Eos Energy Enterprises, Inc. 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures 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. 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. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our CEO and our CFO, to allow timely decisions regarding required disclosure. In light of the material weaknesses described below, we performed additional analyses, reconciliations, and other post-closing procedures to determine that our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management concluded that the consolidated financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented. Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f) and based upon the criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“the COSO Framework”). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of our financial reporting and preparation of our financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles. An effective internal control system, no matter how well designed, has inherent limitations, including the possibility of human error or overriding controls, and therefore can provide only reasonable assurance with respect to reliable financial reporting. Because of its inherent limitations, our internal control over financial reporting may not prevent or detect all misstatements, including the possibility of human error, the circumvention or overriding of controls, or fraud. Effective internal controls can only provide reasonable assurance with respect to the preparation and fair presentation of financial statements. Management, including our CEO and CFO, assessed the Company’s internal control over financial reporting and concluded that they were not effective as of December 31, 2023. In making this assessment, management used the criteria set forth by the COSO framework. Based on this evaluation, our management concluded that our internal control over financial reporting was not effective as of December 31, 2023 due to the material weaknesses resulting from our lack of a formalized internal control framework in accordance with COSO, inadequate segregation of duties in the financial reporting process, lack of review and approval of journal entries, and a lack of management review controls. 48 Table of Contents Management’s Remediation Plan 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. As we continue to evaluate and take actions to improve our internal control over financial reporting, we will further refine our remediation plan and take additional actions to address control deficiencies or modify certain of the remediation measures described above. While progress has been made to enhance our internal control over financial reporting, we are still in the process of designing, implementing, documenting, and testing the effectiveness of these processes, procedures and controls. Additional time is required to complete the implementation and to assess and ensure the sustainability of these procedures. We will continue to devote significant time and attention to these remedial efforts. 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 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. ITEM 9B. OTHER INFORMATION 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”). Ms. 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. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS None. 49 Table of Contents PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information required by this item is incorporated by reference to our Proxy Statement relating to our 2023 Annual Meeting of Stockholders. The Proxy Statement will be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2023. Codes of Business Conduct and Ethics Our board of directors has adopted a Code of Business Conduct and Ethics that applies to all officers, directors and employees, which is available on our website at https://investors.eose.com under "Governance Documents". We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding amendments to, or waiver from, a provision of our Code of Business Conduct and Ethics and by posting such information on the website address and location specified above. ITEM 11. EXECUTIVE COMPENSATION The information required by this item is incorporated by reference to our Proxy Statement relating to our 2023 Annual Meeting of Stockholders. The Proxy Statement will be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2023. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by this item, including Securities Authorized for Issuance Under Equity Plans, is incorporated by reference to our Proxy Statement relating to our 2023 Annual Meeting of Stockholders. The Proxy Statement will be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2023. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this item is incorporated by reference to our Proxy Statement relating to our 2023 Annual Meeting of Stockholders. The Proxy Statement will be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2023. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information required by this item is incorporated by reference to our Proxy Statement relating to our 2023 Annual Meeting of Stockholders. The Proxy Statement will be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2023. PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (1) Financial statement. The consolidated financial statements and Reports of Independent Registered Accounting Firm are listed in the “Index to Financial Statements” beginning on page F-1. (2) Financial Statement Schedules and Other Financial Information. No financial statement schedules are submitted because either they are not applicable or because the required information is included in the consolidated financial statements or notes thereto. 50 Table of Contents (3) Exhibits. Filed as part of this Annual Report are the following exhibits: Incorporated by Reference Exhibit Number Description of Document Schedule/Form File Number Exhibit Filing date 2.1 Agreement and Plan of Merger, dated as of September 7, 2020, by and among the Company, BMRG Merger Sub, LLC, BMRG Merger Sub II, LLC, Eos Energy Storage LLC, New Eos Energy LLC and AltEnergy Storage VI, LLC (incorporated by reference to Exhibit 2.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on September 8, 2020) Form 8-K File No. 001-39291 2.1 September 8, 2020 3.1 Third Amended and Restated Certificate of Incorporation of the Company, as amended Form 10-K File No. 001-39291 3.1 February 28, 2023 3.2 Second Amended and Restated Bylaws of the Company Form 8-K File No. 001-39291 3.2 May 19, 2022 4.1 Specimen Common Stock Certificate Form 8-K File No. 001-39291 4.1 November 20, 2020 4.2 Specimen Warrant Certificate Form 8-K File No. 001-39291 4.2 November 20, 2020 4.3 Eos Energy Enterprises, Inc. 5%/6% Convertible Senior PIK Toggle Note due 2026 Form 8-K File No. 001-39291 4.1 July 7, 2021 4.4 Warrant Agreement, dated May 19, 2020, by and between the Registrant and Continental Stock Transfer & Trust Company Form 8-K File No. 001-39291 4.1 May 22, 2020 4.5 Description of Securities Form 10-K File No. 001-39291 4.5 February 25, 2022 4.6 Indenture, dated April 7, 2022, between the Company and Wilmington Trust, National Association, as trustee (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on April 13, 2022) Form 8-K File No. 001-39291 10.1 April 13, 2022 51 Table of Contents Incorporated by Reference Exhibit Number Description of Document Schedule/Form File Number Exhibit Filing date 4.7 Convertible Promissory Note, dated as of June 13, 2022, between Eos Energy Enterprises, Inc. and YA II PN, LTD. Form 8-K File No. 001-39291 4.1 June 13, 2022 4.8 Convertible Promissory Note dated as of December 29, 2022 between Eos Energy Enterprises, Inc. and YA II PN, LTD. Form 8-K File No. 001-39291 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 Form 8-K File No. 001-39291 10.8 November 20, 2020 52 Table of Contents Incorporated by Reference Exhibit Number Description of Document Schedule/Form File Number Exhibit Filing date 10.2 Eos Energy Enterprises, Inc. 2020 Incentive Plan Form 8-K File No. 001-39291 10.10 November 20, 2020 10.3 Form of Indemnity Agreement Form 8-K File No. 001-39291 10.13 November 20, 2020 10.4 Employment Agreement, dated February 24, 2021, by and between the Company and Joseph Mastrangelo Form 8-K File No. 001-39291 99.1 March 2, 2021 10.5 Offer Letter, dated February 19, 2021, by and between the Company and Jody Markopoulos Form 8-K File No. 001-39291 10.1 March 12, 2021 10.6 Employment Agreement, dated March 25, 2021, by and between the Company and Sagar Kurada Form 8-K File No. 001-39291 10.1 March 31, 2021 10.7 Unit Purchase Agreement, dated April 8, 2021 Form 8-K File No. 001-39291 10.1 April 14, 2021 10.8 Form of Transition Services Agreement (Included in Exhibit 10.08) Form 8-K File No. 001-39291 10.2 April 14, 2021 10.9 Amended and Restated Registration Rights Agreement, dated May 10, 2021, by and between the Registrant, B. Riley Principal Sponsor Co. II, LLC and the other parties thereto Form 8-K File No. 001-39291 4.01 May 10, 2021 10.10 Amended and Restated Registration Rights Agreement, dated May 10, 2021, by and among the Company and the security holders party thereto Form 8-K File No. 001-39291 4.02 May 10, 2021 10.11 Investment Agreement, dated as of July 6, 2021, by and among Eos Energy Enterprises, Inc. and Spring Greek Capital, LLC Form 8-K File No. 001-39291 10.1 July 7, 2021 10.12 Master Equipment Financing Agreement, dated September 30, 2021 Form 8-K File No. 001-39291 10.1 October 5, 2021 10.13 Guaranty Agreement, dated September 30, 2021 Form 8-K File No. 001-39291 10.2 October 5, 2021 53 Table of Contents 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 Form 8-K File No. 001-39291 10.01 December 14, 2021 10.15 Employment Agreement, dated December 13, 2021, by and between the Company and Randall B. Gonzales Form 8-K File No. 001-39291 10.02 December 14, 2021 10.16 Employment Letter, dated December 29, 2021 by and between the Company and John Tedone Form 8-K File No. 001-39291 10.1 February 14, 2022 10.17 Standby Equity Purchase Agreement, dated April 28, 2022, by and between Eos Energy Enterprises, Inc. and YA II PN, Ltd. Form 8-K File No. 001-39291 10.1 April 28, 2022 10.18 Joinder to Investment Agreement, dated May 1, 2022 among Eos Energy Enterprises, Inc., Spring Creek Capital, LLC and Wood River Capital, LLC Form 10-Q File No. 001-39291 10.3 May 9, 2022 10.19 Amendment No. 1 to the Standby Equity Purchase Agreement, dated as of April 28, 2022, between Eos Energy Enterprises, Inc. and YA II PN, LTD. Form 8-K File No. 001-39291 10.1 June 13, 2022 10.20 Supplemental Agreement, dated as of June 13, 2022, to the Standby Equity Purchase Agreement dated as of April 28, 2022 between Eos Energy Enterprises, Inc. and YA II PN, LTD. Form 8-K File No. 001-39291 10.2 June 13, 2022 10.21 Senior Secured Term Loan Credit Agreement, dated as of July 29, 2022, by and among Eos Energy Enterprises, Inc., the lenders party thereto, and ACP Post Oak Credit I LLC, as administrative agent and collateral agent. Form 8-K File No. 001-39291 10.1 August 1, 2022 54 Table of Contents 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 Form 8-K File No. 001-39291 10.2 August 1, 2022 10.23 Commitment Increase Agreement, dated as of August 4, 2022, by and among Eos Energy Enterprises, Inc., the guarantors party thereto, ACP Post Oak Credit I LLC, as administrative agent and lender, and certain other lenders party thereto Form 8-K File No. 001-39291 10.1 August 5, 2022 10.24 Sales Agreement, dated August 5, 2022, by and between Eos Energy Enterprises, Inc. and Cowen and Company, LLC Form 8-K File No. 001-39291 10.2 August 5, 2022 10.25 Amended Director Compensation Policy, dated as of September 7, 2022 Form 8-K File No. 001-39291 10.1 September 9, 2022 10.27 Commitment Increase Agreement, dated as of December 7, 2022, by and among Eos Energy Enterprises, Inc. the guarantors party thereto, and ACP Post Oak Credit LLC. Form 8-K File No. 001-39291 10.1 December 8, 2022 10.30 Separation Agreement, dated January 20, 2023, by and between the Company and Randall Gonzales Form 8-K File No. 001-39291 10.1 January 20, 203 10.31 Employment Agreement, dated January 20, 2023, by and between the Company and Nathan Kroeker Form 8-K File No. 001-39291 10.2 January 20, 203 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 55 Table of Contents 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 10.38 Form of Securities Purchase Agreement, dated as of April 12, 2023 Form 8-K File No. 001-39291 10.1 April 14, 2023 10.39 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 10.43* Separation Agreement, dated January 19 , 2024, by and between the Company and Melissa Berube 10.44* Employment Agreement, dated January 17 , 202 4 , by and between the Company and Michael Silberman 21.1 Subsidiaries of the Company Form 10-K File No. 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) 56 Table of Contents 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 32.1*+ Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2*+ Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 97* Policy relating to recovery of compensation 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.LAB XBRL Taxonomy Extension Label Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document 104* Inline XBRL for the cover page of this Annual Report on Form 10-K, included in the Exhibit 101 Inline XBRL Document Set 57 Table of Contents 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). The Registrant agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request. * Filed herewith. + The certifications furnished in Exhibit 32.1 and Exhibit 32.2 hereto are deemed to accompany this Annual Report on Form 10-K and will not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference. 58 Table of Contents EOS ENERGY ENTERPRISES, INC Index to Financial Statements PAGE Financial Statements Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34 ) F- 2 Consolidated Balance Sheets as of December 31, 2023 and 2022 F- 4 Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2023 and 2022 F- 6 Consolidated Statements of Shareholders' (Deficit) Equity for the Years Ended December 31, 2023 and 2022 F- 7 Consolidated Statements of Cash Flows for the Years Ended December 31, 2023 and 2022 F- 8 Notes to Consolidated Financial Statements F- 10 to F-44 F-1 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Eos Energy Enterprises, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Eos Energy Enterprises, Inc. (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, shareholders’ (deficit) equity, and cash flows, for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. Going Concern 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 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. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. 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. F-2 Table of Contents 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 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. 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 the expected volatility involve unobservable inputs. 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 (1) the embedded conversion features in the Convertible Notes and (2) warrants 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 features and warrants by: ◦ 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 New York, NY March 4, 2024 We have served as the Company's auditor since 2017. F-3 Table of Contents EOS ENERGY ENTERPRISES, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts) December 31, 2023 2022 ASSETS Current assets: Cash and cash equivalents $ 69,473 $ 17,076 Restricted cash 3,439 2,725 Accounts receivable, net 3,387 1,666 Inventory, net 17,070 23,260 Vendor deposits 7,161 4,789 Contract assets, current 6,386 1,859 Prepaid expenses 1,082 2,289 Grant receivable 3,256 263 Other receivables 7,500 — Other current assets 3,577 1,220 Total current assets 122,331 55,147 Property, plant and equipment, net 37,855 27,169 Intangible assets, net 295 240 Goodwill 4,331 4,331 Operating lease right-of-use asset, net 4,033 4,316 Long-term restricted cash 11,755 11,422 Other assets, net 5,892 4,163 Total assets $ 186,492 $ 106,788 LIABILITIES Current liabilities: Accounts payable $ 20,540 $ 34,669 Accrued expenses 32,332 15,359 Operating lease liability, current 1,496 1,106 Long-term debt, current 3,332 2,872 Convertible notes payable - related party — 2,688 Contract liabilities, current 3,070 3,850 Other current liabilities 100 32 Total current liabilities 60,870 60,576 Long-term liabilities: Operating lease liability 3,350 4,130 Long-term debt 88,002 87,321 Convertible notes payable - related party 112,525 82,950 Contract liabilities, long-term 3,540 956 Warrants 27,461 78 Other liabilities 1,544 3,488 Total long-term liabilities 236,422 178,923 Total liabilities 297,292 239,499 F-4 Table of Contents EOS ENERGY ENTERPRISES, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts) December 31, 2023 2022 COMMITMENTS AND CONTINGENCIES (NOTE 16) 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 21 9 Preferred stock, $ 0.0001 par value, 1,000,000 shares authorized, no shares outstanding at December 31, 2023 and 2022 — — Additional paid in capital 765,018 513,614 Accumulated deficit ( 875,846 ) ( 646,340 ) Accumulated other comprehensive income 7 6 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. F-5 Table of Contents EOS ENERGY ENTERPRISES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (In thousands, except share and per share amounts) For the Years Ended December 31, 2023 2022 Revenue Total revenue $ 16,378 $ 17,924 Costs and expenses Cost of goods sold 89,798 153,260 Research and development expenses 18,708 18,469 Selling, general and administrative expenses 53,650 60,623 Loss from write-down of property, plant and equipment 7,159 6,846 Grant income, net — ( 16 ) Total costs and expenses 169,315 239,182 Operating loss ( 152,937 ) ( 221,258 ) Other (expense) income Interest expense, net ( 18,770 ) ( 7,915 ) Interest expense – related party ( 37,466 ) ( 10,898 ) Change in fair value of warrants ( 24,980 ) 848 Change in fair value of derivatives - related parties 9,983 10,880 Loss on debt extinguishment ( 3,510 ) ( 942 ) Other expense ( 1,795 ) ( 477 ) Loss before income taxes $ ( 229,475 ) $ ( 229,762 ) Income tax expense 31 51 Net loss $ ( 229,506 ) $ ( 229,813 ) Other comprehensive income Foreign currency translation adjustment, net of tax 1 6 Comprehensive loss $ ( 229,505 ) $ ( 229,807 ) Basic and diluted loss per share attributable to common shareholders Basic $ ( 1.81 ) $ ( 3.68 ) Diluted $ ( 1.81 ) $ ( 3.68 ) Weighted average shares of common stock Basic 126,967,756 62,439,857 Diluted 126,967,756 62,439,857 The accompanying notes are an integral part of these consolidated financial statements. F-6 Table of Contents EOS ENERGY ENTERPRISES, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' (DEFICIT) EQUITY (In thousands, except share and per share amounts) Common Stock Additional Paid in Capital Accumulated Other Comprehensive Income Accumulated Deficit Total Shares Amount Balances on December 31, 2021 53,786,632 $ 5 $ 448,969 $ — $ ( 416,527 ) $ 32,447 Stock-based compensation — — 13,794 — — 13,794 Exercise of warrants 600 — 7 — — 7 Release of restricted stock units 704,178 — — — — — Cancellation of shares used to settle payroll tax withholding ( 203,951 ) — ( 978 ) — — ( 978 ) Issuance of common stock 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 ) Balances on December 31, 2022 82,653,781 $ 9 $ 513,614 $ 6 $ ( 646,340 ) $ ( 132,711 ) Stock-based compensation — — 14,057 — — 14,057 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 114,841,813 12 237,627 — — 237,639 Foreign currency translation adjustment — — — 1 — 1 Net loss — — — — ( 229,506 ) ( 229,506 ) Balances on December 31, 2023 199,133,827 $ 21 $ 765,018 $ 7 $ ( 875,846 ) $ ( 110,800 ) The accompanying notes are an integral part of these consolidated financial statements. F-7 Table of Contents EOS ENERGY ENTERPRISES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands, except share and per share amounts) December 31, 2023 2022 Cash flows from operating activities Net loss $ ( 229,506 ) $ ( 229,813 ) Adjustment to reconcile net loss to net cash used in operating activities Stock-based compensation 14,057 13,794 Depreciation and amortization 9,751 6,814 Loss from write-down of property, plant and equipment 7,159 6,846 Amortization of right-of-use assets 1,023 865 Non-cash interest expense 4,972 1,886 Non-cash interest expense - related party 36,903 10,899 Commitment fee for SEPA settled by common stock - related party — 1,061 Loss on debt extinguishment 3,510 942 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 ) Changes in operating assets and liabilities: Prepaid expenses 1,207 304 Inventory 6,190 ( 10,284 ) Accounts receivable ( 1,713 ) 234 Vendor deposits ( 2,377 ) 6,808 Contract assets ( 6,322 ) ( 631 ) Grant receivable ( 2,993 ) — Accounts payable ( 11,475 ) 19,516 Accrued expenses 19,349 5,079 Accounts payable and accrued expenses-related parties — ( 1,200 ) Operating lease liabilities ( 1,130 ) ( 785 ) Contract liabilities 1,804 3,957 Note payable — ( 19,637 ) Other receivables ( 7,500 ) — Other ( 4,774 ) ( 1,387 ) Net cash used in operating activities ( 145,018 ) ( 196,857 ) Cash flows from investing activities Investment in notes receivable — ( 261 ) Proceeds from notes receivable — 3,163 Purchases of intangible assets ( 138 ) — Purchases of property, plant and equipment ( 29,323 ) ( 20,072 ) Net cash used in investing activities ( 29,461 ) ( 17,170 ) Cash flows from financing activities Proceeds from issuance of convertible notes payable – related party, net of discount 48,050 9,310 Payment of debt issuance costs - related party ( 1,116 ) ( 304 ) Proceeds received from the Senior Secured Term Loan, net of discount — 97,992 Payment of debt issuance costs ( 3,046 ) ( 12,398 ) F-8 Table of Contents EOS ENERGY ENTERPRISES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands, except share and per share amounts) December 31, 2023 2022 Principal payments on finance lease obligations ( 96 ) ( 14 ) Proceeds from equipment financing facility — 4,216 Repayment of equipment financing facility ( 2,867 ) ( 1,913 ) Issuance of common stock and warrants 192,167 43,626 Payment of equity issuance costs ( 5,003 ) — Proceeds from exercise of stock options 462 — Proceeds from exercise of public warrants — 7 Repurchase of shares from employees for income tax withholding purposes ( 633 ) ( 978 ) Net cash provided by financing activities 227,918 139,544 Effect of foreign exchange on cash, cash equivalents and restricted cash 5 14 Net increase (decrease) in cash, cash equivalents and restricted cash 53,444 ( 74,469 ) Cash, cash equivalents and restricted cash, beginning of year 31,223 105,692 Cash, cash equivalents and restricted cash, end of year $ 84,667 $ 31,223 Non-cash investing and financing activities: Right-of-use operating lease assets in exchange for lease liabilities 718 2,112 Fixed assets acquired with finance lease 125 147 Accrued and unpaid capital expenditures 548 2,626 Issuance of convertible notes for interest paid-in-kind 10,327 6,267 Issuance of common stock upon settlement of Yorkville Convertible Notes 51,023 7,534 Accrued and unpaid debt issuance costs — 5,536 Supplemental disclosures Cash paid for interest $ 15,133 $ 5,766 The accompanying notes are an integral part of these consolidated financial statements. F-9 Table of Contents EOS ENERGY ENTERPRISES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts) 1. Overview Eos Energy Enterprises, Inc. (the “Company,” “we,” “us,” “our,” and “Eos”) designs, develops, manufactures, and markets innovative energy storage solutions for utility-scale, microgrid, and commercial & industrial (“C&I”) applications. Eos developed a broad range of intellectual property with multiple patents covering unique battery chemistry, mechanical product design, energy block configuration and a software operating system (Battery Management System). The Company has only one operating and reportable segment. Liquidity and Going Concern As a growth company in the early commercialization stage of its lifecycle, Eos is subject to inherent risks and uncertainties associated with the development of an enterprise. In this regard, substantially all of the Company’s efforts to date have been devoted to the development and manufacturing of battery energy storage systems and complimentary products and services, recruitment of management and technical staff, deployment of capital to expand the Company’s operations to meet customer demand and raising capital to fund the Company’s development. As a result of these efforts, the Company has incurred significant losses and negative cash flows from operations since its inception and expects to continue to incur such losses and negative cash flows for the foreseeable future until such time that the Company can reach a scale of profitability to sustain its operations. In order to execute its development strategy, the Company has historically relied on outside capital through the issuance of equity, debt, and borrowings under financing arrangements (collectively “outside capital”) to fund its cost structure and expects to continue to rely on outside capital for the foreseeable future. While the Company believes it will eventually reach a scale of profitability to sustain its operations, there can be no assurance the Company will be able to achieve such profitability or do so in a manner that does not require its continued reliance on outside capital. Moreover, while the Company has historically been successful in raising outside capital, there can be no assurance the Company will be able to continue to obtain outside capital in the future or do so on terms that are acceptable to the Company. As of the date the accompanying consolidated financial statements were issued (the “issuance date”), management evaluated the significance of the following negative financial conditions in accordance with Accounting Standard Codification 205-40, Going Concern: • Since its inception, the Company has incurred significant losses and negative cash from operations in order to fund its development. During the year ended December 31, 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, 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. F-10 Table of Contents EOS ENERGY ENTERPRISES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts) 1. 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 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. While the Company was in compliance with this covenant as of December 31, 2023, and 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. In the event the Company is unable to remain in compliance with the minimum financial liquidity covenant and the other nonfinancial covenants required by the Senior Secured Term Loan, and the Company is further unable to cure such noncompliance or secure a waiver, Atlas may, at its discretion, exercise any and all of its existing rights and remedies, which may include, among other things, entering into a forbearance agreement with the Company, and/or asserting its rights in the Company’s assets securing the loan. Moreover, the Company’s other lenders may exercise similar rights and remedies under the cross-default provisions of their respective borrowing arrangements with the Company. • Absent an ability to secure additional outside capital in the near term, the Company will be unable to meet its obligations as they become due over the next twelve months beyond the issuance date. • In the event the Company’s ongoing efforts to raise additional outside capital prove unsuccessful, management will be required to seek other strategic alternatives, which may include, among others, a significant curtailment in the Company’s operations, a sale of certain of the Company’s assets, a sale of the entire Company to strategic or financial investors, and/or allowing the Company to become insolvent. These uncertainties raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements have been prepared on the basis that the Company will continue to operate as a going concern, which contemplates that the Company will be able to realize assets and settle liabilities and commitments in the normal course of business for the foreseeable future. Accordingly, the accompanying consolidated financial statements do not include any adjustments that may result from the outcome of these uncertainties. 2. Summary of Significant Accounting Policies Principles of Consolidation The Company follows accounting standards established by the Financial Accounting Standards Board (“FASB”) to ensure consistent reporting of financial condition, results of operations and cash flows. References to accounting principles generally accepted in the United States (“GAAP”) in these notes are to the FASB Accounting Standards Codification™ (“ASC”) and related updates (“ASU”). The financial statements include the accounts of the Company and its subsidiaries and have been prepared in accordance with GAAP. All intercompany transactions and balances have been eliminated in consolidation. Reclassification of Prior Year Presentation Certain prior year amounts have been reclassified for consistency with the current year presentation. F-11 Table of Contents EOS ENERGY ENTERPRISES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts) 2. Summary of Significant Accounting Policies (cont.) Foreign Currency The Company follows the provisions of ASC 830, Foreign Currency Matters . The Company’s foreign subsidiaries use the local currency of their respective countries as their functional currency. The assets and liabilities of foreign operations are translated at the exchange rates in effect at the balance sheet date. The operating results of foreign operations are translated at weighted average exchange rates. The related translation gains or losses are reported as a separate component of shareholders’ (deficit) equity in accumulated other comprehensive loss. Gains and losses from foreign currency transactions, which were insignificant for years ended December 31, 2023 and 2022, are included as other income (expense) in the consolidated statements of operations and comprehensive loss. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. Allowance for Expected Credit Losses The Company evaluates the creditworthiness of its customers. If the collection of any specific receivable is doubtful, an allowance is recorded in the allowance for expected credit losses. 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 in Other Assets on the accompanying consolidated balance sheets. Cash, Cash Equivalents, and Restricted Cash The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents are recorded at cost, which approximates fair value. Embedded derivatives Some of our debt financings contain embedded derivatives, such as conversion features. The Company evaluates each debt agreement to determine whether the embedded derivative feature requires bifurcation from the host liability, in which case would require to be accounted for as a derivative liability. The Company uses valuation models to estimate the fair value of the embedded derivatives. The change in fair value of the embedded derivatives is presented separately on the consolidated statements of operations and comprehensive loss. Earnings (loss) Per Share In accordance with the provisions of ASC Topic 260, Earnings per Share , basic earnings per share (“EPS”) is computed by dividing earnings available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Other potentially dilutive common shares, and the related impact to earnings, are considered when calculating EPS on a diluted basis. See Note 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. F-12 Table of Contents EOS ENERGY ENTERPRISES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts) 2. Summary of Significant Accounting Policies (cont.) Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement: Level 1 - Quoted prices in active markets for identical assets or liabilities. Level 2 - Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 - Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability. Goodwill Goodwill consists of the excess of the purchase price over the fair value of identifiable net assets of businesses acquired. Goodwill is reviewed for impairment each year using a qualitative or quantitative process that is performed at least annually or whenever events or circumstances indicate a likely reduction in the fair value of a reporting unit below its carrying amount. Prior to performing a quantitative evaluation, an assessment of qualitative factors may be performed to determine whether it is more likely than not that the fair value of a reporting unit exceeds the carrying value. If it is determined that it is unlikely that the carrying value exceeds the fair value, the Company is not required to complete the quantitative goodwill impairment evaluation. If it is determined that the carrying value may exceed fair value when considering qualitative factors, a quantitative goodwill impairment evaluation is performed. When performing the quantitative evaluation, if the carrying value of the reporting unit exceeds its fair value, an impairment loss equal to the difference will be recorded. The Company completed the annual goodwill impairment test as of November 30, 2023, using a qualitative assessment for the reporting unit. The Company concluded that it is more likely than not that the fair value of the reporting unit is greater than the carrying amount, and a quantitative goodwill impairment test was not necessary. As a result of the annual assessment, there were no impairment charges for the year ended December 31, 2023. Government Grants 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 The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. An assessment is performed to determine whether the depreciation and amortization of long-lived assets over their remaining lives can be recovered through projected undiscounted future cash flows. The amount of any long-lived asset impairment is measured based on fair value and is charged to operations in the period in which a long-lived assets impairment is determined by management. F-13 Table of Contents EOS ENERGY ENTERPRISES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts) 2. Summary of Significant Accounting Policies (cont.) Income Taxes and Deferred Taxes The Company complies with the accounting and reporting requirements of FASB ASC Topic 740, Income Taxes ("ASC 740"). Income taxes are computed under the asset and liability method reflecting both current and deferred taxes, which reflect the tax impact of all events included in the financial statements. The balance sheet approach (i) reflects a current tax liability or asset recognized for estimated taxes payable or refundable on tax returns for the current and prior years, (ii) reflects a deferred tax liability or asset recognized for the estimated future tax effects attributable to temporary differences and carryforwards, (iii) measures current and deferred tax liabilities and assets using the enacted tax rate of which the effects of future changes in tax laws or rates are not anticipated, and (iv) reduces deferred tax assets, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realized. ASC 740 prescribes a recognition threshold and a measurement attribute for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. The Company recognizes deferred tax assets only to the extent that management concludes these assets are more-likely-than-not to be realized. Significant judgement is required in assessing and estimating the more-likely-than-not tax consequences of the events included in the financial statements. Management considers all available positive and negative evidence, including future reversals of existing temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income tax expense. The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (i) management determines whether it is more-likely-than-not that the tax position will be sustained on the technical merits of the position and (ii) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. Intangible Assets, net Intangible assets are stated at their historical cost and amortized on a straight-line basis over their expected useful lives. Inventory, net Inventories are stated at the lower of cost or net realizable value. Cost is computed using standard cost which approximates actual cost on a first-in, first-out basis. The Company records inventory when it takes delivery and title to the product according to the terms of each supply contract. The Company evaluates its ending inventories for excess quantities and obsolescence. A valuation allowance is recorded for inventories that management considers excess or obsolete. Management considers forecasted demand in relation to the inventory on hand, competitiveness of product offerings, market conditions and product life cycles when determining excess and obsolescence and net realizable value adjustments. Once inventory is written down and a new cost basis is established, it is not written back up if demand increases. Leases The Company accounts for its leases under ASU 2016-02, Leases (“ASC 842”). Under ASC 842, the right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The discount rate used to calculate the present value represents our incremental borrowing rate and is calculated based on the treasury yield curve that is commensurate with the term of each lease, and a spread representative of our borrowing costs. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Leases may be classified as either operating leases or finance leases. Leases with an initial term of 12 months or less are excluded from the scope of ROU assets and liabilities, as allowed by ASC 842. F-14 Table of Contents EOS ENERGY ENTERPRISES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts) 2. Summary of Significant Accounting Policies (cont.) The Company has lease agreements with lease and non-lease components. The Company has elected the practical expedient to account for non-lease components as part of the lease component for all asset classes. The majority of the Company's lease agreements are real estate leases. Property, Plant and Equipment, net Equipment is stated at cost, less accumulated depreciation. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets. Leasehold improvements are amortized on a straight-line basis over the shorter of the estimated useful lives of the improvements or the life of the lease. Maintenance and repair expenditures are expensed as incurred. Expenditures which significantly improve or extend the life of an asset are capitalized. 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 Research and development costs are expensed as incurred, which include materials, supplies, salaries, benefits and other costs related to research, development and testing of products. Revenue Recognition Revenue is earned from the sales, installation, and commissioning of BESS, the terms of which are dictated by supply agreements the Company enters into with its customers. Revenue is recognized to depict the transfer of promised goods and/or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring the promised goods and/or services to the customer. As most contracts contain multiple goods delivered to the customer at different times, the transaction price is allocated to each good based on the relative standalone selling price and revenue is recognized when or as the performance obligation is satisfied. The Company uses either the expected cost-plus margin approach or adjusted market assessment approach to estimate the standalone selling prices of its goods and services. Product Revenue Product revenue is comprised of revenue from the BESS, along with other products, including inverters and spare parts, and is recognized at the point in time at which control passes, the determination of which is made in accordance with ASC 606, based on indicators of control. Generally, passage of control will be determined based upon the shipping terms, which vary by contract. Many of the Company’s contracts with customers contain some component of variable consideration. The Company estimates variable consideration, such as refunds, penalties including liquidated damages, and the customer’s right to return, using the expected value method, and adjusts transaction price for its estimate of variable consideration. We update our estimates of variable consideration and adjust the transaction price accordingly by recording an adjustment to net revenue and refund liability with respect to variable consideration such as penalties, refunds, and credits to customers. The Company has concluded that its estimation of variable consideration results in an adjustment to the transaction price such that it is probable that a significant reversal of cumulative revenue would not occur in the future. Shipping and handling costs are included in cost of goods sold. Sales tax collected from customers are recorded on a net basis and therefore, not included in revenue. Sales tax is recorded as a liability (payable) until remitted to governmental authorities. F-15 Table of Contents EOS ENERGY ENTERPRISES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts) 2. Summary of Significant Accounting Policies (cont.) Service Revenue Service revenue includes commissioning, installation and engineering, procurement and construction revenue. As the customer simultaneously receives and consumes the benefits provided by the Company’s performance, these performance obligations are satisfied over time. The Company uses an input method to measure progress towards satisfaction. If at any time management determines that in the case of a particular contract total costs will exceed total contract revenue, a provision for the entire anticipated contract loss is recorded at that time. Warranty related revenue In addition to a standard two-year limited warranty against defects, the Company offers customers the option to purchase an extended warranty, a maintenance and monitoring service and/or a performance guarantee. As the standard two-year limited warranty is classified as an assurance-type warranty, based on criteria set forth in ASC 606, it is not accounted for as a separate performance obligation. The extended warranty, maintenance and monitoring service warranty and performance guarantee, however, represent distinct services and are accounted for as separate performance obligations based on a time-lapsed measure of progress resulting in a ratable recognition of revenue over the respective performance period. For these performance obligations, at any time if management determines that in the case of a particular warranty that total costs will exceed total warranty revenue, a provision for the entire anticipated warranty loss is recorded at that time and included in warranty liability on the consolidated balance sheets. Contract Assets and Contract Liabilities The Company recognizes contract assets for certain contracts in which revenue recognition performance obligations have been satisfied, however invoicing to the customer has not yet occurred. Contract liabilities primarily relate to advance consideration received from customers in advance of the Company’s satisfying performance obligations under contractual arrangements. Contract balances are reported in a net contract asset or liability position on a contract-by-contract basis at the end of each reporting period. Payment terms are generally aligned with meeting various contractual milestones, beginning with purchase order execution and extending through manufacturing release, ready to ship, delivery and commissioning. Practical Expedients and Exemptions As permitted by ASC 606, Revenue from Contracts with Customers (“ASC 606”) , the Company elected to use certain practical expedients. The Company treats costs associated with obtaining new contracts as expenses when incurred if the amortization period of the asset recognized by the Company is one year or less. Segments The Company’s chief operating decision-maker (“CODM”) is its Chief Executive Officer and President. Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the CODM in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. As such, the Company has determined that it operates in one operating and one reportable segment. Stock-Based Compensation Stock-based compensation is estimated at the grant date based on the fair value of the award and is recognized as expense over the requisite service period of the award. 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. F-16 Table of Contents EOS ENERGY ENTERPRISES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts) 2. 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 Warranty obligations are incurred in connection with the sale of the Company’s products. Costs to provide for warranty obligations are estimated and recorded as a liability at the time of recording the sale. Warranty reserves include management’s best estimate of the projected costs to repair or to replace any items under warranty, which is based on various factors, including the use of actual claim data to date, results of lab testing, factory quality data, and field monitoring. 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. 3. Revenue Recognition The Company's revenues comprised of the following: For the Years Ended December 31, 2023 2022 Product revenue $ 16,151 $ 17,429 Service revenue 227 495 Total revenues $ 16,378 $ 17,924 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. F-17 Table of Contents EOS ENERGY ENTERPRISES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts) 3. Revenue Recognition (cont.) December 31, 2023 2022 Contract assets $ 8,322 $ 2,000 Contract liabilities $ 6,610 $ 4,806 Contract assets increased by $ 6,322 during the year ended December 31, 2023 due to recognition of revenues for which invoicing has not yet occurred. 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 $ 3,070 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. 4. Cash, Cash Equivalents and Restricted Cash Restricted cash - current consists of escrow deposits related to U.S. Custom Bonds insurance and escrow deposits related to our credit card program agreements. 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: December 31, 2023 2022 Cash and cash equivalents $ 69,473 $ 17,076 Restricted cash - current 3,439 2,725 Long-term restricted cash 11,755 11,422 Total cash, cash equivalents, and restricted cash $ 84,667 $ 31,223 5. Inventory The following table provides information about inventory balances: December 31, 2023 2022 Raw materials $ 15,487 $ 22,899 Work-in-process 1,105 361 Finished goods 478 — Total Inventory, net $ 17,070 $ 23,260 F-18 Table of Contents EOS ENERGY ENTERPRISES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts) 6. Property, Plant and Equipment, Net The following table provides information about property, plant and equipment, net balances: December 31, Useful lives 2023 2022 Equipment 5 — 10 years $ 20,559 $ 23,653 Finance lease 5 — years 504 379 Furniture 5 — 10 years 2,103 1,868 Leasehold improvements Lesser of useful life/remaining lease 7,718 6,303 Tooling 2 — 3 years 7,045 6,926 Construction in progress 17,958 — Total 55,887 39,129 Less: Accumulated depreciation ( 18,032 ) ( 11,960 ) Total property, plant and equipment, net $ 37,855 $ 27,169 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, 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. 7. Intangible Assets Intangible assets consisted of various patents valued at $ 400 , which represents the cost to acquire the patents. These patents are determined to have useful lives and are amortized into the results of operations over ten years . During the years ended December 31, 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 2024 $ 86 2025 86 2026 43 2027 40 2028 40 $ 295 8. Notes Receivable, Net and Variable Interest Entities (“VIEs”) Consideration Notes receivable primarily consist of amounts due to the Company related to the financing we offered to certain customers. The Company reports notes receivable at the principal balance outstanding less an allowance for losses. F-19 Table of Contents EOS ENERGY ENTERPRISES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts) 8. Notes Receivable, Net and Variable Interest Entities (“VIEs”) Consideration (cont.) 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. 9. Accrued Expenses Accrued expenses were as follows: December 31, 2023 2022 Accrued payroll $ 4,553 $ 2,706 Warranty reserve (1) 6,197 3,836 Accrued legal and professional expenses 10,710 840 Provision for contract losses 3,351 2,561 Insurance premium payable, current (2) 2,605 2,607 Other 4,916 2,809 Total accrued expenses $ 32,332 $ 15,359 (1) Refer to the table below for the warranty reserve activity. (2) Refer to Note 12, Borrowings for additional information. The following table summarizes warranty reserve activity: For the Years Ended December 31, 2023 2022 Warranty reserve - beginning of period $ 3,836 $ 2,112 Additions for current year deliveries 811 2,460 Changes in the warranty reserve estimate 2,070 1,284 Warranty costs incurred ( 520 ) ( 2,020 ) Warranty reserve - end of period $ 6,197 $ 3,836 10. 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. F-20 Table of Contents EOS ENERGY ENTERPRISES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts) 10. 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. 11. Related Party Transactions 2021 Convertible Notes Payable In July 2021, the Company issued $ 100,000 aggregate principal amount of convertible notes to Spring Creek Capital, LLC, a wholly-owned, indirect subsidiary of Koch Industries, Inc., (the “2021 Convertible Notes”). In connection with these 2021 Convertible Notes, the Company paid $ 3,000 to B. Riley Securities, Inc., a related party, who acted as a placement agent. Refer to Note 12, Borrowings, for additional information. 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. F-21 Table of Contents EOS ENERGY ENTERPRISES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts) 11. Related Party Transactions (cont.) 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. 12. Borrowings The Company’s borrowings consist of the following related and third-party borrowings: December 31, 2023 December 31, 2022 Maturity Date Borrowing Outstanding Carrying Value* Borrowing Outstanding Carrying Value* 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 Current portion 3,332 3,332 5,560 5,560 Total borrowings, non-current $ 235,630 $ 200,527 $ 214,184 $ 170,271 * Carrying value includes unamortized deferred financing costs, unamortized discounts, and fair value of embedded derivative liabilities. Yorkville Convertible Promissory Notes - Related Party 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. 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. F-22 Table of Contents EOS ENERGY ENTERPRISES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts) 12. Borrowings (cont.) 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 On July 6, 2021, the Company entered into an investment agreement with Spring Creek Capital, LLC, a wholly-owned, indirect subsidiary of Koch Industries. The investment agreement provides for the issuance and sale to Koch of convertible notes in the aggregate principal amount of $ 100,000 . The maturity date of the 2021 Convertible Notes is June 30, 2026, subject to earlier conversion, redemption, or repurchase. Contractual Interest Rates - The 2021 Convertible Notes bear interest at a rate of 5 % per year if interest is paid in cash, or 6 % per year if interest is paid in-kind. Interest on the 2021 Convertible Notes is payable semi-annually in arrears on June 30 and December 30. Conversion Rights - The 2021 Convertible Notes are convertible at the option of the holder at any time until the business day prior to the maturity date, including in connection with a redemption by the Company. 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. The Company has the right to settle conversions in shares of common stock, cash, or any combination thereof. 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. If, following the Company’s delivery of a redemption notice, the 2021 Convertible Notes are converted pursuant to the holders’ conversion rights, the Company is required to make an additional cash payment to the converting holder equal to the present value of all interest payments the holder would have been entitled to receive had such 2021 Convertible Notes remained outstanding until June 30, 2026 (the “interest make-whole payment”). The present value is calculated using a discount rate equal to the risk-free rate plus 50 basis points and assuming interest accrued at the cash interest rate of 5 % per year. Contingent Redemption - With certain exceptions, upon the occurrence of certain events, fundamental changes described in the 2021 Convertible Notes Agreement, the holders of the 2021 Convertible Notes may require that the Company repurchase all or part of the principal amount of the Notes at a purchase price of 100 % of the principal amount of such 2021 Convertible Notes, plus accrued and unpaid interest. Embedded Derivatives - The interest make-whole payment can be triggered only in connection with an induced conversion, and therefore represents an adjustment to the settlement amount of the embedded conversion feature. Because this adjustment is calculated in a manner in which the cash payout may exceed the time value of the embedded conversion feature, the embedded conversion feature is precluded from being considered indexed to the Company’s own stock. Therefore, the embedded conversion feature does not qualify for the scope exceptions to derivative accounting prescribed by ASC 815. F-23 Table of Contents EOS ENERGY ENTERPRISES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts) 12. Borrowings (cont.) Interest expense recognized on the 2021 Convertible Notes is as follows: For the Years Ended December 31, 2023 2022 Contractual interest expense $ 6,648 $ 6,267 Amortization of debt discount 5,237 3,588 Amortization of debt issuance costs 508 388 Total $ 12,393 $ 10,243 The carrying value for the 2021 Convertible Notes is as follows: December 31, 2023 2022 Principal $ 115,815 $ 109,167 Unamortized debt discount ( 19,612 ) ( 24,733 ) Unamortized debt issuance costs ( 1,895 ) ( 2,402 ) Embedded derivative liability 78 918 Aggregate carrying value $ 94,386 $ 82,950 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. F-24 Table of Contents EOS ENERGY ENTERPRISES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts) 12. 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: Year Ended 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 F-25 Table of Contents EOS ENERGY ENTERPRISES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts) 12. 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 (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 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. Prime Lending Rate, (y) the NYFRB Rate (as defined in the Senior Secured Term Loan Agreement) plus 0.5 % and (z) the SOFR. The applicable margin under the Credit Agreement is 8.5 % per annum with respect to SOFR loans, and 7.5 % per annum with respect to ABR loans. Interest on the Senior Secured Term Loan accrues at a variable interest rate, and interest payments are due quarterly. The Company may elect to convert SOFR Loans to ABR (and ABR Loans to SOFR). 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. The call premium is equal to the present value of all interest payments due through June 30, 2024, calculated using a discount rate equal to the applicable treasury rate as of the repayment date plus 50 basis points. The Company deemed that the fair value of the embedded derivative features which qualify for bifurcation was de minimis. 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 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 Years Ended December 31, 2023 2022 Contractual interest expense $ 13,943 $ 4,887 Amortization of debt discount 407 142 Amortization of debt issuance costs 3,601 1,320 Total $ 17,951 $ 6,349 F-26 Table of Contents EOS ENERGY ENTERPRISES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts) 12. Borrowings (cont.) The carrying value of the Senior Secured Term Loan is as follows: December 31, 2023 2022 Principal $ 100,000 $ 100,000 Unamortized debt discount ( 1,459 ) ( 1,866 ) Unamortized debt issuance costs ( 12,917 ) ( 16,518 ) Aggregate carrying value $ 85,624 $ 81,616 Equipment Financing facility The Company entered into an agreement on September 30, 2021 with Trinity Capital Inc. ("Trinity") for a $ 25,000 equipment financing facility, the proceeds of which will be used to acquire certain manufacturing equipment, subject to Trinity's approval. Each draw is executed under a separate payment schedule (a “Schedule”) that constitutes a separate financial instrument. The financing fees included in each Schedule are established through monthly payment factors determined by Trinity. Such monthly payment factors are based on the Prime Rate reported in The Wall Street Journal in effect on the first day of the month in which a Schedule is executed. Date of Draw Gross Amount of Initial Draw Coupon Interest Rate Debt Issuance Costs September 2021 $ 7,000 14.3 % $ 175 September 2022 4,216 16.2 % 96 Total Equipment Financing loans $ 11,216 $ 271 On September 30, 2022, the equipment facility’s unused commitment of $ 13,784 expired. As of December 31, 2023 and December 31, 2022, total equipment financing debt outstanding was $ 5,710 and $ 8,577 , respectively of which $ 3,332 and $ 2,872 are recorded as a current liability on the consolidated balance sheets, respectively. 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. 13. 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. F-27 Table of Contents EOS ENERGY ENTERPRISES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts) 13. 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 Warrants 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 . F-28 Table of Contents EOS ENERGY ENTERPRISES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts) 14. Leases The Company leases machinery, manufacturing facilities, office space, land, and equipment under both operating and finance leases. Lease assets and lease liabilities as of December 31, 2023 and 2022 were as follows: December 31, Classification on Balance Sheet 2023 2022 Assets ROU operating lease assets Operating lease right-of-use asset, net $ 4,033 $ 4,316 Finance lease assets Property, plant and equipment, net 209 153 Total lease assets $ 4,242 $ 4,469 December 31, Classification on Balance Sheet 2023 2022 Liabilities Current Operating lease liability Operating lease liability, current $ 1,496 $ 1,106 Finance lease liability Other current liabilities 100 32 Long-term Operating lease liability Operating lease liability 3,350 4,130 Finance lease liability Other liabilities 88 126 Total lease liabilities $ 5,034 $ 5,394 Operating lease costs for the years ended December 31, 2023 and 2022, were $ 1,573 and $ 1,370 , respectively. As of December 31, 2023 and 2022, the weighted average remaining term (in years) for the operating leases was 2.77 and 3.82 years, respectively and the weighted average discount rate was 16.0 % and 10.4 %, respectively. As of December 31, 2023 and 2022, the weighted average remaining term (in years) for the finance leases was 2.54 and 3.94 years, respectively, and the weighted average discount rate was 26.3 % and 19.9 %, respectively. Future minimum lease payments as of December 31, 2023 were as follows: Operating leases Finance leases Total 2024 $ 2,063 $ 135 $ 2,198 2025 2,175 56 2,231 2026 1,610 35 1,645 2027 — 19 19 Total minimum lease payments $ 5,848 $ 245 $ 6,093 Less amounts representing interest ( 1,002 ) ( 57 ) ( 1,059 ) Present value of minimum lease payments $ 4,846 $ 188 $ 5,034 Lessor The Company currently leases BESS to one customer with a 20 -year term through sales-type leases. Leases offered by the Company include purchase options during the lease term with a bargain purchase option at the end of the term. At the time of accepting a lease that qualifies as a sales-type lease, the Company records the gross amount of lease payments receivable, estimated residual value of the leased equipment and unearned finance income. The unearned finance income is recognized interest income over the lease term using the interest method. F-29 Table of Contents EOS ENERGY ENTERPRISES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts) 14. 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. Net sales-type lease receivables of $ 1,512 and $ 1,471 , net of unearned finance income are recorded under other assets on the consolidated balance sheets as of December 31, 2023 and 2022, respectively. 15. Fair Value Measurement 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. 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, 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: December 31, 2023 December 31, 2022 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Liabilities Warrants $ — $ 55 $ 27,406 $ — $ 78 $ — Embedded derivatives $ — $ — $ 4,423 $ — $ — $ 1,945 Warrants 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. F-30 Table of Contents EOS ENERGY ENTERPRISES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts) 15. 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 May 15, 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 December 31, 2023 December 14, 2023 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. F-31 Table of Contents EOS ENERGY ENTERPRISES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts) 15. 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 % Level 3 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, 2023 2022 Embedded derivatives Balance at beginning of the period $ 1,945 $ 12,359 Additions 30,619 466 Change in fair value of derivatives - related party ( 28,141 ) ( 10,880 ) Balance at end of the period $ 4,423 $ 1,945 Warrants Balance at beginning of the period $ — $ — Additions 55,330 — Change in fair value of warrants ( 27,924 ) — Balance at end of the period $ 27,406 $ — F-32 Table of Contents EOS ENERGY ENTERPRISES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts) 15. Fair Value Measurement (cont.) The estimated fair value of financial instruments not carried at fair value in the consolidated balance sheets was as follows: Level in fair value hierarchy December 31, 2023 December 31, 2022 Carrying Value Fair Value Carrying Value Fair Value Notes receivable 3 $ 863 $ 719 $ 863 $ 677 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 Yorkville Convertible Notes* 3 — — 2,688 2,908 Total $ 204,722 $ 143,255 $ 176,694 $ 149,864 *Includes the embedded derivative liabilities. 16. Commitments and Contingencies Lease commitments The Company has lease commitments under lease agreements. See Note 14, Leases, for additional information. Minimum Volume Commitment In June 2022, the Company entered into a long-term supply agreement with a minimum volume commitment with a third party, which provides services to process certain raw materials. Any purchase order issued under this supply agreement will be non-cancellable. To the extent the Company fails to order the guaranteed minimum volume defined in the contract at the end of the term, the Company is required to pay the counterparty an amount equal to the shortfall, if any, multiplied by a fee. As of December 31, 2023, the Company had open purchase commitments of $ 113 under this agreement. The Company believes that the probability of failing to meet the minimum volume commitment is remote and no shortfall penalty has been accrued as of December 31, 2023. Legal Proceedings 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. F-33 Table of Contents EOS ENERGY ENTERPRISES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts) 16. Commitments and Contingencies (cont.) 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. 17. Stock-Based Compensation Stock-based compensation expense included in the consolidated statements of operations and comprehensive loss was as follows: For the years ended December 31, 2023 2022 Stock options $ 2,468 $ 3,002 Restricted stock units 11,589 10,792 Total $ 14,057 $ 13,794 The stock compensation has been recorded in cost of goods sold, research and development expenses and selling, general and administrative expenses. The following table summarizes stock option activity during the years ended December 31, 2023 and 2022: Units Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (years) Options Outstanding at December 31, 2021 2,023,460 $ 9.51 6.3 Granted 3,275,224 1.33 Cancelled/Forfeited ( 953,872 ) 4.84 Options Outstanding at December 31, 2022 4,344,812 4.37 7.7 Granted 649,865 2.27 Cancelled/Forfeited ( 504,550 ) 2.39 Exercised ( 262,500 ) 1.35 Options Outstanding at December 31, 2023 4,227,627 4.47 5.2 Options Exercisable at December 31, 2023 3,590,262 4.86 5.3 A summary of restricted stock units (RSU) activity for the years ended December 31, 2023 and 2022 is as follows: F-34 Table of Contents EOS ENERGY ENTERPRISES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts) 17. Stock-Based Compensation (cont.) Units Weighted-Average Grant-Date Fair Value RSUs Outstanding at December 31, 2021 2,194,756 $ 16.36 Granted 2,557,263 2.87 Cancelled/Forfeited ( 1,051,951 ) 8.55 Vested ( 704,178 ) 15.02 RSUs Outstanding at December 31, 2022 2,995,890 7.89 Granted 4,804,057 3.42 Cancelled/Forfeited ( 898,525 ) 4.86 Vested ( 1,453,964 ) 7.39 RSUs Outstanding at December 31, 2023 5,447,458 4.58 In 2023, the Company reserved an additional 8,000,000 shares for the Amended and Restated 2020 Incentive Plan. 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 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. Stock compensation is recognized on a straight-line basis over the requisite service period of the award, which is generally the award vesting term. For awards with performance conditions, compensation expense is recognized using an accelerated attribution method over the vesting period. The performance conditions primarily relate to achievement of sales and financing targets. 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. The weighted average assumptions used to determine the fair value of stock options granted in 2023 and 2022 are as follows: 2023 2022 Volatility 62.60 % 61.36 % Risk free interest rate 4.07 % 3.27 % Expected life (years) 3.00 4.67 Dividend yield 0 % 0 % 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. 18. Income Taxes 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 for the years ended December 31, 2023 and 2022 was as follows: F-35 Table of Contents EOS ENERGY ENTERPRISES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts) 18. Income Taxes (cont.) For the years ended December 31, 2023 2022 U.S. $ ( 229,585 ) $ ( 229,923 ) Non-U.S. 110 161 Total income (loss) before income tax $ ( 229,475 ) $ ( 229,762 ) Income expense (benefit) Income tax expense (benefit) was as follows: For the years ended December 31, 2023 2022 Current expense (benefit): U.S. federal $ — $ — U.S. state and local — — Non-U.S. 31 51 Total current income tax (benefit) provision $ 31 $ 51 Deferred expense (benefit): U.S. federal $ — $ — U.S. state and local — — Non-U.S. — — Total deferred income tax (benefit) provision — — 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: F-36 Table of Contents EOS ENERGY ENTERPRISES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts) 18. Income Taxes (cont.) For the years ended December 31, 2023 2022 Income (loss) before income taxes $ ( 229,475 ) $ ( 229,762 ) Statutory U.S. federal income tax (21%) ( 48,190 ) ( 48,250 ) State and local income tax 330 ( 12,051 ) Income taxed at rates other than statutory 8 17 Non-deductible convertible debt 8,420 ( 2,220 ) Non-deductible warrant cost ( 5 ) ( 178 ) Stock-based compensation 1,687 1,622 Non-deductible officers compensation 2,580 — Valuation allowance 34,821 60,444 Other 380 667 Total income tax expense $ 31 $ 51 Effective tax rate — — 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 The Company records deferred income taxes to reflect the net tax effects of temporary differences, if any, between the carrying amounts of assets and liabilities for financial reporting and the amounts used for income tax purposes. The components of deferred tax assets and liabilities at December 31, 2023 and 2022 were as follows: F-37 Table of Contents EOS ENERGY ENTERPRISES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts) 18. Income Taxes (cont.) December 31, 2023 2022 Deferred tax assets: NOL carryforwards $ 152,380 $ 121,142 Capital loss carryforwards 235 235 Tax credit carryforwards 65 65 Goodwill 6,735 7,427 Capitalized research & experimental costs 8,213 3,952 Stock-based compensation 3,819 4,819 Accruals and reserves 2,503 1,678 Organizational costs 124 140 Lease liability 1,309 1,413 Fixed assets 268 316 Inventory 977 663 Transaction costs 244 266 Deferred tax assets, gross $ 176,872 $ 142,116 Valuation allowance ( 175,680 ) ( 140,858 ) Total deferred tax assets, net $ 1,192 $ 1,258 Deferred tax liabilities: Right of use asset ( 1,144 ) ( 1,194 ) Intangibles ( 41 ) ( 63 ) Other ( 7 ) ( 1 ) Deferred tax liabilities ( 1,192 ) ( 1,258 ) Total deferred tax asset (liability) $ — $ — 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, 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. Changes in the valuation allowance are included in the Company’s income tax provision in the period of change. In determining whether a valuation allowance is required, the Company evaluates factors such as prior earnings history, expected future earnings, reversal of existing taxable temporary differences, carry back and carry forward periods and tax planning strategies that could potentially enhance the likelihood of the realization of a deferred tax asset. 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. The valuation allowance increased by $ 34,822 between December 31, 2023 and 2022. The increase was primarily attributable to an increase in NOL carryforwards. 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. F-38 Table of Contents EOS ENERGY ENTERPRISES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts) 18. Income Taxes (cont.) Net Operating Losses & Tax Credits As of December 31, 2023 and 2022, the Company has federal research and development tax credits (“R&D credit”) of approximately $ 3,733 for both years, which begin to expire in varying amounts from 2031 – 2038, subject to the annual limitation described below. In addition, the Company has state R&D credits of approximately $ 65 for the years ended December 31, 2023 and 2022, which will expire in 2024. The Company has NOL carryforwards for tax purposes and other deferred tax assets that are available to offset future taxable income, subject to the annual limitation described below. As of December 31, 2023 and 2022, the Company has gross federal NOL carryforwards of approximately $ 638,507 and $ 485,351 , 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, 2023, $ 222,764 begins to expire in varying amounts from 2033 through 2043, while $ 5,569 has an indefinite carryforward period. The U.S. (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. 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, 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 The Company is subject to income taxes in the United States (federal and state), India, and Italy. Significant judgment is required in evaluating the Company’s tax positions and determining the Company’s provision for income taxes. During the ordinary course of business, there are transactions and calculations for which the ultimate tax determination is uncertain. The Company records a liability for uncertain tax positions on the basis of a two-step process in which (i) management determines whether it is more-likely-than-not that the tax position will be sustained on the technical merits of the position and (ii) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. F-39 Table of Contents EOS ENERGY ENTERPRISES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts) 18. Income Taxes (cont.) The Company has unrecognized tax benefits associated with uncertain tax positions as of December 31, 2023 and 2022 as follows: For the years ended December 31, 2023 2022 Gross unrecognized tax benefits as of January 1 $ 685 $ 719 Additions: Current year tax positions — — Prior year tax positions — — Rate change ( 5 ) ( 34 ) Settlements — — Lapse of statute of limitations — — Gross unrecognized tax benefits as of December 31 $ 680 $ 685 The total amount of gross unrecognized tax benefits was $ 680 and $ 685 for the years ended December 31, 2023 and 2022, respectively. The decrease in gross unrecognized tax benefits in 2023 was due to a change in state deferred tax rate. 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 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. The Company is not currently under examination by any taxing jurisdiction. The Company regularly assesses the adequacy of its provision for income tax contingencies in accordance with ASC 740, Income Taxes . 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. 19. Shareholders' Deficit Preferred Shares The Company is authorized to issue 1,000,000 shares of preferred stock with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. At December 31, 2023 and 2022, there were no shares of preferred stock issued or outstanding. Common Stock 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. Treasury Stock For the years ended December 31, 2023 and 2022, the Company recorded treasury stock of $ 633 and $ 978 for shares withheld from employees to cover the payroll tax liability of RSUs vested, respectively. The treasury stock was immediately retired. F-40 Table of Contents EOS ENERGY ENTERPRISES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts) 19. 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. For the years ended December 31, 2023 and 2022, 0 and 600 public warrants were exercised, respectively. On December 31, 2023 and 2022, there were 7,052,254 and 7,001,654 public warrants outstanding, respectively. 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 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 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 On April 28, 2022, the Company entered into the SEPA with Yorkville. Pursuant to the SEPA, as amended, the Company has the right, but not the obligation, to sell to Yorkville up to $ 75,000 of shares of its common stock at the Company’s request at any time during the commitment period, which commenced on April 28, 2022 and will end on the earlier of (i) May 1, 2024, or (ii) the date on which Yorkville shall have made payment of advances requested by the Company totaling up to the commitment amount of $ 75,000 . Each sale the Company requests under the SEPA (an “Advance”) may be for a number of shares of common stock with an aggregate value of up to $ 20,000 . The SEPA provides for shares to be sold to Yorkville at 97.0 % of market price. 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 . F-41 Table of Contents EOS ENERGY ENTERPRISES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts) 19. 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. The Company will also reimburse Cowen for certain expenses incurred in connection with the Sales Agreement. The Sales Agreement will terminate upon the earlier of (i) the sale of all Placement Shares subject to the Sales Agreement or (ii) termination of the Sales Agreement in accordance with the terms and conditions set forth therein. 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 Basic earnings per share (“EPS”) is computed by dividing earnings available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Other potentially dilutive common shares, and the related impact to earnings, are considered when calculating EPS on a diluted basis. As the Company incurred a net loss for the years ended December 31, 2023 and 2022, the potential dilutive shares from stock options, restricted stock units, warrants, and convertible redeemable notes were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive for the periods presented. Therefore, basic and diluted EPS are computed using the same number of weighted average shares for the years ended December 31, 2023 and 2022. The following potentially dilutive shares were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive for the periods presented: For the years ended December 31, 2023 2022 Stock options and restricted stock units 9,675,085 7,340,702 Warrants 61,411,393 7,326,654 Convertible Notes 16,226,124 7,422,371 F-42 Table of Contents EOS ENERGY ENTERPRISES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts) 20. 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. F-43 ITEM 16. FORM 10-K SUMMARY Not applicable. 117 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Edison, State of New Jersey, on March 4, 2024. EOS ENERGY ENTERPRISES, INC. By: /s/ Nathan Kroeker Chief Financial Officer KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Joseph Mastrangelo and Nathan Kroeker and each or any one of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the United States Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: Name Position Date /s/ Joseph Mastrangelo Chief Executive Officer and Director March 4, 2024 Joseph Mastrangelo (Principal Executive Officer) /s/ Nathan Kroeker Chief Financial Officer March 4, 2024 Nathan Kroeker (Principal Financial Officer) /s/ Sumeet Puri Chief Accounting Officer March 4, 2024 Sumeet Puri (Principal Accounting Officer) /s/ Jeffrey Bornstein Director March 4, 2024 Jeffrey Bornstein /s/ Alex Dimitrief Director March 4, 2024 Alex Dimitrief /s/ Claude Demby Director March 4, 2024 Claude Demby /s/ Jeffrey McNeil Director March 4, 2024 Jeffrey McNeil /s/ Russell Stidolph Director March 4, 2024 Russell Stidolph /s/ Marian "Mimi" Walters Director March 4, 2024 Marian "Mimi" Walters /s/ Audrey Zibelman Director March 4, 2024 Audrey Zibelman