Eos Energy Enterprises, Inc 10-Q for FY2024 Q2
Eos Energy Enterprises, Inc. (EOSE)
10-Q
2024-08-06
For: 2024-06-30
View Original
Added on
April 10, 2026
About this 10-Q
Eos Energy Enterprises, Inc filed this 10-Q on August 6, 2024, covering the quarter ended June 30, 2024 (FY2024 Q2).
Headline figures
Quarter ended June 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $898K
- up 260.6% from $249K a year earlier
- Net loss
- $28.17M
- compared with a net loss of $131.63M a year earlier
- Diluted EPS
- -$0.25
- compared with -$1.12 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended June 30, 2024
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from to
Commission file number 001-39291
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||||||||
| (Address of Principal Executive Offices) | (Zip Code) | ||||||||||
(732 ) 225-8400
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer | ☐ | Accelerated filer | ☐ | ||||||||
| ☒ | Smaller reporting company | ||||||||||
| Emerging growth company | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The registrant had outstanding 216,708,398 shares of common stock as of August 1, 2024.
Table of Contents
| Page | ||||||||
Unaudited Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023 | ||||||||
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2024 and 2023 | ||||||||
Unaudited Condensed Consolidated Statements of Shareholders’ Deficit for the Three and Six Months Ended June 30, 2024 and 2023 | ||||||||
Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023 | ||||||||
Item 1. | ||||||||
Item 1a. | ||||||||
1
FORWARD-LOOKING INFORMATION
All statements included in this Quarterly Report on Form 10-Q (“Quarterly Report”), other than statements or characterizations of historical fact, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions, as they relate to us, are intended to identify forward-looking statements. These statements appear in a number of places in this Quarterly Report and include statements regarding the intent, belief or current expectations of Eos Energy Enterprises, Inc. Forward-looking statements are based on our management’s beliefs, as well as assumptions made by and information currently available to, them. Because such statements are based on expectations as to future financial and operating results and are not statements of fact, actual results may differ materially from those projected. Factors which may cause actual results to differ materially from current expectations include, but are not limited to:
•changes adversely affecting the business in which we are engaged;
•our ability to forecast trends accurately;
•our ability to generate cash, service indebtedness and incur additional indebtedness;
•our ability to raise financing in the future;
•our customer’s ability to secure project financing;
•risks associated with the Credit Agreement (defined below), including risks of default, dilution of outstanding Common Stock, consequences for failure to meet milestones and contractual lockup of shares;
•the amount of final tax credits available to our customers or to Eos Energy Enterprises, Inc. pursuant to the Inflation Reduction Act;
•uncertainties around our ability to meet the applicable conditions precedent and secure final approval of a loan in a timely manner or at all from the Department of Energy, Loan Programs Office, or the timing of funding and the final size of any loan that is approved;
•the possibility of a government shutdown while we work to meet the applicable conditions precedent and finalize loan documents with the U.S. Department of Energy Loan Programs Office or while we await notice of a decision regarding the issuance of a loan from the Department of Energy Loan Programs Office;
•our ability to continue to develop efficient manufacturing processes to scale and to forecast related costs and efficiencies accurately;
•fluctuations in our revenue and operating results;
•competition from existing or new competitors;
•our ability to convert firm order backlog and pipeline to revenue;
•risks associated with security breaches in our information technology systems;
•risks related to legal proceedings or claims;
•risks associated with evolving energy policies in the United States and other countries and the potential costs of regulatory compliance;
•risks associated with changes to the U.S. trade environment;
•our ability to maintain the listing of our shares of common stock on NASDAQ;
•our ability to grow our business and manage growth profitably, maintain relationships with customers and suppliers and retain our management and key employees;
•risks related to adverse changes in general economic conditions, including inflationary pressures and increased interest rates;
•risk from supply chain disruptions and other impacts of geopolitical conflict;
2
•changes in applicable laws or regulations; and
•other factors detailed under the section entitled “Risk Factors” herein.
Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. Forward-looking statements speak only as of the date they are made. Readers are cautioned not to put undue reliance on forward-looking statements and, except as required by law, the Company assumes no obligation and does not intend to update or revise these forward-looking statements, whether as a result of new information, future events, or otherwise. See also Part I, Item 1A, “Risk Factors” disclosures contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 for additional discussion of the risks and uncertainties that could cause the Company’s actual results to differ materially from those expressed or implied in its forward-looking statements.
3
Part I - Financial Information
EOS ENERGY ENTERPRISES, INC. | ||
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS | ||
| (In thousands, except share and per share amounts) | ||
| June 30, 2024 | December 31, 2023 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
Loan commitment assets | |||||||||||
| Accounts receivable, net | |||||||||||
| Inventory, net | |||||||||||
| Vendor deposits | |||||||||||
| Contract assets, current | |||||||||||
| Prepaid expenses | |||||||||||
Grant receivable | |||||||||||
Other receivables | |||||||||||
| Other current assets | |||||||||||
| Total current assets | |||||||||||
| Property, plant and equipment, net | |||||||||||
| Intangible assets, net | |||||||||||
| Goodwill | |||||||||||
| Operating lease right-of-use asset, net | |||||||||||
| Long-term restricted cash | |||||||||||
Other assets, net | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued expenses | |||||||||||
| Operating lease liability, current | |||||||||||
| Long-term debt, current | |||||||||||
| Contract liabilities, current | |||||||||||
| Other current liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Long-term liabilities: | |||||||||||
| Operating lease liability | |||||||||||
| Long-term debt | |||||||||||
Notes payable - related party | |||||||||||
| Contract liabilities, long-term | |||||||||||
Warrants liability | |||||||||||
Warrants liability - related party | |||||||||||
| Other liabilities | |||||||||||
| Total long-term liabilities | |||||||||||
| Total liabilities | |||||||||||
4
EOS ENERGY ENTERPRISES, INC. | ||
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS | ||
| (In thousands, except share and per share amounts) | ||
| June 30, 2024 | December 31, 2023 | ||||||||||
COMMITMENTS AND CONTINGENCIES (NOTE 16) | |||||||||||
Series A-1 Preferred Stock, $ | |||||||||||
| SHAREHOLDERS' DEFICIT | |||||||||||
Common stock, $ | |||||||||||
Preferred stock, $ | |||||||||||
| Additional paid in capital | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Accumulated other comprehensive income | |||||||||||
| Total shareholders' deficit | ( | ( | |||||||||
Total liabilities, preferred stock and shareholders' deficit | $ | $ | |||||||||
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
5
EOS ENERGY ENTERPRISES, INC. | ||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS | ||
| (In thousands, except share and per share amounts) | ||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||||
| Total revenue | $ | $ | $ | $ | ||||||||||||||||||||||
| Costs and expenses | ||||||||||||||||||||||||||
| Cost of goods sold | ||||||||||||||||||||||||||
| Research and development expenses | ||||||||||||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||||||||||||
| Loss from write-down of property, plant and equipment | ||||||||||||||||||||||||||
| Total costs and expenses | ||||||||||||||||||||||||||
| Operating loss | ( | ( | ( | ( | ||||||||||||||||||||||
Other (expense) income | ||||||||||||||||||||||||||
| Interest expense, net | ( | ( | ( | ( | ||||||||||||||||||||||
| Interest expense - related party | ( | ( | ( | ( | ||||||||||||||||||||||
Change in fair value of debt - related party | ( | ( | ||||||||||||||||||||||||
Change in fair value of warrants | ( | ( | ( | ( | ||||||||||||||||||||||
Change in fair value of derivatives - related parties | ( | ( | ( | ( | ||||||||||||||||||||||
Gain (loss) on debt extinguishment | ( | ( | ||||||||||||||||||||||||
Other expense | ( | ( | ( | ( | ||||||||||||||||||||||
Loss before income taxes | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
Income tax expense | ||||||||||||||||||||||||||
Net loss attributable to shareholders | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
Accretion of Series A-1 Preferred Stock | ( | ( | ||||||||||||||||||||||||
Net loss attributable to common shareholders | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
Other comprehensive income (loss) | ||||||||||||||||||||||||||
| Foreign currency translation adjustment, net of tax | ( | |||||||||||||||||||||||||
Comprehensive loss attributable to common shareholders | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
Basic and diluted loss per share attributable to common shareholders | ||||||||||||||||||||||||||
| Basic | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Diluted | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Weighted average shares of common stock | ||||||||||||||||||||||||||
| Basic | ||||||||||||||||||||||||||
| Diluted | ||||||||||||||||||||||||||
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
6
EOS ENERGY ENTERPRISES, INC. | ||
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' (DEFICIT) EQUITY | ||
| (In thousands, except share and per share amounts) | ||
| Common Stock | Additional Paid in capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total | |||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||
Balances on March 31, 2023 | $ | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
Exercise of stock options | |||||||||||||||||||||||||||||||||||
| Release of restricted stock units | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Cancellation of shares used to settle payroll tax withholding | ( | — | ( | — | — | ( | |||||||||||||||||||||||||||||
| Issuance of common stock | — | — | |||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | — | |||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
Balances on June 30, 2023 | $ | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||
Balances on March 31, 2024 | $ | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
| Release of restricted stock units | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Cancellation of shares used to settle payroll tax withholding | ( | — | ( | — | — | ( | |||||||||||||||||||||||||||||
| Issuance of common stock | — | — | |||||||||||||||||||||||||||||||||
Series A-1 Preferred Stock accretion to redemption value | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | — | |||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
Balances on June 30, 2024 | $ | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||
7
EOS ENERGY ENTERPRISES, INC. | ||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT | ||
| (In thousands, except share and per share amounts) | ||
| Common Stock | Additional Paid in capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total | |||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||
Balances on December 31, 2022 | $ | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
Exercise of stock options | — | — | — | ||||||||||||||||||||||||||||||||
| Release of restricted stock units | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Cancellation of shares used to settle payroll tax withholding | ( | — | ( | — | — | ( | |||||||||||||||||||||||||||||
| Issuance of common stock | — | — | |||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | — | |||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
Balances on June 30, 2023 | $ | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||
Balances on December 31, 2023 | $ | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
| Release of restricted stock units | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Cancellation of shares used to settle payroll tax withholding | ( | — | ( | — | — | ( | |||||||||||||||||||||||||||||
| Issuance of common stock | — | — | |||||||||||||||||||||||||||||||||
Series A-1 Preferred Stock accretion to redemption value | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
Balances on June 30, 2024 | $ | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
8
EOS ENERGY ENTERPRISES, INC. | ||
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| (In thousands, except share and per share amounts) | ||
Six Months Ended June 30, | |||||||||||
2024 | 2023 | ||||||||||
| Cash flows from operating activities | |||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Adjustment to reconcile net loss to net cash used in operating activities | |||||||||||
| Stock-based compensation | |||||||||||
| Depreciation and amortization | |||||||||||
(Gain) loss on debt extinguishment | ( | ||||||||||
| Loss from write-down of property, plant and equipment | |||||||||||
| Amortization of right-of-use assets | |||||||||||
| Non-cash interest expense | |||||||||||
| Non-cash interest expense - related party | |||||||||||
Change in fair value of debt - related party | |||||||||||
Change in fair value of warrants | |||||||||||
Change in fair value of derivatives - related parties | |||||||||||
| Other | |||||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Prepaid expenses | ( | ||||||||||
| Inventory | ( | ||||||||||
| Accounts receivable | ( | ||||||||||
| Vendor deposits | ( | ||||||||||
| Contract assets | ( | ( | |||||||||
Grant receivable | ( | ||||||||||
| Accounts payable | ( | ||||||||||
| Accrued expenses | ( | ||||||||||
| Operating lease liabilities | ( | ( | |||||||||
| Contract liabilities | ( | ||||||||||
| Other | ( | ||||||||||
| Net cash used in operating activities | ( | ( | |||||||||
| Cash flows from investing activities | |||||||||||
Purchases of intangible assets | ( | ||||||||||
| Purchases of property, plant and equipment | ( | ( | |||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Cash flows from financing activities | |||||||||||
| Principal payments on finance lease obligations | ( | ( | |||||||||
| Proceeds from exercise of options | |||||||||||
| Proceeds from issuance of convertible notes - related party | |||||||||||
Payment of debt issuance costs - related party | ( | ( | |||||||||
Proceeds from Credit and Securities Purchase Transaction | |||||||||||
Payment of equity issuance costs | ( | ||||||||||
Payoff of Senior Secured Term Loan | ( | ||||||||||
| Repayment of equipment financing facility | ( | ( | |||||||||
9
EOS ENERGY ENTERPRISES, INC. | ||
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| (In thousands, except share and per share amounts) | ||
Six Months Ended June 30, | |||||||||||
2024 | 2023 | ||||||||||
Proceeds from issuance of common stock | |||||||||||
| Proceeds from issuance of common stock and warrants - related party | |||||||||||
| Repurchase of shares from employees for income tax withholding purposes | ( | ( | |||||||||
| Net cash provided by financing activities | |||||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | ( | ||||||||||
Net decrease in cash, cash equivalents and restricted cash | ( | ||||||||||
| Cash, cash equivalents and restricted cash, beginning of the period | |||||||||||
| Cash, cash equivalents and restricted cash, end of the period | $ | $ | |||||||||
| Non-cash investing and financing activities | |||||||||||
| Accrued and unpaid capital expenditures | $ | $ | |||||||||
| Issuance of convertible notes for interest paid in kind | |||||||||||
| Right-of-use operating lease assets in exchange for lease liabilities | |||||||||||
| Issuance of common stock upon settlement of Yorkville convertible notes | |||||||||||
| Accrued and unpaid capitalized internal-use software | |||||||||||
| Supplemental disclosures | |||||||||||
| Cash paid for interest | $ | $ | |||||||||
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
10
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 only one
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 in four 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.
11
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.
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.
12
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
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.
13
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 in four 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 in three 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 a ten-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 %.
14
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.
15
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 were no
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.
16
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, | For the Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Product revenue | $ | $ | $ | $ | |||||||||||||||||||
| Service revenue | |||||||||||||||||||||||
| Total revenues | $ | $ | $ | $ | |||||||||||||||||||
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.
June 30, 2024 | December 31, 2023 | ||||||||||
| Contract assets | $ | $ | |||||||||
| Contract liabilities | $ | $ | |||||||||
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.
17
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
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, Borrowings and Note 3, Credit Agreement and Securities Purchase Transaction for 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:
June 30, 2024 | June 30, 2023 | ||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
Restricted cash - current | |||||||||||
| Long-term restricted cash | |||||||||||
| Total cash, cash equivalents and restricted cash | $ | $ | |||||||||
6. Inventory
The following table provides information about Inventory balances:
June 30, 2024 | December 31, 2023 | ||||||||||
| Raw materials | $ | $ | |||||||||
| Work-in-process | |||||||||||
| Finished goods | |||||||||||
| Total inventory, net | $ | $ | |||||||||
18
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:
| Estimated Useful lives | June 30, 2024 | December 31, 2023 | |||||||||||||||||||||
| Equipment | $ | $ | |||||||||||||||||||||
| Finance lease | |||||||||||||||||||||||
| Furniture | |||||||||||||||||||||||
| Leasehold improvements | Lesser of useful life/ remaining lease | ||||||||||||||||||||||
| Tooling | |||||||||||||||||||||||
Construction in progress (“CIP”) | |||||||||||||||||||||||
| Total | |||||||||||||||||||||||
| Less: Accumulated depreciation | ( | ( | |||||||||||||||||||||
| Total property, plant and equipment, net | $ | $ | |||||||||||||||||||||
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 were no
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 over ten years . The Company recorded amortization expense of $10 20
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.
19
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:
June 30, 2024 | December 31, 2023 | ||||||||||
| Accrued payroll | $ | $ | |||||||||
Warranty reserve (2) | |||||||||||
| Accrued legal and professional expenses | |||||||||||
| Provision for contract losses | |||||||||||
Insurance premium payable | |||||||||||
Other (1) | |||||||||||
| Total accrued expenses | $ | $ | |||||||||
(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:
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Warranty reserve - beginning of period | $ | $ | $ | ||||||||||||||||||||
| Additions for current period deliveries | |||||||||||||||||||||||
| Changes in the warranty reserve estimate | ( | ( | |||||||||||||||||||||
| Warranty costs incurred | ( | ( | ( | ( | |||||||||||||||||||
| Warranty reserve - end of period | $ | $ | $ | $ | |||||||||||||||||||
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.
20
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.
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.
21
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, Borrowings for pre-advance loans in form of convertible promissory notes and Note 19, Shareholders' Deficit for 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 Transaction for detailed discussion.
13. Borrowings
The Company’s debt obligations at carrying value consist of the following related and third-party borrowings:
June 30, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||
Maturity Date | Borrowing Outstanding | Carrying Value* | Borrowing Outstanding | Carrying Value* | |||||||||||||||||||||||||
| 2021 Convertible Note Payable | June 2026 | $ | $ | $ | $ | ||||||||||||||||||||||||
Delayed Draw Term Loan (at fair value) | June 2029 | ||||||||||||||||||||||||||||
| AFG Convertible Notes | June 2026 | ||||||||||||||||||||||||||||
Notes payable - related party | |||||||||||||||||||||||||||||
| Senior Secured Term Loan | March 2026 | ||||||||||||||||||||||||||||
| Equipment financing facility | April 2026 | ||||||||||||||||||||||||||||
| Total borrowings | |||||||||||||||||||||||||||||
| Current portion | |||||||||||||||||||||||||||||
| Total borrowings, non-current | $ | $ | $ | $ | |||||||||||||||||||||||||
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 in four 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.
22
EOS ENERGY ENTERPRISES, INC. | ||
| NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | ||
| (In thousands, except share and per share amounts) | ||
13. Borrowings (cont.)
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.
23
EOS ENERGY ENTERPRISES, INC. | ||
| NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | ||
| (In thousands, except share and per share amounts) | ||
13. Borrowings (cont.)
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
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:
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Contractual interest expense | $ | $ | $ | $ | |||||||||||||||||||
| Amortization of debt discount | |||||||||||||||||||||||
| Amortization of debt issuance costs | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
The balances for the 2021 Convertible Note are as follows:
June 30, 2024 | December 31, 2023 | ||||||||||
| Principal | $ | $ | |||||||||
| Unamortized debt discount | ( | ( | |||||||||
| Unamortized debt issuance costs | ( | ( | |||||||||
| Embedded conversion feature | |||||||||||
| Aggregate carrying value | $ | $ | |||||||||
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.
24
EOS ENERGY ENTERPRISES, INC. | ||
| NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | ||
| (In thousands, except share and per share amounts) | ||
13. Borrowings (cont.)
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:
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Contractual interest expense | $ | $ | $ | $ | |||||||||||||||||||
| Amortization of debt discount | |||||||||||||||||||||||
Amortization of issuance costs | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
The balances for the AFG Convertible Notes are as follows:
June 30, 2024 | December 31, 2023 | ||||||||||
| Principal | $ | $ | |||||||||
| Unamortized debt discount | ( | ( | |||||||||
| Unamortized debt issuance costs | ( | ( | |||||||||
| Embedded conversion feature | |||||||||||
| Aggregate carrying value | $ | $ | |||||||||
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.
25
EOS ENERGY ENTERPRISES, INC. | ||
| NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | ||
| (In thousands, except share and per share amounts) | ||
13. Borrowings (cont.)
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:
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Contractual interest expense | $ | $ | $ | $ | |||||||||||||||||||
| Amortization of debt discount | |||||||||||||||||||||||
| Amortization of debt issuance costs | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
26
EOS ENERGY ENTERPRISES, INC. | ||
| NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | ||
| (In thousands, except share and per share amounts) | ||
13. Borrowings (cont.)
The Senior Secured Term Loan balances are as follows:
December 31, 2023 | |||||||||||
| Principal | $ | ||||||||||
| Unamortized debt discount | ( | ||||||||||
| Unamortized debt issuance costs | ( | ||||||||||
| Aggregate carrying value | $ | ||||||||||
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:
| Date of Draw | Gross Amount of Initial Draw | Coupon Interest Rate | Debt Issuance Costs | ||||||||||||||
| September 2021 | $ | $ | |||||||||||||||
| September 2022 | |||||||||||||||||
| Total Equipment Financing loans | $ | $ | |||||||||||||||
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.
27
EOS ENERGY ENTERPRISES, INC. | ||
| NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | ||
| (In thousands, except share and per share amounts) | ||
13. Borrowings (cont.)
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 were no 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:
June 30, 2024 | December 31, 2023 | ||||||||||||||||||||||
Number of Warrants Outstanding | Fair Value | Number of Warrants Outstanding | Fair Value | ||||||||||||||||||||
Warrants liability | |||||||||||||||||||||||
| IPO warrants | $ | $ | |||||||||||||||||||||
| April 2023 warrants | |||||||||||||||||||||||
| May 2023 warrants | |||||||||||||||||||||||
| December 2023 warrants | |||||||||||||||||||||||
Total | $ | $ | |||||||||||||||||||||
Warrants liability - related party | |||||||||||||||||||||||
SPA Warrant | |||||||||||||||||||||||
Contingent warrants(a) | |||||||||||||||||||||||
Total | $ | $ | |||||||||||||||||||||
(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 Measurements for further information.
28
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 a ten-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.
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.
29
EOS ENERGY ENTERPRISES, INC. | ||
| NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | ||
| (In thousands, except share and per share amounts) | ||
15. Fair Value Measurement (cont.)
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.
June 30, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||||||||
| Liabilities | |||||||||||||||||||||||||||||||||||
SPA Warrant (a) | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Contingent warrants (a) | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
IPO, April, May and December 2023 Warrants (b) | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Delayed Draw Term Loan | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Embedded derivatives | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Total liabilities | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
(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.
30
EOS ENERGY ENTERPRISES, INC. | ||
| NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | ||
| (In thousands, except share and per share amounts) | ||
15. Fair Value Measurement (cont.)
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:
Loan Commitment Assets: | June 21, 2024 | |||||||
Milestones achievement expectations | Very high probability | |||||||
Debt yield | % | |||||||
Quantitative information about all significant unobservable inputs used in the fair value measurement for recurring level 3 measurements:
Delayed Draw Term Loan | June 21, 2024 | June 30, 2024 | ||||||||||||
Debt yield | % | % | ||||||||||||
Contingent Warrants- all tranches | June 21, 2024 | June 30, 2024 | ||||||||||||
Milestones achievement expectations | Very high probability | Very high probability | ||||||||||||
Volatility | % | % | ||||||||||||
SPA Warrant | June 21, 2024 | June 30, 2024 | ||||||||||||
Discount for lack of marketability (“DLOM”) | % | % | ||||||||||||
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EOS ENERGY ENTERPRISES, INC. | ||
| NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | ||
| (In thousands, except share and per share amounts) | ||
15. Fair Value Measurement (cont.)
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:
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Delayed Draw Term Loan | |||||||||||||||||||||||
| Balance at beginning of the period | $ | $ | $ | $ | |||||||||||||||||||
| Additions | |||||||||||||||||||||||
| Change in fair value of Term Loan | |||||||||||||||||||||||
| Balance at end of the period | $ | $ | $ | $ | |||||||||||||||||||
SPA Warrant and Contingent Warrants | |||||||||||||||||||||||
| Balance at beginning of the period | $ | $ | $ | $ | |||||||||||||||||||
| Additions | |||||||||||||||||||||||
| Change in fair value of warrants | |||||||||||||||||||||||
| Balance at end of the period | $ | $ | $ | $ | |||||||||||||||||||
| April, May, and December 2023 Warrants | |||||||||||||||||||||||
| Balance at beginning of the period | $ | $ | $ | $ | |||||||||||||||||||
| Additions | |||||||||||||||||||||||
| Change in fair value of warrants | |||||||||||||||||||||||
| Balance at end of the period | $ | $ | $ | $ | |||||||||||||||||||
| Embedded derivatives | |||||||||||||||||||||||
| Balance at beginning of the period | $ | $ | $ | $ | |||||||||||||||||||
| Additions | |||||||||||||||||||||||
Change in fair value of derivatives - related parties1 | ( | ||||||||||||||||||||||
| Balance at end of the period | $ | $ | $ | $ | |||||||||||||||||||
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:
June 30, 2024 | December 31, 2023 | ||||||||||||||||||||||
| Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||||||||||
| Notes receivable | $ | $ | $ | $ | |||||||||||||||||||
Loan commitment assets | |||||||||||||||||||||||
| 2021 Convertible Note* | |||||||||||||||||||||||
| Senior Secured Term Loan | |||||||||||||||||||||||
| AFG Convertible Notes* | |||||||||||||||||||||||
| Equipment financing facility | |||||||||||||||||||||||
| Series A-1 Preferred Stock | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
*Includes the embedded derivative liabilities.
32
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:
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Stock options | $ | $ | $ | $ | |||||||||||||||||||
| Restricted stock units | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
The stock compensation expense has been recorded in cost of goods sold, research and development expenses and selling, general and administrative expenses.
33
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.)
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.
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 were no
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 to one vote for each share held. At June 30, 2024 and December 31, 2023, there were 216,491,215 199,133,827
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.
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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 were no 7,052,254
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 were no
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.
35
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:
Three and Six Months Ended June 30, | |||||||||||
2024 | 2023 | ||||||||||
| Stock options and restricted stock units | |||||||||||
Warrants | |||||||||||
Convertible Notes | |||||||||||
20. Other Expense
The following table provides information about Other expense:
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
Financing issuance costs | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Other | ( | ( | ( | ||||||||||||||||||||
Total | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
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.
36
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the accompanying Unaudited Condensed Consolidated Financial Statements for the six months ended June 30, 2024 and 2023 and the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, including the financial statements and notes thereto.
Overview
The Company offers an innovative Znyth™ technology battery energy storage system ("BESS") designed to provide the operating flexibility to manage increased grid complexity and price volatility resulting from an overall increase in renewable energy generation and a congested grid coming from an increase in electricity demand growth. The Company’s BESS is a validated chemistry with accessible non-precious earth components in a durable design that is intended to deliver results in even the most extreme temperatures and conditions. The system is designed to be safe, flexible, scalable, sustainable and manufactured in the United States using raw materials primarily sourced in the United States. We believe the Company’s Z3™ battery module is the core of its innovative systems. The Z3 battery module is the only US designed and manufactured battery module that today provide utilities, independent power producers, renewables developers and C&I customers with an alternative to lithium-ion and lead-acid monopolar batteries for critical 3- to 12-hour discharge duration applications. We believe the Z3 battery will transform how utility, industrial and commercial customers store power.
In addition to its BESS, the Company currently offers: (a) a BMS which provides a remote asset monitoring capability and service to track the performance and health of the Company’s BESS and to proactively identify future system performance issues through predictive analytics; (b) project management services to ensure the process of implementing the Company’s BESS are coordinated in conjunction with the customer’s overall project plans; (c) commissioning services that ensure the customer’s installation of the BESS meets the performance expected by the customer; and (d) long-term maintenance plans to maintain optimal operating performance of the Company’s systems.
The Company’s growth strategy contemplates increasing sales of battery energy storage systems and related software and services through a direct sales team and sales channel partners. The Company’s current and target customers include utilities, project developers, independent power producers and commercial and industrial companies.
Strategy
The Company continues to invest in the refinement and production of its Z3 battery, which builds off the same electrochemistry that has not fundamentally changed for the better part of a decade. The next Z3 battery is designed to reduce cost and weight while improving manufacturability and system performance. The Eos Z3 battery is more cost-effective and has a simpler tub design with 50% fewer cells and 98% fewer welds per battery module than the Gen 2.3. The Company currently expects that the Z3 battery will give customers the benefit of two times the energy density per square foot, along with the ability to cycle multiple times per day, all with the same safety, reliability, security and recyclability. The Z3 transition is fully underway and the first semi-automated battery manufacturing line is installed and has started commercial production. The Z3 batteries utilize the same chemistry, which has over 3 million cycles, and incorporate a new mechanical design aimed at improving performance, lowering cost and increasing manufacturability.
The Company started delivery of its Z3 battery modules in the third quarter of 2023. The Z3 battery incorporates valuable lessons learned from the past 15 years into a new system design which the Company expects to result in efficiencies as it develops its new state-of-the-art manufacturing line.
The Company believes the simplicity, flexibility and safety of our products are what the market desires. In addition, we believe that the Inflation Reduction Act gives us a competitive advantage by virtue of production tax credits (“PTC”) that can be claimed on battery components manufactured domestically, and tax credits for customers for projects that satisfy domestic content requirements. See Regulatory Landscape section. The Company intends to engage with a consortium of community leaders, universities and supply chain partners in anticipation of pursuing grants made available under the Bipartisan Infrastructure Law of 2021.
37
Regulatory Landscape
U.S. Department of Energy (“DOE”)
In August 2023, the DOE issued a Conditional Commitment Letter to the Company for a loan of an aggregate principal amount of up to $398.6 million through the DOE’s Clean Energy Financing Program. The Conditional Commitment Letter follows an extensive technical, financial and commercial due diligence process by the DOE. If finalized, the loan is expected to fund 80% of eligible costs of the Company’s planned manufacturing expansion in Turtle Creek, Pennsylvania.
Eligible costs include capital expenditures and other costs associated with ramping up the manufacturing lines and facility, for example start-up and shakedown costs, as well as certain material and labor costs before efficiencies are met. The Company is working to finalize the loan documents with the DOE and to fulfill certain conditions precedent. Eos is spending eligible costs now that would be reimbursable at first funding.
Inflation Reduction Act of 2022 (“IRA”)
The IRA features significant economic incentives for both energy storage customers and manufacturers for projects placed in service after December 31, 2022. One of the most important features of the IRA is that it offers a 10-year term tax credit, whereas historically similar industrial credits have been shorter in duration. Customers placing new energy storage facilities in service will be allowed to claim at least a thirty percent investment tax credit (“ITC”) under certain conditions. The IRA also offers an extra ten percent credit if the project is in an “energy community” and another ten percent credit if the project satisfies domestic content requirements, which will be set forth when the implementing regulations are finalized. The ten percent bonus for domestic content could represent a strategic advantage for the Company resulting from the Company’s near-sourcing and Made in America strategy, and we currently anticipate that projects utilizing Eos batteries will qualify for the bonus.
As discussed in Note 11, Government Grants to our Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report, starting in 2023, there are Production Tax Credits under Internal Revenue Code 45X (“PTC”) that can be claimed on battery components manufactured in the U.S. and sold to U.S. or foreign customers. These tax credits available to manufacturers include a credit for ten percent of the cost incurred to make electrode active materials in addition to credits of $35 per kWh of capacity of battery cells and $10 per kWh of capacity of battery modules. These credits are cumulative, meaning that companies will be able to claim each of the available tax credits based on the battery components produced and sold through 2029, after which the PTC will begin to gradually phase down through 2032. These credits are expected to be a new source of cash flow for Eos in the future.
Company Highlights
•In January 2024, the Company entered into a supply agreement with TETRA Technologies, Inc (“TETRA”) that further expanded this partnership. TETRA is a leading global energy services and solutions company. This supply agreement designates TETRA as the preferred strategic supplier of electrolyte products for the Company’s Eos Z3TM long duration energy storage cube.
•In February 2024, the Company entered into a multiyear pricing agreement with SHPP US LLC, a Saudi Basic Industries Corporation (“SABIC”) affiliate, to supply conductive composite thermoplastic for the Eos Z3TM battery module. The Company and SABIC have worked collaboratively to develop a solution using one of SABIC’s new resin materials to replace the titanium used in prior Eos battery iterations.
•In February 2024, the Company achieved “Power On” status of all motion systems on its first state-of-the-art manufacturing line. Reaching this milestone is a significant step in achieving the state-of-the-art manufacturing line being installed and commissioned in the Company’s Turtle Creek facility.
•In April 2024, the Company and Pine Gate Renewables signed an agreement to expand its existing relationship. The new Master Supply Agreement (“MSA”) is for 500 MWh of energy storage systems to be delivered over the next five years.
•In May 2024, the Company successfully completed its Factory Acceptance Testing on State of the Art (“SotA”) manufacturing line.
•For the three months ended June 30, 2024, the Company recognized $0.1 million of grant income related to the IRA PTC.
•In June 2024, the Company announced a strategic investment of up to $315.5 million from an affiliate of Cerberus Capital Management LP (“Cerberus”), to support the Company’s growth plans.
•In June, the Company recognized a gain on debt extinguishment of $68.5 million from the payoff of the Senior Secured Term Loan.
•In June 2024, the Company completed the installation of the first state of the art line in its Turtle Creek facility and began commercial production of batteries off the new line to be delivered to customer sites.
38
Results of Operations
Revenue
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | 2024 | 2023 | $ Change | % Change | 2024 | 2023 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||
| Revenue | $ | 898 | $ | 249 | 649 | 261 | % | $ | 7,499 | $ | 9,084 | (1,585) | (17) | % | |||||||||||||||||||||||||||||||||
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.
For the three months ended June 30, 2024, Revenue increased by $0.6 million or 261% from $0.2 million. The increase for the three months is due to higher product component and commissioning sales. For the six months ended June 30, 2024, Revenue decreased by $1.6 million or 17% from $9.1 million. The decrease for the six months is due to reduced production and deliveries due to the installation of the Company’s new manufacturing line.
Cost of goods sold
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | 2024 | 2023 | $ Change | % Change | 2024 | 2023 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||
| Cost of goods sold | $ | 14,121 | $ | 11,246 | 2,875 | 26 | % | $ | 42,350 | $ | 38,186 | 4,164 | 11 | % | |||||||||||||||||||||||||||||||||
Cost of goods sold primarily consists of direct costs relating to labor, material and overhead directly tied to product manufacturing, engineering, 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 manufacturing engineering, 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. 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.
For the three months ended June 30, 2024, Cost of goods sold increased by $2.9 million or 26% from $11.2 million. For the six months ended June 30, 2024, Cost of goods sold increased by $4.2 million or 11% from $38.2 million. The increase for the three and six months ended June 30, 2024 was primarily due to an increase in project commissioning costs on previously delivered projects, along with the underutilization and absorption of labor and overhead associated with implementing the new line.
Research and development expenses
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | 2024 | 2023 | $ Change | % Change | 2024 | 2023 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||
| R&D expenses | $ | 4,250 | $ | 5,026 | (776) | (15) | % | $ | 9,450 | $ | 10,471 | (1,021) | (10) | % | |||||||||||||||||||||||||||||||||
Research and development expenses consist primarily of salaries and other personnel-related costs, materials, third-party services, depreciation and amortization of intangible assets.
For the three months ended June 30, 2024, Research and development costs decreased by $0.8 million or 15% from $5.0 million. For the six months ended June 30, 2024, Research and development costs decreased by $1.0 million or 10% from $10.5 million. The decrease for the three and six months was driven by lower spending on materials and supplies, partially offset by an increase in payroll and personnel costs and stock compensation costs.
39
Selling, general and administrative expenses
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | 2024 | 2023 | $ Change | % Change | 2024 | 2023 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||
| SG&A expenses | $ | 11,293 | $ | 13,138 | (1,845) | (14) | % | $ | 25,535 | $ | 27,093 | (1,558) | (6) | % | |||||||||||||||||||||||||||||||||
Selling, general and administrative expenses primarily consist of payroll and personnel-related, outside professional services, facilities, depreciation, travel, marketing and public company costs.
For the three months ended June 30, 2024, Selling, general and administrative expenses decreased by $1.8 million or 14% from $13.1 million. For the six months ended June 30, 2024, Selling, general and administrative expenses decreased by $1.6 million or 6% from $27.1 million. The decrease was driven by lower legal expenses and stock compensation costs, partially offset by an increase in facility costs.
Loss from write-down of property, plant and equipment
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||||||||||
| ($ in thousands) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| Loss from write-down of property, plant and equipment | $ | 271 | $ | 5,436 | $ | 336 | $ | 6,196 | |||||||||||||||
The Company incurred a loss of $0.3 million and $5.4 million from write-down of property, plant and equipment for the three months ended June 30, 2024 and 2023, respectively, and a loss of $0.3 million and $6.2 million for the six months ended June 30, 2024 and 2023, respectively. The write-down is due to obsolete equipment and tooling that was used to manufacture the Gen 2.3 BESS but cannot be repurposed for the next generation Eos Z3 battery.
Interest expense, net
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||||||||||
| ($ in thousands) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| Interest expense, net | $ | (3,515) | $ | (4,886) | $ | (7,782) | $ | (9,715) | |||||||||||||||
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 (see Note 7, Property, Plant and Equipment for further discussion). For the three and six months ended June 30, 2024, Interest expense, net decreased $1.4 million and $1.9 million, respectively, due to the capitalized interest on CIP assets recognized in 2024 and lower interest expense recognized from the Senior Secured Term Loan.
Interest expense - related party
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||||||||||
| ($ in thousands) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
2021 Convertible Note Payable interest and amortization | $ | (3,479) | $ | (3,009) | $ | (6,895) | $ | (5,970) | |||||||||||||||
AFG Convertible Note interest and amortization | (1,433) | (1,129) | (2,868) | (2,098) | |||||||||||||||||||
AFG Convertible Note Day 1 loss | — | — | — | (2,873) | |||||||||||||||||||
Yorkville Promissory Notes Day 1 losses | — | (10,620) | — | (17,572) | |||||||||||||||||||
Interest expense, related party | $ | (4,912) | $ | (14,758) | $ | (9,763) | $ | (28,513) | |||||||||||||||
See Note 13, Borrowings to our Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report for further discussion.
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Change in fair value of debt - related party
The change in the fair value of debt of $0.2 million for the three and six months ended June 30, 2024 relates to the Delayed Draw Term Loan.
Change in fair value of warrants
For the Three Months Ended June 30, 2024 | For the Six Months Ended June 30, 2024 | ||||||||||
| ($ in thousands) | Change in Fair Value | ||||||||||
| IPO warrants | $ | (3) | $ | 3 | |||||||
April 2023 warrants | (1,874) | (1,092) | |||||||||
May 2023 warrants | (461) | (274) | |||||||||
December 2023 warrants | (5,603) | (3,678) | |||||||||
Change in fair value of warrants | $ | (7,941) | $ | (5,041) | |||||||
For the Three Months Ended June 30, 2023 | For the Six Months Ended June 30, 2023 | ||||||||||||||||||||||||||||||||||
| ($ in thousands) | Loss on issuance | Loss on Change in Fair Value | Net loss | Loss on issuance | Loss on Change in Fair Value | Net loss | |||||||||||||||||||||||||||||
IPO warrants | $ | — | $ | (221) | $ | (221) | $ | — | $ | (377) | $ | (377) | |||||||||||||||||||||||
April 2023 warrants | (26,366) | (21,375) | (47,741) | (26,366) | (21,375) | (47,741) | |||||||||||||||||||||||||||||
May 2023 warrants | (5,267) | (5,978) | (11,245) | (5,267) | (5,978) | (11,245) | |||||||||||||||||||||||||||||
December 2023 warrants | — | — | — | — | — | — | |||||||||||||||||||||||||||||
Change in fair value of warrants | $ | (31,633) | $ | (27,574) | $ | (59,207) | $ | (31,633) | $ | (27,730) | $ | (59,363) | |||||||||||||||||||||||
Change in fair value of derivatives - related parties
Gain (Loss) | For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||||||||
| ($ in thousands) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
Change in fair value of embedded derivatives - related parties | $ | (1,525) | $ | (15,426) | $ | (991) | $ | (28,360) | |||||||||||||||
Change in fair value of warrants - related parties | (46,202) | — | (46,202) | — | |||||||||||||||||||
Change in fair value of derivatives - related parties | $ | (47,727) | $ | (15,426) | $ | (47,193) | $ | (28,360) | |||||||||||||||
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 of our SPA Warrant and contingent warrants (See Note 14, Warrants Liability).
Gain (loss) on debt extinguishment
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||||||||||
| ($ in thousands) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
Gain (loss) on debt extinguishment | $ | 68,478 | $ | (1,876) | $ | 68,478 | $ | (3,510) | |||||||||||||||
For the three and six months ended June 30, 2024, the Company recognized a gain on debt extinguishment of $68.5 million from the payoff of the Senior Secured Term Loan.
For the three and six months ended June 30, 2023, the Company recognized a loss on debt extinguishment of $1.9 million and $3.5 million, respectively, from the issuance of common stock upon Yorkville's redemption of their convertible promissory notes.
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Other expense
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||||||||||
| ($ in thousands) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
Other expense | $ | (3,270) | $ | (878) | $ | (3,134) | $ | (895) | |||||||||||||||
For the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, Other expense increased by $2.4 million and $2.2 million, respectively, primarily due to recognition of financing issuance costs from the Credit and Securities Purchase Transaction.
Income tax expense
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||||||||||
| ($ in thousands) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
Income tax expense | $ | 8 | $ | 2 | $ | 33 | $ | 12 | |||||||||||||||
The Company incurred income tax expense for the three and six months ended June 30, 2024 and 2023 in relation to the pre-tax income from the Company’s international subsidiaries.
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 $210.5 million (the “Delayed Draw Term Loan”) to be made in four installments ($75.0 million, the Initial Draw which was funded on June 21, 2024, and the remaining three tranches which may be drawn in the amounts of $30.0 million, $65.0 million and $40.5 million 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 $105.0 million 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 $100.0 million Senior Secured Term Loan, resulting in a gain on debt extinguishment in the amount of $68.5 million.
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:
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•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 $74.9 million, incurred negative cash flows from operations of $66.8 million and had an accumulated deficit of $950.7 million as of June 30, 2024.
•As of June 30, 2024, the Company had $52.5 million of unrestricted cash and cash equivalents available to fund the Company’s operations and working capital of $115.1 million,which includes loan commitment assets of $76.1 million 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 $398.6 million 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.
Financing Arrangements
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 the six months ended June 30, 2024, the Company closed on the following capital transactions:
•Under the ATM offering program, for the six months ended June 30, 2024, the Company sold 16,627,523 shares raising proceeds of $14.1 million, net of fees paid to Cowen, at an average selling price of $0.87 per share, included in the Condensed Consolidated Statement of Shareholders' Deficit.
•The Company secured a strategic investment of up to $315.5 million from an affiliate of Cerberus. The investment by Cerberus is structured as a $210.5 million Delayed Draw Term Loan to be made in four installments. On June 21, 2024 the first installment of $75.0 million was funded. Additional amounts totaling $135.5 million will be made available to the Company, subject to the achievement of certain milestones. As part of the strategic investment, a $105.0 Revolving Facility will be made available to the Company at the Lenders’ sole discretion and only if the Delayed Draw Term Loan is fully funded. The Company utilized a portion of the proceeds to retire its existing $100.0 million Senior Secured Term Loan on favorable terms, strengthening the Company’s balance sheet. See Note 3, Credit and Securities Purchase Transaction.
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Capital Expenditures
The Company expects capital expenditures and working capital requirements to increase as it executes its growth strategy. Total capital expenditures for the six months ended June 30, 2024 and June 30, 2023 were $10.3 million and $10.1 million, respectively. See Note 7, Property, Plant and Equipment for further discussion.
Discussion and Analysis of Cash Flows
The Company relies heavily on private placement of convertible notes, term loans, equipment financing and issuance of common stock and warrants. Our short-term working capital needs are primarily related to funding of debt interest payments, repayment of debt principal, product manufacturing, research and development and general corporate expenses. The Company’s long-term working capital needs are primarily related to repayment of long-term debt obligations and capital expenses for capacity expansion and maintenance, equipment upgrades and repair of equipment.
The following table summarizes the Company’s cash flows from operating, investing and financing activities for the periods presented.
| Six Months Ended June 30, | ||||||||||||||||||||
| ($ in thousands) | 2024 | 2023 | $ Change | |||||||||||||||||
| Net cash used in operating activities | $ | (66,807) | $ | (75,582) | $ | 8,775 | ||||||||||||||
| Net cash used in investing activities | $ | (10,299) | $ | (10,100) | $ | (199) | ||||||||||||||
| Net cash provided by financing activities | $ | 50,024 | $ | 92,612 | $ | (42,588) | ||||||||||||||
Cash flows from operating activities:
Cash flows used in operating activities primarily comprise of costs related to research and development, manufacturing of products, project commissioning and other general and administrative activities.
Net cash used in operating activities of $66.8 million for the six months ended June 30, 2024 was primarily driven by a net loss of $74.9 million, adjusted for non-cash items of $9.7 million, primarily related to stock compensation expense, depreciation and amortization, non-cash interest expense, gain on debt extinguishment, changes in fair value of debt, warrants and derivatives. The net cash outflows from changes in operating assets and liabilities was $1.6 million, primarily driven by an increase in contract assets of $4.6 million, decrease in accrued expenses of $2.0 million, increase in accounts receivable of $1.2 million, partially offset by increase in contract liabilities of $2.6 million and decrease in grant receivable of $1.8 million.
Net cash used in operating activities was $75.6 million for the six months ended June 30, 2023, primarily driven by a net loss of $203.2 million, adjusted for non-cash items of $140.3 million, primarily related to stock 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 was $12.7 million, primarily driven by an increase in accounts payable and accrued expenses of $11.0 million, increase in vendor deposits of $5.4 million, and decrease in contract liabilities of $1.5 million, partially offset by decrease in inventory of $6.6 million.
Cash flows from investing activities:
Net cash flows used in investing activities for the six months ended June 30, 2024 were mainly composed of payments made for purchases of property, plant and equipment of $10.3 million.
Net cash flows used in investing activities for the six months ended June 30, 2023 were composed of payments made for purchases of property, plant and equipment of $10.1 million.
Cash flows from financing activities:
Net cash provided by financing activities was $50.0 million for the six months ended June 30, 2024, primarily due to the proceeds received from the Credit and Securities Purchase Transaction of $70.1 million and from the issuance of common stock of $14.1 million. The proceeds were partially offset by payoff of the Senior Secured Term Loan of $19.9 million, debt issuance costs - related party of $12.2 million, payments on the equipment financing facility of $1.6 million and share repurchases from employees for tax withholding of $0.4 million.
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Net cash provided by financing activities was $92.6 million for the six months ended June 30, 2023, primarily due to the net proceeds received from the Yorkville Convertible Promissory Notes and AFG Convertible Notes of $48.1 million and from the issuance of common stock and warrants of $49.3 million. The proceeds were partially offset by equity issuance costs of $2.1 million, debt issuance costs related to the Yorkville Convertible Promissory Notes and AFG Convertible Notes of $1.1 million, payments on the equipment financing facility of $1.4 million and share repurchases from employees for tax withholding of $0.5 million.
Contractual Obligations
The Company has certain obligations and commitments to make future payments under contracts. As of June 30, 2024, this is composed of the following:
•Future lease payments, including interest, under non-cancellable operating and financing leases of $5.0 million. The leases expire at various dates prior to 2028.
•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, $3.0 million and (ii) on June 30, 2025, subject to the absence of certain events of default under the Credit Agreement, $4.0 million.
•Principal and Interest payments related to the following debt obligations (see Note 13, Borrowings to our Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report):
| Future Debt Payments | |||||
Delayed Draw Term Loan - due June 2029 (1) | $ | 161,466 | |||
2021 Convertible Note Payable - due June 2026 (1) | 134,261 | ||||
AFG Convertible Notes - due June 2026 (1) | 32,468 | ||||
Equipment financing facility - due April 2025 and April 2026 | 4,587 | ||||
| Total | $ | 332,782 | |||
(1) As of June 30, 2024, the Company is obligated to repay future contractual interest payments for the 2021 Convertible Note and AFG Convertible Notes in-kind. The Company also has the option to repay the Delayed Draw Term Loan in-kind.
Critical Accounting Estimates (“CAE”)
The Company’s Unaudited Condensed Consolidated Financial Statements are prepared in conformity with U.S. generally accepted accounting principles (U.S. GAAP). In preparing the Company’s Unaudited Condensed Consolidated Financial Statements, management makes assumptions, judgments and estimates on historical experience and various other factors that management believes to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. Management regularly reevaluates assumptions, judgments and estimates. The Company’s significant accounting policies are described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
These should also be read with the CAE in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
Warrants Liability
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. The sensitivity of the fair value calculation to volatility could create materially different results under different conditions or using different assumptions. See Note 15, Fair Value Measurement to our unaudited consolidated financial statements.
Convertible Notes and 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. The sensitivity of the fair value calculation to debt yield and volatility could create materially different results under different conditions or using different assumptions. See Note 15, Fair Value Measurement to our unaudited consolidated financial statements.
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The following is a new CAE as of June 30, 2024
New Instruments fair valued (see Note 15, Fair Value Measurement)
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. The fair value for the SPA Warrant is estimated based on its intrinsic value, using the Eos common stock closing price adjusted by a discounted 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 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 value 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 15, 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in the Company’s market risk exposures for the six months ended June 30, 2024, as compared to those discussed in its Annual Report on Form 10-K for the year ended December 31, 2023.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company’s management, under the supervision of the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO), evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation and consistent with the evaluations previously reported in prior periods, the CEO and CFO have concluded that the Company’s disclosure controls and procedures were not effective as of June 30, 2024 because of material weaknesses resulting from lack of a formalized internal control framework in accordance with the Committee of Sponsoring Organizations (COSO) Framework, inadequate segregation of duties in the financial reporting process, lack of review and approval of journal entries and a lack of management review controls.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in the Company’s reports filed under the Exchange Act is accumulated and communicated to management, including its CEO and its CFO, to allow timely decisions regarding required disclosure.
In light of these material weaknesses, management performed additional analyses, reconciliations and other post-closing procedures to determine that the Company’s Unaudited Condensed Consolidated Financial Statements are prepared in accordance with U.S. GAAP. Based on this review, management concluded that the Unaudited Condensed Consolidated Financial Statements included in this report fairly present in all material respects the Company’s financial condition, results of operations and cash flows for the periods presented.
Management’s Remediation Plan
In response to the material weaknesses, management, with oversight from the Audit Committee has identified and begun to implement steps to remediate the material weaknesses. These remediation efforts are detailed in Item 9A,“Controls and Procedures” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
Changes in Internal Control Over Financial Reporting
Other than the actions taken as described in Management's Remediation Plan above to improve the Company’s internal control over financial reporting, there have been no changes in our internal control over financial reporting during the quarter ended June 30, 2024 that materially affected, or which are reasonably likely to materially affect, our internal control over financial reporting.
Part II - Other information
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Item 1. Legal Proceedings
From time to time, the Company may be involved in litigation relating to claims arising out of the Company’s operations. While the outcomes of these types of claims are uncertain, management does not expect that the ultimate costs to resolve these matters will have a material adverse effect on our consolidated financial position, results of operations or cash flows.
The following is also disclosed in Note 16, Commitments and Contingencies to our Unaudited Condensed Consolidated Financial Statements:
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 $8.5 million, 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 $1.0 million 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.
Item 1A. Risk Factors
As of the date of this Quarterly Report on Form 10-Q, there have been no additional material changes to the risk factors disclosed in our annual report on Form 10-K for the fiscal year ended December 31, 2023, except as discussed below. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.
If we fail to meet the covenants in Credit Agreement, we may be subject to default on the loan, which could have a material adverse effect on our business.
The Credit Agreement contains 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 Credit Agreement is 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 $2.5 million, (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.
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While the Company was in compliance with the above covenants as of July 31, 2024, the Company may be unable to remain in compliance and cure any noncompliance with these covenants in the future, in which case the Lenders may no longer be required to continue funding under the Credit Agreement. There can be no assurance that the Company will be able to secure funding under the Credit Agreement or outside sources of capital in the event it fails to meet a funding milestone. In the event the Company is unable to remain in compliance with the covenants under the 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. 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. Any such default on the Credit Agreement could have a material adverse effect on our business.
Under the terms of the Credit Agreement, current stockholders may be subject to significant dilution, and the voting power of the currently outstanding Common Stock could be significantly diluted.
As of June 30, 2024 there were 216,491,215 shares of Common Stock issued and outstanding and an aggregate of 131,071,870 shares of Common Stock issuable upon the conversion or exercise of outstanding convertible securities, including 43,276,194 shares of Common Stock underlying the SPA Warrant. Although the SPA Warrant is not exercisable for more than 19.99% of the Company’s outstanding shares as of June 21, 2024, upon receipt of stockholder approval in accordance with Nasdaq rules, the SPA Warrant would no longer be subject to such limitation, and the Preferred Stock, SPA Warrant and Contingent Warrants (the SPA Warrant and any Contingent Warrants, collectively the “Warrants”) issued or issuable under the Delayed Draw Term Loan would become exercisable or convertible into a significant portion of the outstanding shares of Common Stock.
If the Purchaser funds all draws under the Delayed Draw Term Loan and the Company meets each of the milestones under the Delayed Draw Term Loan, the Purchaser will be entitled to receive Preferred Stock and/or Contingent Warrants (depending on whether stockholder approval has been received) that, when aggregated with the SPA Warrant and Series A Preferred Stock, equal 33.0% of the issued and outstanding Common Stock on a fully diluted basis. Assuming the Company issues no other securities after July 31, 2024, such Preferred Stock and Warrants would aggregate to an equivalent of 152,505,718 shares of Common Stock. If the Purchaser funds all draws under the Delayed Draw Term Loan and the Company fails to meet all of the milestones under the Delayed Draw Term Loan, the Purchaser would be entitled to receive Preferred Stock and/or Contingent Warrants (depending on whether stockholder approval has been received) that, when aggregated with the SPA Warrant and Series A Preferred Stock, equal 49.0% of the issued and outstanding Common Stock on a fully diluted basis, assuming the Warrants and Series A Preferred stock were fully convertible into Common Stock. Assuming the Company issues no other securities after July 31, 2024, such Preferred Stock and Warrants would aggregate to an equivalent of 297,490,357 shares of Common Stock.
In addition, if the Company were to issue additional shares of Common Stock or securities convertible or exercisable into Common Stock or trigger anti-dilution protection under the Preferred Stock and Warrants, the Preferred Stock and Warrants may become convertible or exercisable into additional shares of Common Stock. The issuance, pursuant to the terms of the Warrants and the Series B Preferred Stock, of Common Stock will dilute the percentage ownership interest of all stockholders, could dilute the book value per share of the Common Stock and will increase the number of the Company’s outstanding shares, and upon conversion or exercise would dilute the voting power of the Common Stock, which could cause the market price of our Common Stock to decrease. Depressed trading prices of our Common Stock could further impair our ability to raise sufficient capital to carry on our business.
The Company may need to seek alternative sources of capital, or risk its ability to continue operations, in the event it fails to meet a milestone under the terms of the Credit Agreement and the SPA.
Pursuant to the terms of the Credit Agreement and the SPA, the Purchaser is not required to provide funding under the Delayed Draw Term Loan in the event that the Company does not meet the necessary performance and funding milestones stipulated in the Credit Agreement. In the event the Company does not meet these milestones and the Purchaser 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. If the Purchaser does not continue funding, and the Company’s efforts to raise additional outside capital prove unsuccessful, management would 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.
A substantial number of shares of the Company’s Common Stock that are issuable upon the exercise or conversion of securities issuable under the Delayed Draw Term Loan and the SPA are subject to a contractual lockup.
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Under the terms of the Delayed Draw Term Loan and the SPA, the holders of our securities issuable thereunder are subject to a contractual lockup that expires on June 21, 2025. The securities issuable under the Delayed Draw Term Loan and the SPA represent a substantial portion of our outstanding shares of Common Stock and, subject to stockholder approval and beneficial ownership limitations, have the potential to represent an even larger portion of our outstanding shares of common Stock, and we are obligated to register the resale of these shares of Common Stock by the holders.
Upon the effectiveness of the resale registration statement or otherwise in accordance with Rule 144 under the Securities Act and after expiration or waiver of the lock-up, the holders may sell our Common Stock in the open market or in privately negotiated transactions, which could have the effect of increasing the volatility in the trading price of our Common Stock or putting significant downward pressure on the price of our Common Stock.
The resale, or expected or potential resale, of a substantial number of shares of our Common Stock in the public market could adversely affect the market price for our Common Stock and make it more difficult for you to sell your Common Stock at times and prices that you feel are appropriate. Furthermore, because there will be a large number of shares registered pursuant to the registration statement, selling holders could continue to offer the securities covered by the registration statement for a significant period of time, the precise duration of which cannot be predicted. Accordingly, the adverse market and price pressures resulting from an offering pursuant to a registration statement may continue for an extended period of time.
Further, sales of our Common Stock upon expected expiration of resale restrictions could encourage short sales by market participants. Generally, short selling means selling a security, contract or commodity not owned by the seller. The seller is committed to eventually purchase the financial instrument previously sold. Short sales are used to capitalize on an expected decline in the security’s price. As such, short sales of our Common Stock could have a tendency to depress the price of our Common Stock, which could further increase the potential for short sales.
We cannot predict the size of future issuances or sales of our Common Stock or the effect, if any, that future issuances and sales of our Common Stock will have on the market price of our Common Stock. Sales of substantial amounts of our Common Stock, including issuances made in the ordinary course of the Company’s business, or the perception that such sales could occur, may materially and adversely affect prevailing market prices of our Common Stock.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures
None
Item 5. Other Information
None
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(a) Exhibits
| Incorporated by Reference | ||||||||||||||||||||||||||||||||
| Exhibit Number | Description of Document | Schedule/Form | File Number | Exhibits | Filing Date | |||||||||||||||||||||||||||
| 3.1 | Form 10-K | File No. 001-39291 | 3.1 | February 28, 2023 | ||||||||||||||||||||||||||||
| 3.2 | Form 10-Q | File No. 001-39291 | 3.2 | May 14, 2024 | ||||||||||||||||||||||||||||
| 3.3 | Form 8-K | File No. 001-39291 | 3.1 | May 19, 2022 | ||||||||||||||||||||||||||||
| 3.4 | Form 8-K | File No. 001-39291 | 3.1 | June 24, 2024 | ||||||||||||||||||||||||||||
| 10.1 | Form 8-K | File No. 001-39291 | 10.10 | November 20, 2020 | ||||||||||||||||||||||||||||
| 10.2 | Form S-8 | File No. 333-265708 | 99.2 | June 17, 2022 | ||||||||||||||||||||||||||||
| 10.3 | Form S-8 | File No. 333-272848 | 99.3 | June 23, 2023 | ||||||||||||||||||||||||||||
| 10.4 | Form 10-Q | File No. 001-39291 | 10.6 | May 14, 2024 | ||||||||||||||||||||||||||||
10.5† | Form 8-K | File No. 001-39291 | 10.1 | June 24, 2024 | ||||||||||||||||||||||||||||
| 10.6 | Form 8-K | File No. 001-39291 | 10.2 | June 24, 2024 | ||||||||||||||||||||||||||||
| 10.7 | Form 8-K | File No. 001-39291 | 10.3 | June 24, 2024 | ||||||||||||||||||||||||||||
| 10.8 | Form 8-K | File No. 001-39291 | 10.4 | June 24, 2024 | ||||||||||||||||||||||||||||
| 10.9 | Form 8-K | File No. 001-39291 | 10.5 | June 24, 2024 | ||||||||||||||||||||||||||||
| 10.10 | Form 8-K | File No. 001-39291 | 10.6 | June 24, 2024 | ||||||||||||||||||||||||||||
| 10.11 | Form 8-K | File No. 001-39291 | 10.1 | July 30, 2024 | ||||||||||||||||||||||||||||
10.12* | ||||||||||||||||||||||||||||||||
50
| Incorporated by Reference | ||||||||||||||||||||||||||||||||
| Exhibit Number | Description of Document | Schedule/Form | File Number | Exhibits | Filing Date | |||||||||||||||||||||||||||
10.13* | ||||||||||||||||||||||||||||||||
10.14* | ||||||||||||||||||||||||||||||||
10.15* | ||||||||||||||||||||||||||||||||
10.16* | ||||||||||||||||||||||||||||||||
10.17* | ||||||||||||||||||||||||||||||||
| 31.1* | ||||||||||||||||||||||||||||||||
| 31.2* | ||||||||||||||||||||||||||||||||
| 32* | ||||||||||||||||||||||||||||||||
| 101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |||||||||||||||||||||||||||||||
| 101.SCH | XBRL Taxonomy Extension Schema Document | |||||||||||||||||||||||||||||||
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |||||||||||||||||||||||||||||||
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |||||||||||||||||||||||||||||||
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |||||||||||||||||||||||||||||||
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |||||||||||||||||||||||||||||||
| 104 | Cover page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |||||||||||||||||||||||||||||||
____________________________
†Portions of this exhibit have been omitted pursuant to Item 601(b)(10) of Regulation S-K because they are both (i) not material and (ii) contain the type of information that the Company customarily and actually treats as private and confidential. Certain exhibits and
51
schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Registrant hereby undertakes to furnish supplementally a copy of any omitted exhibit or schedule upon request by the Securities and Exchange Commission.
*Filed herewith.
52
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| EOS ENERGY ENTERPRISES, INC. | ||||||||
Date: August 6, 2024 | By: | /s/ Joseph Mastrangelo | ||||||
| Name: | Joseph Mastrangelo | |||||||
| Title: | Chief Executive Officer and Director (Principal Executive Officer) | |||||||
Date: August 6, 2024 | By: | /s/ Nathan Kroeker | ||||||
| Name: | Nathan Kroeker | |||||||
| Title: | Chief Financial Officer (Principal Financial Officer) | |||||||
53
Page 1 EOS ENERGY ENTERPRISES, INC. Restricted Stock Unit Award Agreement (Time-Based) This Restricted Stock Unit Award Agreement (Time-Based) (this “Agreement”), dated as of [________] [___], 20[___], is entered into by and between Eos Energy Enterprises, Inc., a Delaware corporation (the “Company”), and the Participant whose name appears on the signature page to this Agreement (the “Participant”). The Company and the Participant are referred to in this Agreement individually as a “Party,” or collectively as the “Parties.” Background A. The Board of Directors of the Company (the “Board”) has adopted the Eos Energy Enterprises, Inc. Amended and Restated 2020 Incentive Plan (as amended, supplemented, restated, replaced, or otherwise modified from time to time, the “Plan”). Capitalized terms used but not defined in this Agreement shall have the meanings given to such terms in, or by reference in, the Plan. B. In order to encourage and motivate Eligible Persons, the Board desires to provide such individuals with an ownership interest in the Company in accordance with the Plan. C. The Committee has approved an award to the Participant of time-based restricted stock units (each individually, the “RSU”, and collectively, the “RSUs”) of the Company, pursuant to which each RSU represents the right to receive one share of common stock, par value $0.10 per share, of the Company (“Common Stock”) or such other consideration permitted by Section 5, under the terms and conditions set forth in this Agreement and the Plan (collectively, the “Award”). D. Each Party desires to enter into this Agreement to evidence and confirm the Award. Terms and Conditions NOW THEREFORE, for good and valuable consideration and mutual covenants set forth in this Agreement, and intending to be legally bound, each Party hereby agrees to the following: 1. Award: Subject to the terms and conditions set forth below, the Company hereby evidences and confirms the Award to the Participant, effective as of the grant date set forth on the signature page to this Agreement (the “Grant Date”), consisting of the aggregate number of RSUs set forth on the signature page to this Agreement. 2. Vesting: Except as set forth in Section 6 and 7 and subject to the continuous engagement or employment of the Participant by the Company or any of its Affiliates through and including each the applicable vesting date, the following portions of the RSUs shall vest on the corresponding vesting date (each individually, a “Vesting Date”) set forth in the table below: RSUs to Vest1 Vesting Date 1/3 increment of the total Award [The first anniversary of the Grant Date][August 1, [__]] 1/3 increment of the total Award [The second anniversary of the Grant Date] [August 1, [__]] 1/3 increment of the total Award [The third anniversary of the Grant Date] [August 1, [__]] 1 The Company may round up or down in the event a fractional share would otherwise be issuable on any Vesting Date pursuant to the schedule noted in this table.
Restricted Stock Unit Award Agreement (Time-Based) [________] [___], 20[___] _____________________________________________________________________________________________ Page 2 3. Transferability: Except as expressly permitted under Section 15(b) of the Plan, the RSUs may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. 4. No Rights as a Stockholder: The Participant shall have no voting or other rights as a stockholder of the Company with respect to any RSUs (or portion thereof) until the RSUs (or portion thereof) have been settled and issued in accordance with the terms and conditions of this Agreement and the Plan. 5. Settlement and Issuance of Stock: (a) No shares of Common Stock or such other consideration shall be issued to the Participant prior to the Vesting Date for such applicable RSUs vest and the restrictions with respect to such RSUs are removed or otherwise expire in accordance with the terms of this Agreement and the Plan. (b) To the extent the RSUs (or portion thereof) shall have become vested in accordance with this Agreement and the Plan, the Company shall deliver to the Participant, as soon as reasonably practicable after the applicable Vesting Date (but no later than March 15th of the following calendar year), one share of Common Stock for each such RSU registered in the Participant’s name, or such other consideration permitted under Section 9(f)(ii) of the Plan. Upon the delivery of shares of Common Stock to the Participant, such shares shall be fully assignable, alienable, saleable and transferrable by the Participant; provided that any such assignment, alienation, sale, transfer or other alienation with respect to such shares of Common Stock shall be in accordance with applicable securities laws and any applicable Company policy. (c) The Company shall evidence any Common Stock to be issued under this Section 5 in payment of such vested RSUs in the manner it deems appropriate. 6. Clawback and Recoupment: By accepting, or being deemed to have accepted, the RSUs, the Participant expressly agrees that the Participant and the Award is bound by the terms of any written clawback or recoupment policies that the Company, with the approval of the Board or an authorized Committee of the Board, may adopt either prior to or following the Grant Date, including the Eos Energy Enterprises, Inc. Clawback Policy (as may be amended, supplemented, restated, replaced or otherwise modified from time to time), and including any policy adopted by Company to conform to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and rules promulgated thereunder by the SEC and that the Company determines should apply to the Award. Any such policy may subject the Participant’s Award and amounts paid or realized with respect to the Award to reduction, cancellation, forfeiture, or recoupment if certain specified events or wrongful conduct occur as specified in any such clawback policy. Nothing in the preceding sentence will be construed as limiting the general application of Section 8(a) of this Agreement. 7. Effects of Certain Events Prior to Vesting: (a) Termination Due to Death or Disability: In the event the Participant’s service relationship with the Company or any of its Affiliates is terminated due to the Participant’s death or Disability, any RSUs that are not vested as of the date of such termination of service will vest in full as of the date of such termination of service. For purposes of this Agreement, “Disability” shall mean the inability of the Participant to perform the Participant’s material duties of employment after reasonable accommodation due to a physical or mental injury, infirmity, or incapacity for one hundred eighty (180) days (including weekends and holidays) in any three hundred sixty-five (365) day period as determined by the Committee in its reasonable discretion. (b) Involuntary Termination without Cause and Qualifying Retirement: In the event the Participant’s service relationship with the Company or any of its Affiliates is terminated: (i) by the
Restricted Stock Unit Award Agreement (Time-Based) [________] [___], 20[___] _____________________________________________________________________________________________ Page 3 Company without Cause or (ii) as a result of the Participant’s Qualifying Retirement, a prorated number of the RSUs will vest as of the date of such termination of service based on the number of full months of service through the date of termination (taking into account any vesting previously achieved); provided that, the Participant has, no later than fifty-five (55) days following the date of his or her termination of service, executed and not revoked a release of claims in a form provided by the Company. For purposes of this Agreement, “Qualifying Retirement” means the Participant’s termination of service (other than a termination by the Company for Cause or at a time by Cause exists) at a time when the Participant has attained age 60 and the Participant’s length of employment with the Company and any of its Affiliates is at least 10 completed years. (c) Change in Control: In the event the Participant’s service relationship with the Company or any of its Affiliates (or, as applicable, the successor or the surviving entity (or its parent)) is terminated without Cause, on or within 12 months following a Change in Control, the RSUs will become immediately vested as of the date of such termination of service; provided that the Participant has, no later than fifty-five (55) days following the date of his or her termination of service, executed and not revoked a release of claims in a form provided by the Company (or, as applicable, the successor or the surviving entity (or its parent)). Notwithstanding the foregoing, if the outstanding RSUs are not assumed or substituted for by the acquiror in connection with the Change in Control, the unvested RSUs will immediately vest upon the closing of the Change in Control. (d) Other Terminations: In the event the Participant’s service relationship with the Company or any of its Affiliates is terminated for any reason other than as set forth in Section 3(a) through (c), the RSUs (or portion thereof) that are not vested as of the Participant’s termination of services shall be immediately forfeited and cancelled on the date of such termination of service. (e) Effect of Employment Agreement: Notwithstanding any provision in this Agreement to the contrary, in the event of an inconsistency regarding the treatment of RSUs upon a termination of Participant’s service relationship between this Agreement, on the one hand, and any formal employment agreement (excluding, for the avoidance of doubt, any offer letter) entered into by and between the Participant and the Company or any of its Affiliates, whether entered into before or after the date of this Agreement, on the other hand, the terms of the employment agreement shall control unless this Agreement provides more favorable treatment. 8. Responsibility for Taxes: (a) The Participant acknowledges that, regardless of any action taken by the Company, the ultimate liability for all income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items related to the Participant’s participation in the Plan and legally applicable to the Participant (“Tax-Related Items”) is and remains the Participant’s responsibility and may exceed the amount actually withheld by the Company. The Participant further acknowledges that the Company (i) makes no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the RSUs, including, but not limited to, the grant, vesting or settlement of the RSUs, the subsequent sale of shares of Common Stock (if any) acquired upon settlement of the RSUs and the receipt of any dividends, dividend equivalents; and (ii) does not commit to and is under no obligation to structure the terms of the grant or any aspect of the RSUs to reduce or eliminate the Participant’s liability for Tax- Related Items or achieve any particular tax result. Further, if the Participant is subject to Tax-Related Items in more than one jurisdiction, the Participant acknowledges that the Company may be required to withhold or account for Tax-Related Items in more than one jurisdiction. (b) Upon the vesting and/or settlement of the RSUs (or as of the date of any relevant taxable or tax withholding date or other date on which the value of any RSUs otherwise become includible in the Participant’s gross income for tax purposes), the Participant shall be required to pay to the Company, and the Company shall have the right to deduct from any compensation payable to the Participant, the
Restricted Stock Unit Award Agreement (Time-Based) [________] [___], 20[___] _____________________________________________________________________________________________ Page 4 amount of any applicable federal, state, local and foreign Tax-Related Items that the Company determines must be withheld with respect to the RSUs (the “Tax Withholding Obligations”). In this regard, unless otherwise determined by the Committee, the Tax Withholding Obligations shall be satisfied by the Company withholding, in accordance with Section 15(c) of the Plan, from the number of shares of Common Stock otherwise issuable upon settlement of the RSUs, a portion of such shares having an aggregate Fair Market Value equal to the amount of the applicable Tax Withholding Obligations. Notwithstanding the foregoing, the Participant agrees and authorizes the Company, or its respective agents, to satisfy any applicable Tax Withholding Obligations in respect of the RSUs by any of the following means, as may be determined by the Committee (or its delegate) in its discretion from time to time: (i) withholding from the Participant’s wages or other cash compensation paid to the Participant by the Company; (ii) requiring the Participant to remit the aggregate amount of such Tax Withholding Obligations to the Company in full, in cash or by check, bank draft or money order payable to the order of the Company; (iii) through a procedure whereby the Participant delivers irrevocable instructions to a broker designated by the Committee to sell shares of Common Stock obtained upon settlement of the RSUs and to deliver promptly to the Company an amount of the proceeds of such sale equal to the amount of the Tax-Related Items (“sell-to-cover”); (iv) by a “net settlement” procedure under which the Company reduces the number of shares of Common Stock (or such other consideration) issued on settlement of the RSUs by the number of shares of Common Stock (or such other consideration) with an aggregate fair market value that equals the amount of the Tax Withholding Obligations; or (v) any other method of withholding determined by the Committee and permitted by applicable law. (c) The Participant agrees to pay to the Company any amount of Tax-Related Items that the Company may be required to withhold or account for as a result of the Participant’s participation in the Plan that cannot be satisfied by the means described in Section 7(b). The Company may refuse to issue or deliver the shares of Common Stock or other consideration issuable upon settlement, or the proceeds of the sale of any such shares, if the Participant fails to comply with the Participant’s obligations in connection with the Tax-Related Items. 9. Plan Provisions: The RSUs granted under this Agreement are being issued pursuant to and in accordance with the Plan (a copy of which has been made available to the Participant) and, as such, are subject in all respects to the Plan which shall be deemed incorporated into and made part of this Agreement. This Agreement is subject to all the terms, conditions, limitations, and restrictions contained in the Plan, including any amendment, supplement, restatement, replacement, or other modification thereto from time to time, and to such rules, regulations, and interpretations relating to the Plan as may be adopted by the Committee and as may be in effect from time to time. To the extent that any provision of this Agreement conflicts with the expressly applicable terms of the Plan, the Participant acknowledges and agrees that those terms of the Plan shall control and, if necessary, the applicable terms of this Agreement shall be deemed amended so as to carry out the purpose and intent of the Plan. 10. No Entitlements: The grant of the RSUs shall not be construed as giving the Participant the right to be retained in the employ of, or to continue to provide services to, the Company or any of its Affiliates. Any Award granted under the Plan shall be a one-time Award that does not constitute a promise of future grants. The Company, in its sole discretion, maintains the right to make available future grants under the Plan. The RSUs do not confer on the Participant any right or entitlement to receive compensation in any specific amount or to create a trust or a funded or secured obligation of any kind. In addition, the RSUs are not part of the Participant’s base salary or wages and will not be taken into account in determining any other employment-related rights the Participant may have, such as rights to pension, retirement, or severance pay. 11. Imposition of other Requirements and the Participant Undertaking: The Company reserves the right to impose other requirements on the Participant’s participation in the Plan, on the RSUs and on any shares of Common Stock or such other consideration to be issued upon settlement of the RSUs, to the extent the Company determines it is necessary or advisable for legal or administrative reasons. The
Restricted Stock Unit Award Agreement (Time-Based) [________] [___], 20[___] _____________________________________________________________________________________________ Page 5 Participant agrees to take whatever additional action and execute whatever additional documents the Company may deem necessary or advisable to accomplish the foregoing or to carry out or give effect to any of the obligations or restrictions imposed on either the Participant or the RSUs pursuant to this Agreement. 12. References: Unless otherwise expressly noted, all references to: (a) “Section” shall mean, with respect to such reference, each such section or subsection of this Agreement unless otherwise noted, and (b) “Attachment” shall mean, with respect to any such reference, each such schedule or exhibit attached to this Agreement. The headings of any section or paragraph of this Agreement are for convenience of reference only and shall not be used to interpret any provision of this Agreement. References herein to rights and obligations of the Participant shall apply, where appropriate, to the Participant’s legal representative or estate without regard to whether specific reference to such legal representative or estate is contained in a particular provision of this Agreement. 13. Non-Waiver: No failure or delay by the Company in exercising any right, power or privilege under this Agreement shall constitute a waiver of such right, power or privilege, nor shall any single or partial exercise by the Company of such right, power or privilege preclude any other or further exercise of such right, power or privilege or the exercise of any right, power, or privilege under this Agreement. 14. Assignment: Any assignment by the Participant of this Agreement or any right, remedy, obligation, or liability arising under this Agreement, without the prior written consent of the Company shall not be permitted. 15. Successors and Assigns and No Third-Party Beneficiaries: This Agreement shall be binding upon and inure to the benefit of the Parties and their respective heirs, successors, legal representatives and permitted assigns. Nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the Parties, and their respective heirs, successors, legal representatives and permitted assigns, any legal or equitable rights, remedies, obligations, or liabilities under or by reason of this Agreement. 16. Severability: The provisions of this Agreement are to be deemed severable and the invalidity, illegality, or unenforceability of one or more of such provisions shall not affect the validity, legality, or enforceability of the remaining provisions. If any provision of this Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction, or would disqualify the Plan or this Agreement under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the intent of this Agreement, such provision shall be stricken as to such jurisdiction, and the remainder of this Agreement shall remain in full force and effect. 17. Governing Law: This Agreement shall be governed by, and construed and enforced under, the laws of the State of Delaware, U.S.A., without regard to its otherwise applicable conflicts of laws rules. The obligation of the Company to sell and deliver Common Stock under this Agreement is subject to applicable laws and to the approval of any governmental authority required in connection with the authorization, issuance, sale, or delivery of such Common Stock. 18. Dispute Resolution: All controversies and claims arising out of or relating to this Agreement, or the breach hereof, shall be settled by the Company’s mandatory dispute resolution procedures, if any, as may be in effect from time to time with respect to matters arising out of or relating to the Participant’s employment with the Company. 19. Remedies: The Parties shall be entitled to recover from each other reasonable attorneys’ fees incurred in connection with the successful enforcement of the terms and provisions of this Agreement whether by an action to enforce specific performance or for damages for its breach or otherwise.
Restricted Stock Unit Award Agreement (Time-Based) [________] [___], 20[___] _____________________________________________________________________________________________ Page 6 20. Entire Agreement: This Agreement, the Plan, and any other agreements, attachments, schedules, exhibits and/or other documents referred to in this Agreement or therein constitutes the entire agreement and understanding of the Parties, and supersedes any prior or contemporaneous written or oral agreements between the Parties, regarding the subject matter contained in this Agreement. 21. Amendment: No amendment or modification of any provision of this Agreement that has a material adverse effect on the Participant shall be effective unless signed in writing by or on behalf of the Company and the Participant; provided that this Agreement may be amended, supplemented, restated, replaced or otherwise modified from time to time, solely the Board or by the Committee at any time without the Participant’s consent (a) in accordance with the provisions of the Plan or as otherwise set forth in this Agreement, (b) if the Board or the Committee determines, in its sole discretion, that amendment is necessary or advisable in light of any addition to or change in any federal or state, tax or securities law or other law or regulation, which change occurs after the Grant Date and by its terms applies to the Award; or (c) other than in the circumstances described in clauses (a) or (b), with the Participant’s consent. 22. Execution by Counterparts and Portable Document Format: This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Signatures of any Party exchanged or delivered by an electronic signature program (such as DocuSign or through the Company’s third-party plan manager), an email transmission in portable document format (also known as a “pdf.” file), or facsimile shall be deemed delivery of an original executed counterpart for all purposes and shall be binding on all parties. 23. Deemed Acceptance: If the Participant does not execute, deliver or otherwise provide: (a) a signature on the signature page to this Agreement, (b) the electronic equivalent of consent, or (c) written notice to the Company of the Participant’s rejection of the RSUs by the first date on which the RSUs are scheduled to vest and are thereby settled and released into the Participant’s account, the RSUs shall be deemed accepted by the Participant as of the first date on which the RSUs vest and the Participant and the RSUs shall subject to all of the terms and conditions of this Agreement and the Plan. [SIGNATURE PAGE TO FOLLOW]
[SIGNATURE PAGE FOR RESTRICTED STOCK UNIT AWARD AGREEMENT] IN WITNESS WHEREOF, the Parties have signed this Restricted Stock Unit Award Agreement (Time-Based) as of the Grant Date. Eos Energy Enterprises, Inc. By: ______________________ Joe Mastrangelo Chief Executive Officer and President Participant’s Signature _________________________ [Participant’s Signature to be obtained via the UBS system] Participant’s Name: [First Name Last Name] Participant’s Address: [Address] Number of RSUs Granted: [Shares Granted] Grant Date: [Grant Date]
Page 1 EOS ENERGY ENTERPRISES, INC. Restricted Stock Unit Award Agreement (Performance-Based) This Restricted Stock Unit Award Agreement (Performance-Based) (this “Agreement”), dated as of [________] [___], 20[___], is entered into by and between Eos Energy Enterprises, Inc., a Delaware corporation (the “Company”), and the Participant whose name appears on the signature page to this Agreement (the “Participant”). The Company and the Participant are referred to in this Agreement individually as a “Party,” or collectively as the “Parties.” Background A. The Board of Directors of the Company (the “Board”) has adopted the Eos Energy Enterprises, Inc. Amended and Restated 2020 Incentive Plan (as amended, supplemented, restated, replaced, or otherwise modified from time to time, the “Plan”). Capitalized terms used but not defined in this Agreement shall have the meanings given to such terms in, or by reference in, the Plan. B. In order to encourage and motivate Eligible Persons, the Board desires to provide such individuals with an ownership interest in the Company in accordance with the Plan. C. The Committee has approved an award to the Participant of performance-based restricted stock units (each individually, the “PRSU”, and collectively, the “PRSUs”) of the Company, pursuant to which each PRSU represents the right to receive one share of common stock, par value $0.10 per share, of the Company (“Common Stock”) or such other consideration as permitted under Section 5, under the terms and conditions set forth in this Agreement and the Plan (collectively, the “Award”). D. Each Party desires to enter into this Agreement to evidence and confirm the Award. Terms and Conditions NOW THEREFORE, for good and valuable consideration and mutual covenants set forth in this Agreement, and intending to be legally bound, each Party hereby agrees to the following: 1. Award: Subject to the terms and conditions set forth below, the Company hereby evidences and confirms the Award to the Participant, effective as of the grant date set forth on the signature page to this Agreement (the “Grant Date”), consisting of the target aggregate number of PRSUs set forth on the signature page to this Agreement. 2. Vesting: Except as set forth in Section 6 and 7 and subject to the continuous engagement or employment of the Participant by the Company or any of its Affiliates through and including each the applicable vesting date, the PRSUs shall vest on the date the Committee certifies the Company’s achievement of the Performance Metric, but in no event later than ninety (90) days following the end of the Performance Period; provided that the actual number of PRSUs vesting (such number of PRSUs to be within a range of 0% to 200% of the target number of PRSUs granted) shall be determined based on the achievement of the Performance Metric. The performance metric and the performance period applicable to the PRSUs are set forth on the signature page hereof (respectively, the “Performance Metric” and the “Performance Period”). 3. Transferability: Except as expressly permitted under Section 15(b) of the Plan, the PRSUs may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution.
Restricted Stock Unit Award Agreement (Performance-Based) [________] [___], 20[___] _____________________________________________________________________________________________ Page 2 4. No Rights as a Stockholder: The Participant shall have no voting or other rights as a stockholder of the Company with respect to any PRSUs (or portion thereof) until the PRSUs (or portion thereof) have been settled and issued in accordance with the terms and conditions of this Agreement and the Plan. 5. Settlement and Issuance of Stock: (a) No shares of Common Stock or such other consideration shall be issued to the Participant prior to the Vesting Date for such applicable PRSUs vest and the restrictions with respect to such PRSUs are removed or otherwise expire in accordance with the terms of this Agreement and the Plan. (b) To the extent the PRSUs (or portion thereof) shall have become vested in accordance with this Agreement and the Plan, the Company shall deliver to the Participant, as soon as reasonably practicable after the applicable Vesting Date (but no later than March 15th of the following calendar year), one share of Common Stock for each such PRSU registered in the Participant’s name, or such other consideration permitted under Section 9(f)(ii) of the Plan. Upon the delivery of shares of Common Stock to the Participant, such shares shall be fully assignable, alienable, saleable and transferrable by the Participant; provided that any such assignment, alienation, sale, transfer or other alienation with respect to such shares of Common Stock shall be in accordance with applicable securities laws and any applicable Company policy. (c) The Company shall evidence any Common Stock to be issued under this Section 5 in payment of such vested PRSUs in the manner it deems appropriate. 6. Clawback and Recoupment: By accepting, or being deemed to have accepted, the PRSUs, the Participant expressly agrees that the Participant and the Award is bound by the terms of any written clawback or recoupment policies that the Company, with the approval of the Board or an authorized Committee of the Board, may adopt either prior to or following the Grant Date, including the Eos Energy Enterprises, Inc. Clawback Policy (as may be amended, supplemented, restated, replaced or otherwise modified from time to time), and including any policy adopted by Company to conform to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and rules promulgated thereunder by the SEC and that the Company determines should apply to the Award. Any such policy may subject the Participant’s Award and amounts paid or realized with respect to the Award to reduction, cancellation, forfeiture, or recoupment if certain specified events or wrongful conduct occur as specified in any such clawback policy. Nothing in the preceding sentence will be construed as limiting the general application of Section 8(a) of this Agreement. 7. Effects of Certain Events Prior to Vesting: (a) Termination Due to Death or Disability: In the event the Participant’s service relationship with the Company or any of its Affiliates is terminated due to the Participant’s death or Disability, any PRSUs that are not vested as of the date of such termination of service will vest in full (based on target performance) as of the date of such termination of service. For purposes of this Agreement, “Disability” shall mean the inability of the Participant to perform the Participant’s material duties of employment after reasonable accommodation due to a physical or mental injury, infirmity, or incapacity for one hundred eighty (180) days (including weekends and holidays) in any three hundred sixty-five (365) day period as determined by the Committee in its reasonable discretion. (b) Involuntary Termination without Cause and Qualifying Retirement: In the event the Participant’s service relationship with the Company or any of its Affiliates is terminated: (i) by the Company without Cause or (ii) as a result of the Participant’s Qualifying Retirement, a prorated number of the PRSUs will remain outstanding and eligible to vest based on actual achievement of the applicable Performance Metrics, with such pro-rata portion equal to the product of (x) the target number of PRSUs
Restricted Stock Unit Award Agreement (Performance-Based) [________] [___], 20[___] _____________________________________________________________________________________________ Page 3 granted pursuant to this Agreement multiplied by (y) a fraction, (A) the numerator of which is the number of full calendar months elapsed from the Grant Date through the date of Employee’s termination of service and (B) the denominator of which is the total number of months from the Grant Date through the end of the Performance Period; provided that, the Participant has, no later than fifty-five (55) days following the date of his or her termination of service, executed and not revoked a release of claims in a form provided by the Company. For purposes of this Agreement, “Qualifying Retirement” means the Participant’s termination of service (other than a termination by the Company for Cause or at a time by Cause exists) at a time when the Participant has attained age 60 and the Participant’s length of employment with the Company and any of its Affiliates is at least 10 completed years. (c) Change in Control: In the event the Participant’s service relationship with the Company or any of its Affiliates (or, as applicable, the successor or the surviving entity (or its parent)) is terminated without Cause, on or within 12 months following a Change in Control, the PRSUs will become immediately vested as of the date of such termination of service based on the greater of target performance and actual performance through the date immediately prior to the date of the Change in Control (to the extent determinable); provided that the Participant has, no later than fifty-five (55) days following the date of his or her termination of service, executed and not revoked a release of claims in a form provided by the Company (or, as applicable, the successor or the surviving entity (or its parent)). Notwithstanding the foregoing, if the outstanding PRSUs are not assumed or substituted for by the acquiror in connection with the Change in Control, the unvested PRSUs will immediately vest upon the closing of the Change in Control at the greater of target performance and actual performance through the date immediately prior to the date of the Change in Control (to the extent determinable). (d) Other Terminations: In the event the Participant’s service relationship with the Company or any of its Affiliates is terminated for any reason other than as set forth in Section 3(a) through (c), the PRSUs (or portion thereof) that are not vested as of the Participant’s termination of services shall be immediately forfeited and cancelled on the date of such termination of service. (e) Effect of Employment Agreement: Notwithstanding any provision in this Agreement to the contrary, in the event of an inconsistency regarding the treatment of PRSUs upon a termination of Participant’s service relationship between this Agreement, on the one hand, and any formal employment agreement (excluding, for the avoidance of doubt, any offer letter) entered into by and between the Participant and the Company or any of its Affiliates, whether entered into before or after the date of this Agreement, on the other hand, the terms of the employment agreement shall control unless this Agreement provides more favorable treatment. 8. Responsibility for Taxes: (a) The Participant acknowledges that, regardless of any action taken by the Company, the ultimate liability for all income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items related to the Participant’s participation in the Plan and legally applicable to the Participant (“Tax-Related Items”) is and remains the Participant’s responsibility and may exceed the amount actually withheld by the Company. The Participant further acknowledges that the Company (i) makes no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the PRSUs, including, but not limited to, the grant, vesting or settlement of the PRSUs, the subsequent sale of shares of Common Stock (if any) acquired upon settlement of the PRSUs and the receipt of any dividends, dividend equivalents; and (ii) does not commit to and is under no obligation to structure the terms of the grant or any aspect of the PRSUs to reduce or eliminate the Participant’s liability for Tax- Related Items or achieve any particular tax result. Further, if the Participant is subject to Tax-Related Items in more than one jurisdiction, the Participant acknowledges that the Company may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
Restricted Stock Unit Award Agreement (Performance-Based) [________] [___], 20[___] _____________________________________________________________________________________________ Page 4 (b) Upon the vesting and/or settlement of the PRSUs (or as of the date of any relevant taxable or tax withholding date or other date on which the value of any PRSUs otherwise become includible in the Participant’s gross income for tax purposes), the Participant shall be required to pay to the Company, and the Company shall have the right to deduct from any compensation payable to the Participant, the amount of any applicable federal, state, local and foreign Tax-Related Items that the Company determines must be withheld with respect to the PRSUs (the “Tax Withholding Obligations”). In this regard, unless otherwise determined by the Committee, the Tax Withholding Obligations shall be satisfied by the Company withholding, in accordance with Section 15(c) of the Plan, from the number of shares of Common Stock otherwise issuable upon settlement of the PRSUs, a portion of such shares having an aggregate Fair Market Value equal to the amount of the applicable Tax Withholding Obligations. Notwithstanding the foregoing, the Participant agrees and authorizes the Company, or its respective agents, to satisfy any applicable Tax Withholding Obligations in respect of the PRSUs by any of the following means, as may be determined by the Committee (or its delegate) in its discretion from time to time: (i) withholding from the Participant’s wages or other cash compensation paid to the Participant by the Company; (ii) requiring the Participant to remit the aggregate amount of such Tax Withholding Obligations to the Company in full, in cash or by check, bank draft or money order payable to the order of the Company; (iii) through a procedure whereby the Participant delivers irrevocable instructions to a broker designated by the Committee to sell shares of Common Stock obtained upon settlement of the PRSUs and to deliver promptly to the Company an amount of the proceeds of such sale equal to the amount of the Tax-Related Items (“sell-to-cover”); (iv) by a “net settlement” procedure under which the Company reduces the number of shares of Common Stock (or such other consideration) issued on settlement of the PRSUs by the number of shares of Common Stock (or such other consideration) with an aggregate fair market value that equals the amount of the Tax Withholding Obligations; or (v) any other method of withholding determined by the Committee and permitted by applicable law. (c) The Participant agrees to pay to the Company any amount of Tax-Related Items that the Company may be required to withhold or account for as a result of the Participant’s participation in the Plan that cannot be satisfied by the means described in Section 7(b). The Company may refuse to issue or deliver the shares of Common Stock or other consideration issuable upon settlement, or the proceeds of the sale of any such shares, if the Participant fails to comply with the Participant’s obligations in connection with the Tax-Related Items. 9. Plan Provisions: The PRSUs granted under this Agreement are being issued pursuant to and in accordance with the Plan (a copy of which has been made available to the Participant) and, as such, are subject in all respects to the Plan which shall be deemed incorporated into and made part of this Agreement. This Agreement is subject to all the terms, conditions, limitations, and restrictions contained in the Plan, including any amendment, supplement, restatement, replacement, or other modification thereto from time to time, and to such rules, regulations, and interpretations relating to the Plan as may be adopted by the Committee and as may be in effect from time to time. To the extent that any provision of this Agreement conflicts with the expressly applicable terms of the Plan, the Participant acknowledges and agrees that those terms of the Plan shall control and, if necessary, the applicable terms of this Agreement shall be deemed amended so as to carry out the purpose and intent of the Plan. 10. No Entitlements: The grant of the PRSUs shall not be construed as giving the Participant the right to be retained in the employ of, or to continue to provide services to, the Company or any of its Affiliates. Any Award granted under the Plan shall be a one-time Award that does not constitute a promise of future grants. The Company, in its sole discretion, maintains the right to make available future grants under the Plan. The PRSUs do not confer on the Participant any right or entitlement to receive compensation in any specific amount or to create a trust or a funded or secured obligation. In addition, the PRSUs are not part of the Participant’s base salary or wages and will not be taken into account in determining any other employment-related rights the Participant may have, such as rights to pension, retirement, or severance pay.
Restricted Stock Unit Award Agreement (Performance-Based) [________] [___], 20[___] _____________________________________________________________________________________________ Page 5 11. Imposition of other Requirements and the Participant Undertaking: The Company reserves the right to impose other requirements on the Participant’s participation in the Plan, on the PRSUs and on any shares of Common Stock or such other consideration to be issued upon settlement of the PRSUs, to the extent the Company determines it is necessary or advisable for legal or administrative reasons. The Participant agrees to take whatever additional action and execute whatever additional documents the Company may deem necessary or advisable to accomplish the foregoing or to carry out or give effect to any of the obligations or restrictions imposed on either the Participant or the PRSUs pursuant to this Agreement. 12. References: Unless otherwise expressly noted, all references to: (a) “Section” shall mean, with respect to such reference, each such section or subsection of this Agreement unless otherwise noted, and (b) “Attachment” shall mean, with respect to any such reference, each such schedule or exhibit attached to this Agreement. The headings of any section or paragraph of this Agreement are for convenience of reference only and shall not be used to interpret any provision of this Agreement. References herein to rights and obligations of the Participant shall apply, where appropriate, to the Participant’s legal representative or estate without regard to whether specific reference to such legal representative or estate is contained in a particular provision of this Agreement 13. Non-Waiver: No failure or delay by the Company in exercising any right, power or privilege under this Agreement shall constitute a waiver of such right, power or privilege, nor shall any single or partial exercise by the Company of such right, power or privilege preclude any other or further exercise of such right, power or privilege or the exercise of any right, power, or privilege under this Agreement. 14. Assignment: Any assignment by the Participant of this Agreement or any right, remedy, obligation, or liability arising under this Agreement, without the prior written consent of the Company shall not be permitted. 15. Successors and Assigns and No Third-Party Beneficiaries: This Agreement shall be binding upon and inure to the benefit of the Parties and their respective heirs, successors, legal representatives and permitted assigns. Nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the Parties, and their respective heirs, successors, legal representatives and permitted assigns, any legal or equitable rights, remedies, obligations, or liabilities under or by reason of this Agreement. 16. Severability: The provisions of this Agreement are to be deemed severable and the invalidity, illegality, or unenforceability of one or more of such provisions shall not affect the validity, legality, or enforceability of the remaining provisions. If any provision of this Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction, or would disqualify the Plan or this Agreement under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the intent of this Agreement, such provision shall be stricken as to such jurisdiction, and the remainder of this Agreement shall remain in full force and effect. 17. Governing Law: This Agreement shall be governed by, and construed and enforced under, the laws of the State of Delaware, U.S.A., without regard to its otherwise applicable conflicts of laws rules. The obligation of the Company to sell and deliver Common Stock under this Agreement is subject to applicable laws and to the approval of any governmental authority required in connection with the authorization, issuance, sale, or delivery of such Common Stock. 18. Dispute Resolution: All controversies and claims arising out of or relating to this Agreement, or the breach hereof, shall be settled by the Company’s mandatory dispute resolution procedures, if any, as may be in effect from time to time with respect to matters arising out of or relating to the Participant’s employment with the Company.
Restricted Stock Unit Award Agreement (Performance-Based) [________] [___], 20[___] _____________________________________________________________________________________________ Page 6 19. Remedies: The Parties shall be entitled to recover from each other reasonable attorneys’ fees incurred in connection with the successful enforcement of the terms and provisions of this Agreement whether by an action to enforce specific performance or for damages for its breach or otherwise. 20. Entire Agreement: This Agreement, the Plan, and any other agreements, attachments, schedules, exhibits and/or other documents referred to in this Agreement or therein constitutes the entire agreement and understanding of the Parties, and supersedes any prior or contemporaneous written or oral agreements between the Parties, regarding the subject matter contained in this Agreement. 21. Amendment: No amendment or modification of any provision of this Agreement that has a material adverse effect on the Participant shall be effective unless signed in writing by or on behalf of the Company and the Participant; provided that this Agreement may be amended, supplemented, restated, replaced or otherwise modified from time to time, solely the Board or by the Committee at any time without the Participant’s consent (a) in accordance with the provisions of the Plan or as otherwise set forth in this Agreement, (b) if the Board or the Committee determines, in its sole discretion, that amendment is necessary or advisable in light of any addition to or change in any federal or state, tax or securities law or other law or regulation, which change occurs after the Grant Date and by its terms applies to the Award; or (c) other than in the circumstances described in clauses (a) or (b), with the Participant’s consent. 22. Execution by Counterparts and Portable Document Format: This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Signatures of any Party exchanged or delivered by an electronic signature program (such as DocuSign or through the Company’s third-party plan manager), an email transmission in portable document format (also known as a “pdf.” file), or facsimile shall be deemed delivery of an original executed counterpart for all purposes and shall be binding on all parties. 23. Deemed Acceptance: If the Participant does not execute, deliver or otherwise provide: (a) a signature on the signature page to this Agreement, (b) the electronic equivalent of consent, or (c) written notice to the Company of the Participant’s rejection of the PRSUs by the first date on which the PRSUs are scheduled to vest and are thereby settled and released into the Participant’s account, the PRSUs shall be deemed accepted by the Participant as of the first date on which the PRSUs vest and the Participant and the PRSUes shall subject to all of the terms and conditions of this Agreement and the Plan. [SIGNATURE PAGE TO FOLLOW]
[SIGNATURE PAGE FOR RESTRICTED STOCK UNIT AWARD AGREEMENT] IN WITNESS WHEREOF, the Parties have signed this Restricted Stock Unit Award Agreement (Performance-Based) as of the Grant Date. Eos Energy Enterprises, Inc. By: ______________________ Joe Mastrangelo Chief Executive Officer and President Participant’s Signature _________________________ [Participant’s Signature to be obtained via the UBS system] Participant’s Name: [First Name Last Name] Participant’s Address: [Address] Target Number of PRSUs Granted: [Shares Granted] Grant Date: [Grant Date] Performance Period: The period that runs from [__________] to [__________]. Performance Metric: [__________]
Page 1 EOS ENERGY ENTERPRISES, INC. Restricted Stock Unit Award Agreement (Time-Based) (Directors) This Restricted Stock Unit Award Agreement (Time-Based) (this “Agreement”), dated as of [________] [___], 20[___], is entered into by and between Eos Energy Enterprises, Inc., a Delaware corporation (the “Company”), and the Participant whose name appears on the signature page to this Agreement (the “Participant”). The Company and the Participant are referred to in this Agreement individually as a “Party,” or collectively as the “Parties.” Background A. The Board of Directors of the Company (the “Board”) has adopted the Eos Energy Enterprises, Inc. Amended and Restated 2020 Incentive Plan (as amended, supplemented, restated, replaced, or otherwise modified from time to time, the “Plan”). Capitalized terms used but not defined in this Agreement shall have the meanings given to such terms in, or by reference in, the Plan. B. In order to encourage and motivate Eligible Persons, the Board desires to provide such individuals with an ownership interest in the Company in accordance with the Plan. C. The Committee has approved an award to the Participant of time-based restricted stock units (each individually, the “RSU”, and collectively, the “RSUs”) of the Company, pursuant to which each RSU represents the right to receive one share of common stock, par value $0.10 per share, of the Company (“Common Stock”) or such other consideration permitted by Section 5, under the terms and conditions set forth in this Agreement and the Plan (collectively, the “Award”). D. Each Party desires to enter into this Agreement to evidence and confirm the Award. Terms and Conditions NOW THEREFORE, for good and valuable consideration and mutual covenants set forth in this Agreement, and intending to be legally bound, each Party hereby agrees to the following: 1. Award: Subject to the terms and conditions set forth below, the Company hereby evidences and confirms the Award to the Participant, effective as of the grant date set forth on the signature page to this Agreement (the “Grant Date”), consisting of the aggregate number of RSUs set forth on the signature page to this Agreement. 2. Vesting: Except as set forth in Section 6 and subject to the continuous engagement of the Participant by the Company or any of its Affiliates through and including each the applicable vesting date, the RSUs shall fully vest on the earlier of (i) the first anniversary of the Grant Date and (ii) immediately prior to the date of the next annual shareholders meeting of the Company following the Grant Date (such date, the “Vesting Date”). 3. Transferability: Except as expressly permitted under Section 15(b) of the Plan, the RSUs may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. 4. No Rights as a Stockholder: The Participant shall have no voting or other rights as a stockholder of the Company with respect to any RSUs (or portion thereof) until the RSUs (or portion thereof) have been settled and issued in accordance with the terms and conditions of this Agreement and the Plan.
Restricted Stock Unit Award Agreement (Time-Based) [________] [___], 20[___] _____________________________________________________________________________________________ Page 2 5. Settlement and Issuance of Stock: (a) No shares of Common Stock or such other consideration shall be issued to the Participant prior to the Vesting Date for such applicable RSUs vest and the restrictions with respect to such RSUs are removed or otherwise expire in accordance with the terms of this Agreement and the Plan. (b) To the extent the RSUs (or portion thereof) shall have become vested in accordance with this Agreement and the Plan, the Company shall deliver to the Participant, as soon as reasonably practicable after the applicable Vesting Date (but no later than March 15th of the following calendar year), one share of Common Stock for each such RSU registered in the Participant’s name, or such other consideration permitted under Section 9(f)(ii) of the Plan. Upon the delivery of shares of Common Stock to the Participant, such shares shall be fully assignable, alienable, saleable and transferrable by the Participant; provided that any such assignment, alienation, sale, transfer or other alienation with respect to such shares of Common Stock shall be in accordance with applicable securities laws and any applicable Company policy. (c) The Company shall evidence any Common Stock to be issued under this Section 5 in payment of such vested RSUs in the manner it deems appropriate. 6. Effects of Certain Events Prior to Vesting: (a) Change in Control: In the event the Participant’s service relationship with the Company or any of its Affiliates (or, as applicable, the successor or the surviving entity (or its parent)) is terminated without Cause, on or within 12 months following a Change in Control, the RSUs will become immediately vested as of the date of such termination of service; provided that the Participant has, no later than fifty-five (55) days following the date of his or her termination of service, executed and not revoked a release of claims in a form provided by the Company (or, as applicable, the successor or the surviving entity (or its parent)). Notwithstanding the foregoing, if the outstanding RSUs are not assumed or substituted for by the acquiror in connection with the Change in Control, the unvested RSUs will immediately vest upon the closing of the Change in Control. (b) Terminations of Service: In the event the Participant’s service relationship with the Company or any of its Affiliates is terminated for any reason other than as set forth in Section 6(a), the RSUs (or portion thereof) that are not vested as of the Participant’s termination of services shall be immediately forfeited and cancelled on the date of such termination of service. 7. Responsibility for Taxes: The Company may take such action as it deems appropriate to ensure that all applicable income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items related to the Participant’s participation in the Plan and legally applicable to the Participant, if any, which are the sole and absolute responsibility of the Participant, are withheld or collected from the Participant. The Company shall not be required to withhold amounts unless required by applicable law. The Participant acknowledges that, because the Participant is a non-employee director of the Company, the Company is not subject to any federal or state income tax withholding obligations with respect to the RSUs awarded to the Participant hereunder. 8. Plan Provisions: The RSUs granted under this Agreement are being issued pursuant to and in accordance with the Plan (a copy of which has been made available to the Participant) and, as such, are subject in all respects to the Plan which shall be deemed incorporated into and made part of this Agreement. This Agreement is subject to all the terms, conditions, limitations, and restrictions contained in the Plan, including any amendment, supplement, restatement, replacement, or other modification thereto from time to time, and to such rules, regulations, and interpretations relating to the Plan as may be adopted by the Committee and as may be in effect from time to time. To the extent that any provision of this Agreement conflicts with the expressly applicable terms of the Plan, the Participant acknowledges and
Restricted Stock Unit Award Agreement (Time-Based) [________] [___], 20[___] _____________________________________________________________________________________________ Page 3 agrees that those terms of the Plan shall control and, if necessary, the applicable terms of this Agreement shall be deemed amended so as to carry out the purpose and intent of the Plan. 9. No Entitlements: The grant of the RSUs shall not be construed as giving the Participant the right to be retained in the employ of, or to continue to provide services to, the Company or any of its Affiliates. Any Award granted under the Plan shall be a one-time Award that does not constitute a promise of future grants. The Company, in its sole discretion, maintains the right to make available future grants under the Plan. The RSUs do not confer on the Participant any right or entitlement to receive compensation in any specific amount or to create a trust or a funded or secured obligation of any kind. In addition, the RSUs are not part of the Participant’s base salary or wages and will not be taken into account in determining any other employment-related rights the Participant may have, such as rights to pension, retirement, or severance pay. 10. Imposition of other Requirements and the Participant Undertaking: The Company reserves the right to impose other requirements on the Participant’s participation in the Plan, on the RSUs and on any shares of Common Stock or such other consideration to be issued upon settlement of the RSUs, to the extent the Company determines it is necessary or advisable for legal or administrative reasons. The Participant agrees to take whatever additional action and execute whatever additional documents the Company may deem necessary or advisable to accomplish the foregoing or to carry out or give effect to any of the obligations or restrictions imposed on either the Participant or the RSUs pursuant to this Agreement. 11. References: Unless otherwise expressly noted, all references to: (a) “Section” shall mean, with respect to such reference, each such section or subsection of this Agreement unless otherwise noted, and (b) “Attachment” shall mean, with respect to any such reference, each such schedule or exhibit attached to this Agreement. The headings of any section or paragraph of this Agreement are for convenience of reference only and shall not be used to interpret any provision of this Agreement. References herein to rights and obligations of the Participant shall apply, where appropriate, to the Participant’s legal representative or estate without regard to whether specific reference to such legal representative or estate is contained in a particular provision of this Agreement. 12. Non-Waiver: No failure or delay by the Company in exercising any right, power or privilege under this Agreement shall constitute a waiver of such right, power or privilege, nor shall any single or partial exercise by the Company of such right, power or privilege preclude any other or further exercise of such right, power or privilege or the exercise of any right, power, or privilege under this Agreement. 13. Assignment: Any assignment by the Participant of this Agreement or any right, remedy, obligation, or liability arising under this Agreement, without the prior written consent of the Company shall not be permitted. 14. Successors and Assigns and No Third-Party Beneficiaries: This Agreement shall be binding upon and inure to the benefit of the Parties and their respective heirs, successors, legal representatives and permitted assigns. Nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the Parties, and their respective heirs, successors, legal representatives and permitted assigns, any legal or equitable rights, remedies, obligations, or liabilities under or by reason of this Agreement. 15. Severability: The provisions of this Agreement are to be deemed severable and the invalidity, illegality, or unenforceability of one or more of such provisions shall not affect the validity, legality, or enforceability of the remaining provisions. If any provision of this Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction, or would disqualify the Plan or this Agreement under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the
Restricted Stock Unit Award Agreement (Time-Based) [________] [___], 20[___] _____________________________________________________________________________________________ Page 4 determination of the Committee, materially altering the intent of this Agreement, such provision shall be stricken as to such jurisdiction, and the remainder of this Agreement shall remain in full force and effect. 16. Governing Law: This Agreement shall be governed by, and construed and enforced under, the laws of the State of Delaware, U.S.A., without regard to its otherwise applicable conflicts of laws rules. The obligation of the Company to sell and deliver Common Stock under this Agreement is subject to applicable laws and to the approval of any governmental authority required in connection with the authorization, issuance, sale, or delivery of such Common Stock. 17. Dispute Resolution: All controversies and claims arising out of or relating to this Agreement, or the breach hereof, shall be settled by the Company’s mandatory dispute resolution procedures, if any, as may be in effect from time to time with respect to matters arising out of or relating to the Participant’s employment with the Company. 18. Remedies: The Parties shall be entitled to recover from each other reasonable attorneys’ fees incurred in connection with the successful enforcement of the terms and provisions of this Agreement whether by an action to enforce specific performance or for damages for its breach or otherwise. 19. Entire Agreement: This Agreement, the Plan, and any other agreements, attachments, schedules, exhibits and/or other documents referred to in this Agreement or therein constitutes the entire agreement and understanding of the Parties, and supersedes any prior or contemporaneous written or oral agreements between the Parties, regarding the subject matter contained in this Agreement. 20. Amendment: No amendment or modification of any provision of this Agreement that has a material adverse effect on the Participant shall be effective unless signed in writing by or on behalf of the Company and the Participant; provided that this Agreement may be amended, supplemented, restated, replaced or otherwise modified from time to time, solely the Board or by the Committee at any time without the Participant’s consent (a) in accordance with the provisions of the Plan or as otherwise set forth in this Agreement, (b) if the Board or the Committee determines, in its sole discretion, that amendment is necessary or advisable in light of any addition to or change in any federal or state, tax or securities law or other law or regulation, which change occurs after the Grant Date and by its terms applies to the Award; or (c) other than in the circumstances described in clauses (a) or (b), with the Participant’s consent. 21. Execution by Counterparts and Portable Document Format: This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Signatures of any Party exchanged or delivered by an electronic signature program (such as DocuSign or through the Company’s third-party plan manager), an email transmission in portable document format (also known as a “pdf.” file), or facsimile shall be deemed delivery of an original executed counterpart for all purposes and shall be binding on all parties. 22. Deemed Acceptance: If the Participant does not execute, deliver or otherwise provide: (a) a signature on the signature page to this Agreement, (b) the electronic equivalent of consent, or (c) written notice to the Company of the Participant’s rejection of the RSUs by the first date on which the RSUs are scheduled to vest and are thereby settled and released into the Participant’s account, the RSUs shall be deemed accepted by the Participant as of the first date on which the RSUs vest and the Participant and the RSUs shall subject to all of the terms and conditions of this Agreement and the Plan. [SIGNATURE PAGE TO FOLLOW]
[SIGNATURE PAGE FOR RESTRICTED STOCK UNIT AWARD AGREEMENT] IN WITNESS WHEREOF, the Parties have signed this Restricted Stock Unit Award Agreement (Time-Based) as of the Grant Date. Eos Energy Enterprises, Inc. By: ______________________ Joe Mastrangelo Chief Executive Officer and President Participant’s Signature _________________________ [Participant’s Signature to be obtained via the UBS system] Participant’s Name: [First Name Last Name] Participant’s Address: [Address] Number of RSUs Granted: [Shares Granted] Grant Date: [Grant Date]
DIRECTOR FORM OPTION AWARD AGREEMENT This Option Award Agreement (this “Agreement”) is dated as of [Grant Date:Month DD, YYYY], and is made by and between Eos Energy Enterprises, Inc., a Delaware corporation (the “Company”), and the Participant whose name appears on the signature page to this Agreement (“Director”). Capitalized terms used herein and not defined shall have the meaning ascribed to such terms in the B. Riley Principal Merger Corp. II 2020 Incentive Plan, as amended from time to time. Witnesseth: Whereas, the Board has adopted the Plan to motivate Eligible Persons of the Company or its Affiliates by providing them with an ownership interest in the Company; Whereas, the Committee has approved the grant to Director of an Option to purchase the aggregate number of shares of Common Stock set forth on the signature page to this Agreement, at the per share Exercise Price set forth on the signature page to this Agreement; and Whereas, Director and the Company desire to enter into an agreement to evidence and confirm the grant of such Option on the terms and conditions set forth herein. Now, therefore, to evidence the Option so granted, and to set forth the terms and conditions governing such Option, the Company and Director hereby agree as follows: 1. Grant. The Company hereby evidences and confirms its grant to Director, effective as of the date hereof (the “Grant Date”), of an Option to purchase the aggregate number of shares of Common Stock set forth on the signature page hereof (the “Shares”). The Option shall have an Exercise Price per share (which is not less than the Fair Market Value as of the date hereof) set forth on the signature page to this Agreement, and is not intended to be an Incentive Stock Option. 2. Vesting and Exercisability. (a) Vesting. Except as otherwise provided in this Agreement, subject to the continuous engagement of Director by the Company or any Affiliate through the applicable vesting date, the Option shall fully vest and become exercisable on the earlier of (i) the first anniversary of the Grant Date, and (ii) immediately prior to the date of the next annual shareholders meeting of the Company following the Grant Date; provided, that, the Option shall vest in full upon the consummation of a Change in Control. (b) Committee Acceleration. The Committee may accelerate the vesting or exercisability of all or any portion of the Option, at any time and from time to time. Notwithstanding the immediately preceding sentence, except as approved by the Committee, no Option shall vest or become exercisable after the date on which Director receives a notice of termination of engagement from the Company or tenders a notice of termination to the Company, as applicable. 3. Termination. (a) Normal Termination Date. Unless earlier terminated pursuant to Section 3(b), the Option shall terminate and be cancelled on the fifth anniversary of the Grant Date (the “Normal Termination Date”). (b) Early Termination. (i) For Cause; Breach of Restrictive Covenants. In the event Director’s services to the Company
and its Affiliates are terminated by the Company for Cause, the Option (or portion thereof) then held by Director (whether or not then vested or exercisable) shall be immediately forfeited and cancelled, in full, on the date of such termination of services. In addition, if, while Director is bound by any restrictive covenants in favor of the Company and its Affiliates, Director breaches any such provision, the Option (or portion thereof) then held by Director (whether or not then vested or exercisable) shall be immediately forfeited and cancelled, in full, on the date of such breach. (ii) For Any Other Reason. In the event Director’s services to the Company and its Affiliates are terminated for any reason other than a reason specified in Section 3(b)(i), the Option (or portion thereof) then held by Director that is then vested and exercisable shall remain exercisable for a period of 12 months from the date of such termination, but in no event after the Normal Termination Date. (iii) Termination of Unvested Option. The Option (or portion thereof) that is not vested and exercisable as of Director’s termination of services shall be immediately forfeited and cancelled on the date of such termination of services. 4. Transferability. Except as expressly permitted under Section 14(b) of the Plan, the Option may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. 5. Exercise. (a) Exercise Generally. To the extent that the Option (or portion thereof) shall have become and remain vested and exercisable, and subject to Section 3 and such administrative regulations as the Committee may have adopted, Director may exercise such Option in accordance with the terms and conditions of Section 7(d) of the Plan. (b) Limitations on Exercise. Notwithstanding anything to the contrary contained in this Agreement, the Option may not be exercised in whole or in part, and no notation shall be made in the books of the Company and/or certificates representing Shares shall be delivered, unless (i) all requisite approvals and consents of any governmental authority of any kind having jurisdiction over the exercise of the Option shall have been secured; (ii) the purchase of the Shares upon the exercise of the Option shall be exempt from registration under applicable U.S. federal and state securities laws, and applicable non-U.S. securities laws, or the Shares shall have been registered under such laws; and (iii) the aggregate Exercise Price shall have been paid and all applicable withholding requirements shall have been satisfied. 6. Forfeiture; Recovery of Compensation. By accepting, or being deemed to have accepted, the Option, Director expressly agrees to be bound by the terms of any clawback or recoupment policy of the Company that applies to incentive compensation that includes the Option. Nothing in the preceding sentence will be construed as limiting the general application of Section 7(a) of this Agreement. 7. General Provisions. (a) Plan Provisions. The Option granted hereunder is being issued pursuant to and in accordance with the Plan (a copy of which has been made available to Director) and, as such, is subject in all respects to the Plan, all of the terms of which are made a part of and incorporated into this Agreement. In the event of any conflict between any term of this Agreement and the terms of the Plan, the terms of the Plan shall control. (b) No Rights as a Stockholder. Director shall have no voting or other rights as a stockholder of the Company with respect to any Shares underlying the Option until the Option (or portion thereof) has been exercised in accordance with Section 7(d) of the Plan and the Shares have been delivered to Director.
(c) Securities Law Matters; Compliance with Rule 144. (i) Securities Law Matters. Director acknowledges that, until the Shares underlying this Option have been registered under the Securities Act or such other state or foreign laws, as applicable, (A) the Shares underlying the Option have not been registered under the Securities Act or any state or foreign securities or “blue sky” laws; (B) the Shares underlying the Option must be held indefinitely and Director must continue to bear the economic risk of the investment in the Shares unless the Shares are subsequently registered under the Securities Act and such state or foreign laws or an exemption from registration is available; (C) when and if the Shares underlying the Option may be disposed of without registration in reliance upon Rule 144 of the Securities Act (“Rule 144”), such disposition can generally be made only in limited amounts in accordance with the provisions of such rule; and (D) a notation shall be made in the appropriate records of the Company indicating that the Shares underlying the Option are subject to restrictions on transfer set forth in this Agreement and, if the Company should in the future engage the services of a stock transfer agent, appropriate stop-transfer restrictions will be issued to such transfer agent with respect to the Shares underlying the Option. (ii) Compliance with Rule 144. If any of the Shares underlying the Option are to be disposed of in accordance with Rule 144, Director shall transmit to the Company an executed copy of Form 144 (if required by Rule 144) no later than the time such form is required to be transmitted to the Securities and Exchange Commission for filing and such other documentation as the Company may reasonably require to assure compliance with Rule 144 in connection with such disposition. (d) Binding Effect; Benefits; Assignability. This Agreement shall be binding upon and inure to the benefit of the parties to this Agreement and their respective successors and assigns. Nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the parties to this Agreement or their respective successors or assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein. Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Company or Director without the prior written consent of the other party. (e) Amendment. This Agreement may be amended, modified or supplemented only by a written instrument executed by Director and the Company; provided, however, that, without Director’s consent, the Committee may amend (such amendment to have the minimum economic effect necessary, as determined by the Committee in its sole discretion) this Agreement in such a manner as may be necessary or appropriate to avoid having the Option become subject to the penalty provisions of Section 409A of the Code. (f) Severability. In the event that any one or more of the provisions of this Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby. (g) Counterparts; Section Headings. This Agreement may be executed in any number of counterpart, each of which shall be deemed to be an original, and all of which together shall constitute one and the same instrument. The parties hereto agree to accept a signed facsimile or portable document format copy of this Agreement as a fully binding original. Except as otherwise indicated, references herein to any “Section” means a “Section” of this Agreement, and the section headings in this Agreement are for purposes of reference only and shall not limit or define the meaning hereof. -- Signature page follows --
In Witness Whereof, the Company and Director have executed this Option Award Agreement as of the date first above written. Eos Energy Enterprises, Inc. By: Name: Joe Mastrangelo Title: Chief Executive Officer Director [Participant Name:First Name Last Name] Number of Shares of Common Stock subject to the Option: [Granted:Options Granted] Per Share Exercise Price: [Price:Option Price]
RESTRICTED STOCK UNIT AWARD AGREEMENT This Restricted Stock Unit Award Agreement (this “Agreement”) is dated effective as of ________________, 202__, and is made by and between Eos Energy Enterprises, Inc., a Delaware corporation (f/k/a B. Riley Principal Merger Corp. II) (the “Company”), and the Participant whose name appears on the signature page to this Agreement (“Executive”). Capitalized terms used herein and not defined shall have the meaning ascribed to such terms in the Eos Energy Enterprises, Inc. 2020 Incentive Plan, as amended from time to time. Witnesseth: Whereas, the Board has adopted the Plan to motivate Eligible Persons of the Company or its Affiliates by providing them with an ownership interest in the Company; Whereas, the Committee has approved the grant to Executive of the aggregate number of Restricted Stock Units set forth on the signature page to this Agreement; and Whereas, Executive and the Company desire to enter into an agreement to evidence and confirm the grant of such Restricted Stock Units on the terms and conditions set forth herein. Now, therefore, to evidence the Restricted Stock Units so granted, and to set forth the terms and conditions governing such Restricted Stock Units, the Company and Executive hereby agree as follows: 1. Grant. The Company hereby evidences and confirms its grant to Executive, effective as of the date hereof (the “Grant Date”), of the aggregate number of Restricted Stock Units set forth on the signature page hereof. 2. Vesting. (a) Vesting. Except as otherwise provided in this Agreement, subject to the continuous engagement or employment of Executive by the Company or any Affiliate through the applicable vesting date, the Restricted Stock Units shall vest [in three equal annual installments on each of the first three anniversaries of the Grant Date]; provided, that, the Restricted Stock Units shall vest in full (x) [upon the consummation of a Change in Control], or (y) subject to [Section XXX ] of that certain Employment Agreement, dated as of _________, 202__, by and between Executive and the Company (the “Employment Agreement”), upon the termination of Executive’s employment with the Company by the Company without Cause or by Executive for Good Reason (each as defined in the Employment Agreement)]. (b) Committee Acceleration. The Committee may accelerate the vesting of all or any portion of the Restricted Stock Units, at any time and from time to time. Notwithstanding the immediately preceding sentence, except as approved by the Committee and as set forth in the Employment Agreement, no Restricted Stock Units shall vest after the date on which Executive receives a notice of termination of engagement or employment from the Company or tenders a notice of termination to the Company, as applicable. 3. Other Termination. In the event Executive’s services to the Company and its Affiliates are terminated for any other reason, the Restricted Stock Units (or portion thereof) that are not vested as of Executive’s termination of services shall be immediately forfeited and cancelled on the date of such termination of services. 4. Transferability. Except as expressly permitted under Section 14(b) of the Plan, the Restricted Stock Units may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution.
5. Settlement. To the extent the Restricted Stock Units (or portion thereof) shall have become vested, and subject to such administrative regulations as the Committee may have adopted, the Restricted Stock Units shall be settled and issued in accordance with the terms and conditions of Section 9(d)(ii) of the Plan. 6. Forfeiture; Recovery of Compensation. By accepting, or being deemed to have accepted, the Restricted Stock Units, Executive expressly agrees to be bound by the terms of any clawback or recoupment policy of the Company that applies to incentive compensation that includes the Restricted Stock Units. Nothing in the preceding sentence will be construed as limiting the general application of Section 7(a) of this Agreement. 7. General Provisions. (a) Plan Provisions. The Restricted Stock Units granted hereunder are being issued pursuant to and in accordance with the Plan (a copy of which has been made available to Executive) and, as such, are subject in all respects to the Plan, all of the terms of which are made a part of and incorporated into this Agreement. In the event of any conflict between any term of this Agreement and the terms of the Plan, the terms of the Plan shall control. (b) No Rights as a Stockholder. Executive shall have no voting or other rights as a stockholder of the Company with respect to any Restricted Stock Units (or portion thereof) until the Restricted Stock Units (or portion thereof) have been settled and issued in accordance with the terms and conditions of Section 9(d)(ii) of the Plan. (c) Securities Law Matters; Compliance with Rule 144. (i) Executive acknowledges that, until the Common Stock to be acquired upon the settlement of the Restricted Stock Units has been registered under the Securities Act or such other state or foreign laws, as applicable, (A) the Common Stock to be acquired upon the settlement of the Restricted Stock Units has not been registered under the Securities Act or any state or foreign securities or “blue sky” laws; (B) the Common Stock to be acquired upon the settlement of the Restricted Stock Units must be held indefinitely and Executive must continue to bear the economic risk of the investment in the Common Stock unless the Common Stock is subsequently registered under the Securities Act and such state or foreign laws or an exemption from registration is available; (C) when and if the Common Stock to be acquired upon the settlement of the Restricted Stock Units may be disposed of without registration in reliance upon Rule 144 of the Securities Act (“Rule 144”), such disposition can generally be made only in limited amounts in accordance with the provisions of such rule; and (D) a notation shall be made in the appropriate records of the Company indicating that the Common Stock to be acquired upon the settlement of the Restricted Stock Units is subject to restrictions on transfer set forth in this Agreement and, if the Company should in the future engage the services of a stock transfer agent, appropriate stop-transfer restrictions will be issued to such transfer agent with respect to the Common Stock to be acquired upon the settlement of the Restricted Stock Units. (ii) Compliance with Rule 144. If the Common Stock to be acquired upon the settlement of the Restricted Stock Units (or portion thereof) are to be disposed of in accordance with Rule 144, Executive shall transmit to the Company an executed copy of Form 144 (if required by Rule 144) no later than the time such form is required to be transmitted to the Securities and Exchange Commission for filing and such other documentation as the Company may reasonably require to assure compliance with Rule 144 in connection with such disposition. (d) Binding Effect; Benefits; Assignability. This Agreement shall be binding upon and inure to the benefit of the parties to this Agreement and their respective successors and assigns. Nothing
in this Agreement, express or implied, is intended or shall be construed to give any person other than the parties to this Agreement or their respective successors or assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein. Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Company or Executive without the prior written consent of the other party. (e) Amendment. This Agreement may be amended, modified or supplemented only by a written instrument executed by Executive and the Company; provided, however, that, without Executive’s consent, the Committee may amend (such amendment to have the minimum economic effect necessary, as determined by the Committee in its sole discretion) this Agreement in such a manner as may be necessary or appropriate to avoid having the Restricted Stock Units become subject to the penalty provisions of Section 409A of the Code. (f) Severability. In the event that any one or more of the provisions of this Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby.(g) Counterparts; Section Headings. This Agreement may be executed in any number of counterpart, each of which shall be deemed to be an original, and all of which together shall constitute one and the same instrument. The parties hereto agree to accept a signed facsimile or portable document format copy of this Agreement as a fully binding original. Except as otherwise indicated, references herein to any “Section” means a “Section” of this Agreement, and the section headings in this Agreement are for purposes of reference only and shall not limit or define the meaning hereof. -- Signature page follows --
In Witness Whereof, the Company and Executive have executed this Restricted Stock Unit Award Agreement as of the date first above written. Eos Energy Enterprises, Inc. By: ________________________________ Name: Title: Executive _______________________________ [NAME] Number of Restricted Stock Units: [XXX,XXX]
RESTRICTED STOCK UNIT AWARD AGREEMENT This Restricted Stock Unit Award Agreement (this “Agreement”) is dated as of [Grant Date:Month DD, YYYY], and is made by and between Eos Energy Enterprises, Inc., a Delaware corporation (f/k/a B. Riley Principal Merger Corp. II) (the “Company”), and the Participant whose name appears on the signature page to this Agreement (“Employee”). Capitalized terms used herein and not defined shall have the meaning ascribed to such terms in the B. Riley Principal Merger Corp. II 2020 Incentive Plan, as amended from time to time. Witnesseth: Whereas, the Board has adopted the Plan to motivate Eligible Persons of the Company or its Affiliates by providing them with an ownership interest in the Company; Whereas, the Committee has approved the grant to Employee of the aggregate number of Restricted Stock Units set forth on the signature page to this Agreement; and Whereas, Employee and the Company desire to enter into an agreement to evidence and confirm the grant of such Restricted Stock Units on the terms and conditions set forth herein. Now, therefore, to evidence the Restricted Stock Units so granted, and to set forth the terms and conditions governing such Restricted Stock Units, the Company and Employee hereby agree as follows: 1. Grant. The Company hereby evidences and confirms its grant to Employee, effective as of the date hereof (the “Grant Date”), of the aggregate number of Restricted Stock Units set forth on the signature page hereof. 2. Vesting. (a) Vesting. Except as otherwise provided in this Agreement, subject to the continuous engagement or employment of Employee by the Company or any Affiliate through the applicable vesting date, the Restricted Stock Units shall vest in 3 equal annual installments on each of the first 3 anniversaries of the Grant Date. (May be some rounding so each installment may not be exactly the same number.) (b) Committee Acceleration. The Committee may accelerate the vesting of all or any portion of the Restricted Stock Units, at any time and from time to time. Notwithstanding the immediately preceding sentence, except as approved by the Committee, no Restricted Stock Units shall vest after the date on which Employee receives a notice of termination of engagement or employment from the Company or tenders a notice of termination to the Company, as applicable. 3. Termination. In the event Employee’s services to the Company and its Affiliates are terminated for any reason, the Restricted Stock Units (or portion thereof) that are not vested as of Employee’s termination of services shall be immediately forfeited and cancelled on the date of such termination of services. 4. Transferability. Except as expressly permitted under Section 14(b) of the Plan, the Restricted Stock Units may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. 5. Settlement. To the extent the Restricted Stock Units (or portion thereof) shall have become vested, and subject to such administrative regulations as the Committee may have adopted, the Restricted Stock Units shall be settled and issued in accordance with the terms and conditions of Section 9(d)(ii) of the Plan. 6. Forfeiture; Recovery of Compensation. By accepting, or being deemed to have accepted, the Restricted Stock Units, Employee expressly agrees to be bound by the terms of any clawback or recoupment policy of the Company that applies to incentive compensation that includes the Restricted
Stock Units. Nothing in the preceding sentence will be construed as limiting the general application of Section 7(a) of this Agreement. 7. General Provisions. (a) Plan Provisions. The Restricted Stock Units granted hereunder are being issued pursuant to and in accordance with the Plan (a copy of which has been made available to Employee) and, as such, are subject in all respects to the Plan, all of the terms of which are made a part of and incorporated into this Agreement. In the event of any conflict between any term of this Agreement and the terms of the Plan, the terms of the Plan shall control. (b) No Rights as a Stockholder. Employee shall have no voting or other rights as a stockholder of the Company with respect to any Restricted Stock Units (or portion thereof) until the Restricted Stock Units (or portion thereof) have been settled and issued in accordance with the terms and conditions of Section 9(d)(ii) of the Plan. (c) Securities Law Matters; Compliance with Rule 144. (i) Employee acknowledges that, until the Common Stock to be acquired upon the settlement of the Restricted Stock Units has been registered under the Securities Act or such other state or foreign laws, as applicable, (A) the Common Stock to be acquired upon the settlement of the Restricted Stock Units has not been registered under the Securities Act or any state or foreign securities or “blue sky” laws; (B) the Common Stock to be acquired upon the settlement of the Restricted Stock Units must be held indefinitely and Employee must continue to bear the economic risk of the investment in the Common Stock unless the Common Stock is subsequently registered under the Securities Act and such state or foreign laws or an exemption from registration is available; (C) when and if the Common Stock to be acquired upon the settlement of the Restricted Stock Units may be disposed of without registration in reliance upon Rule 144 of the Securities Act (“Rule 144”), such disposition can generally be made only in limited amounts in accordance with the provisions of such rule; and (D) a notation shall be made in the appropriate records of the Company indicating that the Common Stock to be acquired upon the settlement of the Restricted Stock Units is subject to restrictions on transfer set forth in this Agreement and, if the Company should in the future engage the services of a stock transfer agent, appropriate stop-transfer restrictions will be issued to such transfer agent with respect to the Common Stock to be acquired upon the settlement of the Restricted Stock Units. (ii) Compliance with Rule 144. If the Common Stock to be acquired upon the settlement of the Restricted Stock Units (or portion thereof) are to be disposed of in accordance with Rule 144, Employee shall transmit to the Company an executed copy of Form 144 (if required by Rule 144) no later than the time such form is required to be transmitted to the Securities and Exchange Commission for filing and such other documentation as the Company may reasonably require to assure compliance with Rule 144 in connection with such disposition. (d) Binding Effect; Benefits; Assignability. This Agreement shall be binding upon and inure to the benefit of the parties to this Agreement and their respective successors and assigns. Nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the parties to this Agreement or their respective successors or assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein. Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Company or Employee without the prior written consent of the other party. (e) Amendment. This Agreement may be amended, modified or supplemented only by a written instrument executed by Employee and the Company; provided, however, that, without Employee’s consent, the Committee may amend (such amendment to have the minimum economic effect necessary, as determined by the Committee in its sole discretion) this Agreement in such a manner as may be necessary or appropriate to avoid having the Restricted Stock Units become subject to the penalty provisions of Section 409A of the Code.
(f) Severability. In the event that any one or more of the provisions of this Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby. (g) Counterparts; Section Headings. This Agreement may be executed in any number of counterpart, each of which shall be deemed to be an original, and all of which together shall constitute one and the same instrument. The parties hereto agree to accept a signed facsimile or portable document format copy of this Agreement as a fully binding original. Except as otherwise indicated, references herein to any “Section” means a “Section” of this Agreement, and the section headings in this Agreement are for purposes of reference only and shall not limit or define the meaning hereof. -- Signature page follows --
In Witness Whereof, the Company and Employee have executed this Restricted Stock Unit Award Agreement as of the date first above written. Eos Energy Enterprises, Inc. By: Joe Mastrangelo Chief Executive Officer Employee (signature to be obtained at acceptance in the UBS system) [Participant Name:First Name Last Name] Address: [Address:Linear] Number of Restricted Stock Units: [[Granted:Shares Granted]]
EXHIBIT 31.1
CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Joseph Mastrangelo, certify that:
1. I have reviewed this quarterly report on Form 10-Q (the “Report”) of Eos Energy Enterprises, Inc. (the “Registrant”);
2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;
3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Report;
4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and
d. Disclosed in this Report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
Date: August 6, 2024 | By: | /s/ Joseph Mastrangelo | ||||||||||||||||||||||||
| Joseph Mastrangelo | ||||||||||||||||||||||||||
| Chief Executive Officer | ||||||||||||||||||||||||||
| (Principal Executive Officer) | ||||||||||||||||||||||||||
EXHIBIT 31.2
CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Nathan Kroeker, certify that:
1. I have reviewed this quarterly report on Form 10-Q (the “Report”) of Eos Energy Enterprises, Inc. (the Registrant”);
2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;
3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Report;
4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and
d. Disclosed in this Report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
Date: August 6, 2024 | By: | /s/ Nathan Kroeker | ||||||||||||||||||||||||
| Nathan Kroeker | ||||||||||||||||||||||||||
| Chief Financial Officer | ||||||||||||||||||||||||||
| (Principal Financial Officer) | ||||||||||||||||||||||||||
EXHIBIT 32
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Eos Energy Enterprises, Inc. (the “Registrant”), for the quarterly period ended June 30, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Joseph Mastrangelo, hereby certify, in the capacity and on the date indicated below, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
Date: August 6, 2024 | By: | /s/ Joseph Mastrangelo | ||||||||||||||||||||||||
| Joseph Mastrangelo | ||||||||||||||||||||||||||
| Chief Executive Officer | ||||||||||||||||||||||||||
| (Principal Executive Officer) | ||||||||||||||||||||||||||
In connection with the Quarterly Report on Form 10-Q of Eos Energy Enterprises, Inc. (the “Registrant”), for the quarterly period ended June 30, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Nathan Kroeker, hereby certify, in the capacity and on the date indicated below, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
Date: August 6, 2024 | By: | /s/ Nathan Kroeker | |||||||||||||||||||||||||||
| Nathan Kroeker | |||||||||||||||||||||||||||||
| Chief Financial Officer | |||||||||||||||||||||||||||||
| (Principal Financial Officer) | |||||||||||||||||||||||||||||