopted

In October 2021, the FASB issued ASU 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers .

The amendments in this standard update address diversity and inconsistency related to the recognition and measurement of contract assets and contract liabilities acquired in a business combination and require that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606.

This standard update is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years and should be applied prospectively to business combinations occurring on or after the effective date of the amendments.

Early adoption of the standard is permitted, including adoption in an interim period.

T he Company has assessed the standard and concluded that this would only be applicable for acquisitions that the Company enters into prospectively only if the target company has contract assets and contract liabilities.

On April 8, 2021, the Company entered into a unit purchase agreement (the “Purchase Agreement”) with Holtec Power, Inc.

In accordance with the terms and conditions of the Purchase Agreement, the Company purchased from Holtec the remaining 51 % interest in HI-POWER, LLC (“Hi-Power”) that was not already owned by the Company.

Hi-Power was incorporated as a joint venture between the Company and Holtec in 2019.

In connection with the transaction, the Company also entered into a transition services agreement and a sublease with Holtec.

The transaction closed on April 9, 2021 (the “Acquisition Date”).

Following the consummation of the transactions set forth in the Purchase Agreement (the “Transactions”), Hi-Power became a 100 % indirect, wholly-owned subsidiary of the Company and the obligations of the parties under the Hi-Power joint venture terminated.

The aggregate purchase price of $ 25,000 was to be paid in annual increments of $ 5,000 beginning on May 31, 2021, as evidenced by a secured promissory note secured by the assets of the Company.

The Purchase Agreement also required that the Company pay to Holtec, on the closing of the Transactions, cash equal to $ 10,283 .

Total payments to Holtec under this Purchase Agreement will be $ 35,283 .

During the third quarter of 2022, the Company repaid all outstanding amounts under the Purchase Agreement, which resulted in a loss on debt extinguishment of $ 942 .

The fair value of these payments was $ 33,474 at the Acquisition Date and included $ 32,750 allocated to the termination of a pre-existing agreement with Holtec and $ 724 allocated to the acquisition.

The obligations and rights of both parties under the pre-existing joint venture agreement were terminated at the time of acquisition and $ 32,750 of the fair value of the consideration transferred was allocated to the termination of the agreement, which resulted in a loss on the pre-existing agreement of $ 30,368 for the year ended December 31, 2021.

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Acquisition (cont.)

Prior to the acquisition of the remaining 51 % ownership interest in Hi-Power, the Company accounted for its initial 49 % ownership interest in Hi-Power as an unconsolidated joint venture under the equity method of accounting.

In connection with the acquisition of the remaining 51 % ownership interest in Hi-Power, the Company’s consolidated financial statements include all of the accounts of Hi-Power, and all intercompany balances and transactions have been eliminated in consolidation.

The results of operations of Hi-Power have been included in the Company’s consolidated financial statements since the date of acquisition.

The consideration transferred for our now 100 % ownership interest in connection with the acquisition, net of intercompany balances between the Company and Hi-Power, totaled $ 418 , of which $ 205 represents the fair value of the Company’s previously held 49 % ownership interest in Hi-Power.

In accordance with ASC 805, Business Combinations , the Company remeasured the previously held 49 % ownership interest in Hi-Power at its Acquisition Date fair value.

As of the Acquisition Date, a loss of $ 7,480 was recognized in earnings for the remeasurement of the previously held 49 % ownership interest.

The following table summarizes the fair values of the assets acquired and liabilities assumed as of the acquisition date:

Inventory $ 2,666

Vendor deposits 818

Property, plant and equipment, net 74

Goodwill 4,331

Accounts payable and accrued expenses ( 3,634 )

Provision for firm purchase commitments ( 3,890 )

Net assets acquired, net of cash and cash equivalents of $ 53 (1)

(1) Net assets acquired exclude the intercompany balance between Eos and Hi-Power and cash acquired.

The Company expects the goodwill recognized as part of the acquisition will be deductible for U.S.

income tax purposes.

The Company also incurred insignificant non-consideration acquisition expenses including legal and accounting services related to the acquisition, which are recorded in selling, general and administrative expenses on the Company’s consolidated statements of operations and comprehensive loss.

Recent Accounting Pronouncements

In October 2023, the FASB issued ASU 2023-06, Disclosure Agreements - Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative .

This amendment will impact various disclosure areas, including the statement of cash flows, accounting changes and error corrections, earnings per share, debt, equity, derivatives, and transfers of financial assets.

The amendments in this ASU 2023-06 will be effective on the date the related disclosures are removed from Regulation S-X or Regulation S-K by the SEC, and will no longer be effective if the SEC has not removed the applicable disclosure requirement by June 30, 2027.

Early adoption is prohibited.

The Company is currently assessing the potential impact this amendment could have on its disclosures.

In December 2023, the FASB released ASU 2023-09, Improvements to Income Tax Disclosures, which requires additional disclosures related to the effective tax rate reconciliation and taxes paid.

The amendment is effective for periods beginning after December 15, 2024, and the Company is currently evaluating the impact on its financial statements and related disclosures.

There were no other accounting standards or updates during the year ended December 31, 2023 that had a material impact on the Company’s consolidated financial statements.

Revenue Recognition

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Total revenues $ 16,378 $ 17,924

For the year ended December 31, 2022, we had one customer who accounted for 80.8 % of the total revenue.

For the year ended December 31, 2023, we had two customers who accounted for 49.9 % and 45.2 % of the total revenue.

For the year ended December 31, 2022, we had one customer who accounted for 80.8 % of the total revenue.

Contract Balances

The following table provides information about contract assets and contract liabilities from contracts with customers.

Contract assets, current and contract liabilities, current and long-term are included separately on the consolidated balance sheets and contract assets, long-term are included under other assets, net.

Contract assets - current and contract liabilities, current and long-term are included separately on the consolidated balance sheets and contract assets, long-term are included under other assets.

EOS ENERGY ENTERPRISES, INC.

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Contract liabilities increased by $ 1,804 during the year ended December 31, 2023, reflecting $ 10,434 in customer advance payments, partially offset by the recognition of $ 8,630 of revenue during the year ended December 31, 2023 that was included in the contract liability balance at the beginning of the period.

Contract liabilities of $ 3,850 as of December 31, 2022 are expected to be recognized within the next twelve months and contract liabilities, long-term of $ 956 are expected to be recognized as revenue over approximately the next three years.

Contract assets of $ 1,859 as of December 31, 2022 are expected to be recognized as accounts receivable within the next twelve months.

Long-term contract assets of $ 141 are expected to be recognized as accounts receivable over approximately the next three years.

Contract liabilities of $ 3,070 as of December 31, 2023 are expected to be recognized within the next twelve months and contract liabilities, long-term of $ 3,540 are expected to be recognized as revenue within more than a year.

Contract assets of $ 6,386 as of December 31, 2023 are expected to be recognized as accounts receivable within the next twelve months and long-term contract assets of $ 1,936 are expected to be recognized as accounts receivable within more than a year.

Cash, Cash Equivalents and Restricted Cash

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Custom Bonds insurance and escrow deposits related to our credit card program agreements.

Additionally, long-term restricted cash relates to interest that is required to be held in escrow per the Senior Secured Term Loan Agreement in an amount equal to the aggregate amount of the four immediately following interest payments owed (see Note 13, Borrowings for further discussion).

Long-term restricted cash relates to interest that is required to be held in escrow per the Senior Secured Term Loan Agreement in an amount equal to the next four quarterly interest payments owed as of the balance sheet date (see Note 12, Borrowings for further discussion).

Cash, cash equivalents, and restricted cash reported within the accompanying consolidated balance sheets that sum to the total of the same such amounts presented in the accompanying consolidated statements of cash flows consisted of the following:

Cash and cash equivalents $ 69,473 $ 17,076

Restricted cash (1)

Restricted cash - current

Long-term restricted cash 11,755 11,422

Total cash, cash equivalents, and restricted cash $ 84,667 $ 31,223

(1) Restricted cash, current.

The following table provides information about inventory balances:

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Tooling 2 — 3 years 7,045 6,926

Construction in progress

Total 55,887 39,129

2 unchanged sentences

Depreciation expense related to property, plant and equipment was $ 9,668 and $ 6,774 during the years ended December 31, 2023 and 2022, respectively.

For the years ended December 31, 2022 and 2021, the Company recorded a loss from write-down of property, plant and equipment of $ 6,846 and $ 50 , respectively, mainly due to replacement of equipment, outsourcing of certain production processes, and the shift in production from the current generation Gen 2.3 BESS to the next generation Z3 battery system.

For the years ended December 31, 2023 and 2022, the Company recorded a loss from write-down of property, plant and equipment of $ 7,159 and $ 6,846 , respectively, mainly due to replacement of equipment, outsourcing of certain production processes, and the shift in production from the Gen 2.3 battery system to the Z3™ battery system.

Included in construction in progress assets is capitalized interest costs of $ 966 as of December 31, 2023.

Depreciation will commence after the assets under construction are placed in service.

Intangible Assets

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During the years ended December 31, 2023 and 2022, the Company recorded amortization expense of $ 40 for each period, related to patents.

During the year ended December 31, 2023, the Company also capitalized $ 138 of costs for internal-use software.

The software has a useful life and is amortized into the results of operations over 3 years.

The Company recorded amortization expense of $ 43 for the year ended December 31, 2023, related to software.

Estimated future amortization expense of intangible assets as of December 31, 2023 are as follows:

Amortization Expense

Thereafter 40

Notes Receivable, Net and Variable Interest Entities (“VIEs”) Consideration

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The Company reports notes receivable at the principal balance outstanding less an allowance for losses.

The estimate of credit losses is based on historical trends, customers’ financial condition and current economic trends.

The Company charges interest at a fixed rate and calculates interest income by applying the effective rate to the outstanding principal balance.

The Company had notes receivable, net of $ 863 and $ 3,650 outstanding as of December 31, 2022 and 2021, respectively.

As of December 31, 2022 and 2021, the Company recorded an allowance for expected credit loss from the notes receivable of $ 2 and $ 6 , respectively.

EOS ENERGY ENTERPRISES, INC.

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Notes Receivable, Net and Variable Interest Entities (“VIEs”) Consideration (cont.)

The customers to whom the Company offers financing through notes receivables are VIEs.

However, the Company is not the primary beneficiary, because the Company does not have power to direct the activities of the VIEs that most significantly impact the VIEs’ economic performance.

Therefore, the VIEs are not consolidated into the Company’s consolidated financial statements .

The estimate of credit losses is based on historical trends, customers’ financial condition and current economic trends.

The Company charges interest at a fixed rate and calculates interest income by applying the effective rate to the outstanding principal balance.

The Company had notes receivable, net of $ 863 outstanding as of December 31, 2023 and 2022, respectively.

These amounts are included in other assets and other current assets in the accompanying consolidated balance sheets.

As of December 31, 2023 and 2022, respectively, the allowance for expected credit loss related to the notes receivable amounted to $ 2 .

The customer to whom the Company offers financing through notes receivables is a VIE.

However, the Company is not the primary beneficiary, because the Company does not have power to direct the activities of the VIE that most significantly impacts the VIE’s economic performance.

Therefore, the VIE is not consolidated into the Company’s consolidated financial statements .

The maximum loss exposure is limited to the carrying value of notes receivable as of the balances sheet dates.

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Warranty reserve - end of period $ 6,197 $ 3,836

Grant Expense, Net

Government Grants

California Energy Commission

From time-to-time, the Company has entered into grant agreements with the California Energy Commission (“CEC”) for conducting studies to demonstrate the benefits of certain energy-saving technologies to utility companies and consumers in the State of California.

Under such agreements, the Company is entitled to receive reimbursement of costs incurred by the Company covered by the grants.

For the years ended December 31, 2022 and 2021, the Company received $ 1,007 and $ — in reimbursement payments, respectively, from the CEC.

As of December 31, 2022 and 2021, the Company had grant receivables in the amounts of $ 263 and $ 1,020 , which were included in other current assets in the consolidated balance sheets.

There was no deferred grant income as of December 31, 2022 and 2021.

Related expenses incurred by the Company are offset against grant income earned or received from the CEC.

During the years ended December 31, 2022 and 2021, grant (income) expense, net was ($ 16 ) and $ 269 , respectively.

EOS ENERGY ENTERPRISES, INC.

1 unchanged sentence

(In thousands, except share and per share amounts)

Government Grants (cont.)

As of December 31, 2023 and 2022, the Company had grant receivables in the amounts of $ 0 and $ 263 from the CEC recorded in the accompanying consolidated balance sheets, respectively.

There was no deferred grant income as of December 31, 2023 and 2022.

Related expenses incurred by the Company are offset against grant income earned or received from the CEC.

During the years ended December 31, 2023 and 2022, grant (income) expense, net was $ 0 and $( 16 ), respectively related to the CEC.

Inflation Reduction Act of 2022 (“IRA”)

On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 into law.

The IRA has significant economic incentives for both energy storage customers and manufacturers for projects placed in service after December 31, 2022.

Starting in 2023, there are Production Tax Credits under Internal Revenue Code 45X (“PTC”), that can be claimed on battery components manufactured in the U.S.

and sold to U.S.

or foreign customers.

These tax credits available to manufacturers include a credit for ten percent of the cost incurred to make electrode active materials in addition to credits of $35 per kWh of capacity of battery cells and $10 per kWh of capacity of battery modules.

These credits are cumulative, meaning that companies will be able to claim each of the available tax credits based on the battery components produced and sold through 2029, after which the PTC will begin to gradually phase down through 2032.

In June 2023, the IRS issued temporary and proposed regulations related to applicable tax credit transferability and direct pay provisions of the Inflation Reduction Act.

The Company has reviewed these regulations and believes they do not have a material impact on the financial statements.

Since the PTC is a refundable credit (i.e., a credit with a direct-pay option available), the PTC is outside the scope of ASC 740.

Therefore, the Company accounts for the PTC under a government grant model.

GAAP does not address the accounting for government grants received by a business entity that are outside the scope of ASC 740.

The Company’s accounting policy is to analogize to IAS 20, Accounting for Government Grants and Disclosure of Government Assistance, under IFRS Accounting Standards.

Under IAS 20, once it is reasonably assured that the entity will comply with the conditions of the grant, the grant money should be recognized on a systematic basis over the periods in which the entity recognizes the related expenses or losses for which the grant money is intended to compensate.

The Company recognizes grants once it is probable that both of the following conditions will be met:

(1) the Company is eligible to receive the grant and (2) the Company is able to comply with the relevant conditions of the grant.

The PTC is recorded as the applicable items become finished goods and the conditions in the preceding paragraph are met.

For the year ended December 31, 2023, the Company recognized PTC of $ 3,256 as a reduction of cost of goods sold on the consolidated statement of operations and comprehensive loss.

As of December 31, 2023, grant receivable related to the PTC of $ 3,256 is recorded in the consolidated balance sheets.

Related Party Transactions

2021 Convertible Notes Payable

In July 2021, the Company issued $ 100,000 aggregate principal amount of convertible notes to Spring Creek Capital, LLC, a wholly-owned, indirect subsidiary of Koch Industries, Inc., a related party due to its beneficial ownership exceeding 10% of the Company's Common Shares (the “2021 Convertible Notes”).

In connection with these 2021 Convertible Notes, the Company paid $ 3,000 to B.

Riley Securities, Inc., also related party, who acted as a placement agent.

Riley Securities, Inc., a related party, who acted as a placement agent.

Refer to Note 12, Borrowings, for additional information.

Loss on pre-existing agreement

For the year ended December 31, 2021, a loss on pre-existing agreement of $ 30,368 was recorded in connection with the acquisition of Hi-Power.

See Note 3, Acquisition for additional information.

Disgorgement of short swing profits

For the year ended December 31, 2021, the Company received $ 432 from its then affiliated company B.

Riley Securities, Inc.

resulting from a disgorgement of short swing profits under Section 16 (b) of the Exchange Act.

This amount was recognized as an increase to Additional paid in capital as a capital contribution from stockholder when it was earned.

Warrants liability

The Company issued private warrants to an affiliated company owned by B.

Riley Financial, Inc.

which were outstanding as of December 31, 2022 and 2021.

See Note 14, Warrants Liability - Related Party for additional information.

Standby Equity Purchase Agreement

On April 28, 2022, the Company entered into the Standby Equity Purchase Agreement with YA II PN, Ltd.

Pursuant to the SEPA, the Company has the right, but not the obligation, to sell to Yorkville shares of its common stock at the Company’s request.

See Note 20, Shareholders' Equity for additional information.

On June 13, 2022, the Company issued and sold a convertible promissory note with an aggregate principal amount of $ 7,500 in a private placement to Yorkville under a supplemental agreement dated as of June 13, 2022 to the SEPA.

On December 29, 2022, the Company issued and sold a convertible promissory note with an aggregate principal amount of $ 2,000 in a private placement to Yorkville under a supplemental agreement dated as of December 29, 2022 to the SEPA.

See Note 13, Borrowings for additional information.

Settlement Agreement

As disclosed at the time of the Merger Agreement, prior to the execution and delivery of the Merger Agreement, certain unitholders of EES (“Hellman parties”) asserted claims (“Threatened Claims”) against another director and affiliated investors, including AltEnergy Storage VI, LLC (the "Securityholder Representative"), questioning the dilutive effect of a certain historical security issuances on the former EES common unitholders.

Under the Merger Agreement, the Securityholder Representative had the obligation to defend against the Threatened Claims, and the Company had the obligation to advance or cause to be advanced to the Securityholder Representative up to $ 5,000 of defense costs, subject to a deductible of $ 2,000 (the "Deductible"), in connection with the investigation, defense, or settlement of any Threatened Claims.

The Deductible was to be borne by the Company, and any additional amounts advanced were reimbursable by the former unitholders of EES.

On December 1, 2021, a Settlement Agreement was entered into between Hellman Parties and the Securityholder Representative pursuant to which, 300,000 Eos Shares (“Settlement Shares”) would be transferred to the Hellman parties from the EES unitholders at the time of merger.

AFG Convertible Notes

In January 2023, the Company issued and sold $ 13,750 of 26.5 % Convertible Senior PIK Notes due 2026 (“AFG Convertible Notes”) to Great American Insurance Company, Ardsley Partners Renewable Energy, LP, CCI SPV III, LP, Denman Street LLC, John B.

Bending Irrevocable Children’s Trust, John B.

Berding, and AE Convert, LLC (together, the “Purchasers”).

AE Convert LLC, a Delaware limited liability company is managed by Russell Stidolph, a related party as Mr.

Stidolph is a director of the Company.

In connection with the issuance and sale of the AFG Convertible Notes, the Company entered into an investment agreement (the “Investment Agreement”) with the Purchasers.

Refer to Note 12, Borrowing s , for additional information.

EOS ENERGY ENTERPRISES, INC.

2 unchanged sentences

Related Party Transactions (cont.)

On December 28, 2021, the independent members of the Board approved a contribution of $ 1,200 towards the Settlement.

The approval was based on the independent members of the Board’s business judgment that, among other reasons, such a contribution (i) would ensure that the Company would not have to spend the entire $ 2,000 Deductible towards the costs of defense of any litigation, (ii) would avoid the additional cost, distraction, uncertainty, and overhang of litigation relating to the Mergers, (iii) would benefit the Company’s future relationships with its long-term investors, and (iv) would generate future goodwill with such investors during an important growth stage of the Company.

As the Company’s contribution benefits certain Eos shareholders at the time of the Merger Agreement, including AltEnergy LLC and B.

Riley Financial Inc, who are considered as related parties owning more than 5 % of the equity interest in the Company, this transaction is considered, reviewed and approved as a related party transaction.

On December 29, 2021, an amendment to the Settlement Agreement between the Hellman Parties and the Securityholder Representative was entered into, pursuant to which, $ 1,200 of the value represented by the Settlement Shares was to be paid in cash, representing the equivalent of 140,023 of the Settlement Shares.

The Company accrued $ 1,200 in accounts payable and accrued expenses - related party on December 31, 2021, which was paid on January 4, 2022.

The remaining 159,977 in Settlement Shares were transferred to the Hellman parties from the former EES unitholders, on a pro rata basis, on December 29, 2021.

Standby Equity Purchase Agreement (SEPA)

On April 28, 2022, the Company entered into the SEPA under which the Company had the right, but not the obligation, to sell to Yorkville shares of its common stock at the Company’s request.

On August 23, 2023, the Company and Yorkville terminated the SEPA, as amended, by mutual written consent.

See Note 12, Borrowings for pre-advance loans in form of convertible promissory notes and Note 19, Shareholders' Deficit for additional information.

The Company’s borrowings consist of the following related and third-party borrowings:

1 unchanged sentence

December 31, 2022

Maturity Date

Borrowing Outstanding Carrying Value* Borrowing Outstanding Carrying Value*

Yorkville Convertible Promissory Note - due June 2023 $ 2,000 $ 2,688 $ — $ —

2021 Convertible Notes Payable – due June 2026 109,167 82,950 102,900 84,148

Senior Secured Term Loan - due March 2026 100,000 81,616 — —

Note Payable - Hi-Power — — 20,000 18,695

Equipment financing facility - due April 2025 8,577 8,577 6,389 6,371

2021 Convertible Notes Payable

June 2026 115,815 94,386 109,167 82,950

Senior Secured Term Loan

March 2026 100,000 85,624 100,000 81,616

AFG Convertible Note

June 2026 17,429 18,139 — —

Equipment financing facility

April 2026 5,718 5,710 8,577 8,577

Yorkville Convertible Promissory Note

June 2023 $ — $ — $ 2,000 $ 2,688

Total borrowings 238,962 203,859 219,744 $ 175,831

3 unchanged sentences

Yorkville Convertible Promissory Notes - Related Party

On June 13, 2022, the Company issued and sold a convertible promissory note (the “June 2022 Promissory Note”) with a stated principal amount of $ 7,500 in a private placement to Yorkville under a Supplemental Agreement to the SEPA (the “Supplemental Agreement”).

The June 2022 Promissory Note had a maturity date of September 15, 2022, and was issued with a 2 % original issue discount, debt issuance costs of $ 125 , bears interest only upon the occurrence of an Event of Default (as defined in the SEPA) for so long as it remains uncured.

Upon the occurrence of an Event of Default, interest will begin to accrue at a rate of 15 % per year.

The June 2022 Promissory Note gives Yorkville the right, but not the obligation, to convert principal and accrued interest into shares of the Company’s common stock at a conversion price of $ 2.21 any time prior to the maturity date, subject to terms and conditions of the June 2022 Promissory Note.

In July and August 2022, pursuant to the terms of the Supplemental Agreement, Yorkville delivered six Investor Notices requiring the Company to issue and sell an aggregate of 3,393,663 shares of common stock at a price of $ 2.21 per share to Yorkville, in order to offset all outstanding amounts owed to Yorkville under the June 2022 Promissory Note.

Interest expense on the June 2022 Promissory Note was $ 309 for the year ended December 31, 2022.

As of December 31, 2022, the outstanding balance of the June 2022 Promissory Note was zero .

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Borrowings (cont.)

On December 29, 2022, the Company issued a convertible promissory note (the "December 2022 Promissory Note") with an aggregate principal amount of $ 2,000 in a private placement to Yorkville under a second supplemental agreement to the SEPA.

The December 2022 Promissory Note has a maturity date of June 29, 2023, and was issued with an original issue discount of 2 %, debt issuance costs of $ 179 , and an annual interest rate of 5 % which shall increase to an annual rate of 15 % upon an Event of Default (as defined in the SEPA) for so long as it remains uncured.

The December 2022 Promissory Note is convertible into shares of the Company’s common stock at a conversion price equal to the lower of $ 1.1779 or 96.5 % of the lowest daily volume weighted average price of the Company’s common stock during the seven consecutive trading days immediately preceding the conversion date (the "Conversion Price").

Mandatory Payments - If, any time after the Issuance Date, and from time to time thereafter, the daily VWAP is less than the Floor Price for five consecutive Trading Days (the last such day of each such occurrence, a “Triggering Date”), then the Company shall make weekly payments in an amount equal to the sum of (i) $ 1,000,000 of Principal (or the outstanding Principal if less than such amount), (ii) the "Payment Premium" - defined as an amount equal to 3 % of the Principal amount of a payment being made by the Company paid in cash, and (iii) accrued and unpaid interest as of each payment date.

The obligation of the Company to make weekly payments shall cease if at any time after the Triggering Date the daily VWAP is greater than the Floor Price for a period of five consecutive Trading Days, unless a subsequent Triggering Date occurs.

Conversion Rights - Yorkville has the right, but not the obligation, to convert principal and accrued interest into shares of the Company’s common stock at the Conversion Price any time prior to the Maturity Date, subject to the terms and conditions of the December 2022 Promissory Note.

At any time that there is an outstanding balance owed under the December 2022 Promissory Note, Yorkville may, pursuant to the terms of the Second Supplemental Agreement, deliver Investor Notices to require the Company to issue and sell shares of common stock under the SEPA at the Conversion Price in order to repay the amounts owed by the Company to the Holder under the December 2022 Promissory Note.

In addition, while there is an outstanding balance owed under the December 2022 Promissory Note, the Company must use any Advance requested by the Company pursuant to the SEPA to repay the amounts owed by the Company to the Holder under the December 2022 Promissory Note.

The shares issuable upon conversion are subject to the Exchange Cap.

See Note 20, Shareholders' Equity for further discussion regarding the Exchange Cap.

Optional Redemption - The Company has the right, but not the obligation, to redeem early a portion or all amounts outstanding under the December 2022 Promissory Note provided that (i) the Company provides the Holder with at least five trading days’ prior written notice (each, a “Redemption Notice”) of its desire to exercise an Optional Redemption, and (ii) the VWAP of the Company’s common stock on each of the ten trading days immediately prior to the Redemption Notice is less than the conversion price.

Event of Default Put Option - Upon the occurrence of an Event of Default, interest will begin to accrue at a rate of 15 % per year and Yorkville may elect to accelerate the repayment of each installment.

Contingent Interest upon Event of Default - If any Event of Default has occurred and is continuing, then the full unpaid Principal amount of the December 2022 Promissory Note and the 3 % Payment Premium, together with interest and other amounts owed to the date of acceleration shall become at Yorkville's election, immediately due and payable in cash.

Embedded Derivatives - The number of shares issuable for conversion of the December 2022 Promissory Note is subject to the Exchange Cap limitation under the SEPA, unless shareholder approval is obtained.

Therefore, at issuance, shareholder approval is an explicit input that can adjust the number of shares issuable upon settlement.

Because shareholder approval is not an input that is indexed to the Company’s shares, the conversion feature is not indexed to the Company's own stock.

Therefore, the conversion feature does not qualify for the scope exception to derivative accounting and bifurcation is required at issuance.

In January 2023, Yorkville delivered Investor Notices requiring the Company to issue and sell an aggregate of 1,953,612 shares of common stock to Yorkville to offset all outstanding amounts owed to Yorkville under the December 2022 Promissory Note.

During the first half of 2023, the Company issued three additional convertible promissory notes (the “2023 Promissory Notes”) with an aggregate principal amount of $ 35,000 in a private placement to Yorkville under the second, third and fourth supplemental agreements to the SEPA, respectively.

The fair values of the 2023 Promissory Notes at issuance was greater than the proceeds received.

As such, the Company recorded the excess of fair value of the issued 2023 Promissory Notes over the proceeds received as interest expense - related party in the amount of $ 17,571 , which is reflected in the consolidated statements of operations and comprehensive loss.

On various dates during the first half of 2023, Yorkville delivered Investor Notices requiring the Company to issue and sell an aggregate of 20,993,417 shares of common stock to Yorkville to offset all outstanding amounts owed to Yorkville under the outstanding 2023 Promissory Notes.

The Company recognized a loss on debt extinguishment from the issuance of common stock from the December 2022 Promissory Note and the 2023 Promissory Notes (collectively referred to as the “Yorkville Promissory Notes”) of $ 3,510 for the year ended December 31, 2023, which is reflected in the consolidated statements of operations and comprehensive loss.

EOS ENERGY ENTERPRISES, INC.

2 unchanged sentences

Borrowings (cont.)

In addition to the conversion feature, the optional redemption feature, the events of default put option and the contingent interest upon event of default feature, are embedded features that require bifurcation.

The embedded derivative features were bundled into a single embedded derivative, bifurcated and accounted for as a derivative liability measured at fair value.

The fair value of the embedded derivative in the December 2022 Promissory Note was estimated using the intrinsic and discounted cash flow model at inception and on subsequent valuation dates.

These models incorporate inputs such as the stock price of the Company and its debt yield.

The assumptions used to determine the fair value of the embedded derivatives at issuance and at year-end were as follows:

December 29, 2022 December 31, 2022

EOSE Common Stock Price $ 1.17 $ 1.48

Debt Yield 25.00 % 25.00 %

As of December 29, 2022 and December 31, 2022, the fair value of the embedded derivative was $ 419 and $ 1,027 , respectively.

The loss from the change in fair value of the embedded derivative for the year ended December 31, 2022 amounted to $ 608 and is included on the consolidated statements of operations and comprehensive income (loss).

The fair value of the December 2022 Promissory Note at issuance was $ 2,299 , which was greater than the proceeds received.

The Company recorded the difference as interest expense at inception.

The December 2022 Promissory Note was fully converted into common shares in January 2023, see Note 21, Subsequent Events for additional information.

The carrying value of the December 2022 Promissory Note is as follows:

December 31, 2022

Principal $ 2,000

Unamortized debt discount ( 160 )

Unamortized debt issuance costs ( 179 )

Embedded derivative liability 1,027

Aggregate carrying value $ 2,688

Embedded derivatives- Yorkville Convertible Promissory Notes - Related party

The conversion feature for each of the Yorkville Promissory Notes discussed above did not qualify for the scope exception to derivative accounting, therefore bifurcation was required for each issuance.

Upon extinguishment of each Yorkville Promissory Note, the embedded derivatives were adjusted to fair value.

This remeasurement resulted in net gains of $ 6,922 for the year ended December 31, 2023, which is included in change in fair value of derivatives - related parties on the consolidated statements of operations and comprehensive loss.

As of December 31, 2023, there were no outstanding amounts under the Yorkville Promissory Notes.

2021 Convertible Notes Payable - Related Party

6 unchanged sentences

The 2021 Convertible Notes will be convertible into shares of the Company's common stock based on an initial conversion rate of 49.9910 shares of the Company’s common stock, which is equal to an initial conversion price of approximately $ 20.00 per share, in each case subject to customary anti-dilution and other adjustments.

For the years ended December 31, 2022 and 2021, there were no adjustments to conversion rate.

As of December 31, 2022 and 2021, 5,457,348 and 5,144,074 shares, respectively, of the Company’s common stock were issuable upon conversion of the 2021 Convertible Notes including the principal and interest payment in-kind.

The Company has the right to settle conversions in shares of common stock, cash, or any combination thereof.

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Borrowings (cont.)

Optional Redemption - On or after June 30, 2024, the 2021 Convertible Notes will be redeemable by the Company in the event that the closing sale price of the Company’s common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides the redemption notice at a redemption price of 100 % of the principal amount of such 2021 Convertible Notes, plus accrued and unpaid interest.

5 unchanged sentences

Therefore, the embedded conversion feature does not qualify for the scope exceptions to derivative accounting prescribed by ASC 815.

The Company estimated the fair value of the embedded conversion feature using a binomial lattice model at the inception and on subsequent valuation dates.

This model incorporates inputs such as the stock price of the Company, dividend yield, risk-free interest rate, the effective debt yield and expected volatility.

The effective debt yield and volatility involve unobservable inputs classified as Level 3 of the fair value hierarchy (see Note 16, Fair Value Measurement ).

The assumptions used to determine the fair value of the embedded conversion feature are as follows:

Term 3.50 years 4.50 years

Dividend yield — % — %

Risk-free interest rate 4.1 % 1.2 %

Volatility 80.0 % 60.0 %

Effective debt yield 25.0 % 19.0 %

As of December 31, 2022 and 2021, the fair value of the embedded conversion feature was $ 918 and $ 12,359 respectively.

The gain from the change in the fair value of the embedded derivative conversion features for the years ended December 31, 2022 and 2021 amounted to $ 11,488 and $ 17,507 , respectively.

EOS ENERGY ENTERPRISES, INC.

14 unchanged sentences

Aggregate carrying value $ 94,386 $ 82,950

In accordance with the terms under the Senior Secured Term Loan, the Company is obligated to repay in-kind all contractual interest attributable to the 2021 Convertible Notes.

The gain from the change in fair value of the embedded derivative liability for the years ended December 31, 2023 and 2022 was $ 840 and $ 11,488 , respectively.

See Note 15, Fair Value Measurement for the assumptions used to determine the fair value of the embedded derivative.

The Company is obligated to repay all contractual interest attributable to the 2021 Convertible Notes in-kind on a semi-annual basis, in accordance with the terms under the Senior Secured Term Loan.

During the year ended December 31, 2023, contractual interest in-kind of $ 6,648 was recorded as an increase to the 2021 Convertible Notes' principal balance on the consolidated balance sheet.

AFG Convertible Notes - Related Party

On January 18, 2023, the Company entered into the Investment Agreement with the Purchasers relating to the issuance and sale to the Purchasers of $ 13,750 in aggregate principal amount of the Company’s AFG Convertible Notes.

Contractual Interest Rates - The AFG Convertible Notes bear interest at a rate of 26.5 % per annum, which is entirely paid-in-kind.

All interest payments are made through an increase in the principal amount of the outstanding AFG Convertible Notes or through the issuance of additional notes (such interest is referred to herein as “PIK Interest”).

Interest on the AFG Convertible Notes is payable semi-annually in arrears on June 30 and December 30, commencing on June 30, 2023.

It is expected that the Notes will mature on June 30, 2026, subject to earlier conversion, redemption or repurchase.

Conversion Rights - The AFG Convertible Notes are convertible at the option of the holder (the “Conversion Option”) at any time until the business day prior to the maturity date, including in connection with a redemption by the Company.

The AFG Convertible Notes are convertible into shares of the Company’s common stock, par value $ 0.0001 per share, based on an initial conversion price of approximately $ 1.67 per share subject to customary anti-dilution and other adjustments.

The Company has the right to settle conversions in shares of common stock, cash, or any combination thereof.

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Borrowings (cont.)

Optional Redemption - On or after June 30, 2024, provided that the Company has obtained stockholder approval, the AFG Convertible Notes are redeemable by the Company in the event that the closing sale price of the Company’s common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides the redemption notice.

The redemption price will be equal to the then current principal amount of the AFG Convertible Notes (inclusive of all PIK Interest), plus the aggregate amount of all interest payments on the AFG Convertible Notes that the holders of the AFG Convertible Notes to be redeemed would have been entitled to receive had the AFG Convertible Notes remained outstanding to the maturity date.

Contingent Redemption - With certain exceptions, upon the occurrence of certain events and fundamental changes described in the AFG Convertible Notes Agreement, the holders of the AFG Convertible Notes may require that the Company repurchase all or part of the principal amount of the AFG Convertible Notes at a purchase price of 100 % of the principal amount of the AFG Convertible Notes, plus accrued and unpaid interest.

Embedded Derivative - The Conversion Option includes an exercise contingency, which requires the Company to obtain shareholder approval for conversions subject to the Exchange Cap.

If shareholder approval is not obtained, following commercially reasonable efforts, the Company will be required to settle the conversion in excess of the Exchange Cap in cash.

Since settlement in cash may be required in absence of shareholder approval, the embedded conversion feature fails the equity classification guidance in ASC 815 and is thus precluded from being classified in equity.

Therefore, the embedded conversion feature is required to be bifurcated from the AFG Convertible Notes and accounted for at fair value at each reporting date, with changes in fair value recognized on the consolidated statements of operations and comprehensive loss.

The fair value of the AFG Convertible Notes at issuance was $ 16,623 , which was greater than the proceeds received.

The Company recorded the difference of $ 2,873 as interest expense on the accompanying consolidated statement of operations and comprehensive loss.

Interest expense recognized on the AFG Convertible Notes is as follows:

December 31, 2023

Contractual interest expense $ 3,679

Amortization of debt discount 743

Amortization of debt issuance costs 209

Total $ 4,631

The balance for the AFG Convertible Notes is as follows:

December 31, 2023

Principal $ 17,429

Unamortized debt discount ( 2,835 )

Unamortized debt issuance costs ( 800 )

Embedded conversion feature 4,345

Aggregate carrying value $ 18,139

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Borrowings (cont.)

The gain from the change in fair value of the embedded derivative for the year ended December 31, 2023 amounted to $ 2,106 .

See Note 15, Fair Value Measurement for the assumptions used to determine the fair value of the embedded derivative as of December 31, 2023 and as of the date of issuance.

The Company is obligated to repay all contractual interest attributable to the AFG Convertible Notes in-kind on a semi-annual basis, in accordance with the terms of the Investment Agreement.

During the year ended December 31, 2023, contractual interest in-kind of $ 3,679 was recorded as an increase to the AFG Convertible Notes' principal balance on the consolidated balance sheet.

Senior Secured Term Loan

On July 29, 2022 (the "Closing Date"), the Company entered into a $ 100,000 Senior Secured Term Loan Credit Agreement with Atlas Credit Partners (ACP) Post Oak Credit I LLC, as administrative agent for the lenders and collateral agent for the secured parties.

As of December 31, 2022, the Company had total borrowings of $ 100,000 under the Senior Secured Term Loan, composed of borrowings on July 29, 2022, August 4, 2022, and December 7, 2022 of $ 85,106 and $ 9,574 , and $ 5,320 , respectively.

On July 29, 2022 (the "Closing Date"), the Company entered into a $ 100,000 Senior Secured Term Loan Credit Agreement with Atlas Credit Partners (ACP) Post Oak Credit I LLC (Atlas), as administrative agent for the lenders and collateral agent for the secured parties.

The Senior Secured Term Loan is scheduled to mature on the earlier of (i) July 29, 2026, and (ii) 91 days prior to the current maturity date of the 2021 Convertible Notes of June 30, 2026.

The Company has the right at any time to prepay any Borrowing in whole or in part in an amount of not less than $ 500 .

The Company used the proceeds from the Senior Secured Term Loan to (i) fund growth investments and for general corporate purposes including corporate-level research and development investments, (ii) expand the manufacturing facility of the Company’s wholly owned subsidiary, Hi-Power, (iii) redeem in full the Company’s existing indebtedness to Holtec (see Note 3, Acquisition for further discussion) and (iv) pay certain insurance premiums, interest reserves, fees and expenses incurred in connection with the Senior Secured Term Loan agreement.

The outstanding principal balance of the Senior Secured Term Loan bears interest, at the applicable margin plus, at the Company’s election, either (i) the benchmark secured overnight financing rate (“SOFR”), which is a per annum rate equal to (y) the Adjusted Term SOFR plus 0.2616 %, or (ii) the alternate base rate (“ABR”), which is a per annum rate equal to the greatest of (x) the U.S.

3 unchanged sentences

The Company may elect to convert SOFR Loans to ABR (and ABR Loans to SOFR).

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Borrowings (cont.)

As of December 31, 2023, the interest rate in effect for the Senior Secured Term Loan's fourth quarter of 2023 interest payment was 14.15 %.

Any repayment of principal prior to the second anniversary of the issuance date is subject to a call premium.

1 unchanged sentence

The Company deemed that the fair value of the embedded derivative features which qualify for bifurcation was de minimis.

Concurrently, the Company entered into a Guarantee and Collateral Agreement which secures and guarantees the Senior Secured Term Loan with substantially all the assets of the Company and its subsidiaries, other than the Company’s equity interests in Hi-Power and assets of Hi-Power.

Additionally, interest is required to be escrowed in an amount equal to the aggregate amount of the four immediately following interest payments owed on the Loans.

At December 31, 2022, escrowed interest of $ 11,422 is presented in Long-term restricted cash on the consolidated balance sheets.

Additionally, interest is required to be escrowed based on the principle outstanding.

This amount was $ 11,755 at December 31, 2023.

This escrowed amount is classified as restricted cash on the consolidated balance sheets.

The agreements also contain customary affirmative and negative covenants.

They limit the Company’s and its subsidiaries’ ability to incur indebtedness, make restricted payments, including cash dividends on its common stock, make certain investments, loans and advances, enter into mergers and acquisitions, sell, assign, transfer or otherwise dispose of its assets, enter into transactions with its affiliates and engage in sale and leaseback transactions, among other restrictions.

Furthermore, the limitation on the Company’s ability to incur indebtedness also (i) limits the amount of debt under the SEPA Loans that the Company may have outstanding at any time to $ 15,000 , and (ii) requires payment in kind of principal and interest on each of the SEPA Pre-Advance Loans (if any) and on the 2021 Convertible Notes.

Additionally, the Company may not permit Liquidity (as defined in the Senior Secured Term Loan) as of the last day of each fiscal quarter to be less than the Interest Escrow Required Amount (as defined in the Senior Secured Term Loan), which is calculated as the aggregate amount of the four immediately following interest payments under the Senior Secured Term Loan.

While the Company was in compliance with this covenant as of December 31, 2022 and currently 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 (see Note 1, Overview ).

Debt issuance costs of $ 885 and original issue discounts of $ 2,008 were recognized for all amounts borrowed under the Senior Secured Term Loan.

These fees shall be amortized to interest expense, utilizing the effective interest method through loan maturity.

Debt issuance costs also include credit wrap insurance premiums of $ 16,953 for all amounts borrowed under the Senior Secured Term Loan.

The credit wrap insurance provides the Lender with a guarantee on the Company’s credit risk.

In the event the Senior Secured Term Loan remains outstanding on the first, second and third anniversaries of the closing date, the Company will be required to pay additional insurance premiums equal to 3 %, 3 %, and 2 %, respectively of the Senior Secured Term Loan balance then outstanding.

The debt issuance fees shall be amortized to interest expense, utilizing the effective interest method through loan maturity.

Furthermore, the limitation on the Company’s ability to incur indebtedness also requires payment of principal and interest in kind on the 2021 Convertible Notes.

While the Company was in compliance with this covenant as of December 31, 2023, and currently expects to remain in compliance as of March 31, 2024, 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, 2024 and thereafter (see Note 1, Overview for further discussion).

The following table summarizes interest expense recognized on the Senior Secured Term Loan:

For the Year-Ended December 31, 2022

For the Years Ended December 31,

Contractual interest expense $ 13,943 $ 4,887

7 unchanged sentences

The carrying value of the Senior Secured Term Loan is as follows:

December 31, 2022

Principal $ 100,000 $ 100,000

13 unchanged sentences

Total Equipment Financing loans $ 11,216 $ 271

In addition to the above fees, a commitment fee of $ 188 was paid at the 2021 closing of the equipment financing facility.

On September 30, 2022, the equipment facility’s unused commitment of $ 13,784 expired.

1 unchanged sentence

For the years ended December 31, 2023 and 2022, the Company recognized $ 1,111 and $ 922 as interest expense attributable to the equipment financing agreement, respectively.

Other Borrowings

Note Payable – Hi-Power

In connection with the Hi-Power acquisition (see Note 3, Acquisition ), the Company agreed to pay an aggregate purchase price of $ 25,000 .

Principal payments of $ 5,000 were paid in May 2021 and 2022.

The fair value of the note payable was estimated using active market quotes, based on the Company’s incremental borrowing rates for similar types of borrowing arrangements, which were Level 2 inputs (see Note 16, Fair Value Measurement ).

As of December 31, 2021, notes payable included a current portion of $ 4,926 and a long-term portion of $ 13,769 , respectively.

The Note was extinguished during the third quarter of 2022 with proceeds from the Senior Secured Term Loan.

The Company recognized a loss of $ 942 from debt extinguishment for the year ended December 31, 2022 .

Warrants Liability - Related Party

Private placement warrants issued to the Sponsor of BMRG in its initial public offering on May 22, 2020 became exercisable on May 22, 2021.

These warrants are classified as Level 2 financial instruments in the fair value hierarchy (see Note 16, Fair Value Measurement ).

They are valued on the basis of the quoted price of the Company’s public warrants, adjusted for insignificant difference between the public warrants and the private placement warrants.

As of December 31, 2022 and 2021, 325,000 private warrants were outstanding with a fair value of $ 78 and $ 926 , respectively.

These amounts are included in warrants liability - related party on the consolidated balance sheets.

Warrants Liability

The Company has issued private placement warrants to various counterparties since the initial public offering (“IPO”), some of which are exercisable and outstanding as of December 31, 2023 and December 31, 2022.

In April 2023, the Company issued 16,000,000 shares of common stock and 16,000,000 private placement warrants to purchase shares of common stock, and in May 2023, the Company issued another 3,601,980 shares of common stock and 3,601,980 private placement warrants to purchase shares of common stock (the “April 2023 Transaction” and “May 2023 Transaction”, respectively).

The proceeds from the April 2023 Transaction and May 2023 Transaction were $ 40,000 , and $ 8,000 , respectively.

The fair value of the warrants and common stock for the April 2023 Transaction and May 2023 Transaction at issuance was $ 66,366 and $ 13,267 , respectively, which was greater than the proceeds.

As such, the Company recorded the excess as losses in the amounts of $ 26,366 and $ 5,267 , respectively, as a component of change in fair value of warrants in the Company’s consolidated statements of operations and comprehensive loss.

The Company paid $ 2,328 in underwriting fees at closing related to the Transactions.

The April 2023 Transaction and the May 2023 Transactions at issuance were considered a related party transaction due to the number of common shares and warrants issued.

The ownership percentage exceeded the thresholds defined by SEC and US GAAP for a related party.

However, as of December 31, 2023, all shareholders and warrant holders did not exceed the related party threshold.

As such, the warrants liability as disclosed on the consolidated balance sheets and elsewhere in this document are not classified as related party.

EOS ENERGY ENTERPRISES, INC.

1 unchanged sentence

(In thousands, except share and per share amounts)

Warrants Liability - Related Party (cont.)

The change in fair value for the years ended December 31, 2022 and 2021 amounted to $ 848 and $ 1,775 , respectively.

The change has been recognized in loss (gain) on change in fair value of derivatives - related parties in the Company’s consolidated statements of operations and comprehensive loss.

Warrants Liability (cont.)

In December 2023, the Company issued in a combined public offering (i) 34,482,759 shares of its common stock and (ii) accompanying common warrants to purchase one share of common stock for each share of common stock sold (the "December 2023 Public Offering").

The gross proceeds to the Company from the December 2023 Public Offering were $ 50,000 , before deducting underwriting fees at closing.

The offering price for each share of common stock and accompanying warrant was $ 1.45 .

The fair value of the warrants and common stock for the December 2023 Public Offering at issuance was $ 71,294 , which was greater than the proceeds.

As such, the Company recorded the excess as losses in the amount of $ 21,294 , as a component of change in fair value of warrants in the Company’s consolidated statements of operations and comprehensive loss.

The Company paid $ 2,500 in underwriting fees at closing and incurred an additional $ 175 in legal fees related to the offering.

The 2023 warrants do not qualify for equity classification guidance in ASC 815-40 and are measured at fair value at each reporting period.

The amount of warrants outstanding and fair value for all warrants as of December 31, 2023 and 2022 are as follows:

December 31, 2023

December 31, 2022

Outstanding Fair Value Warrants Outstanding Fair Value

IPO warrants 274,400 $ 55 325,000 $ 78

April 2023 warrants 16,000,000 6,276 — —

May 2023 warrants 3,601,980 1,544 — —

December 2023 warrants 34,482,759 19,586 — —

Total 54,359,139 $ 27,461 325,000 $ 78

For all warrants in aggregate, the change in fair value for the years ended December 31, 2023 and 2022 has been recognized in change in fair value of warrants on the Company’s consolidated statements of operations and comprehensive loss.

The fair value for the warrants are included in warrants liability on the consolidated balance sheets.

See Note 15, Fair Value Measurements for further information .

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

The Company leases machinery, manufacturing facilities, office space, land, and equipment under both operating and finance leases.

18 unchanged sentences

2026 1,610 35 1,645

2026 1,420 35 1,455

Total minimum lease payments $ 5,848 $ 245 $ 6,093

1 unchanged sentence

Present value of minimum lease payments $ 4,846 $ 188 $ 5,034

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Leases (cont.)

The Company currently leases BESS to one customer with a 20 -year term through sales-type leases.

2 unchanged sentences

The unearned finance income is recognized interest income over the lease term using the interest method.

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Leases (cont.)

For the years ended December 31, 2023 and 2022, the Company recognized revenue of $ 0 and $ 1,166 from the sales-type lease, respectively.

1 unchanged sentence

Fair Value Measurement

The Company’s financial instruments consist of cash and cash equivalents, restricted cash, accounts receivable, notes receivable, net, contract assets, long-term restricted cash, accounts payable, convertible notes payable — related party, contract liabilities, long-term debt, and warrants liability- related party.

Accounting standards establish a hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three levels.

The fair value hierarchy gives the highest priority to quoted market prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Accounting standards require financial assets and liabilities to be classified based on the lowest level of input that is significant to the fair value measurement.

The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.

The carrying value of cash and cash equivalents, restricted cash, accounts receivable, contract assets, long-term restricted cash, contract liabilities and accounts payable are considered to be representative of their fair value due to the short maturity of these instruments.

The table below summarizes the fair values of certain liabilities that are included within the Company's accompanying consolidated balance sheets, and their designations among the three fair value measurement categories:

2 unchanged sentences

Level 1 Level 2 Level 3 Level 1 Level 2 Level 3

Private placement warrants $ — $ 78 $ — $ — $ 926 $ —

Embedded derivative liabilities $ — $ — $ 1,945 $ — $ — $ 12,359

The following table presents a roll-forward of the activity of the embedded derivative liabilities within our 2021 Convertible Notes and the December 2022 Promissory Note (see Note 13, Borrowings for further discussion).

These liabilities were measured at fair value on a recurring basis using significant unobservable inputs (Level 3).

$ — $ 55 $ 27,406 $ — $ 78 $ —

Embedded derivatives

$ — $ — $ 4,423 $ — $ — $ 1,945

The IPO warrants are classified as Level 2 financial instruments in the table above.

They are valued on the basis of the quoted price of the Company’s public warrants, adjusted for insignificant difference between the public warrants and the private placement warrants.

The April 2023 warrants, May 2023 warrants, and the December 2023 warrants are classified as Level 3 financial instruments in the table above.

The Company estimated the fair value of these warrants using the Black-Scholes model at inception and on subsequent valuation dates.

This model incorporates inputs such as the stock price of the Company, risk-free interest rate, volatility, and time to expiration.

The volatility involves unobservable inputs classified as Level 3 of the fair value hierarchy.

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Fair Value Measurement (cont.)

The inputs used to determine the fair value of the April 2023 warrants, May 2023 warrants, and the December 2023 warrants are as follows:

April 2023 warrants December 31, 2023

April 12, 2023

Time to expiration 4.79 years 5.51 years

Common stock price $ 1.09 $ 2.61

Risk-free interest rate 3.8 % 3.4 %

Volatility 70.0 % 70.0 %

May 2023 warrants December 31, 2023

Time to expiration 4.54 years 5.17 years

Common stock price $ 1.09 $ 2.31

Risk-free interest rate 3.8 % 3.4 %

Volatility 70.0 % 70.0 %

December 2023 warrants

2023 December 14,

Time to expiration 4.96 years 5.00 years

Common stock price $ 1.09 $ 1.32

Risk-free interest rate 3.8 % 3.9 %

Volatility 70.0 % 70.0 %

Embedded derivatives

The Company estimated the fair value of the embedded conversion features in the 2021 Convertible Note and AFG Convertible Note using a binomial lattice model at inception and on subsequent valuation dates.

This model incorporates inputs such as the stock price of the Company, dividend yield, risk-free interest rate, the effective debt yield and expected volatility.

The effective debt yield and volatility involve unobservable inputs classified as Level 3 of the fair value hierarchy.

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Fair Value Measurement (cont.)

The inputs used to determine the fair value of the embedded derivative liabilities are as follows:

2021 Convertible Note

December 31, 2023

December 31, 2022

Term 2.50 years 3.50 years

Dividend yield — % — %

Risk-free interest rate 4.1 % 4.1 %

Volatility 70.0 % 80.0 %

Effective debt yield 40.0 % 25.0 %

AFG Convertible Note

December 31, 2023

January 18, 2023

Term 2.50 years 3.45 years

Dividend yield — % — %

Risk-free interest rate 4.1 % 3.6 %

Volatility 70.0 % 70.0 %

Effective debt yield 40.0 % 40.0 %

The following table summarizes the changes in the fair value of liabilities that are included within the Company’s accompanying consolidated balance sheets and are designated as Level 3:

For the Years Ended December 31,

Embedded derivatives

Balance at beginning of the period $ 1,945 $ 12,359

Additions 30,619 466

Change in fair value included in earnings ( 10,880 ) ( 17,507 )

Change in fair value of derivatives - related party

( 28,141 ) ( 10,880 )

Balance at end of the period $ 4,423 $ 1,945

Balance at beginning of the period $ — $ —

Additions 55,330 —

Change in fair value of warrants

Balance at end of the period $ 27,406 $ —

EOS ENERGY ENTERPRISES, INC.

7 unchanged sentences

Notes receivable 3 $ 863 $ 719 $ 863 $ 677

Note payable- Hi-Power 3 — — 18,695 14,607

2021 Convertible Notes* 3 94,386 57,998 82,950 62,421

Senior Secured Term Loan 3 85,624 61,360 81,616 77,576

AFG Convertible Notes*

3 18,139 18,352 — —

Equipment financing facility 3 5,710 4,826 8,577 6,282

December 2022 Promissory Note* 3 2,688 2,908 — —

Yorkville Convertible Notes*

3 — — 2,688 2,908

Total $ 204,722 $ 143,255 $ 176,694 $ 149,864

11 unchanged sentences

Legal Proceedings

Department of Justice

On July 7, 2022, the Company entered into a settlement agreement with the U.S.

Department of Justice (DOJ) and Vincent Icolari (“Relator”) to resolve the previously disclosed investigation by the DOJ for underpayment of certain custom duties in past years in connection with imports of batteries and battery components manufactured abroad.

The investigation resulted from a qui tam lawsuit (the “Civil Action”) filed by the Relator in December 2019 alleging violations of the False Claims Act.

Pursuant to the terms of the settlement agreement, the Company has agreed to pay a total of $ 1,017 to the United States Department of Justice and $ 70 to Relator’s counsel.

Upon receipt of such payments, the DOJ and the Relator have agreed to release the Company from civil monetary and administrative claims under the False Claims Act and the Relator has agreed to release the Company from any claims related to the Civil Action.

The Company has fully settled this liability as of December 31, 2022.

In April 2022, the Company received a subpoena from the U.S.

Securities and Exchange Commission (“SEC”).

On August 29, 2022, the Company received a letter from the SEC informing the Company that the SEC’s investigation relating to the subpoena has concluded without any recommendation for enforcement action as to the Company.

Class Action Complaints

On March 8, 2023, a class action lawsuit (the “Delman Complaint”) was filed in the Court of Chancery of the State of Delaware by plaintiff Richard Delman (the “Delman Plaintiff”) against certain defendants including the Company’s former directors (the “Delman Defendants”).

Neither the Company nor Eos Energy Storage LLC were named as a defendant in the Delman Complaint, but each was identified as a relevant non-party, and the Company has indemnification obligations relating to the lawsuit.

On February 1, 2024, the parties to the Delman Compliant agreed to a binding Settlement Term Sheet (the “Settlement”) whereby the Delman Plaintiff agreed to resolve the Delman Complaint in exchange for a settlement payment of $ 8,500 , consisting of cash payments previously made by the Company of approximately $ 1,000 and an additional cash payment of approximately $ 7,500 funded by the Company’s D&O liability insurance policies.

The settlement is subject to confirmatory discovery and approval by the Court of Chancery.

EOS ENERGY ENTERPRISES, INC.

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Commitments and Contingencies (cont.)

Delaware Section 205 Petition

On November 12, 2020, B.

Riley Principal Merger Corp.

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”).

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 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 August 1, 2023, a class action lawsuit was filed in the United States District Court of New Jersey by plaintiff William Houck (the “Houck Complaint”) against the Company and against three individual officers:

the Company’s Chief Executive Officer, its former Chief Financial Officer, and its current Chief Financial Officer (with the Company, the “Houck Defendants”).

The Houck Complaint alleges that the Houck Defendants violated federal securities laws by making knowingly false or misleading statements about the Company’s contractual relationship with a customer and about the size of the Company’s order backlog and commercial pipeline.

The Company has denied the allegations of wrongdoing in the Houck Complaint and intends to continue to vigorously defend against this action.

Stock-Based Compensation

6 unchanged sentences

The following table summarizes stock option activity during the years ended December 31, 2023 and 2022:

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Stock-Based Compensation (cont.)

Units Weighted-Average

5 unchanged sentences

Cancelled/Forfeited ( 953,872 ) 4.84

Exercised ( 123,837 ) 8.67

Options Outstanding at December 31, 2022

2 unchanged sentences

Cancelled/Forfeited ( 504,550 ) 2.39

( 262,500 ) 1.35

Options Outstanding at December 31, 2023

3 unchanged sentences

A summary of restricted stock units (RSU) activity for the years ended December 31, 2023 and 2022 is as follows:

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Stock-Based Compensation (cont.)

Units Weighted-Average

14 unchanged sentences

As of December 31, 2023 and 2022, 5,015,893 and 994,108 shares remain for future issuance, respectively.

Options generally have a term of five to ten years and vest over periods ranging from three months to five years .

RSUs generally vest over periods from three to four years .

Options generally have a term of five to ten years and vest over periods ranging from three months to two years .

RSUs generally vest over periods from one to three years .

During the year ended December 31, 2023, the Company granted 40,000 RSUs and 0 options with performance and service conditions.

2 unchanged sentences

The performance conditions primarily relate to achievement of sales and financing targets.

In December 2022, the Company modified 625,000 of performance-based stock options that were issued in June 2022 by extending the period to meet certain performance conditions.

As of December 31, 2022, there were 15,000 and 1,575,000 performance-based RSUs and stock options, respectively.

In June 2023, the Company modified 550,000 performance-based stock options that were issued in June 2022 and December 2022 by extending the period to meet certain performance conditions.

During the year ended December 31, 2023, all performance conditions were met for these 550,000 options, therefore accelerating the vesting and respective expense.

As of December 31, 2023, total unrecognized stock compensation expense was $ 15,314 of which $ 15,051 was attributable to unvested RSUs and $ 263 attributable to unvested stock options.

Compensation expense for these unvested awards is expected to be recognized over a weighted-average remaining vesting period of 0.4 years for stock options and 2.3 years for RSUs.

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Stock-Based Compensation (cont.)

The weighted average assumptions used to determine the fair value of options granted in 2022 and 2021 are as follows:

The weighted average assumptions used to determine the fair value of stock options granted in 2023 and 2022 are as follows:

Volatility 62.60 % 61.36 %

2 unchanged sentences

Dividend yield 0 % 0 %

The RSUs issued were valued at the stock price of the Company on the date of the grant.

The weighted average grant date fair value of all options granted was $ 0.72 and $ 8.08 per option for the years ended December 31, 2022 and 2021, respectively.

The Company is subject to regulation under U.S., Italy and India tax laws, regulations and policies.

The weighted average grant date fair value of all stock options granted was $ 1.02 and $ 0.72 per option for the years ended December 31, 2023 and 2022, respectively.

The Company is subject to U.S., Italy and India tax laws, regulations and policies.

Changes to these laws or regulations may affect the Company’s tax liability, return on investments and business operations.

Earnings before income taxes

Net income (losses) before income taxes were as follows:

Net income (losses) before income taxes for the years ended December 31, 2023 and 2022 was as follows:

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Income Taxes (cont.)

For the years ended December 31,

13 unchanged sentences

Total income tax (benefit) provision $ 31 $ 51

The Company has a tax provision of $ 31 and $ 51 for the years ended December 31, 2023 and 2022, respectively, due to foreign taxable income and the generation of U.S.

taxable losses offset by a valuation allowance on the deferred tax assets.

Reconciliation of U.S.

Federal Statutory income tax rate to actual income tax rate

The reconciliation from the statutory U.S.

federal income tax rate to the effective tax rate is as follows:

EOS ENERGY ENTERPRISES, INC.

2 unchanged sentences

Income Taxes (cont.)

The Company has a tax provision of $ 51 for the year ended December 31, 2022 due to foreign taxable income and the generation of U.S.

taxable losses offset by a valuation allowance, discussed below, on the deferred tax assets.

The Company has a tax provision of $ — for the year ended December 31, 2021 due to the generation of U.S.

taxable losses offset by a valuation allowance on the deferred tax assets.

Reconciliation of US Federal Statutory income tax rate to actual income tax rate

The reconciliation from the statutory U.S.

federal income tax rate to the effective tax rate is as follows:

For the years ended December 31,

7 unchanged sentences

Stock-based compensation 1,687 1,622

Non-deductible officers compensation

Valuation allowance 34,821 60,444

2 unchanged sentences

Effective tax rate — —

The reported income tax provision differs from the amount computed by applying the statutory US federal income tax rate of 21% to the income before income taxes primarily due to pretax losses for which no tax benefit has been provided, non-deductible convertible debt, as well as stock-based compensation.

The reported income tax provision differs from the amount computed by applying the statutory U.S.

federal income tax rate of 21% to the income before income taxes primarily due to pretax losses in the U.S.

for which no tax benefit has been provided, non-deductible convertible debt, as well as stock-based compensation.

Deferred Income Taxes

16 unchanged sentences

Fixed assets 268 316

Interest limitation — 1,430

Inventory 977 663

4 unchanged sentences

Deferred tax liabilities:

Fixed assets — ( 1,073 )

Right of use asset ( 1,144 ) ( 1,194 )

Note payable — ( 497 )

Intangibles ( 41 ) ( 63 )

2 unchanged sentences

Total deferred tax asset (liability) $ — $ —

As of December 31, 2022, the Company’s net deferred tax balances consist primarily of U.S.

federal and state net operating losses (“NOLs”) available for carry forward, tax amortizable goodwill in excess of financial statement goodwill, stock-based compensation, and capitalized research and experimental (“R&E”) costs.

As of December 31, 2021, the Company's net deferred tax balances consist primarily of U.S.

federal and state NOLs as available for carry forward and tax amortizable goodwill in excess of financial statement goodwill.

The Tax Cuts & Jobs Act of 2017 ("TCJA") mandated that R&E costs incurred in tax years beginning after December 31, 2021 must be capitalized and amortized over five years if the research is performed in the United States and over 15 years if performed outside the United States.

As of December 31, 2022, the Company has capitalized and will amortize these costs over the required periods.

During 2021, the Company participated in a tax certificate transfer program with the state of New Jersey and sold a portion of its available prior year New Jersey state NOLs, in varying amounts from tax years 2017 through 2019.

The deferred tax balances and related disclosures above reflect the adjusted attribute carryforwards and associated deferred tax assets post-sale of the prior years’ attributes.

The Company did not participate in the program during 2022.

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Income Taxes (cont.)

As of December 31, 2023 and December 31, 2022, the Company has capitalized and will amortize these costs over the required periods.

The Company maintains a valuation allowance where it is more-likely-than-not that all or a portion of a deferred tax asset may not be realized.

1 unchanged sentence

In determining whether a valuation allowance is required, the Company evaluates factors such as prior earnings history, expected future earnings, reversal of existing taxable temporary differences, carry back and carry forward periods and tax planning strategies that could potentially enhance the likelihood of the realization of a deferred tax asset.

As of December 31, 2022, all deferred tax assets related to the U.S.

Management has determined that it is more-likely-than not that the Company will not be able to utilize its deferred tax assets at December 31, 2022 and 2021 due to a history of cumulative losses.

The Company has determined that it is more-likely-than-not that it will not be able to utilize its U.S.

deferred tax assets at December 31, 2023 and 2022 due to a history of cumulative losses.

As such, the Company has a valuation allowance against its net deferred tax assets.

1 unchanged sentence

The increase was primarily attributable to an increase in NOL carryforwards.

At December 31, 2022, the valuation allowance is $ 140,858 , of which $ 1,762 will be allocated to additional paid-in capital when released.

The remaining valuation allowance of $ 139,096 will be released through continuing operations.

At December 31, 2023, the valuation allowance is $ 175,680 , of which $ 1,762 would be allocated to additional paid-in capital if released.

The remaining valuation allowance of $ 173,918 would be released through continuing operations.

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Income Taxes (cont.)

Net Operating Losses & Tax Credits

3 unchanged sentences

As of December 31, 2023 and 2022, the Company has gross federal NOL carryforwards of approximately $ 638,507 and $ 485,351 , respectively.

As of December 31, 2022 and 2021, the Company has state NOL carryforwards of approximately $ 235,679 and $ 125,855 , respectively.

As of December 31, 2023 and 2022, the Company has state NOL carryforwards of $ 228,333 and $ 235,679 , respectively.

Regarding the federal NOL for the year ended December 31, 2023, $ 89,051 begins to expire in varying amounts from 2032 through 2036, while $ 549,456 has an indefinite carryforward period.

Regarding the state NOL carryforwards for the year ended December 31, 2022, $ 233,566 begin to expire in varying amounts from 2033 through 2042, while $ 2,113 has an indefinite carryforward period.

Regarding the state NOL carryforwards for the year ended December 31, 2023, $ 222,764 begins to expire in varying amounts from 2033 through 2043, while $ 5,569 has an indefinite carryforward period.

(federal and state) operating loss carryforwards and credits may be subject to an annual limitation due to the “change in ownership” provisions of the Internal Revenue Code, and similar state provisions.

The Company determined that the merger transaction constitutes a change of ownership as defined under Internal Revenue Code Section 382 and Section 383.

Based on management’s Section 382 Limitation Analysis, it is expected that all NOL carryforwards that existed as of the transaction date will be allowable under Section 382, however, the deferred tax asset on the Company’s NOL carryforward is offset by a full valuation allowance.

In 2020, the Company determined that the merger transaction constitutes a change of ownership as defined under Internal Revenue Code Section 382 and Section 383.

Based on management’s Section 382 Limitation Analysis, it is expected that all NOL carryforwards that existed as of the transaction date will be allowable under Section 382.

Subsequent changes in ownership could have occurred through December 31, 2023, which could further severely limit the use of losses.

Management believes such limitation will not have a material adverse effect on the financial statements as the Company is currently in a net loss position, and the deferred tax asset on the Company’s NOL carryforward is offset by a full valuation allowance.

Management will further evaluate the impact, if any, on the allowable net operating loss carryforward.

Based on management’s Section 383 Limitation Analysis, it is expected that as of December 31, 2023 and December 31, 2022, $ 3,733 of federal R&D credits will expire unused.

On August 16, 2022, the IRA was signed into law that includes a new alternative minimum tax based upon financial statement income (“book minimum tax”) and tax incentives for energy and climate initiatives, among other provisions.

The Company is not expected to be impacted by the book minimum tax given its extensive losses.

The Company continues to assess the tax incentives in the legislation that could impact pre-tax income, effective tax rate, or valuation of deferred tax assets.

On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 into law.

There are two major corporate tax provisions included in the Act.

In general, the IRA creates a 15% corporate alternative minimum tax (“CAMT”) on any corporation that has (or has had) average annual “adjusted financial statement income” for a three-year period preceding the tax year that exceeds $1 billion.

The CAMT is effective for tax years beginning after December 31, 2022.

The IRA also imposes on publicly traded U.S.

corporations a 1% excise tax on certain repurchases of their stock.

The excise tax is effective for stock repurchases after December 31, 2022.

The Company does not expect the aforementioned provisions in the IRA to have any material impact on the Company’s financial statements.

In addition to the CAMT discussed above, the IRA has production tax credits that are discussed in Note 10, Government Grants.

Unrecognized Tax Benefits

19 unchanged sentences

Included in the balance of unrecognized tax benefits at December 31, 2023 are potential benefits of nil that, if recognized, would affect the effective tax rate on income from continuing operations.

The open tax years for federal and state tax returns are generally 2019 and forward.

The open tax years for federal returns are 2020 and forward, and the open tax years for state returns are generally 2019 and forward.

Net operating losses and R&D credits generated in closed years and utilized in open years are subject to adjustment by the tax authorities.

2 unchanged sentences

As a result, the Company may adjust the reserves for unrecognized tax benefits for the impact of new facts and developments, such as changes to interpretation of relevant tax law, assessments from taxing authorities, settlements with tax authorities and lapses of statute of limitations.

Shareholders' Equity

Shareholders' Deficit

Preferred Shares

1 unchanged sentence

At December 31, 2023 and 2022, there were no shares of preferred stock issued or outstanding.

On June 28, 2022, the Company’s shareholders approved an amendment to the Company’s Third Amended and Restated Certificate of Incorporation to increase the authorized shares of common stock with $ 0.0001 par value from 200,000,000 to 300,000,000 .

The holders of the Company’s common stock are entitled to one vote for each share.

The Company is authorized to issue 300,000,000 shares of common stock at $ 0.0001 par value.

The holders of the Company’s common stock are entitled to one vote for each share held.

At December 31, 2023 and 2022, there were 199,133,827 and 82,653,781 shares of common stock issued and outstanding.

Contingently Issuable Common Stock

In connection with the Merger transaction, the Company was obligated to issue within five years from the closing date to each unitholder Eos Energy Storage, LLC ("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 during the Earnout Period (each of clauses (i) and (ii), a “Triggering Event”).

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Shareholders' Equity (cont.)

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.

Accordingly, 1,999,185 Shares were issued to the unitholders of EES.

Sponsor Earnout Shares

Pursuant to the Sponsor Earnout letter signed in connection with the Merger, 1,718,000 shares of common stock issued and outstanding held by BMRG ("Sponsor Earnout Shares") were subject to certain transfer and other restrictions, under which (a) 859,000 Sponsor Earnout Shares ("Block A Sponsor Earnout Shares") were restricted from being transferred unless and until either, for a period of five years after the Closing, (i) the share price of our common stock equals or exceeds $ 12.00 per share for any 20 trading days within any consecutive 30 -trading day period or (ii) a change of control occurs for a share price equaling or exceeding $ 12.00 per share, and (b) the remaining 859,000 Sponsor Earnout Shares ("Block B Sponsor Earnout Shares") were subject to similar restrictions except that the threshold is increased from $ 12.00 to $ 16.00 .

If after the five-year period, there are no triggering events, the Sponsor Earnout Shares will be forfeited and canceled for no consideration.

If after the five-year period, only the triggering event described in clause (a) above has occurred, the remaining 859,000 Sponsor Earnout Shares described in clause (b) will be forfeited and canceled for no consideration.

On January 22, 2021, as the Company's stock price exceeded $ 16.00 per share for 20 trading days within a consecutive 30 -trading day period, Block B Sponsor Earnout Shares were released from restriction.

Treasury Stock

1 unchanged sentence

The treasury stock was immediately retired.

Public and Private Warrants

The Company sold warrants to purchase 9,075,000 shares of the Company's common stock in the public offering on May 22, 2020.

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Shareholders' Deficit (cont.)

Public Warrants

In 2020, the Company issued public and private warrants to purchase 9,075,000 shares of the Company's common stock.

Each public warrant entitles the holder to purchase a share of common stock at a price of $ 11.50 per share.

1 unchanged sentence

On December 31, 2023 and 2022, there were 7,052,254 and 7,001,654 public warrants outstanding, respectively.

In addition to the public warrants, there are also private warrants outstanding as of December 31, 2022 and 2021 (see Note 14, Warrants Liability - Related Party for further discussion ).

See Note 13, Warrants Liability for private warrants outstanding as of December 31, 2023 and 2022.

April 2023 Transaction and May 2023 Transaction

As discussed in Note 13, Warrants Liability, the April 2023 Transaction consisted of issuance of 16,000,000 shares of common stock at a price of $ 2.50 per share.

The Company also issued 16,000,000 private placement warrants to purchase 16,000,000 shares of common stock.

The warrants have an exercise price of $ 3.14 per share, became exercisable in October 2023 and expire five and one-half years from the date of issuance (see Note 13, Warrants Liability for further discussion).

The May 2023 Transaction consisted of issuance of 3,601,980 shares of common stock at a price of $ 2.221 per share.

The Company also issued 3,601,980 private placement warrants to purchase 3,601,980 shares of common stock.

The warrants have an exercise price of $ 2.50 per share, and became exercisable in July 2023.

The warrants expire five years from the date they were initially exercisable (see Note 13, Warrants Liability for further discussion ) .

The gross proceeds to the Company from the April and May Transactions were $ 40,000 and $ 8,000 , respectively, before deducting underwriting fees.

December 2023 Public Offering

The gross proceeds to the Company from the offering were $ 50,000 , before deducting underwriting fees.

The offering price for each share of common stock and accompanying warrant was $ 1.45 .

Each warrant has an exercise price of $ 1.60 per share, is immediately exercisable and will expire on the fifth anniversary of the original issuance date (see Note 13, Warrants Liability for further discussion ) .

Standby Equity Purchase Agreement

3 unchanged sentences

The SEPA provides for shares to be sold to Yorkville at 97.0 % of market price.

Upon the Company's entry into and subject to the terms and conditions set forth in the SEPA, 465,117 shares were issued to Yorkville as consideration for its irrevocable commitment to purchase shares of common stock, pursuant to the SEPA, as shown in the consolidated statement of shareholders' equity.

The fair value of these shares of $ 1,061 was recorded as other expense in the consolidated statements of operations and comprehensive loss.

Subject to the mutual consent of Yorkville and the Company, from time to time the Company may request, and Yorkville shall provide, pre-advance loans (each, a “Pre-Advance Loan”) each in the principal amount not to exceed $ 50,000 , pursuant to a promissory note on terms and conditions to be agreed by both parties.

Pursuant to the terms and conditions set forth in the SEPA, 465,117 shares were issued to Yorkville in April 2022 as consideration for its irrevocable commitment to purchase shares of common stock.

The fair value of these shares of $ 1,061 was recorded as other expense in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2022.

For the year ended December 31, 2023, total funds raised under the SEPA, inclusive of proceeds received from the 2023 Promissory Notes, were $ 35,550 .

Total shares issued under the SEPA for the year ended December 31, 2023 were 23,630,937 .

EOS ENERGY ENTERPRISES, INC.

1 unchanged sentence

(In thousands, except share and per share amounts)

Shareholders' Equity (cont.)

On June 13, 2022, the Company issued and sold a Convertible Promissory Note with a principal amount of $ 7,500 in a private placement to Yorkville under the Supplemental Agreement.

The Promissory Note was issued with a 2 % original issue discount, bears interest only upon the occurrence of an Event of Default, and had a maturity date of September 15, 2022.

The Promissory Note gives Yorkville the right, but not the obligation, to convert principal and accrued interest into shares of the Company’s common stock at a conversion price of $ 2.21 any time prior to the maturity date, subject to the terms and conditions of the Promissory Note (see Note 13, Borrowings).

On December 29, 2022, the Company and Yorkville entered into Amendment No.

3 to the SEPA, to (i) decrease the commitment amount under the SEPA to $ 75,000 ;

and (ii) reinstitute the Exchange Cap (as defined in the SEPA), which amounts to 19.99 % of the outstanding shares of common stock immediately prior to entering into Amendment No.

3, and applies to all subsequent issuances of common stock under the SEPA, together with any issuances of convertible promissory notes issued by the Company to Yorkville as a Pre-Advance loan.

In January 2023, Yorkville delivered Investor Notices requiring the Company to issue and sell an aggregate of 1,953,612 shares of common stock to Yorkville, in order to offset all outstanding amounts owed to Yorkville under the December 2022 Promissory Note.

See Note 13, Borrowings and Note 21, Subsequent Events for further discussion.

For the year ended December 31, 2022, total funds raised under the SEPA, inclusive of proceeds received from the Convertible Promissory Notes, were $ 14,500 .

Shareholders' Deficit (cont.)

For the year ended December 31, 2022, total funds raised under the SEPA, inclusive of proceeds received from the December 2022 Promissory Note, were $ 14,500 .

Total shares issued under the SEPA for the year ended December 31, 2022 were 7,361,602 .

On August 23, 2023, the Company and Yorkville terminated the SEPA, as amended, by mutual written consent.

At the time of termination, there were no outstanding borrowings, advance notices or shares of Common Stock to be issued under the SEPA.

In addition, there were no fees due by the Company or Yorkville in connection with the termination of the SEPA.

At-the-Market Offering Program

On August 5, 2022, the Company entered into the Sales Agreement with Cowen and Company, LLC, with respect to an at-the-market offering program under which the Company may offer and sell, from time to time at its sole discretion, shares of its common stock, par value $ 0.0001 per share, having an aggregate offering price of up to $ 100,000 (the “Placement Shares”) through Cowen as its sales agent and/or principal.

On August 23, 2023, Amendment No.

1 to the ATM increased the maximum aggregate offering price from $ 100,000 to $ 200,000 .

The Company will pay Cowen a commission equal to 3.0 % of the gross sales proceeds of any Placement Shares sold.

2 unchanged sentences

During the year ended December 31, 2023, the Company sold 37,126,137 shares raising net proceeds of $ 92,916 , net of fees paid to Cowen, at an average selling price of $ 2.58 per share, included in the consolidated statement of shareholders' equity.

During the year ended December 31, 2022, the Company sold 20,539,603 shares raising net proceeds of $ 38,626 , net of fees paid to Cowen, at an average selling price of $ 1.94 per share, included in the consolidated statement of shareholders' equity.

Earnings (loss) Per Share

3 unchanged sentences

Therefore, basic and diluted EPS are computed using the same number of weighted average shares for the years ended December 31, 2023 and 2022.

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Shareholders' Equity (cont.)

The following potentially dilutive shares were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive for the periods presented:

1 unchanged sentence

Stock options and restricted stock units 9,675,085 7,340,702

Public and private placement warrants 7,326,654 7,327,254

61,411,393 7,326,654

Convertible Notes 16,226,124 7,422,371

Subsequent Events

In January 2023, pursuant to the terms of the SEPA and the Second Supplemental Agreement, Yorkville delivered Investor Notices requiring the Company to issue and sell an aggregate of 1,953,612 shares of common stock to Yorkville to offset all outstanding amounts owed to Yorkville under the December 2022 Promissory Note.

On February 1, 2023, the Company issued and sold a convertible promissory note with an aggregate principal amount of $ 5,000 (the “February 2023 Promissory Note”) in a private placement to Yorkville under the Second Supplemental Agreement.

On February 23, 2023 and February 27, 2023, Yorkville delivered Investor Notices pursuant to which, effective February 28, 2023, Yorkville would offset all amounts due under the February 2023 Promissory Note in connection with Yorkville’s purchase of an aggregate of 3,879,706 shares of common stock of the Company under the SEPA.

Following the issuance of the shares, there would be no amount outstanding under the February 2023 Promissory Note.

Convertible Note Issuance

On January 18, 2023, the Company entered into an investment agreement (the “Investment Agreement”) with Great American Insurance Company, Ardsley Partners Renewable Energy, LP, CCI SPV III, LP, Denman Street LLC, John B.

Berding Irrevocable Children’s Trust, John B.

Berding, and AE Convert, LLC, a Delaware limited liability company managed by Russell Stidolph, a related party as Mr.

Stidolph is a director of the Company (together, the “Purchasers”) relating to the issuance and sale to the Purchasers of $ 13,750 in aggregate principal amount of the Company’s 26.5 % Convertible Senior PIK Notes due 2026.

The transactions contemplated by the Investment Agreement closed on January 18, 2023.

Delaware Section 205 Petition

On November 12, 2020, BMRG, the predecessor to the Company, held the BMRG Special Meeting to approve certain matters relating to the business combination between BMRG and Eos Energy Storage LLC.

A recent ruling by the Delaware Court of Chancery introduced uncertainty as to whether Section 242(b)(2) of 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.

EOS ENERGY ENTERPRISES, INC.

1 unchanged sentence

(In thousands, except share and per share amounts)

Subsequent Events (cont.)

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

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

Subsequent Events

On January 8, 2024, Hi-Power entered into an Amended and Restated Manufacturing Purchase and Supply Agreement (the “Supply Agreement”) with TETRA Technologies, Inc.

(“TETRA”), a Delaware corporation, to govern the provision of TETRA PureFlow® zinc bromide and the manufacturing and provision of Eos’s proprietary electrolyte solution (collectively, the “Products”) by TETRA to Eos.

Pursuant to the Supply Agreement, TETRA has provided certain volume supply commitments in exchange for serving as Eos’ preferred supplier of the Products.

As Eos’s preferred supplier, Eos has agreed to purchase 100 % of its requirement of zinc bromide products, including TETRA PureFlow® zinc bromide, and 75 % of its requirement of Eos’ proprietary electrolyte solution from TETRA, and has provided TETRA a right of first refusal prior to entering into a supply agreement for such Products from a third-party.

The Supply Agreement does not contain any minimum purchase volume requirements.

As part of the Supply Agreement, TETRA is granted a non-exclusive, non-sub-licensable, non-transferable license to Hi-Power’s proprietary electrolyte formula, solely in connection with manufacturing and provision of Eos’ proprietary electrolyte solution to Eos.

The Supply Agreement expires on December 31, 2027 and contains customary default provisions, liquidated damages, suspension clauses and remedies in the event of any uncured default by Hi-Power.

On January 31, 2024, Hi-Power entered into a Pricing Agreement (“Pricing Agreement”) with SHPP US LLC (“Sabic”) to govern the pricing terms for sales of certain resin (the “Product”) to Hi-Power authorized purchasers by Sabic.

Pursuant to the Pricing Agreement, Sabic has provided certain pricing commitments in exchange for serving as Hi-Power’s exclusive supplier of the Products.

As Hi-Power’s exclusive supplier, Hi-Power has agreed to require that its authorized suppliers purchase 100 % of Hi-Power’s requirement of Product from Sabic.

The Pricing Agreement also contains certain minimum purchase volume requirements, in exchange for which Sabic granted Hi-Power and/or its authorized suppliers the exclusive right to purchase the Product within the market space of zinc-bromine bi-polar electrodes for use in stationary utility storage.

The Pricing Agreement expires on December 31, 2028.

On February 1, 2024, the Company entered into a binding Settlement Term Sheet (the “Settlement”) to resolve a pending stockholder class complaint brought by Richard Delman in the Court of Chancery of the State of Delaware the (“Delman Complaint”) against certain of the Company’s former directors that served prior to the Company’s business combination transaction in 2020.

Neither the Company or Eos Energy Storage LLC was named as a defendant in the complaint, but each was identified as a relevant non-party and the Company owes certain indemnification obligations relating to the lawsuit to the Company’s former directors.

Pursuant to the Settlement, the Delman Plaintiff agreed to resolve the Delman Complaint in exchange for a settlement payment of $ 8,500 , consisting of cash payments previously made by the Company of approximately $ 1,000 and an additional cash payment of approximately $ 7,500 funded by the Company’s D&O liability insurance policies.

The settlement is subject to confirmatory discovery and approval by the Court of Chancery.

FORM 10-K SUMMARY

Not applicable.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Edison, State of New Jersey, on February 28, 2023.

EOS ENERGY ENTERPRISES, INC.

4 unchanged sentences

Name Position Date

/s/ Joseph Mastrangelo Chief Executive Officer and Director February 28, 2023

/s/ Joseph Mastrangelo Chief Executive Officer and Director March 4, 2024

Joseph Mastrangelo (Principal Executive Officer)

/s/ Nathan Kroeker Chief Financial Officer February 28, 2023

/s/ Nathan Kroeker Chief Financial Officer March 4, 2024

Nathan Kroeker (Principal Financial Officer)

/s/ John Tedone Chief Accounting Officer February 28, 2023

John Tedone (Principal Accounting Officer)

/s/ Jeffrey Bornstein Director February 28, 2023

/s/ Sumeet Puri

Chief Accounting Officer March 4, 2024

(Principal Accounting Officer)

/s/ Jeffrey Bornstein Director March 4, 2024

Jeffrey Bornstein

/s/ Alex Dimitrief Director February 28, 2023

/s/ Alex Dimitrief Director March 4, 2024

Alex Dimitrief

/s/ Audrey Zibelman Director February 28, 2023

Audrey Zibelman

/s/ Claude Demby Director February 28, 2023

/s/ Russell Stidolph Director February 28, 2023

/s/ Claude Demby Director March 4, 2024

/s/ Jeffrey McNeil

Director March 4, 2024

Jeffrey McNeil

/s/ Russell Stidolph Director March 4, 2024

Russell Stidolph

/s/ Marian "Mimi" Walters Director February 28, 2023

/s/ Marian "Mimi" Walters Director March 4, 2024

Marian "Mimi" Walters

/s/ Audrey Zibelman Director March 4, 2024

Audrey Zibelman

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures