Eos Energy Enterprises Inc

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

1. Overview

Nature of Operations

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 onlyone 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. 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.

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. While the Company believes its recent entry into new credit facilities as discussed below has significantly improved its capital position and provides a path to sustainable operations and profitability, there can be no assurance the Company will be able to achieve such profitability or do so in a manner that does not require additional 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, should it be needed.

As discussed in Note 3, Credit and Securities Purchase Transaction, on June 21, 2024, the Company entered into a Credit and Guaranty Agreement (the “Credit Agreement”) with CCM Denali Debt Holdings, LP., an affiliate of Cerberus Capital Management LP, (the “Lender”, also acting as administrative and collateral agent) to provide:

1. a secured multi-draw facility in an aggregate principal amount of $210,500 (the “Delayed Draw Term Loan”) to be made infour installments ($75,000, the Initial Draw which was funded on June 21, 2024, and the remaining three tranches which may be drawn in the amounts of $30,000, $65,000 and $40,500 on August 31, 2024, October 31, 2024, and January 31, 2025, respectively, upon the Company’s achievement of certain applicable funding milestones), and

2. a $105,000 revolving credit facility available to be drawn by the Company beginning June 21, 2026 at the Lender’s sole discretion and only after the Delayed Draw Term Loan is fully funded.

In addition, Eos utilized a portion of the proceeds of the Delayed Draw Term Loan to extinguish its existing $100,000 Senior Secured Term Loan, resulting in a gain on debt extinguishment in the amount of $68,478.

As of the date the accompanying Unaudited Condensed 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 six months ended June 30, 2024, the Company incurred a net loss of $74,880, incurred negative cash flows from operations of $66,807 and had an accumulated deficit of $950,726 as of June 30, 2024.

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

1. Overview (cont.)

•As of June 30, 2024, the Company had $52,454 of unrestricted cash and cash equivalents available to fund the Company’s operations and working capital of $115,058,which includes loan commitment assets of $76,091 classified as current assets on the Unaudited Condensed Consolidated Balance Sheets.

•Additionally, the Company continues to progress through the Department of Energy (DOE) Loan Programs 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 of 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. The Company continues to work with the DOE to meet these conditions and close the loan, however, there can be no assurance that the Company will be able to secure such a loan or on terms that are acceptable to the Company.

•The Company is required to remain in compliance with certain quarterly financial covenants under its Credit Agreement. These financial covenants include (a) minimum EBITDA, (b) Revenue, and (c) a Liquidity covenant (collectively, the “financial covenants”). While the Company was in compliance with these covenants as of June 30, 2024, the Company may be unable to remain in compliance with these covenants as of September 30, 2024, and thereafter, absent the Company’s ability to draw under the Delayed Draw Term Loan or secure a waiver from the Lender. In the event the Company is unable to remain in compliance with the financial covenants and the other nonfinancial covenants required by Credit Agreement and the Company is further unable to cure such noncompliance or secure a waiver, the Lender 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.

•In the event the Company does not achieve the funding milestones, the Lender chooses not to continue funding, and the Company’s ongoing efforts to raise additional outside capital prove unsuccessful, the Company will be unable to meet its obligations as they become due over the next twelve months beyond the issuance date. In such an event, 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 Unaudited Condensed 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 Unaudited Condensed Consolidated Financial Statements do not include any adjustments that may result from the outcome of these uncertainties.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying Unaudited Condensed Consolidated Financial Statements include the accounts of the Company and its 100% owned, direct and indirect subsidiaries and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). All intercompany transactions and balances have been eliminated in the preparation of the Unaudited Condensed Consolidated Financial Statements. These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The interim financial statements should be read in conjunction with the audited consolidated financial statements, including the notes thereto, included in our 2023 Annual Report on Form 10-K. These interim results are not necessarily indicative of results for the full year.

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

2. Summary of Significant Accounting Policies (cont.)

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.

Reclassification of Prior Year Presentation

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations.

Series A-1 Preferred Stock

The Company’s Series A-1 Preferred Stock that was issued as part of the Credit and Securities Purchase Transaction becomes redeemable based upon the passage of time and therefore meets the criteria to be classified within temporary equity. Management has elected to recognize changes in the redemption value pursuant to ASC 480-10-S99-3A-15(b). As a result, the Company will remeasure the Series A-1 Preferred Stock to the maximum redemption value at each reporting date but will never be adjusted below its initial carrying value. Adjustments are reflected in Additional paid in capital on the Company’s Unaudited Condensed Consolidated Balance Sheets.

Production Tax Credits under Internal Revenue Code 45X (“PTC”)

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 is 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 a non-monetary asset since the Company’s intention is to sell the tax credit to a third-party and is recorded at the value that is expected to be received from the sale in Other assets, net and Inventory, net on the Company’s Unaudited Condensed Consolidated Balance Sheets and is subsequently recognized in Cost of goods sold in the Unaudited Condensed Consolidated Statement of Operations when the inventory is sold. In the event the PTC is sold, upon the receipt of the cash payments, the Company will record offsets to Other assets, net. Differences in the recorded value of the PTC and the sale price will be recognized as an adjustment to Cost of goods sold in the Unaudited Condensed Consolidated Statement of Operations.

Fair Value Option

The Company has elected the option under ASC 825-10, Financial Instruments("ASC 825"), to measure the Delayed Draw Term Loan (see Note 3. Credit and Securities Purchase Transaction) at fair value. The fair value option may be elected on an instrument-by-instrument basis and is irrevocable unless a new election date occurs. When the fair value option is elected for an instrument, unrealized gains and losses for such instrument is reported in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss at each subsequent reporting date. Upfront costs and fees related to items for which the fair value option is elected shall be recognized in earnings as incurred and not deferred. These amounts are included in Other expense in the Unaudited Condensed Consolidated Statement of Operations.

Recent Accounting Pronouncements

There were no new accounting standards or updates during the six months ended June 30, 2024 that would have a material impact on the Company’s Unaudited Condensed Consolidated Financial Statements.

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

3. Credit and Securities Purchase Transaction

Credit and Guaranty Agreement (“Credit Agreement”)

Delayed Draw Term Loan

On June 21, 2024, the Company entered into the following agreements with CCM Denali Debt Holdings, LP, an affiliate of Cerberus Capital Management LP (herein after referred to as“Denali”, “Lender”, “Denali Lender”, “Holder”, “Purchaser”). As a result of this transaction, the Lender is deemed a related party. Pursuant to the Credit Agreement, the Lender has agreed to provide a $210,500 secured multi-draw facility to be made infour installments (the “Delayed Draw Term Loan”) as well as a $105,000 revolving credit facility (“Revolving Facility”), to be made available at the Lenders’ sole discretion and only if the Delayed Draw Term Loan is fully funded. On June 21, 2024 the initial $75,000 installment was funded (the “Initial Draw”). The Initial Draw is included in Notes payable - related party on the Unaudited Condensed Consolidated Balance Sheets and is measured at fair value (pursuant to the fair value option elected by the Company in accordance with ASC 825). See Note 13, Borrowings, for further discussion.

Delayed Draw Term Loan Commitments (“Loan Commitment Assets”)

Pursuant to the terms of the Credit Agreement, Denali has committed to fund to the Company, additional amounts up to $135,500 to be made available to the Company by the Lender inthree tranches ($30,000, $65,000 and $40,500 on August 31, 2024, October 31, 2024 and January 31, 2025, respectively), subject to the achievement of certain performance milestones, and subject to terms and conditions set forth in the Credit Agreement. As of June 30, 2024, the Loan Commitment Assets amounted to $76,091 on the Company’s Condensed Consolidated Balance Sheets, which was the fair value on the issuance date.

Securities Purchase Agreement

On June 21, 2024, the Company entered into a Securities Purchase Agreement (the “SPA”) with CCM Denali Equity Holdings, LP (the “Purchaser”).

SPA Warrant

Under the SPA, the Company issued a warrant to purchase 43,276,194 shares of Common Stock representing a collective ownership of 19.9% (the “SPA Warrant”). The SPA Warrant has aten-year term and an exercise price of $0.01 per share. The SPA Warrant includes anti-dilutive rights, subject to certain excluded issuances, in the event any shares of Common Stock, options, warrants, convertible securities or other equity or equity equivalent securities payable in Common Stock are issued at a price per share of less than the fair market value (as defined in the Warrant) of a share of Common Stock on the issuance date of the Warrant, subject to adjustment. Until or unless the Company receives stockholder approval, the Company may not issue additional shares of Common Stock exceeding 19.99% of shares of Common Stock issued and outstanding as of the date of the Initial Draw (such percentage, as may be adjusted in accordance with the terms of the Warrant, the “Warrant Conversion Cap”) upon exercise of the Warrant, and is required to issue, at the option of the Lender, Series A Preferred Stock or additional warrants on Common Stock upon a draw under the Delayed Draw Credit Facility. Prior to stockholder approval, in lieu of receiving such anti-dilution protection, the liquidation value of the Series A-1 Preferred Stock (discussed below) will be proportionately increased to give effect to such anti-dilution protection. Following stockholder approval, the Warrant Conversion Cap increases to 49.9% of the number of shares of Common Stock issued and outstanding as of the applicable measurement date; provided that, following stockholder approval, the holder of the Warrant has the option to amend the Warrant Conversion Cap to any percentage less than 49.9%.

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

3. Credit Agreement and Securities Purchase Transaction (cont.)

The SPA Warrant is exercisable at the holder’s discretion for cash or on a cashless basis. The SPA Warrant is subject to automatic cashless exercise on the expiration date if the fair market value of one share is greater than the exercise price then in effect. Upon an acceleration under the Credit Agreement, the Company may be required to purchase the SPA Warrant from the holder at an amount equal to the closing sale price less the SPA Warrant price at the request of the holder. The SPA Warrant meets the criteria for liability classification under ASC 480 and is recognized at fair value with changes in fair value included in Change in fair value of derivatives - related parties in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss.

Contingent Warrants

Upon the achievement of performance milestones on dates specified in the Credit Agreement, the Company will receive additional funds and will issue at the option of the Lender, Preferred Stock (Series A-1 Preferred Stock, if prior to shareholder approval or Series B Preferred stock if after shareholder approval) or warrants on common stock (collectively “Contingent Warrants”) under the SPA in an amount equal to the applicable percentage, up to an aggregate of 33.0% ownership limitation on a fully diluted basis at such time the Delayed Draw Term Loan is fully drawn. The Contingent Warrants meet the criteria for liability classification under ASC 480. As such, the Contingent Warrants are included in Warrants liability - related party on the Unaudited Condensed Consolidated Balance Sheets at fair value as of June 30, 2024. The change in fair value of the Contingent warrants is included in Change in fair value of derivatives - related parties on the Company’s Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss. See Note 14, Warrants Liability, for further discussion of the SPA Warrant and Contingent Warrants.

Series A-1 Preferred Stock

On June 21, 2024, the Company filed with the Secretary of State of the State of Delaware the Series A-1 Certificate of Designation and issued 59 shares of Series A-1 Preferred Stock to satisfy the terms of the Credit Agreement. Under the terms of the Series A-1 Certificate of Designation, each share of Series A-1 Preferred Stock has an original issue price of $455,822.59 (the “A-1 Original Issue Price”) and a liquidation value, payable with the Common Stock, as if such shares were convertible into 541,357 shares, or an aggregate of 31,940,063 shares of Common Stock, subject to adjustment. The Series A-1 Preferred Stock is non-voting and non-convertible into Common Stock. Holders of the Series A-1 Preferred Stock are entitled to receive dividends or distributions on each share of Series A-1 Preferred Stock equal to dividends or distributions actually paid on each share of Common Stock, multiplied by the number of shares of Common Stock represented by the Series A-1 Preferred Stock Liquidation Value (as defined in the Series A-1 Certificate of Designation). If stockholder approval of the issuance of additional shares of Common Stock in connection with the SPA Warrant described above is obtained, then the Series A-1 Preferred Stock will become convertible into shares of Series B-1 Preferred Stock.

At any time after the fifth (5th) anniversary of the original issue date (which is the date on which the Series A-1 Certificate of Designation filed with the Secretary of State of Delaware), the outstanding shares of Series A-1 Preferred Stock held by any holder become redeemable for cash at the redemption price. The redemption price will be an amount per share equal to the greater of (i) A-1 Original Issue Price plus all accrued and unpaid dividends thereon, up to and including the date of redemption and (ii) the number of shares of Common Stock represented by the Series A-1 Liquidation Value (as defined in the Series A-1 Certificate of Designation) multiplied by the average of the closing sale price of the Common Stock for the five (5) business days immediately prior to the date of redemption plus all accrued and unpaid dividends thereon, up to and including the date of redemption. Subject to certain excluded issuances (as defined in the Series A-1 Certificate of Designation), the Series A-1 Preferred Stock is subject to anti-dilution protection in the number of shares of Common Stock represented by the liquidation preference. Additionally, the Series A-1 Preferred Stock provides that, to the extent any Warrant so requires, the number of shares of Common Stock represented by the Series A-1 Liquidation Value will be increased as set forth in the SPA Warrant.

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

3. Credit Agreement and Securities Purchase Transaction (cont.)

The terms of any additional shares of Series A Preferred Stock issued pursuant to the terms of the Credit Agreement and SPA will be substantially similar to the Series A-1 Preferred Stock, but for the number of shares constituting such shares, the original issue price of such series and the liquidation value of such shares. Series A Preferred Stock can only be issued prior to shareholder approval.

As of June 30, 2024, the Series A-1 Preferred Stock is classified as mezzanine equity on the Unaudited Condensed Consolidated Balance Sheets at its redemption value because it is probable of becoming redeemable. The Company recorded accretion of the Series A-1 Preferred Stock, which reduces additional paid-in capital, on the Unaudited Condensed Statements of Shareholders' Equity (Deficit).

Series B-1 Preferred Stock

If stockholder approval of the issuance of additional shares of Common Stock in connection with the SPA warrant described above is obtained, then the Series A-1 Preferred Stock will become convertible into shares of Series B-1. The Series B-1 Preferred Stock will contain substantially similar terms to the Series A-1 Preferred Stock except that each share of Series B-1 Preferred Stock will be convertible into 1,000,000 shares of Common Stock.

As of and for the three and six months ended June 30, 2024, there wereno shares of Series B-1 Preferred Stock issued or outstanding.

Atlas Payoff Letter and Insurer Letter Agreement

On June 21, 2024 (the “Atlas Facility Termination Date”), the Company entered into a payoff letter agreement (the “Atlas Payoff Letter”), by and among the Company, ACP Post Oak Credit I LLC (“Atlas”) and the Atlas Lenders (as defined below) relating to the Company’s Senior Secured Term Loan (see Note 13, Borrowings), dated as of July 29, 2022 (the “Atlas Credit Agreement”), by and among the Company and Atlas, as lender, administrative agent and collateral agent, and the lenders from time to time party thereto (collectively with Atlas, the “Atlas Lenders”). Pursuant to the Atlas Payoff Letter, as of the Atlas Facility Termination Date, all outstanding obligations under the Atlas Credit Agreement and the related facility documents were deemed paid and satisfied in full and all security interests and other liens granted to or held by the Atlas Lenders were terminated and released. Under the Atlas Payoff Letter, the Company agreed to pay to the Atlas Lenders on the Atlas Facility Termination Date (a) approximately $11,900 (which was released from the interest escrow account maintained pursuant to the Atlas Credit Agreement, and (b) $8,000. Atlas also agreed, in lieu of amounts due from the Company, to receive a $1,000 participation in the Credit Agreement, as negotiated between Atlas and the Denali Lender. The Company has no obligation under the participation agreement between Atlas and the Lender. The payoff of the Senior Secured Term Loan resulted in a restructuring gain. These amounts are included in Gain (loss) on debt extinguishment on the Unaudited Condensed Consolidated Statement of Operations and Comprehensive Loss. See Note 13, Borrowings, for further discussion.

In connection with the termination of the Atlas Credit Agreement, the Company entered into an insurer letter agreement, dated as of June 21, 2024 (the “Insurer Letter Agreement”), with the insurance companies that issued insurance policies to certain Atlas Lenders in connection with the Atlas Credit Agreement (the “Atlas Insurers”) pursuant to which the Company and the Atlas Insurers agreed that the Company shall pay to the Atlas Insurers, subject to the terms and conditions of the Insurer Letter Agreement (i) on December 31, 2024, subject to the absence of certain events of default under the Credit Agreement, $3,000 and (ii) on June 30, 2025, subject to the absence of certain events of default under the Credit Agreement, $4,000. These amounts are included in Accrued expenses on the Unaudited Condensed Consolidated Balance Sheets.

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

4. Revenue Recognition

The Company primarily earns revenue from sales of its energy storage systems and services including installation, commissioning and extended warranty services. Product revenues, which are generally recognized at a point in time, and service revenues, which are generally recognized over time, are as follows:

For the three months ended June 30, 2024, the Company had one customer that accounted for 87.0% of total revenue; for the six months ended June 30, 2024, we had one customer that accounted for 88.0% of total revenue as the Company focused on the transition to the new manufacturing line.

For the three months ended June 30, 2023, the Company had one customer that accounted for 100.0% of total revenue; for the six months ended June 30, 2023, we had one customer that accounted for 97.8% of total revenue.

Contract assets and Contract liabilities

The following table provides information about contract assets and contract liabilities from contracts with customers. Contract assets, current, Contract liabilities, current and Contract liabilities, long-term are included separately on the Unaudited Condensed Consolidated Balance Sheets and contract assets expected to be recognized in greater than twelve months are included under Other assets, net.

The Company recognizes contract assets for certain contracts in which revenue recognition performance obligations have been satisfied but invoicing to the customer has not yet occurred. Contract liabilities primarily relate to 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.

Contract assets increased by $4,552 during the six months ended June 30, 2024 due to recognition of revenues for which invoicing has not yet occurred. Contract liabilities increased by $2,592 during the six months ended June 30, 2024, reflecting $863 of revenue recognized from customers and offset by $3,455 in customer advance payments.

Contract liabilities of $4,814 as of June 30, 2024 are expected to be recognized within the next twelve months and long-term contract liabilities of $4,388 are expected to be recognized as revenue in greater than twelve months. Contract assets of $11,107 as of June 30, 2024 are expected to be recognized within the next twelve months and long-term contract assets of $1,767 are expected to be recognized as accounts receivable in greater than twelve months.

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

4. Revenue Recognition(cont.)

Remaining Performance Obligations

Remaining performance obligations (“RPO”) represent the allocated transaction price of unsatisfied or partially unsatisfied performance obligations. The Company expectsto recognize revenue related to the RPOs as the performance obligations are satisfiedin accordance with the Company’s revenue recognition policy, which can be found in Note 2, Summary of Significant Accounting Policies, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

5. 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 as of June 30, 2024 relates to a minimum liquidity requirement in the Credit and Guaranty Agreement. Prior to the first tranche funding, the Company shall not permit liquidity at any time be less than $2,500. Once the first tranche is funded, the minimum liquidity requirement increases to $5,000 and once the Delayed Draw Term Loan is disbursed in full, or the first date any indebtedness is incurred through the DOE LPO, or the Company achieves positive EBITDA, the minimum liquidity requirement increases to $15,000.

Long-term restricted cash as of June 30, 2023 relates to interest that was 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. In connection with the June 2024 SPA and the Credit Agreement, the Company reached an agreement to payoff and terminate the Senior Secured Term Loan. Accordingly, the restricted cash held in the related escrow account was released (see Note 13, Borrowingsand Note 3, Credit Agreement and Securities Purchase Transactionfor further discussion).

The following table reconciles reported amounts from the Unaudited Condensed Consolidated Balance Sheets to Cash, Cash Equivalents and Restricted Cash reported within the Unaudited Condensed Consolidated Statements of Cash Flows:

6. Inventory

The following table provides information about Inventory balances:

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

7. Property, Plant and Equipment, Net

The following table provides information about Property, plant and equipment, net balances:

Depreciation expense related to property, plant and equipment was $1,349 and $2,444 for the three months ended June 30, 2024 and 2023 and $2,524 and $5,111 for the six months ended June 30, 2024 and 2023, respectively.

The Company recorded a loss from write-down of property, plant and equipment of $271 and $5,436 for the three months ended June 30, 2024 and 2023, and $336 and $6,196 for the six months ended June 30, 2024 and 2023, 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.

On June 28, 2024, the Company successfully began commercial operations on the first manufacturing line. Accordingly, the assets classified as construction in progress were reclassified to equipment, furniture, leasehold improvements and tooling in the table above. Included in construction in progress prior to the reclassification were capitalized interest costs of $991 and $1,841 for the three and six months ended June 30, 2024, respectively. There wereno capitalized interest costs recognized for the three and six months ended June 30, 2023.

8. Intangible Assets

Intangible assets include 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 overten years. The Company recorded amortization expense of $10 for the three months ended June 30, 2024 and 2023 and $20 for the six months ended June 30, 2024 and 2023, related to patents.

The Company capitalized $146 of costs for internal-use software, including $8 of costs capitalized during the six months ended June 30, 2024. The software has a useful life and is amortized into the results of operations over 3 years. The Company recorded amortization expense of $12 and $10 for the three months ended June 30, 2024 and 2023 and $24 and $20 for the six months ended June 30, 2024 and 2023, respectively, related to software.

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

Notes receivable, net, relates to financing the Company offered to a customer. The Company reports the notes receivable at the principal balance outstanding less an allowance for losses. The estimate of credit losses is based on historical trends, the customer’s 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.

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

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

The Company had notes receivable, net, of $847 and $863 outstanding as of June 30, 2024 and December 31, 2023, respectively. These amounts are included in Other assets, net and Other current assets in the accompanying Unaudited Condensed Consolidated Balance Sheets. As of June 30, 2024 and December 31, 2023, the allowance for expected credit loss related to the notes receivable amounted to $37 and $2, respectively.

The customer to whom the Company offers financing through notes receivable 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 impact 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.

10. Accrued Expenses

Accrued expenses were as follows:

(1) Included in Other accrued expenses in the table above as of June 30, 2024 is $7,000 payable in accordance with the Insurer Letter Agreement.

See Note 3, Credit and Securities Purchase Transaction for further discussion.

(2) Refer to the table below for the warranty reserve activity for the three and six months ended June 30, 2024.

The following table summarizes warranty reserve activity:

11. Government Grants

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 PTC, that can be claimed on battery components manufactured in the U.S. and sold to U.S. or foreign customers. The 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.

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

11. Government Grants(cont.)

In April 2024, the Department of the Treasury and the Internal Revenue Service (IRS) issued final regulations (Final Regulations) on the transferability of certain energy tax credits, pursuant to Section 6418 of the Internal Revenue Code of 1986, as amended, which was enacted as part of the Inflation Reduction Act of 2022. 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 is 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 are produced and sold and the conditions in the preceding paragraph are met.

During the second quarter of 2024, the Company entered into tax credit purchase agreements to sell and transfer all of the PTCs related to the production and sale of battery cells and battery modules produced in calendar years 2023 and in the first quarter of 2024, that were eligible to be claimed on the Company’s tax returns for the related years. The transferred tax credits were sold at 90% of their value and the cash purchase price of the PTCs was $3,430.

Cash was received from the buyer in April and June of 2024, after the completed registration requirements were filed through the IRS‑provided electronic portal, inclusive of registration numbers needed to claim the credit on the Buyer’s tax return. Upon the receipt of the cash payments, the Company recorded offsets to the PTC/Grant Receivable account. There were no differences between the recorded fair value of the PTC receivable and the amount of consideration received. Future differences, if any, will be recognized as an adjustment to cost of goods sold.

The Company recognized PTC credits of $125 and $45 for the three months ended June 30, 2024 and 2023 and $1,667 and $844 for the six months ended June 30, 2024 and 2023, respectively, as a reduction of cost of goods sold on the Unaudited Condensed Consolidated Statement of Operations and Comprehensive Loss. As of June 30, 2024 and December 31, 2023, grant receivable related to the PTC in the amount of $1,493 and $3,256, respectively, is recorded in the Unaudited Condensed Consolidated Balance Sheets.

12. Related Party Transactions

2021 Convertible Note Payable

In July 2021, the Company issued a convertible note in the aggregate principal amount of $100,000 to Spring Creek Capital, LLC, a wholly-owned, indirect subsidiary of Koch Industries, Inc. (the “2021 Convertible Note”). In connection with the 2021 Convertible Note, the Company paid $3,000 to B. Riley Securities, Inc., a related party, who acted as a placement agent. Refer to Note 13, 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 in 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, a Delaware limited liability company managed by Russell Stidolph, a director of the Company (together, the “Purchasers”). 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 13, Borrowings, for additional information.

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

12. Related Party Transactions(cont.)

Standby Equity Purchase Agreement

On April 28, 2022, the Company entered into the Standby Equity Purchase Agreement (“SEPA”). Pursuant to the SEPA, 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 13, Borrowingsfor pre-advance loans in form of convertible promissory notes and Note 19, Shareholders' Deficitfor additional information.

Credit and Securities Purchase Transaction

Pursuant to the terms and conditions of Credit and Securities Purchase Transaction, CCM Denali Equity Holdings, LP (“Denali”) is considered a related party as result of such transaction. Refer to Note 3, Credit and Securities Purchase Transactionfor detailed discussion.

13. Borrowings

The Company’s debt obligations at carrying value consist of the following related and third-party borrowings:

*Carrying value includes unamortized deferred financing costs, unamortized discounts and fair value of embedded derivative liabilities, except for the Delayed Draw Term Loan, which is carried at fair value.

Delayed Draw Term Loan

On June 21, 2024, the Company entered into a Credit Agreement, under which the Lenders committed: (i) a $210,500 secured multi-draw facility (the “Delayed Draw Term Loan”) to be made infour tranches, and (ii) a $105,000 revolving credit facility beginning June 21, 2026, to be made available at the Lenders’ sole discretion and only if the Delayed Draw Term Loan is fully funded on terms and subject to conditions set forth in the Credit Agreement. On June 21, 2024, the Company borrowed an Initial Draw of $75,000 from the Delayed Draw Term Loan facility. The issuance was net of an original issue discount of $3,750. The Company used a portion of the loan proceeds to payoff and terminate all outstanding obligations under the Atlas Credit Agreement. The remaining three tranches may be drawn in the amounts of $30,000, $65,000 and $40,500 on August 31, 2024, October 31, 2024, and January 31, 2025, respectively, upon the Company’s achievement of certain applicable funding milestones. See Note 3, Credit Agreement and Securities Purchase Transaction for additional information on this transaction.

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Borrowings under the Credit Agreement bear interest at an annual rate equal to 15.0% per annum, subject to the following increases: (i) an additional 5.0% per annum upon the occurrence of an event of default under the Credit Agreement; and (ii) an additional 1.0% -5.0% per annum for failure to obtain stockholder approval within 90 to 240 days following the signing of the Credit Agreement. The Company’s may elect to add accrued and unpaid interest on the loans to the principal amount of the loans (capitalized interest). Each tranche under the Delayed Draw Term Loan is subject to a 5% original issue discount payable at the time of each draw. Borrowings under the Credit Agreement are subject to certain fees, including (i) an exit fee equal to 5.0% of the aggregate principal amount of Loans, or Revolving Loans being paid, repaid, prepaid, refinanced or replaced in a prepayment event, (ii) a make-whole payment for certain prepayments prior to June 21, 2027 and (iii) a prepayment premium for any prepayments prior to the scheduled maturity date.

The Credit and Guaranty Agreement includes a minimum liquidity requirement under which the Company shall not permit liquidity at any time be less than $2,500, prior to the first tranche funding. Once the first tranche is funded, the minimum liquidity requirement increases to $5,000 and once the Delayed Draw Term Loan is disbursed in full, or the first date any indebtedness is incurred through the DOE LPO, or the Company achieves positive EBITDA, the minimum liquidity requirement increases to $15,000.

The facilities are scheduled to mature on the earlier of (i) the date that is five years after the signing of the Credit Agreement and (ii)91 days prior to the maturity of certain of the Company’s outstanding convertible notes.

Milestones

In the event the Company fails to achieve any milestones on any predetermined tranche date or the one additional milestone measurement date, the Company will not receive the specific tranche unless waived by the Lenders, and will be subject to a penalty represented by an up to 4.0% increase in the applicable percentage at each missed milestone measurement date, which could result in the issuance of additional shares of Preferred Stock or Warrants up to an applicable percentage increase of up to 16.00% for all missed milestones, or up to a 49.0% overall applicable percentage taking into account the 33.0% applicable percentage. If the Company fails to achieve an interim milestone, but then subsequently achieves the final milestone for that particular category, the incremental penalty equity related to that milestone category is returned to the Company.

Debt Covenants

The facilities include various affirmative and negative covenants applicable to the Company including, among others, (i) meeting certain minimum EBITDA and revenue metrics, measured quarterly, and maintaining certain minimums of liquid cash with accounts controlled by the agent, (ii) reporting and information covenants including the delivery of annual, quarterly and monthly financial statements, daily cash reports, annual financial plans and forecasts with weekly progress reports and updates, (iii) monthly meetings with the Lenders and the engagement of advisors and consultants requested by the Lenders, and (iv) restrictions on business and activities including debt incurrence, asset dispositions, distributions, investments, and modifications to or terminations of various material contracts. The facilities are subject to certain events of default which can be triggered by, among other things, (i) breach of payment obligations and other obligations and representations in the Credit Agreement nor related documents, (ii) default under other debt facilities with a principal above a predetermined amount, (iii) failure to perform or comply with certain covenants in the Credit Agreement, (iv) entry into a decree or order for relief in respect of the Company or any of its subsidiaries in an involuntary case under the Bankruptcy Code of the United States or under any other debtor relief law, (v) any money judgment, writ or warrant of attachment or similar process involving in the aggregate at any time an amount in excess of $2,500, (vi) any order, judgement or decree entered against the Company or the Guarantors decreeing the dissolution or split up of such entity, (vii) the failure of the Common Stock to be listed on an internationally recognized stock exchange in the United States and (viii) a change of control. The Company was in compliance with these covenants as of June 30, 2024.

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

The Company elected the fair value option to account for the Delayed Draw Term Note for operational ease. The financial liability was initially measured at its issue-date fair value and is subsequently remeasured at fair value on a recurring basis at each reporting period date. The Initial Draw fair value was $25,653 at issuance and $25,893 at June 30, 2024, for which a loss of $240 was recognized for the three and six months ended on June 30, 2024 in Change in fair value of debt - related party on the Unaudited Condensed Consolidated Statements of Operations. The Company did not separately report interest expense attributable to the Delayed Draw Term Loan because such interest was included in the determination of the fair value of the Note. See Note 15, Fair Value Measurement for the assumptions used to determine the fair value the Delayed Draw Term Loan at issuance and at June 30, 2024.

2021 Convertible Note 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, Inc. The investment agreement provides for the issuance and sale to Koch Industries of the 2021 Convertible Note in the aggregate principal amount of $100,000.

The 2021 Convertible Note contains an embedded derivative feature, which is presented on the Unaudited Condensed Consolidated Balance Sheets as a component of Notes payable - related party. See Note 15, Fair Value Measurement for the assumptions used to determine the fair value of the embedded derivative as of June 30, 2024 and December 31, 2023.

Interest expense recognized on the 2021 Convertible Note is as follows:

The balances for the 2021 Convertible Note are as follows:

The Company is obligated to repay all contractual interest attributable to the 2021 Convertible Note in-kind on a semi-annual basis, in accordance with the terms under the Delayed Draw Term Loan. Therefore, for the semi-annual period ended June 30, 2024 and December 31, 2023, interest payable attributable for the 2021 Convertible Notes that was paid in kind, capitalized and added to the principal amount of the 2021 Convertible Notes was $3,474 and $3,373, respectively.

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

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. The AFG Convertible Notes bear interest at a rate of 26.5% per annum, which is entirely paid-in-kind (“PIK Interest”) semi-annually in arrears on June 30 and December 30. It is expected that the Notes will mature on June 30, 2026, subject to earlier conversion, redemption or repurchase. 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.

The Conversion Option includes an exercise contingency, which requires the Company to obtain stockholder approval for conversions subject to the Exchange Cap. If stockholder approval of the issuance of additional shares of Common Stock 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 stockholder 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 Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss. The embedded derivative is presented on the Unaudited Condensed Consolidated Balance Sheets as a component of Notes payable - related party. The fair value of the embedded derivative was $5,361 and $4,345 as of June 30, 2024 and December 31, 2023, respectively.

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 for the six months ended June 30, 2023 on the Unaudited Condensed Consolidated Statement of Operations and Comprehensive Loss.

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

The balances for the AFG Convertible Notes are as follows:

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. Therefore, for the semi-annual period ended June 30, 2024 and December 31, 2023, interest payable attributable to the AFG Convertible Notes that was paid in kind, capitalized and added to the principal amount of the AFG Convertible Note was $2,309 and $2,039, respectively.

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Senior Secured Term Loan

On July 29, 2022, the Company entered into a $100,000 Senior Secured Term Loan Credit Agreement with Atlas Credit Partners (ACP) Post Oak Credit I LLC, as administrative agent for the lenders and collateral agent for the secured parties. The Senior Secured Term Loan was 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 Note of June 30, 2026.

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 Prime Lending Rate, (y) the NYFRB Rate (as defined in the 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.

Additionally, interest was required to be escrowed based on the principle outstanding. This amount was $11,755 at December 31, 2023. This escrowed and restricted cash was presented on a separate line item on the Unaudited Condensed Consolidated Balance Sheets as Long-term restricted cash. The agreements also contained customary affirmative and negative covenants. The Company was in compliance with all covenants prior to and at the time of the loan termination, as discussed below.

Termination of the Senior Secured Term Loan

On June 21, 2024, the Atlas Credit Agreement, and the subsequent commitment increase agreements thereto, which provided for a $100,000, were terminated pursuant to the terms of the Atlas Payoff Letter and the Insurer Letter Agreement, and all security interests and other liens granted to or held by the Atlas Lenders were terminated and released.

In accordance with the Atlas Payoff Letter, the Company agreed to payoff the Senior Secured Term Loan for (a) approximately $11,900 (which was released from the interest escrow account maintained pursuant to the Atlas Credit Agreement and (b) $1,000 for the account of Atlas; provided that Atlas agreed to accept a participation in the Credit Agreement in lieu of such $1,000 payment, and (c) $8,000. In accordance with the Insurer Letter Agreement, the Company shall pay to the Atlas Insurers (i) on December 31, 2024, subject to the absence of certain events of default under the Credit Agreement, $3,000 and (ii) on June 30, 2025, subject to the absence of certain events of default under the Credit Agreement, $4,000.

Absent termination, the Senior Secured Term Loan would have matured on the earlier of (i) July 29, 2026 and (ii)91 days prior to the maturity of certain of the Company’s outstanding convertible notes. The aggregate principal amount of the Senior Secured Term Loan outstanding was $100,000 at the time of termination.

The Company accounted for the termination of the Senior Secured Term Loan in accordance with ASC 470-60, Troubled Debt Restructurings. As a result, the Company recognized a restructuring gain of $68,478 in the Unaudited Condensed Consolidated Statement of Operations and Comprehensive Loss for the three and six months ended June 30, 2024.

See Note 3, Credit Agreement and Securities Purchase Transaction for additional information on this transaction.

The following table summarizes interest expense recognized:

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

The Senior Secured Term Loan balances are as follows:

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. The Company has drawn a portion of the facility as follows:

As of June 30, 2024 and December 31, 2023, total equipment financing carrying value was $4,109 and $5,710, respectively of which $3,041 and $3,332 are recorded as a current liability on the Unaudited Condensed Consolidated Balance Sheets, respectively. Interest expense attributable to the equipment financing agreement was $178 and $387 for the three and six months ended June 30, 2024, respectively. Interest expense attributable to the equipment financing agreement was $292 and $609 for the three and six months ended June 30, 2023, respectively.

Yorkville Convertible Promissory Notes - Related Party

In December 2022, February 2023, March of 2023, and April 2023, the Company issued convertible promissory notes with an aggregate principal amount of $37,000 in a private placement to Yorkville under the second and third supplemental agreements to the SEPA. The fair values of the convertible promissory notes at issuance were greater than the proceeds received. Accordingly, the Company recorded the excess of fair value of these promissory notes over the proceeds as Interest expense - related party in the amount of $10,620 and $17,572, for the three and six months ended June 30, 2023, respectively, which is reflected in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss.

During the first half of 2023, Yorkville delivered Investor Notices requiring the Company to issue and sell an aggregate of 22,947,029 shares of common stock to Yorkville to offset all outstanding amounts owed to Yorkville under the outstanding convertible promissory notes. The Company recognized a loss on debt extinguishment from the issuance of common stock from the outstanding convertible promissory notes of $1,876 and $3,510 for the three and six months ended June 30, 2023, which is reflected in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss.

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

The conversion feature for each of the convertible promissory notes did not qualify for the scope exception to derivative accounting, therefore the conversion option was bifurcated from each convertible promissory note. The bifurcated derivatives were recorded at their initial fair value on the date of issuance and subject to remeasurement at the debt extinguishment date, with changes in fair value recognized as a realized gain or loss in the Unaudited Condensed Consolidated Statements of Operations. Net gains of $8,818 and $6,922 were recognized for the three and six months ended June 30, 2023.

As of December 31, 2023, there wereno outstanding Yorkville convertible promissory notes.

14. Warrants Liability

The amount of warrants outstanding and fair value for all warrants as of June 30, 2024 and December 31, 2023 are as follows:

(a) Contingent warrants represent future issuable shares of stock. See Note 3, Credit and Securities Purchase Transaction for further discussion.

Warrants liability

The Company issued private placement warrants to B. Riley Financial, Inc. in conjunction with its initial public offering 2020 (“IPO warrants”).

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. 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 warrants” and “May 2023 warrants”, respectively).

In December 2023, the Company issued in a combined public offering 34,482,759 shares of common stock and 34,482,759 accompanying common warrants to purchase shares of common stock (the "December 2023 warrants").

The IPO, April, May, and December 2023 Warrants are classified as Warrant liability on the Unaudited Condensed Consolidated Balance Sheets. The change in fair value of the IPO, April, May, and December 2023 Warrants is presented as Change in fair value of warrants on the Company’s Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss. See Note 15, Fair Value Measurementsfor further information.

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

14. Warrants Liability(cont.)

Warrants liability- related party

SPA Warrant

At closing of the SPA with CCM Denali Equity Holdings, LP (the “Purchaser”), the Company issued to the Purchaser, one warrant to purchase 43,276,194 shares of Common Stock. The warrant has aten-year term, a $0.01 per share exercise price, and is exercisable at the Purchaser’s discretion for cash or on a cashless basis. Upon an acceleration under the Credit Agreement, the Company could be required to purchase the warrant from the holder at an amount equal to the most recently quoted price. Prior to stockholder approval, the Company may not issue additional shares of Common Stock exceeding 19.99% of shares of Common Stock issued and outstanding as of the date of the Initial Draw. The warrant provides for certain anti-dilution adjustments. After stockholder approval, the Warrant Conversion Cap increases to 49.9%. See Note 3, Credit Agreement and Securities Purchase Transaction for additional information on this transaction.

Contingent Warrants

Following the Initial Draw, on three separate predetermined draw dates upon the achievement of the corresponding performance milestone for each such draw date, the Company will receive additional funds under the Credit Agreement and will issue securities under the SPA in an amount equal to the applicable percentage, up to an aggregate of 33.0% ownership limitation on a fully-diluted basis at such time the Delayed Draw Term Loan is fully drawn. Although these contingent warrants are not issued or exercisable until additional draws occur, they meet the definition of a derivative and are recognized at fair value with changes in fair value reported in the Condensed Consolidated Statements of Operations and Comprehensive Loss.

Both the SPA Warrant and the Contingent warrants are classified as Warrant liability- related party on the Unaudited Condensed Consolidated Balance Sheets. The change in fair value of the SPA and Contingent warrants is included in Change in fair value of derivatives- related parties on the Company’s Condensed Consolidated Statements of Operations and Comprehensive Loss. See Note 15, Fair Value Measurementsfor further information.

15. Fair Value Measurement

Accounting standards establish a 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.

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

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

The following tables set forth the Company's financial liabilities measured at fair values based on the fair value hierarchy, as described above. These should also be read with Note 2, Summary of Significant Accounting Policies, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

(a) Included in Warrants liability - Related party on the Unaudited Condensed Consolidated Balance Sheets.

(b) All these instruments are Level 3, except for the IPO warrants (Level 2). These are included in Warrants liability on the Unaudited

Condensed Consolidated Balance Sheets.

Each of the following recurring level 2 and level 3 instruments’ valuation model used to determine fair value is disclosed in the Company’s Annual Report on the Form 10-K for the year ended December 31, 2023.

IPO Warrants

The IPO warrants 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.

April 2023 warrants, May 2023 warrants and December 2023 warrants

The April 2023 warrants, May 2023 warrants and December 2023 warrants all are valued 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 is a significant unobservable input classified as Level 3 of the fair value hierarchy.

Embedded derivatives

The Company estimated the fair value of the embedded conversion features in the 2021 Convertible Note and the AFG Convertible Notes using a binomial lattice model at inception and on subsequent measurement dates. This model incorporates significant inputs such as the stock price of the Company, dividend yield, risk-free interest rate, debt yield and expected volatility. The volatility and debt yield are significant unobservable inputs classified as Level 3 of the fair value hierarchy.

Accounting for instruments resulting from the Credit and Securities Purchase Transaction

The Loan commitment assets, were measured at fair value as of June 21, 2024 (see Note 3, Credit and Securities Purchase Transaction). The fair value was $76,091 calculated using the discounted cash flow model. They will not be subsequently remeasured at fair value.

The following instruments , which were subsequently measured at fair value were recognized at fair value as of June 21, 2024 (see Note 3, Credit and Securities Purchase Transaction):

•Delayed Draw Term Loan

•SPA Warrant

•Contingent Warrants

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 a debt yield and considering the probability of achieving certain milestones.

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

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 and an allowance for certain redemption features using Black-Scholes option pricing model, considering the probability of achieving certain milestones. A DLOM was applied considering the underlying shares of the Contingent Warrants are unregistered.

The fair value for all the above instruments are designated as level 3 measurements as they rely on significant unobservable inputs. The significant unobservable inputs for each of these instruments are disclosed in the tables below. All other inputs used are observable.

Quantitative information about all significant unobservable inputs used in the fair value measurement for non-recurring level 3 measurements:

Quantitative information about all significant unobservable inputs used in the fair value measurement for recurring level 3 measurements:

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Level 3 Rollforward for Liabilities Measured at Fair Value on a Recurring Basis

The following table summarizes the changes in the fair value of liabilities that are included within the Company’s accompanying Unaudited Condensed Consolidated Balance Sheets and are designated as Level 3:

1 Includes loss on debt extinguishment from Yorkville Promissory Note Conversions for the three and six months ended June 30, 2023.

The estimated fair value of financial instruments not carried at fair value in the Unaudited Condensed Consolidated Balance Sheets was as follows:

*Includes the embedded derivative liabilities.

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

16. Commitments and Contingencies

For amounts related to commitments related to future payments, including leases, see Item 2- Management’s Discussion and Analysis- Contractual Obligations.

Minimum Volume Commitment

In June 2022, the Company entered into a long-term supply agreement with a minimum volume commitment with a third party that provides services to process certain raw materials. Any purchase order issued under this supply agreement will be non-cancellable. If the Company fails to order the guaranteed minimum volume defined in the contract at the end of the term, the Company will be required to pay the counterparty an amount equal to the shortfall, if any, multiplied by a fee. The Company is currently negotiating an extension to the agreement, and therefore, believes it is probable that they will meet the guaranteed minimum purchase volume requirements described above under the amended terms.

Legal Proceedings

Class Action Complaints

On March 8, 2023, a class action lawsuit was filed in the Court of Chancery of the State of Delaware by plaintiff Richard Delman 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 but each was identified in the Complaint as a relevant non-party and the Company has indemnification obligations relating to the lawsuit. On February 1, 2024, the parties agreed to a binding Settlement Term Sheet (the “Settlement”) whereby plaintiff agreed to resolve the lawsuit in exchange for a settlement payment of $8,500, to be fully funded by the Company’s Directors and Officers (“D&O”) liability insurance policies subject to a retention by the Company of approximately $1,000 consisting of the Company’s payment of legal fees related to this matter. On June 1, 2024, the parties submitted to the Court of Chancery a definitive Stipulation and Agreement of Settlement, Compromise, and Release, and related documents, and on July 1, 2024, the Court of Chancery entered a scheduling order with a hearing on the proposed Settlement scheduled for October 17, 2024.

On August 1, 2023, a class action lawsuit was filed in the United States District Court of New Jersey by plaintiff William Houck against the Company, the Company’s Chief Executive Officer, its former Chief Financial Officer and its current Chief Financial Officer (with the Company, the “Houck Defendants”). The Complaint alleges that the 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. Defendants deny the allegations and, on February 13, 2024, moved to dismiss the Complaint. On March 5, 2024, plaintiff filed an amended complaint that dropped the Company’s former Chief Financial Officer as a defendant. On April 4, 2024, defendants filed a renewed motion to dismiss the lawsuit. The Company intends to continue to vigorously defend against this action.

17. Stock-Based Compensation

Stock-based compensation expense included in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss was as follows:

The stock compensation expense has been recorded in cost of goods sold, research and development expenses and selling, general and administrative expenses.

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

17. Stock-Based Compensation(cont.)

As of June 30, 2024, total unrecognized compensation expense was $10,529 attributable to unvested restricted stock units (“RSU”). Compensation expense for these unvested awards is expected to be recognized over a weighted-average remaining vesting period of 2.0 years for RSUs.

18. Income Taxes

Income tax expense was $8 and $2 for the three months ended June 30, 2024 and 2023, and $33 and $12 for the six months ended June 30, 2024 and 2023 respectively, related to state margin taxes and taxable earnings from foreign operations. The income tax expense differs from the amount computed by applying the statutory U.S. federal income tax rate of 21% to the loss before income taxes. This is due to non-taxable income, foreign operations and pre-tax losses for which no tax benefit can be recognized for U.S. income tax purposes.

The Company estimates and applies the annual effective tax rate to its ordinary earnings each interim period. Any significant unusual or infrequent items are not included in the estimation of the annual effective tax rate; instead, these items and their related income tax expense are separately stated in the interim period in which they occur. The quarterly estimate of the annual effective tax rate and related tax expense is subject to variation due to a multitude of factors, including, but are not limited to, the inability to accurately predict the Company’s pre-tax and taxable income and loss.

At each balance sheet date, management assesses the likelihood that the Company will be able to realize its deferred tax assets. Management considered all available positive and negative evidence in assessing the need for a valuation allowance. The realization of deferred tax assets depends on the generation of sufficient taxable income of the appropriate character and in the appropriate taxing jurisdiction during the future periods in which the related temporary differences become deductible. Management has determined that it is unlikely that the Company will be able to utilize its U.S. deferred tax assets at June 30, 2024 and December 31, 2023 due to cumulative losses. Therefore, the Company has a valuation allowance against its net U.S. deferred tax assets.

As of June 30, 2024 and December 31, 2023, the Company has unrecognized tax benefits associated with uncertain tax positions that, if recognized, would not affect the effective tax rate on income from continuing operations. The Company is not currently under examination by any taxing jurisdiction and none of the uncertain tax positions are expected to reverse within the next 12 months.

The Company files income tax returns in U.S. federal and various state jurisdictions, as well as in Italy and India. The open tax years for federal returns are 2020 and forward and open tax years for state returns are generally 2019 and forward. In addition, net operating losses generated in closed years and utilized in open years are subject to adjustment by the tax authorities.

19. Shareholders’ Deficit

Preferred Stock

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 June 30, 2024 and December 31, 2023, there wereno shares of preferred stock issued or outstanding.

Common Stock

The Company is authorized to issue 600,000,000 shares of common stock at $0.0001 par value as of June 30, 2024. The holders of the Company’s common stock are entitled toone vote for each share held. At June 30, 2024 and December 31, 2023, there were 216,491,215 and 199,133,827 shares of common stock issued and outstanding, respectively.

Treasury Stock

The Company recorded treasury stock of $43 and $106 for the three months ended June 30, 2024 and 2023 and $351 and $451 for the six months ended June 30, 2024 and 2023, respectively, for shares withheld from employees to cover the payroll tax liability of RSUs vested. The treasury stock was immediately retired.

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

19. Shareholders’ Deficit(cont.)

Public Warrants

The Company sold warrants to purchase 9,075,000 shares of the Company’s common stock in a public offering on May 22, 2020 (the “Public Warrants”). Each Public Warrant entitles the holder to purchase a share of common stock at a price of $11.50 per share. There wereno Public Warrants exercised during the three and six months ended June 30, 2024 and 2023. As of June 30, 2024 and December 31, 2023, there were 7,052,254 public warrants outstanding for both periods.

Standby Equity Purchase Agreement

During the six months ended June 30, 2023, total funds raised under the SEPA, inclusive of proceeds received from the Yorkville convertible promissory notes, were $35,550. During the six months ended June 30, 2023, total shares issued under the SEPA were 23,630,937.

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

The Company has a sales agreement with Cowen and Company, LLC (“Cowen”), with respect to an at-the-market offering (“ATM”) program under which the Company may offer and sell, from time to time at its sole discretion, shares of its common stock, having an aggregate offering price of up to $200,000 through Cowen as its sales agent and/or principal.

During the three months ended June 30, 2024, the Company sold 9,387,541 shares raising proceeds of $6,882, net of fees paid to Cowen, at an average selling price of $0.76 per share. During the six months ended June 30, 2024, the Company sold 16,627,523 shares raising proceeds of $14,089, net of fees paid to Cowen, at an average selling price of $0.87 per share. There wereno shares issued under the ATM offering program for the three and six months ended June 30, 2023.

Earnings Per Share

Generally, 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. However, management has elected to recognize changes in the redemption value of the Series A-1 Preferred Stock. At each balance sheet date, the redemption value of the Series A-1 Preferred Stock will be calculated, and if the redemption value is greater than the carrying value, the carrying value will be accreted to the redemption value. The accretion is recorded as a deemed dividend, which, in the absence of Retained earnings, reduces additional paid in capital and earnings available to common shareholders in computing basic and diluted EPS. Other potentially dilutive common shares and the related impact to earnings are considered when calculating EPS on a diluted basis. Since the Company incurred a net loss for the three and six months ended June 30, 2024 and 2023, the potential dilutive shares from stock options, restricted stock units, warrants and convertible 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 three and six months ended June 30, 2024 and 2023.

EOS ENERGY ENTERPRISES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

19. Shareholders’ Deficit(cont.)

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

20. Other Expense

The following table provides information about Other expense:

21. Subsequent Events

The Company has evaluated subsequent events through the issuance date of these financial statements. No material subsequent events were identified that require disclosure.