Eos Energy Enterprises, Inc.

Previous wording

Inflation and cost factors - During 2024, the effects of the Federal Reserve’s interest rate hikes in 2022 and in the first half of 2023 had an impact on reducing inflation back towards normal levels. This eased many investor concerns and worked to stabilize the cost of purchasing supplies and raw materials for the Company.

Current wording

During 2025, the effects of the Federal Reserve’s current year interest rate reductions have allowed for continued growth for the Company. These interest rate reductions have allowed the Company to reduce the cost of capital. These interest rate reductions have eased many investor concerns and worked to stabilize the cost of labor, purchasing supplies and raw materials for the Company.

Previous wording

On November 26, 2024, the Company entered into the DOE Loan Facility. The DOE Loan Facility is a key step in advancing the Company's Project American Made Zinc Energy ("AMAZE") and is expected to fund the expansion of Eos’ manufacturing capacity to 8 GWh by 2027 to meet the growing demand for longer duration battery energy storage systems. The DOE Loan Facility provides for up to $303.5 million in funding, including capitalized interest.

Current wording

On November 26, 2024, the Company entered into the DOE Loan Facility. The DOE Loan Facility is a key step in advancing the Company's Project American Made Zinc Energy ("AMAZE") and is expected to fund the expansion of Eos’ manufacturing capacity to 8 GWh by 2027 to meet the growing demand for longer duration battery energy storage systems. The DOE Loan Facility provides for a principal amount of up to $277.5 million of borrowings and capitalized interest amount of up to $26.0 million.

Previous wording

Through December 31, 2024, the Company has received funding under the DOE Loan Facility for an aggregate amount of $68.3 million, at an interest rate of 4.791% for eligible project costs incurred through December 6, 2024. These costs are a portion of Tranche 1 of the DOE Loan Facility. Tranche 1 provides up to $102.0 million for eligible costs in connection with the design, construction, installation, startup and shakedown of a battery automation line and related tools, with a projected annual production capacity of approximately 1.25 GWh ("Line 1").

Current wording

As of December 31, 2025, the Company has received funding under the DOE Loan Facility for an aggregate amount of $90.9 million utilizing the full commitment available for Tranche 1. The initial draw of $68.3 million was made at an interest rate of 4.791% for eligible project costs incurred through December 6, 2024. The second draw of $22.7 million was made at an interest rate of 4.286%, for eligible costs incurred through June 4, 2025. These costs represent Tranche 1 that provided $90.9 million for eligible costs in connection with the design, construction, installation, startup and shakedown of a battery automation line and related tools.

Previous wording

Production Tax Credits under Internal Revenue Code 45X (“PTC”) 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 April 2024, the IRS issued final 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.

Current wording

Production Tax Credits under Internal Revenue Code 45X (“PTC”) 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 April 2024, the IRS issued final regulations related to applicable tax credit transferability and direct pay provisions of the Inflation Reduction Act.

Previous wording

•In January 2025, the Company successfully achieved all operational milestones that guarantees final $40.5 million under the $210.5 million Delayed Draw Term Loan to further solidify its position as a leader in American energy storage systems. Successfully meeting these performance milestones will enable the Company to fuel its ongoing operations, U.S. production expansion, and the creation of an American energy storage powerhouse, without the need to raise additional capital via debt or additional equity offerings.

Current wording

•In January 2025, the Company successfully achieved all operational milestones that guaranteed the final $40.5 million under the fully funded $210.5 million Delayed Draw Term Loan ("DDTL") to further solidify its position as a leader in American energy storage systems. Successfully meeting these performance milestones will enable the Company to fuel its ongoing operations, U.S. production expansion, and the creation of an American energy storage powerhouse, without the need to raise additional capital via debt or additional equity offerings.

Previous wording

•With the Delayed Draw Term Loan fully funded, combined with DOE loan facility's first disbursement in December 2024, Eos has a strong foundation and sufficient capital to continue implementing Project AMAZE. The Company is executing its strategy to scale production into strong customer demand for long duration energy storage. Cash from customer projects now play an important role in funding working capital and our American-made system can play a critical role in America achieving energy independence. The $210.5 million Delayed Draw Term Loan ("DDTL") is now fully funded, driven by the Company consistently achieving key operational milestones related to the Company’s state-of-the-art manufacturing line, raw materials cost-out, Z3 technology performance improvement and orders backlog cash conversion. The Company surpassed its January raw materials cost-out target by 6% while delivering manufacturing cycle times below 10 seconds to further demonstrate continued operational efficiency and progress.

Current wording

•With the DDTL fully funded, combined with DOE Loan Facility's first disbursement in December 2024, Eos has a strong foundation and sufficient capital to continue implementing Project AMAZE. The Company is executing its strategy to scale production into strong customer demand for long duration energy storage. Cash from customer projects now play an important role in funding working capital and our American-made system can play a critical role in America achieving energy independence. The $210.5 million DDTL is now fully funded, driven by the Company consistently achieving key operational milestones related to the Company’s state-of-the-art manufacturing line, raw materials cost-out, Z3 technology performance improvement and orders backlog cash conversion. The Company surpassed its January raw materials cost-out target by 6% while delivering manufacturing cycle times below 10 seconds to further demonstrate continued operational efficiency and progress.

Previous wording

The Company generates revenues from the delivery of its BESS and service-related solutions. The Company expects revenues to increase as it scales production to meet customer demand.

Current wording

The Company generates revenues from the delivery of its BESS and service-related solutions. The Company expects revenues to increase as it continues to scale production to meet customer demand.

Previous wording

Cost of goods sold primarily consists of direct costs relating to labor, material and overhead directly tied to product assembly, procurement and construction (“EPC”), project delivery, commissioning and start-up test procedures. Indirect costs included in cost of goods sold are manufacturing overhead such as equipment maintenance, environmental health and safety, quality and production control procurement, transportation, logistics, depreciation and facility-related costs. As a nascent technology with a new manufacturing process that is early in its product lifecycle, the Company still faces significant costs associated with production start-up, commissioning of various components, modules and subsystems and other related costs. For the year ended December 31, 2024, the Company recognized $3.8 million reduction of cost of goods sold related to the IRA PTC. The Company expects its cost of goods sold to exceed revenues in the near term as it continues to scale production and prepares battery energy storage systems delivered to customers to go-live.

Current wording

Cost of goods sold primarily consists of direct costs relating to labor, material and overhead directly tied to product assembly, procurement and construction (“EPC”), project delivery, commissioning and start-up test procedures. Indirect costs included in cost of goods sold are manufacturing overhead such as equipment maintenance, environmental health and safety, quality and production control procurement, transportation, logistics, depreciation and facility-related costs. As a nascent technology with a new manufacturing process that is early in its product lifecycle, the Company still faces significant costs associated with production start-up, commissioning of various components, modules and subsystems and other related costs. For the year ended December 31, 2025 and 2024 the Company recognized $21.3 million and $3.8 million, respectively, reduction of cost of goods sold related to the IRA PTC. The Company expects its cost of goods sold to exceed revenues in the near term as it continues to scale production and prepares battery energy storage systems delivered to customers to go-live.

Previous wording

Selling, general and administrative expenses increased by $6.4 million or 12%, from $53.7 million for the year ended December 31, 2023 to $60.0 million for the year ended December 31, 2024. The increase was primarily driven by higher consulting fees and payroll, partially offset by decrease in legal fees.

Current wording

Research and development costs increased $5.8 million or 25% for the year ended December 31, 2025 compared to the year ended December 31, 2024. The increase was primarily driven by higher spending on outside services and payroll, partially offset by a decrease in materials and supplies.

Previous wording

The Company incurred losses of $9.1 million and $7.2 million from write-downs of property, plant and equipment for the years ended December 31, 2024 and 2023, respectively. The 2023 write-downs were 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. The 2024 write-downs were primarily related to design changes from the Z3™-Phase 1 to Z3™-Phase 2 production in which the Phase 1 production assets could not be utilized or repurposed for Phase 2 production. Additionally, the 2024 amount contains costs for disposal of equipment and tooling that was used for manufacturing of the Gen 2.3 battery, but cannot be repurposed for the Eos Z3 battery production.

Current wording

The Company incurred losses of $1.8 million and $9.1 million from write-downs of property, plant and equipment for the years ended December 31, 2025 and 2024, respectively. The 2025 and 2024 write-downs were due to design changes from the Z3-Phase 1 to Z3-Phase 2 production in which the Phase 1 production assets could not be utilized or repurposed for Phase 2 production. Additionally, the 2024, amount contains costs for disposal of equipment and tooling that was used for manufacturing of the Gen 2.3 battery, but cannot be repurposed for the Eos Z3 battery production. Additionally, the loss from write-down of property, plant and equipment contains costs for disposal of miscellaneous equipment and tooling that cannot be repurposed for more automated processes.

Previous wording

Interest expense, net includes expenses for accrued interest, amortization of debt issuance costs and debt discounts.

Current wording

Interest expense, net includes expenses for accrued interest, amortization of debt issuance costs and debt discounts, partially offset by capitalized interest costs on CIP assets and interest income.

Previous wording

Interest expense, net decreased by $10.1 million for the year ended December 31, 2024, compared to the year ended December 31, 2023. This was mainly due to lower interest expense recognized from the Senior Secured Term Loan due to the loan's extinguishment in June 2024. See Note 13, Borrowings for detail of interest expense recognized for the Senior Secured Term Loan.

Current wording

Interest expense, net increased by $4.6 million for the year ended December 31, 2025, compared to the year ended December 31, 2024 due to a full year of interest expense recognized on the DOE Loan Facility and partial year of interest expense for the May 2025 Convertible Notes and November 2025 Convertible Notes. This increase was partially offset due to lower interest expense recognized from the Senior Secured Term Loan due to the payoff of the Atlas Credit Facility in 2024 and additional interest income due to increased cash balances.

Previous wording

The change in the fair value of debt - related party of $33.8 million for the year ended December 31, 2024, related to the Delayed Draw Term Loan. The primary factors contributing to the fair value change was the extension of the maturity date and timing of future cash flows of the DDTL netting with a debt yield reduction which decreased from 47.5% to 30.0% during the year ended December 31, 2024. The change in fair value applicable to the debt yield reduction is included in Change in fair value of debt - credit risk in Accumulated other comprehensive (loss) income.

Current wording

The Change in fair value of debt - related party of $33.8 million for the year ended December 31, 2024, primarily related to the extension of the maturity date and timing of future cash flows of the DDTL.

Previous wording

The change in the fair value of embedded derivatives - related parties, was due to our convertible debt (See Note 13, Borrowings) and the change in fair value of warrants - related parties was due to changes in fair value of our SPA Warrant and contingent warrants (See Note 14, Warrants Liability).

Current wording

The Change in the fair value of derivatives - related parties, was due to the 2021 Convertible Note Payable and AFG Convertible Notes (See Note 13, Borrowings) and the Change in fair value of warrants - related parties was due to changes in fair value of our SPA Warrant and Contingent warrants (See Note 14, Warrants Liability). The change is largely driven by the Company's common stock price increase year over year.

Previous wording

The Company recognized a loss on debt extinguishment of $3.5 million for the year ended December 31, 2023 from the issuance of common stock upon Yorkville's redemption of their convertible promissory notes.

Current wording

The Company recognized a loss on debt extinguishment of $52.7 million for the year ended December 31, 2025 from the payoff of the 2021 Convertible Notes, prepayment of the DDTL and modification of the Non-Affiliated AFG Convertible Notes.

Previous wording

Other expense of $8.1 million for the year ended December 31, 2024 primarily included loss from derecognition of loan commitment assets during 2024 from the Credit and Securities Purchase Transaction. See Note 3, Credit and Securities Purchase Transaction, for more information.

Current wording

Other expense of $8.1 million for the year ended December 31, 2024 primarily relates to the loss from derecognition of loan commitment assets during 2024 from the Credit and Securities Purchase Transaction. See Note 3, Credit and Securities Purchase Transaction, for more information.

Previous wording

Income tax expense of approximately $0.02 million and $0.03 million was recorded for the years ended December 31, 2024 and 2023. The taxes are attributable to taxable earnings from the Company’s foreign operations which were insignificant for all periods presented.

Current wording

Income tax expense of approximately $0.02 million was recorded for the years ended December 31, 2025 and 2024. The taxes are attributable to taxable earnings from the Company’s foreign operations which were insignificant for all periods presented.

Previous wording

•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, 2024, the Company incurred a net loss of $685.9 million. Adjustments to reconcile the net loss to cash used in operations are primarily from non-cash items on the Consolidated Statements of Cash Flows. The non-cash items totaled $549.2 million. The Company incurred negative cash flows from operations of $153.9 million and had an accumulated deficit of $1,561.7 million as of December 31, 2024.

Current wording

During the year ended December 31, 2025, the Company incurred a net loss of $969.6 million. Adjustments to reconcile the net loss to cash used in operations are primarily from non-cash items on the Consolidated Statements of Cash Flows. The non-cash items totaled $746.4 million. The Company incurred negative cash flows from operations of $211.2 million and had an accumulated deficit of $2,535.8 million as of December 31, 2025.

Previous wording

•As of December 31, 2024, the Company had $74.3 million of unrestricted cash and cash equivalents available to fund the Company’s operations, and working capital of $114.9 million, which includes loan commitment assets of $21.7 million classified as current assets on the Consolidated Balance Sheets.

Current wording

As of December 31, 2025, the Company had $568.0 million of unrestricted cash and cash equivalents available to fund the Company’s operations, and working capital of $564.9 million on the Consolidated Balance Sheets. Additionally, the Company had $56.6 million of restricted cash, refer to Note 5, Cash, Cash Equivalents and Restricted Cash for further discussion.

Previous wording

•Through December 31, 2024, under the DOE Loan Facility, the Company drew down $68.3 million for the eligible project cost that the Company had incurred through December 6, 2024. These costs are a portion of Tranche 1 of the DOE Loan Facility. Tranche 1 provides up to $102.0 million for eligible costs in connection with the design, construction, installation, startup and shakedown of a battery automation line and related tools. In the event the Company does not achieve certain funding conditions and the DOE chooses not to continue funding, the Company would need to seek alternative sources of capital, which may not be available on favorable terms or at all.

Current wording

Through December 31, 2025, under the DOE Loan Facility, the Company drew down $90.9 million for the eligible project cost that the Company had incurred through June 4, 2025. These costs represent Tranche 1 of the DOE Loan Facility for eligible costs in connection with the design, construction, installation, startup and shakedown of a battery automation line and related tools. In the event the Company does not achieve certain funding conditions and the DOE chooses not to continue funding, the Company may need to seek alternative sources of capital, which may not be available on favorable terms or at all.

Previous wording

The Company has historically relied on outside capital to fund its cost structure and expects this reliance to continue for the foreseeable future until the Company reaches profitability through its planned revenue generating activities. During 2024, the Company closed on the following capital transactions:

Current wording

The Company has historically relied on outside capital to fund its cost structure and expects this reliance to continue for the foreseeable future until the Company reaches profitability through its planned revenue generating activities. The Company has sufficient working capital for the next twelve months, however the Company may rely upon profitability and outside capital in the long term. During 2025, the Company closed on the following capital transactions:

Previous wording

See Note 13, Borrowings, and Note 20, Shareholders' Equity for all of the Company’s outstanding debt and equity transactions.

Current wording

As of December 31, 2025, the Company had drawn down $90.9 million under the DOE Loan Facility, utilizing the full commitment available for Tranche 1. The initial draw of $68.3 million was made for eligible project costs incurred through December 6, 2024. The second draw of $22.7 million was made for eligible project costs incurred through June 4, 2025. These costs represent Tranche 1 that provided $90.9 million for eligible costs in connection with the design, construction, installation, startup and shakedown of a battery automation line and related tools. See Note 13, Borrowings and Note 20, Shareholders' Equity for all of the Company’s outstanding debt and equity transactions.

Previous wording

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 complementary 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. However, 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.

Current wording

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: 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 historically have been devoted to the development and manufacturing of battery energy storage systems and complementary 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.

Previous wording

•The Credit and Securities Purchase Transaction and the DOE Loan Facility contain certain quarterly financial covenants, which include (a) Minimum Liquidity, (b) Minimum Consolidated EBITDA, and (c) Minimum Consolidated Revenue (collectively, the “financial covenants”). As of the fiscal quarter ended December 31, 2024, the only financial covenant in effect was Minimum Liquidity. As of December 31, 2024, the Company was in compliance with this covenant, as well as all non-financial covenants and expects to remain in compliance with the Minimum Liquidity covenant over the next twelve month beyond the issuance date. The Minimum Consolidated EBITDA and Minimum Consolidated Revenue financial covenants are effective starting fiscal quarter ending December 31, 2025. As of December 31, 2024, the Company expects that it may be unable to remain in compliance with the Minimum Consolidated EBITDA and Minimum Consolidated Revenue financial covenant beginning December 31, 2025, absent the Company’s ability to secure a waiver or amend the Credit and Securities Purchase Transaction and the DOE Loan Facility. In the event the Company is unable to comply with the financial and non-financial covenants as of December 31, 2025, and the Company is unable to secure a waiver, Cerberus and DOE may, at their discretion, enter into a forbearance agreement with the Company and/or exercise any and all of their existing rights and remedies, which may include, among other things, asserting their rights in the Company’s assets securing the loans. Moreover, the Company’s other lenders may exercise similar rights and remedies under the cross-default provisions of their respective borrowing agreements with the Company.

Current wording

The Company considered the covenants in place as of December 31, 2025 which relate to the Credit Agreement and the DOE Loan Facility which contain certain quarterly financial covenants. These covenants include (a) Minimum Liquidity, (b) Minimum Consolidated EBITDA and (c) Minimum Consolidated Revenue (collectively, the “financial covenants”). As of the fiscal quarter ended December 31, 2025, the only financial covenant in effect was Minimum Liquidity. As of December 31, 2025, the Company was in compliance with this covenant, as well as all non-financial covenants and expects to remain in compliance with the Minimum Liquidity covenant over the next twelve months beyond the issuance date. The Minimum Consolidated EBITDA and Minimum Consolidated Revenue financial covenants are effective starting fiscal quarter ending March 31, 2027.

Previous wording

Although the Company expects capital expenditures and working capital requirements to increase as it seeks to execute its growth strategy, total capital expenditures for the years ended December 31, 2024 and December 31, 2023 were $33.2 million and $29.3 million, respectively. The increase in capital expenditures in 2024 was primarily driven by costs incurred for Phase 2 production of the Z3™ battery system. See Note 7, Property, Plant and Equipment for further discussion.

Current wording

The Company expects capital expenditures and working capital requirements to increase as it seeks to execute its growth strategy, total capital expenditures for the years ended December 31, 2025 and 2024 were $54.7 million, $33.2 million, respectively. See Note 7, Property, Plant and Equipment and Note 8, Intangible Assets for further discussion.

Previous wording

Net cash used in operating activities of $145.0 million for the year ended December 31, 2023 was primarily driven by a net loss of $229.5 million, adjusted for non-cash items of $94.2 million. Non-cash items included stock-based compensation expense, depreciation and amortization, non-cash interest expense, changes in fair value of warrants and derivatives, and loss from the write-down of property, plant and equipment. The net cash outflows from changes in operating assets and liabilities of $9.7 million was primarily driven by decrease in accounts payable of $11.5 million, increase in contract assets of $6.3 million, increase in other receivables of $7.5 million, and increase in grant receivables of $3.0 million, partially offset by an increase in accrued expenses of $19.3 million.

Current wording

Net cash used in operating activities of $211.2 million for the year ended December 31, 2025 was primarily driven by a net loss of $969.6 million, adjusted for non-cash items of $746.4 million. Non-cash items included stock-based compensation expense, depreciation and amortization, non-cash interest expense, loss on debt extinguishment, induced conversion expense, loss from the write-down of property, plant and equipment and changes in the fair value of debt, warrants and derivatives. The net cash inflow from changes in operating assets and liabilities of $12.1 million was primarily driven by an increase in accounts payable of $62.1 million and accrued expenses of $3.3 million, partially offset by an increase in inventory of $22.4 million, grant receivable of $8.7 million, accounts receivable of $4.0 million, vendor deposits $2.9 million and a decrease in contract liabilities of $8.9 million.

Previous wording

Net cash flows used in investing activities for the year ended December 31, 2023 were primarily composed of payments made for purchases of property, plant and equipment of $29.3 million, which included costs incurred for development and construction of a fully automated manufacturing line for the Z3™ battery.

Current wording

Net cash flows used in investing activities for the year ended December 31, 2025 were primarily composed of payments made for purchases of property, plant and equipment of $53.8 million.

Previous wording

Net cash provided by financing activities was $227.9 million for the year ended December 31, 2023. This was primarily from the issuance of common stock and warrants in the amount of $192.2 million, as well net proceeds received from the issuance of Yorkville Convertible Promissory Notes and AFG Convertible Notes, totaling $48.1 million. The proceeds were partially offset by equity issuance costs of $5.0 million, debt issuance costs related to the Yorkville Convertible Promissory Notes, AFG Convertible Notes and Senior Secured Term Loan of $4.2 million, payments on the equipment financing facility of $2.9 million and share repurchases from employees for tax withholding purposes of $0.6 million.

Current wording

Net cash provided by financing activities was $787.1 million for the year ended December 31, 2025. This was primarily due to the proceeds received from the issuance of common stock of $539.3 million, the November 2025 Convertible Notes of $580.5 million, May 2025 Convertible Notes of $240.0 million, exercise of warrants of $108.6 million, Credit and Securities Purchase Transaction of $38.5 million and DOE Loan of $22.7 million. The proceeds were partially offset by the partial payoff of the May 2025 Convertible Notes of $558.2 million, payoff of the 2021 Convertible Notes of $130.9 million, partial payoff of the DDTL of $50.0 million, debt issuance costs related to the Credit and Securities Purchase Transaction and DOE Loan of $7.0 million and payments on the equipment financing facility of $1.6 million.

Previous wording

•Future lease payments, including interest, under non-cancellable operating and financing leases of $4.2 million. The leases expire at various dates prior to 2028. See Note 15, Leasesto our Consolidated Financial Statements included elsewhere in this Annual Report.

Current wording

•Future lease payments, including interest, under non-cancellable operating and financing leases of $58.9 million. The leases expire at various dates prior to 2039. See Note 15, Leasesto our Consolidated Financial Statements included elsewhere in this Annual Report.

Previous wording

The Company generally provides a standard warranty for a period of two years. We also provide extended warranties and performance guarantees, which are identified as separate performance obligations in the Company's contracts with customers. We accrue warranty reserves 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 actual claim data to date, results of lab testing, factory quality data, and field monitoring. Due to limited claim experience since commercialization of our product, and the potential for variability in these underlying factors, the difference between our estimated costs and our actual costs could be material to our Consolidated Financial Statements. If actual product failure rates or the frequency or severity of reported claims differ from our estimates, we may be required to revise our estimated warranty liability. We will also update actual warranty experience to determine warranty reserves as such experience becomes available. We review our reserves at least quarterly, seeking to ensure that our accruals are adequate in meeting expected future warranty obligations, and we will adjust our estimates as needed. Initial warranty data can be limited at the early stage in the commercialization of our products and, the adjustments that we record may be material. Thus, it is likely that as we sell additional BESS, we will acquire additional information on the projected costs to repair or replace items under warranty and may need to make additional adjustments (See Note 10, Accrued Expensesto our Consolidated Financial Statements included elsewhere in this Annual Report).

Current wording

The Company generally provides a standard warranty. We also provide extended warranties and performance guarantees, which are identified as separate performance obligations in the Company's contracts with customers. We accrue warranty reserves 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 actual claim data to date, results of lab testing, factory quality data and field monitoring. Due to limited claim experience since commercialization of our product, and the potential for variability in these underlying factors, the difference between our estimated costs and our actual costs could be material to our Consolidated Financial Statements. If actual product failure rates or the frequency or severity of reported claims differ from our estimates, we may be required to revise our estimated warranty liability. We will also update actual warranty experience to determine warranty reserves as such experience becomes available. We review our reserves at least quarterly, seeking to ensure that our accruals are adequate in meeting expected future warranty obligations, and we will adjust our estimates as needed. Initial warranty data can be limited at the early stage in the commercialization of our products and, the adjustments that we record may be material. Thus, it is likely that as we sell additional BESS, we will acquire additional information on the projected costs to repair or replace items under warranty and may need to make additional adjustments (See Note 10, Accrued Expensesto our Consolidated Financial Statements included elsewhere in this Annual Report).

Previous wording

The Company estimated the fair value of the embedded conversion features in the 2021 Convertible Notes and the AFG Convertible Notes 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. The sensitivity of the fair value calculation to these methods, assumptions, and estimates included could create materially different results under different conditions or using different assumptions. See Note 16, Fair Value Measurementsto our Consolidated Financial Statements included elsewhere in this Annual Report.

Current wording

The Company estimated the fair value of the embedded conversion features in the May 2025 Convertible Notes, November 2025 Convertible Notes, 2021 Convertible Notes and the AFG Convertible Notes 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. The sensitivity of the fair value calculation to these methods, assumptions and estimates included could create materially different results under different conditions or using different assumptions. See Note 16, Fair Value Measurementsto our Consolidated Financial Statements included elsewhere in this Annual Report.

Previous wording

The fair value of the Delayed Draw Term Loan was estimated using a discounted cash flow (“DCF”) method, based on the contractual cash flows discounted at an effective debt yield. The fair value of the loan commitment asset was estimated using the discounted cash flow model, based on the contractual cash flows discounted at the effective debt yield and considering the probability of achieving certain milestones. The fair value for the SPA Warrant is estimated based on its intrinsic value, using the Eos common stock closing price adjusted by a discount for lack of marketability (“DLOM”), less the exercise price of $0.01 for the SPA Warrant. A DLOM was applied considering the underlying shares of the SPA Warrants are unregistered. The fair value of the Contingent Warrants is estimated based on the underlying Eos common stock closing price adjusted by a DLOM using a Black-Scholes model, considering the probability of achieving certain milestones. A DLOM was applied considering the underlying shares of the Contingent Warrants are unregistered. The fair values for all these instruments are designated as level 3 measurements as they rely on significant unobservable inputs. The significant unobservable inputs for each of these instruments are detailed in Note 16, Fair Value Measurement), which include debt yield, DLOM, and milestones achievement expectations. The sensitivity of the fair value calculation to debt yield, DLOM, and milestones achievement expectations could create materially different results under different conditions or using different assumptions.

Current wording

The fair value of the Delayed Draw Term Loan was estimated using a discounted cash flow (“DCF”) method, based on the contractual cash flows discounted at an effective debt yield. The fair value of the loan commitment asset was estimated using the discounted cash flow model, based on the contractual cash flows discounted at the effective debt yield and considering the probability of achieving certain milestones. The fair value for the SPA Warrant is estimated based on its intrinsic value, using the Eos common stock closing price adjusted by a discount for lack of marketability (“DLOM”), less the exercise price of $0.01 for the SPA Warrant. A DLOM was applied considering the SPA Warrants are unregistered. The fair value of the Contingent Warrants is estimated based on the underlying Eos common stock closing price adjusted by a DLOM using a Black-Scholes model, considering the probability of achieving certain milestones. A DLOM was applied considering the Contingent Warrants are unregistered. The fair values for all these instruments are designated as level 3 measurements as they rely on significant unobservable inputs. The significant unobservable inputs for each of these instruments are detailed in Note 16, Fair Value Measurement), which include debt yield, DLOM and milestones achievement expectations. The sensitivity of the fair value calculation to debt yield, DLOM and milestones achievement expectations could create materially different results under different conditions or using different assumptions.