As
filed with the Securities and Exchange Commission on March 8, 2021
Registration
No. -
UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
EOS
ENERGY ENTERPRISES, INC.
(Exact
name of registrant as specified in its charter)
Delaware
|
|
3690
|
|
84-4290188
|
(State
or other jurisdiction of
incorporation or organization)
|
|
(Primary
Standard Industrial
Classification Code Number)
|
|
(I.R.S.
Employer
Identification No.)
|
3920
Park Avenue
Edison, New Jersey 08820
(732) 27225-8400
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Joe
Mastrangelo
Chief Executive Officer
Eos Energy Enterprises, Inc.
3920 Park Avenue
Edison, New Jersey 08820
Tel: (732) 27225-8400
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies
to:
Anthony
M. Saur
David P. LaGalia
Zachary Jacobs
Morrison Cohen LLP
909 Third Avenue, 27th Floor
New York, New York 10022
Tel: (212) 735-8600
Approximate
date of commencement of proposed sale to the public: From time to time after this Registration Statement becomes effective.
If
any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933 check the following box: ☒
If
this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the
following box and list the Securities Act registration statement number of the earlier effective registration statement for the
same offering. ☐
If
this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If
this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
|
☐
|
Accelerated filer
|
☐
|
Non-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 7(a)(2)(B) of the Securities Act.
☐
CALCULATION OF REGISTRATION FEE
Title of Securities to be Registered(1)
|
|
Amount
to be
Registered(2)
|
|
|
Proposed
Maximum
Offering
Price per
Share(3)
|
|
|
Proposed
Maximum
Aggregate
Offering
Price
|
|
|
Amount of
Registration
Fee(4)
|
|
Common stock, par value $0.0001 per share
|
|
|
2,074,465
|
(5)
|
|
$
|
18.13
|
|
|
$
|
37,610,050.45
|
(3)
|
|
$
|
4,103.26
|
|
Common stock, par value $0.0001 per share
|
|
|
98,882
|
(6)
|
|
$
|
29.58
|
(7)
|
|
$
|
2,924,929.56
|
|
|
$
|
319.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
40,534,980.1
|
|
|
$
|
4,422.37
|
(8)
|
|
(1)
|
The
securities are being registered solely in connection with the resale of shares of common
stock by the selling securityholders named in this registration statement.
|
|
(2)
|
Pursuant
to Rule 416 under the Securities Act of 1933, as amended (the “Securities Act”),
the registrant is also registering an indeterminate number of additional securities that
may become issuable as a result of any stock dividend, stock split, recapitalization
or other similar transaction.
|
|
(3)
|
Estimated
solely for the purpose of calculating the registration fee in accordance with Rule 457(c)
and Rule 457(g) under the Securities Act, based on the average of the high and low prices
of the registrant’s common stock on March 4, 2021, as reported on The Nasdaq
Capital Market, which was approximately $18.13 per share.
|
|
(4)
|
Calculated
by multiplying the proposed maximum aggregate offering price of securities to be registered
by 0.0001091.
|
|
(5)
|
The
Registrant is hereby registering 2,074,457 shares of common stock for sale by the selling
securityholders named in this registration statement, which includes (i) up to 1,994,171
shares issued to certain of the selling securityholders pursuant to the terms of the
Merger Agreement (defined below) upon the achievement of certain earnout targets, (ii)
up to 79,546 shares issued or issuable to Joe Mastrangelo, the Company’s Chief
Executive Officer and a director, upon vesting of restricted stock units granted to him
under the Eos Energy Enterprises, Inc. Amended and Restated 2012 Equity Incentive Plan,
and (ii) up to 748 shares of common stock issuable to Mack Treece, the Company’s
Chief Strategic Alliances Officer, upon satisfaction of certain vesting terms set forth
in previously issued restricted stock units held by Mr. Treece.
|
|
(6)
|
Represents
up to 98,882 shares issuable upon exercise of options granted under the Eos Energy Enterprises,
Inc. Amended and Restated 2012 Equity Incentive Plan.
|
|
(7)
|
Estimated
solely for purposes of determining the registration fee in accordance with Rules 457(c)
and (h) under the Securities Act, on the basis of the weighted average exercise price
of options outstanding under the plan.
|
|
(8)
|
Pursuant
to Rule 429 under the Securities Act and as further described below under the heading
“Statement Pursuant to Rule 429(b),” the prospectus contained in this Registration
Statement covers (i) 43,744,680 shares of common stock and (ii) 325,000 warrants to purchase
common stock previously registered under the registrant’s Registration Statement
on Form S-1 filed by the registrant on January 12, 2021 (File No. 333-251243) which was
declared effective on January 21, 2021, and 2,853,750 shares of common stock previously
registered under the registrant’s Registration Statement on Form S-1 filed by the
registrant on November 13, 2020 (File No. 333-249713) which was declared effective on
November 16, 2020 (the “Prior Registration Statements”). These shares have
not yet been sold by the selling securityholders described in the Prior Registration
Statements and are included in the prospectus contained in this Registration Statement.
See “Statement Pursuant to Rule 429(b)” below.
|
STATEMENT
PURSUANT TO RULE 429(b)
This registration statement
also acts as a post-effective amendment to the registrant’s registration statements on (i) Form S-1 (333-251243) related
to the resale of up to 43,744,680 shares of common stock and 325,000 warrants to purchase common stock by selling securityholders,
and (ii) Form S-1 (333-249713) related to the resale of up to 2,853,750 of common stock by selling securityholders. The registrant
is filing a single prospectus in this registration statement, pursuant to Rule 429 under the Securities Act, in order to satisfy
the requirements of the Securities Act for the offering in its Registration Statement on Form S-1 (No. 333-251243) and on Form
S-1 (File No. 333-249713) (together, the “Prior Registration Statements”). The prospectus in this Registration Statement
is a combined prospectus for (i) 2,173,339 shares of common stock being newly registered hereunder, (ii) 43,744,680 shares of common
stock and 325,000 warrants to purchase common stock remaining for resale under the Form S-1 (333-251243) and (iii) 2,853,750 shares
of common stock remaining for resale under the Form S-1 (333-249713). The combined prospectus in this registration statement constitutes
a post-effective amendment to the prior Registration Statements, which shall hereafter become effective concurrently with the effectiveness
of this registration statement. The post-effective amendments are being filed by the Registrant to (i) reflect that 1,146,250 shares
of common stock were previously sold by selling securityholders named in the Prior Registration Statement on Form S-1 (333-249713),
(ii) add its financial statements for the fiscal year ended December 31, 2020, (iii) update the related management’s discussion
and analysis of financial condition and results of operations for the year ended December 31, 2020, and (iv) update unaudited pro
forma financial information for the year ended December 31, 2020. If any securities previously registered under the Prior Registration
Statements are offered and sold before the effective date of this registration statement, the amount of previously registered securities
so sold will not be included in the prospectus that is a part of this registration statement.
Pursuant
to Rule 416, this Registration Statement also covers additional securities that may be offered as a result of anti-dilution provisions
regarding stock splits, stock dividends, or similar transactions relating to the shares of common stock issuable upon exercise
of warrants covered by this registration statement.
The
Registrant previously paid a registration fee of $68,151.93 in connection with the filing of the registration statement on Form
S-1 (No. 333-251243) filed with the Securities and Exchange Commission on December 12, 2020, to register the 43,744,680 shares
of common stock and 325,000 warrants to purchase common stock. The Registrant previously paid a registration fee of $4,355.27
in connection with the filing of the registration statement on Form S-1 (No. 333-249713) filed with the Securities and Exchange
Commission on October 28, 2020 to register 4,000,000 shares of common stock. The Registrant is paying concurrently herewith the
registration fee of $4,422.37 in connection with the registration of 2,173,339 shares of common stock.
The
registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until
the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this registration statement shall
become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
EXPLANATORY
NOTE
On
November 16, 2020, in connection with the consummation of our business combination with Eos Energy Storage LLC (“EES LLC”),
we entered in to a registration rights agreement with the former members of EES LLC pursuant to which we are obligated to
register all shares of common stock issued to such holders in connection with the business combination. On December 10, 2020 we
filed a registration statement on Form S-1 which included 29,644,680 shares of common stock issued upon the consummation of the
business combination, as required by the registration rights agreement. Such registration statement was declared effective as
of January 21, 2021. The registration statement also covered resales of up to 14,100,000 shares of common stock and warrants to
purchase 325,000 shares of common stock, which were registered pursuant to obligations set forth in a registration rights agreement
and warrant agreement entered into upon the consummation of our initial public offering.
On
January 21, 2021 the Company achieved certain milestones set forth in the merger agreement governing the terms of the business
combination, resulting in the issuance of an additional 1,994,171 shares of our common stock to former members of EES LLC (the
“Earnout Shares”) on February 11, 2021. Pursuant to the terms of the registration rights agreement, we are also obligated
to register the resale of the Earnout Shares and, accordingly, this registration statement contains a prospectus (the “Reoffer
Prospectus”) that covers the offering by the selling securityholders of up to 1,994,171 Earnout Shares. The inclusion of
the Earnout Shares in the Reoffer Prospectus is in satisfaction of our obligations under the registration rights agreement. The
inclusion of persons listed as selling securityholders as required under the registration rights agreement does not necessarily
represent a present intention on the part of such persons to sell any or all of such Earnout Shares.
The
Reoffer Prospectus also covers the offer and resale of (i) up to 79,531 shares of common stock that have been issued to Joe Mastrangelo,
the Company’s Chief Executive Officer and a director, upon vesting of restricted stock units granted to him under the Eos
Energy Enterprises, Inc. Amended and Restated 2012 Equity Incentive Plan, (ii) up to 5,015 shares of common stock issuable to
Mr. Mastrangelo upon issuance of the Earnout Shares, (iii) up to 748 shares of common stock issuable to Mack Treece, the Company’s
Chief Strategic Alliances Officer, upon satisfaction of certain vesting terms set forth in previously issued restricted stock
units held by Mr. Treece, and (iv) up to 98,882 shares of common stock that have been or may be issued to certain of the selling
securityholders upon exercise of options granted under such plan (together, the “Restricted Shares”). The Restricted
Shares are included in the Reoffer Prospectus to allow the holders thereof to reoffer and resell such Restricted Shares on a continuous
or delayed basis in the future irrespective of their classification as “restricted securities” (as such term is defined
in Rule 144 of the Securities Act). The inclusion of persons listed as selling securityholders does not necessarily represent
a present intention on the part of such persons to sell any or all of such Restricted Shares.
Finally,
as noted above in the “Statement Pursuant to Rule 429(b),” the Reoffer Prospectus will also cover the offer and resale
of up to 46,598,430 shares of common stock and 325,000 warrants to purchase common stock that are subject to currently effective
registration statements. The inclusion of these securities in the Reoffer Prospectus under Rule 429(b) is for administrative convenience
and does not represent the resale of any additional shares beyond what is covered by currently effective registration statements.
The inclusion of persons listed as selling securityholders with respect to such shares and warrants, either in the currently effective
registration statements or the Reoffer Prospectus, does not necessarily represent a present intention on the part of such persons
to sell any or all of such securities.
The
information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it
is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
SUBJECT
TO COMPLETION, DATED MARCH 8, 2021
PRELIMINARY
PROSPECTUS
EOS
ENERGY ENTERPRISES, INC.
48,771,777
Shares of Common Stock
325,000 Warrants to Purchase Common Stock
The
selling securityholders named in this prospectus may offer and sell from time to time up to 48,771,777 shares of our common stock,
par value $0.0001 per share, and warrants to purchase up to 325,000 shares of common stock, consisting of:
|
●
|
up
to 1,994,171 shares issued to former members of EES LLC upon achievement of certain earnout
milestones set forth in the Merger Agreement;
|
|
●
|
up
to (i) 74,531 shares of common stock issued to Joe Mastrangelo, the Company’s Chief
Executive Officer and a director, upon vesting of restricted stock units granted to him
under the Eos Energy Enterprises, Inc. Amended and Restated 2012 Equity Incentive Plan
(the “Plan”), and (ii) 5,015 shares of common stock issuable to Mr. Mastrangelo
in connection with the achievement of the earnout milestones;
|
|
●
|
up
to 748 shares of common stock issuable Mack Treece, the Company’s Chief Strategic
Alliances Officer, upon satisfaction of certain vesting terms set forth in previously
issued restricted stock units held by Mr. Treece;
|
|
●
|
up
to 98,882 shares of common stock issuable to certain of the selling securityholders upon
exercise of options granted under the Plan;
|
|
●
|
up
to 2,853,750 shares of common stock issued in a private placement in connection with
the business combination pursuant to the terms of the equity commitment letter and subscription
agreements;
|
|
●
|
up
to 4,375,000 shares of common stock originally issued in a private placement to the Sponsor
and subsequently distributed in part to certain BMRG directors and members of the Sponsor;
|
|
●
|
up
to 325,000 private placement warrants issued in a private placement to the Sponsor;
|
|
●
|
up
to 29,644,680 shares of common stock held by other selling securityholders of the Company;
and
|
|
●
|
up
to 650,000 shares of common stock that were a constituent part of the private placement
units.
|
In
addition, this prospectus relates to the offer and sale of up to 8,750,000 shares of common stock that are issuable by us upon
the exercise of the public warrants, which were previously registered, and up to 325,000 shares of common stock underlying private
placement warrants issued in a private placement to the Sponsor.
The selling securityholders
may offer, sell or distribute all or a portion of the securities hereby registered publicly or through private transactions at
prevailing market prices or at negotiated prices. We will not receive any of the proceeds from such sales of the shares of common
stock. We will bear all costs, expenses and fees in connection with the registration of these securities, including with regard
to compliance with state securities or “blue sky” laws. The selling securityholders will bear all commissions and discounts,
if any, attributable to their sale of shares of common stock. The inclusion of persons listed as selling securityholders does not
necessarily represent a present intention on the part of such persons to sell any or all of the securities hereby registered. See
“Plan of Distribution” beginning on page 92 of this prospectus.
We
are an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities
Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and we may take advantage
of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging
growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section
404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy
statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder
approval of any golden parachute payments not previously approved. This prospectus complies with the requirements that apply to
an issuer that is an emerging growth company.
Our common stock and
warrants are listed on The Nasdaq Capital Market under the symbols “EOSE” and “EOSEW”, respectively. On
March 4, 2021, the last reported sales price of our common stock was $18.13 per share and the last reported sales price of our
warrants was $6.48 per warrant.
Investing
in our securities involves a high degree of risk. You should review carefully the risks and uncertainties described under the
heading “Risk Factors” beginning on page 6 of this prospectus, and under similar headings in any amendment or supplements
to this prospectus. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved
of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal
offense.
The
date of this prospectus is , 2021.
Table
of Contents
You
should rely only on the information contained in this prospectus. No one has been authorized to provide you with information that
is different from that contained in this prospectus. This prospectus is dated as of the date set forth on the cover hereof. You
should not assume that the information contained in this prospectus is accurate as of any date other than that date.
We
have proprietary rights to trademarks, trade names and service marks appearing in this prospectus that are important to our business.
Solely for convenience, the trademarks, trade names and service marks may appear in this prospectus without the ® and ™
symbols, but any such references are not intended to indicate, in any way, that we forgo or will not assert, to the fullest extent
under applicable law, our rights or the rights of the applicable licensors to these trademarks, trade names and service marks.
All trademarks, trade names and service marks appearing in this prospectus are the property of their respective owners. We do
not intend our use or display of other parties’ trademarks, trade names or service marks to imply, and such use or display
should not be construed to imply, a relationship with, or endorsement or sponsorship of us by, these other parties.
For investors outside
the United States: We have not done anything that would permit this offering or possession or distribution of this prospectus in
any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States
who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering
of the shares of common stock and the distribution of this prospectus outside the United States.
FREQUENTLY
USED TERMS
Unless
otherwise stated or unless the context otherwise requires, the terms “Company,” “we,” “us,”
“our,” and “Eos” refer to Eos Energy Enterprises, Inc., a Delaware corporation, the term “BMRG”
refers to the Company prior to the consummation of the business combination. In this prospectus:
|
●
|
“AltEnergy”
means AltEnergy Storage VI, LLC.
|
|
●
|
“BRFBR”
means B. Riley Securities, Inc.
|
|
●
|
“B.
Riley Financial” means B. Riley Financial, Inc.
|
|
●
|
“BRPI”
means B. Riley Principal Investments, LLC.
|
|
●
|
“BMRG”
means B. Riley Principal Merger Corp. II.
|
|
●
|
“business
combination” means the acquisitions and transactions contemplated by the Merger Agreement, which were consummated as
of November 16, 2020.
|
|
●
|
“Charter”
means the third amended and restated certificate of incorporation of the Company.
|
|
●
|
“Class A
common stock” means the Class A common stock of BMRG, par value $0.0001 per share.
|
|
●
|
“Class B
common stock” means the Class B common stock of BMRG, par value $0.0001 per share.
|
|
●
|
“Closing”
means the closing of the business combination.
|
|
●
|
“Code”
means the Internal Revenue Code of 1986, as amended.
|
|
●
|
“common
stock” means the common stock of the Company, par value $0.0001 per share.
|
|
●
|
“DGCL”
means the General Corporation Law of the State of Delaware.
|
|
●
|
“Director
Nomination Agreement” means the director nomination agreement entered into at Closing between BMRG, the Sponsor, and
certain of our equityholders.
|
|
●
|
“EES
LLC” means Eos Energy Storage LLC.
|
|
●
|
“Equity
Commitment Letter” means the Equity Commitment Letter, dated September 7, 2020, by and between BMRG and B. Riley Financial.
|
|
●
|
“Exchange
Act” means the Securities Exchange Act of 1934, as amended.
|
|
●
|
“founder
shares” means the shares of Class B common stock purchased by BMRG’s initial stockholders.
|
|
●
|
“GAAP”
means United States generally accepted accounting principles, consistently applied, as in effect from time to time.
|
|
●
|
“IPO”
means the Company’s initial public offering, consummated on May 22, 2020, through the sale of 17,500,000 units at $10.00
per unit.
|
|
●
|
“Merger
Agreement” means the agreement and plan of merger, dated September 7, 2020, by and among BMRG, Merger Sub I, Merger
Sub II, Eos, Newco and AltEnergy.
|
|
●
|
“Merger
Sub I” means BMRG Merger Sub, LLC.
|
|
●
|
“Merger
Sub II” means BMRG Merger Sub II, LLC.
|
|
●
|
“Nasdaq”
means The Nasdaq Capital Market.
|
|
●
|
“Newco”
means New Eos Energy LLC.
|
|
●
|
“PIPE
Investment” means the private placement pursuant to which certain stockholders collectively subscribed for 4,000,000
shares of common stock at $10.00 per share, for an aggregate purchase price of $40,000,000.
|
|
●
|
“private
placement” means the private sale of the private placement units simultaneously with the closing of the IPO.
|
|
●
|
“private
placement shares” means the shares of common stock included in the private placement units.
|
|
●
|
“private
placement units” means the 650,000 units at $10.00 per private placement unit purchased by the Sponsor in the private
placement, each of which consists of one share of common stock and one-half of one private placement warrant.
|
|
●
|
“private
placement warrants” means the warrants underlying the private placement units issued in the private placement, each
of which is exercisable for one share of common stock at $11.50 per share.
|
|
●
|
“public
warrants” means the 8,750,000 redeemable warrants sold as part of the units in the IPO.
|
|
●
|
“SEC”
means the U.S. Securities and Exchange Commission.
|
|
●
|
“Securities
Act” means the Securities Act of 1933, as amended.
|
|
●
|
“Sponsor”
means B. Riley Principal Sponsor Co. II, LLC.
|
|
●
|
“Subscription
Agreements” means the subscription agreements between BMRG and certain other institutional investors related to the
issuance of Class A common stock.
|
|
●
|
“transfer
agent” means Continental Stock Transfer & Trust Company.
|
|
●
|
“trust
account” means the trust account established in connection with the IPO.
|
|
●
|
“units”
means the units of the Company, each consisting of one share of common stock and one-half of one redeemable warrant of the Company,
with each such warrant entitling the holder thereof to purchase one share of common stock at a price of $11.50 per share.
|
|
●
|
“warrants”
means the private placement warrants and public warrants.
|
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act of 1934. Forward-looking statements provide our current expectations or forecasts of future events. Forward-looking
statements include statements about our expectations, beliefs, plans, objectives, intentions, assumptions and other statements
that are not historical facts. The words “anticipates,” “believe,” “continue,” “could,”
“estimate,” “expect,” “intends,” “may,” “might,” “plan,”
“possible,” “potential,” “predicts,” “project,” “should,” “will,”
“would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean
that a statement is not forward-looking. There can be no assurance the future developments affecting us will be those that we
have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control)
or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by
these forward- looking statements. Forward-looking statements in this prospectus may include, but are not limited to, statements
about:
|
●
|
the
ability to maintain the listing of our common stock on Nasdaq;
|
|
●
|
our
ability to raise financing in the future;
|
|
●
|
our
success in retaining or recruiting, or changes required in, our officers, key employees or directors;
|
|
●
|
our
public securities’ potential liquidity and trading;
|
|
●
|
changes
adversely affecting the business in which we are engaged;
|
|
●
|
unfavorable
conditions or disruptions in the capital and credit markets;
|
|
●
|
our
ability to forecast trends accurately;
|
|
●
|
our
ability to generate cash, service indebtedness and incur additional indebtedness;
|
|
●
|
our ability to develop efficient manufacturing processes to scale and to forecast related costs and efficiencies accurately;
|
|
●
|
restrictive
covenants that may limit our business and our ability to engage in certain corporate and financial transactions;
|
|
●
|
our
ability to obtain capital on commercially reasonable terms;
|
|
●
|
fluctuations
in our revenue and operating results;
|
|
●
|
competition
from existing or new competitors;
|
|
●
|
risks
associated with security breaches in our information technology systems;
|
|
●
|
risks
related to legal proceedings or claims, including liability claims;
|
|
●
|
risks
related to labor disputes;
|
|
●
|
risks
associated with changes in federal, state, or local laws;
|
|
●
|
risks
associated with potential costs of regulatory compliance;
|
|
●
|
risks
associated with changes to U.S. trade policies;
|
|
●
|
risks
resulting from the impact of global pandemics, including the novel coronavirus, COVID-19;
|
|
●
|
general
economic conditions; 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. We undertake no obligation to update or revise
any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required
under applicable securities laws.
SUMMARY
OF THE PROSPECTUS
This
summary highlights selected information from this prospectus and does not contain all of the information that is important to
you in making an investment decision. This summary is qualified in its entirety by the more detailed information included in this
prospectus. Before making your investment decision with respect to our securities, you should carefully read this entire prospectus,
including the information under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition
and Results of Operations,” and the financial statements included elsewhere in this prospectus.
Unless
otherwise indicated or the context otherwise requires, references in this prospectus to “Company”, “we,”
“our,” “us” and other similar terms refer to Eos Energy Enterprises, Inc. and our consolidated subsidiaries.
All references to “BMRG” refer to the Company before the Closing.
General
We
design, manufacture and deploys reliable, sustainable, safe and scalable low-cost battery storage solutions for the electric utility
industry. Founded in 2008, we are focused on accelerating the growth of clean energy in the United States by deploying all
sizes of stationary battery storage solutions that deliver reliable and cost-competitive power in a safe and environmentally sustainable
way. Our flagship product, the Eos Znyth® DC battery system (“Eos Znyth® systems”),
is designed to meet the requirements of the grid-scale energy storage market, is commercially available and scalable, and is manufactured
in the United States. Zinc hybrid cathode (“Znyth®”) technology requires just five core commodity
materials that are derived from non-rare earth and non-conflict minerals, in addition to being fully recyclable. Our battery is
non-flammable and does not require any moving parts or pumps, which allows for simple upkeep and market-leading low-cost operations.
BMRG
was incorporated in Delaware in June 2019 as a blank check company under the name B. Riley Principal Merger Corp. II. On November
16, 2020, BMRG, EES LLC, BMRG Merger Sub, LLC (“Merger Sub I”), BMRG Merger Sub II, LLC (“Merger Sub II”),
New Eos Energy LLC (“Eos HoldCo”) and AltEnergy Storage VI, LLC (“AltEnergy”) consummated the transactions
contemplated by the Merger Agreement, following the approval at the special meeting of the stockholders of BMRG held on October
15, 2020. At the Closing, (1) Merger Sub I merged with and into Eos HoldCo, with Eos HoldCo continuing as the surviving company
and a wholly-owned subsidiary of the Company, and (2) Eos HoldCo then merged with and into Merger Sub II, with Merger Sub II continuing
as the surviving company and a wholly-owned subsidiary of the Company. In connection with the Closing, the registrant changed
its name from B. Riley Merger Corp. II to Eos Energy Enterprises, Inc., and Merger Sub II changed its name from BMRG Merger Sub
II, LLC to Eos Energy Enterprises Intermediate Holdings, LLC.
The
mailing address of our principal executive office is 3920 Park Avenue, Edison, NJ 08820, and our phone number is (732) 225-8400.
Our corporate website address is www.eosenergystorage.com. Information contained on or accessible through our website is not a
part of this prospectus, and the inclusion of our website address in this prospectus is an inactive textual reference only.
Summary
Risk Factors
Investing
in our securities involves risks. You should carefully consider the risks described in “Risk Factors” beginning
on page 6 before making a decision to invest in our common stock. If any of these risks actually occurs, our business, financial
condition and results of operations would likely be materially adversely affected. In such case, the trading price of our securities
would likely decline, and you may lose all or part of your investment. Set forth below is a summary of some of the principal risks
we face:
Risks
Related to Our Business and Industry
|
●
|
We
have a history of losses and have to deliver significant business growth to achieve sustained, long-term profitability and long-term
commercial success.
|
|
●
|
We
identified material weaknesses in our internal control over financial reporting at December 31, 2020 and 2019, and we may identify
additional material weaknesses in the future that may cause us to fail to meet our reporting obligations or result in material
misstatements of our financial statements. If we fail to remediate these material weaknesses or if we otherwise fail to establish
and maintain effective control over financial reporting, our ability to accurately and timely report our financial results could
be adversely affected.
|
|
●
|
The
relatively recent commercialization of our products makes it difficult to evaluate our future prospects.
|
|
●
|
If
demand for low-cost energy storage solutions does not continue to grow or grows at a slower rate than we anticipate, our business
and results of operations may be impacted.
|
|
●
|
Failure
to deliver the benefits offered by our technologies, or the emergence of improvements to competing technologies, could reduce
demand for our products and harm our business.
|
|
●
|
As
we endeavor to expand our business, we will incur significant costs and expenses, which could outpace our cash reserves. Unfavorable
conditions or disruptions in the capital and credit markets may adversely impact business conditions and the availability of credit.
|
|
●
|
The
loss of one or more members of our senior management team or other key personnel or our failure to attract additional qualified
personnel may adversely affect our business and our ability to achieve our anticipated level of growth.
|
|
●
|
The
failure or breach of our IT systems could affect our sales and operations.
|
|
●
|
We
are exposed to various risks related to legal proceedings or claims that could adversely affect our operating results. The nature
of our business exposes us to various liability claims, which may exceed the level of our insurance coverage resulting in us not
being fully protected.
|
Risks
Related to our Products and Manufacturing
|
●
|
We
must obtain environmental, health and safety certifications for our Gen 2.3 product.
|
|
●
|
Compared
to traditional energy storage technologies, our products have less power density and round-trip efficiency and may be considered
inferior to competitors’ products.
|
|
●
|
We
rely on our contract manufacturer and its respective business practices to manufacture our products.
|
|
●
|
We
may experience difficulties in establishing manufacturing capacity to scale and estimating potential cost savings and efficiencies
from anticipated improvements to our manufacturing capabilities.
|
|
●
|
We
may experience delays, disruptions, or quality control problems in our manufacturing operations.
|
|
●
|
We
may not have sufficient insurance coverage to cover business continuity.
|
|
●
|
Defects
or performance problems in our products could result in loss of customers, and decreased revenue, as well as warranty, indemnity,
and product liability claims.
|
|
●
|
If
we elect to expand our production capacity by constructing one or more new manufacturing facilities, we may encounter challenges
relating to the construction, management and operation of such facilities.
|
Risks
Related to our Future Growth
|
●
|
If
we fail to manage our recent and future growth effectively, we may be unable to execute our business plan, maintain high levels
of customer service, or adequately address competitive challenges.
|
|
●
|
We
will require additional financing to achieve our goals and a failure to obtain this capital on acceptable terms, or at all, may
adversely impact our ability to support our business growth strategy.
|
|
●
|
Our
planned expansion into new geographic markets or new product lines or services could subject us to additional business, financial,
and competitive risks.
|
|
●
|
Our
results of operations may fluctuate from quarter to quarter, which could make our future performance difficult to predict and
could cause our results of operations for a particular period to fall below expectations, resulting in a decline in the price
of our common stock.
|
|
●
|
Forecasts
of market growth in this prospectus may not be accurate.
|
Risks
Related to our United States and Foreign Operations
|
●
|
The
reduction, elimination or expiration of government subsidies and economic incentives
related to renewable energy solutions could reduce demand for our technologies and harm
our business.
|
|
●
|
Changes
in the U.S. trade environment, including the recent imposition of import tariffs, could adversely affect the amount or timing
of our revenues, results of operations or cash flows.
|
|
●
|
Changes
in applicable law, regulations or requirements, or our material failure to comply with any of them, can increase our costs and
have other negative impacts on our business.
|
|
●
|
We
could be adversely affected by any violations of the FCPA, the U.K. Bribery Act, and other foreign anti-bribery laws, as well
as violations against export controls and economic embargo regulations.
|
Risks
Related to Intellectual Property
|
●
|
If
we fail to protect, or incur significant costs in defending, our intellectual property and other proprietary rights, then our
business and results of operations could be materially harmed.
|
|
●
|
Third
parties may assert that we are infringing upon their intellectual property rights, which could divert management’s attention,
cause us to incur significant costs, and prevent us from selling or using the technology to which such rights relate.
|
Risk
Related to Our Securities
|
●
|
Provisions
in our Charter may inhibit a takeover of us, which could limit the price investors might be willing to pay in the future for our
common stock and could entrench management.
|
|
●
|
Future
resales of common stock may cause the market price of our securities to drop significantly,
even if our business is doing well.
|
|
●
|
We
may redeem the public warrants prior to their exercise at a time that is disadvantageous
to such warrant holders, thereby making your public warrants worthless.
|
|
●
|
Our
stock price may be volatile and may decline regardless of our operating performance.
|
|
●
|
There
can be no assurance that the warrants will be in the money at the time they become exercisable,
and they may expire worthless.
|
|
●
|
There
can be no assurance that our common stock will be able to comply with the continued listing
standards of Nasdaq.
|
|
●
|
We
are currently an emerging growth company and a smaller reporting company within the meaning
of the Securities Act, and that status could make our securities less attractive to investors.
|
THE
OFFERING
Securities
offered by the selling securityholders
|
|
We
are registering the resale by the selling securityholders named in this prospectus, or their permitted transferees, of an aggregate
of 48,771,777 shares of common stock and warrants to purchase 325,000 shares of common stock, which includes:
|
|
●
|
up
to 1,994,171 shares issued to former members of EES LLC upon achievement of certain milestones set forth in the Merger Agreement;
|
|
●
|
up
to (i) 74,531 shares of common stock issued to Joe Mastrangelo, the Company’s Chief Executive Officer and a director, upon
vesting of restricted stock units granted to him under the Plan, and (ii) 5,015 shares of common stock issuable to Mr. Mastrangelo
in connection with the achievement of the earnout milestones;
|
|
●
|
up
to 748 shares of common stock issuable Mack Treece, the Company’s Chief Strategic Alliances Officer, upon satisfaction of
certain vesting terms set forth in previously issued restricted stock units held by Mr. Treece;
|
|
●
|
up
to 98,882 shares of common stock issuable to certain of the selling securityholders upon exercise of options granted under the
Plan;
|
|
●
|
up
to 2,853,750 shares of common stock issued in a private placement in connection with the business combination pursuant to the
terms of the equity commitment letter and subscription agreements;
|
|
●
|
up
to 4,375,000 shares of common stock originally issued in a private placement to the Sponsor and subsequently distributed in part
to certain BMRG directors and members of the Sponsor;
|
|
●
|
up
to 325,000 private placement warrants issued in a private placement to the Sponsor;
|
|
●
|
up
to 29,644,680 shares of common stock held by other selling securityholders of the Company; and
|
|
●
|
up
to 650,000 shares of common stock that were a constituent part of the private placement units.
|
|
|
In
addition, we are registering up to 8,750,000 shares of common stock issuable upon exercise of the public warrants that
were previously registered and up to 325,000 shares of common stock underlying private placement warrants issued in a
private placement to the Sponsor.
|
|
|
|
Terms
of the Offering
|
|
The
selling securityholders will determine when and how they will dispose of the shares of common stock and warrants registered under
this prospectus for resale.
|
|
|
|
Shares
outstanding prior to the
offering(1)
|
|
As
of March 4, 2021, we had 51,801,259 shares of common stock issued and outstanding.
|
|
|
|
Shares
outstanding after the offering(1)
|
|
60,975,825
shares of common stock (assuming (i) the exercise for cash of options to purchase 98,882 shares of common stock, (ii) the issuance
of 748 shares of common stock to Mr. Treece, and (iii) the exercise for cash of warrants to purchase 9,075,000 shares of common
stock).
|
Use
of proceeds
|
|
We
will not receive any of the proceeds from the sale of the warrants or shares of common stock by the selling securityholders except
with respect to amounts received by us due to the exercise of the warrants or options. We expect to use the proceeds received
from the exercise of the warrants or options, if any, for working capital and general corporate purposes.
|
|
|
|
Nasdaq
ticker symbol
|
|
Our
common stock and warrants are listed on Nasdaq under the symbols “EOSE” and “EOSEW.”
|
|
(1)
|
The
number of shares of our common stock to be outstanding prior to and after this offering is based on shares of our common stock
outstanding as of March 4, 2021, and excludes:
|
|
●
|
2,143,636
shares of our common stock issuable upon the exercise of stock options outstanding as
of March 4, 2021, at a weighted-average exercise price of $9.19 per share; and
|
|
●
|
3,843,727
additional shares of our common stock reserved for future issuance under our 2020 Incentive
Plan, or our Amended and Restated 2012 Equity Incentive Plan, as well as any automatic
increases in the number of shares of our common stock reserved for future issuance under
our 2020 Incentive Plan; and
|
|
●
|
9,075,000
shares of our common stock issuable upon the exercise of warrants to purchase common
stock outstanding as of March 4, 2020, at an exercise price of $11.50 per share.
|
Unless
otherwise indicated, this prospectus reflects and assumes no exercise of outstanding options or warrants after March 4, 2021.
RISK
FACTORS
An
investment in our securities involves a high degree of risk. You should carefully consider the risks described below before making
an investment decision. Our business, prospects, financial condition, or operating results could be harmed by any of these risks,
as well as other risks not known to us or that we consider immaterial as of the date of this prospectus. The trading price of
our securities could decline due to any of these risks, and, as a result, you may lose all or part of your investment.
Risks
Related to Our Business and Industry
We
have a history of losses and have to deliver significant business growth to achieve sustained, long-term profitability and long-term
commercial success.
We
have had net losses on a GAAP basis in each fiscal quarter since inception of our business. For the year ended December 31,
2020 and 2019, we had $68.8 million and $79.5 million in net losses, respectively. Although our available capital has increased
substantially with our Merger with BMRG, we continue to have limited resources relative to certain of our competitors, especially
certain Li-ion manufacturers that have a longer history, are part of large multinational corporations and are already operating
at a profit. In order to achieve profitability as well as long-term commercial success, we must continue to execute our plan to
expand our business, which will require us to deliver on our existing global sales pipeline in a timely manner, increase our production
capacity, grow demand for our products, continue to decrease the cost of our products, and seize new market opportunities by leveraging
our proprietary technology and its manufacturing processes for novel solutions. Failure to do one or more of these things could
prevent us from achieving sustained, long-term profitability.
As
we transition from our research and development and our system pilot phase and into a full commercial phase, we expect, based
on our sales pipeline, to grow revenues. However, our revenue may not grow as expected for a number of reasons, many of which
are outside of our control, including a decline in global demand for battery storage products, increased competition, or our failure
to continue to capitalize on growth opportunities. If we are not able to sustain revenue growth and continue to raise the capital
necessary to support operations, we may be unable to continue as a going concern.
We
identified material weaknesses in our internal control over financial reporting at December 31, 2020 and 2019, and we may
identify additional material weaknesses in the future that may cause us to fail to meet our reporting obligations or result in
material misstatements of our financial statements. If we fail to remediate these material weaknesses or if we otherwise fail
to establish and maintain effective control over financial reporting, our ability to accurately and timely report our financial
results could be adversely affected.
As
a public company, we are required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley
Act, which requires management to certify financial and other information in our quarterly and annual reports and provide an annual
management report on the effectiveness of controls over financial reporting. Though we are required to disclose changes made in
our internal controls and procedures on a quarterly basis, we will not be required to make our first annual assessment of our
internal control over financial reporting pursuant to Section 404 until the year following our first annual report required to
be filed with the SEC, which will be the year ended December 31, 2021. Further, as an emerging growth company, our independent
registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial
reporting pursuant to Section 404 until the later of the year following our first annual report required to be filed with the
SEC and the year in which revenues are $100 million or greater, or the date we no longer are an emerging growth company. At such
time, our independent registered public accounting firm may issue a report with an adverse opinion on our internal controls over
financial reporting in the event our controls are not effective.
Notwithstanding
the foregoing, in connection with the audits of our financial statements for the years ended December 31, 2020 and 2019,
we and our auditors identified certain control deficiencies in the design and operation of our internal control over financial
reporting that constituted material weaknesses. A material weakness is a deficiency, or a combination of deficiencies, in internal
control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements
will not be prevented or detected on a timely basis.
The
material weaknesses resulted from our lack of (i) a formalized internal control framework, (ii) segregation of duties in the financial
reporting process, (iii) review and approval of journal entries, and (iv) management review controls. These remain material weaknesses
as of the date of this report. Although these material weaknesses have not been remediated, we have taken and will continue to
take steps to strengthen our accounting function and plan to hire additional professionals to accommodate the expansion of our
business. In addition, we are in the process of implementing, and plan to continue to implement, new controls, processes and technologies
to improve our internal controls over financial reporting. We cannot provide any assurances that the measures that we have taken
and are planning to take to remediate these material weaknesses will be sufficient to prevent future material weaknesses from
occurring. We also cannot assure you that we have identified all of our existing material weaknesses.
In
light of the control deficiencies and the resulting material weaknesses that were identified, we believe that it is possible that,
had we and our registered public accounting firm performed an assessment or audit, respectively, of our internal control over
financial reporting in accordance with the provisions of the Sarbanes-Oxley Act, additional material weaknesses may have been
identified.
When
evaluating our internal control over financial reporting, we may identify material weaknesses that we may not be able to remediate
in time to meet the applicable deadline for compliance with the requirements of Section 404. If we are unable to remediate our
existing material weaknesses or identify additional material weaknesses and are unable to comply with the requirements of Section
404 in a timely manner or assert that our internal control over financial reporting is effective, or if our independent registered
public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting
once we are no longer an emerging growth company, investors may lose confidence in the accuracy and completeness of our financial
reports and the market price of our common stock could be negatively affected, and we could become subject to investigations by
the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which could require additional
financial and management resources.
The
relatively recent commercialization of our products makes it difficult to evaluate our future prospects.
Since
our inception, we sold only ten (10) Eos Znyth® DC battery systems to our customers. We began commercializing our products
in mid-2018, and while our research and development activities successfully established the efficiency of our chemistry we struggled
to incorporate our proven technologies into an effective manufacturing design prior to 2018. Although the relatively long research
and development runway has given us the time to refine our designs and optimize our technologies, the latest generation of our
products have been brought to market only recently.
Our
success will depend on our ability to manufacture products at scale and low cost while timely meeting customers’ demands,
and overcome any negative perception in the market related to our historical manufacturing challenges, and we may not be able
to generate sufficient customer confidence in our latest designs and ongoing product improvements and lower the cost due to economies
of scale. Our inability to predict the extent of customer adoption of our proprietary technologies in the already-established
traditional energy storage market makes it difficult to evaluate our profitability and future prospects.
If
demand for low-cost energy storage solutions does not continue to grow or grows at a slower rate than we anticipate, our business
and results of operations may be impacted.
Our
flagship product, the Eos Znyth® system, is a Znyth® battery that can be used as an alternative to lithium-ion (“Li-ion”)
batteries. Our products are being piloted by eight blue chip utilities and commercial and industrial (“C&I”) end
users. The pilots are being used on several use cases including solar shifting, peak shaving, price arbitrage, utility ancillary
services and microgrids. We cannot provide any assurances that utilities or C&I users will adopt our products as alternative
energy storage solutions at levels sufficient to grow our business.
The
viability and demand for our products, may be affected by many factors outside of our control, including:
|
●
|
cost
competitiveness, reliability and performance of our products compared to Li-ion products;
|
|
●
|
levels
of investment by end users of energy storage products, which may decrease when economic
growth or energy demand slows resulting in a reduction in battery purchases generally;
|
|
●
|
expansion
of electricity use across the global economy, including growth of the electric vehicle
market. If electric vehicles sales slow, thus diminishing the demand for Li-ion, then
Li-ion competitors could move capacity to the stationary battery storage market to avoid
shutting factories, which could put pressures on pricing in the market;
|
|
●
|
strength
of the renewable energy industry and associated integration opportunities for our products;
|
|
●
|
a
favorable regulatory landscape, including: full adoption by the states in the US of FERC
Order 841, which mandates that battery storage can participate in the demand response
and ancillary markets; incentives for the implementation of battery storage by state
regulators; and adoption by Congress of an investment tax credit for standalone battery
storage; and
|
|
●
|
the
emergence, continuance or success of other alternative energy storage technologies and
products.
|
If
we do not manage these risks and overcome these potential difficulties outside of our control successfully, our business and results
of operations may suffer.
Failure
to deliver the benefits offered by our technologies, or the emergence of improvements to competing technologies, could reduce
demand for our products and harm our business.
We
believe that, compared to Li-ion batteries, our energy storage solutions offer significant benefits, including the use of widely-available
and low-cost materials with no rare earth components, full recyclability at end-of-life, a fifteen (15) to thirty (30) year product
life requiring minimal maintenance, and a wide thermal operating range that eliminates the need for fire suppression and HVAC,
which would otherwise be required for use with Li-ion batteries.
However,
if our manufacturing costs increase, or if our expectations regarding the operation, performance, maintenance and disposal of
our products are not realized, we could have difficulty marketing our products as a superior alternative to already-established
technologies and impact the market reputation and adaptability of our products. In addition, developments of existing and new
technologies could improve their cost and usability profile, reducing any relative benefits currently offered by our products
which would negatively impact the likelihood of our products gaining market acceptance.
As
we endeavor to expand our business, we will incur significant costs and expenses, which could outpace our cash reserves. Unfavorable
conditions or disruptions in the capital and credit markets may adversely impact business conditions and the availability of credit.
We
expect to incur additional costs and expenses in the future related to the continued development and expansion of our business,
including in connection with expanding our manufacturing capabilities to significantly increase production capacity, developing
our products, maintaining and enhancing our research and development operations, expanding our sales, marketing, and business
development activities in the United States and internationally, and growing our project management, field services and overall
operational capabilities for delivering projects. We do not know whether our revenues will grow rapidly enough to absorb these
costs or the extent of these expenses or their impact on our results of operations.
Disruptions
in the global capital and credit markets as a result of an economic downturn, economic uncertainty, changing or increased regulation,
or failures of significant financial institutions could adversely affect our customers’ ability to access capital and could
adversely affect our access to liquidity needed for business in the future. Our business could be hurt if we are unable to obtain
additional capital as required, resulting in a decrease in our revenues and profitability.
The
loss of one or more members of our senior management team or other key personnel or our failure to attract additional qualified
personnel may adversely affect our business and our ability to achieve our anticipated level of growth.
We
depend on the continued services of our senior management team, including our chief executive officer, chief strategic alliance
officer, chief commercial officer and chief financial officer, and other key personnel, each of whom would be difficult to replace.
The loss of any such personnel could have a material adverse effect on our business and our ability to implement our business
strategy. All of our employees, including our senior management, are free to terminate their employment relationships with us
at any time. We do not maintain key-person insurance for any of our employees, including senior management.
Additionally,
our ability to attract qualified personnel, including senior management and key technical personnel, is critical to the execution
of our growth strategy. Competition for qualified senior management personnel and highly skilled individuals with technical expertise
is extremely intense. We face and are likely to continue to face challenges identifying, hiring, and retaining qualified personnel
in all areas of our business. In addition, integrating new employees into our team could prove disruptive to our operations, require
substantial resources and management attention, and ultimately prove unsuccessful. Our failure to attract and retain qualified
senior management and other key technical personnel could limit or delay our strategic efforts, which could have a material adverse
effect on our business, financial condition, results of operations, and prospects.
Third
parties might attempt to gain unauthorized access to our network or seek to compromise our products and services.
From
time to time, we may face attempts by others to gain unauthorized access through the Internet or to introduce malicious software
to our IT systems. We or our products may be a target of computer hackers, organizations or malicious attackers who attempt to:
|
●
|
gain
access to our network or data centers or those of our customers;
|
|
●
|
steal
proprietary information related to our business, products, employees, and customers;
|
|
●
|
or
interrupt our systems or those of our customers.
|
From
time to time, we encounter intrusions or attempts at gaining unauthorized access to our network and we routinely run intrusion
checks. To date, none has resulted in any material adverse impact to our business or operations; however, there can be no guarantee
that such intrusions will not be material in the future. While we seek to detect and investigate all unauthorized attempts and
attacks against our network and products, and to prevent their recurrence where practicable through changes to our internal processes
and tools and/or changes to our products, we remain potentially vulnerable to additional known or unknown threats. In addition
to intentional third-party cyber-security breaches, the integrity and confidentiality of company and customer data may be compromised
as a result of human error, product defects, or technological failures. Cybersecurity breaches, whether successful or unsuccessful,
and other IT system interruptions, including those resulting from human error and technological failures, could result in us incurring
significant costs related to, for example, rebuilding internal systems, reduced inventory value, providing modifications to our
products and services, defending against litigation, responding to regulatory inquiries or actions, paying damages, or taking
other remedial steps with respect to third parties.
The
failure or breach of our IT systems could affect our sales and operations.
Our
email and collaboration tools are outsourced to a managed services provider, Delval Technology Solutions (“DTS”).
While we regularly review the cyber security tools and other security protection provided by DTS and DTS regularly runs intrusion
and other security tests on services provided to us, there can be no guarantee that a failure or breach of such systems will not
occur. We operate a number of IT systems throughout our business that could fail for a variety of reasons, including the threats
of unauthorized intrusions and attackers. If such failures were to occur, we may not be able to sufficiently recover to avoid
the loss of data or any adverse impact on our operations that are dependent on such IT systems. This could result in lost sales
as we may not be able to meet the demands for our product.
Furthermore,
because our IT systems are essential for the exchange of information both internally and in communicating with third parties,
including our suppliers and manufacturers, cyber-security breaches could potentially lead to the unauthorized release of sensitive,
confidential or personal data or information, improper use of our systems, or, unauthorized access, use, disclosure, modification
or destruction of information or defective products. If these cyber-security breaches continue, our operations and ability to
communicate both internally and with third parties may be negatively impacted. Additionally, if we try to remediate our cyber-security
problems, we could face significant unplanned capital investments and any damage or interruption could have a material adverse
effect on our reputation, business, financial condition, and results of operations.
We
may not be able to identify or complete transactions with attractive acquisition candidates. Future acquisitions may result in
significant transaction expenses and we may incur significant costs. We may experience integration and consolidation risks associated
with these future acquisitions.
We
may from time to time selectively pursue on an opportunistic basis acquisitions of additional businesses that complement our existing
business and footprint. The success of any such growth strategy would depend, in part, on selecting strategic acquisition candidates
at attractive prices and effectively integrating their businesses into our own, including with respect to financial reporting
and regulatory matters. There can be no assurance that we will be able to identify attractive acquisition candidates or complete
the acquisition of any identified candidates at favorable prices and upon advantageous terms and conditions, including financing
alternatives.
We
may not have sufficient management, financial and other resources to integrate and consolidate any future acquisitions. Any significant
diversion of management’s attention or any major difficulties encountered in the integration of the businesses we acquire
could have a material adverse effect on our business, financial condition or results of operations, which could decrease our profitability
and make it more difficult for us to grow our business. Among other things, these integration risks could include:
|
●
|
the
loss of key employees;
|
|
●
|
the
disruption of operations and business;
|
|
●
|
the
retention or transition of customers and vendors;
|
|
●
|
the
integration of corporate cultures and maintenance of employee morale;
|
|
●
|
inability
to maintain and increase competitive presence;
|
|
●
|
customer
loss and revenue loss;
|
|
●
|
possible
inconsistencies in standards, control procedures and policies;
|
|
●
|
problems
with the assimilation of new operations, sites or personnel, which could divert resources
from our regular operations;
|
|
●
|
integration
of financial reporting and regulatory reporting functions; and/or
|
|
●
|
potential
unknown liabilities.
|
In
addition, general economic conditions or unfavorable capital and credit markets could affect the timing and extent to which we
can successfully acquire or integrate new businesses, which could limit our revenues and profitability.
We
are exposed to various risks related to legal proceedings or claims that could adversely affect our operating results. The nature
of our business exposes us to various liability claims, which may exceed the level of our insurance coverage resulting in us not
being fully protected.
We
are a party to lawsuits in the normal course of our business. Litigation can be expensive, lengthy and disruptive to normal business
operations. Moreover, the results of complex legal proceedings are difficult to predict. Responding to lawsuits brought against
us, or legal actions that we may initiate, can be expensive and time-consuming. Unfavorable outcomes from these claims and/or
lawsuits could adversely affect our business, results of operations, or financial condition, and we could incur substantial monetary
liability and/or be required to change our business practices.
Our
business may expose us to claims for personal injury, death or property damage resulting from the use of our products or from
employee related matters. Additionally, we could be subject to potential litigation associated with compliance with various laws
and governmental regulations at the federal, state or local levels, such as those relating to the protection of persons with disabilities,
employment, health, safety, security and other regulations under which we operate.
As
disclosed at the time of the Merger Agreement, prior to the execution and delivery of the Merger Agreement, a former director
and unitholder of EES asserted claims against another director and affiliated investors questioning the dilutive effect of certain
historical security issuances on the former EES common unitholders. Since these allegations and claims relate to a historical
dispute between the former EES unitholders regarding their relative ownership amounts of EES prior to the business combination,
we do not believe these allegations implicate the Company. Consistent with the intra-unitholder nature of this dispute, and as
was disclosed at the time of the Merger Agreement, the Merger Agreement requires the former EES unitholders to indemnify the Company
and EES for any losses related to such potential claims. These indemnification obligations are secured by a pledge and grant to
the Company of a first priority lien on forty percent (40%) of the shares of Company common stock that each former EES unitholder
became eligible to receive under the Merger Agreement at closing.
As
part of the Merger Agreement, the Company agreed to advance up to $5,000,000 of defense costs that may be incurred on behalf of
the former EES unitholders in connection with the investigation, defense or settlement of any such potential claims. The first
$2,000,000 of any such defense costs are to be borne by the Company, and any additional advance amounts are to be reimbursed by
the former unitholders of EES on a pro-rata basis. We will continue to monitor this dispute and its potential implications to
our business and personnel.
We
carry comprehensive insurance, subject to deductibles, at levels we believe are sufficient to cover existing and future claims
made during the respective policy periods. However, we may be exposed to multiple claims, and, as a result, could incur significant
out-of-pocket costs before reaching the deductible amount, which could adversely affect our financial condition and results of
operations. In addition, the cost of such insurance policies may increase significantly upon renewal of those policies as a result
of general rate increases for the type of insurance we carry as well as our historical experience and experience in our industry.
Although we have not experienced any material losses that were not covered by insurance, our existing or future claims may exceed
the coverage level of our insurance, and such insurance may not continue to be available on economically reasonable terms, or
at all. If we are required to pay significantly higher premiums for insurance, are not able to maintain insurance coverage at
affordable rates or must pay amounts in excess of claims covered by our insurance, then we could experience higher costs that
could adversely affect our financial condition and results of operations.
Labor
disputes could disrupt our ability to serve our customers and/or lead to higher labor costs.
As
of December 31, 2020, we had eighty-four (84) employees with eighty-three (83) full-time employees and one (1) part-time
employee, none of whom are represented by unions or covered by collective bargaining agreements. If a union sought to organize
any of our employees, such organizing efforts or collective bargaining negotiations could potentially lead to work stoppages and/or
slowdowns or strikes by certain of our employees, which could adversely affect our ability to serve our customers. Further, settlement
of actual or threatened labor disputes or an increase in the number of our employees covered by collective bargaining agreements
can have unknown effects on our labor costs, productivity and flexibility.
Risks
Related to our Products and Manufacturing
We
must obtain environmental, health and safety certifications for its Gen 2.3 product.
While
our engineering is working closely with the Underwriters Laboratories (“UL”) and Technischer Überwachungsverein
(“TÜV”) certification agencies to certify its Gen 2.3 product against all applicable safety standards, there
is no guarantee that such certification shall be obtained. Based on these North American certifications, we also intend to expand
our Gen 2.3 product certification to other national standards such as European Conformity (“CE”) marking in the European
Union and the international certification of the International Electrotechnical Commission (“IEC”). Failure to obtain
UL, IEC or CE certification would have a significant impact on our revenues, as such certifications are required by most of our
customers. As Battery Storage is a relatively new market segment, additional rules will be introduced and regulation changes will
occur. We must continue to adapt and ensure conformity to new standards and regulations introduced in the market.
Compared
to traditional energy storage technologies, our products have less power density and roundtrip efficiency and may be considered
inferior to competitors’ products.
Traditional
Li-ion batteries offer higher power density and a lower self-discharge rate than our batteries. If customers were to place greater
value on power density and efficient power delivery over the numerous other advantages of our technologies, including the widely-available
and low-cost materials with no rare earth components, full recyclability at end-of-life, a fifteen (15) to thirty (30) year product
life requiring minimal maintenance, and a wide thermal operating range that eliminates the need for fire suppression and HVAC,
then we could have difficulty positioning our batteries as a viable alternative to traditional Li-ion batteries and our business
would suffer.
We
rely on our contract manufacturer and its respective business practices to manufacture our products.
On
August 21, 2019, we entered into a joint venture agreement with Holtec Power, Inc (“Holtec”) and formed HI-POWER,
LLC (“HI-POWER”), which is owned 51% by Holtec and 49% by us. While we are free to either establish our own manufacturing
capability, form a joint venture with another party, or hire a contract manufacturing partner to manufacture batteries and products
delivered outside of North America, HI-POWER has exclusive rights to manufacture batteries sold and delivered in North America
by us, provided that HI-POWER meets cost, quality and delivery “performance metrics” as defined by HI-POWER’s
board of directors and the applicable joint venture arrangements between Holtec and us. HI-POWER’s board of directors is
comprised of two members designated by Holtec and two members designated by us. Actions of the board must generally be approved
by a majority of the directors, except for certain actions that require unanimous approval.
We
rely on HI-POWER’s board of directors’ oversight, including that of the two members designated by us who are also
executives of EOS, to ensure that HI-POWER follows ethical business practices such as fair wage practices and compliance with
environmental, safety, and other local laws. A lack of demonstrated compliance could lead us to seek alternative manufacturers,
which could increase our costs and result in delayed delivery of our products, product shortages, or other disruptions of our
operations. Violation of labor or other laws by HI-POWER or the divergence of a manufacturer’s labor or other practices
from those generally accepted as ethical in the United States or other markets in which we do business could also attract negative
publicity for us and harm our business.
We
may experience difficulties in establishing manufacturing capacity to scale and estimating potential cost savings and efficiencies
from anticipated improvements to our manufacturing capabilities.
To
date, our Joint Venture has only manufactured batteries in limited quantities primarily for R&D activities and to a
limited extend for commercial customers. The output achieved to date is a fraction of what the Company expects will be
necessary for full commercialization and to meet the demand we see in the market for our product. The manufacturing process
for commercial scale is still being refined and improved. There are risks associated with scaling up manufacturing to
commercial volumes including, among others, technical or other problems with process scale-up, process reproducibility,
stability issues, quality consistency, timely availability of raw materials and cost overruns. There is no assurance that the
Company’s manufacturer will be successful in establishing a larger-scale commercial manufacturing process that achieves
our objectives for manufacturing capacity and cost per battery, in a timely manner or at all. If we are unable to produce
sufficient quantities of product for commercialization on a timely basis and in a cost-effective manner, the Company’s
commercialization efforts would be impaired which could materially affect our business, financial condition, results of
operations and growth prospects.
We
may experience delays, disruptions, or quality control problems in our manufacturing operations.
Our
current manufacturing and testing processes do not require significant technological or production process expertise. However,
any change in our processes could cause one or more production errors, requiring a temporary suspension or delay in our production
line until the errors can be researched, identified, and properly addressed and rectified. This may occur particularly as we introduce
new products, modify our engineering and production techniques, and/or expand our capacity. In addition, our failure to maintain
appropriate quality assurance processes could result in increased product failures, loss of customers, increased warranty reserve,
decreased production, and logistical costs and delays. Any of these developments could have a material adverse effect on our business,
financial condition, and results of operations.
The
ongoing Covid-19 pandemic has caused significant uncertainty in the United States and global economies as well as the markets
we serve and could adversely affect our business, results of operations and financial condition.
The
Covid-19 pandemic continues to spread throughout the United States and in various parts of the world and has resulted in authorities
implementing numerous measures to contain the virus, including travel bans and restrictions, quarantines, shelter-in-place orders,
and business limitations and shutdowns. We remain unable to accurately predict the full impact that Covid-19 will have on our
results of operations, financial condition, liquidity and cash flows due to numerous uncertainties, including the duration and
severity of the pandemic and containment measures. Our compliance with containment and mitigation measures has not yet materially
impacted our day-to-day operations, but there can be no guaranty that the pandemic will not disrupt our business and operations
or impair our ability to implement our business plan successfully.
To
support the health and well-being of our employees, customers, partners and communities, since approximately March 19, 2020 all
of our non-essential employees have been working remotely. This represents approximately 78% of our workforce. In addition, we
understand that the employees of many of our customers are working remotely, which may delay the timing of some orders as well
as shipments and cash collections. There can be no guaranty that disruptions, such as staff not being allowed to enter our manufacturing
facility or our supply chain being disrupted, to our operations caused by Covid-19 will not result in inefficiencies, delays and
additional costs in our product development, sales, marketing, and customer service efforts that we cannot fully mitigate through
remote or other alternative work arrangements. For example, Covid-19 caused a several week delay in completing the UL certification
of the Gen 2.3 product due to the certification company being delayed in completing the in-person witness tests.
More
generally, the pandemic raises the possibility of an extended global economic downturn and has caused volatility in financial
markets, which could affect demand for our products and services and impact our results and financial condition even after the
pandemic is contained and the shelter-in-place orders are lifted. For example, we may be unable to collect receivables from those
customers significantly impacted by Covid-19. Also, a decrease in orders in a given period could negatively affect our revenues
in future periods, particularly if experienced on a sustained basis. The pandemic may also have the effect of heightening many
of the other risks described in these “Risk Factors”, particularly those risks associated with our customers and supply
chain.
We
may not have sufficient insurance coverage to cover business continuity.
We
rely on a single-source joint venture manufacturer. As a result, a sustained or repeated interruption in the manufacturing of
our products by HI-POWER due to labor shortage, fire, flood, war, pandemic or natural disasters may interfere with our ability
to manufacture our products and fulfil customers’ demands in a timely manner. Failure to manufacture our products and meet
customer demands would impair our ability to generate revenues which would adversely affect our financial results.
Defects
or performance problems in our products could result in loss of customers, reputational damage, and decreased revenue, facing
warranty, indemnity, and product liability claims that may arise from defective products.
Since
our inception, our business objectives have been focused on producing a safe, low-cost grid-scale energy storage solution to meet
the increasing demand for and adoption of renewable energy generation assets. The current Gen 2.3 battery design has after years
of research and prototype development resulted in robust control of cell-to-cell spacing using a method which can easily be scaled
for mass manufacturing at low cost.
Although
our latest Gen 2.3 products meet its stringent quality requirements, they may contain undetected errors or defects, especially
when first introduced or when new generations of products are released. Errors, defects, or poor performance can arise due to
design flaws, defects in raw materials or components or manufacturing difficulties, which can affect the quality of our products.
Any actual or perceived errors, defects, or poor performance in our products could result in the replacement or recall of our
products, shipment delays, rejection of our products, damage to our reputation, lost revenue, diversion of our engineering personnel
from our product development efforts, and increases in customer service and support costs, all of which could have a material
adverse effect on our business, financial condition, and results of operations.
Furthermore,
defective components may give rise to warranty, indemnity, or product liability claims against us that exceed any revenue or profit
we receive from the affected products. HI-POWER provides us with a two (2) year manufacturing warranty, which we pass to our customers
based on the use case of the customer and normal system degradation expected from such use case. We also offer customers an extended
performance warranty of up to twenty (20) years at an additional cost to the customer. The price charged for any such extended
warranty is based on the use case of the customer and the additional performance that such customer wishes to ensure. For extended
warranties, this may require system augmentation or battery replacements, which would be provided at no additional charge beyond
the price of the extended warranty paid by such customer.
We,
in turn, provide a two (2) year design warranty to HI-POWER, which warrants that the DC battery design will be free of design
defects for the two-year warranty period. As a result, we effectively bear the risk of design warranty claims for two (2) years
after we or Holtec has sold any products manufactured by HI-POWER (or much longer, in the case of any extended performance warranty
purchased by our customers). We also bear the full risk of any manufacturing warranty claims under its extended warranty after
the initial two (2) year period covered by HI-POWER has expired. While we accrued reserves for warranty claims, our estimated
warranty costs for previously sold products may change to the extent future products are not compatible with earlier generation
products under warranty. Our warranty accruals are based on various assumptions, which are based on a short operating history.
As a result, these assumptions could prove to be materially different from the actual performance of our systems, causing us to
incur substantial unanticipated expense to repair or replace defective products in the future or to compensate customers for defective
products. Our failure to accurately predict future claims could result in unexpected volatility in, and have a material adverse
effect on, our financial condition.
If
one of our products were to cause injury to someone or cause property damage, including as a result of product malfunctions, defects,
or improper installation, we could be exposed to product liability claims. We could incur significant costs and liabilities if
we are sued and if damages are awarded against us. Further, any product liability claim we face could be expensive to defend and
could divert management’s attention. The successful assertion of a product liability claim against us could result in potentially
significant monetary damages, penalties or fines, subject us to adverse publicity, damage our reputation and competitive position,
and adversely affect sales of our products. In addition, product liability claims, injuries, defects, or other problems experienced
by other companies in the battery industry could lead to unfavorable market conditions for the industry as a whole and may have
an adverse effect on our ability to attract new customers, thus harming our growth and financial performance.
If
we elect to expand our production capacity by constructing one or more new manufacturing facilities, we may encounter challenges
relating to the construction, management and operation of such facilities.
HI-POWER
will maintain its exclusive rights to manufacture the batteries for our products sold and delivered in North America if it continues
to meet the quality, cost and delivery timelines set by its board of directors and as further specified in the applicable joint
venture arrangements between us and Holtec. However, if HI-POWER fails to meet these required performance metrics, we would be
free to establish our own manufacturing operations for North America, either directly or through other partnerships. Under these
circumstances, we would have the right to transfer manufacturing processes, technology and know-how from HI-POWER to any such
new facility. In addition, for sales outside of North America, we are free to establish our own manufacturing facilities or to
partner with other companies to manufacture our products.
Accordingly,
we may, in the future, seek to construct one or more manufacturing facilities designed to meet our product supply needs. Although
we currently believe that we could build a new one (1) gigawatt-hour (“GWh”) manufacturing facility in less than eight
months, we cannot provide any assurances that we would be able to successfully establish or operate our manufacturing facility
in a timely or profitable manner, or at all, or within any budget that might be forecasted for such a project. The construction
of any such facility would require significant capital expenditures and result in significantly increased fixed costs. If we are
unable to transition manufacturing operations to any such new facilities in a cost-efficient and timely manner, then we may experience
disruptions in operations, which could negatively impact our business and financial results. Further, if the demand for our products
decreases or if we do not produce the expected output after any such new facility is operational, we may not be able to spread
a significant amount of our fixed costs over the production volume, thereby increasing our per product fixed cost, which would
have a negative impact on our financial condition and results of operations.
Our
ability to expand our manufacturing capacity would also greatly depend on our ability to hire, train and retain an adequate number
of manufacturing employees, in particular employees with the appropriate level of knowledge, background and skills. Should we
be unable to hire such employees, our business and financial results could be negatively impacted.
Risks
Related to our Future Growth
If
we fail to manage our recent and future growth effectively, we may be unable to execute our business plan, maintain high levels
of customer service, or adequately address competitive challenges.
We
have experienced significant growth in recent periods and intend to continue to expand our business significantly within existing
and new markets. This growth has placed, and any future growth may place, a significant strain on our management, operational,
and financial infrastructure. In particular, we will be required to expand, train, and manage our growing employee base and scale
and otherwise improve our information technology (“IT”) infrastructure in tandem with that headcount growth. Our management
will also be required to maintain and expand our relationships with customers, suppliers, and other third parties and attract
new customers and suppliers, as well as manage multiple geographic locations.
Our
current and planned operations, personnel, customer support, IT, information systems, and other systems and procedures might be
inadequate to support future growth and may require us to make additional unanticipated investments in its infrastructure. Our
success and ability to further scale our business will depend, in part, on our ability to manage these changes in a cost-effective
and efficient manner. If we cannot manage our growth, we may be unable to take advantage of market opportunities, execute our
business strategies, or respond to competitive pressures. This could also result in declines in quality or customer satisfaction,
increased costs, difficulties in introducing new offerings, or other operational difficulties. Any failure to effectively manage
growth could adversely impact our business and reputation.
Our
growth prospects depend on our ability to capitalize on market opportunities.
We
believe that a number of market opportunities could help fuel our growth prospects, including the following:
|
●
|
the
pervasiveness of electric grid congestion, creating an opportunity to deploy batteries
to reduce the peak energy usage of a customer in specific locations where infrastructure
constraints create a need for transmission and/or distribution upgrades;
|
|
●
|
the
demand for co-location of battery assets on solar or wind farms to store off-peak intermittent
renewable energy production and provide on-peak energy at the higher price of alternative
energy;
|
|
●
|
C&I
end users’ adoption of alternative energy generation technologies to supplement
or replace on-the-grid energy usage; and
|
|
●
|
carbon
reduction targets and lower prices from renewables may be forcing earlier retirement
of conventional energy sources and drive demand for energy storage.
|
If
these expected market opportunities do not materialize, or if we fail to capitalize on them, then we may not be able to meet our
growth projections.
We
require additional financing to achieve our goals and a failure to obtain this capital on acceptable terms, or at all, may adversely
impact our ability to support our business growth strategy.
We
intend to continue to make investments to support our business and will require additional funds. In particular, we will require
additional funds to develop new products and enhance existing products, expand our operations, including our sales and marketing
organizations and our presence outside of the United States, improve our infrastructure or acquire complementary businesses, technologies,
products and other assets. Accordingly, we anticipate that equity or debt financings to secure additional funds will be necessary
and we intend to pursue such financing to support our business strategy. If we raise additional funds through future issuances
of equity or convertible debt securities, our stockholders could suffer significant dilution, and any new equity securities we
issue could have rights, preferences and privileges superior to those of holders of our common stock. Any debt financing that
we may secure in the future could involve restrictive covenants relating to our capital raising activities and other financial
and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities.
We may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing
when we require it, our ability to continue to support our business growth, scale our infrastructure, develop product enhancements
and to respond to business challenges could be significantly impaired, and our business, results of operations and financial condition
may be adversely affected.
Our
planned expansion into new geographic markets or new product lines or services could subject us to additional business, financial,
and competitive risks.
In
the years ended December 31, 2020 and 2019, we sold our products in a number of different countries, including the United
States, India, Brazil and the United Kingdom. We have in the past, and may in the future, evaluate opportunities to expand into
new geographic markets and introduce new product offerings and services that are a natural extension of our existing business.
We also may from time to time engage in acquisitions of businesses or product lines with the potential to strengthen our market
position, enable us to enter attractive markets, expand our technological capabilities, or provide synergy opportunities.
Our
success operating in these new geographic or product markets, or in operating any acquired business, will depend on a number of
factors, including our ability to develop solutions to address the requirements of the electric utility industry and C&I end
users, our timely qualification and certification of new products, our ability to manage increased manufacturing capacity and
production, and our ability to identify and integrate any acquired businesses.
Further,
any additional markets that we may enter could have different characteristics from the markets in which we currently sell products,
and our success will depend on our ability to adapt properly to these differences. These differences may include regulatory requirements,
including tax laws, trade laws, labor regulations, tariffs, export quotas, customs duties, or other trade restrictions, limited
or unfavorable intellectual property protection, international, political or economic conditions, restrictions on the repatriation
of earnings, longer sales cycles, warranty expectations, product return policies and cost, performance and compatibility requirements.
In addition, expanding into new geographic markets will increase our exposure to presently existing and new risks, such as fluctuations
in the value of foreign currencies and difficulties and increased expenses in complying with United States and foreign laws, regulations
and trade standards, including the Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”).
Failure
to develop and introduce these new products successfully into the market, to successfully integrate acquired businesses or to
otherwise manage the risks and challenges associated with our potential expansion into new product and geographic markets, could
adversely affect our revenues and our ability to sustain profitability.
Our
results of operations may fluctuate from quarter to quarter, which could make our future performance difficult to predict and
could cause our results of operations for a particular period to fall below expectations, resulting in a decline in the price
of our common stock.
Revenue
from our battery sales is primarily recorded upon transfer of ownership of the product to the customer. Under our customer contracts,
this transfer typically takes place upon shipment of the battery from our manufacturing facility but, in some instances, occurs
upon delivery to a customer site or, even more infrequently, at the time of commercial operation. Because our revenues are generally
derived from sales of hardware that may take many months to manufacture and prepare for delivery, such revenue can come in peaks
and troughs based on the underlying customer arrangements. As a result, our quarterly results of operations are difficult to predict
and may fluctuate significantly in the future based on the timing of product deliveries.
Forecasts
of market growth in this prospectus may not be accurate.
Market
opportunity estimates and growth forecasts included in this prospectus are subject to significant uncertainty and are based on
assumptions and estimates that may not prove to be accurate. The forecasts and estimates in this prospectus relating to the expected
size and growth of the markets for energy storage and other markets in which we participate may prove to be inaccurate. Even if
these markets experience the forecasted growth described in this prospectus, we may not grow our business at similar rates, or
at all. Our future growth is subject to many factors, including market adoption of our products, which is subject to many risks
and uncertainties. Accordingly, the forecasts and estimates of market size and growth described in this prospectus should not
be taken as indicative of our future growth. In addition, these forecasts do not take into account the impact of the current global
Covid-19 pandemic, and we cannot assure you that these forecasts will not be materially and adversely affected as a result.
Risks
Related to our United States and Foreign Operations
The
reduction, elimination or expiration of government subsidies and economic incentives related to renewable energy solutions could
reduce demand for our technologies and harm our business.
To
promote renewable energy generation and consumption, federal, state, local and foreign government bodies provide incentives to
owners, end users, distributors, system integrators and manufacturers of alternative energy systems in the form of rebates, tax
credits and other financial incentives such as system performance payments, payments of renewable energy credits associated with
renewable energy generation and exclusion of certain renewable energy systems from property tax assessments.
Our
business relies, in part, on the co-location of battery assets with solar and wind technologies. The market for on-grid applications,
where solar or wind power is used to supplement a customer’s electricity purchased from the utility network or sold to a
utility under tariff, often depends in large part on the availability and size of government and economic incentives that vary
by geographic market. The reduction, elimination or expiration of government subsidies and economic incentives for on-grid solar
electricity may negatively affect the competitiveness of alternative electricity generation relative to conventional and non-solar
renewable sources of electricity and could harm or halt the growth of the alternative electricity industries. Because our C&I
end user sales are generally expected to be made into the on-grid market, these changes could harm our business. For example,
in 2015 the U.S Congress passed a multi-year extension to the solar Investment Tax Credit (“ITC”), which extension
helped grow the U.S solar market. As of January 1, 2020, the ITC is being gradually reduced from thirty percent (30%) to twenty-six
percent (26%) for both residential and commercial in 2020 and is expected to reach ten percent (10%) for commercial only in 2022.
In December 2020, the Congress passed the Consolidated Appropriations Act, 2021 which extended the 26% credit for two years until
January 1, 2023 and the applicability of the 22% credit for another year until January 1, 2024. If the ITC would not be extended
any further, the reduction in the ITC could reduce the demand for solar energy solutions in the United States, which would have
an adverse impact on our business, financial condition, and results of operations.
In
general, subsidies and incentives may expire on a particular date, end when the allocated funding is exhausted or be reduced or
terminated as solar energy adoption rates increase or as a result of legal challenges, the adoption of new statutes or regulations
or the passage of time. These reductions or terminations often occur without warning.
In
addition, several jurisdictions have adopted renewable portfolio standards, which mandate that a certain portion of electricity
delivered by utilities to customers come from a set of eligible renewable energy resources by a certain compliance date. Some
programs further specify that a portion of the renewable energy quota must be from solar electricity. Under some programs, a utility
can receive a “credit” for renewable energy produced by a third party by either purchasing the electricity directly
from the producer or paying a fee to obtain the right to renewable energy generated but used by the generator or sold to another
party. A renewable energy credit allows the utility to add this electricity to its renewable portfolio requirement total without
actually expending the capital for generating facilities. However, there can be no assurances that such policies will continue.
For example, in December 2015, Nevada’s Public Utilities Commission increased the fixed service charge for net-metered solar
customers and lowered compensation for net excess solar generation proposals to extend compliance deadlines, reduce targets or
repeal standards which have also been introduced in a number of states.
If
the foregoing or any other subsidies and incentives applicable to alternative energy implementation or usage are reduced or eliminated,
or the regulatory landscape otherwise becomes less favorable, then there could be reduced demand for alternative energy solutions,
which could have an adverse impact on our business, financial condition, and results of operations.
Changes
in the U.S. trade environment, including the recent imposition of import tariffs, could adversely affect the amount or timing
of our revenues, results of operations or cash flows.
We
currently procure the felt required for our batteries and the electrical cables for the battery container from China, as we believe
that the materials procured from our Chinese suppliers currently have the best overall performance and price compared to domestic
alternatives. Escalating trade tensions between the United States and China have recently led to certain increased tariffs and
trade restrictions. There can be no guarantee that these developments will not negatively impact the price of the felt used in
our products. We believe we could obtain a similar performing felt and electrical cabling in the United States, but such sources
would likely also charge a higher cost than our current suppliers, which would negatively impact our gross margins. It is difficult
to predict what further trade-related actions governments may take, which may include additional or increased tariffs and trade
restrictions, and we may be unable to quickly and effectively react to such actions, which could result in supply shortages and
increased costs.
We
could be subject to foreign exchange risk.
Our
international sales are typically denominated in U.S. dollars or Euros. As a result, we do not have significant direct exposure
to currency valuation exchange rate fluctuations. However, because our products are sold internationally, to the extent that the
U.S. dollar strengthens against the foreign currency of a customer or potential customer, we may find our products at a price
disadvantage as compared with other non-U.S. suppliers. This could lead to our receiving lower prices or being unable to compete
for that specific customer’s business. Consequently, currency fluctuations could adversely affect the competitiveness of
our products in international markets.
We
have operations in the United States, which exposes us to multiple federal, state and local regulations. Changes in applicable
law, regulations or requirements, or our material failure to comply with any of them, can increase our costs and have other negative
impacts on our business.
Applicable
laws and requirements address multiple aspects of our operations, such as worker safety, consumer rights, privacy, employee benefits
and more, and can often have different requirements in different jurisdictions. Changes in these requirements, or any material
failure to comply with them, could increase our costs, affect our reputation, limit our business, drain management’s time
and attention or otherwise, generally impact our operations in adverse ways.
We
could be adversely affected by any violations of the FCPA, the U.K. Bribery Act, and other foreign anti-bribery laws, as well
as violations against export controls and economic embargo regulations.
The
FCPA prohibits companies and their intermediaries from making improper payments to foreign government officials for the purpose
of obtaining or retaining business. Other countries in which we operate also have anti-bribery laws, some of which prohibit improper
payments to government and non-government persons and entities. Our policies mandate compliance with these anti-bribery laws.
However, we currently operate in and intend to further expand into, many parts of the world that have experienced governmental
corruption to some degree and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs
and practices. In addition, due to the level of regulation in our industry and related energy industries, our entry into certain
jurisdictions may require substantial government contact where norms can differ from U.S. standards. Although we expect to maintain
strict internal control policies and procedures designed to guard against improper conduct, there can be no guarantee that our
employees, agents, and business partners will not take actions in violation of our internal control policies. In the event that
we believe or have reason to believe that our employees or agents have or may have violated applicable laws, including anti-corruption
laws, we may be required to investigate or have outside counsel investigate the relevant facts and circumstances, and detecting,
investigating and resolving actual or alleged violations can be expensive and require significant time and attention from senior
management. Any violation of U.S. federal and state and non-U.S. laws, regulations and policies could result in substantial fines,
sanctions, civil and/or criminal penalties, and curtailment of operations in the United States or other applicable jurisdictions.
In addition, actual or alleged violations could damage our reputation and ability to do business. Any of the foregoing could materially
adversely affect our business, financial condition and results of operations.
Furthermore,
we are subject to the export controls and economic embargo rules and regulations of the United States, including, but not limited
to, the Export Administration Regulations and trade sanctions against embargoed countries, which are administered by the Office
of Foreign Assets Control within the Department of the Treasury, as well as the laws and regulations administered by the Department
of Commerce. These regulations limit our ability to market, sell, distribute or otherwise transfer our products or technology
to prohibited countries or persons. While we do not conduct business with sanctioned and embargoed countries and we expect to
maintain strict internal control policies and procedures designed to guard against improper conduct, a determination that we have
failed to comply, whether knowingly or inadvertently, may result in substantial penalties, including fines and enforcement actions
and civil and/or criminal sanctions, the disgorgement of profits and the imposition of a court-appointed monitor, as well as the
denial of export privileges, and may have an adverse effect on our reputation.
Risks
Related to Intellectual Property
If
we fail to protect, or incur significant costs in defending, our intellectual property and other proprietary rights, then our
business and results of operations could be materially harmed.
Our
success depends to a significant degree on our ability to protect our intellectual property and other proprietary rights. We rely
on a combination of patent, trademark, copyright, trade secret, and unfair competition laws, as well as confidentiality and other
contractual provisions with our customers, suppliers, employees, and others, to establish and protect our intellectual property
and other proprietary rights. Our ability to enforce these rights is subject to general litigation risks, as well as uncertainty
as to the enforceability of our intellectual property rights in various countries. When we seek to enforce our rights, we may
be subject to claims that our intellectual property rights are invalid or not enforceable. Our assertion of intellectual property
rights may result in another party seeking to assert claims against us, which could harm our business. Our inability to enforce
intellectual property rights under any of these circumstances would likely harm our competitive position and business.
We
applied for patents in the United States, Europe, Africa, South America, Asia and Australia, some of which have been issued. We
cannot guarantee that any of our pending applications will be approved or that our existing and future intellectual property rights
will be sufficiently broad to protect our proprietary technology, and any failure to obtain such approvals or finding that our
intellectual property rights are invalid or unenforceable could force us to, among other things, rebrand or re-design our affected
products. In countries where we have not applied for patent protection or where effective intellectual property protection is
not available to the same extent as in the United States, we may be at greater risk that our proprietary rights will be misappropriated,
infringed, or otherwise violated.
Our
intellectual property may be stolen or infringed upon. Despite our implementation of security measures, our IT systems and those
of our service providers are vulnerable to circumstances beyond our reasonable control which may lead to the theft of our intellectual
property, trade secrets or business disruption, including inappropriate retention or disclosure of trade secrets by current or
former employees. To the extent that any disruption or security breach results in a loss or damage to our data or an inappropriate
disclosure of confidential information, it could cause significant damage to our reputation, affect our relationships with our
customers, suppliers and employees and lead to claims against the company. Any lawsuits that we may initiate to protect our significant
investment in our intellectual property also may consume management and financial resources for long periods of time and may not
result in favorable outcomes, which may adversely affect our business, results of operations or financial condition.
Third
parties may assert that we are infringing upon their intellectual property rights, which could divert management’s attention,
cause us to incur significant costs, and prevent us from selling or using the technology to which such rights relate.
Our
competitors and other third parties hold numerous patents related to technology used in our industry. From time to time, we may
be subject to claims of intellectual property right infringement and related litigation, and, if we gain greater recognition in
the market, we will face a higher risk of being the subject of claims that we have violated others’ intellectual property
rights. While we believe that our products and technology do not infringe in any material respect upon any valid intellectual
property rights of third parties, we cannot be certain that we would be successful in defending against any such claims. If we
do not successfully defend or settle intellectual property claims, we could be liable for significant monetary damages and could
be prohibited from continuing to use certain technology, business methods, content, or brands. To avoid a prohibition, we could
seek a license from the applicable third party, which could require us to pay significant royalties, increasing our operating
expenses. If a license is not available at all or not available on reasonable terms, then we may be required to develop or license
a non-violating alternative, either of which could require significant effort and expense. If we cannot license or develop a non-violating
alternative, we would be forced to limit or stop sales of our offerings and may be unable to effectively compete. Any of these
results would adversely affect our business, financial condition, and results of operations.
We
may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant
negative effect on our financial condition, results of operations and stock price, which could cause you to lose some or all of
your investment.
Unexpected
risks may arise that cause us to write-down or write-off assets, restructure our operations, or incur impairment or other charges
that could result in losses. Even though these charges may be non-cash items and not have an immediate impact on our liquidity,
the fact that we report charges of this nature could contribute to negative market perceptions about us or our securities. In
addition, charges of this nature may cause us to violate net worth or other covenants to which we may be subject. Accordingly,
our stockholders could suffer a reduction in the value of their shares.
Risk
Related to Our Securities
Our
stock price may be volatile and may decline regardless of our operating performance
Fluctuations
in the price of our common stock could contribute to the loss of all or part of your investment. The trading price of our common
stock could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control.
Any of the factors listed below could have a material adverse effect on your investment in our common stock and our common stock
may trade at prices significantly below the price you paid for it. In such circumstances, the trading price of our common stock
may not recover and may experience a further decline.
Factors
affecting the trading price of our common stock may include:
|
●
|
actual
or anticipated fluctuations in our quarterly financial results or the quarterly financial
results of companies perceived to be similar to us;
|
|
●
|
changes
in the market’s expectations about our operating results;
|
|
●
|
success
of competitors;
|
|
●
|
our
operating results failing to meet the expectation of securities analysts or investors
in a particular period;
|
|
●
|
changes
in financial estimates and recommendations by securities analysts concerning us or the
industries in which we operate in general;
|
|
●
|
operating
and stock price performance of other companies that investors deem comparable to us;
|
|
●
|
our
ability to market new and enhanced products on a timely basis;
|
|
●
|
changes
in laws and regulations affecting our business;
|
|
●
|
commencement
of, or involvement in, litigation involving us;
|
|
●
|
changes
in our capital structure, such as future issuances of securities or the incurrence of
additional debt;
|
|
●
|
the
volume of shares of our common stock available for public sale;
|
|
●
|
any
major change in our board of directors or management;
|
|
●
|
sales
of substantial amounts of our common stock by our directors, executive officers or significant
stockholders or the perception that such sales could occur; and
|
|
●
|
general
economic and political conditions such as recessions, interest rates, fuel prices, international
currency fluctuations and acts of war or terrorism.
|
Broad
market and industry factors may materially harm the market price of our securities irrespective of our operating performance.
The stock market in general, and Nasdaq, have experienced price and volume fluctuations that have often been unrelated or disproportionate
to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of our
securities, may not be predictable. A loss of investor confidence in the market for the stocks of other companies that investors
perceive to be similar to us could depress our stock price regardless of our business, prospects, financial conditions, or results
of operations. A decline in the market price of our securities also could adversely affect our ability to issue additional securities
and our ability to obtain additional financing in the future.
To
the extent that any shares of common stock are issued upon exercise of any of the warrants, the number of shares eligible for
resale in the public market would increase.
We
have 9,075,000 outstanding warrants to purchase 9,075,000 shares of common stock at an exercise price of $11.5 per share, which
will become exercisable on May 22, 2021.
To
the extent that any shares of common stock are issued upon exercise of any of the warrants to purchase shares of common stock,
there will be an increase in the number of shares of common stock eligible for resale in the public market. Sales of a substantial
number of such shares in the public market could adversely affect the market price of common stock.
Provisions
in our Charter and Delaware law may have the effect of discouraging lawsuits against our directors and officers.
Our
Charter requires, unless we consent in writing to the selection of an alternative forum, that (i) any derivative action or proceeding
brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other
employee to us or our stockholders, (iii) any action asserting a claim against us, our directors, officers or employees arising
pursuant to any provision of the DGCL or our Charter or our bylaws, or (iv) any action asserting a claim against us or our directors,
officers or employees governed by the internal affairs doctrine may be brought only in the Court of Chancery in the State of Delaware,
except any claim (A) as to which the Court of Chancery of the State of Delaware determines that there is an indispensable party
not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction
of the Court of Chancery within ten days following such determination), (B) which is vested in the exclusive jurisdiction of a
court or forum other than the Court of Chancery, (C) for which the Court of Chancery does not have subject matter jurisdiction,
or (D) any action arising under the Securities Act, as to which the Court of Chancery and the federal district court for the District
of Delaware shall have concurrent jurisdiction. If an action is brought outside of Delaware, the stockholder bringing the suit
will be deemed to have consented to service of process on such stockholder’s counsel. Although we believe this provision
benefits us by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies,
a court may determine that this provision is unenforceable, and to the extent it is enforceable, the provision may have the effect
of discouraging lawsuits against our directors and officers, although our stockholders will not be deemed to have waived our compliance
with federal securities laws and the rules and regulations thereunder.
Notwithstanding
the foregoing, our Charter provides that the exclusive forum provision will not apply to suits brought to enforce a duty or liability
created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. Section 27 of the Exchange
Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act
or the rules and regulations thereunder. Although we believe this provision benefits us by providing increased consistency in
the application of Delaware law in the types of lawsuits to which it applies, the provision may have the effect of discouraging
lawsuits against our directors and officers.
Provisions
in our Charter may inhibit a takeover of us, which could limit the price investors might be willing to pay in the future for our
common stock and could entrench management.
Our
Charter contains provisions that may hinder unsolicited takeover proposals that stockholders may consider to be in their best
interests. We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control.
Together these provisions may make more difficult the removal of management and may discourage transactions that otherwise could
involve payment of a premium over prevailing market prices for our securities. These provisions include:
|
●
|
no
cumulative voting in the election of directors, which limits the ability of minority
stockholders to elect director candidates;
|
|
●
|
a
classified board of directors with three-year staggered terms, which could delay the
ability of stockholders to change the membership of a majority of the Board;
|
|
●
|
the
right of our Board to elect a director to fill a vacancy created by the expansion of
our Board or the resignation, death or removal of a director in certain circumstances,
which prevents stockholders from being able to fill vacancies on our Board;
|
|
●
|
a
prohibition on stockholder action by written consent, which forces stockholder action
to be taken at an annual or special meeting of our stockholders;
|
|
●
|
advance
notice procedures that stockholders must comply with in order to nominate candidates
to our Board or to propose matters to be acted upon at a meeting of stockholders, which
may discourage or deter a potential acquirer from conducting a solicitation of proxies
to elect the acquirer’s own slate of directors or otherwise attempting to obtain
control of the Company; and
|
|
●
|
the
requirement that a meeting of stockholders may only be called by members of our Board
or the stockholders holding a majority of our shares, which may delay the ability of
our stockholders to force consideration of a proposal or to take action, including the
removal of directors.
|
Future
resales of common stock may cause the market price of our securities to drop significantly, even if our business is doing well.
The
Sponsor’s founder shares, private placement units, private placement shares, private placement warrants, and any shares
of common stock issued upon conversion or exercise thereof are each subject to transfer restrictions pursuant to lock-up provisions
in a letter agreement, dated May 19, 2020, between us and the Sponsor. Likewise, the shareholders who have received common stock
in connection with the business combination are contractually restricted from selling or transferring any shares of our common
stock they received pursuant to the lock-up provisions contained therein. However, following the expiration of these lockup-up
periods, neither such shareholders nor the Sponsor are restricted from selling their shares of our common stock, other than by
applicable securities laws. Additionally, the investors are not restricted from selling any of their shares of our common stock
following the Closing, other than by applicable securities laws. A resale prospectus covering 43,744,680 shares and 325,000 warrants
held by the shareholders and warrant holders and the Sponsor was declared effective by the SEC on January 21, 2021, which may
be utilized to sell such securities for so long as it remains effective. A resale prospectus covering 4,000,000 shares held by
the PIPE investors was declared effective by the SEC on November 16, 2020, which may be utilized to sell such securities for so
long as it remains effective.
As
such, sales of a substantial number of shares of our common stock in the public market could occur at any time irrespective of
the Company’s performance. These sales, or the perception in the market that the holders of a large number of shares intend
to sell shares, could reduce the market price of our common stock. Such sales may occur based upon individual investor liquidity
requirements or other factors outside of our control. Upon completion of the business combination, the Sponsor, the shareholders
of the common stock issued in connection with the Merger, and the investors collectively owned approximately 83.3% of the outstanding
shares of our common stock.
As
restrictions on resale end and registration statements are available for use, the sale or possibility of sale of shares by the
Sponsor, shareholders who received common stock in connection with the business combination, and the investors could have the
effect of increasing the volatility in our share price or the market price of our common stock could decline if the holders of
currently restricted shares sell them or are perceived by the market as intending to sell them.
We
may redeem the public warrants prior to their exercise at a time that is disadvantageous to such warrant holders, thereby making
your public warrants worthless.
We
will have the ability to redeem outstanding public warrants at any time after they become exercisable and prior to their expiration,
at a price of $0.01 per warrant, provided that the closing price of our common stock equals or exceeds $18.00 per share (as adjusted
for stock splits, share dividends, reorganizations, recapitalizations and the like) for any twenty (20) trading days within a
thirty (30) trading-day period ending on the third (3rd) trading day prior to proper notice of such redemption. If
and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify
the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding warrants could force
holders (i) to exercise the warrants and pay the exercise price therefor at a time when it may be disadvantageous to do so, (ii)
to sell the warrants at the then-current market price when the holder might otherwise wish to hold their warrants or (iii) to
accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially
less than the market value of the warrants. The private placement warrants are not redeemable by us so long as they are held by
the Sponsor or its permitted transferees.
There
can be no assurance that the warrants will be in the money at the time they become exercisable, and they may expire worthless.
The
exercise price for the outstanding warrants is $11.50 per share of common stock. There can be no assurance that the warrants will
be in the money following the time they become exercisable and prior to their expiration, and as such, the warrants may expire
worthless.
There
can be no assurance that our common stock will be able to comply with the continued listing standards of Nasdaq.
The
shares of our common stock and warrants are listed on Nasdaq. If Nasdaq delists the common stock from trading on its exchange
for failure to meet the listing standards, we and our stockholders could face significant material adverse consequences including:
|
●
|
a
limited availability of market quotations for our securities;
|
|
●
|
a
determination that our common stock is a “penny stock,” which will require
brokers trading in our common stock to adhere to more stringent rules, possibly resulting
in a reduced level of trading activity in the secondary trading market for our common
stock;
|
|
●
|
a
limited amount of analyst coverage; and
|
|
●
|
a
decreased ability to issue additional securities or obtain additional financing in the
future.
|
We
do not currently intend to pay dividends on our common stock and, consequently, your ability to achieve a return on your investment
will depend on appreciation in the price of our common stock.
We
have never declared or paid cash dividends on our common stock. We currently do not anticipate paying any cash dividends in the
foreseeable future. Any future determination to declare cash dividends will be made at the discretion of our board of directors,
subject to applicable laws, and will depend on our financial condition, results of operations, capital requirements, general business
conditions and other factors that our board of directors may deem relevant.
Risks
Related our Status as a Public Company
The
obligations associated with being a public company involve significant expenses and will require significant resources and management
attention, which may divert from our business operations.
As
a public company, we are subject to the reporting requirements of the Exchange Act and the Sarbanes-Oxley Act of 2002, as amended
(“SOX”). The Exchange Act requires the filing of annual, quarterly and current reports with respect to a public company’s
business and financial condition. SOX requires, among other things, that a public company establish and maintain effective internal
control over financial reporting. As a result, we incur significant legal, accounting and other expenses that we did not incur
prior to the business combination. Our entire management team and many of our other employees devote substantial time to compliance,
and may not effectively or efficiently manage our transition into a public company.
We
are currently an emerging growth company and a smaller reporting company within the meaning of the Securities Act, and to the
extent we have taken advantage of certain exemptions from disclosure requirements available to emerging growth companies or smaller
reporting companies, this could make our securities less attractive to investors and may make it more difficult to compare our
performance with other public companies.
We are an “emerging
growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act
of 2012, as amended (the “JOBS Act”), and we may take advantage of certain exemptions from various reporting requirements
that are applicable to other companies that are not emerging growth companies, including, but not limited to, not being required
to comply with the auditor attestation requirements of Section 404 of SOX, reduced disclosure obligations regarding executive compensation
in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive
compensation and stockholder approval of any golden parachute payments not previously approved. As a result, our stockholders may
not have access to information they may deem important that we may have been required to disclose if we were not an emerging growth
company and smaller reporting company. We cannot predict whether investors will find our securities less attractive because we
will rely on these exemptions. If some investors find our securities less attractive as a result of our reliance on these exemptions,
the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our
securities and the trading prices of our securities may be more volatile.
Further,
section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial
accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared
effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised
financial accounting standards. We intend to take advantage of the benefits of this extended transition period. This may make
comparison of our financial statements with certain other public companies difficult or impossible because of the potential differences
in accounting standards used.
We
will remain an emerging growth company until the earlier of (i) the last day of the fiscal year (a) following the fifth anniversary
of the completion of our initial public offering, (b) in which we have total annual gross revenue of at least $1.07 billion (as
adjusted for inflation pursuant to SEC rules from time to time), or (c) in which we are deemed to be a large accelerated filer,
which means the market value of our shares of common stock that are held by non-affiliates exceeds $700 million as of the prior
June 30th, and (ii) the date on which we issued more than $1.00 billion in non-convertible debt during the prior three-year period.
Accordingly, if the market value of our shares of common stock held by non-affiliates continues to exceed $700 million as of June
30, 2021, we will cease to qualify as an emerging growth company or smaller reporting company as of January 1, 2022. If we are
thereafter not able to implement the requirements of Section 404 of SOX, including any additional requirements once we are no
longer an emerging growth company, in a timely manner or with adequate compliance, we may not be able to assess whether our internal
controls over financial reporting are effective, which may subject us to adverse regulatory consequences and could harm investor
confidence and the market price of our securities.
USE
OF PROCEEDS
All
of the shares of common stock offered by the selling securityholders pursuant to this prospectus will be sold by the selling securityholders
for their respective amounts. We will not receive any of the proceeds from these sales.
We
will receive up to an aggregate of approximately $2,925,107 from the exercise of the options, and up to an aggregate of approximately
$104,362,500 from the exercise of the warrants, assuming the exercise in full of all such options and warrants for cash. We expect
to use the net proceeds from the exercise of the options and warrants for general corporate purposes, which may include acquisitions
and other business opportunities and the repayment of indebtedness. Our management will have broad discretion over the use of
proceeds from the exercise of the options and warrants.
There
is no assurance that the holders of the options or warrants will elect to exercise any or all of the options or warrants. To the
extent that the options or warrants are exercised on a “cashless basis,” the amount of cash we would receive from
the exercise of the options and warrants will decrease.
UNAUDITED
PRO FORMA COMBINED FINANCIAL INFORMATION
On November 16, 2020
(the “Closing Date”), Eos Energy Enterprises, Inc. (formerly known as B. Riley Principal Merger Corp. II), a Delaware
corporation (the “Company”), consummated its acquisition of Eos Energy Storage, LLC., a Delaware limited liability
company (“Eos”), pursuant to the Agreement and Plan of Merger, dated as of September 7, 2020 (the “Merger Agreement”).
The transactions contemplated by the Merger Agreement are referred to herein as the “Business Combination.”
In
connection with the closing of the Business Combination (the “Closing”), the Company changed its name from “B.
Riley Principal Merger Corp II” to “Eos Energy Enterprises, Inc.”, (“EOSE”).
On
November 12, 2020, the Business Combination was approved by the stockholders of the Company at a special meeting (the “Special
Meeting”). The Business Combination was completed on November 16, 2020. In connection with the Business Combination, 6,442,195
shares of the Company’s common stock were redeemed at a per share price of approximately $10.10. Upon the Closing, the Company
had 49,802,417 shares of common stock outstanding, 32,421,362 of which were held by non-affiliates of the Company.
For purposes of the
unaudited pro forma combined financial information, the aggregate consideration for the Business Combination was $300 million or
30 million shares.
Immediately
prior to the Closing, pursuant to subscription agreements (the “Subscription Agreements”) with certain institutional
and accredited investors (“PIPE investors”), the Company issued an aggregate of 4 million shares of common stock for
$10.00 per share, for an aggregate purchase price of $40 million.
Introduction
The following unaudited
pro forma combined financial statements present the combination of the financial information of the Company and Eos, adjusted to
give effect to the Business Combination and the equity financing provided by the Equity Commitment Letter and Subscription Agreements
with PIPE investors. The following unaudited pro forma combined financial information has been prepared in accordance with Article
11 of Regulation S-X.
The following unaudited
pro forma combined statement of operations for the fiscal year ended December 31, 2020 gives pro forma effect to the Business Combination
and equity financing as if they had been completed on January 1, 2020.
The unaudited pro forma
combined financial statements have been presented for illustrative purposes only and do not necessarily reflect what the Company’s
financial condition or results of operations would have been had the Business Combination occurred on the date indicated. Further,
the unaudited pro forma combined financial information also may not be useful in predicting the future financial condition and
results of operations of the Company. The actual results of operations may differ significantly from the pro forma amounts reflected
herein due to a variety of factors. The unaudited pro forma adjustments represent management’s estimates based on information
available as of the date of these unaudited pro forma combined financial statements.
This
information has been developed from and should be read together with Eos’s audited and unaudited financial statements and
related notes included in this prospectus, “Management’s Discussion and Analysis of Financial Condition and Results
of Operations” and other financial information included herein and the sections titled “BMRG’s Management’s
Discussion and Analysis of Financial Condition and Results of Operations,” incorporated in the Company’s amended
registration statement filed with the U.S. Securities and Exchange Commission on November 13, 2020.
The
Business Combination is accounted for under the scope of the Financial Accounting Standards Board’s Accounting Standards
Codification (“ASC”) Topic 805, business combinations (“ASC 805”), as a reverse recapitalization, with
no goodwill or other intangible assets recorded, in accordance with GAAP. Eos has been determined to be the accounting acquirer
based on the evaluation of the following facts and circumstances:
|
●
|
Eos’s senior
management comprises the senior management of the combined company,
|
|
●
|
Eos has greater
influence in putting forth the relative majority of the members of the initial Board of Directors,
|
|
●
|
Eos’s operations
comprises the ongoing operations of the combined company; and
|
|
●
|
The relative size
of BMRG is larger based on assets
|
ASC
805 provides that in identifying the acquiring entity in a transaction effected through an exchange of equity interests, all pertinent
facts and circumstances must be considered, including: the relative voting rights of the stockholders of the constituent companies
in the combined company; the existence of a large minority voting interest in the combined entity (if no other owner or organized
group of owners has a significant voting interest); the composition of the board of directors and senior management of the combined
company; the relative size of each company; and the terms of the exchange of equity securities in the transaction, including payments
of any premium. The preponderance of the evidence discussed above supports the conclusion that Eos is the accounting acquirer
in the Business Combination. Under this method of accounting, BMRG has been treated as the “acquired” company for
financial reporting purposes. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of
Eos issuing stock for the net assets of BMRG, accompanied by a recapitalization. The net assets of BMRG was stated at historical
cost, with no goodwill or other intangible assets recorded.
Description
of the Business Combination
At
Closing Eos’s security holders received aggregate consideration with a value equal to $300 million.
In
the Business Combination, the Company merged with and into Eos, and Eos became a wholly-owned subsidiary of the Company. Upon
the Closing, the Company changed its name to “Eos Energy Enterprises, Inc.”
Financing
for the business combination and for related transaction expenses consisted of:
|
●
|
$176.7 million of
proceeds from the Company’s IPO on deposit in the trust account (plus any interest income accrued thereon since the
IPO), net of $65.1 million in redemptions of shares of Class A common stock in connection with the business combination;
and
|
|
●
|
$40 million of proceeds
from the Equity Commitment Letter and Subscription Agreements with PIPE investors.
|
The unaudited pro forma
combined financial information has been prepared after giving effect to the Business Combination, and the redemption rights exercised
by the Company’s public stockholders, where 6,442,195 public shares were redeemed. As the business combination has been reflected
in our balance sheet as of December 31, 2020, no pro forma balance sheet is provided in accordance with Article 11 of Regulation
S-X.
EOS
ENERGY ENTERPRISES, INC. UNAUDITED PRO FORMA
COMBINED STATEMENT OF OPERATIONS FOR THE
YEAR ENDED DECEMBER 31, 2020
|
|
B. Riley Principal Merger Corp. II (Historical)
|
|
|
EOS Energy Enterprise, Inc. (Historical)
|
|
|
Transaction Accounting Adjustments
|
|
|
Pro Forma Combined
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
—
|
|
|
$
|
219
|
|
|
$
|
—
|
|
|
$
|
219
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
|
|
|
|
5,509
|
|
|
|
|
|
|
|
5,509
|
|
Research and development expenses
|
|
|
|
|
|
|
13,983
|
|
|
|
|
|
|
|
13,983
|
|
General and administrative expenses
|
|
|
2,887
|
|
|
|
18,883
|
|
|
|
|
|
|
|
21,770
|
|
Grant expense (income), net
|
|
|
|
|
|
|
913
|
|
|
|
|
|
|
|
913
|
|
Total costs and expenses
|
|
|
2,887
|
|
|
|
39,288
|
|
|
|
—
|
|
|
|
42,175
|
|
Operating loss
|
|
|
(2,887
|
)
|
|
|
(39,069
|
)
|
|
|
—
|
|
|
|
(41,956
|
)
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from equity in unconsolidated joint venture
|
|
|
|
|
|
|
127
|
|
|
|
|
|
|
|
127
|
|
Interest income (expense), net
|
|
|
29
|
|
|
|
(115
|
)
|
|
|
|
|
|
|
(86
|
)
|
Interest expense – related party
|
|
|
|
|
|
|
(23,706
|
)
|
|
|
23,706
|
(1)
|
|
|
—
|
|
Change in fair value, embedded derivative
|
|
|
|
|
|
|
2,092
|
|
|
|
(2,092
|
)(1)
|
|
|
—
|
|
Change in fair value, Sponsor Earnout Shares
|
|
|
|
|
|
|
(8,083
|
)
|
|
|
|
|
|
|
(8,083
|
)
|
Income (loss) before income tax expense
|
|
|
(2,858
|
)
|
|
|
(68,754
|
)
|
|
|
21,614
|
|
|
|
(49,998
|
)
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(2,858
|
)
|
|
$
|
(68,754
|
)
|
|
$
|
21,614
|
|
|
$
|
(49,998
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic and diluted
|
|
|
|
|
|
|
9,408,841
|
|
|
|
|
|
|
|
48,053,632
|
(2)
|
Basic and diluted net loss per share
|
|
|
|
|
|
$
|
(7.31
|
)
|
|
|
|
|
|
$
|
(1.04
|
)(2)
|
NOTES
TO UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS
Note
1 — Description of the Business Combination
Basis
of presentation
The pro forma financial
statements have been prepared in accordance with Article 11 of Regulation S-X as amended by the final
rule, Release No. 33-10786, “Amendments to Financial Disclosures about Acquired and Disposed Businesses”.
The historical financial information of BMRG and EES has been adjusted in the unaudited pro forma combined financial information
to reflect transaction accounting adjustments related to the Business Combination in accordance with U.S. GAAP. The
transaction accounting adjustments are prepared to illustrate the estimated effect of the Business Combination and certain other
adjustments.
The Company’s
historical results reflect the audited consolidated statement of operations for the year ended December 31, 2020. BMRG’s
historical results reflect their unaudited statement of operations for the period ended November 16, 2020 under GAAP.
Description
of the Business Combination
As
previously mentioned, Eos Energy Enterprises, Inc. (formerly known as B. Riley Principal Merger Corp. II), a Delaware corporation
(the “Company”), consummated its previously announced acquisition of Eos Energy Storage, LLC., a Delaware corporation
(“EES”), on November 16, 2020 (the “Closing Date”), pursuant to the Agreement and Plan of Merger, dated
as of September 7, 2020 (the “Merger Agreement”). The transactions contemplated by the Merger Agreement are referred
to herein as the “Business Combination.”
Under
applicable accounting standards, EES is the accounting acquirer in the Business Combination, which has been treated as a reverse
recapitalization. Accordingly, the accounting for the transaction is similar to that of a capital infusion to EES. Net assets
of the Company have been stated at historical cost, with no goodwill or intangible assets recorded.
For purposes of the
unaudited pro forma combined financial information, the table below represents the sources and uses of funds as it relates to the
Business Combination:
Sources and Uses (in thousands)
|
Sources
|
|
|
|
|
Uses
|
|
|
|
BMRG Cash Held in Trust(1)
|
|
$
|
176,655
|
|
|
Stock Consideration
|
|
|
300,000
|
|
Issuance of Shares
|
|
|
300,000
|
|
|
Fees and Expenses(3)
|
|
|
21,893
|
|
PIPE(2)
|
|
|
40,000
|
|
|
Cash to facilitate growth(4)
|
|
|
129,696
|
|
|
|
|
|
|
|
Cash to redeeming shareholders(5)
|
|
|
65,066
|
|
Total Sources
|
|
$
|
516,655
|
|
|
Total Uses
|
|
$
|
516,655
|
|
|
(1)
|
Represents
the amount of the restricted investments and cash held in the Trust account upon consummation of the Business Combination at Closing.
|
|
(2)
|
Represents
the issuance, in a private placement to be consummated concurrently with the Closing, to third-party investors of 4,000,000 shares
of Class A common stock.
|
|
(3)
|
Represents
the total fees and expenses incurred as part of the acquisition paid at the Closing.
|
|
(4)
|
Represents
remaining cash that will be used to fund operations/growth and working capital needs of the Company after the Closing.
|
|
(5)
|
Represents
the redemption of 36.8% of the Company’s public shares through the exercise of the shareholders’ redemption rights.
|
Basis
of the Pro Forma Presentation
As
a result of the consummation of the Business Combination, the Company adopted EES’s accounting policies.
Note
2 — Accounting Transaction Adjustments
(a) Adjustments to the Unaudited
Pro Forma Combined Statements of Operations for the year ended December 31, 2020
The pro forma adjustments
included in the unaudited pro forma combined statement of operations for the year ended December 31, 2020 are as follows:
(1) Reflects
the adjustment to interest expense and change in fair value associated with the conversion of EES’s convertible notes payable —
related party to the common stock of the Company.
(2)
Reflects pro forma net loss per share based on 48,053,632 weighted average shares outstanding of $(1.04).
(b)
Other Non-recurring Costs
The unaudited pro forma
combined statement of operations includes certain non-recurring expense including, among other things, costs related
to legal, accounting and other professional fees totaling approximately $4.7 million that we do not expect to recur in the next
12 months.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
following discussion should be read in conjunction with the audited consolidated financial statements and related notes thereto
included elsewhere in this prospectus. In addition to historical information, this discussion contains forward-looking statements
that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management’s
expectations. Factors that could cause such differences are discussed in “Forward-Looking Statements” and “Risk
Factors.”
Overview
We
design, manufacture, and deploy reliable, sustainable, safe and scalable low-cost battery storage solutions for the electric utility
industry.
The
Company was originally incorporated in Delaware on June 3, 2019 as a special purpose acquisition company under the name B. Riley
Principal Merger Corp. II., in order to acquire, through a merger, capital stock exchange, asset acquisition, stock purchase,
reorganization or similar business combination one or more businesses.
On
November 16, 2020, the Company consummated the transactions contemplated by an Agreement and Plan of Merger (the “Merger
Agreement”), dated as of September 7, 2020, by and among BMRG Merger Sub, LLC, our wholly-owned subsidiary and a Delaware
limited liability company (“Merger Sub I”), BMRG Merger Sub II, LLC, our wholly-owned subsidiary and a Delaware limited
liability company (“Merger Sub II”), Eos Energy Storage LLC, a Delaware limited liability company (“EES”),
New Eos Energy LLC, a wholly-owned subsidiary of EES and a Delaware limited liability company (“Newco”) and AltEnergy
Storage VI, LLC, a Delaware limited liability company (“AltEnergy”). Pursuant to the Merger Agreement, (1) Merger
Sub I merged with and into Newco (the “First Merger”), whereupon the separate existence of Merger Sub I ceased, and
Newco continued as the surviving company (such company, in its capacity as the surviving company of the First Merger, is sometimes
referred to as the “First Surviving Company”) and became our wholly owned subsidiary; and (2) immediately following
the First Merger and as part of the same overall transaction as the First Merger, the First Surviving Company merged with and
into Merger Sub II, whereupon the separate existence of the First Surviving Company ceased, and Merger Sub II continued as the
surviving company and our wholly owned subsidiary.
Upon
the closing of the business combination (the “Closing”), the Company changed its name to “Eos Energy Enterprises,
Inc.”
The
business combination is accounted for as a reverse recapitalization. EES is deemed the accounting predecessor and the combined
entity is the successor SEC registrant, meaning that EES’ financial statements for previous periods are disclosed in the
registrant’s future periodic reports filed with the SEC. Under this method of accounting, BMRG is treated as the acquired
company for financial statement reporting purposes.
As
a SEC-registered and NASDAQ-listed company, we are required to implement procedures and processes to address public company regulatory
requirements and customary practices and have and continue to hire additional personnel in this context. We expect to incur additional
annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director
fees, and additional internal and external accounting, legal, and administrative resources, including increased personnel costs,
audit and other professional service fees.
Key
Factors Affecting Operating Results
Commercialization
We
began full commercial production of our Eos Gen 2.3 125|500 DC Battery System and delivering first shipments to customers in January
2021. Our testing of Gen 2.3 batteries produced in limited quantities during 2020 has indicated performance at expected levels
pending movement into commercial production. While we expect the performance to be the same as we further scale commercial production,
the manufacturing line for this battery system has not been fully tested. If performance of the battery system does not meet our
specifications, we may need to reduce the speed of production to ensure we have quality batteries that meet our performance specifications.
Any delay in production could affect the delivery of batteries to our customers.
We
are also in the process of getting a third-party product safety certification from Underwriter Laboratories (UL) for the Eos Gen
2.3 125|500 DC Battery System. While we anticipate receiving UL Certification, the certification has been delayed due to Covid-19
and is expected in the second quarter of 2021.
Our
growth strategy contemplates increasing sales of a commercial battery system through our direct sales team and sales channel partners.
We anticipate our customers to include utilities, project developers, independent power producers and commercial and industrial
companies. As we intend to expand our sales both in volume and geography, we have started discussions with several companies in
North America, Europe, the Middle East and Asia about partnering on selling our product in these regions. For some of these potential
partners we have begun discussions ranging from being a reseller of our product to being a joint venture partner in the manufacturing
of our battery systems. We expect to continue expanding the direct sales force in North America, adding direct sales people outside
North America, and entering into strategic alliances to advance our sales growth globally.
Integration
of Alliance Partners
We
may in the future seek to construct one or more manufacturing facilities, thereby expanding our manufacturing footprint to meet
customer demand. Provided the arrangement with our joint venture partner HI-POWER continues to meet the quality, cost and delivery
timelines set by the HI-POWER Board of Directors, HI-POWER would maintain its exclusivity to manufacture the batteries for products
sold and delivered in North America. If HI-POWER fails to meet required performance metrics, we can establish our own manufacturing
for North America either directly or through other partnerships.
For
sales outside of North America, we may establish our own manufacturing facilities or may partner with other companies to manufacture
our products. The construction of any such facility would require significant capital expenditures and result in significantly
increased fixed costs. If we establish our own manufacturing facility, we have the right to transfer the manufacturing processes,
technology and know-how from the HI-POWER JV to any new facility.
We
commission and provide for the operation and maintenance of our battery storage systems deployed to date, and for those battery
storage systems sold throughout the life of their operations. In addition, we also offer extended product warranties to supplement
the life of these assets. As our sales expand in volume and geography, we have engaged third parties to perform this function
on our behalf.
Market
Trends and Competition
According
to Bloomberg New Energy Finance (“BNEF”) the global energy storage market is expected to grow to a cumulative 1,095
gigawatts (“GW”), attracting an estimated $660 billion in future investment by 2040. With approximately 3.3 GW of
energy storage commissioned globally in 2019, it is expected to increase to 4.7 GW in 2020. It is expected the global energy storage
market will grow at a 53% compound annual growth rate from 6,480 megawatt hours (“MWh”) in 2019 to approximately 83,000
MWh by 2025.
Based
on BNEF, the United States would represent over 15% of this global market. The percentage of renewable energy in total electricity
generation in the United States will change from 18% in 2019 to 36% by 2030 and solar energy is estimated to contribute 20% to
the total electricity supply. Favorable regulatory conditions such as the recent court decision validating FERC Order 841, along
with state sponsored incentives in New York, California, Massachusetts and other states coupled with the rapid growth of solar
PV plus storage applications throughout the United States are expected to grow the utility-scale energy storage market from 172
megawatts (“MW”) / 345 MWh in 2019 to 6,631 MW / 17,563 MWh by 2025. We estimate 1,250 GW of additional capacity from
renewables to be delivered to the grid by 2024, leading to an increased demand for energy storage.
Factors
affecting customers to make decision when choosing from different battery storage systems in the market include:
|
●
|
product
performance and features;
|
|
●
|
safety
and sustainability;
|
|
●
|
total
lifetime cost of ownership;
|
|
●
|
total
product lifespan;
|
|
●
|
power
and energy efficiency;
|
|
●
|
duration
of the batteries storage;
|
|
●
|
customer
service and support; and
|
|
●
|
U.S.
based manufacturing and sourced materials.
|
Lithium-ion
currently has 95% or more market share for the stationary battery industry. We believe we are the first commercially available
battery system that does not have a lithium-ion chemistry. We anticipate our battery system using Znyth® technology will gradually
take some market share of the battery industry. This considers its unique operating characteristics, including a 100% discharge
capability, flattened degradation curve and a 3-12 hour duration, as well as other characteristics related to safety and the cost
of operating and maintaining our battery system. Our ability to successfully deploy our battery system technology and gain market
share in the energy storage market will be important to the growth of our business.
Regulatory
Landscape
In
North America, geographic distribution of energy storage deployment has been driven by regulatory policy with both federal and
state level programs contributing to stable revenue streams for energy storage. Refer to the Business section for a description
of these programs and the impact on our business.
Covid-19
We
have implemented operational and protective measures to ensure the safety, health and welfare of our employees and stakeholders.
This includes implementing work from home policies for non-essential employees, which constitutes 78% of our workforce. We have
also ensured that all employees and visitors that visit our office have access to personal protective equipment and we strictly
enforce social distancing. We will maintain these precautions and procedures until Covid-19 is under adequate control. To-date,
Covid-19 caused a several week delay in completing the UL certification of the Gen 2.3 product due to the certification company
being delayed in completing the in-person witness tests. In addition, it caused the delay for us to deliver products to one of
our customers. Other than this, Covid-19 did not have a material impact on our operations or financial condition.
The
full impact of the Covid-19 pandemic on our financial condition and results of operations will depend on future developments,
such as the ultimate duration and scope of the pandemic, its impact on our employees, customers, and vendors, in addition to how
quickly normal economic conditions and operations resume and whether the pandemic impacts other risks disclosed in “Risk
Factors” within this prospectus. Even after the pandemic has subsided, we may continue to experience adverse impacts to
our business from any economic recession or depression that may occur as a result of the pandemic. Therefore, we cannot reasonably
estimate the impact at this time. We continue to actively monitor the pandemic and may determine to take further actions that
alter our business operations as may be required by federal, state, or local authorities or that we determine to be in the best
interests of our employees, customers, vendors, and shareholders.
Components
of Results of Operations
As
the Merger is accounted for as reverse recapitalization, the operating results included in this discussion reflect the historical
operating results of EES prior to the Merger and the combined results of Eos following the closing of the Merger. The assets and
liabilities of the Company are stated at their historical cost.
Revenue
We
have primarily generated revenues from limited sales as we recently launched our next generation energy storage solution Gen 2.3
that is scalable and can be used for a variety of commercial use cases. We expect revenues to increase as we scale our production
to meet demand for the next generation of our product.
Cost
of sales
In
August 2019, we established a joint venture, HI-POWER, that manufactures the Gen 2.3 battery system on our behalf. Our cost
of sales for the Gen 2.3 battery system includes the purchase of the manufactured system from Hi-Power, the joint venture which
produces the Gen 2.3 battery system. Cost of sales also includes the provision for excess, obsolete and slow-moving inventories,
the reserve for losses on firm purchase commitments, cost of products sold directly by the Company to our customers, depreciation
of manufacturing plant and equipment, warranty accruals, as well as shipping, logistics and facility related costs. We expect
our cost of sales to exceed revenues in the near term as we continue to scale our business.
Before
launching commercial production of our Gen 2.3 battery system, we manufactured our battery systems ourselves and our cost of sales
included material, labor, and other direct costs related to the manufacture of energy storage product for sale to customers. Other
items contributing to cost of sales were manufacturing overhead such as engineering expense, equipment maintenance, environmental
health and safety, quality and production control and procurement.
Research
and development expenses
Research
and development expenses consist primarily of salaries and personnel-related costs as well as products, materials, third party
services, and depreciation on equipment and facilities used in our research and development process. We expect our research and
development costs to increase for the foreseeable future as we continue to invest in research and development activities that
are necessary to achieve our technology and product roadmap goals.
General
and administrative expenses
General
and administrative expenses consist mainly of personnel-related expenses including corporate, executive, finance, and other administrative
functions, expenses for outside professional services, including legal, audit and accounting services, as well as expenses for
facilities, depreciation, amortization, travel, and marketing costs. We expect general, and administrative expenses to increase
for the foreseeable future as we scale our headcount with the growth of our business, and as a result of operating as a public
company, including compliance with the rules and regulations of the SEC, legal, audit, additional insurance expenses, investor
relations activities, and other administrative and professional services.
Grant
expense (income), net
Grant
expense (income), net includes our expenses net of reimbursement related to grants provided by the California Energy Commission
(“CEC”).
Sale
of tax attributes
The
sale of tax attributes represents the benefit recorded from the sale of our State of New Jersey net operating loss carryforwards
and R&D tax credits to third parties.
Income
(loss) on equity in unconsolidated joint venture
The
income (loss) on equity in unconsolidated joint venture represents our proportionate share of the income (loss) from our investment
in HI-POWER LLC, a joint venture established with Holtec Power, Inc.
Interest
expense
Interest
expense consists primarily of interest incurred on our convertible notes payable before the Merger, including the accretion
of interest on convertible notes that contained embedded features that permit holders to demand immediate repayment of
principal and interest. All convertible notes were converted to common stock in connection with Merger and no balance
outstanding as of December 31, 2020
Change
in fair value, embedded derivative
The
convertible notes issued during 2019 and 2020 contained an embedded derivative feature that could accelerate the repayment of
the convertible notes upon a qualified financing event not within our control. This embedded derivative resulted in the recording
of a premium or discount on convertible notes that were recognized in earnings upon their issuance. In connection with the Merger,
all convertible notes were converted to common stock and the embedded derivative fair value was zero as of December 31, 2020.
Results
of Operations
Comparison
of Year Ended December 31, 2020 to Year Ended December 31, 2019
The
following table sets forth our operating results for the periods indicated:
|
|
Year Ended December 31,
|
|
|
$
|
|
|
%
|
|
($ in thousands)
|
|
2020
|
|
|
2019
|
|
|
Change
|
|
|
Change
|
|
Revenue
|
|
$
|
219
|
|
|
$
|
496
|
|
|
$
|
(277
|
)
|
|
|
(56
|
)
|
Cost and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
5,509
|
|
|
|
8,332
|
|
|
|
(2,823
|
)
|
|
|
(34
|
)
|
Research and development expenses
|
|
|
13,983
|
|
|
|
11,755
|
|
|
|
2,228
|
|
|
|
19
|
|
General and administrative expenses
|
|
|
18,883
|
|
|
|
7,710
|
|
|
|
11,173
|
|
|
|
145
|
|
Grant expense (income), net
|
|
|
913
|
|
|
|
(469
|
)
|
|
|
1,382
|
|
|
|
(295
|
)
|
Operating loss
|
|
|
(39,069
|
)
|
|
|
(26,832
|
)
|
|
|
(12,237
|
)
|
|
|
46
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of state tax attributes
|
|
|
—
|
|
|
|
4,060
|
|
|
|
(4,060
|
)
|
|
|
(100
|
)
|
Interest income (expense), net
|
|
|
(115
|
)
|
|
|
2
|
|
|
|
(117
|
)
|
|
|
(5850
|
)
|
Interest expense – related party
|
|
|
(23,706
|
)
|
|
|
(49,708
|
)
|
|
|
26,002
|
|
|
|
(52
|
)
|
Loss on extinguishment of convertible notes – related party
|
|
|
—
|
|
|
|
(6,111
|
)
|
|
|
6,111
|
|
|
|
(100
|
)
|
Change in fair value, embedded derivative
|
|
|
2,092
|
|
|
|
(716
|
)
|
|
|
2,808
|
|
|
|
(392
|
)
|
Change in fair value, Sponsor Earnout Shares
|
|
|
(8,083
|
)
|
|
|
—
|
|
|
|
(8,083
|
)
|
|
|
NM
|
|
Income (loss) from equity
in unconsolidated joint venture
|
|
|
127
|
|
|
|
(178
|
)
|
|
|
305
|
|
|
|
(171
|
)
|
Net loss
|
|
$
|
(68,754
|
)
|
|
$
|
(79,483
|
)
|
|
$
|
10,729
|
|
|
|
(13
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share attributable to common shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted
|
|
$
|
(7.31
|
)
|
|
$
|
(20.22
|
)
|
|
$
|
12.91
|
|
|
|
(64
|
%)
|
Revenue
Revenue
was $0.2 million and $0.5 million for the year ended December 31, 2020 and 2019, respectively, related to sales of our initial
energy storage solution for specific customer application. Revenue decreased between 2019 and 2020 as Eos transitioned its business
to launch its next generation of energy storage solution, Gen 2.3, in the second half of 2020.
Cost
of Sales
Cost
of sales decreased by $2.8 million or 34% from $8.3 million for the year ended December 31, 2019 to $5.5 million for the
year ended December 31, 2020. The decrease results primarily from a decrease of $3.0 million for manufacturing costs incurred
during the year ended December 31, 2019. In August 2019 (and as amended in August 2020), the Company entered into an agreement
with Holtec Power, Inc (“Holtec”) to form the unconsolidated joint venture, HI-POWER LLC (“Hi-Power” or
“JV”). The JV manufactures the products for all of the Company’s projects in North America. For the year ended
December 31, 2019, $0.9 million impairment loss from manufacturing property and equipment were charged to cost of sales. For 2020,
the Company incurred $1.1 million increases in losses resulting from inventory reserves related to excess and obsolescence, lower
of cost or market adjustments and reserves for losses on firm inventory purchase commitment, compared to 2019.
Research
and Development
Research
and development costs increased by $2.2 million or 19% from $11.8 million for the year ended December 31, 2019 to $14.0 million
for the year ended December 31, 2020. The increase results primarily from $3.9 million increase of expenses for material
and supplies as well as leases, related to R&D activities associated with our Gen 2.3 battery system, offset by reductions
in payroll expenses and personnel related cost of $0.5 million, $0.4 million in outside service, $0.7 million decrease in impairment
loss for R&D property and equipment from 2019 to 2020, and $0.2 million in facility cost. As the Company transitioned its
efforts from research and development activities to focus on the commercial production of its next generation energy storage solution,
it reduced its R&D headcount.
General
and Administrative Expenses
General
and administrative expenses increased by $11.2 million or 145% from $7.7 million for the year ended December 31, 2019 to
$18.9 million for the year ended December 31, 2020. Included in this is an increase of stock-based compensation for employees
and service providers by $ 5 million in 2020. Vesting of certain stock options and performance-based options was accelerated in
accordance with terms of the related award agreement at the Merger. The increase of General and administrative expenses was further
due to a $4.1 million increase in payroll and personnel cost for the year ended December 31, 2020 as well as $2.5 million
higher professional fees and marketing expenses related to our public listing efforts. As the Company is commercializing the Gen
2.3 battery storage solution, as well as since becoming a public company in November 2020, we incurred significantly higher legal,
accounting and other expenses.
Grant
expense (income), net
Grant
expense (income), net increased by $1.4 million or (295)% from $ (0.5) million for the year ended December 31, 2019 to $0.9
million for the year ended December 31, 2020. The increase results from lower grant income earned for the year ended December
31, 2020 and level of research and development activity related to its grants from the California Energy Commission.
Sale
of state tax attributes
We
recognized income of $— million and $4.1 million during the years ended December 31, 2020 and 2019, respectively related
to the sale of our state net operating losses and research and development credit carryforwards under the New Jersey Economic
Development Authority Technology Business Tax Certificate Transfer Program. The Company has been approved for selling more state
tax attributes for the year ended December 31, 2019 in 2020 and is still working to find matching purchaser in the market.
Income
(loss) on equity in unconsolidated joint venture
The
income (loss) on equity in unconsolidated joint venture results from our portion of HI-POWER LLC’s income and loss incurred.
The joint venture was established in August 2019 and incurred initial losses in 2019. The joint venture turned a profit for
the year ended December 31, 2020.
Interest
expense — related party
Interest
expense - related party decreased by $26.0 million from $49.7 million for the year ended December 31, 2019 to $23.7 million
for the year ended December 31, 2020. Eos’s convertible notes issued during 2019 and 2020 included an embedded feature
that permits holders to demand immediate repayment of all outstanding principal and interest resulting in the immediate accretion
of interest expense. During the year ended December 31, 2019, proceeds allocated to the issuance of convertible notes was
$19.3 million and Eos recorded $49.7 million of interest expense related to these convertible notes that include a demand feature
that could require repayment of principal and interest during 2019. During the twelve months ended December 31, 2020, proceeds
allocated to the issuance of convertible notes was $9.0 million, and Eos recorded $23.7 million of interest expense related to
these convertible notes.
Loss
on extinguishment of convertible notes — related party
The
loss on extinguishment of convertible notes of $6.1 million in 2019 was the result of the modification in April 2019 of convertible
notes issued during 2018 and January 2019.
Change
in fair value, embedded derivative
The
change in fair value of $2.1 million and $(0.7) for the years ended December 31, 2020 and December 31, 2019 reflect
the change in fair value of the embedded derivative feature on our convertible notes that was recorded through earnings.
Change
in fair value, Sponsor Earnout Shares
The
change in fair value of $(8.1) million for the years ended December 31, 2020 reflects the change in fair value of the Sponsor
Earnout Shares classified as liability as of the Merger date through the date they were released from restriction and reclassified
into equity on December 16, 2020.
Liquidity
and Capital Resources
As
of December 31, 2020, we had cash and cash equivalents of $121.9 million. Since our inception, we have financed our operations
primarily through funding received from the private placement of convertible notes and the issuance of common and preferred units.
In November 2020, we received $142.3 million in connection with the consummation of the Merger and the private placement upon
the Closing.
We
expect capital expenditures and working capital requirements to increase as we seek to execute on our growth strategy. We currently
anticipate that total capital expenditures for fiscal 2021 will be approximately $35 to $40 million which will be used primarily
for additional equipment, automation, and implementation to increase our capacity and efficiency to meet our customer’s
needs. Our capital expenditure and working capital requirements in the foreseeable future may change depending on many factors,
including but not limited to the overall performance of existing equipment, our sales pipeline, our operating results and any
adjustments in our operating plan needed in response to industry conditions, competition or unexpected events. We believe that
our existing cash, together with cash from operations, will be sufficient to meet our capital expenditure and working capital
requirements for the foreseeable future.
The
following table summarizes our cash flows from operating, investing and financing activities for the periods presented.
|
|
Fiscal Year Ended
|
|
($ in thousands)
|
|
2020
|
|
|
2019
|
|
Net cash used in operating activities
|
|
$
|
(26,559
|
)
|
|
$
|
(23,834
|
)
|
Net cash used in investing activities
|
|
|
(6,625
|
)
|
|
|
(2,900
|
)
|
Net cash provided by financing activities
|
|
|
154,175
|
|
|
|
22,098
|
|
Cash
flows from operating activities:
Our
cash flows used in operating activities to date have been primarily comprised of costs related to research and development, manufacturing
of our initial energy storage products, and other general and administrative activities. As we continue and expand commercial
production, we expect our expenses related to personnel, manufacturing, research and development and general and administrative
activities to increase.
Net
cash used in operating activities was $26.6 million for the year ended December 31, 2020 which is comprised of our net loss
of $68.8 million, adjusted for non-cash interest expense on convertible debt of $23.7 million and other non-cash charges that
includes stock-based compensation of $5.1 million, depreciation and amortization of $1.6 million, change in fair value of embedded
derivative of $(2.1) million, change in fair value of Sponsor Earnout Shares of $8.1 million, provision for firm purchase commitment
of $1.6 million. The net cash flows inflow from to changes in operating assets and liabilities was $4.4 million for year ended
December 31, 2020, primarily driven by a decrease in accounts receivable from the sale of state tax attributes of $4.1 million
and an increase in accounts payable and accrued expenses of $3.0 million, offset by the increase of prepaid expense and other
expense of $1.6 million.
Net
cash used in operating activities was $23.8 million for the year ended December 31, 2019, which is comprised of our net loss
of $79.5 million, adjusted for non-cash interest expense on convertible debt of $49.7 million and other non-cash charges that
includes depreciation and amortization of $2.1 million, change in fair value of embedded derivative of $0.7 million, impairment
of property and equipment of $1.6 million loss on extinguishment of convertible notes — related party of $6.1 million and
other non-cash charges of $0.2 million. The net cash outflow from changes in operating assets and liabilities was $4.9 million
for the year ended December 31, 2019 primarily related to an increase in accounts receivable from the sale of state tax attributes
of $4.1 million and a decrease in accounts payable and accrued expenses of $1.1 million.
Cash
flows from investing activities:
Our
cash flows from investing activities have been comprised primarily of purchases of property and equipment of $3.6 million and
$2.3 million for the year ended December 31, 2020 and December 31, 2019, respectively, as well as investments in joint
venture.
In
August 2019, we began to make investments in the HI-POWER joint venture, which has the exclusive rights to manufacture our
battery storage systems in North America, subject to meeting certain performance targets. Our initial financial commitment to
this joint venture was $4.1 million in the form of cash and special purpose manufacturing equipment. The special purpose manufacturing
equipment continues to be classified as property and equipment on our balance sheet until it is fully commissioned and operational
and has produced the first ten megawatts per hour of commercial product. During the latter half of 2019, the Company made cash
contributions of $0.6 million to HI-POWER. In the year ended December 31, 2020, the Company made additional contributions
of $3.0 million. The increase of the contribution was a result of the shorter period of time for Hi-POWER’s operation in
2019, which only included four months, compared to a full year of operation in 2020, as well as increasing production at the JV.
Cash
flows from financing activities:
Through
December 31, 2020, we have raised capital from the Merger with BMRG and financed our operations through the sale of common
and preferred units and convertible notes.
Net
cash provided by financing activities was $154.2 million in the year ended December 31, 2020 and included $142.3 proceeds
from the Merger with BMRG, with $10.3 million paid for direct incremental transaction cost, and proceeds from a Paycheck Protection
Program loan of $1.3 million. Prior to the Merger, the Company additionally received $11.8 million from issuance of contingent
redeemable preferred units and $9.0 million from issuance of convertible notes.
Net
cash provided by financing activities was $22.1 million for the year ended December 31, 2019 and included proceeds from the
issuance of convertible notes payable — related party of $21.1 million, and proceeds of $2.0 million attributable to the
issuance of contingently redeemable preferred units. These proceeds were partially offset by a cash outflow related to the repayment
of short-term notes payable of $1.0 million.
We
have certain obligations and commitments to make future payments under contracts. The following table sets forth our
estimates of future payments at December 31, 2020. See Note 7 — Investment in Unconsolidated Joint Venture, Note 8
— Commitment and contingencies and Note 13 — Long term debt for a further description of these obligations and
commitments.
($ in thousands)
|
|
Total
|
|
|
Less
than
1 year
|
|
|
1-3 years
|
|
|
3-5 years
|
|
|
More than
5 years
|
|
Paycheck Protection Program Loan
|
|
$
|
1,258
|
|
|
|
978
|
|
|
|
280
|
|
|
|
—
|
|
|
|
—
|
|
Operating and capital lease
|
|
$
|
4,823
|
|
|
|
699
|
|
|
|
1,584
|
|
|
|
1,861
|
|
|
|
679
|
|
Firm purchase commitment
|
|
$
|
2,504
|
|
|
|
2,504
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Other loans
|
|
$
|
93
|
|
|
|
93
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
8,678
|
|
|
|
4,274
|
|
|
|
1,864
|
|
|
|
1,861
|
|
|
|
679
|
|
At
December 31, 2020, we had an agreement to provide a loan commitment to one of our customer for $1 million. $0.1 million were
drawn on that commitment as of December 31, 2020.
Off-Balance
Sheet Arrangements
On
January 10, 2020, the Company entered into a one-year invoice securitization facility (the “LSQ Invoice Purchase Agreement
Facility”) pursuant to (i) an Invoice Purchase Agreement (the “IPA”), as sellers, (the “Seller”),
and LSQ Funding Group, L.C. (“LSQ”), as purchaser (the “Purchaser”). Under the terms of the IPA, the Company
contributes certain invoices, related collections and security interests (collectively, the “Invoices”) to LSQ on
a revolving basis. Under the terms of the IPA, the Company issues to the Purchasers an ownership interest in the Invoices for
up to $3.5 million in cash proceeds. This facility was terminated in September 2020. During the year ended December 31, 2020, the Company sold $4.1 million of receivables from sales of state tax attributes and $1.5 million of grant receivables. Costs
incurred on the sale was $0.1 million for the year ended December 31, 2020. These amounts are recorded in interest expense
in the statements of operations.
As
of December 31, 2020 and December 31, 2019, we did not have any off balance sheet receivables outstanding nor did we
incur any costs associated with off-balance sheet arrangements. We did not have any other material off-balance sheet arrangements
as of December 31, 2020 and December 31, 2019.
Critical
Accounting Policies and Use of Estimates
Our
consolidated financial statements are prepared in conformity with U.S. generally accepted accounting principles. In preparing
our consolidated financial statements, we make assumptions, judgments, and estimates on historical experience and various other
factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates
under different assumptions or conditions. We regularly reevaluate our assumptions, judgments, and estimates.
Our
significant accounting policies are described in Note 1, “Nature of Operations and Summary of Significant Accounting Policies,”
in the Notes to the audited financial statements. Our most significant accounting policies, which reflect significant management
estimates and judgment in determining amounts reported in our audited financial statements were as follows:
Principles
of Consolidation and Reverse Acquisition
The
Merger was accounted for as a reverse recapitalization in accordance with ASC 805 Business combination. Under this method of accounting,
BMRG has been treated as acquiree and EES is treated as acquirer for financial reporting purposes. This determination was primarily
based on current shareholders of EES having a relative majority of the voting power of the combined entity, the operations of
EES prior to the acquisition comprising the only ongoing operations of the combined entity, and senior management of EES comprising
the majority of the senior management of the combined entity. Accordingly, for accounting purposes, the financial statements of
the combined entity represent a continuation of the financial statements of EES with the acquisition being treated as the equivalent
of EES issuing stock for the net assets of BMRG, accompanied by a recapitalization. The net assets of BMRG were recognized at
historical cost as of the date of the Merger, with no goodwill or other intangible assets recorded.
Inventory
Valuation
Inventory
is stated at the lower of cost or net realizable value. The Company capitalizes inventory costs when, based on management’s
judgment, future commercialization is considered probable and the future economic benefit is expected to be realized; otherwise,
such costs are expensed as research and development. Inventory is evaluated for impairment periodically for excess, obsolescence
and for instances where cost of the inventory is in excess of its estimated net realizable value. In estimating a provision for
excess, obsolete and slow-moving inventory, we consider such factors as competitor offerings, market conditions and the life cycle
of the product. If inventory on-hand is determined to be excess, obsolete or has a carrying amount that exceeds its net realizable
value, we will reduce the carrying amount to its estimated net realizable value.
In
preparation with the launch of our next generation energy storage solution, we will begin building inventory levels based on our
forecast for demand. A significant decrease in demand could result in an increase in the amount of excess inventory on hand, which
could lead to additional charges for excess and obsolete inventory.
The
Company assesses whether losses on purchase commitments should be accrued. Losses that are expected to arise from firm, non-cancellable,
commitments for future purchases are recognized unless recoverable. The recognized loss on purchase commitments is reduced as
inventory items are received and the remaining purchase commitment decreases.
Fair
Value Measurement
The
Company estimated the original fair value of the contingently issuable common stock (refer to Note 2 of the financial statement)
that is contingently issuable based on a Monte Carlo Stimulation pricing model considering stock price of the Company, risk free
rate of 0.41% and volatility of 60% utilizing a peer group based on five year term.
The
fair values of the Sponsor Earnout Shares on the Closing date were estimated using a Monte Carlo simulation based on stock price
of the Company, a risk free rate of 0.41% and volatility of 60% utilizing a peer group based on a five year term. The fair value
of the first tranche of Sponsor Earnout Shares that vested on December 16, 2020 was based on the closing share price of the Company’s
publicly traded stock on that date.
Stock-based
compensation is estimated at the grant date based on the fair value of the awards and is recognized as expense over the service
period. We estimate the fair value of stock options and stock purchase warrants using the Black-Scholes option pricing model.
Refer
to “Fair Value of Financial Instruments” in Note 1 in our “Notes to the Consolidated Financial
Statements” for additional information about fair value measurements.
Convertible
Notes Payable
We
record conventional convertible debt in accordance with ASC 470-20, Debt with Conversion and Other Options. Conventional
convertible debt is a financial instrument in which the holder may only realize the value of the conversion option by exercising
the option and receiving the entire proceeds in a fixed number of shares or the equivalent amount of cash. Convertible instruments
that are not bifurcated as a derivative, and not accounted for as a separate equity component under the cash conversion guidance
are evaluated to determine whether their conversion prices create an embedded beneficial conversion feature at inception, or may
become beneficial in the future due to potential adjustments. A beneficial conversion feature is deemed to be a nondetachable
conversion feature that is “in-the-money” at the commitment date. The in-the-money portion, also known as the intrinsic
value of the option, is recorded in equity, with an offsetting discount to the carrying amount of convertible debt to which it
is attached. The intrinsic value of the beneficial conversion feature within its convertible debt, including amortization of the
debt discount recorded in connection with a beneficial conversion feature, was not material to our audited financial statements.
The
convertible notes issued during 2019 and 2020 contained an embedded derivative feature that could accelerate the repayment of
the convertible notes upon either a qualified financing event or the note holders’ put exercise. For the year ended December 31,
2020, embedded derivative assets with initial fair value of $411 was recognized. Embedded derivative assets with initial fair
value of $181 and embedded derivative liabilities with initial fair value of $1,145 were recognized during 2019. As of December 31,
2019, the embedded derivatives were classified as current liabilities on the consolidated balance sheet and had fair values of
$1,681. The embedded derivatives were fair valued through the Merger date. During the year ended December 31, 2020 a gain
from the change in fair value of embedded derivative of $2,092 was recognized, while for the year ended December 31, 2019
a loss of $716 was recorded. The fair value of the embedded derivative was zero as of December 31, 2020 as a result of the conversion
of the notes in connection with the Merger.
BUSINESS
Business
Combination
Eos
Energy Enterprises, Inc. (the “Company” or “Eos”), a Delaware corporation, was incorporated under its
prior name B. Riley Merger Corp. II as a blank check company on June 3, 2019. On September 7, 2020, the Company entered into an
Agreement and Plan of Merger (the “Merger Agreement”) with BMRG Merger Sub, LLC, our wholly-owned subsidiary and a
Delaware limited liability company (“Merger Sub I”), BMRG Merger Sub II, LLC, our wholly-owned subsidiary and a Delaware
limited liability company (“Merger Sub II”), Eos Energy Storage LLC, a Delaware limited liability company (“EES”),
New Eos Energy LLC, a wholly-owned subsidiary of EES and a Delaware limited liability company (“Newco”) and AltEnergy
Storage VI, LLC, a Delaware limited liability company (“AltEnergy”).
On
November 16, 2020, the transactions described above were consummated. In connection with the business combination (the “Business
Combination”): (1) Merger Sub I merged with and into Newco (the “First Merger”), whereupon the separate existence
of Merger Sub I ceased, and Newco continued as the surviving company (such company, in its capacity as the surviving company of
the First Merger, is sometimes referred to as the “First Surviving Company”) and became our wholly owned subsidiary;
and (2) immediately following the First Merger and as part of the same overall transaction as the First Merger, the First Surviving
Company merged with and into Merger Sub II, whereupon the separate existence of the First Surviving Company ceased, and Merger
Sub II continued as the surviving company and our wholly owned subsidiary.
Upon
the closing of the business combination (the “Closing”), the Company changed its name to “Eos Energy Enterprises,
Inc.” The business combination is accounted for as a reverse recapitalization. EES is deemed the accounting predecessor
and the combined entity is the successor SEC registrant. The historical financial statements of EES became the historical financial
statement of the combined entities that are disclosed in the registrant’s future periodic reports filed with the SEC.
Business
Overview
We design, manufacture,
and deploy safe, scalable, efficient and sustainable, low-total cost of ownership battery storage solutions for the electricity
industry. Our flagship technology is the proprietary Eos Znyth aqueous zinc battery, the core of the Eos DC energy storage system
(the “Eos Znyth® system”), with both front-of-the-meter and behind-the-meter applications, particularly those with
three to twelve-hour use cases. The Eos Znyth® system is a first non lithium-ion stationary battery energy storage system (“BESS”)
that is competitive in both price and performance, fully recyclable, does not require any rare earth or conflict materials, and
is commercially available and scalable. Stationary BESS’s are used to store energy for many purposes, including stabilizing
and reducing congestion of the power grid and reducing peak energy usage. When coupled with renewable energy sources such as solar
photovoltaic (“PV”) and wind generation, the Eos Znyth® system can store energy that the renewable source produces
and discharge it when the source is not producing energy, thus reducing the intermittency and increasing the value of the renewable
energy source. Additionally, storage is used by commercial and industrial customers to save energy costs by reducing their peak
usage, thus reducing the demand charges from utilities. We believe that scalable energy storage serves as a central catalyst for
modernizing and creating a more reliable and resilient, efficient, sustainable, and affordable grid and that utilities are especially
eager for a reliable, sustainable, safe, low-cost and scalable battery storage solution.
EES
was founded in 2008 under the name Grid Storage Technologies, initially focusing on developing the chemistry of its proprietary
electrolyte-based battery technology and improving mechanical design and system performance. Our products, which are manufactured
and developed in the United States, have the ability to play a pivotal role in the transition to a more sustainable, resilient
and low carbon energy future. We have transformed from an organization that focused primarily on research and development to one
focused on commercialization of our energy storage solution and a scaled manufacturing platform. We produced our first proof of
concept with generation 1 of the Eos Znyth® system in 2015 (“Gen 1”) and began commercial shipments of our generation
2 Eos Znyth® system in 2018 (“Gen 2”). As of December 31, 2020, we have delivered approximately ten Eos Znyth®
systems comprised of over 2,500 Znyth® batteries or approximately 5 megawatt hours (“MWh”). We started the process
of delivering Generation 2.3 Eos Znyth® systems (“Gen 2.3”) to customers in December 2020. Each Gen 2.3 container
is comprised of 144 batteries, which are connected to, and monitored through, our proprietary battery management system. Each
system is individually designed with the appropriate number of containers to achieve the end user’s desired energy needs.
Our
competitive advantage is our Znyth® battery technology, which employs a unique zinc-halide oxidation/reduction cycle packaged
in a sealed, flooded, bipolar battery. Our patented aqueous zinc-powered battery technology offers a safe, scalable, fully recyclable
and sustainable alternative to lithium-ion battery power. The Znyth® technology requires just five core commodity materials
derived from non-rare earth and non-conflict minerals that are abundantly available and fully recyclable. The Eos Znyth® system
is also non-flammable and does not require any moving parts or pumps, allowing for simple maintenance and low-cost operation.
The Eos Znyth®
system offers an alternative to Li-ion at a cost per kilowatt hour (“kWh”) that is competitive. Unlike Li-ion, and
due to its wide operating temperature range, our commodity-based aqueous zinc chemistry does not require high-cost heating, ventilation,
air conditioning (“HVAC”), or fire suppression equipment. Eos Znyth® is manufactured with no toxic chemicals, which
limits risk of catastrophic failure. Where Li-ion batteries have a history of explosions and fires, our systems do not face this
issue due to the stable, non-combustible chemistry used in our battery. Our raw materials and components are readily available
commodities with fewer supply constraints than competing technologies and are environmentally benign. Li-ion batteries use scarce,
toxic rare earth materials that can be in short supply due to their use in electric vehicles, mobile phones and an array of other
electronics. Li-ion batteries can themselves be, and in recent months have been, in short supply. Our technology is highly scalable,
easily installed and integrated into new or existing electric infrastructure. It also includes our proprietary battery management
system, which optimizes our battery performance and protects the health and longevity of the battery. Our products are currently
manufactured in the United States using a highly automated assembly line which requires a fraction of the capital expenditure of
equivalent Li-ion manufacturing processes. Our scalable manufacturing platform can be localized anywhere in the world in fewer
than twelve months. Our technology is protected by a robust patent portfolio. With over 220 patent applications filed, we have
more than 140 patents pending, issued or published in thirty-three (33) countries.
We
sell our products through our direct sales force and through sales channels to developers, power producers, large utilities and
commercial and industrial companies. Our sales focus is on use cases that require three (3) to twelve (12) hours of battery storage,
although our battery can be used for shorter durations as well. We are establishing a global sales presence by leveraging our
sales channels and direct sales team. We work with customers to understand the use case for each battery storage project and propose
the best solution to maximize the economics for the end user. Examples of customers and use cases for our systems include:
|
●
|
Solar
developers that combine battery storage with solar fields to time shift energy by charging
the battery during the day and then using the battery during peak hours, just after sundown.
|
|
●
|
Industrial
customers that use battery storage to improve power quality and improve the efficiency
of other energy sources.
|
|
●
|
Commercial
and industrial customers utilize battery storage to safely reduce demand charges from their utility and participate in utility
programs to improve grid operations. In the event of a loss of electricity from the grid, our battery can be used to provide resilience,
such as running emergency systems in the building including elevators and fire alarms.
|
|
●
|
Utilities
that use battery storage systems to offset or postpone capital expenditures and to provide
congestion relief, which improves the reliability of the power grid.
|
Our
customers include renewable power producers and developers like EnerSmart Storage LLC (“EnerSmart”), Renew Akshay
Urja PVT. LTD (“ReNew Power”), Carson Hybrid Energy Storage (“CHES”) and International Electric Power,
LLC (“IEP”), industrial companies such as Motor Oil Corinth Refineries S.A. (“Motor Oil”), utilities companies
such as Duke Energy Corporation (“Duke”) and San Diego Gas & Electric Company (“SDG&E”) as well
as microgrid developers like Verdant Microgrid LLC (“Verdant”), Nayo Tropical Technology LTD (“Nayo”)
and Charge Bliss, Inc. (“Charge Bliss”).
We
have formed a joint venture with Holtec Power, Inc (“Holtec”), a multi-billion dollar supplier to the nuclear power
industry that is looking to “repower” decommissioned nuclear plants with renewable energy sources and battery storage.
By using wind and solar energy sources combined with storage they create baseload capable energy resources that provide electricity
to be sold to the utilities. In addition, we are in discussions with other partners to do the same for coal plants that are in
the process of closing. Repowering such plants requires a BESS with a flexible discharge duration of three to twelve hours, the
ability to cycle daily, a 100% depth of discharge and a usable energy capacity of the system that does not degrade below 70% during
its product lifetime. The Eos Znyth® system meets all such requirements and we believe is well suited for this application.
Industry
Overview
We
believe that energy storage is on the verge of global wide scale deployment. As batteries increasingly become economical on a
levelized cost of energy basis, we believe that utility-scale battery technology will be increasingly beneficial for a variety
of solutions, including solar PV-plus-storage, peaking capacity, grid congestion and wind generation plus storage. We anticipate
rapid increases in utility scale, co-located renewable energy-plus-storage projects, especially in the United States, with most
near and medium-term installations qualifying as utility scale. By combining a battery with an intermittent renewable energy source,
such as wind or solar, the energy stored in the battery can be used when the intermittent source is not available, for example
if the wind is not blowing or the sun is not shining.
According to Bloomberg
New Energy Finance (“BNEF”) the global energy storage market is expected to grow to a cumulative 1,095 gigawatts (“GW”),
attracting an estimated $660 billion in future investment by 2040. With approximately 3.3 GW of energy storage commissioned globally
in 2019, BNEF anticipated an increase to 4.7 GW in 2020. We expect the global energy storage market to grow at a 53% compound annual
growth rate from 6,480 MWh in 2019 to approximately 83,000 MWh by 2025.
Based
on BNEF, the United States would represent over 15% of this global market. The percentage of renewable energy in total electricity
generation in the United States will change from 18% in 2019 to 36% by 2030 and solar energy is estimated to contribute 20% to
the total electricity supply. Favorable regulatory conditions such as the recent court decision validating Federal Energy Regulatory
Commission (FERC) Order 841, along with state sponsored incentives in New York, California, Massachusetts and other states coupled
with the rapid growth of solar PV plus storage applications throughout the United States are expected to grow the utility-scale
energy storage market from 172 megawatts (“MW”) / 345 MWh in 2019 to 6,631 MW / 17,563 MWh by 2025. It is estimated
that 1,250 GW of additional capacity from renewables will be delivered to the grid by 2024, leading to an increased demand for
energy storage. Below is a demonstration of the projected energy storage global market and the projected annual investment in
the energy storage global market by region:
Limitations
of Existing Technologies
Li-ion
is the most prevalent incumbent energy storage technology, historically used in consumer electronics, electric vehicles and select
transportation industries, and is the primary competitor to our systems. According to the U.S. Energy Information Administration,
Li-ion accounted for 93% of all new energy storage capacity in the United States since 2012, growing at an annual rate of 55%.
According to the Lazard Levelized Cost of Storage Version 4.0 Final report (“Lazard LCOS 4.0 Report”), Li-ion has
an optimal power capacity of between 5 kiloWatts (“kW”) — 100 Megawatts (“MW”) and an anticipated
useful life of ten (10) years. The two primary ingredients for Li-ion batteries are lithium and cobalt.
Due
to the factors described below, we believe that even though lithium supplies are generally forecasted to accommodate the global
increase in demand in the near term, supply chains will likely become strained over time. Additionally, cobalt faces significant
supply chain uncertainty that may constrain Li-ion battery growth.
|
●
|
Lithium
Supply. The lithium supply chain is highly concentrated, and according to an article by McKinsey & Company titled “Lithium
and Cobalt: A tale of two commodities” (“McKinsey Article”) only eight (8) countries are producing lithium globally,
of which Chile, Australia and China accounted for 85% of production in 2017. Only four companies — Talison Lithium Pty Ltd,
Sociedad Química y Minera de Chile S.A., Albemarle Corporation and FMC Corporation — control the majority of the
global mining output. Without the addition of new lithium mining projects and with growing lithium demand, especially in the electric
vehicle space, demand may soon exceed supply, thus hindering the growth of lithium based products.
|
|
●
|
Cobalt
Supply. According to the McKinsey Article, while the top three producers of cobalt comprise only 40% of the global cobalt
supply, regional suppliers are more monopolistic. The Democratic Republic of the Congo (“DRC”) represented approximately
70% of global output in 2019, a share that is projected to increase further. The DRC historically experienced supply disruptions
and is currently revising mining laws, with additional concerns regarding child labor, potentially threatening the market’s
overall growth. Additionally, approximately 90% of the global cobalt supply is produced as a by-product from either copper or
nickel mining, making cobalt expansion projects closely tied to the economics of these markets. Global forecasts for cobalt production
show supply shortages arising as early as 2022, which would likely slow Li-ion battery growth.
|
|
●
|
Electric
Vehicle (“EV”) Demand. Both the lithium and cobalt markets have been largely driven by battery demand, primarily
from consumer electronics, representing 40% and 25% of demand in 2017, respectively. Lithium and cobalt could face supply constraints
due to the demand for these materials in batteries for the EV industry. As the global EV market expands, we expect global demand
for both materials to increase. EVs represented 1.3% of global vehicle sales in 2017, but BNEF forecasted that EVs will hit 10%
of global passenger vehicle sales in 2025, with that number rising to 28% in 2030 and 58% in 2040. The proportion of Li-ion batteries
consumed by the EV industry was 64% in 2019 and is forecasted to grow to 80% by 2030.
|
Li-ion
also suffers from certain inherent technological limitations. The life cycle of Li-ion batteries can be limited under demanding
conditions, due to the need for HVAC to keep the battery temperatures around 25C. Because of this, Li-ion is challenging to pair
with solar in areas where the grid is not stable, which limits usage in many locations around the world. Li-ion can be susceptible
to overheating, explosions and related safety issues, as the April 2019 lithium battery explosion near Phoenix Arizona demonstrated.
Most urban areas restrict the use of commercial size Li-ion batteries in buildings. Finally, Li-ion technology is difficult to
recycle and dispose because it contains toxic materials.
There
are a number of additional battery technologies utilized in the energy storage industry, such as:
|
●
|
Flow
Battery. Flow batteries store energy by chemically changing the electrolyte (vanadium) or by plating zinc (zinc bromide).
According to the Lazard LCOS 4.0 Report, flow batteries have an optimal power capacity of between 25 kW — 100 MW and an
anticipated useful life of twenty (20) years. While flow batteries typically have minimal storage capacity degradation and limited
potential for fire, they require expensive components and have a comparatively high balance of system costs. Specifically, the
raw materials are expensive, and the cost of operation and maintenance are very high. Flow batteries also have reduced efficiency
due to high mechanical losses, and high maintenance requirements. They require massive scale to reach competitive cost points
which, along with the above, limits applications to niche markets.
|
|
●
|
Lead-Acid.
Lead-acid batteries are the most commonly utilized battery storage technology, and are the primary battery utilized in automotive
vehicles. The Lazard LCOS 4.0 Report notes that they have an optimal power capacity of 1 — 100+ MW and an anticipated useful
life of between three and five years. Furthermore, while lead-acid batteries are relatively low cost and can be utilized for multiple
purposes, they have a poor depth of discharge, short lifespan, low energy density and a large footprint as compared to other technologies.
|
Our
Solution
Our battery storage
systems offer a safe, sustainable and scalable alternative to Li-ion at a lower Levelized Cost of Storage (“LCOS”).
Our solution consists of the Eos Znyth® system, which integrates Eos Znyth® batteries in a modular, outdoor-rated enclosure,
in our large-scale system or in modular, configurable racks for indoor urban storage.
The
key benefits of our solution include:
|
●
|
Peak
Shifting and Demand Management. Our multi-cycle DC Znyth® system shifts
power to peak hours, with repeated constant power performance down to 100% depth of discharge
without increased degradation. Li-ion typically limits the depth of discharge to 80-90%
due to the impact on accelerating the lithium battery degradation. Additionally, based
on our research estimates, even at 80% depth of discharge Li-ion battery is expected
to lose 2.5% of energy storage capacity per year over its lifetime, compared with 1-1.5%
for our product, resulting in a more favorable degradation curve with estimated operating
expense savings at $3/kWh per year. Utilities and end customers can use our batteries
to efficiently store excess base-load generation and renewable energy produced during
off peak hours. By discharging during peak hours, we eliminate the need for new fossil
based fuel and inefficient peaking generation, thereby reducing carbon emissions drastically.
Boundless Impact Research & Analytics performed a climate impact study in November
2020 comparing Eos batteries to traditional battery chemistries such as Lithium-Ion,
Lead-Acid, Sodium Sulfur and Vanadium Redox. Eos’s technology achieved the lowest
GHG emissions compared to all of the other technologies with notable showing an 84% lower
GHG emissions footprint compared to Li-Ion from a life-cycle assessment perspective.
Additionally, utilities can use the peak shifted energy to postpone or eliminate capital
investment, and the end user can reduce their demand charges from the utility.
|
|
●
|
Low
Maintenance and Minimal Auxiliary Load. Our battery system does not require an HVAC or fire suppression system, resulting
in significantly lower expenses associated with operation and maintenance of the battery. This in turn brings significant cost
savings to our customers, resulting in a meaningfully improved return on investment for our storage product and up to approximately
30% reduction in levelized cost of storage. HVAC systems usually represent 8% of delivered energy for Li-ion storage systems,
compared with 1.5% for our product to run the cooling fans for the batteries, resulting in operating expense savings from cooling
the batteries of $2/kWh per year, based on our estimates. Additionally, given that our battery does not require an auxiliary electricity
load to support HVAC and fire suppression systems, it is able to ride through grid outages, resulting in more reliable energy
storage. Comparatively, Li-ion often cannot operate without grid power due to its large auxiliary load needed for HVAC systems.
|
|
●
|
Solar/Wind
Integration and Shifting. Renewable energy sources such as wind and solar are intermittent, potentially introducing instability
into the electric grid and limiting their viability as a firm, dispatchable power source. Our batteries allow utilities and consumers
to smooth production and time shift the produced energy. Through the use of our batteries, solar electricity produced at noon
can be stored and deployed as a stable power source at peak demand later in the afternoon. Similarly, wind energy produced during
night time can be used to level out peaks in the morning.
|
|
●
|
Ancillary
Services. Our batteries can be used to bring revenue to our commercial and industrial customers through their participation
in the demand response and ancillary markets. The demand response markets are used by utilities to offset grid congestion at certain
locations by paying end users for reducing their energy use during congested periods. The ancillary markets are used to stabilize
and keep the grid in balance, and end users are paid to either inject energy into the grid or receive power from the grid, thus
providing the balance. Our batteries are eligible for entry into demand response and ancillary electricity markets that provide
stability to the power grid.
|
|
●
|
Performs Across
Wide Temperature Range. Our system’s performance is stable from - 20º to 50ºC without HVAC and has
a unique ability to recover from temperatures as high as 70º to 90ºC, which would cause other battery technologies
such as Li-ion to experience thermal runaway and potential fire or explosion. Data from our cell, battery and system testing
shows that round trip efficiency (“RTE”) is stable within 75%+/- 3% across - 11º to 41ºC. (round trip
efficiency is the ratio of energy put in (in kWh) to energy retrieved from storage (in kWh)). Below is a demonstration of the
wide temperature operating range of our battery technology based on data from deployed systems:
|
|
●
|
Resilient
system recovering after extreme temperature abuse as high as 90ºC. This is a significant differentiator to Li-ion which
requires HVAC and fire suppression, thus increasing capital expenditures required for maintenance, as Li-ion must be kept within
a narrow temperature range (25 °C +/- 3 °C) to mitigate the risk of thermal runaway, leading to fire or explosion. Based
on our estimates, our low maintenance capabilities results in approximately $1/kWh per year operating expense savings. Below is
a demonstration of our battery that was subjected to temperatures exceeding 90ºC while being operated. After the battery
was allowed to cool to room temperature, the battery was able to return to its pre-abuse performance.
|
|
●
|
Upside
Opportunities. Given that raw materials represent a high percentage of the Eos Znyth® system’s total
cost, we expect the salvage value of the raw materials will offset the cost of system removal and decommissioning at the end of
life for our customers. We continue to evaluate and refine recycling cost and estimate that our battery system will still have
50% of its original capacity after thirty (30) years of use. We anticipate development of a secondary, after-life market for our
batteries in approximately 10 years, which may generate additional revenue for customers or offset other costs.
|
Our
Competitive Strengths
Our
key competitors are traditional Li-ion battery manufacturers, such as Samsung Electronics Co., Ltd, LG Chem, Ltd., Sungrow and
Contemporary Amperex Technology Co. Limited. We believe the following strengths of our business distinguish us from our competitors
and position us to capitalize on the expected continued growth in the energy storage market:
|
●
|
Differentiated
Product. Lithium cells must be kept within a narrow temperature range (25 °C +/- 3 °C), otherwise they are at risk
of thermal runaway, potentially leading to fire or explosion. The Eos Znyth® system has a significantly wider thermal
operating range (-20 °C to 50 °C), which eliminates the need for costly thermal management measures such as HVAC and fire
suppression systems. Our battery system is able to charge and discharge at different durations, covering a wide range of use cases;
for Li-ion, the charge and discharge rates are fixed, and the life of a battery can degrade if it is not charged or discharged
at the rate for which it was designed.
|
|
●
|
Minimal
Supply Chain Constraints. All materials for producing our Eos Znyth® system are widely available commodities with no supply
chain constraints and no competition with EVs. No rare earths or conflict materials are used in the production of our batteries.
Additionally, all materials are fully recyclable at end of product life and the recycled material can be sold, which results in
net present value savings of $4/kWh versus lithium.
|
|
●
|
Proven
Technology Solution in the Growing Energy Storage Market. We delivered 4,900 kWh worth of our systems to customers since inception.
As we launched the Znyth® Gen 2.3 product and are ramping manufacturing up to gigawatt-hours (“GWh”)
scale, we believe that we will benefit from the overall growth of the energy storage market, which as projected by BNEF, is expected
to reach 1,095 GWh by 2040.
|
|
●
|
Experienced
Technology Team Focused on Continuous Innovation. We have successfully introduced three generations of energy storage
systems in six years (Gen 1, Gen 2, and Gen 2.3) and plan to release new generations in the coming years. Gen 1 and Gen 2
were pilot systems that provided us with the experience to optimize the performance and design of Gen 2.3. Our research and
development team is responsible for our portfolio of fourteen (14) patent families with over 220 patent applications filed,
more than 140 pending, issued or published in thirty-three (33) countries, protecting our technology and system architecture.
We believe that our continued investment in Research and Development will enable us to continue to increase efficiency,
energy density, functionality, and reliability while reducing the cost of our battery solution.
|
|
●
|
Established
Global Sales Channels Anchored with Top Tier Customers. We sell products directly to the electric utility industry and through
sales channel partners to the commercial and industrial market. As we are building our pipeline, during fiscal year 2020, we built
relationships with new customers and entered into agreements to provide battery solutions to several customers within and outside
of the United States.
|
|
●
|
Strong
management team. We have assembled an executive team focused on accelerating the commercialization of the next-generation
Eos Znyth® solution. With decades of diverse experience in the energy industry and deep expertise in manufacturing,
battery storage and executing complex power and energy projects around the world, our management team is able to develop, manufacture
and deliver systems at scale to meet the growing demands of the global storage market.
|
Our
Products
The Eos Znyth®
system is designed to meet a wide range of requirements in the battery storage industry, including large grid-scale energy storage
projects, large and small solar storage projects, commercial or industrial projects, in-building urban projects and eventually
the residential market. With a three (3) to twelve (12) hour discharge capability, immediate response time, and modular construction,
the Eos Znyth® system can be scaled and configured to reduce cost and maximize profitability in a wide range of battery storage
projects. While the Eos Znyth® system can be implemented in any configuration required, we offer three standard configurations:
the Energy BlockTM (“Energy Block”), the large-scale system and customized racking configurations.
Our
innovative Energy Block packaging comprises a twenty (20) foot standard International Organization for Standardization shipping
container which enables flexible options for system installation while significantly lowering the installation cost and accelerating
permitting and installation time. The Energy Block is shipped with batteries and all electrical equipment integrated and factory
tested into a standard twenty (20) foot intermodal shipping container for drop and play convenience. Each sub-system includes
pre-integrated strings of Eos Znyth® batteries with DC wiring, DC system protection, support structure, enclosure and Eos
battery management system. The Energy Block system integrates Eos Znyth® batteries in a modular, outdoor-rated enclosure capable
of delivering three (3) to twelve (12) hours of continuous discharge at specified power. Each DC system is made-up of a containerized
Energy Block integrating 144 Znyth® Batteries and a DC control section. Our proprietary battery management system monitors
the voltage and temperature of each battery in the system, isolates faulty battery strings and provides real time visibility of
battery operating limits. The Block is typically purchased by commercial industrial customers, solar developers and is ideal for
40MWh and smaller battery systems, but can be used for larger systems as well.
The large-scale system
is designed for large battery storage projects by allowing for what we believe to be the highest power density on the smallest
footprint overall. The large-scale system is a pole barn type structure with a racking system that allows the modular Znyth®
batteries to be stacked in a tall multilevel configuration, thus providing increased power density. Because the Znyth® battery
does not require HVAC or fire suppression systems and is simpler to install, operate and maintain as compared to Li-ion, we believe
the large-scale system provides a cost-effective way to implement large Znyth® battery storage systems. Furthermore, the large-scale
system is typically purchased by utilities, independent power producers, solar and wind developers, and is an ideal solution for
larger systems above 40MWh.
Our
Urban customized and modular racking solution is offered primarily for indoor battery storage projects but could be used in a
wide range of projects. The safety and modular nature of the Znyth® battery allows for implementations in basements, on rooftops,
or any number of other locations in a building. Customized racks are typically purchased by commercial and industrial customers,
as well as system integrators, and are typically used for indoor systems that require a modular configuration.
Our
Strategy
Since our founding
in 2008, we have been on a mission to accelerate the shift to clean energy with positively ingenious solutions that transform how
the world stores power. Key elements of our strategy include:
|
●
|
Continue
to innovate and advance our solutions. We intend to continue to innovate our energy storage systems by developing new and
enhanced technologies and solutions. Our innovation also extends to our manufacturing ability, which includes a proprietary equipment
and process design. We entered into a partnership with Holtec to launch HI-POWER, a joint-venture manufacturing facility in Pittsburgh,
Pennsylvania with an annual manufacturing capacity of 1 GWh and with sufficient space to expand the existing factory to manufacture
3.5 GWh. We believe that our future technology will continue to reduce cost and improve the efficiency and competitiveness of
our offerings. We plan to continue to introduce new generations of our technology to increase the adoption of our energy storage
systems worldwide.
|
|
●
|
Further
expand our products and services. We offer remote asset monitoring and optimization services to track the performance and
health of our batteries and to proactively identify future system performance. We intend to continue to expand the software functionality
by including an onsite controller that integrates with the power control system (inverter) which can be remotely controlled and
managed to ensure that the battery system is optimized for performance and the best economic return. Specifically, we plan on
incorporating machine learning, artificial intelligence, data science and optimization algorithms to enable use cases and create
the greatest value to the end user.
|
|
●
|
Further
expand project related services. We offer to customers the following project related services:
|
1. Project management. We offer customers project management services to ensure the process of implementing our battery system is managed in conjunction with the overall project plans. We will oversee the entire project from end to end. We charge the customer depending on the scope of our involvement.
2. Commissioning of the battery system. We commission our battery system and charge the customer for the commissioning services. The commissioning service ensures that our battery is providing the performance and operations that were committed to the customer.
3. Operations and Maintenance (“O&M”). We offer to our customers operational and maintenance plans to keep our battery in top performance. This consists of both remote monitoring of the battery health and performance as well as periodic onsite visits to perform routine maintenance.
We
plan to expand our O&M resources and capabilities to meet our customers’ needs. This expansion will include adding employees
to perform the work, as well as contracting and certifying qualified third parties to perform the commissioning, operations and
maintenance services.
|
●
|
Leverage
our partnerships to produce Znyth® batteries at scale. We partnered with Holtec to produce Znyth® batteries
and Znyth® DC battery systems at GWh scale as part of the HI-POWER joint venture. As the U.S. market grows, HI-POWER expects
to expand its manufacturing capacity at Holtec’s Manufacturing Division facility near Pittsburgh, Pennsylvania. We may also
establish additional manufacturing facilities in partnership with Holtec at additional U.S. locations and/or in international
locations with Holtec or other potential partners.
|
|
●
|
Implement
near-term cost reduction. We intend to optimize manufacturing for Gen 2.3 by insourcing selected services and implement further
automation of the manufacturing process. Through our continued research and development efforts, we also believe we can continue
to reduce the amount and cost of material required to manufacture the batteries. We further plan to substitute new materials to
reduce cost. We also believe we will achieve lower prices for certain materials through volume purchasing.
|
Our
Customers
Our
customers include renewable power producers and developers like EnerSmart Storage LLC (“EnerSmart”), Renew Akshay
Urja PVT. LTD (“ReNew Power”), Carson Hybrid Energy Storage (“CHES”) and International Electric Power,
LLC (“IEP”), industrial companies such as Motor Oil Corinth Refineries S.A. (“Motor Oil”), utilities companies
such as Duke Energy Corporation (“Duke”) and San Diego Gas & Electric Company (“SDG&E”) as well
as microgrid developers like Verdant Microgrid LLC (“Verdant”), Nayo Tropical Technology LTD (“Nayo”)
and Charge Bliss, Inc. (“Charge Bliss”). Our largest customer in fiscal year 2019 was Duke Energy, which accounted
for 26.1% of our revenues in fiscal 2019. For fiscal year 2020, our revenue primarily resulted from recognition of amounts previously
recorded as deferred revenue.
Intellectual
Property
The
success of our business depends, in part, on our ability to maintain and protect our proprietary technology, information,
processes and know-how. We rely primarily on patent, trademark, copyright and trade secrets laws in the United States and
similar laws in other countries, confidentiality agreements and procedures and other contractual arrangements. We are in the
process of filing, or have recently filed, certain patents relative to our Gen 2.3 product that are subject to United
States Patent and Trademark Office (“USPTO”) approval. A majority of our patents relate to cell chemistry,
architecture and battery mechanical design, system packaging and battery management systems. We continually assess
opportunities to seek patent protection for those aspects of our technology, design, methodologies and processes that we
believe provide significant competitive advantages. As of December 31, 2020, we had fourteen (14) patent families with
over 220 patent applications filed, more than 140 patents pending, issued, or published in thirty-three (33) countries,
protecting our technology and system architecture. Our key issued patents are scheduled to expire between years 2035 and
2036.
We
rely on trade secret protection and confidentiality agreements to safeguard our interests with respect to proprietary know-how
that is not patentable and processes for which patents are difficult to enforce. We believe that many key elements of our manufacturing
processes involve proprietary know-how, technology or data that are not covered by patents or patent applications, including technical
processes, test equipment designs, algorithms and procedures.
All
of our research and development personnel have entered into confidentiality and proprietary information agreements with us. These
agreements address intellectual property protection issues and require our employees to assign to us all of the inventions, designs
and technologies that our personnel develop during the course of their employment.
We
also require our customers and business partners to enter into confidentiality agreements before we disclose any sensitive aspects
of our technology or business plans.
Competition
The
markets for our products are competitive, and we compete with manufacturers of traditional Li-ion and other battery storage systems.
Factors affecting customers to make decision when choosing from different battery storage systems in the market include:
|
●
|
product
performance and features;
|
|
●
|
safety
and sustainability;
|
|
●
|
total
lifetime cost of ownership;
|
|
●
|
total
product lifespan;
|
|
●
|
power
and energy efficiency;
|
|
●
|
duration
of the batteries storage;
|
|
●
|
customer
service and support; and
|
|
●
|
U.S.
based manufacturing and sourced materials.
|
Our
Znyth® system competes with products from traditional Li-ion battery manufacturers and solution providers such as Samsung
Electronics Co., Ltd, LG Chem, Ltd., Sungrow and Contemporary Amperex Technology Co. Limited. We believe that our Znyth® battery
based system offers significant technology, safety and cost advantages that reflect a competitive differentiation over lithium
energy storage technologies.
Regulatory
Policy
The United States is
one of almost 200 nations that, in December 2015, agreed to an international climate change agreement in Paris, France, that calls
for countries to set their own greenhouse gas (“GHG”) emissions targets and be transparent about the measures each
country will use to achieve these targets (“Paris Agreement”). The Paris Agreement was signed by the United States
in April 2016 and came into force on November 4, 2016. However, the Paris Agreement does not impose any binding obligations on
its participants. In August 2017, the U.S. Department of State officially informed the United Nations of the United States’
intent to withdraw from the Paris Agreement, with such withdrawal becoming effective in November 2020. On January 20, 2021, in
one of his first post-inauguration actions, President Biden notified the United Nations of the United States’ intention to
rejoin the Paris Agreement, which became effective on February 19, 2021.
Legislation
or regulations that may be adopted to address climate change could make lower GHG emitting energy sources, such as solar and wind,
more desirable than higher GHG emitting energy sources, such as coal and fuel oil. As a result, such climate change regulatory
and legislative initiatives with more stringent limitations on GHG emissions would potentially increase the demand for energy
storage systems.
In
the United States and Puerto Rico, geographic distribution of energy storage deployment has been driven by regulatory policy with
both federal and state level programs contributing to stable revenue streams for energy storage. Such policies include:
|
●
|
Federal
Energy Regulatory Commission. FERC Order 841 requires eligibility for energy storage in wholesale, capacity and ancillary
services markets. FERC Order 841 allows each regional transmission organization and independent system operator to establish its
own rules and guidelines for integrating energy storage resources, but does specify that the guidelines must allow storage resources
to provide and be compensated for all the services it is technically capable of providing. According to BNEF, markets being enabled
by FERC Order 841 may spur the United States back to the top of global storage deployments
|
|
●
|
California.
California is expected to lead front-of-the-meter energy storage deployments through 2023, mainly driven by Assembly Bill 2514
procurement targets and investor-owned utilities procuring storage for capacity applications. The California Public Utilities
Commission mandated utilities to procure up to 500 MW of behind the meter (“BTM”) storage. Further, growth in California
is driven by the Demand Response Auction Mechanism, which creates economic incentives for distributed energy resources to offer
their services to utilities and grid energy markets. The California independent systems operator allows wholesale market participation
for BTM storage assets which can earn capacity payments and provide ancillary services.
|
|
●
|
Massachusetts.
Massachusetts set an energy storage procurement target of 1,000 MWh by 2025. The Advancing Commonwealth Energy Storage program
awarded $20 million in grants which directly supported 32 MW of BTM storage capacity to date. The Solar Massachusetts Renewable
Target program calls for 1,600 MW of PV, and includes significant incentives paid to solar system owners if paired with storage.
The Peak Demand Reduction Grant Program is a $4.7 million Massachusetts Department of Energy Resources initiative designed to
test strategies for reducing Massachusetts’ energy usage at times of peak demand. The Massachusetts Department of Energy
Resources also published the Clean Peak Energy Standard which is designed to provide incentives to clean energy technologies that
can supply electricity or reduce demand during seasonal peak demand periods established by the Department of Energy Resources.
|
|
●
|
New
York. New York set an energy storage target of 1,500 MW by 2025 (3,000 MW by 2030), 500 MW of which will be commercial and
industrial. $400 million in state funding is available for energy storage projects. The New York State Energy Research and Development
Authority must distribute $350 million in market acceleration incentives for energy storage, including for solar plus storage
projects to jump start activity and allow projects to access federal tax credits in the near term. NY Green Bank has announced
$200 million in financing support for energy storage.
|
|
●
|
Other.
The Midwest, New England, Pacific Northwest states and Puerto Rico have taken the early charge on front-of-the-meter energy storage
adoption in the “all others” market category, although we anticipate that states such as Minnesota and Florida, as
well as areas in the Southwest Power Pool and the Midcontinent Independent System Operator, will emerge further over the next
five years. Puerto Rico, with its latest draft integrated resource plan, could lead this market over the next four years if it
moves forward with its mini-grid proposal. Still in the proposal phase, Arizona’s commissioner chose a 3 GW energy storage
target to be achieved by 2030 and also called for a Clean Peak Target which increases clean resources deployed during peak times
by 1.5% per year until 2030. Under Executive Order 28, the New Jersey Energy Master Plan calls for 600 MW of energy storage by
2021 and 2,000 MW by 2030. In Nevada, Senate Bill 204 requires the public utilities commission of Nevada to investigate and establish
targets for certain electric utilities to procure energy storage systems while Senate Bill 145 establishes an incentive program
for behind-the-meter energy storage within the state’s solar program. In Hawaii, Hawaiian Electric Company, Inc. recently
announced 262 MW of storage across three islands, further establishing its position as a leading market. Missouri and Louisiana
are also expected to issue orders supporting new utility demand response programs.
|
Government
Incentives
The U.S. Congress is
considering a variety of proposals for tax incentives that will benefit the energy storage industry, including in the form of tax
credits. IRS private letter ruling 201809003 clarified that energy storage is eligible for federal tax credits if charged primarily
by qualifying renewable resources. In December 2020, the U.S. Congress passed a spending bill that includes $35 billion in energy
research and development programs, a two-year extension of the Investment Tax Credit for solar power, a one-year extension of the
Production Tax Credit for wind power projects, and an extension through 2025 for offshore wind tax credits. Proposals that have
or are being considered by Congress include: (i) the establishment of an investment tax credit for standalone energy storage; (ii)
the creation of a 30% investment tax credit for refueling costs and qualified nuclear power plant capital expenditures for each
taxable year through 2023, thereafter declining each year until it reaches 10% in 2026; (iii) extension of the federal solar energy
investment tax credit for ten (10) more years, keeping the credit at 30% through 2029; (iv) the consolidation of forty-four (44)
federal energy tax incentives into three provisions to award credits for clean electricity, lower-emitting transportation fuels
and energy efficient offices and homes; (v) the allowance of renewable electricity production and investment tax credits to be
transferred on a limited basis to any entity involved in a renewable energy project, regardless of whether they have taxable income;
and (vi) the extension of the production tax credit for energy produced from closed and open-loop biomass, geothermal, landfill
gas, trash, qualified hydro, marine and hydrokinetic facilities to facilities that began construction by the end of 2019. There
can be no assurance that all or any of the above proposals will be adopted by the U.S. Congress.
Employees
As
of December 31, 2020, we had eighty-four (84) employees with eighty-three (83) full-time employees and one (1) part-time
employee. Of these full-time employees, thirty-eight (38) were engaged in research and development, ten (10) in sales and marketing,
seventeen (17) in operations and support and eighteen (18) in general and administrative capacities.
None
of our employees are represented by a labor union. We have not experienced any employment-related work stoppages, and we consider
relations with our employees to be good.
Facilities
Our
corporate headquarters are located in Edison, New Jersey, in an office consisting of approximately 63,000 square feet of office,
testing and product design space. We have a ten (10) year lease on our corporate headquarters, which expires on September 14,
2026.
We
believe that our existing properties are in good condition and are sufficient and suitable for the conduct of our business for
the foreseeable future. To the extent we need to increase our footprint as our business grows, we expect that additional space
and facilities will be available.
MANAGEMENT
Management
and Board of Directors
Our
principal officers are Joe Mastrangelo, Chief Executive Officer, Mack Treece, Chief Strategic Alliances Officer and Sagar Kurada,
Chief Financial Officer. In addition, following the business combination, Russ Stidolph will serve as Chairman of the Company’s
board of directors.
The
board of directors of the Company is comprised of seven directors, of which, in accordance with the terms of the Director Nomination
Agreement, Daniel Shribman, Mimi Walters and Alex Dimitrief have been nominated by the Sponsor and Russell Stidolph, Joseph Mastrangelo,
Krishna Singh and Audrey Zibelman have been nominated by the Seller, respectively.
The
following persons with ages as of March 4, 2021 are the executive officers and directors of the Company:
Name
|
|
Age
|
|
Position
|
Joe Mastrangelo
|
|
52
|
|
Chief Executive
Officer
|
Sagar Kurada
|
|
42
|
|
Chief Financial
Officer
|
Mack Treece
|
|
62
|
|
Chief Strategic
Alliances Officer
|
Dr. Balakrishnan
G. Iyer
|
|
46
|
|
Chief Commercial
Officer
|
Daniel Shribman
|
|
37
|
|
Director
|
Russ Stidolph
|
|
45
|
|
Director
|
Dr. Krishna
Singh
|
|
73
|
|
Director
|
Alex Dimitrief
|
|
61
|
|
Director
|
Audrey Zibelman
|
|
63
|
|
Director
|
Marian “Mimi”
Walters
|
|
58
|
|
Director
|
Joe
Mastrangelo, 52, joined EES LLC as a board advisor in March 2018 and assumed the role of Chief Executive Officer
from August, 2019 until the closing of the business combination. Mr. Mastrangelo has served as a director and the Chief Executive
Officer since the closing of the business combination. Before coming to Eos, Mr. Mastrangelo was president and chief executive
officer of Gas Power Systems since September 2015. As an energy industry leader for the past two decades, Mr. Mastrangelo
has extensive experience leading diverse teams to develop and deploy commercial scale projects around the world. Mr. Mastrangelo
has broad operating experience across the energy value chain including serving as Chief Executive Officer of GE’s Power
Conversion business, applying science and systems of power conversion to increase the efficiency of the world’s energy infrastructure.
Mr. Mastrangelo spent ten years with GE Oil & Gas, in leadership roles in finance, quality, and commercial operations,
culminating in being named a GE Corporate Officer in 2008. Joe began his career with GE in the company’s Financial Management
Program and then joined GE’s Corporate Audit Staff. Originally from New York, Mr. Mastrangelo earned a Bachelor of
Science in Finance from Clarkson University and an Associate of Science, Business Administration and Management from Westchester
Community College.
Sagar
C. Kurada, 42, joined EES LLC as as Chief Financial Officer in July 2020 and continued to serve our Chief Financial
Officer following the closing of the business combination. In this position, Mr. Kurada is responsible for the overall financial
strategy and direction at Eos, overseeing all financial functions, he guides the controller, treasury, shareholder relations,
accounting, tax, financial planning and internal audit functions to pursue the Eos’s aggressive growth strategy and meet
its clients’ and investors’ expectations. Prior to joining Eos, Mr. Kurada acted as Chief Financial Officer of HighTower
Advisors from August 2016 to November 2019. Mr. Kurada also served as Chief Executive Officer of multiple GE operating
entities, and worked in the private equity consulting practice at FCM from July 2014 to July 2016. Throughout his 20-year
career in financial strategy, planning, accounting, auditing, Mr. Kurada has established a reputation for building world-class
teams and for aligning financial and business interests to support business strategy and high-growth. Sagar has led multiple equity
and debt financings and raised in excess of $1 billion of capital to support business growth. Mr. Kurada holds a BS in Finance
and Technology from Rensselaer Polytechnic Institute and MBA from Columbia Business School.
Mack
Treece, 62, joined EES LLC as a consultant in March 2019 and assumed the role of Chief Financial Officer in March 2019.
In June, 2020 Mr. Treece was appointed Chief Strategic Alliances Officer EES LLC and continued serving in such position following
the closing of the business combination. Prior to Eos, Mack served as the Chief Executive Officer and Chief Financial Officer
of Viridity Energy since November 2012, where he was responsible for all day-to-day operations, including sales, marketing,
operations and finance. Mr. Treece has over 25 years of experience in senior management positions, with a specific focus
on successfully scaling young companies into dominant market positions. Previously, Mr. Treece was the Chief Executive Officer
and co-founder of ConnectFN and was responsible for the overall management and strategic direction of the company. Prior to ConnectFN,
Mr. Treece served as President for Teliris where he led the telepresence provider’s Global Sales, Marketing, Finance and
Operations. Mr. Treece also held several executive positions with increasing responsibility at Orange Business Services (formerly
Equant). Mr. Treece began his career with Bell Atlantic, where he last held the position of Global Chief Financial Officer for
Bell Atlantic International Wireless (BAIW) and Senior Vice President for Asia. Mr. Treece has lived and worked abroad as part
of global organizations for more than 25 years. He has a B.S. in Finance and Marketing from the University of Virginia and
a MBA in International Finance from Widener University.
Dr. Balakrishnan
G. Iyer, 46, Dr. Iyer joined EES LLC as a director on April 19th, 2020 and continued to serve in such
position following the closing of the business combination. Prior to Eos, Dr. Iyer was Co-founder and Chief Growth Officer
of Utopus Insights since April 2017, a New York-based global renewable energy analytics company, recently acquired by
Vestas. Dr. Iyer is a seasoned energy and utilities industry management professional, with rich experience driving business
development for global conglomerates. Dr. Iyer successfully steered three startups from inception to exit, with investments
from some of the largest utilities and financial investors worldwide. Dr. Iyer began his career at Schlumberger in June 1996
and previously served as Chief Operating Officer of Enel Green Power as part of their acquisition of BLP where he worked from
July 2012 till April 2017 and as VP, Business Development at GE, where he drove technology developments for renewable
energy and smart grid. He worked in GE in various roles from July 2000 till June 2012. Dr. Iyer earned a Master’s
in Engineering from Binghamton University in New York, an MBA from New York University (NYU) Stern, and Joint Undergraduate
and Master’s Degrees in Mechanical Engineering & Science from Birla Institute of Technology and Science (BITS)
in India. In 2019, Dr. Iyer was conferred with an Honorary Degree of Doctor of Science by his alma mater, Binghamton University,
for his contributions to the fields of sustainable energy and inclusive education.
Daniel
Shribman, 37, served as the Chief Executive Officer, Chief Financial Officer and a director of BMRG from its inception
until the closing of the business combination and has served as our director since the closing of the business combination. Mr.
Shribman served as chief investment officer of B. Riley Financial (Nasdaq: RILY) and as president of B. Riley Principal Investments,
LLC since September 2019 and September 2018, respectively. Mr. Shribman helps oversee the asset base of B. Riley Financial alongside
chief executive officer Bryant Riley. This asset base consists of several cash flow generating operating businesses in addition
to cash and investments of roughly $750 million. The investment portfolio includes bilateral loans and small cap equity positions
in both public and private markets. In virtually all investments, B. Riley Financial is involved at the board level and active
in business and capital allocation decisions. Mr. Shribman has served as a member of the board of directors of Alta Equipment
Group Inc. (NYSE: ALTG) since February 2020, when it completed its business combination with B. Riley Principal Merger Corp.,
where Mr. Shribman was chief financial officer. Mr. Shribman brings experience in both public and private equity to us. Prior
to joining B. Riley, Mr. Shribman was a Portfolio Manager at Anchorage Capital Group, L.L.C., a special situation asset manager,
from 2010 to 2018. During Mr. Shribman’s tenure at Anchorage Capital Group, L.L.C., he led investments in dozens of public
and private opportunities across the general industrial, transportation, automotive, aerospace, gaming, hospitality and real estate
industries. These investments ranged from public equities and bonds to deeply distressed securities, par bank debt, minority owned
private equity and majority owned private equity. Mr. Shribman worked in close collaboration with management teams and boards
to maximize shareholder value in the form of both operational turnarounds, capital market financing and capital deployment initiatives.
Prior to Anchorage Capital Group, L.L.C., Mr. Shribman worked at Tinicum Capital Partners, a private equity firm, and in the restructuring
advisory group at Lazard (NYSE: LAZ).
Russell
Stidolph, 45, has served as a director of EES LLC since 2014 and the chairman of the board of EES LLC since 2018, and
continued in both positions following the closing of the business combination. Mr. Stidolph is the founder AltEnergy, LLC a private
equity firm focused on alternative energy investing, where he has served as Managing Director since 2006. Prior to forming AltEnergy,
Mr. Stidolph was a Principal at J.H. Whitney & Co., LLC a middle-market private equity firm based in New Canaan, Connecticut.
While at J.H. Whitney Mr. Stidolph was responsible for starting and developing the firm’s alternative energy investing practice
where he was responsible for Hawkeye Renewables, LLC and Iowa Winds, LLC. Mr. Stidolph was both the Chief Financial Officer and
Vice Chairman of Hawkeye Renewables, LLC before it was sold in 2006 to Thomas H. Lee Partners, LP. Prior to joining J.H. Whitney,
Mr. Stidolph was a member of the corporate finance group at PaineWebber, Inc., that was responsible for high yield and leverage
finance origination. Mr. Stidolph also acted as Senior Vice President and the Chief Financial Officer of Tres Amigas, LLC and
he still sits on the Company’s Board of Directors, and was Chairman of the board of directors of Viridity Energy, Inc before
it was sold to Ormat Technologies in 2017. Russell received a Bachelor of Arts degree from Dartmouth College.
Dr. Krishna
Singh, 73, has served as our director since the closing of the business combination. Dr. Singh is the founder of Holtec
International, a diversified energy technology company with nine major operations centers in seven countries on five continents,
where he has served as president and chief executive officer since 1986. Dr. Singh has been active in the nuclear power industry
since 1971 and is a widely-published author in with over 70 technical papers, one textbook and numerous symposia volumes. He is
a prolific inventor with and a prolific inventor (119 patents granted, many pending). In addition to Holtec International, Dr. Singh
serves on numerous advisory boards in the energy industry including the Nuclear Energy Institute and the University of California
Nuclear Engineering Department. Dr. Singh also serves as a member of the board of overseers at the University of Pennsylvania
School of Engineering and Applied Science and a director of the Washington DC Atlantic Counsel. Dr. Singh received his Ph.D.
in Mechanical Engineering from the University of Pennsylvania, Philadelphia (1972), a M.S. in Engineering Mechanics also from
Penn (1969), and a B.S. in Mechanical Engineering from BIT Sindri (Ranchi University), India (1967).
Alex
Dimitrief, 61, has served as our director since the closing of the business combination. Mr. Dimitrief is an experienced
director, Chief Executive Officer, C-suite leader and general counsel who has steered varied energy-related and other global businesses
through a wide range of complex commercial, legal and organizational challenges. He has previously served as a director of both
public and non-public companies including The We Company, Synchrony Financial (NYSE: SF) and GE Capital Bank and presently sits
on the Advisory Board of Cresset Capital Management. As President and Chief Executive Officer of General Electric’s Global
Growth Organization, Mr. Dimitrief was responsible for driving GE’s growth in more than 180 countries. Under Mr. Dimitrief’s
watch in 2018, GE achieved $76 billion in international orders and secured billions in financing for many of GE’s emerging
market customers. As GE’s General Counsel, Mr. Dimitrief served as the principal executive advisor to GE’s Board and
led a global team responsible for GE’s legal matters, compliance, SEC reporting, government affairs and environmental safety
programs. In previous roles at GE, Mr. Dimitrief was a leader of the transformation of GE Capital (including the IPO/split-off
of Synchrony Financial) and led joint venture negotiations for GE Energy in China and Russia. In announcing Mr. Dimitrief’s
retirement from GE in January 2019, Chief Executive Officer Larry Culp described Mr. Dimitrief as “one of the most
respected leaders at GE” who “effectively represented GE before governments, regulators and customers throughout the
world and is widely recognized as a compelling champion of integrity, transparency and the rule of law.” In 2007, Mr. Dimitrief
came to GE from after 20 years as a senior partner at Kirkland & Ellis LLP, where he “first chaired”
and regularly advised Boards about securities, restructuring, intellectual property, product liability, environmental, governance
and commercial disputes. Mr. Dimitrief earned his B.A. from Yale College and his J.D. from Harvard Law School.
Marian
“Mimi” Walters, 58, has served as our director since the closing of the business combination. Ms. Walters
has served as Chief Commercial Officer for Leading Edge Power Solutions, LLC since November 2019. She is a former Member
of the U.S. House of Representatives (the “House”) from California’s 45th District where she worked
on key legislation, business and policy initiatives related to energy, technology, environmental and healthcare and served from
2015 to 2019. Ms. Walters was a member of House Leadership and served on the influential Energy and Commerce Committee. She was
a member of the Communications and Technology, Digital Commerce and Consumer Protection, and Oversight and Investigations subcommittees.
Prior to her election to Congress, Ms. Walters was a member of the California State Senate, from 2008 to 2014, where she
served on the Banking and Financial Institutions Committee and was Vice Chair of the Appropriations Committee. She previously
served in the California State Assembly and was mayor and council member for the City of Laguna Niguel. Prior to her career in
public service, Ms. Walters was an investment professional at Drexel Burnham Lambert and Kidder, Peabody & Co. She
earned a B.A. in political science from the University of California, Los Angeles.
Audrey
Zibelman, 63, has served as our director since the closing of the business combination. Ms. Zibelman is Managing Director
and Chief Executive Officer of the Australian Energy Market Operator (“AEMO”), responsible for overseeing AEMO’s
strategy, operations and administrative functions. In addition to taking on role as Chief Executive Officer of AEMO, Ms. Zibelman
also serves on the CSIRO Energy Advisory Committee, the Melbourne Energy Institute’s Advisory Board, and as a Director of
the Melbourne Recital Centre and the Advanced Energy Economy Institute. Ms. Zibelman has extensive experience in the public,
private and not-for profit energy and electricity sectors in the United States. Prior to joining AEMO in March 2017,
her roles included Chair of the New York State Public Service Commission (“NYPSC”), from August 2013 to
March 2018, Executive Vice President and Chief Operating Officer of system operator PJM from January 2008 to February 2013,
executive roles with Xcel Energy, from 1992 to 2004, one of the United States largest integrated gas and electricity utilities
and served on a number of energy industry advisory groups and Boards. During her tenure at the NYPSC, Ms. Zibelman led the
design and implementation of extensive regulatory and retail market changes to modernize and transform the state’s electricity
industry under New York Governor Andrew M. Cuomo’s ‘Reforming the Energy Vision’ plan. A recognized national
and international expert in energy policy, markets and Smart Grid innovation, Ms. Zibelman is a Founder and past President
and CEO of Viridity Energy, Inc., which she formed after more than 25 years of electric utility industry leadership experience
in both the public and private sectors. Previously, Ms. Zibelman was the Executive Vice President and Chief Executive Officer
of GO15 member organization, PJM, a regional transmission organization responsible for operating the power grid and wholesale
power market which serves fourteen states across the eastern United States. Ms. Zibelman also held legal and executive
positions at Xcel Energy, served as General Counsel to the New Hampshire Public Utilities Commission, and was Special Assistant
Attorney General in the Minnesota Attorney General’s Office. During her career, Ms. Zibelman has served on numerous
industry-related and non-profit boards, including, but not limited to the Midwest and Mid-Atlantic Reliability Councils. Ms. Zibelman’s
board experience also includes Advisor to Secretary of Energy for the U.S. Department of Energy and Advisory Council, New York
State Energy Research and Development Authority, the New York State Planning Board and the New York State Emergency
Planning Council. Ms. Zibelman received her B.A. from Penn State University, her Executive MBA from University of Minnesota —
Carlson School of Management and her J.D. from Hamline University of Law.
Board
Composition
Our
business affairs are managed under the direction of our board of directors, which consists of seven members.
Our
Charter provides that the number of directors, which is fixed at seven members, may be increased or decreased from time to time
by a resolution of our board of directors. Our board of directors is divided into three (3) classes with only one class of
directors being elected in each year and each class serving a three (3) year term. The directors hold their office for a term
of three (3) years or until their respective successors are elected and qualified, subject to such director’s earlier death,
resignation, disqualification or removal. The term of office of the Class I directors, consisting of Marian “Mimi Walters”
and Audrey Zibelman, will expire at the Company’s annual meeting of stockholders in 2021. The term of office of the Class
II directors, consisting of Joe Mastrangelo and Alex Dimitrief, will expire at expires at the Company’s annual meeting of
stockholders in 2022. The term of office of the Class III directors, consisting of Russ Stidolph, Krishna P. Singh and Daniel
Shribman, will expire at the Company’s annual meeting of stockholders in 2023.
Director
Independence
The
size of the Company’s board of directors is seven directors, five of whom qualify as independent within the meaning of the
independent director guidelines of Nasdaq. Alex Dimitrief, Audrey Zibelman, Marian “Mimi” Walters, Daniel Shribman,
Russ Stidolph are “independent directors” as defined in the rules of Nasdaq and applicable SEC rules.
Nasdaq
rules require that a majority of our board of directors be independent. An “independent director” is defined generally
as a person other than an executive officer or employee of a listed company or any other individual having a relationship which,
in the opinion of a listed company’s board of directors, would interfere with the exercise of independent judgment in carrying
out the responsibilities of a director.
Committees
of the Board of Directors
Our
board of directors established the following committees: an audit committee, a compensation committee, and a nominating and corporate
governance committee. The composition and responsibilities of each committee are described below. Members will serve on these
committees until their resignation or until otherwise determined by our board of directors.
Audit
Committee
|
|
Compensation
Committee
|
|
Nominating
and Corporate
Governance Committee
|
Alex Dimitrief
|
|
Audrey Zibelman
|
|
Alex Dimitrief*
|
Audrey Zibelman
|
|
Mimi Walters
|
|
Russ Stidolph
|
Daniel Shribman*
|
|
Russ Stidolph*
|
|
Mimi Walters
|
Audit
Committee
The
Company’s audit committee oversees the Company’s corporate accounting and financial reporting process. Among other
matters, the audit committee:
|
●
|
appoints our independent
registered public accounting firm;
|
|
●
|
evaluates the independent
registered public accounting firm’s qualifications, independence and performance;
|
|
●
|
determines the engagement
of the independent registered public accounting firm;
|
|
●
|
reviews and approves
the scope of the annual audit and the audit fee;
|
|
●
|
discusses with management
and the independent registered public accounting firm the results of the annual audit and the review of the Company’s
quarterly financial statements;
|
|
●
|
approves the retention
of the independent registered public accounting firm to perform any proposed permissible non-audit services;
|
|
●
|
monitors the rotation
of partners of the independent registered public accounting firm on the Company’s engagement team in accordance with
requirements established by the SEC;
|
|
●
|
is responsible for
reviewing our financial statements and our management’s discussion and analysis of financial condition and results of
operations to be included in our annual and quarterly reports to be filed with the SEC;
|
|
●
|
reviews our critical
accounting policies and estimates; and
|
|
●
|
reviews the audit
committee charter and the committee’s performance at least annually.
|
The
members of the audit committee are Alex Dimitrief and Audrey Zibelman, with Daniel Shribman serving as the chair of the committee.
Under the rules of the SEC, members of the audit committee must also meet heightened independence standards. All of the members
of the audit committee are independent directors as defined under the applicable rules and regulations of the SEC and Nasdaq with
respect to audit committee membership. Daniel Shribman qualifies as our “audit committee financial expert,” as such
term is defined in Item 407(d)(5)(ii) of Regulation S-K. Our board of directors adopted a written charter for the audit committee
that satisfies the applicable SEC and Nasdaq rules and regulations, and is available on our website at https://investors.eose.com.
Compensation
Committee
Our
compensation committee reviews and recommends policies relating to compensation and benefits of our officers and employees. Among
other matters, the compensation committee:
|
●
|
reviews and recommends
corporate goals and objectives relevant to compensation of our chief executive officer and other executive officers;
|
|
●
|
evaluates the performance
of these officers in light of those goals and objectives and recommend to our board of directors the compensation of these
officers based on such evaluations;
|
|
●
|
recommends to our
board of directors the issuance of stock options and other awards under our stock plans; and
|
|
●
|
reviews and evaluates,
at least annually, the performance of the compensation committee and its members, including compliance by the compensation
committee with its charter.
|
The
members of our Company’s compensation committee are Audrey Zibelman and Mimi Walters, with Russ Stidolph serving as the
chair of the committee. Each of the members of the Company’s compensation committee are independent under the applicable
rules of Nasdaq, and each is a “non-employee director” as defined in Rule 16b-3 promulgated under the Exchange Act.
Our board of directors adopted a written charter for the compensation committee that satisfies the applicable SEC and Nasdaq rules
and regulations, and is available on our website at https://investors.eose.com.
Nominating
and Corporate Governance Committee
The
nominating and corporate governance committee is responsible for making recommendations to our board of directors regarding candidates
for directorships and the size and composition of our board of directors. In addition, the nominating and corporate governance
committee is responsible for overseeing our corporate governance policies and reporting and making recommendations to our board
of directors concerning governance matters.
The
members of the Company’s nominating and corporate governance committee are Russ Stidolph and Mimi Walters, with Alex Dimitrief
serving as the chair of the committee. Each of the members of our nominating and corporate governance committee is an independent
director under the applicable rules of Nasdaq relating to nominating and corporate governance committee independence. Our board
of directors adopted a written charter for the nominating and corporate governance committee that satisfies the applicable SEC
and Nasdaq rules and regulations, and is available on our website at https://investors.eose.com.
Code
of Ethics
Our
board of directors has adopted a Code of Business Conduct and Ethics that applies to all officers, directors and employees, which
is available on our website at (investors.eose.com) under “Governance Documents”. We intend to satisfy the disclosure
requirement under Item 5.05 of Form 8-K regarding amendments to, or waiver from, a provision of our Code of Business Conduct and
Ethics and by posting such information on the website address and location specified above.
Limitation
on Liability and Indemnification Matters
The
Charter contains provisions that limit the liability of our directors for monetary damages to the fullest extent permitted by
Delaware law. Consequently, our directors will not be personally liable to us or our stockholders for monetary damages for any
breach of fiduciary duties as directors, except liability for:
|
●
|
any breach of the
director’s duty of loyalty to us or our stockholders;
|
|
●
|
any act or omission
not in good faith or that involves intentional misconduct or a knowing violation of law;
|
|
●
|
unlawful payments
of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the DGCL; or
|
|
●
|
any transaction
from which the director derived an improper personal benefit.
|
The
Charter and our bylaws provide that we are required to indemnify our directors and officers, in each case to the fullest extent
permitted by Delaware law. Our bylaws also provide that we are obligated to advance expenses incurred by a director or officer
in advance of the final disposition of any action or proceeding, and permit us to secure insurance on behalf of any officer, director,
employee or other agent for any liability arising out of his or her actions in that capacity regardless of whether we would otherwise
be permitted to indemnify him or her under Delaware law. We entered into agreements to indemnify our directors, executive officers
and other employees as determined by our board of directors. With specified exceptions, these agreements provide for indemnification
for related expenses including, among other things, attorneys’ fees, judgments, fines and settlement amounts incurred by
any of these individuals in any action or proceeding. We believe that these bylaws provisions and indemnification agreements are
necessary to attract and retain qualified persons as directors and officers. The Company also maintains directors’ and officers’
liability insurance.
The
limitation of liability and indemnification provisions in the Charter and bylaws may discourage stockholders from bringing a lawsuit
against our directors and officers for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation
against our directors and officers, even though an action, if successful, might benefit us and our stockholders. Further, a stockholder’s
investment may be adversely affected to the extent that we pay the costs of settlement and damage.
EXECUTIVE
COMPENSATION
The
following disclosure covers the material components of the compensation for our principal executive officer and other most highly
compensated executive officer, who are referred to in this section as “named executive officers,” for the fiscal year
ended December 31, 2020. This section should be read in conjunction with our financial statements and related notes appearing
elsewhere in this prospectus, along with the section entitled “Certain Relationships and Related Party Transactions.”
Compensation information included in the following section is presented in actual dollar amounts. This section provides information
in accordance with the scaled SEC disclosure rules available to “emerging growth companies.”
As
an emerging growth company, we have opted to comply with the executive compensation disclosure rules applicable to “smaller
reporting companies,” as such term is defined under the Securities Act, which require compensation disclosure for (i) all
individuals who served as our principal executive officer or in a similar capacity during fiscal year ended December 31, 2020,
(ii) our two most highly compensated executive officers other than our principal executive officer who were serving as executive
officers as of the fiscal year ended December 31, 2020, and (ii) up to two additional individuals for whom disclosure would have
been provided pursuant to clause (ii), but for the fact that the individual was not serving as an executive officer as of the
fiscal year ended December 31, 2020. We refer to these executive officers collectively as the named executive officers (“NEOs”).
This section should be read in conjunction with our financial statements and related notes appearing elsewhere in this prospectus,
along with the section entitled “Certain Relationships and Related Party Transactions.” Compensation information
included in the following section is presented in actual dollar amounts. For fiscal year ended December 31, 2020, the NEOs were:
|
●
|
Joe Mastrangelo,
Chief Executive Officer;
|
|
●
|
Sagar Kurada, Chief
Financial Officer;
|
|
●
|
Mack Treece, Chief
Strategic Alliances Officer;
|
Mr.
Treece was appointed Chief Financial Officer effective March 5, 2019. Effective as of June 1, 2020, Mr. Treece also assumed the
title of Chief Strategic Alliances Officer. As of July 6, 2020, Sagar Kurada assumed the office of Chief Financial Officer from
Mr. Treece.
Summary
Compensation Table
The
following table presents summary information regarding the total compensation paid to, earned by and awarded to each of Eos’s
NEOs for 2020.
Name and Principal Position
|
|
Year
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards(1)
($)
|
|
|
Option
Awards(2)
($)
|
|
|
Nonqualified
Deferred
Compensation
Earnings
($)
|
|
|
All Other
Compensation
($)
|
|
|
Total
($)
|
|
Joe Mastrangelo(3),
Chief Executive Officer
|
|
2020
|
|
$
|
357,692
|
|
|
$
|
400,000
|
|
|
$
|
801,724
|
|
|
$
|
2,328,197
|
|
|
|
-
|
|
|
$
|
87,246
|
(4)
|
|
$
|
3,974,859
|
|
Sagar Kurada(5),
Chief Financial Officer
|
|
2020
|
|
$
|
171,154
|
|
|
$
|
450,000
|
|
|
|
-
|
|
|
$
|
47,214
|
|
|
|
-
|
|
|
$
|
0
|
|
|
$
|
668,368
|
|
Mack Treece,
Chief Strategic Alliances Officer
|
|
2020
|
|
$
|
312,583
|
|
|
$
|
325,000
|
|
|
|
13,814
|
|
|
$
|
65,983
|
|
|
|
-
|
|
|
$
|
8,735
|
(6)
|
|
$
|
726,116
|
|
(1)
|
Represents the restricted
stock unit award expense recorded based on the fair value of restricted stock unit granted to our named executive officers
on the grant date and the vesting period per restricted stock unit award agreements, as estimated pursuant to FASB ASC Topic
718. For a discussion of the valuation methodology used, see Note 1, “Stock-Based Compensation” of the notes to
Eos Energy Enterprises, Inc. consolidated financial statements included elsewhere in this prospectus.
|
(2)
|
Represents the option
award expense recorded based on the fair value of stock options granted to our named executive officers on the grant date
and the vesting period per option agreements, as estimated pursuant to FASB ASC Topic 718. Grant date fair value is calculated
based on the Black-Scholes option pricing model. For information regarding the assumptions used in determining the grant date
fair value, see Note 1, “Stock-Based Compensation” of the notes to our consolidated financial statements included
elsewhere in this prospectus. These amounts do not necessarily correspond to the actual value that may be realized from the
option awards by the maned executive officers.
|
(3)
|
Mr. Mastrangelo
does not receive compensation for his service as a director.
|
(4)
|
For fiscal 2020,
Mr. Mastrangelo received a car allowance of $8,668, $54,900 in residential expenses and $23,678 in business travel expense
reimbursement.
|
(5)
|
Mr. Kurada was appointed
Chief Financial Officer on July 6, 2020.
|
(6)
|
For fiscal 2020,
Mr. Treece received $8,735 in business travel expense reimbursement.
|
Employment
Agreements
Employment
Offer Letter with Mr. Mastrangelo
In
connection with the engagement of Mr. Mastrangelo as a board advisor, we entered into an employment offer letter dated as of July
26, 2018.
The
employment offer letter contained the following material compensation terms:
|
●
|
base compensation
consisting of a $25,000 monthly consulting fee, which increased to $400,000 per year upon appointment as full time Chief Executive
Officer on August 1, 2019; and
|
|
●
|
participation in
the Company’s health insurance and other employee benefits Eos also maintains, and an annual car allowance of $7,796.
|
Mr.
Mastrangelo’s employment offer letter was terminated and replaced with an employment agreement effective as of June 22,
2020, as further described below.
2020
Employment Agreement with Mr. Mastrangelo
Effective
as of June 22, 2020 Eos entered into an Employment Agreement with Mr. Mastrangelo, which replaced and terminated Mr. Mastrangelo’s
employment offer letter.
The
employment agreement contains the following material compensation terms:
|
●
|
base compensation
of $400,000 per year based on full-time employment;
|
|
●
|
annual performance-based
incentive bonus with an annual target payout of 50% to 100% of base compensation, payable in cash, to be prorated for the
2020 fiscal year;
|
|
●
|
participation in
the Company’s health insurance and other employee benefits Eos also maintains, along with reimbursement for reasonable
travel, lodging, meal and other business-related expenses;
|
|
●
|
an initial option
grant of 12,000,000 common units with an exercise price of $0.50 per unit, vesting in equal amounts annually over three years;
and
|
|
●
|
an additional option
grant of 6,000,000 common units with an exercise price of $0.50 per unit, vesting in full upon the successful completion of
an equity financing transaction occurring prior to June 23, 2023.
|
Mr.
Mastrangelo’s 2020 Employment Agreement was terminated and replaced with a new employment agreement effective as of February
24, 2021, as further described below.
2021
Employment Agreement with Mr. Mastrangelo
Effective
as of February 24, 2021, the Company entered into an Employment Agreement with Mr. Mastrangelo, which replaced and terminated
Mr. Mastrangelo’s June 22, 2020 employment agreement.
The
employment agreement contains the following material compensation terms:
|
●
|
base salary of $650,000
per year based on full-time employment;
|
|
●
|
annual performance-based
incentive bonus with an annual target payout of 100% of base salary, payable in cash;
|
|
●
|
participation in
the Company’s health insurance and other employee benefits the Company maintains; provided, that if Mr. Mastrangelo
elects not to participate in the Company’s medical and other health benefit plans, the Company will pay for Mr. Mastrangelo
and his family’s current medical and other health benefit plans in Italy, in an amount not to exceed a cumulative maximum
of $17,000 per calendar year;
|
|
|
|
|
●
|
reimbursement for
reasonable travel, lodging, meal and other business-related expenses; and
|
|
●
|
a grant of 750,000
restricted stock units, vesting in equal amounts annually over three years, and fully vesting upon a change in control.
|
If
Mr. Mastrangelo is terminated without “cause” or resigns for “good reason” he will be entitled to (i)
continued payment of his annual base salary for twenty-four months, (ii) a pro-rated annual bonus for the year of termination,
if the applicable performance targets are achieved, and (iii) full vesting of any then-unvested equity awards, in each case, subject
to his execution and non-revocation of a release of claims against the Company and continued compliance with certain restrictive
covenants.
Consulting
Agreement with Mr. Treece
In
connection with the engagement of Mr. Treece as a consultant, we entered into a consulting agreement dated as of March 5, 2019.
The
consulting agreement contains the following material compensation terms:
|
●
|
base compensation
consisting of a $15,000 monthly consulting fee;
|
|
●
|
accrued cash compensation
of $8,000 per month, payable upon the closing of an equity financing by the Company;
|
|
●
|
monthly grants of
equity units of the Company, valued at $7,000 per month; and
|
|
●
|
services-related
expense reimbursement.
|
Mr.
Treece’s consulting agreement was terminated and replaced with an employment agreement effective as of June 1, 2020, as
further described below.
Employment
Agreement with Mr. Treece
Effective
as of June 1, 2020 we entered into an Employment Agreement with Mr. Treece, which replaced and terminated Mr. Treece’s consulting
agreement.
The
employment agreement contains the following material compensation terms:
|
●
|
base compensation
of $325,000 per year based on full-time employment;
|
|
●
|
annual performance-based
incentive bonus with an annual target payout of 50% to 100% of base compensation, payable in cash, beginning in the calendar
year Eos successfully closes an equity financing;
|
|
●
|
participation in
our health insurance and other employee benefits we also maintain, along with reimbursement for reasonable travel, lodging,
meal and other business-related expenses;
|
|
●
|
an initial option
grant of 1,000,000 common units with an exercise price of $0.50 per unit, vesting in equal amounts annually over three years;
and
|
|
●
|
an additional option
grant of 1,000,000 common units with an exercise price equal to the then-current fair market value of unit, to be granted
upon the successful completion of an equity financing transaction prior to termination of employment for any reason, which
will vest in equal amounts annually over three years after grant.
|
If
Mr. Treece is terminated without “cause” or resigns for “good reason” he will be entitled to (i) a lump
sum cash payment equal to six months base compensation, and (ii) a prorated amount of any annual bonus otherwise payable during
the calendar year of termination, each subject to his execution and non-revocation of a release of claims against Eos and continued
compliance with certain restrictive covenants.
Outstanding
Equity Awards at Fiscal Year-End
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
|
Option Exercise
Price ($)
|
|
|
Option Expiration
Date
|
|
Number of shares
or units of stock
that have not
vested
(#)
|
|
|
Market value of
shares of
units of
stock that
have not
vested
($)
|
|
Joe Mastrangelo
|
|
|
-
|
|
|
|
1,037,484
|
(1)
|
|
$
|
8.67
|
|
|
10/23/2030
|
|
|
-
|
|
|
|
-
|
|
Sagar Kurada
|
|
|
-
|
|
|
|
86,457
|
(2)
|
|
$
|
8.67
|
|
|
06/30/2030
|
|
|
-
|
|
|
|
-
|
|
Mack Treece
|
|
|
-
|
|
|
|
115,276
|
(3)
|
|
$
|
8.67
|
|
|
6/01/2030
|
|
|
11,130
|
(4)
|
|
$
|
231,949
|
(5)
|
(1)
|
Beginning on October
23, 2020, so long as Mr. Mastrangelo remains in service, 691,691 of the shares of common stock subject to this option will
vest as to 33.33% on each of the first three anniversaries of June 22, 2020; provided, that such shares shall vest in full
upon the consummation of a change in control of the Company. The remaining number of shares subject to this option will vest,
provided that Mr. Mastrangelo remains in service, on the day the Board determines that the Company has successfully closed
an equity financing transaction prior to June 22, 2023. If no such transaction is consummated by June 22, 2023, any unvested
portion of the option shall immediately terminate.
|
(2)
|
For so long as Mr.
Kurada remains in service, the shares of common stock subject to this option will vest as to 25% on June 30, 2021, with the
remaining vesting in equal annual installments over a three year period.
|
(3)
|
For so long as Mr.
Treece remains in service, the shares of common stock subject to this option will vest as to 33% on June 30, 2021, with the
remaining vesting in equal annual installments over a two year period; provided, however, that the shares will vest in full
upon a change in control of the Company.
|
(4)
|
Represents restricted
stock units which vest in full on December 16, 2021, provided that Mr. Treece remains in service. The restricted stock units
will also vest in full if, prior to such vesting date, Mr. Treece is terminated without cause.
|
(5)
|
The market value
is calculated by multiplying the closing price ($20.84) of our common stock on the NASDAQ Capital Market on December 31, 2020,
the last trading day of fiscal 2020, by the number of restricted stock units that had not vested.
|
Health
and Retirement Benefits
We
provide medical, dental, vision, life insurance and disability benefits to all eligible employees. The NEOs are eligible to participate
in these benefits on the same basis as all other employees.
Director
Compensation
The
compensation committee determines the annual compensation to be paid to the members of our board of directors.
DESCRIPTION
OF SECURITIES
Authorized
and Outstanding Stock
The
Charter authorizes the issuance of 201,000,000 shares of capital stock, consisting of (x) 200,000,000 authorized shares of
common stock and (y) 1,000,000 authorized shares of preferred stock, par value $0.0001 per share. As of March 4, 2020 there
were 51,801,259 shares of common stock outstanding, and no shares of preferred stock outstanding. There is no cumulative voting
with respect to the election of directors.
Common
Stock
Voting
Power
Except
as otherwise required by law or as otherwise provided in any certificate of designation for any series of preferred stock, the
holders of common stock possess all voting power for the election of our directors and all other matters requiring stockholder
action and will at all times vote together as one class on all matters submitted to a vote of the stockholders. Holders of common
stock are entitled to one vote per share on matters to be voted on by stockholders.
Dividends
Holders
of common stock are entitled to receive such dividends and other distributions, if any, as may be declared from time to time by
our board of directors in its discretion out of funds legally available therefor and shall share equally on a per share basis
in such dividends and distributions.
Liquidation,
Dissolution and Winding Up
In
the event of our voluntary or involuntary liquidation, dissolution, distribution of assets or winding-up, the holders of common
stock will be entitled to receive an equal amount per share of all of our assets of whatever kind available for distribution to
stockholders, after the rights of the holders of the preferred stock have been satisfied and after payment or provision for payment
of our debts and other liabilities.
Preemptive
or Other Rights
Our
stockholders have no preemptive or other subscription rights and there is no sinking fund or redemption provisions applicable
to common stock.
Election
of Directors
The
Company’s board of directors are classified into three (3) classes, designated as Class I, Class II and Class II. The
directors first elected to Class I hold office for a term expiring at the first annual meeting of stockholders following the Closing;
the directors first elected to Class II will hold office for a term expiring at the second annual meeting of stockholders following
the Closing; and the directors first elected to Class III will hold office for a term expiring at the third annual meeting of
stockholders following the Closing. At each succeeding annual meeting of the stockholders of the Company, the successors to the
class of directors whose term expires at that meeting will be elected by plurality vote of all votes cast at such meeting to hold
office for a term expiring at the annual meeting of stockholders held in the second year following the year of their election.
Preferred
Stock
Our
Charter provides that shares of preferred stock may be issued from time to time in one or more series. Our board of directors
is authorized to fix the voting rights, if any, designations, powers, preferences, the relative, participating, optional or other
special rights and any qualifications, limitations and restrictions thereof, applicable to the shares of each series. Our board
of directors may, without stockholder approval, issue preferred stock with voting and other rights that could adversely affect
the voting power and other rights of the holders of the common stock and could have anti-takeover effects. The ability of our
board of directors to issue preferred stock without stockholder approval could have the effect of delaying, deferring or preventing
a change of control of the Company or the removal of existing management. We have no preferred stock outstanding at the date hereof.
Although we do not currently intend to issue any shares of preferred stock, we cannot assure you that we will not do so in the
future.
Warrants
Public
Warrants
Each whole warrant
entitles the registered holder to purchase one share of our common stock at a price of $11.50 per share, subject to adjustment
as discussed below, at any time following May 22, 2021. Pursuant to the warrant agreement, a warrant holder may exercise its warrants
only for a whole number of shares of common stock. The warrants will expire November 16, 2025, at 5:00 PM, Eastern Time, or earlier
upon redemption or liquidation.
We
will not be obligated to deliver any shares of common stock pursuant to the exercise of a warrant and will have no obligation
to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares of common
stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to our satisfying our obligations
described below with respect to registration. No warrant will be exercisable and we will not be obligated to issue shares of common
stock upon exercise of a warrant unless common stock issuable upon such warrant exercise has been registered, qualified or deemed
to be exempt under the securities laws of the state of residence of the registered holder of the warrants. In the event that the
conditions in the two (2) immediately preceding sentences are not satisfied with respect to a warrant, the holder of such warrant
will not be entitled to exercise such warrant and such warrant may have no value and expire worthless. In no event will we be
required to net cash settle any warrant. In the event that a registration statement is not effective for the exercised warrants,
the purchaser of a unit containing such warrant will have paid the full purchase price for the unit solely for the share of common
stock underlying such unit.
Under
the Warrant Agreement, we agreed that as soon as practicable, but in no event later than fifteen (15) business days after the
Closing, we will use our best efforts to file with the SEC this registration statement covering the shares of common stock issuable
upon exercise of the warrants, to cause such registration statement to become effective within sixty (60) business days following
the business combination and to maintain a current prospectus relating to those shares of common stock until the warrants expire
or are redeemed, as specified in the warrant agreement. We filed a registration statement on Form S-1 covering such shares on
December 10, 2020, and it was declared effective as of January 21, 2021. Notwithstanding the above, if our common stock is at
the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a
“covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of public
warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities
Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement, and in the
event we do not so elect, we will use our best efforts to register or qualify the shares under applicable blue sky laws to the
extent an exemption is not available.
Once
the warrants become exercisable, the Company may call the warrants for redemption:
|
●
|
in whole and not
in part;
|
|
●
|
at a price of $0.01
per warrant;
|
|
●
|
upon not less than
thirty (30) days’ prior written notice of redemption (the “30-day redemption period”) to each warrant holder;
and
|
|
●
|
if, and only if,
the reported last sale price of the common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends,
reorganizations, recapitalizations and the like) for any twenty (20) trading days within a thirty (30) trading day period
ending three (3) business days before we send the notice of redemption to the warrant holders.
|
If
and when the warrants become redeemable by us, we may not exercise our redemption right if the issuance of shares of common stock
upon exercise of the warrants is not exempt from registration or qualification under applicable state blue sky laws or we are
unable to effect such registration or qualification. We will use our best efforts to register or qualify such shares of common
stock under the blue sky laws of the state of residence in those states in which the warrants were offered by us in the IPO.
We
established the last of the redemption criterion discussed above to prevent a redemption call unless there is at the time of the
call a significant premium to the warrant exercise price. If the foregoing conditions are satisfied and we issue a notice of redemption
of the warrants, each warrant holder will be entitled to exercise its warrant prior to the scheduled redemption date. However,
the price of the common stock may fall below the $18.00 redemption trigger price (as adjusted for stock splits, stock dividends,
reorganizations, recapitalizations and the like) as well as the $11.50 warrant exercise price after the redemption notice is issued.
If
we call the warrants for redemption as described above, our management will have the option to require any holder that wishes
to exercise its warrant to do so on a “cashless basis.” In determining whether to require all holders to exercise
their warrants on a “cashless basis,” our management will consider, among other factors, our cash position, the number
of warrants that are outstanding and the dilutive effect on our stockholders of issuing the maximum number of shares of common
stock issuable upon the exercise of our warrants. If our management takes advantage of this option, all holders of warrants would
pay the exercise price by surrendering their warrants for that number of shares of common stock equal to the quotient obtained
by dividing (x) the product of the number of shares of common stock underlying the warrants, multiplied by the excess of
the “fair market value” (defined below) of the common stock over the exercise price of the warrants by (y) the
fair market value. The “fair market value” shall mean the average reported last sale price of the common stock for
the ten (10) trading days ending on the third (3rd) trading day prior to the date on which the notice of redemption
is sent to the holders of warrants. If the Company’s management takes advantage of this option, the notice of redemption
will contain the information necessary to calculate the number of shares of common stock to be received upon exercise of the warrants,
including the “fair market value” in such case. Requiring a cashless exercise in this manner will reduce the number
of shares to be issued and thereby lessen the dilutive effect of a warrant redemption. The Company believes this feature is an
attractive option to it if it does not need the cash from the exercise of the warrants after the business combination. If we call
our warrants for redemption and our management does not take advantage of this option, the Sponsor and its permitted transferees
would still be entitled to exercise their private placement warrants for cash or on a cashless basis using the same formula described
above that other warrant holders would have been required to use had all warrant holders been required to exercise their warrants
on a cashless basis, as described in more detail below.
A
holder of a warrant may notify us in writing in the event it elects to be subject to a requirement that such holder will not have
the right to exercise such warrant, to the extent that after giving effect to such exercise, such person (together with such person’s
affiliates), to the warrant agent’s actual knowledge, would beneficially own in excess of 4.9% or 9.8% (or such other amount
as a holder may specify) of the shares of common stock outstanding immediately after giving effect to such exercise.
If
the number of outstanding shares of common stock is increased by a stock dividend payable in shares of common stock, or by a split-up
of shares of common stock or other similar event, then, on the effective date of such stock dividend, split-up or similar event,
the number of shares of common stock issuable on exercise of each warrant will be increased in proportion to such increase in
the outstanding shares of common stock. A rights offering to holders of common stock entitling holders to purchase shares of common
stock at a price less than the fair market value will be deemed a stock dividend of a number of shares of common stock equal to
the product of (i) the number of shares of common stock actually sold in such rights offering (or issuable under any other
equity securities sold in such rights offering that are convertible into or exercisable for common stock) and (ii) one (1) minus
the quotient of (x) the price per share of common stock paid in such rights offering divided by (y) the fair market
value. For these purposes (i) if the rights offering is for securities convertible into or exercisable for common stock,
in determining the price payable for common stock, there will be taken into account any consideration received for such rights,
as well as any additional amount payable upon exercise or conversion and (ii) fair market value means the volume weighted
average price of common stock as reported during the ten (10) trading day period ending on the trading day prior to the first
date on which the shares of common stock trade on the applicable exchange or in the applicable market, regular way, without the
right to receive such rights.
In
addition, if the Company, at any time while the warrants are outstanding and unexpired, pay a dividend or make a distribution
in cash, securities or other assets to the holders of common stock on account of such shares of common stock (or other shares
of the Company’s capital stock into which the warrants are convertible), other than (a) as described above, or (b) certain
ordinary cash dividends, then the warrant exercise price will be decreased, effective immediately after the effective date of
such event, by the amount of cash and/or the fair market value of any securities or other assets paid on each share of common
stock in respect of such event.
If
the number of outstanding shares of common stock is decreased by a consolidation, combination, reverse stock split or reclassification
of shares of common stock or other similar event, then, on the effective date of such consolidation, combination, reverse stock
split, reclassification or similar event, the number of shares of common stock issuable on exercise of each warrant will be decreased
in proportion to such decrease in outstanding shares of common stock.
Whenever
the number of shares of common stock purchasable upon the exercise of the warrants is adjusted, as described above, the warrant
exercise price will be adjusted by multiplying the warrant exercise price immediately prior to such adjustment by a fraction (x) the
numerator of which will be the number of shares of common stock purchasable upon the exercise of the warrants immediately prior
to such adjustment, and (y) the denominator of which will be the number of shares of common stock so purchasable immediately
thereafter.
In
case of any reclassification or reorganization of the outstanding shares of common stock (other than those described above or
that solely affects the par value of such shares of common stock), or in the case of any merger or consolidation of us with or
into another corporation (other than a consolidation or merger in which we are the continuing corporation and that does not result
in any reclassification or reorganization of our outstanding shares of common stock), or in the case of any sale or conveyance
to another corporation or entity of the assets or other property of us as an entirety or substantially as an entirety in connection
with which we are dissolved, the holders of the warrants will thereafter have the right to purchase and receive, upon the basis
and upon the terms and conditions specified in the warrants and in lieu of the shares of our common stock immediately theretofore
purchasable and receivable upon the exercise of the rights represented thereby, the kind and amount of shares of stock or other
securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation, or upon
a dissolution following any such sale or transfer, that the holder of the warrants would have received if such holder had exercised
their warrants immediately prior to such event. If less than 70% of the consideration receivable by the holders of common stock
in such a transaction is payable in the form of common stock in the successor entity that is listed for trading on a national
securities exchange or is quoted in an established over-the-counter market, or is to be so listed for trading or quoted immediately
following such event, and if the registered holder of the warrant properly exercises the warrant within thirty (30) days following
public disclosure of such transaction, the warrant exercise price will be reduced as specified in the warrant agreement based
on the Black-Scholes value (as defined in the warrant agreement) of the warrant. The purpose of such exercise price reduction
is to provide additional value to holders of the warrants when an extraordinary transaction occurs during the exercise period
of the warrants pursuant to which the holders of the warrants otherwise do not receive the full potential value of the warrants
in order to determine and realize the option value component of the warrant. This formula is to compensate the warrant holder
for the loss of the option value portion of the warrant due to the requirement that the warrant holder exercise the warrant within
thirty (30) days of the event. The Black-Scholes model is an accepted pricing model for estimating fair market value where no
quoted market price for an instrument is available.
The
warrants have been issued in registered form under the Warrant Agreement, which was filed as Exhibit 4.1 to our Current Report
on Form 8-K filed on May 22, 2020 with the SEC File No. 001-39291) for a complete description of the terms and conditions
applicable to the warrants.
The
warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity
or correct any defective provision, and that all other modifications or amendments will require the vote or written consent of
the holders of at least 50% of the then outstanding public warrants and, solely with respect to any amendment to the terms of
the private placement warrants, a majority of the then outstanding private placement warrants.
The
warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant
agent, with the exercise form on the reverse side of the warrant certificate completed and executed as indicated, accompanied
by full payment of the exercise price (or on a cashless basis, if applicable), by certified or official bank check payable to
us, for the number of warrants being exercised. The warrant holders do not have the rights or privileges of holders of common
stock and any voting rights until they exercise their warrants and receive shares of common stock. After the issuance of shares
of common stock upon exercise of the warrants, each holder will be entitled to one (1) vote for each share held of record
on all matters to be voted on by stockholders.
No
fractional shares will be issued upon exercise of the warrants. If, upon exercise of the warrants, a holder would be entitled
to receive a fractional interest in a share, we will, upon exercise, round down to the nearest whole number of shares of common
stock to be issued to the warrant holder.
Private
Placement Warrants
The
private placement warrants (including the shares issuable upon exercise of such warrants) are not be redeemable by the Company
so long as they are held by members of the Sponsor or its permitted transferees. Otherwise, the private placement warrants are
identical to the warrants sold in the IPO except that the private placement warrants, so long as they are held by the Sponsor
or its permitted transferees, (i) are redeemable by us, (ii) may be exercised by the holders on a cashless basis, (iii) are entitled
to registration rights and (iv) for so long as they are held by the Sponsor, are not exercisable more than five (5) years from
the effective date of the IPO registration statement in accordance with FINRA Rule 5110(f)(2)(G)(i).
If
holders of the private placement warrants elect to exercise them on a cashless basis, they would pay the exercise price by surrendering
their warrants for that number of shares of common stock equal to the quotient obtained by dividing (x) the product of the
number of shares of common stock underlying the warrants, multiplied by the excess of the “fair market value” (defined
below) of the common stock over the exercise price of the warrants by (y) the fair market value. The “fair market value”
shall mean the average reported last sale price of the common stock for the ten (10) trading days ending on the third (3rd)
trading day prior to the date on which the notice of warrant exercise is sent to the warrant agent.
Dividends
The
Company has not paid any cash dividends on our common stock to date. The payment of cash dividends in the future will be dependent
upon our revenues and earnings, if any, capital requirements and general financial conditions subsequent to the Closing. The payment
of any cash dividends subsequent to a business combination will be within the discretion of our board of directors at such time.
Further, if we incur any indebtedness, our ability to declare dividends may be limited by restrictive covenants we may agree to
in connection therewith.
Registration
Rights Agreement
The
holders of founder shares, private placement shares, private placement warrants, and shares of common stock underlying the private
placement warrants have registration rights to require us to register a sale of any of our securities held by them pursuant to
a registration rights agreement signed on the effective date of the IPO. These holders are entitled to make up to three demands,
excluding short form registration demands, that we register such securities for sale under the Securities Act. In addition, these
holders have “piggy-back” registration rights to include their securities in other registration statements filed by
us. Notwithstanding the foregoing, the Sponsor may not exercise its demand and “piggyback” registration rights after
five (5) and seven (7) years, respectively, after the effective date of the IPO registration statement and may not exercise its
demand rights on more than one occasion.
In
connection with the Closing, we entered into the Registration Rights Agreement with the Securityholders (as defined therein) (the
“Registration Rights Agreement”). Under the Registration Rights Agreement, we have certain obligations to the
Registrable Securities. We are required to maintain an effective registration statement registering the resale of the Registrable
Securities. Holders of the Registrable Securities will also have certain “piggy-back” registration rights with respect
to registration statements and rights to us to register for resale such securities pursuant to Rule 415 under the Securities Act.
We will bear the expenses incurred in connection with the filing of any such registration statements. The registration rights
agreement will not contemplate the payment of penalties or liquidated damages as a result of a failure to register, or delays
with respect to the registration of, the Registrable Securities.
Certain
Anti-Takeover Provisions of Delaware Law, the Company’s Charter and Bylaws
The
Charter, bylaws and the DGCL contain provisions that could have the effect of rendering more difficult, delaying, or preventing
an acquisition deemed undesirable by our board of directors. These provisions could also make it difficult for stockholders to
take certain actions, including electing directors who are not nominated by the members of our board of directors or taking other
corporate actions, including effecting changes in our management. For instance, our board of directors will be empowered to elect
a director to fill a vacancy created by the expansion of the board of directors or the resignation, death, or removal of a director
in certain circumstances; and our advance notice provisions in our bylaws will require that stockholders must comply with certain
procedures in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’
meeting.
Our
authorized but unissued common stock and preferred stock will be available for future issuances without stockholder approval and
could be utilized for a variety of corporate purposes, including future offerings to raise additional capital, acquisitions and
employee benefit plans. The existence of authorized but unissued and unreserved common stock and preferred stock could render
more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.
Rule
144
Pursuant
to Rule 144, a person who has beneficially owned restricted shares of our common stock or warrants for at least six months would
be entitled to sell their securities provided that (i) such person is not deemed to have been one of our affiliates at the time
of, or at any time during the three months preceding, a sale and (ii) we are subject to the Exchange Act periodic reporting requirements
for at least three months before the sale and have filed all required reports under Section 13 or 15(d) of the Exchange Act during
the 12 months (or such shorter period as we were required to file reports) preceding the sale.
Persons
who have beneficially owned restricted shares of our common stock or warrants for at least six months but who are our affiliates
at the time of, or at any time during the three months preceding, a sale, would be subject to additional restrictions, by which
such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater
of:
|
●
|
1% of the total
number of shares of common stock then outstanding (as of March 4, 2021, there were 51,801,259 shares of our common stock
outstanding); or
|
|
●
|
the average weekly
reported trading volume of the common stock during the four calendar weeks preceding the filing of a notice on Form 144 with
respect to the sale.
|
Sales
by our affiliates under Rule 144 are also limited by manner of sale provisions and notice requirements and to the availability
of current public information about us.
Restrictions
on the Use of Rule 144 by Shell Companies or Former Shell Companies
Rule
144 is not available for the resale of securities initially issued by shell companies (other than business combination related
shell companies) or issuers that have been at any time previously a shell company. However, Rule 144 also includes an important
exception to this prohibition if the following conditions are met:
|
●
|
the issuer of the
securities that was formerly a shell company has ceased to be a shell company;
|
|
●
|
the issuer of the
securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act;
|
|
●
|
the issuer of the
securities has filed all Exchange Act reports and materials required to be filed, as applicable, during the preceding 12 months
(or such shorter period that the issuer was required to file such reports and materials), other than Current Reports on Form
8-K; and
|
|
●
|
at least one year
has elapsed from the time that the issuer filed current Form 10 type information with the SEC reflecting its status as an
entity that is not a shell company.
|
As
a result, our stockholders are able to sell their shares pursuant to Rule 144 without registration one year after we completed
our initial business combination.
We
are no longer a shell company following the Closing, and so, once the conditions set forth in the exceptions listed above are
satisfied, Rule 144 will become available for the resale of the above noted restricted securities.
BENEFICIAL
OWNERSHIP OF SECURITIES
The
following table sets forth information regarding the beneficial ownership of shares of our common stock by:
|
●
|
each
person who is, or is expected to be, the beneficial owner of more than 5% of the outstanding shares of any series of our voting
common stock;
|
|
|
|
|
●
|
each
of our current executive officers and directors;
|
|
|
|
|
●
|
all
executive officers and directors of the Company, as a group, upon the closing of the Business Combination.
|
The
beneficial ownership of common stock of the Company is based on 51,801,259 shares of common stock issued and outstanding as of
March 4, 2021.
Beneficial
ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a
security if he, she or it possesses sole or shared voting or investment power over that security, including options and warrants
that are currently exercisable or exercisable within sixty (60) days.
Unless
otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all
shares of our common stock beneficially owned by them.
|
|
Number
of
Shares
Beneficially
Owned
|
|
|
Percentage
of
Outstanding
Shares
|
|
Name and Address of Beneficial Owners Executive Officers and Directors
|
|
|
|
|
|
|
|
|
Joe Mastrangelo(1)
|
|
|
79,546
|
|
|
|
*
|
%
|
Mack Treece(1)(2)
|
|
|
11,130
|
|
|
|
*
|
%
|
Sagar Kurada(1)
|
|
|
-
|
|
|
|
-
|
%
|
Dr. Balakrishnan G. Iyer(1)
|
|
|
-
|
|
|
|
-
|
%
|
Russell Stidolph(3)(4)
|
|
|
7,312,805
|
|
|
|
14.3
|
%
|
Daniel Shribman
|
|
|
993,750
|
|
|
|
1.9
|
%
|
Dr. Krishna Singh(5)(6)
|
|
|
2,708,252
|
|
|
|
5.2
|
%
|
Alex Dimitrief(1)
|
|
|
20,000
|
|
|
|
*
|
%
|
Audrey Zibelman(1)
|
|
|
-
|
|
|
|
-
|
%
|
Marian “Mimi” Walters(1)
|
|
|
-
|
|
|
|
-
|
%
|
All Executive Officers and Directors as a Group (Ten Individuals)
|
|
|
11,232,288
|
|
|
|
21.6
|
%
|
5% Holders:
|
|
|
|
|
|
|
|
|
AltEnergy, LLC(4)(7)
|
|
|
7,135,109
|
|
|
|
13.9
|
%
|
B. Riley Financial, Inc.(8)
|
|
|
6,881,279
|
|
|
|
13.3
|
%
|
*
|
Less than 1%.
|
|
|
(1)
|
The business address
of each of these entities or individuals is c/o 3920 Park Avenue Edison, New Jersey 08820.
|
|
|
(2)
|
Includes shares
of common stock underlying restricted stock units.
|
(3)
|
Represents (i) 192,126
shares of common stock issuable upon exercise of vested options held by Mr. Stidolph and (ii) 7,227,484 shares of common stock
in which Mr. Stidoloph has a pecuniary interest in that are held directly by AltEnergy LLC, or AltEnergy, AltEnergy Storage
LLC, or AltEnergy I, AltEnergy Storage II LLC, or AltEnergy II, AltEnergy Storage V LLC, or AltEnergy V, AltEnergy VI LLC,
or AltEnergy VI, AltEnergy Storage Bridge LLC, or Bridge, AltEnergy Transmission LLC, or Transmission, AltEnergy Storage Bridge
Phase II LLC, or Bridge II (collectively, the “AltEnergy Shares”). Mr. Stidolph is the managing director of AltEnergy,
the managing member of each of AltEnergy I, AltEnergy II, AltEnergy VI, AltEnergy V, Bridge, Transmission and Bridge II, and
has voting and dispositive power with respect to the AltEnergy Shares. Mr. Stidolph disclaims beneficial ownership of these
shares, except to the extent of his pecuniary interest therein. The address of Mr. Stidolph and each of the above referenced
entities is 137 Rowayton Avenue, Rowayton, CT 06853.
|
(4)
|
2,711,170 of these
shares are pledged to us for the benefit of certain indemnitees and may not be transferred until the date that is the earlier
of (i) September 7, 2022; and (ii) the date on which the specified indemnified matters pursuant to the Merger Agreement have
been finally resolved, and either (x) no obligations are due and payable as a result thereof, or (y) all obligations have
been paid to the indemnitees in full.
|
|
|
(5)
|
277,238 of these shares are pledged to us for the benefit of certain indemnitees and may not be transferred until the date that is the earlier of (i) September 7, 2022; and (ii) the date on which the specified indemnified matters pursuant to the Merger Agreement have been finally resolved, and either (x) no obligations are due and payable as a result thereof, or (y) all obligations have been paid to the indemnitees in full.
|
|
|
(6)
|
The amount includes
(i) shares of common stock held directly by Holtec International, (ii) shares of common stock held directly by Singh Real
Estate Enterprises Inc., (iii) shares of common stock held directly by Tequesta Properties Inc. and shares of common stock
held directly by HI-MED, LLC. Mr. Singh holds direct and/or indirect ownership of these entities and holds the full voting
and dispositive power with respect to shares held by Holtec International, Tequesta Properties, Inc. and HI-MED, LLC. The
address of Mr. Singh and each of the above referenced entities is 1 Holtec Blvd, Camden, NJ 08104.
|
|
|
(7)
|
Represents securities
held directly by AltEnergy LLC, or AltEnergy, AltEnergy Storage LC, or AltEnergy I, AltEnergy Storage II LLC, or AltEnergy
II, AltEnergy Storage V LLC, or AltEnergy V, AltEnergy VI LLC, or AltEnergy VI, AltEnergy Storage Bridge LLC, or Bridge, AltEnergy
Transmission LLC, or Transmission, AltEnergy Storage Bridge Phase II, or Bridge II. Mr. Stidolph is the managing director
of AltEnergy, the managing member of each of AltEnergy I, AltEnergy II, AltEnergy VI, AltEnergy V, Bridge, Transmission and
Bridge II, and has voting and dispositive power with respect to the AltEnergy Shares. Mr. Stidolph disclaims beneficial ownership
of these shares, except to the extent of his pecuniary interest therein.
|
(8)
|
The amount includes
(i) shares of common stock held by BRC Partners Opportunity Fund, L.P. (“BRC”), (ii) shares of common stock underlying
public warrants held by BRC, (iii) 2,550,750 shares of common stock held by the Sponsor, (iv) shares of common stock underlying
private placement warrants held by the Sponsor, (v) shares of common stock held by B. Riley Securities, Inc. (“BRS”),
(vi) shares of common stock held by B. Riley Principal Investments, LLC (“BRPI”), and (vii) shares of common stock
that are subject to earnout restrictions under the Sponsor Earnout Letter. BRPI is the sole member of the Sponsor and is a
wholly-owned subsidiary of B. Riley Financial, Inc. BRC Partners Management GP, LLC (“BRPGP”) is the general partner
of BRC and B. Riley Capital Management, LLC (“BRCM”) is the parent company of BRPGP and B. Riley Financial is
the parent company of each of BRCM and BRS. B. Riley Financial has voting and dispositive power over the securities held by
each of BRPI, BRS and BRC. Bryant Riley is the Chairman and Co-Chief Executive Officer of B. Riley Financial and has voting
and dispositive power over the securities held by B. Riley Financial. Each of BRPI and Mr. Riley disclaims beneficial ownership
over any securities directly held by the Sponsor, BRS, BRPGP, BRCM or BRC other than to the extent of any pecuniary interest
he or it may have therein, directly or indirectly. The address for this stockholder is 11100 Santa Monica Blvd, Suite 800,
Los Angeles, CA 90025.
|
SELLING
SECURITYHOLDERS
Pursuant
to the terms of the Merger Agreement, on February 11, 2021 we issued 1,994,171 shares of our common stock to former members of
EES LLC upon achievement of certain milestones (the “Earnout Shares”). We are obligated to register the resale of
the Earnout Shares pursuant to the terms of the registration rights agreement and, accordingly, this prospectus covers the offer
and resale, from time to time, by the selling securityholders of any or all of the Earnout Shares.
This
prospectus also covers the offer and resale, from time to time, of (i) up to 74,531 shares of common stock that have been issued
to Joe Mastrangelo, the Company’s Chief Executive Officer and a director, upon vesting of restricted stock units granted
to him under the Plan, (ii) up to 5,015 shares of common stock issuable to Mr. Mastrangelo in connection with the achievement
of the earnout milestones, (iii) up to 748 shares of common stock issuable Mack Treece, the Company’s Chief Strategic Alliances
Officer, upon satisfaction of certain vesting terms set forth in previously issued restricted stock units held by Mr. Treece,
(iv) up to 98,882 shares of common stock issuable to certain of the selling securityholders upon exercise of options granted under
the Plan; (v) up to 2,853,750 shares of common stock issued in a private placement in connection with the business combination
pursuant to the terms of the equity commitment letter and subscription agreements, (vi) up to 4,375,000 shares of common stock
originally issued in a private placement to the Sponsor and subsequently distributed in part to certain BMRG directors and members
of the Sponsor, (vii) up to 325,000 private placement warrants issued in a private placement to the Sponsor; (viii) up to 29,644,680
shares of common stock held by other selling securityholders of the Company; and (ix) up to 650,000 shares of common stock that
were a constituent part of the private placement units.
In
addition, this prospectus relates to the offer and sale of up to 8,750,000 shares of common stock that are issuable by us upon
the exercise of the public warrants, which were previously registered, and up to 325,000 shares of common stock underlying private
placement warrants issued in a private placement to the Sponsor.
The
term “selling securityholders” includes the securityholders listed in the table below and their permitted transferees.
The
table below provides, as of the date of this prospectus, information regarding the beneficial ownership of our common stock of
each selling securityholder, the number of shares of common stock that may be sold by each selling securityholder under this prospectus
and that each selling securityholder will beneficially own after this offering. We have based percentage ownership on 51,801,259
shares of common stock outstanding as of March 4, 2021.
Because
each selling securityholder may dispose of all, none or some portion of their securities, no estimate can be given as to the number
of securities that will be beneficially owned by a selling securityholder upon termination of this offering. For purposes of the
table below, however, we have assumed that after termination of this offering none of the securities covered by this prospectus
will be beneficially owned by the selling securityholder and further assumed that the selling securityholders will not acquire
beneficial ownership of any additional securities during the offering. In addition, the selling securityholders may have sold,
transferred or otherwise disposed of, or may sell, transfer or otherwise dispose of, at any time and from time to time, our securities
in transactions exempt from the registration requirements of the Securities Act after the date on which the information in the
table is presented.
|
|
Shares
of Common Stock
|
|
|
Warrants
to Purchase Common Stock
|
|
Name
|
|
Number
Beneficially Owned Prior to Offering
|
|
|
Number
Registered for Sale Hereby
|
|
|
Number
Beneficially Owned After Offering
|
|
|
Percent
Owned After Offering
|
|
|
Number
Beneficially Owned Prior to Offering
|
|
|
Number
Registered for Sale Hereby
|
|
|
Number
Beneficially Owned After Offering
|
|
|
Percent
Owned After Offering
|
|
ACE
Energy Efficiency SPC
|
|
|
918,438
|
|
|
|
918,438
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Acme
Engineering, Inc.(1)
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Acme
Operating Company(1)
|
|
|
58,440
|
|
|
|
58,440
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Adelaro
US Limited(2)
|
|
|
115,678
|
|
|
|
115,678
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Agile
Energy Limited(3)
|
|
|
922
|
|
|
|
922
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Alekpar
Safarov
|
|
|
20,000
|
|
|
|
20,000
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Alina
LLC(4)
|
|
|
105,807
|
|
|
|
105,807
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
AltEnergy,
LLC(5)
|
|
|
7,135,109
|
|
|
|
7,135,109
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
AME
Cloud Ventures(6)
|
|
|
92,520
|
|
|
|
92,520
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Andrew
Kelleher
|
|
|
153,000
|
|
|
|
153,000
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Arthur
Kressner
|
|
|
3,998
|
|
|
|
3,998
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Asterra
Holdings LLC(7)
|
|
|
24,543
|
|
|
|
24,543
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Barry
Lee Engle III
|
|
|
20,000
|
|
|
|
20,000
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Beckett
Austin Lenhart
|
|
|
1,537
|
|
|
|
1,537
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Ben
Barclay
|
|
|
922
|
|
|
|
922
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Beusa
Investment Tec LLC
|
|
|
35,215
|
|
|
|
35,215
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Brian
Hardwick(8)
|
|
|
2,881
|
|
|
|
2,881
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
B.
Riley Financial, Inc.(9)
|
|
|
6,881,279
|
|
|
|
6,503,250
|
|
|
|
378,029
|
|
|
|
*
|
|
|
|
325,000
|
|
|
|
325,000
|
|
|
|
-
|
|
|
*
|
|
Trust
accounts associated with Bryant Riley(10)
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Bruce
Langone
|
|
|
41,249
|
|
|
|
41,249
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Cannonbury
Invest Limited(11)
|
|
|
163,118
|
|
|
|
163,118
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Carl
Ferenbach
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
CAT3
LLC
|
|
|
246,065
|
|
|
|
246,065
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Chandler
Kate Lenhart
|
|
|
1,537
|
|
|
|
1,537
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Charles
DeCasteja
|
|
|
3,856
|
|
|
|
3,856
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Chris
Darnell
|
|
|
12,00
|
|
|
|
12,500
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Chris
Streeter
|
|
|
11,497
|
|
|
|
11,497
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Corinthian
Investors LLC(12)
|
|
|
32,993
|
|
|
|
32,993
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Cova
Funding LLC(13)
|
|
|
34,289
|
|
|
|
34,289
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Dan
Shribman
|
|
|
993,750
|
|
|
|
993,750
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Dave
Henry(14)
|
|
|
26,802
|
|
|
|
22,767
|
|
|
|
4,035
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
David
Cohen
|
|
|
97,738
|
|
|
|
97,738
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
David
Schiff
|
|
|
36,294
|
|
|
|
36,294
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Denman
Street LLC(15)
|
|
|
631,055
|
|
|
|
455,521
|
|
|
|
175,534
|
|
|
|
*
|
|
|
|
5,700
|
|
|
|
0
|
|
|
|
5,700
|
|
|
*
|
|
Douglas
Kenneth Kennedy
|
|
|
6,849
|
|
|
|
6,849
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
|
|
Shares
of Common Stock
|
|
|
Warrants
to Purchase Common Stock
|
|
Name
|
|
Number
Beneficially Owned Prior to Offering
|
|
|
Number
Registered for Sale Hereby
|
|
|
Number
Beneficially Owned After Offering
|
|
|
Percent
Owned After Offering
|
|
|
Number
Beneficially Owned Prior to Offering
|
|
|
Number
Registered for Sale Hereby
|
|
|
Number
Beneficially Owned After Offering
|
|
|
Percent
Owned After Offering
|
|
EES
Management Holding(16)
|
|
|
141,900
|
|
|
|
141,900
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
FGRK
Lux Partners GP (17)
|
|
|
46,899
|
|
|
|
46,899
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Financiera
Siacapital
|
|
|
18,454
|
|
|
|
18,454
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Fisher
EOS LLC(18)
|
|
|
396,817
|
|
|
|
396,817
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Frank
Genova
|
|
|
11,497
|
|
|
|
11,497
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Franziska
Fortlouis
|
|
|
7,074
|
|
|
|
7,074
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
George
Adamson
|
|
|
22,995
|
|
|
|
22,995
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
George
Brokaw
|
|
|
11,082
|
|
|
|
11,082
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
George
Fina
|
|
|
55,619
|
|
|
|
55,619
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Gerard J.
Berding
|
|
|
1,000
|
|
|
|
1,000
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Glenn
Oztemel
|
|
|
364,178
|
|
|
|
364,178
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Global
Equity Partners(19)
|
|
|
93,074
|
|
|
|
92,274
|
|
|
|
800
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Graham
Sharp
|
|
|
785,910
|
|
|
|
785,910
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Great
American Insurance Company(20)
|
|
|
355,162
|
|
|
|
341,828
|
|
|
|
13,334
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Great
American Life Insurance Company(20)
|
|
|
998,491
|
|
|
|
974,825
|
|
|
|
26,666
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Greer
Family Partners, LP(21)
|
|
|
5,000
|
|
|
|
5,000
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Halpern
Family Trust(22)
|
|
|
143,411
|
|
|
|
143,411
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Harper
Frances Lenhart
|
|
|
1,537
|
|
|
|
1,537
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Hawthorne
II Investment LP(23)
|
|
|
146,470
|
|
|
|
146,470
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
HI-MED,
LLC(24)
|
|
|
307,581
|
|
|
|
307,581
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Hisham
Al-Razzuqi
|
|
|
24,606
|
|
|
|
24,606
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Holtec
International(25)
|
|
|
1,133,770
|
|
|
|
1,133,770
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Howard
Weitmann
|
|
|
20,000
|
|
|
|
20,000
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Igor
Heifetz
|
|
|
9,628
|
|
|
|
9,628
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Jackie
Hoogring(8)
|
|
|
576
|
|
|
|
576
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
James
Hughes
|
|
|
4,394
|
|
|
|
4,394
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
James
L. Kemper
|
|
|
20,000
|
|
|
|
20,000
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
James
Zweng(8)
|
|
|
518
|
|
|
|
518
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Jason
Koy
|
|
|
48,433
|
|
|
|
48,433
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Jason
S Kahan
|
|
|
16,009
|
|
|
|
16,009
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Jeremy
Asher
|
|
|
464
|
|
|
|
464
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Jerry
Labowitz
|
|
|
300,906
|
|
|
|
300,906
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Joseph
Berding
|
|
|
4,800
|
|
|
|
2,500
|
|
|
|
2,300
|
|
|
|
*
|
|
|
|
14,400
|
|
|
|
-
|
|
|
|
14,400
|
|
|
*
|
|
Joe
Mastrangelo(26)
|
|
|
79,546
|
|
|
|
79,546
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Johannes
Rittershausen
|
|
|
22,995
|
|
|
|
22,995
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
|
|
Shares
of Common Stock
|
|
|
Warrants
to Purchase Common Stock
|
|
Name
|
|
Number
Beneficially Owned Prior to Offering
|
|
|
Number
Registered for Sale Hereby
|
|
|
Number
Beneficially Owned After Offering
|
|
|
Percent
Owned After Offering
|
|
|
Number
Beneficially Owned Prior to Offering
|
|
|
Number
Registered for Sale Hereby
|
|
|
Number
Beneficially Owned After Offering
|
|
|
Percent
Owned After Offering
|
|
John
B. Berding Irrevocable Children’s Trust(27)
|
|
|
315,396
|
|
|
|
315,396
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
John
Bernard Berding(28)
|
|
|
727,394
|
|
|
|
727,394
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
John
Desmarais
|
|
|
1,708,130
|
|
|
|
1,708,130
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
John
T. Raymond
|
|
|
626,755
|
|
|
|
626,755
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
John
T. Raymond 2012 Trust(29)
|
|
|
32,986
|
|
|
|
32,986
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Joshua
Fink
|
|
|
16,860
|
|
|
|
16,860
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Joshua
Cole
|
|
|
40,658
|
|
|
|
35,158
|
|
|
|
5,550
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Karl
J. Grafe
|
|
|
500
|
|
|
|
500
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Kenneth
Langone
|
|
|
55,632
|
|
|
|
55,632
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Lawrence
Summers
|
|
|
3,074
|
|
|
|
3,074
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Lisa
Eng
|
|
|
81,111
|
|
|
|
81,111
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Mack
Treece(30)
|
|
|
748
|
|
|
|
748
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Mandy
Lindly
|
|
|
20,000
|
|
|
|
20,000
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Margaret
Wood
|
|
|
6,072
|
|
|
|
6,072
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Marstar
Investments, LLC
|
|
|
8,125
|
|
|
|
8,125
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Matt
Lenhart
|
|
|
144,056
|
|
|
|
119,056
|
|
|
|
25,000
|
|
|
|
*
|
|
|
|
36,715
|
|
|
|
0
|
|
|
|
36,715
|
|
|
*
|
|
Matthew
Cribbins
|
|
|
81,559
|
|
|
|
81,559
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Matthew
Feinberg
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Michael
Abbot
|
|
|
153
|
|
|
|
153
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Michael
Binder(8)
|
|
|
432
|
|
|
|
432
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Michael
Gamson
|
|
|
198,112
|
|
|
|
198,112
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Michael
Jacob Kennedy
|
|
|
24,913
|
|
|
|
24,913
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Michael
Oster
|
|
|
1,157,634
|
|
|
|
1,157,634
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Milton
Lewin
|
|
|
2,372
|
|
|
|
2,372
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Nina
Kennedy
|
|
|
26,047
|
|
|
|
26,047
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Nord
Engine Investment(32)
|
|
|
246,064
|
|
|
|
246,064
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
NRG
Energy
|
|
|
530,439
|
|
|
|
530,439
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
OCI(33)
|
|
|
123,032
|
|
|
|
123,032
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Ospraie
Partners LLC(34)
|
|
|
715,060
|
|
|
|
715,060
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Paradigm
Partners, LP(35)
|
|
|
6,250
|
|
|
|
6,250
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Patrice
McNicoll
|
|
|
35,000
|
|
|
|
35,000
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Patrick
J. Bartels, Jr.
|
|
|
20,000
|
|
|
|
20,000
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Peter
Fox-Penner
|
|
|
1,536
|
|
|
|
1,536
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Peter
Greenleaf
|
|
|
4,074
|
|
|
|
4,074
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Peter
Warner Davidson
|
|
|
9,257
|
|
|
|
9,257
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
PGF
Family Corp(36)
|
|
|
1,631,190
|
|
|
|
1,631,190
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Philip
Lobkowicz
|
|
|
9,235
|
|
|
|
9,235
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Phillippe
Bouchard
|
|
|
22,995
|
|
|
|
22,995
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
|
|
Shares
of Common Stock
|
|
|
Warrants
to Purchase Common Stock
|
|
Name
|
|
Number
Beneficially Owned Prior to Offering
|
|
|
Number
Registered for Sale Hereby
|
|
|
Number
Beneficially Owned After Offering
|
|
|
Percent
Owned After Offering
|
|
|
Number
Beneficially Owned Prior to Offering
|
|
|
Number
Registered for Sale Hereby
|
|
|
Number
Beneficially Owned After Offering
|
|
|
Percent
Owned After Offering
|
|
Prisma
Energy LLC
|
|
|
659,742
|
|
|
|
659,742
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Projector
Holding LLC(37)
|
|
|
27,682
|
|
|
|
27,682
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
QIP
Glidepath Series A LLC
|
|
|
307,581
|
|
|
|
307,581
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Randall
A. Hack
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Randy
Brown
|
|
|
10,544
|
|
|
|
10,544
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Funds
and accounts managed by Reservoir Capital(38)
|
|
|
2,694,638
|
|
|
|
2,694,638
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Richard
T. Weiss 2006 Living Trust(39)
|
|
|
86,140
|
|
|
|
86,140
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Richard
Wood
|
|
|
6,072
|
|
|
|
6,072
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Robert
Kunzweiler
|
|
|
76,339
|
|
|
|
76,339
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Robert
Suss
|
|
|
20,000
|
|
|
|
20,000
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Ronen
Cohen(40)
|
|
|
15,052
|
|
|
|
11,450
|
|
|
|
3,602
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Ross
Pirasteh
|
|
|
5,000
|
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sarathi
Roy
|
|
|
78,673
|
|
|
|
78,673
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Sidamon-Eristoff
Brothers, LLC(41)
|
|
|
5,000
|
|
|
|
5,000
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Sigmund
Heller
|
|
|
28,528
|
|
|
|
28,528
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Singh
Real Estate Enterprises Inc.(42)
|
|
|
1,045,777
|
|
|
|
1,045,777
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Stephen
E. Solms Family Trust U/A 1/30/2008(43)
|
|
|
106,825
|
|
|
|
106,825
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Stephen
Hannan
|
|
|
378,141
|
|
|
|
378,141
|
|
|
|
-
|
|
|
|
*
|
|
|
|
1,000
|
|
|
|
0
|
|
|
|
1,000
|
|
|
*
|
|
Steven
Chu
|
|
|
1,536
|
|
|
|
1,536
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Tequesta
Properties Inc(44)
|
|
|
307,581
|
|
|
|
307,581
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
The
Hsu-Hellman Family 2000 Trust(45)
|
|
|
1,641,358
|
|
|
|
1,641,358
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
The
Zissis Family Trust
|
|
|
69,541
|
|
|
|
69,541
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Thomas
J. Keitel
|
|
|
500
|
|
|
|
500
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Thomas
Malcolm McAvity
|
|
|
186,619
|
|
|
|
186,619
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Thundering
Elk LLC(46)
|
|
|
3,074
|
|
|
|
3,074
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Tim
Hoefer(8)
|
|
|
691
|
|
|
|
691
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Timothy
Lalonde
|
|
|
404,306
|
|
|
|
404,306
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Timothy
Lalonde Ashley Lalonde Trust(47)
|
|
|
3,914
|
|
|
|
3,914
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Timothy
Lalonde Parker Lalonde Trust(47)
|
|
|
3,914
|
|
|
|
3,914
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Timothy
M. Presutti
|
|
|
20,000
|
|
|
|
20,000
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
TJC3
LLC(48)
|
|
|
496,213
|
|
|
|
496,213
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Whipstick
Ventures LLC(49)
|
|
|
163,881
|
|
|
|
163,881
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
William
P. Hogan
|
|
|
500
|
|
|
|
500
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
William
P. Miller Trust
|
|
|
55,884
|
|
|
|
55,884
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
WOCAP
Global Opportunity Investment Partners, L.P.(50)
|
|
|
75,000
|
|
|
|
75,000
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Yong
Hak Huh
|
|
|
29,065
|
|
|
|
29,065
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
Yorktown
Partners(8)
|
|
|
3,293
|
|
|
|
3,293
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
*
|
|
|
(1)
|
Mike Munoz has sole voting and investment power over the shares held by the stockholder.
|
|
(2)
|
Jonathan Kollek has sole voting and investment power over the shares held by the stockholder.
|
|
(3)
|
Jeremy Asher has sole voting and investment power over the shares held by the stockholder.
|
|
(4)
|
Alastair Hunter-Henderson is the Managing Member and CEO of Alina LLC, and has sole voting and investment power over the shares held by the stockholder.
|
|
(5)
|
Represents securities held directly by AltEnergy LLC, or AltEnergy, AltEnergy Storage LC, or AltEnergy I, AltEnergy Storage II LLC, or AltEnergy II, AltEnergy Storage V LLC, or AltEnergy V, AltEnergy VI LLC, or AltEnergy VI, AltEnergy Storage Bridge LLC, or Bridge, AltEnergy Transmission LLC, or Transmission, AltEnergy Storage Bridge Phase II, or Bridge II. Mr. Stidolph is the managing director of AltEnergy, the managing member of each of AltEnergy I, AltEnergy II, AltEnergy VI, AltEnergy V, Bridge, Transmission and Bridge II, and has voting and dispositive power with respect to the AltEnergy Shares. Russell Stidolph, a director of the Company, is the managing director of AltEnergy, the managing member of each of AltEnergy I, AltEnergy II, AltEnergy VI, AltEnergy V, Bridge, Transmission and Bridge II, and has voting and dispositive power with respect to the AltEnergy Shares. Mr. Stidolph disclaims beneficial ownership of these shares, except to the extent of his pecuniary interest therein.
|
|
(6)
|
Jerry Yang has sole voting and investment power over the shares held by the stockholder.
|
|
(7)
|
Gennady Gazin is the 100% owner of Asterra Holdings LLC and has sole voting and investment power over the shares held by the stockholder.
|
|
(8)
|
Represents common stock issuable upon exercise of options.
|
|
(9)
|
The amount includes (i) shares of common stock held by BRC Partners Opportunity Fund, L.P. (“BRC”), (ii) shares of common stock underlying public warrants held by BRC, (iii) 2,550,750 shares of common stock held by the Sponsor, (iv) shares of common stock underlying private placement warrants held by the Sponsor, (v) shares of common stock held by B. Riley Securities, Inc. (“BRS”), (vi) shares of common stock held by B. Riley Principal Investments, LLC (“BRPI”), and (vii) shares of common stock that are subject to earnout restrictions under the Sponsor Earnout Letter. BRPI is the sole member of the Sponsor and is a wholly-owned subsidiary of B. Riley Financial, Inc. BRC Partners Management GP, LLC (“BRPGP”) is the general partner of BRC and B. Riley Capital Management, LLC (“BRCM”) is the parent company of BRPGP and B. Riley Financial is the parent company of each of BRCM and BRS. B. Riley Financial has voting and dispositive power over the securities held by each of BRPI, BRS and BRC. Bryant Riley is the Chairman and Co-Chief Executive Officer of B. Riley Financial and has voting and dispositive power over the securities held by B. Riley Financial. Each of BRPI and Mr. Riley disclaims beneficial ownership over any securities directly held by the Sponsor, BRS, BRPGP, BRCM or BRC other than to the extent of any pecuniary interest he or it may have therein, directly or indirectly.
|
|
(10)
|
The number of shares beneficially owned before this offering includes (i) 20,000 shares held by Bryant and Carleen Riley JTWROS, (ii) 5,000 shares held by Bryant Riley C/F Abigail Riley UMTA CA, (iii) 5,000 shares held by Bryant Riley C/F Charlie Riley UMTA CA, (iv) 5,000 shares held by Bryant Riley C/F Eloise Riley UMTA CA, (v) 5,000 shares held by Bryant Riley C/F Susan Riley UMTA CA, and (vi) 10,000 shares held by Robert Antin Children Irrevocable Trust U/A 1/1/2001 (collectively, the “Trusts”). Bryant Riley is custodian of each of the Trusts and has voting and dispositive power with respect to the securities held by the Trusts.
|
|
(11)
|
W. Geoffrey Beattie is the President of Cannonbury Invest Limited and has sole voting and investment power over the shares held by the stockholder.
|
|
(12)
|
Joseph DellaRosa; Victor Wright, and James Yacobucci are all members of Corinthian Investors LLC, and share equal voting and investment authority over the shares held by the stockholder.
|
|
(13)
|
Andrew Intrater is the Chief Executive Officer of Cova Funding LLC and has sole voting and investment power over the shares held by the stockholder.
|
|
(14)
|
Includes fully vested options to purchase 4,035 shares of common stock.
|
|
(15)
|
Includes (i) 4,034 shares of common stock issuable upon exercise of options, and (ii) 172,000 shares of common stock purchaseable pursuant to publicly traded call contracts. John B. Berding is the Manager of Denman Street LLC and has sole voting and investment power over the shares held by the stockholder.
|
|
(16)
|
Marc Warren has sole voting and investment power over the shares held by the stockholder.
|
|
(17)
|
Robert Kantor and Francis Greenburger have sole voting and investment power over the shares held by the stockholder.
|
|
(18)
|
Arnold Fisher, Kenneth Fisher, and Steven Fisher share voting and investment authority over the shares held by the stockholder.
|
|
(19)
|
Michael A. Shternfeld is the Manager of Global Equity Partners and has sole voting and investment power over the shares held by the stockholder.
|
|
(20)
|
Each of Great American Insurance Company and Great American Life Insurance Company is a direct or indirect wholly-owned subsidiary of American Financial Group, Inc., which is a publicly traded entity (NYSE: AFG).
|
(21)
|
Philip Greer has sole voting and investment power over the shares held by the stockholder.
|
|
(22)
|
Martin I. Halpern is the Grantor/Trustee of Halpern Family Trust and has sole voting and investment power over the shares held by the stockholder.
|
|
(23)
|
Richard Weiss is the General Partner of Hawthorne II Investment LP and has sole voting and investment power over the shares held by the stockholder.
|
|
(24)
|
Dr. Krishna Singh, a director of the Company, holds direct and/or indirect ownership of HI-MED, LLC and holds the full voting and dispositive power with respect to the shares held thereby.
|
|
(25)
|
Includes 86,457 shares of common stock issuable upon exercise of options. Dr. Krishna Singh, a director of the Company, holds direct and/or indirect ownership of Holtec International and holds the full voting and dispositive power with respect to the shares held thereby.
|
|
(26)
|
Mr. Mastrangelo is the Chief Executive Officer and a director of the Company.
|
|
(27)
|
Susan M. Berding is the Trustee of John B. Berding Irrevocable Childrens Trust and has sole voting and investment power over the shares held by the stockholder.
|
|
(28)
|
Includes the following securities held by Denman Street LLC: (i) 446,303 shares of common stock, (ii) 4,034 shares of common stock issuable upon exercise of options, and (iii) 172,000 shares of common stock purchaseable pursuant to publicly traded call contracts. John B. Berding is the Manager of Denman Street LLC and has sole voting and investment power over the shares held thereby.
|
|
(29)
|
John T. Raymond has sole voting and investment power over the shares held by the stockholder.
|
|
(30)
|
Represents 748 additional shares of common stock issuable upon satisfaction of certain vesting terms set forth in previously granted restricted stock units held by Mr. Treece. Mr. Treece is our Chief Strategic Alliances Officer.
|
|
(31)
|
Brian Finn has sole voting and investment power over the shares held by the stockholder.
|
|
(32)
|
Yang Zhu has sole voting and investment power over the shares held by the stockholder.
|
|
(33)
|
DaeWon Choi and ByeongSeon Jang are Team Managers of OCI, JeongHan Ryu is a Manager of OCI, and Saejin Kim is an associate of OCI. Each such individual shares voting and investment power over the shares held by the stockholder.
|
|
(34)
|
Dwright Anderson has sole voting and investment power over the shares held by the stockholder.
|
|
(35)
|
Ed Hoey has sole voting and investment power over the shares held by the stockholder.
|
|
(36)
|
P. Gaye Farncombe is the President of PGF Family Corp and has sole voting and investment power over the shares held by the stockholder.
|
|
(37)
|
Steve Hellman has sole voting and investment power over the shares held by the stockholder.
|
|
(38)
|
Includes (i) 245,737 shares held by Reservoir Capital Partners, L.P., (ii) 288,896 shares held by Reservoir Capital Investment Partners, L.P., (iii) 284,891 shares held by Reservoir Capital Master Fund II, L.P. and (iv) 1,750,114 shares held by Reservoir Resource Partners, L.P. Cyrus Borzooyeh is the chief financial officer of the foregoing entities and has voting and dispositive power with respect to the securities held by each such entity.
|
|
(39)
|
Richard Weiss is the trustee of Richard T. Weiss 2006 Living Trust and has sole voting and investment power over the shares held by the stockholder.
|
|
(40)
|
Includes vested options to purchase 3,602 shares of common stock.
|
|
(41)
|
Simon-Sidamon Eristoff has sole voting and investment power over the shares held by the stockholder.
|
|
(42)
|
Dr. Krishna Singh, a director of the Company, holds direct and/or indirect ownership of Singh Real Estate Enterprises Inc. and holds the full voting and dispositive power with respect to the shares held thereby.
|
|
(43)
|
Ellen B. Solms and Joesph Sedlack are Trustees of the Stephen E. Solms Family Trust U/A 1/30/2008 and share voting and investment power over the shares held by the stockholder.
|
|
(44)
|
Dr. Krishna Singh, a director of the Company, holds direct and/or indirect ownership of Tequesta Properties Inc. and holds the full voting and dispositive power with respect to the shares held thereby.
|
|
(45)
|
Marc Warren is the Trustee of The Hsu-Hellman Family 2000 Trust and has sole voting and investment power over the shares held by the stockholder.
|
|
(46)
|
David R. M. Drescher has sole voting and investment power over the shares held by the stockholder.
|
|
(47)
|
Lisa LaLonde is trustee of Timothy Lalonde Ashley Lalonde Trust and Timothy Lalonde Parker Lalonde Trust, and has sole voting and investment power of the shares held by such stockholders.
|
|
(48)
|
Thomas J. Coleman is the Trustee of the Thomas J. Coleman Revocable Trust, the sole member of TJC3 LLC, and has sole voting and investment power over the shares held by such stockholder.
|
|
(49)
|
Each of Jeffrey S. Bornstein and Ronald C. Hynes shares voting and dispositive power over the securities held by this stockholder.
|
|
(50)
|
Timothy Presutti has voting and dispositive control over the securities held by this stockholder.
|
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The
following is a summary of transactions since January 1, 2020 to which we and BMRG have been a participant, in which:
|
●
|
the
amount involved exceeded or will exceed $120,000; and
|
|
●
|
any
of our directors, executive officers, or holders of more than 5% of our capital stock,
or any member of the immediate family of the foregoing persons, had or will have a direct
or indirect material interest, other than compensation and other arrangements that are
described in the section titled “Executive Compensation” or that were approved
by our compensation committee.
|
B.
Riley Principal Merger Corp. II
B.
Riley Financial is the ultimate parent company of BRFBR, the Sponsor and BRPI. Daniel Shribman, who was BMRG’s Chief Executive
Officer and Chief Financial Officer prior to the business combination, is the President of BRPI and the Chief Investment Officer
of B. Riley Financial. Bryant Riley, a member of BMRG’s board of directors prior to the business combination, is the Chairman
and Co-Chief Executive Officer of B. Riley Financial. Kenneth Young, a member of BMRG’s board of directors prior to the
business combination, is the President of B. Riley Financial and the Chief Executive Officer of BRPI.
Founder
Shares
In
connection with BMRG’s initial formation in June 2019, a wholly-owned subsidiary of B. Riley Financial (which is the
parent of the Sponsor) was issued all of BMRG’s outstanding equity. All founder shares were contributed to the Sponsor in
January 2020, resulting in the Sponsor directly and B. Riley Financial indirectly owning all outstanding founder shares.
On February 3, 2020, BMRG conducted a 1:575 stock split and reclassification of BMRG’s common stock such that the Sponsor
directly and B. Riley Financial indirectly continued to own all 5,750,000 outstanding founder shares. On April 21, 2020, 20,000
founder shares were transferred to each of Patrick Bartels, Jamie Kempner, Timothy Presutti and Robert Suss, BMRG’s independent
director nominees, at their par value. On May 19, 2020, the Sponsor returned 718,750 founder shares to BMRG for cancellation,
resulting in a total of 5,031,250 founder shares outstanding. The number of founder shares outstanding was determined based on
the expectation that the founder shares would represent 20% of the outstanding shares after the IPO excluding the private placement
shares underlying the private placement units. On May 28, 2020, the Sponsor forfeited 656,250 founder shares in connection with
the determination by the underwriters of the IPO not to exercise their over-allotment option in whole or in part.
BMRG’s
initial stockholders have agreed not to transfer, assign or sell any of their founder shares until the earlier to occur of (A) one
year after the completion of the business combination or (B) subsequent to the business combination, (x) if the last
sale price of our common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations,
recapitalizations and the like) for any twenty (20) trading days within any consecutive thirty (30) trading day period commencing
at least 150 days after the business combination, or (y) the date on which we complete a liquidation, merger, capital
stock exchange, reorganization or other similar transaction that results in all of our stockholders having the right to exchange
their shares of common stock for cash, securities or other property, subject to certain limitations.
Promissory
Note
On
February 4, 2020, BMRG issued a promissory note pursuant to which BMRG borrowed an aggregate principal amount of $300,000. The
promissory note was non-interest bearing, unsecured and due on the earlier of December 31, 2020 or the completion of the IPO.
The promissory note was repaid in full upon the consummation of the IPO.
Private
Placement Securities
Simultaneously
with the closing of the IPO, the Sponsor purchased an aggregate of 650,000 private placement units at $10.00 per private placement
unit ($6,500,000 in the aggregate). Each private placement unit consisted of one share of Class A common stock and one-half
of one private placement warrant. Each whole private placement warrant is exercisable to purchase one share of common stock at
an exercise price of $11.50 per share. The proceeds from the private placement units were added to the proceeds from the IPO held
in the trust account.
BMRG
Registration Rights Agreement
The
holders of the founder shares, private placement shares, private placement warrants, and shares of common stock underlying the
private placement warrants have rights to require us to maintain an effective registration statement with respect to such securities.
These holders are also entitled to make up to three demands, excluding short form registration demands, that we register such
securities for sale under the Securities Act. In addition, these holders have “piggy-back” registration rights to
include their securities in other registration statements filed by us. Notwithstanding the foregoing, the Sponsor may not exercise
its demand and “piggyback” registration rights after five (5) and seven (7) years, respectively, after the effective
date of IPO registration statement and may not exercise its demand rights on more than one occasion.
Business
Combination Marketing Agreement
Pursuant
to the business combination marketing agreement entered into upon the closing of the IPO by BMRG and BRFBR, upon the Closing,
BMRG paid BRFBR a fee of $6,125,000 in consideration of services provides in connection with marketing and completing the business
combination, or 3.5% of the gross proceeds of the IPO.
Administrative
Fees
Commencing
on May 19, 2020, BMRG agreed to pay an affiliate of the Sponsor a total of $10,000 per month for office space, utilities and secretarial
and administrative support. Upon completion of the business combination, we ceased paying these monthly fees.
Equity
Commitment Letter and Subscription Agreements
On
September 7, 2020, B. Riley Financial entered into the Equity Commitment Letter with BMRG, pursuant to which B. Riley Financial
committed to purchase up to 4,000,000 shares of Class A common stock, at a price per share of $10.00 per share, or up to
$40,000,000 in equity financing at Closing, less the number of shares of Class A common stock issued pursuant to Subscription
Agreements. The obligations to consummate the Equity Commitment Letter and Subscription Agreements were conditioned upon, among
other things, customary closing conditions and the consummation of the transactions contemplated by the Merger Agreement. The
PIPE Investment closed immediately prior to the Closing. The Equity Commitment Letter effectively terminated the forward purchase
agreement entered at the time of the IPO requiring our Sponsor and its affiliate to purchase immediately prior to the Closing
an aggregate of 2,500,000 units, each comprised of one share of Class A common stock and one-half of one warrant.
Eos’s
Related Party Transactions
Eos
Registration Rights Agreement
In
connection with the Closing, we entered into a registration rights agreement with certain of our securityholders. Under the registration
rights agreement, the Company will have certain obligations with respect to the Registrable Securities. We are required to maintain
an effective registration statement registering the resale of the Registrable Securities. Holders of the Registrable Securities
also have certain “piggy-back” registration rights with respect to registration statements and rights to require us
to register for resale such securities pursuant to Rule 415 under the Securities Act. We will bear the expenses incurred in connection
with the filing of any such registration statements. The registration rights agreement does not contemplate the payment of penalties
or liquidated damages as a result of a failure to register, or delays with respect to the registration of, the Registrable Securities.
As part of the registration rights agreement, holders of the Registrable Securities agree to a certain lock-up period with respect
to the Registrable Securities.
Sponsor
Earnout Letter
We
entered into a letter agreement at the Closing, pursuant to which the Sponsor agreed to subject the Sponsor Shares, which formerly
constituted shares of Class B common stock of the Company held by the Sponsor, to certain transfer and other restrictions, all
of which expired prior to the date of this prospectus.
Director
Nomination Agreement
In
connection with the Closing, we entered into the Director Nomination Agreement with the Sponsor and certain Eos equityholders
(the “Sellers”), pursuant to which the Sponsor and the Sellers have the right to designate members to be appointed
or nominated for election to the board of directors of the Company, subject to terms and conditions set forth therein. The Sponsor
and the Sellers may also request for at least one of its designated directors to be appointed as a member of each newly established
committee of our board of directors. If the Sponsor or the Sellers has the right to designate one or more nominees and either
has not exercised such right or no such nominee has been elected, then either the Sponsor or the Sellers may designate one board
observer.
Convertible
Promissory Notes
In 2019 and 2020 EES
LLC issued a series of convertible promissory notes to AltEnergy, LLC, AltEnergy Storage II LLC, AltEnergy Storage Bridge, LLC,
AltEnergy Transmission LLC and AltEnergy Storage Bridge Phase II LLC in two phases for an aggregate principal amount of $7,229,117.
Mr. Stidolph serves as the Managing Director of AltEnergy, LLC, which is the managing member of each of, AltEnergy Storage II LLC,
AltEnergy Storage Bridge, LLC, AltEnergy Transmission LLC and AltEnergy Storage Bridge Phase II LLC. Together, AltEnergy, LLC and
its managed entities own 14% of the outstanding shares of common stock as of December 31, 2020. The notes converted immediately
prior to the Closing, resulting in approximately 10,886,335 shares of common stock being issued to the holders of such notes.
Merger
Consideration
Subject
to certain downward adjustments and the other terms and conditions set forth in the Merger Agreement, at Closing the EES LLC securityholders
received total aggregate consideration of 29,644,680 shares of common stock. The EES LLC securityholders also received an additional
1,994,171 shares of our common stock upon the achievement of certain earnout targets pursuant to the terms of the Merger Agreement.
Policies
and Procedures for Related Person Transactions
Our
board of directors adopted a written related person transaction policy that sets forth the following policies and procedures for
the review and approval or ratification of related person transactions.
A
“Related Person Transaction” is a transaction, arrangement or relationship in which we or any of our subsidiaries
was, is or will be a participant, the amount of which involved exceeds $120,000, and in which any related person had, has or will
have a direct or indirect material interest. A “Related Person” means:
|
●
|
any
person who is, or at any time during the applicable period was, one of our officers or
one of our directors;
|
|
●
|
any
person who is known to be the beneficial owner of more than 5% of our voting stock;
|
|
●
|
any
immediate family member of any of the foregoing persons, which means any child, stepchild,
parent, stepparent, spouse, sibling, mother-in-law, father-in-law, daughter-in-law, brother-in-law
or sister-in-law of a director, officer or a beneficial owner of more than 5% of our
voting stock, and any person (other than a tenant or employee) sharing the household
of such director, officer or beneficial owner of more than 5% of our voting stock; and
|
|
●
|
any
firm, corporation or other entity in which any of the foregoing persons is a partner
or principal or in a similar position or in which such person has a 10% or greater beneficial
ownership interest.
|
We
have policies and procedures designed to minimize potential conflicts of interest arising from any dealings we may have with our
affiliates and to provide appropriate procedures for the disclosure of any real or potential conflicts of interest that may exist
from time to time.
U.S.
FEDERAL INCOME TAX CONSIDERATIONS
The
following is a discussion of certain material U.S. federal income tax consequences of the acquisition, ownership and disposition
of shares of our common stock. This discussion is limited to certain U.S. federal income tax considerations to beneficial owners
of our common stock who are initial purchasers of such common stock pursuant to this offering and hold the common stock as a capital
asset within the meaning of Section 1221 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”). This
discussion assumes that any distributions made by us on our common stock and any consideration received by a holder in consideration
for the sale or other disposition of our common stock will be in U.S. dollars.
This
summary is based upon U.S. federal income tax laws as of the date of this prospectus, which is subject to change or differing
interpretations, possibly with retroactive effect. This discussion is a summary only and does not describe all of the tax consequences
that may be relevant to you in light of your particular circumstances, including but not limited to the alternative minimum tax,
the Medicare tax on certain net investment income and the different consequences that may apply if you are subject to special
rules that apply to certain types of investors, including but not limited to:
|
●
|
financial institutions
or financial services entities;
|
|
●
|
governments or agencies
or instrumentalities thereof;
|
|
●
|
regulated investment
companies;
|
|
●
|
real estate investment
trusts;
|
|
●
|
expatriates or former
long-term residents of the United States;
|
|
●
|
persons that acquired
our common stock pursuant to an exercise of employee share options, in connection with employee share incentive plans or otherwise
as compensation;
|
|
●
|
dealers or traders
subject to a mark-to-market method of accounting with respect to our common stock;
|
|
●
|
persons holding
our common stock as part of a “straddle,” constructive sale, hedge, conversion or other integrated or similar
transaction;
|
|
●
|
U.S. holders (as
defined below) whose functional currency is not the U.S. dollar;
|
|
●
|
partnerships (or
entities or arrangements classified as partnerships or other pass-through entities for U.S. federal income tax purposes) and
any beneficial owners of such partnerships;
|
|
●
|
controlled foreign
corporations; and
|
|
●
|
passive foreign
investment companies.
|
If
a partnership (including an entity or arrangement treated as a partnership or other pass-thru entity for U.S. federal income tax
purposes) holds our common stock, the tax treatment of a partner, member or other beneficial owner in such partnership will generally
depend upon the status of the partner, member or other beneficial owner, the activities of the partnership and certain determinations
made at the partner, member or other beneficial owner level. If you are a partner, member or other beneficial owner of a partnership
holding our common stock, you are urged to consult your tax advisor regarding the tax consequences of the acquisition, ownership
and disposition of our common stock.
This
discussion is based on the Code, and administrative pronouncements, judicial decisions and final, temporary and proposed Treasury
regulations as of the date hereof, which are subject to change, possibly on a retroactive basis, and changes to any of which subsequent
to the date of this prospectus may affect the tax consequences described herein. This discussion does not address any aspect of
state, local or non-U.S. taxation, or any U.S. federal taxes other than income taxes (such as gift and estate taxes).
We
have not sought, and do not expect to seek, a ruling from the U.S. Internal Revenue Service (the “IRS”) as to any
U.S. federal income tax consequence described herein. The IRS may disagree with the discussion herein, and its determination may
be upheld by a court. Moreover, there can be no assurance that future legislation, regulations, administrative rulings or court
decisions will not adversely affect the accuracy of the statements in this discussion. You are urged to consult your tax advisor
with respect to the application of U.S. federal tax laws to your particular situation, as well as any tax consequences arising
under the laws of any state, local or foreign jurisdiction.
THIS
DISCUSSION IS ONLY A SUMMARY OF CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS ASSOCIATED WITH THE ACQUISITION, OWNERSHIP AND
DISPOSITION OF OUR COMMON STOCK. EACH PROSPECTIVE INVESTOR IN OUR COMMON STOCK IS URGED TO CONSULT ITS OWN TAX ADVISOR WITH RESPECT
TO THE PARTICULAR TAX CONSEQUENCES TO SUCH INVESTOR OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK, INCLUDING
THE APPLICABILITY AND EFFECT OF ANY U.S. FEDERAL NON-INCOME, STATE, LOCAL, AND NON-U.S. TAX LAWS.
U.S.
Holders
This
section applies to you if you are a “U.S. holder.” A U.S. holder is a beneficial owner of our common stock who or
that is, for U.S. federal income tax purposes:
|
●
|
an individual who
is a citizen or resident of the United States;
|
|
●
|
a corporation (or
other entity taxable as a corporation) organized in or under the laws of the United States, any state thereof or the District
of Columbia;
|
|
●
|
an estate the income
of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or
|
|
●
|
a trust, if (i)
a court within the United States is able to exercise primary supervision over the administration of the trust and one or more
United States persons (as defined in the Code) have authority to control all substantial decisions of the trust or (ii) it
has a valid election in effect under Treasury Regulations to be treated as a United States person.
|
Taxation
of Distributions. If we pay distributions in cash or other property (other than certain distributions of our stock or rights
to acquire our stock) to U.S. holders of shares of our common stock, such distributions generally will constitute dividends for
U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under
U.S. federal income tax principles. Distributions in excess of current and accumulated earnings and profits will constitute a
return of capital that will be applied against and reduce (but not below zero) the U.S. holder’s adjusted tax basis in our
common stock. Any remaining excess will be treated as gain realized on the sale or other disposition of our common stock and will
be treated as described under “U.S. Holders — Gain or Loss on Sale, Taxable Exchange or Other Taxable Disposition
of Common Stock” below.
Dividends
we pay to a U.S. holder that is a taxable corporation generally will qualify for the dividends received deduction if the requisite
holding period is satisfied. With certain exceptions, and provided certain holding period requirements are met, dividends we pay
to a non-corporate U.S. holder may constitute “qualified dividend income” that will be subject to tax at the maximum
tax rate accorded to long-term capital gains. If the holding period requirements are not satisfied, then a corporation may not
be able to qualify for the dividends received deduction and would have taxable income equal to the entire dividend amount, and
non-corporate U.S. holders may be subject to tax on such dividend at regular ordinary income tax rates instead of the preferential
rate that applies to qualified dividend income.
Gain
or Loss on Sale, Taxable Exchange or Other Taxable Disposition of Common Stock. Upon a sale or other taxable disposition of
our common stock, a U.S. holder generally will recognize capital gain or loss in an amount equal to the difference between the
amount realized and the U.S. holder’s adjusted tax basis in the common stock. Any such capital gain or loss generally will
be long-term capital gain or loss if the U.S. holder’s holding period for the common stock so disposed of exceeds one year.
Long-term capital gains recognized by non-corporate U.S. holders may be eligible to be taxed at reduced rates. The deductibility
of capital losses is subject to limitations.
Information
Reporting and Backup Withholding. In general, information reporting requirements may apply to dividends paid to a U.S. holder
and to the proceeds of the sale or other disposition of our common stock, unless the U.S. holder is an exempt recipient. Backup
withholding may apply to such payments if the U.S. holder fails to provide a taxpayer identification number, a certification of
exempt status or has been notified by the IRS that it is subject to backup withholding (and such notification has not been withdrawn).
Backup
withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be allowed as a credit against
a U.S. holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided the required information
is timely furnished to the IRS.
Non-U.S.
Holders
This
section applies to you if you are a “Non-U.S. holder.” As used herein, the term “Non-U.S. holder” means
a beneficial owner of our common stock who or that is for U.S. federal income tax purposes:
|
●
|
a non-resident alien
individual (other than certain former citizens and residents of the United States subject to U.S. tax as expatriates);
|
|
●
|
a foreign corporation;
or
|
|
●
|
an estate or trust
that is not a U.S. holder;
|
but
generally does not include an individual who is present in the United States for a material number of days in the taxable year
of the disposition of our common stock. If you are such an individual, you should consult your tax advisor regarding the U.S.
federal income tax consequences of the acquisition, ownership or sale or other disposition of our common stock.
Taxation
of Distributions. In general, any distributions we make to a Non-U.S. holder of shares of our common stock, to the extent
paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles), will constitute
dividends for U.S. federal income tax purposes and, provided such dividends are not effectively connected with the Non-U.S. holder’s
conduct of a trade or business within the United States, we will be required to withhold tax from the gross amount of the dividend
at a rate of 30%, unless such Non-U.S. holder is eligible for a reduced rate of withholding tax under an applicable income tax
treaty and provides proper certification of its eligibility for such reduced rate (usually on an IRS Form W-8BEN or W-8BEN-E).
Any distribution not constituting a dividend will be treated first as reducing (but not below zero) the Non-U.S. holder’s
adjusted tax basis in its shares of our common stock and, to the extent such distribution exceeds the Non-U.S. holder’s
adjusted tax basis, as gain realized from the sale or other disposition of the common stock, which will be treated as described
under “Non-U.S. Holders — Gain on Sale, Taxable Exchange or Other Taxable Disposition of Common Stock”
below. In addition, if we determine that we are likely to be classified as a “United States real property holding corporation”
(see “Non-U.S. Holders — Gain on Sale, Taxable Exchange or Other Taxable Disposition of Common Stock”
below), we generally will withhold 15% of any distribution that exceeds our current and accumulated earnings and profits.
Gain
on Sale, Taxable Exchange or Other Taxable Disposition of Common Stock. A Non-U.S. holder generally will not be subject to
U.S. federal income or withholding tax in respect of gain recognized on a sale, taxable exchange or other taxable disposition
of our common stock unless:
|
●
|
the gain is effectively
connected with the conduct by the Non-U.S. holder of a trade or business within the United States (and, under certain income
tax treaties, is attributable to a United States permanent establishment or fixed base maintained by the Non-U.S. holder);
or
|
|
●
|
we are or have been
a “United States real property holding corporation” for U.S. federal income tax purposes at any time during the
shorter of the five-year period ending on the date of disposition or the period that the Non-U.S. holder held our common stock.
|
Unless
an applicable treaty provides otherwise, gain described in the first bullet point above will be subject to tax at generally applicable
U.S. federal income tax rates as if the Non-U.S. holder were a U.S. resident. Any gains described in the first bullet point above
of a Non-U.S. holder that is treated as a foreign corporation for U.S. federal income tax purposes may also be subject to an additional
“branch profits tax” imposed at a 30% rate (or lower treaty rate).
If
the second bullet point above applies to a Non-U.S. holder, gain recognized by such holder on the sale, exchange or other disposition
of our common stock will be subject to tax at generally applicable U.S. federal income tax rates. In addition, a buyer of our
common stock from such holder may be required to withhold U.S. federal income tax at a rate of 15% of the amount realized upon
such disposition. We will be classified as a United States real property holding corporation if the fair market value of our “United
States real property interests” equals or exceeds 50% of the sum of the fair market value of our worldwide real property
interests plus our other assets used or held for use in a trade or business, as determined for U.S. federal income tax purposes.
We do not expect to be a United States real property holding corporation immediately after the business combination is completed.
Information
Reporting and Backup Withholding. Information returns will be filed with the IRS in connection with payments of dividends
and the proceeds from a sale or other disposition of shares of our common stock. A Non-U.S. holder may have to comply with certification
procedures to establish that it is not a United States person in order to avoid information reporting and backup withholding requirements.
The certification procedures required to claim a reduced rate of withholding under a treaty generally will satisfy the certification
requirements necessary to avoid the backup withholding as well.
FATCA
Withholding Taxes. Provisions commonly referred to as “FATCA” impose withholding of 30% on payments of dividends
on our common stock to “foreign financial institutions” (which is broadly defined for this purpose and in general
includes investment vehicles) and certain other non-U.S. entities unless various U.S. information reporting and due diligence
requirements (generally relating to ownership by United States persons of interests in or accounts with those entities) have been
satisfied by, or an exemption applies to, the payee (typically certified as to by the delivery of a properly completed IRS Form
W-8BEN-E). Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States
governing FATCA may be subject to different rules. Under certain circumstances, a Non-U.S. holder might be eligible for taxes,
and a Non-U.S. holder might be required to file a U.S. federal income tax return to claim such refunds or credits. Thirty percent
withholding under FATCA was scheduled to apply to payments of gross proceeds from the sale or other disposition of property that
produces U.S.-source interest or dividends beginning on January 1, 2019, but on December 13, 2018, the IRS released proposed regulations
that, if finalized in their proposed form, would eliminate the obligation to withhold on gross proceeds. Such proposed regulations
also delayed withholding on certain other payments received from other foreign financial institutions that are allocable, as provided
for under final Treasury Regulations, to payments of U.S.-source dividends, and other fixed or determinable annual or periodic
income. Although these proposed Treasury Regulations are not final, taxpayers generally may rely on them until final Treasury
Regulations are issued. Prospective investors should consult their tax advisors regarding the effects of FATCA on their investment
in our common stock.
PLAN
OF DISTRIBUTION
The
selling securityholders, which as used here includes donees, pledgees, transferees or other successors-in-interest selling warrants,
shares of common stock or interests in shares of common stock received after the date of this prospectus from a selling securityholder
as a gift, pledge, partnership distribution or other transfer, may, from time to time, sell, transfer or otherwise dispose of
any or all of their warrants, shares of common stock or interests in shares of common stock on any stock exchange, market or trading
facility on which the warrants or shares are traded or in private transactions. These dispositions may be at fixed prices, at
prevailing market prices at the time of sale, at prices related to the prevailing market price, at varying prices determined at
the time of sale, or at negotiated prices.
The
selling securityholders may use any one or more of the following methods when disposing of warrants, shares or interests therein:
|
●
|
ordinary brokerage
transactions and transactions in which the broker-dealer solicits purchasers;
|
|
●
|
block trades in
which the broker-dealer will attempt to sell the shares as agent, but may position and resell a portion of the block as principal
to facilitate the transaction;
|
|
●
|
purchases by a broker-dealer
as principal and resale by the broker-dealer for their account;
|
|
●
|
an exchange distribution
in accordance with the rules of the applicable exchange;
|
|
●
|
privately negotiated
transactions;
|
|
●
|
short sales effected
after the date the registration statement of which this prospectus is a part is declared effective by the SEC;
|
|
●
|
through the writing
or settlement of options or other hedging transactions, whether through an options exchange or otherwise;
|
|
●
|
broker-dealers may
agree with the selling securityholders to sell a specified number of such shares at a stipulated price per share;
|
|
●
|
a combination of
any such methods of sale; and
|
|
●
|
any other method
permitted by applicable law.
|
The
selling securityholders may, from time to time, pledge or grant a security interest in some or all of the warrants or shares of
common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties
may offer and sell the warrants or shares of common stock, from time to time, under this prospectus, or under an amendment to
this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of selling securityholders
to include the pledgee, transferee or other successors in interest as selling securityholders under this prospectus. The selling
securityholders also may transfer the warrants or shares of common stock in other circumstances, in which case the transferees,
pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.
In
connection with the sale of our warrants, shares of common stock or interests therein, the selling securityholders may enter into
hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the warrants
shares of common stock in the course of hedging the positions they assume. The selling securityholders may also sell warrants
or shares of our common stock short and deliver these securities to close out their short positions, or loan or pledge the warrants
or common stock to broker-dealers that in turn may sell these securities. The selling securityholders may also enter into option
or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities
which require the delivery to such broker-dealer or other financial institution of warrants or shares offered by this prospectus,
which warrants or shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented
or amended to reflect such transaction).
Each
of the selling securityholders reserves the right to accept and, together with their agents from time to time, to reject, in whole
or in part, any proposed purchase of warrants or common stock to be made directly or through agents. We will not receive any of
the proceeds from this offering. Upon any exercise of the warrants or options by payment of cash, however, we will receive the
exercise price of such warrants or options.
The
selling securityholders and any underwriters, broker-dealers or agents that participate in the sale of the common stock or interests
therein may be “underwriters” within the meaning of Section 2(11) of the Securities Act. Any discounts, commissions,
concessions or profit they earn on any resale of the shares may be underwriting discounts and commissions under the Securities
Act. selling securityholders who are “underwriters” within the meaning of Section 2(11) of the Securities Act will
be subject to the prospectus delivery requirements of the Securities Act.
In
addition, a selling securityholder that is an entity may elect to make a pro rata in-kind distribution of securities
to its members, partners or stockholders pursuant to the registration statement of which this prospectus is a part by delivering
a prospectus with a plan of distribution. Such members, partners or stockholders would thereby receive freely tradeable securities
pursuant to the distribution through a registration statement.
To
the extent required, the warrants or shares of our common stock to be sold, the names of the selling securityholders, the respective
purchase prices and public offering prices, the names of any agents, dealer or underwriter, any applicable commissions or discounts
with respect to a particular offer will be set forth in an accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement that includes this prospectus.
In
order to comply with the securities laws of some states, if applicable, the warrants or common stock may be sold in these jurisdictions
only through registered or licensed brokers or dealers. In addition, in some states the warrants or common stock may not be sold
unless they have been registered or qualified for sale or an exemption from registration or qualification requirements is available
and is complied with.
We
have advised the selling securityholders that the anti-manipulation rules of Regulation M under the Exchange Act may apply to
sales of warrants or shares in the market and to the activities of the selling securityholders and their affiliates. In addition,
to the extent applicable we will make copies of this prospectus (as it may be supplemented or amended from time to time) available
to the selling securityholders for the purpose of satisfying the prospectus delivery requirements of the Securities Act. The selling
securityholders may indemnify any broker-dealer that participates in transactions involving the sale of the shares against certain
liabilities, including liabilities arising under the Securities Act.
We
have agreed to indemnify the selling securityholders against liabilities, including liabilities under the Securities Act and state
securities laws, relating to the registration of the warrants or shares offered by this prospectus.
We
have agreed with the selling securityholders to keep the registration statement of which this prospectus constitutes a part effective
until all of the shares covered by this prospectus have been disposed of pursuant to and in accordance with the registration statement
or the securities have been withdrawn.
LEGAL
MATTERS
Morrison
Cohen LLP has passed upon the validity of our common stock offered by this prospectus and certain other legal matters related
to this prospectus.
EXPERTS
The
financial statements of B. Riley Principal Merger Corp. II as of February 14, 2020 and December 31, 2019 and for the period from
January 1, 2020 through February 14, 2020 and for the period from June 3, 2019 (inception) through December 31, 2019 included
in this prospectus have been audited by Marcum LLP, independent registered public accounting firm, as set forth in their report,
thereon (which contains an explanatory paragraph relating to substantial doubt about the ability of B. Riley Principal Merger
Corp. II to continue as a going concern as described in Note 1 to the financial statements), appearing elsewhere in this prospectus,
and are included in reliance on such report given upon such firm as experts in auditing and accounting.
The
financial statements of Eos Energy Enterprises, Inc as of December 31, 2020 and 2019, and for each of the two years in the period
ended December 31, 2020, included in this Prospectus, have been audited by Deloitte & Touche LLP, an independent registered
public accounting firm, as stated in their report appearing herein. Such financial statements have been so included in reliance
upon the report of such firm given upon their authority as experts in accounting and auditing.
On
November 16, 2020, the Audit Committee of the Board approved the engagement of Deloitte & Touche as our independent registered
public accounting firm effective as of the Closing to audit the Company’s consolidated financial statements for the year
ended December 31, 2020. The Audit Committee of the board of directors of BMRG prior to the Closing resolved that Marcum would
be dismissed as the Company’s independent registered public accounting firm effective upon the Closing. Accordingly, Marcum
was informed that it would be dismissed as the Company’s independent registered public accounting firm effective as of the
Closing. On November 20, 2020, the Company disclosed the dismissal of Marcum in a Current Report on Form 8-K.
WHERE
YOU CAN FIND MORE INFORMATION
We
have filed a registration statement on Form S-1, including exhibits, under the Securities Act of 1933, as amended, with respect
to the common stock offered by this prospectus. This prospectus does not contain all of the information included in the registration
statement. For further information pertaining to us and our securities, you should refer to the registration statement and our
exhibits.
In
addition, we file annual, quarterly and current reports, proxy statements and other information with the SEC. Our SEC filings
are available to the public on a website maintained by the SEC located at www.sec.gov. We also maintain a website at https://eosenergystorage.com.
Through our website, we make available, free of charge, annual, quarterly and current reports, proxy statements and other information
as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. The information contained
on, or that may be accessed through, our website is not part of, and is not incorporated into, this prospectus.
B.
Riley Principal Merger Corp. II
INDEX
TO FINANCIAL STATEMENTS
|
|
Page
|
B. Riley Principal Merger Corp. II
|
|
|
Financial Statements
|
|
|
Condensed Consolidated Balance Sheets as of September 30, 2020 (Unaudited) and December 31, 2019
|
|
F-2
|
Condensed Consolidated Statements of Operations for the three months ended September 30, 2020 and 2019 and nine months ended September 30, 2020 and period from June 3, 2019 (Inception) through September 30, 2019 (Unaudited)
|
|
F-3
|
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the three months ended September 30, 2020 and 2019 and nine months ended September 30, 2020 and period from June 3, 2019 (Inception) through September 30, 2019 (Unaudited)
|
|
F-4
|
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and period from June 3, 2019 (Inception) through September 30, 2019 (Unaudited)
|
|
F-5
|
Notes to Unaudited Condensed Consolidated Financial Statements
|
|
F-6
|
B.
RILEY PRINCIPAL MERGER CORP. II
Condensed Consolidated Balance Sheets
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
315,105
|
|
|
$
|
—
|
|
Due
from related party
|
|
|
—
|
|
|
|
1
|
|
Prepaid
expenses
|
|
|
236,226
|
|
|
|
—
|
|
Total
current assets
|
|
|
551,331
|
|
|
|
1
|
|
Cash
and cash equivalents held in Trust Account
|
|
|
176,777,682
|
|
|
|
—
|
|
Total
assets
|
|
$
|
177,329,013
|
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders’ Equity (Deficit)
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
21,912
|
|
|
$
|
278
|
|
Accrued
expenses
|
|
|
1,786,970
|
|
|
|
—
|
|
Payable
to Related Party
|
|
|
44,194
|
|
|
|
—
|
|
Total
liabilities
|
|
|
1,853,076
|
|
|
|
278
|
|
|
|
|
|
|
|
|
|
|
Commitments
|
|
|
|
|
|
|
|
|
Class A
Common stock subject to possible redemption; 16,878,905 (at redemption value of approximately $10.10 per share at September
30, 2020)
|
|
|
170,475,931
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity (deficit):
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding
|
|
|
—
|
|
|
|
—
|
|
Class A
Common stock, $0.0001 par value; 100,000,000 shares authorized; 1,271,195 issued and outstanding as of September 30, 2020
and none issued and outstanding as of December 31, 2019 (excluding 16,878,805 subject to possible redemption)
|
|
|
127
|
|
|
|
—
|
|
Class B
Common stock, $0.0001 par value; 25,000,000 shares authorized; 4,375,000 issued and outstanding as of September 30, 2020 and
5,750,000(1) outstanding as of December 31, 2019, see Equity Statement
|
|
|
437
|
|
|
|
575
|
|
Additional
paid-in capital
|
|
|
7,047,891
|
|
|
|
—
|
|
Accumulated
deficit
|
|
|
(2,048,449
|
)
|
|
|
(852
|
)
|
Total
stockholders’ equity (deficit)
|
|
|
5,000,006
|
|
|
|
(277
|
)
|
Total
liabilities and stockholders’ equity (deficit)
|
|
$
|
177,329,013
|
|
|
$
|
1
|
|
|
(1)
|
Includes
an aggregate of 750,000 shares that are subject to forfeiture to the extent the underwriter’s
overallotment is not exercised in full (Note 4).
|
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
B.
RILEY PRINCIPAL MERGER CORP. II
Condensed Consolidated Statements of Operations
(Unaudited)
|
|
Three
Months
Ended
September 30,
2020
|
|
|
Three
Months
Ended
September 30,
2019
|
|
|
Nine
Months
Ended
September 30,
2020
|
|
|
Period
from
June 3,
2019
(Inception) through
September 30,
2019
|
|
Operating
costs
|
|
$
|
1,978,148
|
|
|
$
|
—
|
|
|
$
|
2,075,279
|
|
|
$
|
—
|
|
Loss
from operations
|
|
|
(1,978,148
|
)
|
|
|
—
|
|
|
|
(2,075,279
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
16,294
|
|
|
|
—
|
|
|
|
27,682
|
|
|
|
—
|
|
Net
loss
|
|
$
|
(1,961,854
|
)
|
|
$
|
—
|
|
|
$
|
(2,047,597
|
)
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding, basic and diluted(1)(2)
|
|
|
5,450,881
|
|
|
|
5,000,000
|
|
|
|
7,654,134
|
|
|
|
5,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted loss per common share
|
|
$
|
(0.37
|
)
|
|
$
|
0.00
|
|
|
$
|
(0.27
|
)
|
|
$
|
0.00
|
|
|
(1)
|
Excludes
an aggregate of up to 16,878,805 shares subject to possible redemption.
|
|
(2)
|
Net
loss per common share - basic and diluted excludes income attributable to common stock
subject to possible redemption of $31,646 and $41,955 for the three and nine months ended
September 30, 2020, respectively (see Note 2).
|
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
B.
RILEY PRINCIPAL MERGER CORP. II
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit)
(Unaudited)
Three
months ended September 30, 2020 and 2019
|
|
Class A
Common Stock
|
|
|
Class B
Common Stock
|
|
|
Additional
Paid-in
|
|
|
Accumulated
|
|
|
Total
Stockholders’
Equity
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
(Deficit)
|
|
Balance,
July 1, 2019 (Inception)(1)
|
|
|
—
|
|
|
$
|
—
|
|
|
|
5,750,000
|
|
|
$
|
575
|
|
|
$
|
—
|
|
|
$
|
(574
|
)
|
|
$
|
1
|
|
Net
loss for the three months ended September 30, 2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Balance,
September 30, 2019
|
|
|
—
|
|
|
$
|
—
|
|
|
|
5,750,000
|
|
|
$
|
575
|
|
|
$
|
—
|
|
|
$
|
(574
|
)
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
July 1, 2020(1)
|
|
|
1,075,881
|
|
|
$
|
108
|
|
|
|
4,375,000
|
|
|
$
|
437
|
|
|
$
|
5,086,056
|
|
|
$
|
(86,595
|
)
|
|
$
|
5,000,006
|
|
Common
stock subject to possible redemption
|
|
|
195,314
|
|
|
|
19
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,961,835
|
|
|
|
—
|
|
|
|
1,961,854
|
|
Net
loss for the three months ended September 30, 2020
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,961,854
|
)
|
|
|
(1,961,854
|
)
|
Balance,
September 30, 2020
|
|
|
1,271,195
|
|
|
$
|
127
|
|
|
|
4,375,000
|
|
|
$
|
437
|
|
|
$
|
7,047,891
|
|
|
$
|
(2,048,449
|
)
|
|
$
|
5,000,006
|
|
Nine
months ended September 30, 2020 and Period from June 3, 2019 (Inception) through September 30, 2019
|
|
Class A
Common Stock
|
|
|
Class B
Common Stock
|
|
|
Additional
Paid-in
|
|
|
Accumulated
|
|
|
Total
Stockholders’
Equity
|
|
|
|
Shares(1)
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
(Deficit)
|
|
Balance,
June 3, 2019 (Inception)(1)
|
|
|
—
|
|
|
$
|
—
|
|
|
|
5,750,000
|
|
|
$
|
575
|
|
|
$
|
—
|
|
|
$
|
(574
|
)
|
|
$
|
1
|
|
Net
loss for the period June 3, 2019 (Inception) through September 30, 2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Balance,
September 30, 2019
|
|
|
—
|
|
|
$
|
—
|
|
|
|
5,750,000
|
|
|
$
|
575
|
|
|
$
|
—
|
|
|
$
|
(574
|
)
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
January 1, 2020(1)
|
|
|
—
|
|
|
$
|
—
|
|
|
|
5,750,000
|
|
|
$
|
575
|
|
|
$
|
—
|
|
|
$
|
(852
|
)
|
|
$
|
(277
|
)
|
Cancellation
of Founders
|
|
|
—
|
|
|
|
—
|
|
|
|
(718,750
|
)
|
|
|
(72
|
)
|
|
|
72
|
|
|
|
—
|
|
|
|
—
|
|
Forfeiture
of Class B common stock by Sponsor
|
|
|
|
|
|
|
|
|
|
|
(656,250
|
)
|
|
|
(66
|
)
|
|
|
66
|
|
|
|
|
|
|
|
—
|
|
Class A
common stock issued net of offering costs of $3,976,189
|
|
|
17,500,000
|
|
|
|
1,750
|
|
|
|
—
|
|
|
|
—
|
|
|
|
171,022,061
|
|
|
|
—
|
|
|
|
171,023,811
|
|
Private
Placement of Class A common stock issued
|
|
|
650,000
|
|
|
|
65
|
|
|
|
|
|
|
|
|
|
|
|
6,499,935
|
|
|
|
|
|
|
|
6,500,000
|
|
Common
stock subject to possible redemption
|
|
|
(16,878,805
|
)
|
|
|
(1,688
|
)
|
|
|
|
|
|
|
|
|
|
|
(170,474,243
|
)
|
|
|
|
|
|
|
(170,475,931
|
)
|
Net
loss for the nine months ended September 30, 2020
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(85,743
|
)
|
|
|
(85,743
|
)
|
Balance,
September 30, 2020
|
|
|
1,271,195
|
|
|
$
|
127
|
|
|
|
4,375,000
|
|
|
$
|
437
|
|
|
$
|
7,047,891
|
|
|
$
|
(2,048,449
|
)
|
|
$
|
5,000,006
|
|
|
(1)
|
Includes
an aggregate of 750,000 shares that are subject to forfeiture to the extent that the
underwriter’s over-allotment is not exercised in full (Note 4). On February 3,
2020, the Company conducted a 1:575 stock split and reclassification for each share outstanding
(Note 4).
|
The
accompanying notes are an integral part of these unaudited condensed financial statements.
MERGER
CORP. II
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
|
Nine
Months
Ended
September 30,
2020
|
|
|
Period
from
June 3,
2019
(Inception) through
September 30,
2019
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(2,047,597
|
)
|
|
$
|
—
|
|
Interest
earned on investments held in Trust Account
|
|
|
(27,682
|
)
|
|
|
|
|
Change
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Prepaid
expenses
|
|
|
(236,226
|
)
|
|
|
—
|
|
Increase
in accounts payable and accrued expenses
|
|
|
1,808,604
|
|
|
|
—
|
|
Increase
in payable to related party
|
|
|
44,195
|
|
|
|
—
|
|
Net
cash used in operating activities
|
|
|
(458,706
|
)
|
|
|
—
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Proceeds
deposited in Trust Account
|
|
|
(176,750,000
|
)
|
|
|
—
|
|
Net
cash used in investing activities
|
|
|
(176,750,000
|
)
|
|
|
—
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds
from note payable – related party
|
|
|
100,000
|
|
|
|
—
|
|
Repayment
of note payable – related party
|
|
|
(100,000
|
)
|
|
|
—
|
|
Proceeds
from sale of Units in Public Offering
|
|
|
175,000,000
|
|
|
|
—
|
|
Proceeds
from sale of Units in Private Placement
|
|
|
6,500,000
|
|
|
|
—
|
|
Payment
of underwriting discounts
|
|
|
(3,500,000
|
)
|
|
|
—
|
|
Payment
of offering expenses
|
|
|
(476,189
|
)
|
|
|
—
|
|
Net
cash provided by financing activities
|
|
|
177,523,811
|
|
|
|
—
|
|
Increase
in cash
|
|
|
315,105
|
|
|
|
—
|
|
Cash,
beginning of year
|
|
|
—
|
|
|
|
—
|
|
Cash,
end of period
|
|
$
|
315,105
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures:
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$
|
—
|
|
|
$
|
—
|
|
Taxes
paid
|
|
$
|
—
|
|
|
$
|
—
|
|
Non-cash
investing and financing activities:
|
|
|
|
|
|
|
|
|
Original
value of Class A Common stock subject to possible redemption
|
|
$
|
172,437,623
|
|
|
$
|
—
|
|
Change
in value of Class A Common stock subject to possible redemption
|
|
$
|
(1,961,692
|
)
|
|
$
|
—
|
|
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
B.
RILEY PRINCIPAL MERGER CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 — ORGANIZATION, NATURE OF BUSINESS OPERATIONS AND GOING CONCERN
Organization
and General
B.
Riley Principal Merger Corp. II (the “Company”), a blank check company, was incorporated as a Delaware corporation
on June 3, 2019. The Company is an emerging growth company, as defined in Section 2(a) of the Securities Act of 1933, as
amended, (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).
The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization
or similar business combination with one or more businesses (a “Business Combination”).
All
activity of the Company from June 3, 2019 (inception) through September 30, 2020 relates to the Company’s formation, initial
public offering (the “Public Offering”) described below and evaluating prospective acquisition targets for a potential
Business Combination. The Company will not generate any operating revenues until after completion of its Business Combination,
at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from
the proceeds derived from the Public Offering described below. The Company has selected December 31st as its fiscal
year end.
On
June 3, 2019, 10,000 shares of the Company’s common stock were issued to B. Riley Principal Investments, LLC. On February
3, 2020, the Company conducted a 1:575 stock split and reclassification, resulting in B. Riley Principal Investments, LLC holding
5,750,000 shares of Class B common stock (the “Founder Shares”). All of the Founder Shares were contributed to B.
Riley Principal Sponsor Co. II, LLC (the “Sponsor”), a Delaware limited liability company and a wholly-owned indirect
subsidiary of B. Riley Financial, Inc. (“B. Riley Financial”), in January 2020.
Public
Offering
The
Company completed the sale of 17,500,000 units (the “Units”) at an offering price of $10.00 per Unit in the Public
Offering on May 22, 2020. The Sponsor purchased an aggregate of 650,000 Units at a price of $10.00 per Unit (the “Private
Placement Units”) in a private placement that closed on May 22, 2020 simultaneously with the Public Offering (the “Private
Placement”). The sale of the 17,500,000 Units in the Public Offering (the “Public Units”) generated gross proceeds
of $175,000,000, less underwriting commissions of $3,500,000 (2% of the gross proceeds of the Public Offering) and other offering
costs of $476,189. The Private Placement Units generated $6,500,000 of gross proceeds.
Each
Unit consists of one share of the Company’s Class A common stock, $0.0001 par value (each a “public share”),
and one-half of one redeemable warrant, with each whole warrant exercisable for one share of Class A common stock (each,
a “Warrant” and, with respect to the warrants underlying the Private Placement Units, the “Private Placement
Warrants” and, collectively, the “Warrants”). One Warrant entitles the holder thereof to purchase one whole
share of Class A common stock at a price of $11.50 per share.
Sponsor
and Note Payable — Related Party
On
February 4, 2020, the Sponsor agreed to loan the Company up to $300,000 (see Note 3) to support the Company’s initial formation
and operations. In February 2020, the Company borrowed $50,000 and in April 2020 the Company borrowed an additional
$50,000 which increased the Note Payable balance to $100,000 which was repaid in full in connection with the closing of the Public
Offering using the proceeds from the Public Offering and the Private Placement. At September 30, 2020, there were no amounts outstanding
on the Note Payable.
B.
RILEY PRINCIPAL MERGER CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 — ORGANIZATION, NATURE OF BUSINESS OPERATIONS AND GOING CONCERN (cont.)
The
Trust Account
Upon
completion of the Public Offering, $176,750,000 of proceeds were held in the Company’s trust account at J.P. Morgan Chase
Bank, N.A., with Continental Stock Transfer & Trust Company acting as trustee (the “Trust Account”) and have
been invested in permitted United States “government securities” within the meaning of Section 2(a)(16)
of the Investment Company Act of 1940, as amended, which we refer to as the Investment Company Act, having a maturity of 185 days
or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act
that invest only in direct U.S. government treasury obligations. Unless and until the Company completes the Initial Business Combination,
it may pay its expenses only from the net proceeds of the Public Offering and the Private Placement held outside the Trust Account,
which was $1,284,805 on May 22, 2020, of which $100,000 was used to pay the Note Payable to Sponsor and $476,189 was used to pay
the offering costs. The balance in the Trust Account at September 30, 2020 was $176,777,682.
Except
with respect to interest earned on the funds held in the Trust Account that may be released to the Company to pay its taxes, the
proceeds from the Public Offering may not be released from the Trust Account until the earliest of: (i) the completion of
the Business Combination; (ii) the redemption of any public shares properly submitted in connection with a stockholder vote
to amend the Company’s amended and restated certificate of incorporation to modify the substance or timing of the Company’s
obligation to redeem 100% of its public shares if it does not complete the Business Combination by November 22, 2021, 18 months
from the closing of the Public Offering; or (iii) the redemption of all of the Company’s public shares if the Company
is unable to complete the Business Combination by November 22, 2021, 18 months from the closing of the IPO (at which such time
up to $100,000 of interest shall be available to the Company to pay dissolution expenses), subject to applicable law. The proceeds
deposited in the Trust Account could become subject to the claims of the Company’s creditors, if any, which could have priority
over the claims of the holders of the Company’s public shares (the “public stockholders”).
Business
Combination
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the Public Offering,
although substantially all of the net proceeds of the Public Offering and the Private Placement are intended to be generally applied
toward consummating a Business Combination. The Business Combination must occur with one or more businesses or assets with a fair
market value equal to at least 80% of the assets held in the Trust Account. There is no assurance that the Company will be able
to successfully effect a Business Combination.
The
Company will provide its public stockholders with the opportunity to redeem all or a portion of their shares upon the completion
of the Business Combination, either (i) in connection with a stockholder meeting called to approve the Business Combination
or (ii) by means of a tender offer. However, in no event will the Company redeem its public shares in an amount that would
cause its net tangible assets to be less than $5,000,001.
If
the Company holds a stockholder meeting to approve the Business Combination, a public stockholder will have the right to redeem
its public shares for an amount in cash equal to its pro rata share of the aggregate amount then on deposit in the Trust Account
as of two business days prior to the consummation of the Business Combination, including interest but less taxes payable. As a
result, such shares of Class A common stock have been recorded at redemption amount and classified as temporary equity upon
the completion of the Public Offering, in accordance with the Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) 480, “Distinguishing Liabilities from Equity.”
Pursuant
to the Company’s amended and restated certificate of incorporation, if the Company is unable to complete the Business Combination
by November 22, 2021, 18 months from the closing of the Public Offering, the Company will (i) cease all operations except
for the purpose of winding up, (ii) as promptly as reasonably possible but no more than ten business days thereafter redeem
the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including
interest earned on the funds held in the Trust Account and not previously released to the Company to pay franchise and income
taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares,
which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive
further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following
such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors,
dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors
and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to
the Company’s warrants, which will expire worthless if the Company fails to complete the Business Combination within 18
months of the closing of the Public Offering.
B.
RILEY PRINCIPAL MERGER CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 — ORGANIZATION, NATURE OF BUSINESS OPERATIONS AND GOING CONCERN (cont.)
The
Sponsor and the Company’s officers and directors have entered into a letter agreement with the Company, pursuant to which
they have agreed to waive their rights to liquidating distributions from the Trust Account with respect to any Founder Shares
and Private Placement Shares (as defined below) held by them if the Company fails to complete the Business Combination within
18 months of the closing of the Public Offering. However, if the Sponsor or any of the Company’s directors or officers acquires
shares of Class A common stock in or after the Public Offering, they will be entitled to liquidating distributions from the
Trust Account with respect to such public shares if the Company fails to complete the Business Combination within the prescribed
time period.
In
the event of a liquidation, dissolution or winding up of the Company after an Business Combination, the Company’s remaining
stockholders are entitled to share ratably in all assets remaining available for distribution to them after payment of liabilities
and after provision is made for each class of stock, if any, having preference over the common stock. The Company’s stockholders
have no preemptive or other subscription rights. The Company will provide its stockholders with the opportunity to redeem their
public shares for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account, under the circumstances,
and, subject to the limitations, described herein.
Letter
Agreement
The
Company’s Sponsor, officers and directors have entered into a letter agreement with the Company, pursuant to which they
have agreed, among other things (a) to waive their redemption rights with respect to any Founder Shares, Private Placement
Shares and any Public Shares held by them in connection with the completion of the Business Combination, (b) to waive their
redemption rights with respect to their Founder Shares, Private Placement Shares and public shares in connection with a stockholder
vote to approve an amendment to the Company’s amended and restated certificate of incorporation to modify the substance
or timing of its obligation to redeem 100% of its public shares if it does not complete an Business Combination within 18 months
from the closing of the Public Offering and (c) to vote their Founder Shares and any Public Shares purchased during or after
the Public Offering (including in open market and privately negotiated transactions) in favor of the Initial Business Combination.
Going
Concern Consideration
The
Company has principally financed its operations from inception using proceeds from the promissory note from the Sponsor prior
to the Public Offering and such amount of proceeds from the Public Offering and Private Placement that were placed in an account
outside of the Trust Account (as defined below) for working capital purposes. In connection with the closing of the Public Offering
and the Private Placement on May 22, 2020, an amount of $176,750,000 (or $10.10 per Class A common stock sold to the public in
the Public Offering included in the Public Units) was placed in the Trust Account. As of September 30, 2020, the Company had $315,105
in its operating bank account, $176,777,682 in cash and cash equivalents held in the Trust Account to be used for a Business Combination
or to repurchase or redeem its Class A Common Stock in connection therewith and a working capital deficit of $1,229,514, which
includes Delaware franchise taxes payable of $72,231 (which is included in accrued expenses at September 30, 2020) as franchise
taxes are paid from the Trust account from interest income earned.
If
our funds are insufficient to meet the expenditures required for operating our business through the consummation of the planned
merger as more fully described in Note 6 or in the event that a Business Combination is not consummated, we will likely need to
raise additional funds in order to meet the expenditures required for operating our business. Accordingly, the Company may not
be able to obtain additional financing or raise additional capital to finance its ongoing operations. If the Company is unable
to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not
necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction and reducing overhead expenses.
The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all.
These conditions raise substantial doubt about the Company’s ability to continue as a going concern through November 22,
2021, the scheduled liquidation date. These financial statements do not include any adjustments relating to the recovery of the
recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a
going concern.
B.
RILEY PRINCIPAL MERGER CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
financial statements of the Company are presented in conformity with accounting principles generally accepted in the United States
of America (“GAAP”).
Section 102(b)(1)
of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards
until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not
have a class of securities registered under the Securities Exchange Act of 1934, as amended) are required to comply with the new
or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition
period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable.
The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised
and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt
the new or revised standard at the time private companies adopt the new or revised standard.
This
may make comparison of the Company’s financial statement with another public company which is neither an emerging growth
company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because
of the potential differences in accounting standards used.
The
Company’s unaudited condensed interim financial statements have been prepared in accordance with U.S. GAAP and the rules
and regulations of the SEC for interim financial information and the instructions to Form 10-Q. Accordingly, the financial
statements do not include all of the information and footnotes required by U.S. GAAP. In the opinion of management, all adjustments
considered for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2020
are not necessarily indicative of the results that may be expected for the year ending December 31, 2020 or any other period.
The accompanying unaudited condensed interim financial statements should be read in conjunction with the Company’s audited
financial statements and notes thereto included in the Company’s prospectus filed with the SEC on May 20, 2020, as well
as the Company’s audited balance sheet statement and notes thereto included in the Company’s Form 8-K filed with
the SEC on May 28, 2020.
Loss
Per Common Share
Loss
per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the period.
The Company applies the two-class method in calculating earnings per share. Shares of common stock subject to possible redemption
at June 30, 2020, which are not currently redeemable and are not redeemable at fair value, have been excluded from the calculation
of basic loss per share since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings.
The Company has not considered the effect of warrants sold in the Public Offering and the Private Placement to purchase 9,075,000
shares of Class A common stock, in the calculation of diluted loss per share, since the exercise of the warrants is contingent
upon the occurrence of future events. As a result, diluted loss per share is the same as basic loss per share for the periods
presented. In February 2020, the Company completed a stock split of 1 to 575 shares of Class B common stock, resulting
in 5,750,000 shares of Class B common stock issued and outstanding. The financial statements have been retroactively adjusted
to reflect the stock split for all periods presented.
B.
RILEY PRINCIPAL MERGER CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Reconciliation
of Income (Loss) Per Common Share
The
Company’s net loss is adjusted for the portion of income that is attributable to shares of common stock subject to possible
redemption, as these shares only participate in the earnings of the Trust Account and not the income or losses of the Company.
Accordingly, basic and diluted loss per share is calculated as follows:
|
|
Three Months
Ended
September 30,
2020
|
|
|
Three Months
Ended
September 30,
2019
|
|
|
Nine Months
Ended
September 30,
2020
|
|
|
Period from June 3,
2019
(Inception) through
September 30,
2019
|
|
Net loss
|
|
$
|
(1,961,854
|
)
|
|
$
|
—
|
|
|
$
|
(2,047,597
|
)
|
|
$
|
—
|
|
Less: Loss attributable to common stock subject to possible redemption
|
|
|
(31,646
|
)
|
|
|
—
|
|
|
|
(41,955
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net loss
|
|
$
|
(1,993,500
|
)
|
|
$
|
—
|
|
|
$
|
(2,089,552
|
)
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic and diluted
|
|
|
5,450,881
|
|
|
|
5,000,000
|
|
|
|
7,654,134
|
|
|
|
5,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per common share
|
|
$
|
(0.37
|
)
|
|
$
|
—
|
|
|
$
|
(0.27
|
)
|
|
$
|
—
|
|
Cash
and Cash Equivalents
The
Company considers all short-term investments with an original maturity date of three months or less when purchased to be cash
equivalents. The Company did not have any cash equivalents as of December 31, 2019.
Class A
Common Stock Subject To Possible Redemption
At
discussed in Note 1, all of the 17,500,000 shares of Class A common stock sold as part of the Units in the Public Offering
contain a redemption feature. In accordance with FASB ASC 480, “Distinguishing Liabilities From Equity,” redemption
provisions not solely within the control of the Company require the security to be classified outside of permanent equity. Ordinary
liquidation events, which involve the redemption and liquidation of all of the entity’s equity instruments, are excluded
from the provisions of FASB ASC 480. Although the Company has not specified a maximum redemption threshold, its amended and restated
certificate of incorporation provides that in no event will the Company redeem its public shares in an amount that would cause
its net tangible assets to be less than $5,000,001.
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution,
which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. The Company has not experienced losses on these
accounts and management believes the Company is not exposed to significant risks on such accounts.
Fair
Value of Financial Instruments
The
fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair
Value Measurement,” approximates the carrying amounts represented in the balance sheet, primarily due to their short-term
nature.
B.
RILEY PRINCIPAL MERGER CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Use
of Estimates
The
preparation of financial statements in conformity with GAAP requires the Company’s 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 amounts of revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Offering
Costs
The
Company complies with the requirements of the FASB ASC 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A — “Expenses
of Offering.” The total offering costs incurred by the Company in connection with the Public Offering was $476,189. These
costs and the underwriter discount, of $3,500,000, were charged to capital upon completion of the Public Offering on May 22, 2020.
Income
Taxes
Prior
to the change in ownership on May 22, 2020 as a result of the Public Offering, the Company was included in the consolidated tax
return of B. Riley Financial (the “Parent”). During this period, the Company calculated the provision for income taxes
by using a “separate return” method. Under this method the Company is assumed to file a separate return with the tax
authority, thereby reporting its taxable income or loss and paying the applicable tax to, or receiving the appropriate refund
from, the Parent. The current provision was the amount of tax payable or refundable on the basis of a hypothetical, current year,
separate return. Following changes in ownership on May 22, 2020, the Company deconsolidated from the Parent for tax purposes.
Beginning May 22, 2020, the Company files separate corporate federal and state and local income tax returns.
Any
difference between the tax provision (or benefit) allocated to the Company under the separate return method and payments to be
made by (or received from) the Parent for tax expense are treated as either dividends or capital contribution. Accordingly, the
amount by which the Company’s tax liability under the separate return method exceeds the amount of tax liability ultimately
settled as a result of using incremental expenses of the Parent is periodically settled as a capital contribution from the Parent
to the Company.
The
Company complies with the accounting and reporting requirements of ASC Topic 740 “Income Taxes,” which requires an
asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities
are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future
taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected
to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected
to be realized.
ASC
Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement
of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more
likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties
related to unrecognized tax benefits as income tax expense. As of September 30, 2020 and December 31, 2019, there were no unrecognized
tax benefits and no amounts accrued for interest and penalties. The Company is currently not aware of any issues under review
that could result in significant payments, accruals or material deviation from its position.
The
Company may be subject to potential examination by federal, state and city taxing authorities in the areas of income taxes. These
potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions
and compliance with federal, state and city tax laws. The Company’s management does not expect that the total amount of
unrecognized tax benefits will materially change over the next twelve months.
There
was no provision for income taxes for the three and nine months ended September 30, 2020 and for the three months ended September
30, 2019 and the period from June 3, 2019 (Inception) through September 30, 2019.
B.
RILEY PRINCIPAL MERGER CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Unrecognized
Tax Benefits
The
Company recognizes tax positions in its financial statements only when it is more likely than not that the position will be sustained
on examination by the relevant taxing authority based on the technical merits of the position. A position that meets this standard
is measured at the largest amount of benefit that will more likely than not be realized on settlement. A liability is established
for differences between positions taken in a tax return and amounts recognized in the financial statements. There were no unrecognized
tax benefits as of September 30, 2020. The Company recognizes accrued interest and penalties related to unrecognized tax benefits
as income tax expense. No amounts were accrued for interest expense and penalties related to income tax matters as of September
30, 2020 and December 31, 2019. The Company is subject to income tax examinations by major taxing authorities since inception.
Recent
Accounting Standards
Management
does not believe that any recently issued, but not yet effective, accounting standards updates, if currently adopted, would have
a material effect on the Company’s financial statements.
NOTE
3 — RELATED PARTY TRANSACTIONS
Founder
Shares
On
June 3, 2019, 10,000 shares of the Company’s common stock were issued to B. Riley Principal Investments, LLC. On February
3, 2020, the Company conducted a 1:575 stock split and reclassification, resulting in B. Riley Principal Investments, LLC holding
5,750,000 shares of Class B common stock, representing the “Founder Shares”. All of the Founder Shares were contributed
to the Sponsor in January 2020. The financial statements reflect the issuance of these shares retroactively for all periods
presented. On April 21, 2020, 20,000 Founder Shares were transferred to each of four independent directors of the Company, at
their par value. On May 19, 2020, the Sponsor returned 718,750 shares of Class B common stock to Company for cancellation,
resulting in a total of 5,031,250 Founder Shares outstanding. As used herein, unless the context otherwise requires, Founder Shares
shall be deemed to include the shares of Class A common stock issuable upon conversion thereof. The Founder Shares are identical
to the Class A common stock included in the Units sold in the Public Offering, the Founder Shares will automatically convert
into shares of Class A common stock at the time of the Business Combination and are subject to certain transfer restrictions,
as described in more detail below, and the holders of the Founder Shares, as described in more detail above, have agreed to certain
restrictions and will have certain registration rights with respect thereto. Up to 656,250 Founder Shares were subject to forfeiture
depending on the extent to which the underwriters’ over-allotment option to purchase additional Units was exercised. On
May 28, 2020, the underwriters confirmed that they will not be exercising their over-allotment option in whole or in part, as
such 656,250 Founder Shares have been forfeited. The number of Founder Shares issued was determined based on the expectation that
the Founder Shares would represent 20% of the outstanding shares of Company common stock upon completion of the Public Offering
excluding the shares underlying the Private Placement Units (the “Private Placement Shares”).
The
Company’s initial stockholders, officers and directors have agreed, subject to limited exceptions, not to transfer, assign
or sell any Founder Shares held by them until the earlier to occur of: (i) one year after the completion of the Business
Combination, (ii) the last sale price of Class A common stock equals or exceeds $12.00 per share (as adjusted for stock
splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any consecutive 30-trading
day period commencing at least 150 days after the Business Combination, or (iii) the date following the completion of
the Business Combination on which the Company completes a liquidation, merger, stock exchange, reorganization or other similar
transaction that results in all of the public stockholders having the right to exchange their shares of common stock for cash,
securities or other property.
B.
RILEY PRINCIPAL MERGER CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
3 — RELATED PARTY TRANSACTIONS (cont.)
Business
Combination Marketing Agreement
Pursuant
to a business combination marketing agreement, the Company engaged B. Riley Securities, Inc., at that time known as B. Riley FBR,
Inc., as advisors in connection with its Business Combination to assist it in arranging meetings with its stockholders to discuss
a potential business combination and the target business’ attributes, introduce it to potential investors that may be interested
in purchasing its securities, assist it in obtaining stockholder approval for its Business Combination and assist it with the
preparation of press releases and public filings in connection with the Business Combination. The Company will pay B. Riley Securities,
Inc. for such services upon the consummation of the Business Combination a cash fee in an amount equal to 3.5% of the gross proceeds
of the Public Offering (exclusive of any applicable finders’ fees which might become payable). Pursuant to the terms of
the business combination marketing agreement, no fee will be due if the Company does not complete a Business Combination.
Administrative
Fees
Commencing
on May 19, 2020, the Company agreed to pay an affiliate of the Sponsor a total of $10,000 per month for office space, utilities
and secretarial and administrative support. During the three and nine months ended September 30, 2020, the Company was charged
a total of $44,194 by the Sponsor. These amounts are included in amounts payable to related party at September 30, 2020. Upon
completion of the Company’s Business Combination or liquidation, the Company will cease paying these monthly fees.
Registration
Rights
The
holders of Founder Shares (and any shares of Class A common stock issuable upon conversion of the Founder Shares), Private
Placement Units, Private Placement Shares, Private Placement Warrants (and any shares of Class A common stock issuable upon
the exercise of the Private Placement Warrants) and any securities that may be issued upon conversion of working capital loans,
if any, have registration rights to require the Company to register the resale of any of its securities held by them (in the case
of the Founder Shares, only after conversion of such shares to shares of Class A common stock) pursuant to a registration
rights agreement. The holders of the majority of these securities are entitled to make up to three demands, excluding short form
demands, that the Company register such securities. These holders are also entitled to certain piggyback registration rights with
respect to registration statements filed subsequent to the completion of the Business Combination and rights to require the Company
to register for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration rights agreement
provides that the Company will not permit any registration statement filed under the Securities Act to become effective until
termination of the applicable lock-up period for the securities to be registered. The Company will bear the expenses incurred
in connection with the filing of any such registration statements. Notwithstanding the foregoing, the Sponsor may not exercise
its demand and piggyback registration rights after five and seven years, respectively, after the effective date of the registration
statement of which this prospectus forms a part and may not exercise its demand rights on more than one occasion.
Note
Payable — Related Party
The
Company had a Note Payable to the Sponsor which allowed the Company to borrow up to $300,000 without interest to be used for a
portion of the expenses associated with the Public Offering. The Note Payable was payable on the earlier of: (i) December
31, 2019 or (ii) the date on which the Company consummated an initial public offering of its securities. In February 2020,
the Company borrowed $50,000 and in April 2020 the Company borrowed an additional $50,000 which increased the Note Payable
balance to $100,000 which was paid in full using proceeds from the Public Offering and the Private Placement. At September 30,
2020, there were no amounts outstanding on the Note Payable.
B.
RILEY PRINCIPAL MERGER CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
3 — RELATED PARTY TRANSACTIONS (cont.)
Equity
Commitment Letter
As
further described in Note 6 below, in connection with the proposed Business Combination with Eos, on September 7, 2020, the Company
entered into an equity commitment letter with B. Riley Financial (the “Equity Commitment Letter”), pursuant to which
B. Riley Financial committed to purchase up to 4,000,000 shares of Class A common stock, at a price per share of $10.00 per share,
or up to $40,000,000 in equity financing at Closing, less the number of shares of Class A common stock issued pursuant to subscription
agreements with investors entered into prior to the Closing. The Equity Commitment Letter effectively terminated the forward purchase
agreement entered at the time of the Public Offering requiring the Sponsor and its affiliate to purchase immediately prior to
the closing of the Business Combination an aggregate of 2,500,000 units, each comprised of one share of Class A common stock and
one-half of one warrant.
NOTE
4 — STOCKHOLDERS’ EQUITY
Common
Stock
The
authorized common stock of the Company includes up to 100,000,000 shares of Class A common stock and 25,000,000 shares of
Class B common stock. If the Company enters into a Business Combination, it may (depending on the terms of such a Business
Combination) be required to increase the number of shares of Class A common stock which the Company is authorized to issue
at the same time as the Company’s stockholders vote on the Business Combination, to the extent the Company seeks stockholder
approval in connection with the Business Combination. Holders of the Company’s common stock are entitled to one vote for
each share of common stock. On February 3, 2020, the Company conducted a 1:575 stock split and reclassification resulting in 5,750,000
shares of Class B common stock outstanding (up to 750,000 shares of which are subject to forfeiture depending on the extent
to which the underwriters’ over-allotment option is exercised). On April 21, 2020, 80,000 founder shares were transferred
to the Company’s independent directors, at their par value. On May 19, 2020, 718,750 shares of Class B common stock
were returned to the Company by the Sponsor for cancellation, resulting in a total of 5,031,250 Class B common stock outstanding.
At September 30, 2020, there were 18,150,000 shares (which includes 16,878,805 shares subject to possible redemption) of Class A
common stock issued and outstanding.
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 September 30, 2020 and December 31, 2019,
there were no shares of preferred stock issued or outstanding.
Warrants
Warrants
may only be exercised for a whole number of shares. No fractional Warrants will be issued upon separation of the Units and only
whole Warrants will trade. The Warrants will become exercisable on the later of (a) 30 days after the completion of the Business
Combination or (b) 12 months from the closing of the Public Offering; provided in each case that the Company has an effective
registration statement under the Securities Act covering the shares of Class A common stock issuable upon exercise of the
Warrants and a current prospectus relating to them is available (or the Company permits holders to exercise their Warrants on
a cashless basis and such cashless exercise is exempt from registration under the Securities Act). The Company will as soon as
practicable, but in no event later than 15 business days, after the closing of the Business Combination, use its best efforts
to file with the Securities and Exchange Commission (“SEC”) a registration statement for the registration, under the
Securities Act, of the shares of Class A common stock issuable upon exercise of the Warrants, to cause such registration
statement to become effective within 60 business days after the closing of the Business Combination and to maintain a current
prospectus relating to those shares of Class A common stock until the Warrants expire or are redeemed, as specified in the
Company’s warrant agreement. If the shares issuable upon exercise of the Warrants are not registered under the Securities
Act by the 60th business day after the closing of the
B.
RILEY PRINCIPAL MERGER CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
4 — STOCKHOLDERS’ EQUITY (cont.)
Business
Combination, the Company will be required to permit holders to exercise their Warrants on a “cashless basis” in accordance
with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the above, if the Company’s Class A
common stock is at the time of any exercise of a Warrant not listed on a national securities exchange such that it satisfies the
definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option,
require holders of Warrants who exercise their Warrants to do so on a “cashless basis” in accordance with Section 3(a)(9)
of the Securities Act and, in the event the Company elects, the Company will not be required to file or maintain in effect a registration
statement, but the Company will use its best efforts to register or qualify the shares under applicable blue sky laws to the extent
an exemption is not available.
The
Warrants will expire at 5:00 p.m., New York City time, five years after the completion of a Business Combination or earlier
upon redemption or liquidation.
The
Private Placement Warrants are identical to the Warrants underlying the Units sold in the Public Offering, except that the Private
Placement Warrants and the shares of Class A common stock issuable upon exercise of the Private Placement Warrants will not
be transferable, assignable or salable until 30 days after the completion of the Business Combination, subject to certain
limited exceptions. Additionally, the Private Placement Warrants will be non-redeemable so long as they are held by the Sponsor
or its permitted transferees. If the Private Placement Warrants are held by someone other than the Sponsor or its permitted transferees,
the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Warrants.
The
Company may call the Warrants for redemption (except with respect to the Private Placement Warrants):
|
●
|
in
whole and not in part;
|
|
●
|
at
a price of $0.01 per warrant;
|
|
●
|
upon
a minimum of 30 days’ prior written notice of redemption (the “30-day redemption period”); and
|
|
●
|
if,
and only if, the last sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits,
stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a consecutive 30-trading day
period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.
|
If
the Company calls the Warrants for redemption, management will have the option to require all holders that wish to exercise the
Warrants to do so on a “cashless basis,” as described in the warrant agreement.
The
exercise price and number of shares of Class A common stock issuable upon exercise of the Warrants may be adjusted in certain
circumstances including in the event of a share dividend, or recapitalization, reorganization, merger or consolidation. In addition,
if (x) the Company issues additional shares of Class A common stock or securities convertible into or exercisable or
exchangeable for shares of Class A common stock for capital raising purposes in connection with the closing of the Business
Combination (excluding any issuance of securities under the forward purchase agreement), at an issue price or effective issue
price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined
in good faith by the Company’s board of directors and, in the case of any such issuance to the Sponsor or its affiliates,
without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance (the
“Newly Issued Price”)), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total
equity proceeds, and interest thereon, available for funding the Initial Business Combination, and (z) the volume weighted
average trading price of the Class A common stock during the 20 trading day period starting on the trading day prior to the
day on which the Company consummates the Business Combination (the “Market Value”) is below $9.20 per share, the exercise
price of the Warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly
Issued Price, and the $18.00 per share redemption trigger price described above will be adjusted (to the nearest cent) to be equal
to 180% of the higher of the Market Value and the Newly Issued Price. Additionally, in no event will the Company be required to
net cash settle any Warrant. In the event that a registration
statement is not effective for the exercised Warrants, the purchaser of a Unit containing such Warrant will have paid the full
purchase price for the Unit solely for the share of Class A common stock underlying such Unit. There will be no redemption
rights or liquidating distributions with respect to the Warrants, which will expire worthless if the Company fails to complete
a Business Combination within the 18-month time period.
B.
RILEY PRINCIPAL MERGER CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
5 — FAIR VALUE INSTRUMENTS
The
Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value
at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
The
fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company
would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an
orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets
and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and
to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities).
The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable
inputs used in order to value the assets and liabilities:
|
Level
1:
|
Quoted
prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which
transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing
basis.
|
|
Level
2:
|
Observable
inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities
and quoted prices for identical assets or liabilities in markets that are not active.
|
|
Level
3:
|
Unobservable
inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
|
There
were no assets measure on a recurring basis at fair value at December 31, 2019. At September 30, 2020, there were cash equivalents
in the amount our $176,777,682 with a fair value hierarchy of Level 1 that was used as valuation inputs by the Company to determine
such fair value.
NOTE
6 — MERGER AGREEMENT
On
September 7, 2020, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with BMRG Merger
Sub, LLC, a wholly-owned subsidiary of the Company and a Delaware limited liability company (“Merger Sub I”), BMRG
Merger Sub II, LLC, a wholly-owned subsidiary of the Company and a Delaware limited liability company (“Merger Sub II”),
Eos Energy Storage LLC, a Delaware limited liability company (“Eos”), New Eos Energy LLC, a wholly-owned subsidiary
of Eos and a Delaware limited liability company (“Newco”) and AltEnergy Storage VI, LLC, a Delaware limited liability
company (“AltEnergy”). In connection with the proposed business combination (the “Business Combination”):
(1) Merger Sub I will merge with and into Newco (the “First Merger”), whereupon the separate existence of Merger Sub
I will cease, and Newco will continue as the surviving company (such company, in its capacity as the surviving company of the
First Merger, is sometimes referred to as the “First Surviving Company”) and become a wholly owned subsidiary of the
Company; and (2) immediately following the First Merger and as part of the same overall transaction as the First Merger, the First
Surviving Company will merge with and into Merger Sub II, whereupon the separate existence of the First Surviving Company will
cease, and Merger Sub II will continue as the surviving company and a wholly owned subsidiary of the Company. Upon the closing
of the business combination (the “Closing”), it is anticipated that the Company will change its name to “Eos
Energy Enterprises, Inc.”
B.
RILEY PRINCIPAL MERGER CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
6 — MERGER AGREEMENT (cont.)
Subject
to certain downward adjustments, and the other terms and conditions set forth in the Merger Agreement, at Closing Eos’s
securityholders (the “Sellers”), will receive aggregate consideration equal to up to $300 million of shares of the
Company’s common stock (including shares issuable upon exercise of certain options to acquire such shares), or up to 30,000,000
shares (assuming exercise of certain options to acquire such shares). The Merger Agreement also contemplates the issuance of an
additional 2,000,000 shares of the Company’s common stock to Eos’s securityholders pending the achievement (if any)
of certain earnout targets pursuant to the terms of the Merger Agreement.
The
Closing is subject to certain customary conditions, including, among other things, that the Company has an aggregate of at least
$110 million of cash (before taking into account certain expenses) available, including from the Trust Account and from the proceeds
of investments of equity financing sources.
In
order to help meet the condition under the Merger Agreement that there is at least $110 million of cash available upon the Closing
(before taking into account certain expenses), the Company entered into an Equity Commitment Letter with B. Riley Financial, pursuant
to which B. Riley Financial committed to purchase up to 4,000,000 shares of Class A common stock, at a price per share of $10.00
per share, or up to $40,000,000 in equity financing at Closing, less the number of shares of Class A common stock already issued
pursuant to subscription agreements entered into with investors prior to the Closing. The Equity Commitment Letter effectively
terminated the forward purchase agreement entered at the time of the Public Offering requiring the Sponsor and its affiliate to
purchase, immediately prior to the Closing, an aggregate of 2,500,000 units, each comprised of one share of Class A common stock
and one-half of one warrant.
The
Company and the Sponsor will enter into a letter agreement at the Closing, pursuant to which the Sponsor will agree to subject
1,718,000 of its shares in the Company (the “Sponsor Shares”), which formerly constituted shares of Class B common
stock of the Company held by the Sponsor, to certain transfer and other restrictions, under which (a) 859,000 Sponsor Shares will
be restricted from being transferred unless and until either, for a period of five years after the Closing, (i) the share price
of the Company equals or exceeds $12.00 per share for any 20 trading days within any consecutive 30-trading day period or (ii)
a change of control occurs for a share price of the Company equaling or exceeding $12.00 per share, and (b) the remaining 859,000
Sponsor Shares are subject to similar restrictions except that the threshold is increased from $12.00 to $16.00. If after the
five-year period, there are no triggering events, the Sponsor Shares will be forfeited and canceled for no consideration. If after
the five-year period, only the triggering event described in clause (a) above has occurred, the remaining 859,000 Sponsor Shares
described in clause (b) will be forfeited and canceled for no consideration.
NOTE
7 — SUBSEQUENT EVENTS
The
Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the financial
statements were issued. The Company did not identify any subsequent events that would have required adjustment or disclosure in
the financial statements.
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Shareholder and Board of Directors of
B. Riley Principal Merger Corp. II
Opinion
on the Financial Statements
We
have audited the accompanying balance sheets of B. Riley Principal Merger Corp. II (the “Company”) as of February
14, 2020 and December 31, 2019, the related statements of operations, stockholder’s deficit and cash flows for the period
from January 1, 2020 through February 14, 2020 and for the period from June 3, 2019 (inception) through December 31, 2019, and
the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements
present fairly, in all material respects, the financial position of the Company as of February 14, 2020 and December 31, 2019,
and the results of its operations and its cash flows for the period from January 1, 2020 through February 14, 2020 and for the
period from June 3, 2019 (inception) through December 31, 2019 in conformity with accounting principles generally accepted in
the United States of America.
Explanatory
Paragraph — Going Concern
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully
described in Note 1, the Company has a working capital deficiency, has incurred losses and needs to raise additional funds to
meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company’s ability to
continue as a going concern. Management’s plans in regard to these matters are also described in Note 1 and 3. The financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company
in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not
for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that our audits provide a reasonable basis for our opinion.
/s/
Marcum llp
Marcum
llp
We served as the Company’s auditor
in 2020.
New
York, NY
March 2, 2020, except for Note 6 as to which the date is May 20, 2020
B.
RILEY PRINCIPAL MERGER CORP. II
BALANCE SHEETS
|
|
FEBRUARY 14,
2020
|
|
|
DECEMBER 31,
2019
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
50,000
|
|
|
$
|
—
|
|
Due from related party
|
|
|
1
|
|
|
|
1
|
|
Total assets
|
|
$
|
50,001
|
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholder’s Deficit
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
325
|
|
|
$
|
278
|
|
Note payable – related party
|
|
|
50,000
|
|
|
|
—
|
|
Total liabilities
|
|
|
50,325
|
|
|
|
278
|
|
|
|
|
|
|
|
|
|
|
Stockholder’s deficit:
|
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding
|
|
|
—
|
|
|
|
—
|
|
Class A Common stock, $0.0001 par value; 100,000,000 shares authorized; none issued and outstanding
|
|
|
—
|
|
|
|
—
|
|
Class B Common stock, $0.0001 par value; 25,000,000 shares authorized; 5,750,000 shares issued and outstanding at February 14, 2020
|
|
|
575
|
|
|
|
575
|
|
Additional paid-in capital
|
|
|
—
|
|
|
|
—
|
|
Accumulated deficit
|
|
|
(899
|
)
|
|
|
(852
|
)
|
Total stockholder’s deficit
|
|
|
(324
|
)
|
|
|
(277
|
)
|
Total liabilities and stockholder’s deficit
|
|
$
|
50,001
|
|
|
$
|
1
|
|
The
accompanying notes are an integral part of these financial statements.
PRINCIPAL
MERGER CORP. II
STATEMENTS OF OPERATIONS
|
|
FOR THE PERIOD FROM
JANUARY 1, 2020
THROUGH
FEBRUARY 14,
2020
|
|
|
FOR THE PERIOD FROM
JUNE 3, 2019
(INCEPTION)
THROUGH
DECEMBER 31,
2019
|
|
Selling, general and administrative expenses
|
|
$
|
47
|
|
|
$
|
278
|
|
Loss before income taxes
|
|
|
(47
|
)
|
|
|
(278
|
)
|
Provision for income taxes
|
|
|
—
|
|
|
|
—
|
|
Net loss
|
|
$
|
(47
|
)
|
|
$
|
(278
|
)
|
|
|
|
|
|
|
|
|
|
Basic loss per share
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
Diluted loss per share
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average basic shares outstanding(1)
|
|
|
5,000,000
|
|
|
|
5,000,000
|
|
Weighted average diluted shares outstanding(1)
|
|
|
5,000,000
|
|
|
|
5,000,000
|
|
|
(1)
|
Excludes
an aggregate of 656,250 shares that are subject to forfeiture to the extent that the underwriters over-allotment is not exercised
in full (Note 4). On February 3, 2020, the Company conducted a 1:575 shares for each share outstanding (Note 4).
|
The
accompanying notes are an integral part of these financial statements.
B.
RILEY PRINCIPAL MERGER CORP. II
STATEMENT OF CHANGES IN STOCKHOLDER’S DEFICIT
|
|
CLASS B
COMMON STOCK
|
|
|
ADDITIONAL
PAID-IN
CAPITAL
|
|
|
ACCUMULATED
DEFICIT
|
|
|
TOTAL
STOCKHOLDER’S
DEFICIT
|
|
|
|
SHARES
|
|
|
AMOUNT
|
|
|
|
|
|
|
|
Balance, June 3, 2019 (Inception)(1)
|
|
|
5,750,000
|
|
|
$
|
575
|
|
|
$
|
—
|
|
|
$
|
(574
|
)
|
|
$
|
1
|
|
Net loss for the period June 3, 2019 (inception)
through December 31, 2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(278
|
)
|
|
|
(278
|
)
|
Balance, December 31, 2019
|
|
|
5,750,000
|
|
|
$
|
575
|
|
|
$
|
—
|
|
|
$
|
(852
|
)
|
|
$
|
(277
|
)
|
Net loss for the period January 1, 2020 through
February 14, 2020
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(47
|
)
|
|
|
(47
|
)
|
Balance, February 14, 2020
|
|
|
5,750,000
|
|
|
$
|
575
|
|
|
$
|
—
|
|
|
$
|
(899
|
)
|
|
$
|
(324
|
)
|
|
(1)
|
Includes
an aggregate of 656,250 shares that are subject to forfeiture to the extent that the underwriters over-allotment is not exercised
in full (Note 4). On February 3, 2020, the Company conducted a 1:575 shares for each share outstanding (Note 4).
|
The
accompanying notes are an integral part of these financial statements.
B.
RILEY PRINCIPAL MERGER CORP. II
STATEMENTS OF CASH FLOWS
|
|
FOR THE PERIOD FROM
JANUARY 1,
2020 THROUGH
FEBRUARY 14,
2020
|
|
|
FOR THE PERIOD FROM
JUNE 3, 2019
THROUGH
DECEMBER 31,
2019
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(47
|
)
|
|
$
|
(278
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Increase in Due from related party
|
|
|
—
|
|
|
|
(1
|
)
|
Increase in accounts payable
|
|
|
47
|
|
|
|
278
|
|
Net cash used in operating activities
|
|
|
—
|
|
|
|
(1
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from sale of Class B common stock
|
|
|
—
|
|
|
|
1
|
|
Proceeds from note payable – related party
|
|
|
50,000
|
|
|
|
—
|
|
Net cash provided by financing activities
|
|
|
50,000
|
|
|
|
1
|
|
Increase in cash
|
|
|
50,000
|
|
|
|
—
|
|
Cash, beginning of year
|
|
|
—
|
|
|
|
—
|
|
Cash, end of period
|
|
$
|
50,000
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures:
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
—
|
|
|
$
|
—
|
|
Taxes paid
|
|
|
—
|
|
|
$
|
—
|
|
The
accompanying notes are an integral part of these financial statements.
B.
RILEY PRINCIPAL MERGER CORP. II
NOTES TO FINANCIAL STATEMENTS
NOTE
1 — DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Organization
and General
B.
Riley Principal Merger Corp. II (the “Company”), a blank check corporation, was incorporated as a Delaware corporation
on June 3, 2019. The Company is an emerging growth company, as defined in Section 2(a) of the Securities Act of 1933,
as amended, (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS
Act”). The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase,
reorganization or similar business combination with one or more businesses (a “Initial Business Combination”).
At
February 14, 2020, the Company had not commenced any operations. All activity of the Company includes the activity of the Company
from inception and activity related to the proposed initial public offering (the “Proposed Offering”) described below.
The Company will not generate any operating revenues until after completion of its Initial Business Combination, at the earliest.
The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived
from the Proposed Offering described below. The Company has selected December 31st as its fiscal year end.
Sponsor
and Proposed Financing
The
Company’s sponsor is B. Riley Principal Sponsor Co. II, LLC (the “Sponsor”), a Delaware limited liability company
and a wholly owned indirect subsidiary of B. Riley Financial, Inc. (“B. Riley Financial”). On February 4, 2020, the
Sponsor agreed to loan the Company up to $300,000 (see note 4) to support the Company’s initial formation and operations.
The
Company’s ability to commence meaningful operations and finance its Initial Business Combination is contingent upon obtaining
adequate financial resources through the proposed $175,000,000 ($201,250,000 if the underwriters’ over-allotment is exercised
in full) initial public offering of Units (as defined below) (Note 3). Upon the closing of the Proposed Offering and the
Private Placement, $176,750,000 (or $203,262,500 if the underwriters’ over-allotment option is exercised in full —
Note 3) will be held in a trust account (the “Trust Account”) (discussed below).
The
Trust Account
The
proceeds to be held in the Trust Account will be invested only in U.S. government treasury bills with a maturity of 185 days or
less or in money market funds registered under the Investment Company Act and compliant with Rule 2a-7 thereof that maintain
a stable net asset value of $1.00. Unless and until the Company completes the Initial Business Combination, it may pay its expenses
only from the net proceeds of the Proposed Offering held outside the Trust Account, which will be approximately $500,000 in working
capital after the payment of approximately $750,000 in expenses relating to the proposed Offering, and any loans or additional
investments from the Sponsor, members of the Company’s management team or any of their respective affiliates or other third
parties.
Except
with respect to interest earned on the funds held in the Trust Account that may be released to the Company to pay its taxes, the
proceeds from the Proposed Offering may not be released from the Trust Account until the earliest of: (i) the completion
of the Initial Business Combination; (ii) the redemption of any public shares properly tendered in connection with a stockholder
vote to amend the Company’s amended and restated certificate of incorporation to modify the substance or timing of the Company’s
obligation to redeem 100% of its public shares if it does not complete the Initial Business Combination within 18 months from
the closing of the Proposed Offering; or (iii) the redemption of all of the Company’s public shares if the Company
is unable to complete the Initial Business Combination within 18 months from the closing of the Proposed Offering (at which such
time up to $100,000 of interest shall be available to the Company to pay dissolution expenses), subject to applicable law. The
proceeds deposited in the Trust Account could become subject to the claims of the Company’s creditors, if any, which could
have priority over the claims of the Company’s public stockholders.
B.
RILEY PRINCIPAL MERGER CORP. II
NOTES TO FINANCIAL STATEMENTS
NOTE
1 — DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS (cont.)
Initial
Business Combination
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the Proposed Offering,
although substantially all of the net proceeds of the Proposed Offering and the Private Placement are intended to be generally
applied toward consummating an Initial Business Combination. The Initial Business Combination must occur with one or more businesses
or assets with a fair market value equal to at least 80% of the net assets held in the Trust Account (excluding the amount of
any deferred underwriting discount). There is no assurance that the Company will be able to successfully effect an Initial Business
Combination.
The
Company, after signing a definitive agreement for an Initial Business Combination, will provide its public stockholders’
with the opportunity to redeem all or a portion of their shares upon the completion of the Initial Business Combination, either
(i) in connection with a stockholder meeting called to approve the business combination or (ii) by means of a tender
offer. However, in no event will the Company redeem its public shares in an amount that would cause its net tangible assets to
be less than $5,000,001. In such case, the Company would not proceed with the redemption of its public shares and the related
Initial Business Combination, and instead may search for an alternate Initial Business Combination.
If
the Company holds a stockholder vote or there is a tender offer for shares in connection with an Initial Business Combination,
a public stockholder will have the right to redeem its shares for an amount in cash equal to its pro rata share of the aggregate
amount then on deposit in the Trust Account as of two business days prior to the consummation of the Initial Business Combination,
including interest but less taxes payable. As a result, such shares of Class A common stock will be recorded at redemption
amount and classified as temporary equity upon the completion of the Proposed Offering, in accordance with the Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, “Distinguishing Liabilities
from Equity.”
Pursuant
to the Company’s amended and restated certificate of incorporation, if the Company is unable to complete the Initial Business
Combination within 18 months from the closing of the Proposed Offering, the Company will (i) cease all operations except
for the purpose of winding up, (ii) as promptly as reasonably possible but no more than ten business days thereafter redeem
the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including
interest but less taxes payable (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding
public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right
to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board
of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for
claims of creditors and the requirements of other applicable law.
The
Sponsor and the Company’s officers and directors will enter into a letter agreement with the Company, pursuant to which
they will agree to waive their rights to liquidating distributions from the Trust Account with respect to any Founder Shares and
Private Placement Shares (as defined below) held by them if the Company fails to complete the Initial Business Combination within
18 months of the closing of the Proposed Offering. However, if the Sponsor or any of the Company’s directors or officers
acquires shares of Class A common stock in or after the Proposed Offering, they will be entitled to liquidating distributions
from the Trust Account with respect to such shares if the Company fails to complete the Initial Business Combination within the
prescribed time period.
In
the event of a liquidation, dissolution or winding up of the Company after an Initial Business Combination, the Company’s
remaining stockholders are entitled to share ratably in all assets remaining available for distribution to them after payment
of liabilities and after provision is made for each class of stock, if any, having preference over the common stock. The Company’s
stockholders have no preemptive or other subscription rights. There are no sinking fund provisions applicable to the common stock,
except that the Company will provide its stockholders with the opportunity to redeem their public shares for cash equal to their
pro rata share of the aggregate amount then on deposit in the Trust Account, under the circumstances, and, subject to the limitations,
described herein.
B.
RILEY PRINCIPAL MERGER CORP. II
NOTES TO FINANCIAL STATEMENTS
NOTE
1 — DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS (cont.)
Going
Concern Considerations
At
February 14, 2020, the Company had cash and cash equivalents of $50,000 and a note payable to the Sponsor in the amount of $50,000.
Further, the Company expects to continue to incur significant costs in pursuit of its financing and acquisition plans. This condition
raises substantial doubt about the Company’s ability to continue as a going concern. Management plans to address this uncertainty
through the Proposed Offering as discussed in Note 3. There is no assurance that the Company’s plans to raise capital or
to consummate an Initial Business Combination will be successful or successful within the required time period. The financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE
2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
financial statements of the Company are presented in conformity with accounting principles generally accepted in the United States
of America (“GAAP”).
Emerging
Growth Company
Section 102(b)(1)
of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards
until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not
have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements
that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to
opt out of such extended transition period which means that when a standard is issued or revised and it has different application
dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the
time private companies adopt the new or revised standard.
This
may make comparison of the Company’s financial statement with another public company which is neither an emerging growth
company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because
of the potential differences in accounting standards used.
Net
Loss Per Common Share
The
Company complies with accounting and disclosure requirements of ASC Topic 260, “Earnings Per Share.” Net loss per
common share is computed by dividing net loss by the weighted average number of common shares outstanding for the period, excluding
shares of common stock subject to forfeiture. Net loss per common share is computed by dividing net gain/(loss) applicable to
common stockholders by the weighted average number of common shares outstanding during the period, plus, to the extent dilutive,
the incremental number of shares of common stock to settle warrants, as calculated using the treasury stock method. At February
14, 2020 and December 31, 2019, the Company did not have any dilutive securities and other contracts that could, potentially,
be exercised or converted into common stock and then share in the earnings of the Company under the treasury stock method. As
a result, diluted loss per common share is the same as basic loss per common share for the periods. In February 2020, the Company
completed a stock split of 1 to 575 shares of Class B common stock, resulting in 5,750,000 shares of Class B common stock issued
and outstanding. The financial statements have been retroactively adjusted to reflect the stock split for all periods presented.
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution,
which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. The Company has not experienced losses on these
accounts and management believes the Company is not exposed to significant risks on such accounts.
B.
RILEY PRINCIPAL MERGER CORP. II
NOTES TO FINANCIAL STATEMENTS
NOTE
2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Financial
Instruments
The
fair value of the Company’s assets and liabilities, which qualify as financial instruments under the FASB ASC 820, “Fair
Value Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheet, primarily due to
their short-term nature.
Use
of Estimates
The
preparation of financial statements in conformity with GAAP requires the Company’s 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 amounts of revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Income
Taxes
The
Company is included in the consolidated tax return of B. Riley Financial the parent (the “Parent”). The Company
calculates the provision for income taxes by using a “separate return” method. Under this method the Company
is assumed to file a separate return with the tax authority, thereby reporting its taxable income or loss and paying the applicable
tax to, or receiving the appropriate refund from, the Parent. The Company’s current provision is the amount of tax
payable or refundable on the basis of a hypothetical, current year, separate return.
Any
difference between the tax provision (or benefit) allocated to the Company under the separate return method and payments to be
made to (or received from) the Parent for tax expense are treated as either dividends or capital contribution. Accordingly,
the amount by which the Company’s tax liability under the separate return method exceeds the amount of tax liability ultimately
settled as a result of using incremental expenses of the Parent is periodically settled as a capital contribution from the Parent
to the Company.
The
Company complies with the accounting and reporting requirements of ASC Topic 740 “Income Taxes,” which requires an
asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities
are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future
taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected
to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected
to be realized.
ASC
Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement
of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not
to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized
tax benefits as income tax expense. As of February 14, 2020 and December 31, 2019, there were no unrecognized tax benefits and
no amounts accrued for interest and penalties. The Company is currently not aware of any issues under review that could result
in significant payments, accruals or material deviation from its position.
The
Company may be subject to potential examination by federal, state and city taxing authorities in the areas of income taxes since
inception. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among
various tax jurisdictions and compliance with federal, state and city tax laws. The Company’s management does not expect
that the total amount of unrecognized tax benefits will materially change over the next twelve months.
The
provision for income taxes was deemed to be immaterial at December 31, 2019 and February 14, 2020.
B.
RILEY PRINCIPAL MERGER CORP. II
NOTES TO FINANCIAL STATEMENTS
NOTE
2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Recent
Accounting Pronouncements
Management
does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have
a material effect on the Company’s financial statements.
NOTE
3 — PUBLIC OFFERING
Pursuant
to the Proposed Offering, the Company intends to offer for sale 17,500,000 Units at an offering price of $10.00 per Unit. The
Sponsor will subscribe to purchase an aggregate of 650,000 Units (or 728,750 Units if the underwriters’ over-allotment option
is exercised in full — see below) at a price of $10.00 per Private Placement Unit in a private placement that will close
simultaneously with the Proposed Offering.
Each
Unit consists of one share of the Company’s Class A common stock, $0.0001 par value, and one-half of one redeemable
warrant, with each whole warrant exercisable for one share of Class A common stock (each, a “Warrant” and, collectively,
the “Warrants” and, with respect to the warrants underlying the Private Placement Units, the “Private Placement
Warrants”). One Warrant entitles the holder thereof to purchase one whole share of Class A common stock at a price
of $11.50 per share.
The
Company has also granted the underwriters a 45-day option to purchase on a pro rata basis up to 2,625,000 additional Units at
the initial public offering price less the underwriting discounts and commissions. The option may be exercised only to cover any
over-allotments of Units.
The
Company expects to pay underwriting commissions equal to 2.0% of the gross proceeds of the Proposed Offering at the time of the
Proposed Offering.
Business
Combination Marketing Agreement
The
Company will engage B. Riley Securities, Inc. as advisors in connection with its Initial Business Combination to assist it in
arranging meetings with its stockholders to discuss a potential business combination and the target business’ attributes,
introduce it to potential investors that may be interested in purchasing its securities, assist it in obtaining stockholder approval
for its Initial Business Combination and assist it with the preparation of press releases and public filings in connection with
the Initial Business Combination. The Company will pay B. Riley Securities, Inc. for such services upon the consummation of the
Initial Business Combination a cash fee in an amount equal to 3.5% of the gross proceeds of the Proposed Offering (exclusive of
any applicable finders’ fees which might become payable) ($6,125,000 or up to $7,043,750 if the underwriters’ over-allotment
option is exercised in full). Pursuant to the terms of the business combination marketing agreement, no fee will be due if the
Company does not complete an Initial Business Combination.
B.
RILEY PRINCIPAL MERGER CORP. II
NOTES TO FINANCIAL STATEMENTS
NOTE
4 — RELATED PARTY TRANSACTIONS
Founder
Shares
On
June 3, 2019, 10,000 shares of our common stock were issued to B. Riley Principal Investments, LLC. On February 3, 2020,
the Company conducted a 1:575 stock split, resulting in B. Riley Principal Investments, LLC holding 5,750,000 shares of Class B
common stock (the “Founder Shares”). All of the Founder Shares were contributed to the Sponsor in January 2020. The
financial statements reflect the issuance of these shares retroactively for all periods presented. On May 19, 2020, the Sponsor
returned 718,750 shares of Class B common stock to Company for cancellation, resulting in a total of 5,031,250 Founder Shares
outstanding. As used herein, unless the context otherwise requires, Founder Shares shall be deemed to include the shares of Class A
common stock issuable upon conversion thereof. The Founder Shares are identical to the Class A common stock included in the
Units being sold in the Proposed Offering, the Founder Shares automatically convert into shares of Class A common stock at
the time of the Initial Business Combination and are subject to certain transfer restrictions, as described in more detail below,
and the holders of the Founder Shares, as described in more detail below, have agreed to certain restrictions and will have certain
registration rights with respect thereto. Up to 656,250 Founder Shares are subject to forfeiture depending on the extent to which
the underwriters’ over-allotment option is exercised. The number of Founder Shares issued was determined based on the expectation
that the Founder Shares would represent 20% of the outstanding shares of common stock upon completion of the Proposed Offering
excluding the shares underlying the Private Placement Units. If the Company increases or decreases the size of the Proposed Offering,
the Company will effect a stock dividend or share contribution back to capital, as applicable, with respect to its Class B Common
Stock immediately prior to the consummation of the Proposed Offering in such amount as to maintain the Founder Share ownership
of the Company’s stockholders prior to the Proposed Offering at 20.0% of the Company’s issued and outstanding common
stock upon the consummation of the Proposed Offering.
The
Company’s initial stockholders, officers and directors have agreed, not to transfer, assign or sell any Founder Shares held
by them until the earlier to occur of: (i) one year after the completion of the Initial Business Combination, (ii) the
last sale price of Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends,
reorganizations, recapitalizations and the like) for any 20 trading days within any consecutive 30-trading day period commencing
at least 150 days after the Initial Business Combination, or (iii) the date following the completion of the Initial
Business Combination on which the Company completes a liquidation, merger, stock exchange, reorganization or other similar transaction
that results in all of the public stockholders having the right to exchange their shares of common stock for cash, securities
or other property.
Administrative
Fees
Commencing
on the date of the prospectus, the Company will agree to pay an affiliate of our sponsor a total of $10,000 a month for office
space, utilities and secretarial and administrative support. Upon completion of our Initial Business Combination or our liquidation,
we will cease paying these monthly fees.
Registration
Rights
The
holders of Founder Shares, Private Placement Units, Private Placement Shares, Private Placement Warrants and units that may be
issued upon conversion of working capital loans, if any, will have registration rights to require the Company to register the
resale of any of its securities held by them (in the case of the Founder Shares, only after conversion of such shares to shares
of Class A common stock) pursuant to a registration rights agreement to be signed on or before the effective date of the
Proposed Offering. These holders will also be entitled to certain piggyback registration rights. However, the registration rights
agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective
until termination of the applicable lock-up period for the securities to be registered. The Company will bear the expenses incurred
in connection with the filing of any such registration statements. The holder of Forward Purchase Units has substantially similar
registration rights.
B.
RILEY PRINCIPAL MERGER CORP. II
NOTES TO FINANCIAL STATEMENTS
NOTE
5 — STOCKHOLDER’S DEFICIT
Note
Payable — Related Party
The
Company borrowed $50,000 on February 4, 2020 in accordance with the note payable to Sponsor which allows the Company to borrow
up to $300,000 without interest to be used for a portion of the expenses of this offering. The notes payable is payable on the
earlier of: (i) December 31, 2021 or (ii) the date on which the Company consummates an initial public offering of its
securities. As of February 14, 2020, the note payable due to related party was $50,000.
Forward
Purchase Agreement
The
Company will agree to enter into a Forward Purchase Agreement with an affiliate of the Sponsor, pursuant to which the affiliate
of the Sponsor will agree to purchase, or have its designees purchase, an aggregate of 2,500,000 units, at a price of $10.00 per
unit, or $25,000,000 in the aggregate, in a private placement to close concurrently with the initial business combination. The
obligations under the Forward Purchase Agreement do not depend on whether any public stockholders redeem their Class A common
stock and provide the Company with a minimum funding level for the Initial Business Combination. The Forward Purchase Agreement
includes registration rights with respect to the Forward Purchase Units.
Common
Stock
The
authorized common stock of the Company includes up to 100,000,000 shares of Class A common stock and 25,000,000 shares of
Class B common stock. If the Company enters into an Initial Business Combination, it may (depending on the terms of such
an Initial Business Combination) be required to increase the number of shares of Class A common stock which the Company is
authorized to issue at the same time as the Company’s stockholders vote on the Initial Business Combination to the extent
the Company seeks stockholder approval in connection with the Initial Business Combination. Holders of the Company’s common
stock are entitled to one vote for each share of common stock. At February 14, 2020 and December 31, 2019, there were 5,750,000
shares of Class B common stock issued and outstanding (up to 656,250 shares of which are subject to forfeiture depending
on the extent to which the underwriters’ over-allotment option is exercised) and no shares of Class A common stock
issued and outstanding.
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 February 14, 2020 and December 31, 2019,
there were no shares of preferred stock issued or outstanding.
Warrants
Warrants
may only be exercised for a whole number of shares. No fractional Warrants will be issued upon separation of the Units and only
whole Warrants will trade. The Warrants will become exercisable on the later of (a) 30 days after the completion of the Initial
Business Combination or (b) 12 months from the closing of the Proposed Offering; provided in each case that the Company has an
effective registration statement under the Securities Act covering the shares of Class A common stock issuable upon exercise of
the Warrants and a current prospectus relating to them is available (or the Company permits holders to exercise their Warrants
on a cashless basis and such cashless exercise is exempt from registration under the Securities Act). The Company will agree that
as soon as practicable, but in no event later than 15 business days, after the closing of the Initial Business Combination, the
Company will use its best efforts to file with the SEC a registration statement for the registration, under the Securities Act,
of the shares of Class A common stock issuable upon exercise of the Warrants, to cause such registration statement to become effective
within 60 business days after the closing of the Initial Business Combination and to maintain a current prospectus relating to
those shares of Class A common stock until the warrants expire or are redeemed, as specified in the warrant agreement. If the
shares issuable upon exercise of the warrants are not registered under the Securities Act by the 60th business day
after the closing of the Initial Business Combination, the Company will be required to permit holders to exercise their warrants
on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding
the above, if the Company’s Class A common stock is at the time of any exercise of a warrant not listed on a national securities
exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act,
the Company may, at its option, require holders of Warrants who exercise their warrants to do so on a “cashless basis”
in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company elects, the Company will not be required
to file or maintain in effect a registration statement, but the Company will use its best efforts to register or qualify the shares
under applicable blue sky laws to the extent an exemption is not available.
B.
RILEY PRINCIPAL MERGER CORP. II
NOTES TO FINANCIAL STATEMENTS
NOTE
5 — STOCKHOLDER’S DEFICIT (cont.)
The
Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
The
Private Placement Warrants are identical to the Warrants underlying the Units sold in the Proposed Offering, except that the Private
Placement Warrants and the shares of Class A common stock issuable upon exercise of the Private Placement Warrants will not be
transferable, assignable or salable until 30 days after the completion of the Initial Business Combination, subject to certain
limited exceptions. Additionally, the Private Placement Warrants will be non-redeemable so long as they are held by the initial
purchasers or such purchasers’ permitted transferees. If the
Private
Placement Warrants are held by someone other than the initial shareholders or their permitted transferees, the Private Placement
Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Warrants.
The
Company may call the Warrants for redemption (except with respect to the Private Placement Warrants):
|
•
|
in
whole and not in part;
|
|
•
|
at
a price of $0.01 per warrant;
|
|
•
|
upon
a minimum of 30 days’ prior written notice of redemption (the “30-day redemption period”); and
|
|
•
|
if,
and only if, the last sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits,
stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending
on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.
|
If
the Company calls the Warrants for redemption, management will have the option to require all holders that wish to exercise the
Warrants to do so on a “cashless basis,” as described in the warrant agreement.
The
exercise price and number of shares of Class A common stock issuable upon exercise of the warrants may be adjusted in certain
circumstances including in the event of a share dividend, or recapitalization, reorganization, merger or consolidation. In addition,
if (x) the Company issues additional shares of Class A common stock or securities convertible into or exercisable or exchangeable
for shares of Class A common stock for capital raising purposes in connection with the closing of the Initial Business Combination
(excluding any issuance of securities under the Forward Purchase Agreement), at an issue price or effective issue price of less
than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith by
the Company’s board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking
into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance (the “Newly
Issued Price”)), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds,
and interest thereon, available for funding the Initial Business Combination, and (z) the volume weighted average trading price
of the Class A common stock during the 20 trading day period starting on the trading day prior to the day on which the Company
consummates the Initial Business Combination (the “Market Value”) is below $9.20 per share, the exercise price of
the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued
Price, and the $18.00 per share redemption trigger price described above will be adjusted (to the nearest cent) to be equal to
180% of the higher of the Market Value and the Newly Issued Price. Additionally, in no event will the Company be required
to net cash settle any warrant. In the event that a registration statement is not effective for the exercised warrants, the purchaser
of a unit containing such warrant will have paid the full purchase price for the unit solely for the share of Class A common stock
underlying such unit. There will be no redemption rights or liquidating distributions with respect to the warrants, which will
expire worthless if the Company fails to complete an Initial Business Combination within the 18-month time period.
B.
RILEY PRINCIPAL MERGER CORP. II
NOTES TO FINANCIAL STATEMENTS
Note
6 — Subsequent Events
The
Company evaluated subsequent events and transactions that occurred after the balance sheet date and through March 2, 2020, the
date that the financial statements were issued. The Company did not identify any subsequent events that would have required adjustment
or disclosure in the financial statements.
NOTE
7 — MODIFICATION TO THE TERMS OF THE OFFERING
On
May 19, 2020, the size of the transaction was modified to 17,500,000 Units at an offering price of $10.00 per Unit. As a result,
on May 19, 2020 the Sponsor returned 718,750 shares of Class B common stock to Company for cancellation. As a result of the modified
terms and execution of the underwriting agreement on May 19, 2020 the financial statements have been modified to reflect the final
terms of the agreement, see Note 1, Note 3, and Note 4.
EOS
ENERGY ENTERPRISES, INC
CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE YEARS ENDED
DECEMBER 31, 2020 AND 2019
AND
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the shareholders and the Board of Directors of
EOS Energy Enterprises, Inc.
Opinion
on the Financial Statements
We
have audited the accompanying consolidated balance sheets of EOS Energy Enterprises, Inc. (the “Company”) as of December
31, 2020 and 2019, the related consolidated statements of operations, changes in shareholders’ equity (deficit), and cash
flows, for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the
“financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial
position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the
two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States
of America.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but
not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that our audits provide a reasonable basis for our opinion.
/s/
Deloitte & Touche LLP
New
York, NY
February
25, 2021
We
have served as the Company’s auditor since 2017.
EOS
ENERGY ENTERPRISES, INC
|
|
CONSOLIDATED
BALANCE SHEETS ($ IN THOUSANDS)
|
As
of December 31, 2020 and 2019
|
|
|
2020
|
|
|
2019
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
121,853
|
|
|
$
|
862
|
|
Grants receivable
|
|
|
131
|
|
|
|
326
|
|
Inventory
|
|
|
214
|
|
|
|
—
|
|
Receivable on sale of state tax attributes
|
|
|
—
|
|
|
|
4,060
|
|
Vendor deposits
|
|
|
2,390
|
|
|
|
252
|
|
Prepaid and other current assets
|
|
|
2,779
|
|
|
|
484
|
|
Total current assets
|
|
|
127,367
|
|
|
|
5,984
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
5,653
|
|
|
|
5,316
|
|
Intangible assets, net
|
|
|
320
|
|
|
|
360
|
|
Investment in joint venture
|
|
|
3,736
|
|
|
|
589
|
|
Security deposit
|
|
|
825
|
|
|
|
808
|
|
Other assets
|
|
|
363
|
|
|
$
|
—
|
|
Total assets
|
|
$
|
138,264
|
|
|
$
|
13,057
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
8,861
|
|
|
$
|
6,987
|
|
Accounts payable and accrued expenses - related parties
|
|
|
2,517
|
|
|
|
1,194
|
|
Provision for firm purchase commitments
|
|
|
1,585
|
|
|
|
—
|
|
Convertible notes payable – related party
|
|
|
—
|
|
|
|
76,559
|
|
Capital lease, current portion
|
|
|
11
|
|
|
|
13
|
|
Embedded derivative liability
|
|
|
—
|
|
|
|
1,681
|
|
Long term debt, current portion
|
|
|
1,071
|
|
|
|
—
|
|
Contract liabilities, current portion
|
|
|
77
|
|
|
|
300
|
|
Total current liabilities
|
|
|
14,122
|
|
|
|
86,734
|
|
|
|
|
|
|
|
|
|
|
Long term liabilities
|
|
|
|
|
|
|
|
|
Deferred rent
|
|
|
762
|
|
|
|
663
|
|
Capital lease
|
|
|
4
|
|
|
|
17
|
|
Long term debt
|
|
|
280
|
|
|
|
—
|
|
Total long term liabilities
|
|
|
1,046
|
|
|
|
680
|
|
Total liabilities
|
|
|
15,168
|
|
|
|
87,414
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES (NOTE 8)
|
|
|
—
|
|
|
|
—
|
|
CONTINGENTLY REDEEMABLE PREFERRED UNITS (NOTE 14)
|
|
|
|
|
|
|
|
|
(liquidation preference of $—
and, $136,816 as of December 31, 2020 and December 31, 2019, respectively)
|
|
|
—
|
|
|
|
109,365
|
|
SHAREHOLDERS’
EQUITY1
|
|
|
|
|
|
|
|
|
Common Stock, $0.0001 par value, 200,000,000 shares authorized, 48,943,082 and 3,930,336 shares outstanding at December 31, 2020 and 2019, respectively
|
|
|
5
|
|
|
|
—
|
|
Contingently Issuable Common Stock
|
|
|
17,944
|
|
|
|
—
|
|
Preferred stock, $0.0001 par value, 1,000,000 shares authorized, no shares outstanding at December 31, 2020 and 2019
|
|
|
—
|
|
|
|
—
|
|
Additional paid in capital
|
|
|
395,913
|
|
|
|
20,346
|
|
Accumulated deficit
|
|
|
(290,766
|
)
|
|
|
(204,068
|
)
|
Total shareholders’ equity (deficit)
|
|
|
123,096
|
|
|
|
(183,722
|
)
|
Total liabilities, contingently redeemable preferred units, and shareholders’ equity (deficit)
|
|
$
|
138,264
|
|
|
$
|
13,057
|
|
|
1
|
See
Note 1 for discussion of reverse capitalization given effect herein
|
The
accompanying notes are an integral part of these financial statements.
EOS
ENERGY ENTERPRISES, INC
|
|
CONSOLIDATED
STATEMENTS OF OPERATIONS ($ IN THOUSANDS)
|
For
the years ended December 31, 2020 and 2019
|
|
|
2020
|
|
|
2019
|
|
Revenue
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
219
|
|
|
$
|
496
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
5,509
|
|
|
|
8,332
|
|
Research and development expenses
|
|
|
13,983
|
|
|
|
11,755
|
|
General and administrative expenses
|
|
|
18,883
|
|
|
|
7,710
|
|
Grant expense (income), net
|
|
|
913
|
|
|
|
(469
|
)
|
Total costs and expenses
|
|
|
39,288
|
|
|
|
27,328
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(39,069
|
)
|
|
|
(26,832
|
)
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
Sale of state tax attributes
|
|
|
—
|
|
|
|
4,060
|
|
Interest income (expense), net
|
|
|
(115
|
)
|
|
|
2
|
|
Interest expense – related party
|
|
|
(23,706
|
)
|
|
|
(49,708
|
)
|
Loss on extinguishment of convertible notes
|
|
|
—
|
|
|
|
(6,111
|
)
|
Change in fair value, embedded derivative
|
|
|
2,092
|
|
|
|
(716
|
)
|
Change in fair value, Sponsor Earnout Shares
|
|
|
(8,083
|
)
|
|
|
—
|
|
Income (loss) from equity in unconsolidated joint venture
|
|
|
127
|
|
|
|
(178
|
)
|
Net loss
|
|
$
|
(68,754
|
)
|
|
$
|
(79,483
|
)
|
|
|
|
|
|
|
|
|
|
Basic
and diluted loss per share attributable to common shareholders2
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(7.31
|
)
|
|
$
|
(20.22
|
)
|
Diluted
|
|
$
|
(7.31
|
)
|
|
$
|
(20.22
|
)
|
|
|
|
|
|
|
|
|
|
Weighted
average shares of Common Stock3
|
|
|
|
|
|
|
|
|
Basic
|
|
|
9,408,841
|
|
|
|
3,930,336
|
|
Diluted
|
|
|
9,408,841
|
|
|
|
3,930,336
|
|
|
2
|
See Note 1 for discussion of reverse capitalization given
effect herein
|
|
3
|
See Note 1 for discussion of reverse capitalization given
effect herein
|
The
accompanying notes are an integral part of these financial statements.
EOS
ENERGY ENTERPRISES, INC
|
|
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT) ($ IN THOUSANDS)
|
For
the years ended December 31, 2020 and 2019
|
|
|
Common Stock4
|
|
|
Additional
Paid
in
|
|
|
Contingently
Issuable
Common
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
capital
|
|
|
Stock
|
|
|
Deficit
|
|
|
Total
|
|
Balance, December 31, 2018
|
|
|
3,930,336
|
|
|
$
|
—
|
|
|
$
|
20,211
|
|
|
$
|
—
|
|
|
$
|
(124,585
|
)
|
|
$
|
(104,374
|
)
|
Stock-based compensation
|
|
|
|
|
|
|
—
|
|
|
|
135
|
|
|
|
—
|
|
|
|
—
|
|
|
|
135
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(79,483
|
)
|
|
|
(79,483
|
)
|
Balance, December 31, 2019
|
|
|
3,930,336
|
|
|
$
|
—
|
|
|
$
|
20,346
|
|
|
$
|
—
|
|
|
$
|
(204,068
|
)
|
|
$
|
(183,722
|
)
|
Conversion of contingently redeemable preferred units
|
|
|
14,727,844
|
|
|
|
2
|
|
|
|
121,123
|
|
|
|
—
|
|
|
|
—
|
|
|
|
121,125
|
|
Conversion of convertible notes payable
|
|
|
10,886,336
|
|
|
|
1
|
|
|
|
108,862
|
|
|
|
—
|
|
|
|
—
|
|
|
|
108,863
|
|
Net equity infusion from the Merger
|
|
|
18,364,805
|
|
|
|
2
|
|
|
|
126,024
|
|
|
|
—
|
|
|
|
—
|
|
|
|
126,026
|
|
Contingently Issuable Common Stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
17,944
|
|
|
|
(17,944
|
)
|
|
|
—
|
|
Transaction cost incurred in the Merger
|
|
|
—
|
|
|
|
—
|
|
|
|
(10,274
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(10,274
|
)
|
Capital contribution - disgorgement of short swing profits
|
|
|
—
|
|
|
|
—
|
|
|
|
432
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
432
|
|
Shares issued to Restricted Units holders
|
|
|
174,761
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
5,081
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,081
|
|
Release
of Block A Sponsor Earnout Shares from restriction5
|
|
|
859,000
|
|
|
|
—
|
|
|
|
12,559
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12,559
|
|
Reclassification
of Block B Sponsor earnout shares6
|
|
|
—
|
|
|
|
—
|
|
|
|
11,760
|
|
|
|
—
|
|
|
|
—
|
|
|
|
11,760
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(68,754
|
)
|
|
|
(68,754
|
)
|
Balance, December 31, 2020
|
|
|
48,943,082
|
|
|
$
|
5
|
|
|
$
|
395,913
|
|
|
$
|
17,944
|
|
|
$
|
(290,766
|
)
|
|
$
|
123,096
|
|
|
4
|
See
Note 1 for discussion of reverse capitalization given effect herein
|
|
5
|
See
Note 2 for discussion of Sponsor Earnout Shares
|
|
6
|
See
Note 2 for discussion of Sponsor Earnout Shares
|
The
accompanying notes are an integral part of these financial statements.
EOS ENERGY ENTERPRISES, INC
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS ($ IN THOUSANDS)
|
For the years ended December 31, 2020 and 2019
|
|
|
2020
|
|
|
2019
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(68,754
|
)
|
|
$
|
(79,483
|
)
|
Adjustment to reconcile net loss to net cash used in operating activities
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
5,081
|
|
|
|
135
|
|
Depreciation and amortization
|
|
|
1,558
|
|
|
|
2,123
|
|
Impairment of property and equipment
|
|
|
—
|
|
|
|
1,590
|
|
Loss from disposal of property and equipment
|
|
|
31
|
|
|
|
—
|
|
(Income) Loss from equity in unconsolidated joint venture
|
|
|
(127
|
)
|
|
|
178
|
|
Accreted interest on convertible notes payable – related party
|
|
|
23,706
|
|
|
|
49,708
|
|
Loss on extinguishment of convertible notes
|
|
|
—
|
|
|
|
6,111
|
|
Provision for firm purchase commitment
|
|
|
1,585
|
|
|
|
—
|
|
Change in fair value, embedded derivative
|
|
|
(2,092
|
)
|
|
|
716
|
|
Change in fair value, Sponsor Earnout Shares
|
|
|
8,083
|
|
|
|
—
|
|
Other
|
|
|
—
|
|
|
|
(52
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Receivable on sale of state tax attributes
|
|
|
4,060
|
|
|
|
(4,060
|
)
|
Prepaid and other assets
|
|
|
(1,607
|
)
|
|
|
(462
|
)
|
Inventory
|
|
|
(214
|
)
|
|
|
634
|
|
Grants receivable
|
|
|
195
|
|
|
|
352
|
|
Vendor deposits
|
|
|
(593
|
)
|
|
|
109
|
|
Security deposit
|
|
|
(17
|
)
|
|
|
(64
|
)
|
Accounts payable and accrued expenses
|
|
|
1,709
|
|
|
|
(2,210
|
)
|
Accounts payable and accrued expenses-related parties
|
|
|
1,323
|
|
|
|
1,140
|
|
Contract liabilities
|
|
|
(223
|
)
|
|
|
(468
|
)
|
Deferred rent
|
|
|
99
|
|
|
|
169
|
|
Other assets
|
|
|
(362
|
)
|
|
|
—
|
|
Net cash used in operating activities
|
|
|
(26,559
|
)
|
|
|
(23,834
|
)
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Investment in joint venture
|
|
|
(3,020
|
)
|
|
|
(601
|
)
|
Purchases of property and equipment
|
|
|
(3,605
|
)
|
|
|
(2,299
|
)
|
Net cash used in investing activities
|
|
|
(6,625
|
)
|
|
|
(2,900
|
)
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Capital lease payments
|
|
|
(15
|
)
|
|
|
(72
|
)
|
Proceeds from issuance of convertible notes payable – related party
|
|
|
9,009
|
|
|
|
19,346
|
|
Proceeds of short term notes payable
|
|
|
191
|
|
|
|
—
|
|
Repayment of short term notes payable
|
|
|
(97
|
)
|
|
|
(1,000
|
)
|
Proceeds from Paycheck Protection Program loan
|
|
|
1,257
|
|
|
|
—
|
|
Proceeds attributable to beneficial conversion features of convertible notes payable – related party
|
|
|
—
|
|
|
|
1,793
|
|
Proceeds from capital infusion in reverse recapitalization
|
|
|
142,345
|
|
|
|
—
|
|
Transaction cost for the reverse recapitalization
|
|
|
(10,274
|
)
|
|
|
—
|
|
Issuance of contingently redeemable preferred units
|
|
|
11,759
|
|
|
|
2,031
|
|
Net cash provided by financing activities
|
|
|
154,175
|
|
|
|
22,098
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
120,991
|
|
|
|
(4,636
|
)
|
Cash and cash equivalents, beginning of year
|
|
|
862
|
|
|
|
5,498
|
|
Cash and cash equivalents, end of year
|
|
$
|
121,853
|
|
|
$
|
862
|
|
Non-cash Investing and Financing Activities
|
|
|
|
|
|
|
|
|
Contribution of inventory to joint venture
|
|
$
|
—
|
|
|
$
|
167
|
|
Accrued and unpaid capital expenditures
|
|
$
|
374
|
|
|
$
|
93
|
|
Conversion of convertible notes to common stock in connection with merger
|
|
$
|
108,863
|
|
|
$
|
—
|
|
Conversion of contingently
redeemable preferred stock to common stock in connection with merger
|
|
$
|
121,125
|
|
|
$
|
—
|
|
Receivable from disgorgement of short swing profits
|
|
$
|
432
|
|
|
$
|
—
|
|
Supplemental disclosures
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
118
|
|
|
$
|
6
|
|
The
accompanying notes are an integral part of these financial statements.
EOS
ENERGY ENTERPRISES, INC
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS)
|
1.
Nature of Operations and Summary of Significant Accounting Policies
Nature
of Operations
Eos
Energy Enterprises, Inc. (f/k/a B. Riley Merger Corp. II) (the “Company” or “Eos”) designs, develops,
manufactures, and sells innovative energy storage solutions for the electric utilities, and commercial and industrial end users.
Eos has developed and has received patents on an innovative battery design relying on a unique zinc oxidation/reduction cycle
to generate output current and to recharge. The Battery Management System (“BMS”) software uses proprietary Eos-developed
algorithms and includes ambient and battery temperature sensors, as well as voltage and current sensors for the strings and the
system. Eos and their partners focus on a collaborative approach to jointly develop and sell safe, reliable, long-lasting low-cost
turn-key alternating current (“AC”) integrated systems using Eos’s direct current (“DC”) Battery
System. The Company is also an investor in an unconsolidated joint venture (“JV”) which has the exclusive rights to
manufacture the DC Battery Systems integrated with the BMS for DC Battery Systems that are sold and delivered in North America,
subject to meeting certain performance targets. The Company’s major markets are integration of battery storage with solar
that is connected to the utility power grid or the customer’s solar system that is not connected to the utility power grid,
battery storage systems to be used by utilities to relieve congestion in the power grids and battery storage systems to assist
commercial and industrial customers in reducing their peak energy usage or participating in the utilities ancillary and demand
response markets. The location of the Company’s major markets are seen in North America, Europe, Africa, and Asia.
Reverse
Recapitalization
The
Company was incorporated as a Delaware corporation on June 3, 2019 as a publicly held special purpose acquisition company (“SPAC”)
in order to acquire, through a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business
combination one or more businesses. On November 16, 2020 (the” Merger Date”), the Company consummated a reverse recapitalization
(the “Merger”) pursuant to which B. Riley Merger Corp. II (“BMRG”) acquired Eos Energy Storage LLC pursuant
to an agreement and plan for merger (the “Merger Agreement”) between the Company, BMRG Merger Sub, LLC, our wholly-owned
subsidiary and a Delaware limited liability company (“Merger Sub I”), BMRG Merger Sub II, LLC, our wholly-owned subsidiary
and a Delaware limited liability company (“Merger Sub II”), Eos Energy Storage LLC, a Delaware limited liability company
(“EES”), New Eos Energy LLC, a wholly-owned subsidiary of EES and a Delaware limited liability company (“Newco”)
and AltEnergy Storage VI, LLC, a Delaware limited liability company (“AltEnergy”).
In
connection with the Merger, (1) Merger Sub I merged with and into Newco (the “First Merger”), whereupon the separate
existence of Merger Sub I ceased, and Newco continued as the surviving company (such company, in its capacity as the surviving
company of the First Merger, is sometimes referred to as the “First Surviving Company”) and became our wholly owned
subsidiary; and (2) immediately following the First Merger and as part of the same overall transaction as the First Merger, the
First Surviving Company merged with and into Merger Sub II, whereupon the separate existence of the First Surviving Company ceased,
and Merger Sub II continued as the surviving company and our wholly owned subsidiary. Upon the closing of the business combination
(the “Closing”), the Company changed its name to “Eos Energy Enterprises, Inc.”
EOS
ENERGY ENTERPRISES, INC
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS)
|
1.
Nature of Operations and Summary of Significant Accounting Policies (cont.)
Since
BMRG was a non-operating public shell company, the current shareholders of EES have a relative majority of the voting power of
the combined entity, the operations of EES prior to the acquisition comprises the only ongoing operations of the combined entity,
and senior management of EES comprises the majority of the senior management of the combined entity, the Mergers have been accounted
for as a capital transaction rather than a business combination. According to ASC 805 Business combination, the transaction was
accounted for as a reverse recapitalization consisting of the issuance of Common Stock by Eos for the net monetary assets of BMRG
accompanied by a recapitalization. Accordingly, the net monetary assets received by EES as a result of the Mergers with B. Riley
have been treated as a capital infusion on the closing date. No goodwill or other intangible assets were recorded during the Merger.
The consolidated assets, liabilities and results of operations of the Company are the historical financial statements of EES and
the BMRG assets, liabilities and results of operations are consolidated with the Company beginning on the acquisition date. In
order to reflect the change in capitalization, the historical capitalization related to EES common units have been retroactively
restated based on the exchange ratio as if shares of B. Riley Common Stock had been issued as of the later of (i) the issuance
date of the shares, or (ii) the earliest period presented in the accompanying consolidated financial statements.
Upon
consummation of the Mergers, the former EES convertible notes and redeemable preferred units were converted to common stock of
the Company. Refer to Note 12 and Note 14 for further discussion.
Unless
the context otherwise requires, the use of the terms “the Company”, “we,” “us,” and “our”
in these notes to the consolidated financial statements refers to Eos Energy Enterprises, Inc. and its consolidated subsidiaries.
Basis
of Presentation
The
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 significant intercompany transactions
and balances have been eliminated in the preparation of the consolidated financial statements.
Reclassification
of Prior Year Presentation
Certain
prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect
on the reported results of operations. Adjustment has been made to the Consolidated Balance sheets for the year ended December
31, 2019, to reclassify account payable and accrued expense to related parties and vendor deposits from prepaid and other current
assets. These changes in classification also affected cash flows from operating activities for the year ended December 31, 2019
in the Consolidated Statements of Cash Flows.
Cash
and Cash Equivalents
Cash
and cash equivalents include cash and highly liquid investments purchased with original maturities of three months or less.
Concentration
of Credit Risk
The
Company maintains cash balances at FDIC-insured institutions. However, the FDIC limits may be exceeded at times. The Company has
not experienced any losses on such accounts.
Use
of Estimates
The
preparation of financial statements in conformity with generally accepted accounting principles 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.
EOS
ENERGY ENTERPRISES, INC
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS)
|
1.
Nature of Operations and Summary of Significant Accounting Policies (cont.)
The
most significant estimates in the accompanying financial statements include the valuation of Contingently Issuable Common stock, derivatives, the relative fair value allocation of Phase II bridge financing proceeds, the valuation of inventory, and estimated
lives used for depreciation and amortization purposes.
Income
Taxes and Deferred Taxes
The
Company complies with the accounting and reporting requirements of FASB ASC Topic 740, Income Taxes (ASC 740). Income taxes
are computed under the asset and liability method reflecting both current and deferred taxes, which reflect the tax impact of
all events included in the financial statements. The balance sheet approach (i) reflects a current tax liability or asset recognized
for estimated taxes payable or refundable on tax returns for the current and prior years, (ii) reflects a deferred tax liability
or asset recognized for the estimated future tax effects attributable to temporary differences and carryforwards, (iii) measures
current and deferred tax liabilities and assets using the enacted tax rate of which the effects of future changes in tax laws
or rates are not anticipated, and (iv) reduces deferred tax assets, if necessary, by the amount of any tax benefits that, based
on available evidence, are not expected to be realized.
ASC
740 prescribes a recognition threshold and a measurement attribute for financial statement recognition and measurement of tax
positions taken or expected to be taken in a tax return. Eos recognizes deferred tax assets only to the extent that management
concludes these assets are more-likely-than-not to be realized. Significant judgement is required in assessing and estimating
the more-likely-than-not tax consequences of the events included in the financial statements. Management considers all available
positive and negative evidence, including future reversals of existing temporary differences, projected future taxable income,
tax-planning strategies, and results of recent operations.
The
Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income tax expense. Eos records
uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (i) management determines whether
it is more-likely-than-not that the tax position will be sustained on the technical merits of the position and (ii) for those
tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit
that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. The Company has determined
that the uncertain income tax positions at December 31, 2020 and December 31, 2019 that do not meet the more-likely-than-not
threshold under ASC 740 are $322 and $—, respectively. See Note 10 for further information.
Impairment
of Long — Lived Assets
The
Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount
of the assets may not be recoverable. An assessment is performed to determine whether the depreciation and amortization of long-lived
assets over their remaining lives can be recovered through projected undiscounted future cash flows. The amount of any long-lived
asset impairment is measured based on fair value and is charged to operations in the period in which a long-lived assets impairment
is determined by management.
Intangible
Assets
Intangible
assets are stated at their historical cost and amortized on a straight-line basis over their expected useful lives.
Property
and Equipment, net
Equipment
is stated at cost, less accumulated depreciation. Depreciation is computed on a straight-line basis over the estimate useful lives
of the assets. Leasehold improvements are amortized on a straight-line basis over the shorter of the estimated useful lives of
the improvements or the life of the lease. Maintenance and repair expenditures are expensed as incurred. Expenditures which significantly
improve or extend the life of an asset are capitalized.
EOS
ENERGY ENTERPRISES, INC
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS)
|
1.
Nature of Operations and Summary of Significant Accounting Policies (cont.)
Revenue
from Contracts with Customers
Revenue
is earned from the sales, installation, and commissioning of energy storage systems and is derived from customer contracts. Revenue
is recognized in an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring
the promised goods and/or services to the customer, when or as the Company’s performance obligations are satisfied. For
product sales of energy storage systems, the Company’s performance obligations are satisfied at the point in time when the
customer obtains control of the system, which is either upon delivery of the goods at the customer’s designated location
or upon the customer’s acceptance of the product after commissioning and testing at the customer’s site, depending
on the specific terms of the respective contract with the customer. In addition, the corresponding installation and commissioning
services related to the systems are performance obligations satisfied over time as the respective services are performed, based
on an input measure of progress as labor costs relating to the installation and commissioning services are incurred. Further,
extended warranties are offered by the Company and are identified as performance obligations that are satisfied over time, based
on a time-lapsed measure of progress resulting in a ratable recognition of revenue over the respective warranty period. Payment
terms generally include advance payments to reserve capacity and/or upon issuance of the customer’s purchase order, shipment
readiness, with the remainder upon delivery and commissioning of the system. Shipping and handling costs are included in cost
of sales. Sales tax collected from customers are recorded on a net basis and therefore, not included in revenue. Sales tax is
recorded as a liability (payable) until remitted to governmental authorities.
The
Company may enter into sales contracts that provide for performance obligations in addition to the sale of the product, including
performance guarantees and service obligations. Under these sales contracts, transaction price is allocated to the various performance
obligations based on the relative stand-alone selling prices of the promised goods and services. When the stand-alone selling
price is not observable, revenue is determined based on a best estimate of selling price using cost plus a reasonable margin and
is recognized ratably over the period of performance.
Determination
of Transaction Price
The
transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring
products or services to the customer. The Company includes any fixed charges within its contracts as part of the total transaction
price. In addition, several contracts include variable consideration such as refunds, penalties, and the customer’s right
to return. The Company has concluded that its estimation of variable consideration results in an adjustment to the transaction
price such that it is probable that a significant reversal of cumulative revenue would not occur in the future.
Assessment
of Estimates of Variable Consideration
Many
of the Company’s contracts with customers contain some component of variable consideration. The Company estimates variable
consideration, such as refunds, penalties, and the customer’s right to return, using the expected value method, and adjusts
transaction price for its estimate of variable consideration. Throughout the year, we update our estimate of variable consideration
on a monthly basis, and adjust transaction price accordingly by recording an adjustment to net revenue and refund liability with
respect to variable consideration such as penalties, refunds, and credits to customers. Therefore, management applies the constraint
in its estimation of variable consideration for inclusion in the transaction price such that it is probable that a significant
reversal of cumulative revenue would not occur in the future.
EOS
ENERGY ENTERPRISES, INC
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS)
|
1.
Nature of Operations and Summary of Significant Accounting Policies (cont.)
Practical
Expedients and Exemptions
As
permitted by ASC 606, the Company elected to use certain practical expedients in connection with the implementation of ASC 606.
The Company treats costs associated with obtaining new contracts as expenses when incurred if the amortization period of the asset
the Company would recognize is one year or less. The Company does not adjust the transaction price for significant financing components,
as the Company’s contracts typically do not span more than a one year period. The election of these practical expedients
results in accounting treatments that the Company believes are consistent with historical accounting policies and, therefore,
these elections of practical expedients do not have a material impact on the comparability of the financial statements as no revenue
was earned during the year ended December 31, 2020 and December 31, 2019.
Royalty
Revenue
The
Company receives sales-based royalty payments related to the licensing of intellectual property to the Company’s JV. The
Company recognizes royalty revenues when the licensee sells products to third parties.
Product
Warranty
Warranty
obligations are incurred in connection with the sale of the Company’s products. The Company generally provides a standard
warranty for a period of one to two years, commencing upon commissioning. Costs to provide for warranty obligations are estimated
and recorded as a liability at the time of recording the sale. Extended warranties are identified as performance obligations in
the Company’s contracts with customers, and are discussed as part of revenue from contracts with customers. Costs incurred
in satisfying the Company’s performance obligations with respect to extended warranties are recognized as expense when incurred.
Government
Grants
The
Company records grants received or receivable from government agencies as an offset to the related costs for which the grants
are intended to compensate the Company. The costs of satisfying the Company’s obligations under the respective grant agreements
are recognized as expense when incurred. Once the expenses are approved by the government agencies the Company records the grant
receivable and related grant income. Grants received from government agencies for which expenses have not been incurred are included
within accrued expenses.
Research
and Development Expenses
Research
and development costs are expensed as incurred, which include materials, supplies, salaries, benefits and other costs related
to research, development and testing of products.
Rent
Expense
The
Company records rent expense on a straight-line basis based on the total minimum lease payments over the term of the lease. Differences
between cash paid for lease payments and rent expense are recorded as Deferred rent on the Balance Sheets.
EOS
ENERGY ENTERPRISES, INC
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS)
|
1.
Nature of Operations and Summary of Significant Accounting Policies (cont.)
Accounts
Receivable
The
Company evaluates the creditworthiness of its customers. If the collection of any specific receivable is doubtful, an allowance
is recorded in the allowance for doubtful accounts. The Company had $35 and $— of accounts receivable as of December 31,
2020 and 2019, with $35 and $— of allowances for doubtful accounts recorded, respectively.
Inventory
Inventories
are stated at the lower of cost, which approximates cost determined on a first-in, first-out basis, or net realizable value. The
Company records inventory when it takes delivery and title to the product according to the terms of each supply contract.
The
Company evaluates its ending inventories for excess quantities and obsolescence. Inventories that management considers excess
or obsolete are reserved. Management considers forecasted demand in relation to the inventory on hand, competitiveness of product
offerings, market conditions and product life cycles when determining excess and obsolescence and net realizable value adjustments.
Once inventory is written down and a new cost basis is established, it is not written back up if demand increases.
Investment
in unconsolidated joint venture
The
Company accounts for its investment in its unconsolidated joint venture using the equity method of accounting as it has been determined
that the Company has the ability to exercise significant influence and is not otherwise required to consolidate. All significant
decisions require unanimous consent of both joint venture members. Under the equity method, the investment is initially recorded
at cost and subsequently adjusted for the Company’s share of equity in the joint venture’s income or loss.
The
Company reviews its investments for other-than-temporary impairment whenever events or changes in business circumstances indicate
that the carrying value of the investment may not be fully recoverable. Investments identified as having an indication of impairment
are subject to further analysis to determine if the impairment is other than temporary and to estimate the investment’s
fair value.
Stock-Based
Compensation
Stock-based
compensation is estimated at the grant date based on the fair value of the award and is recognized as expense over the requisite
service period of the award. The Company uses the Black-Scholes option pricing model to estimate the fair value of awards, and
generally these awards only have service conditions. The Company recognizes compensation cost on a straight-line basis over the
requisite service period of the award, which is generally the award vesting term. For awards with performance conditions, we recognize
compensation costs using an accelerated attribution method over the vesting period. Compensation costs are recognized only if
it is probable that the performance condition will be satisfied. Determining the appropriate fair value model and related assumptions
requires judgment, including estimating volatility of the Company’s common stock and expected terms. The expected volatility
rates are estimated based on historical and implied volatilities of comparable publicly traded companies. The expected term represents
the average time that the options that vest are expected to be outstanding based on the vesting provisions, which is determined
through the simplified method, since the Company does not have sufficient historical experience regarding the exercise of options.
The Company has elected to recognize forfeitures as incurred.
EOS
ENERGY ENTERPRISES, INC
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS)
|
1.
Nature of Operations and Summary of Significant Accounting Policies (cont.)
Earnings
(loss) Per Share
In
accordance with the provisions of FASB ASC Topic 260, Earnings per Share, basic earnings per share (“EPS”)
is computed by dividing earnings available to common shareholders by the weighted average number of shares of common stock outstanding
during the period. Other potentially dilutive common shares, and the related impact to earnings, are considered when calculating
EPS on a diluted basis.
In
computing diluted EPS, only potential common shares that are dilutive, those that reduce EPS or increase loss per share, are included.
The effect of contingently issuable shares are not included if the result would be anti-dilutive, such as when a net loss is reported.
Therefore, basic and diluted EPS are computed using the same number of weighted average shares for the years ended December 31,
2020 and 2019, as we incurred a net loss for such periods. The following potentially dilutive shares were excluded from the calculation
of diluted net loss per share because their effect would have been anti-dilutive for the periods presented:
|
|
For the year ended December 31
|
|
|
|
2020
|
|
|
2019
|
|
Stock Options and Restricted Units
|
|
|
2,185,954
|
|
|
|
392,838
|
|
Warrants
|
|
|
9,075,000
|
|
|
|
—
|
|
Block B Sponsor Earnout Shares subject to restrictions
|
|
|
859,000
|
|
|
|
—
|
|
Contingently Issuable Common Stock
|
|
|
2,000,000
|
|
|
|
—
|
|
Convertible Notes (if converted)
|
|
|
—
|
|
|
|
7,655,908
|
|
Contingent redeemable preferred units
|
|
|
—
|
|
|
|
12,964,231
|
|
Segments
The
Company’s chief operating decision-maker (“CODM”) is its Chief Executive Officer and President. Operating segments
are defined as components of an entity for which separate financial information is available and that is regularly reviewed by
the CODM in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s CODM
reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources,
and evaluating financial performance. As such, the Company has determined that it operates in one operating and one reportable
segment.
Fair
Value of Financial Instruments
The
Company’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, and notes payable
— related party and long term debt.
Accounting
standards establish a hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three levels.
The fair value hierarchy gives the highest priority to quoted market prices (unadjusted) in active markets for identical assets
or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Level 2 inputs are inputs other than quoted
prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Accounting
standards require financial assets and liabilities to be classified based on the lowest level of input that is significant to
the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement
requires judgment and may affect the valuation of the fair value of assets and liabilities and their placement within the fair
value hierarchy levels.
EOS
ENERGY ENTERPRISES, INC
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS)
|
1.
Nature of Operations and Summary of Significant Accounting Policies (cont.)
The
carrying value of cash and cash equivalents, accounts receivable, and accounts payable are considered to be representative of
their fair value due to the short maturity of these instruments. The fair value of both the Company’s convertible notes
payable — related party (the “Convertible Notes”) and the embedded derivative liability are classified within
Level 3 of the fair value hierarchy. The Company’s outstanding long term debt are deemed to be at fair value as the interest
rates on these debt obligations are materially consistent with prevailing rates.
The
Company estimated the original fair value of the Contingently Issuable Common Stock based on a Monte Carlo simulation option-pricing
model considering stock price of the Company, a risk free rate of 0.41% and volatility of 60% utilizing a peer group based on
a five year term. This estimate was initially recorded as a distribution to shareholders and was presented as Contingently Issuable
Common Stock. Upon the occurrence of a Triggering Event, any issuable shares would be transferred from Contingently Issuable Common
Stock to common stock and Additional paid-in capital accounts.
Pursuant to the guidance under ASC 815,
Derivatives and Hedging, the Sponsor Earnout Shares was classified as a Level 3 fair value measurement liability, and the
increase or decrease in the fair value during the reporting period is recognized as expense or income accordingly. The fair values
of the Sponsor Earnout Shares on the Closing date were estimated using a Monte Carlo simulation based on stock price of the Company,
a risk free rate of 0.41% and volatility of 60% utilizing a peer group based on a five year term. The fair value of the first tranche
of Sponsor Earnout Shares (“Block A”) that vested on December 16, 2020 was based on the closing share price of the
Company’s publicly traded stock on that date. The fair values of the second tranche of the Sponsor Earnout Shares (“Block
B) on December 16, 2020, when the Block B shares were reclassified from liability to equity, were estimated using a Monte Carlo
simulation based on stock price of the Company, a risk free rate of 0.36% and volatility of 60% utilizing a peer group based on
a five- year term.
The
estimated future cash flows of the Convertible Notes were discounted using a discount rate derived from an appropriate risk-free
interest rate yield curve and credit spread, and the estimated repayment date. As the Company does not have a market observable
credit spread, the Company obtained a range of potential credit spreads available from market observable information on entities
with a comparable credit risk. As of December 31, 2019, the estimated fair value of the convertible notes payable —
related party is approximately $65,942, as compared to the carrying value of approximately $76,559.
The
fair value of the embedded derivatives are determined using valuation techniques that require the use of assumptions concerning
the amount and timing of future cash flows, discount rates, probability of future events and redemption dates that are beyond
management’s control. As of December 31, 2019, the fair value of the embedded derivative liability was $1,681.
As
of December 31, 2020, all convertible notes have been converted to common stock in connection with the Merger. Refer to Note
12 for further discussion of the convertible notes payable — related party and the embedded derivatives.
EOS
ENERGY ENTERPRISES, INC
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS)
|
1.
Nature of Operations and Summary of Significant Accounting Policies (cont.)
Recent
Accounting Pronouncements
Pursuant
to the Jumpstart Our Business Startups Act (“JOBS Act”), an emerging growth company is provided the option to adopt
new or revised accounting standards that may be issued by the FASB or the SEC either (i) within the same periods as those otherwise
applicable to non-emerging growth companies or (ii) within the same time periods as private companies. The Company has elected
to use the extended transition period for complying with any new or revised financial accounting standards. As a result, the Company’s
financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective
date for new or revised accounting standards that are applicable to public companies. We also intend to continue to take advantage
of some of the reduced regulatory and reporting requirements of emerging growth companies pursuant to the JOBS Act so long as
we qualify as an emerging growth company.
In
February 2016, the FASB issued ASU 2016-02, Leases, which will amend current lease accounting to require lessees to recognize
(i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted
basis, and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of,
a specified asset for the lease term. ASU 2016-02 does not significantly change lease accounting requirements applicable to lessors;
however, certain changes were made to align, where necessary, lessor accounting with the lessee accounting model. The Company
is an emerging growth company and would not be required to adopt this ASU No. 2016-02 until January 1, 2022. The Company is currently
evaluating the impact of the adoption of this guidance on the Company’s consolidated financial statements.
In
June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments. The amendments in ASU 2016-13 will provide more decision-useful information about the expected credit losses
on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. In November
2019, the FASB issued ASU No. 2019-10 (“ASU 2019-10”), which extends the effective date for adoption of ASU 2016-13
for certain entities. As a result of the provisions in ASU 2019-10, and as the Company was a smaller reporting company as of December
31, 2020, the Company will not be required to adopt ASU 2016-13 until January 1, 2023. The Company is currently evaluating the
impact of the adoption of this guidance on the Company’s consolidated financial statements.
In
December 2019, the FASB issued Accounting Standards Update No. 2019-12 – Income Taxes (Topic 740) Simplifying the Accounting
for Income Taxes, as part of its initiative to reduce complexity in the accounting standards. The amendments in ASU 2019-12
eliminate certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes
in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also clarifies
and simplifies other aspects of the accounting for income taxes. This ASU is effective for public business entities for fiscal
years and interim periods beginning after December 15, 2020. The adoption of this ASU does not have a material impact on the Company’s
consolidated financial statements.
2.
Merger Agreement and Reverse Recapitalization
Merger
Agreement
As
discussed in Note 1, on November 16, 2020, BMRG and EES entered into the Merger Agreement, which has been accounted for as a reverse
recapitalization. Pursuant to the Merger Agreement, the closing cash shall be no less than $110,000 minus the transaction cost
incurred by BMRG and EES.
On
a special meeting of the shareholders of BMRG held on November 12, 2020, holders of 6,442,195 shares of BMRG’s common stock
exercised their right to redeem those shares for cash at a price of $10.10 per share, for an aggregate of approximately $65,066.
The per share redemption price of $10.10 for holders of Public Shares electing redemption was paid out of BMRG’s Trust Account,
which, after taking into account the redemption but before payment of any transaction expenses, had a balance immediately prior
to the Closing of approximately $111.6 million.
EOS
ENERGY ENTERPRISES, INC
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS)
|
2.
Merger Agreement and Reverse Recapitalization (cont.)
On
November 16, 2020, immediately prior to the Closing, BMRG issued to a number of purchasers (each, a “PIPE Investor”)
an aggregate of 4,000,000 shares of BMRG’s common stock (the “PIPE Shares”), for a purchase price of $10.00
per share and an aggregate purchase price of $40,000. In accounting for the reverse recapitalization, the total cash proceeds
amounted to $142,345 and resulted in the issuance of 18,364,805 shares of Common Stock, as shown in the table below (dollars in
thousands, expect per share amounts).
|
|
Total
Shares
|
|
|
Available
Cash
|
|
Balance, November 15, 2020
|
|
|
22,525,000
|
|
|
$
|
167,411
|
|
Less redemption of BMRG shares prior to the Merger
|
|
|
6,442,195
|
|
|
$
|
65,066
|
|
Less Sponsor Earnout Shares subject to restriction
|
|
|
1,718,000
|
|
|
$
|
—
|
|
Issuance of PIPE Shares
|
|
|
4,000,000
|
|
|
$
|
40,000
|
|
Balance issued upon Merger with BMRG
|
|
|
18,364,805
|
|
|
$
|
142,345
|
|
The
aggregate purchase price for EES as set forth in the Merger Agreement was $300 million. The Merger consideration was settled
through the conversion of EES’ Common Units into shares of BMRG Common Stock at an issuance price of $10.00 per share. Each
issued and outstanding share of the EES’ common units was automatically converted into the applicable portion of the Merger
consideration with the number of shares computed based on the exchange ratio, which is one BMRG share issued to 17.35 common units
of EES. As per the 2012 plan (as defined in Note 15), outstanding options to purchase shares of EES’s common units granted
under the 2012 Plan automatically converted into stock options for shares of BMRG Common Stock upon the same terms and conditions
that were in effect with respect to such stock options immediately prior to the Merger, after giving effect to the exchange ratio
as defined above. All convertible notes and preferred units have been converted to common stock in connection with the Merger.
Refer to Note 12 for further discussion of the convertible notes payable — related party and Note 14 for the discussion
of the preferred units.
Contingently
Issuable Common Stock
Following
the closing of the Merger, and as additional consideration for the transaction, the Company will issue within five years from
the closing date to each unitholder of EES its pro-rata proportion of a one-time issuance of an aggregate of 2,000,000 Shares
(the “Earnout Shares” or “Contingently Issuable Common Stock”), within five business days after (i) the
closing share price of the Company’s shares traded equaling or exceeding $16.00 per share for any 20 trading days within
any consecutive 30-trading day period during the Earnout Period or (ii) a Change of Control (or a definitive agreement providing
for a Change of Control having been entered into) during the Earnout Period (each of clauses (i) and (ii), a “Triggering
Event”).
The
Company estimated the original fair value of the contingently issuable shares to be $17,944, which remains contingently issuable
as of December 31, 2020. This balance was recorded as a distribution to shareholders and was presented as Contingently Issuable
Common Stock. Upon the occurrence of a Triggering Event, any issuable shares would be transferred from Contingently Issuable Common
Stock to common stock and Additional paid-in capital accounts. Any contingently issuable shares not issued as a result of a Triggering
Event not being attained by the end of Earnout period will be cancelled.
On
January 22, 2021, the Triggering Event for the issuance of the Earnout Shares occurred as the Company’s stock price exceeded
$16.00 per share for 20 trading days within a consecutive 30-trading day period during the Earnout Period.
EOS
ENERGY ENTERPRISES, INC
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS)
|
2.
Merger Agreement and Reverse Recapitalization (cont.)
Sponsor
Earnout shares
Pursuant
to the Sponsor Earnout letter signed in connection with the Merger, 1,718,000 shares of common stock issued and outstanding held
by BMRG (“Sponsor Earnout Shares”) were subject to certain transfer and other restrictions, under which (a) 859,000
Sponsor Earnout Shares (“Block A Sponsor Earnout Shares”) are restricted from being transferred unless and until either,
for a period of five years after the Closing, (i) the share price of our common stock equals or exceeds $12.00 per share for any
20 trading days within any consecutive 30-trading day period or (ii) a change of control occurs for a share price equaling or
exceeding $12.00 per share, and (b) the remaining 859,000 Sponsor Earnout Shares (“Block B Sponsor Earnout Shares”)
are subject to similar restrictions except that the threshold is increased from $12.00 to $16.00. If after the five year period,
there are no triggering events, the Sponsor Earnout Shares will be forfeited and canceled for no consideration. If after the five
year period, only the triggering event described in clause (a) above has occurred, the remaining 859,000 Sponsor Earnout Shares
described in clause (b) will be forfeited and canceled for no consideration.
The
Sponsor Earnout Shares were classified as a Level 3 fair value measurement liability and $16,235 was recorded as initial liability
on our Balance Sheet on the Merger Date. On December 16, 2020, the Company’s stock price exceeded $12.00 per share for 20
trading days within a consecutive 30-trading day period. On that date, the restrictions on all 859,000 shares of Block A Sponsor
Earnout Shares were therefore lifted and the holders of these shares were no longer restricted from selling or transferring the
shares under the Sponsor Earnout letter. Prior to transferring these Sponsor Earnout Shares to equity on that date, the associated
liability was marked to market and the change in fair value was recorded in our Statements of Operations. The fair value of these
shares was based on the closing share price of the Company’s publicly traded stock. In addition, Block B Sponsor Earnout
Shares were also reclassified as equity instrument on that day due to the release of Block A Sponsor Earnout Shares from restriction.
The fair value of the Block B Sponsor Earnout Shares was estimated using a Monte Carlo simulation based on the stock price of
the Company, a risk free rate of 0.36% and volatility of 60% utilizing a peer group based on a five year term. For the year ended
December 31, 2020, $8,083 was recorded as loss from change in fair value of Sponsor Earnout Shares in our Statements of Operations.
On
January 22, 2021, as the Company’s stock price exceeded $16.00 per share for 20 trading days within a consecutive 30-trading
day period, Block B Sponsor Earnout Shares was released from restriction.
3.
Revenue Recognition
Contract
Balances
The
following table provides information about contract liabilities from contracts with customers:
|
|
December 31,
2020
|
|
|
December 31,
2019
|
|
|
December 31,
2018
|
|
Contract liabilities
|
|
$
|
77
|
|
|
$
|
300
|
|
|
$
|
718
|
|
Contract
liabilities primarily relate to advance consideration received from customers and deferred revenue for which transfer of control
occurs, and therefore revenue is recognized, as products are delivered or services are provided. 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.
EOS
ENERGY ENTERPRISES, INC
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS)
|
3.
Revenue Recognition (cont.)
During
the year ended December 31, 2020, contract liabilities decreased $223. The Company recognized $184 of revenue during the
year ended December 31, 2020 that was included in the contract liability balance at the beginning of the period.
During
the year ended December 31, 2019, contract liabilities decreased $418. The Company recognized $58 of revenue during the year
ended December 31, 2019 that was included in the contract liability balance at the beginning of the period.
Transaction
Price Allocated to Remaining Performance Obligations
The
following table includes estimated revenue expected to be recognized in the future related to performance obligations that are
unsatisfied (or partially unsatisfied) at the end of the reporting period:
December 31, 2020
|
|
2021
|
|
|
2022
|
|
|
2023
|
|
|
2024
|
|
|
Thereafter
|
|
Product Revenue
|
|
$
|
77
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
4.
Inventory
As
of December 31, 2020 and 2019, we had finished goods of $214 and $—.
5.
Property and Equipment, Net
As
of December 31, 2020 and 2019, property and equipment, net consisted of the following:
|
|
2020
|
|
|
2019
|
|
|
Useful lives
|
|
Equipment
|
|
$
|
7,055
|
|
|
$
|
5,910
|
|
|
5 — 10 years
|
|
Capital lease
|
|
|
201
|
|
|
|
201
|
|
|
5 years
|
|
Furniture
|
|
|
211
|
|
|
|
125
|
|
|
5 — 10 years
|
|
Leasehold Improvements
|
|
|
2,732
|
|
|
|
2,732
|
|
|
Lesser of useful life/remaining lease
|
|
Tooling
|
|
|
523
|
|
|
|
150
|
|
|
2 — 3 years
|
|
Total
|
|
|
10,722
|
|
|
|
9,118
|
|
|
|
|
Less: Accumulated Depreciation and Amortization
|
|
|
(5,069
|
)
|
|
|
(3,802
|
)
|
|
|
|
|
|
$
|
5,653
|
|
|
$
|
5,316
|
|
|
|
|
Depreciation
and amortization expense related to property and equipment was $1,518 and $2,083, during the years ended December 31, 2020
and 2019, respectively. For the year ended December 31, 2020 and 2019, impairment loss charged to Statement of Operations
were $— and $1,590, respectively, primarily related to obsolete equipment relating to its prior generation battery. These
expenses are reflected in cost of sales, research and development expenses and general and administrative expenses in the Statements
of Operations.
EOS
ENERGY ENTERPRISES, INC
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS)
|
6.
Intangible Assets
Intangible
assets consisted of various patents valued at $400, which represents the cost to acquire the patents. These patents are determined
to have useful lives and are amortized into the results of operations over ten years. During the years ended December 31,
2020 and 2019, the Company recorded amortization expenses of $40 and $40, respectively, related to patents.
Estimated
future amortization expense of intangible assets as of December 31, 2020 are as follows:
2021
|
|
|
$
|
40
|
|
2022
|
|
|
|
40
|
|
2023
|
|
|
|
40
|
|
2024
|
|
|
|
40
|
|
2025
|
|
|
|
40
|
|
Thereafter
|
|
|
|
120
|
|
|
|
|
$
|
320
|
|
7.
Investment in Unconsolidated Joint Venture
In
August 2019, the Company entered into an agreement with Holtec Power, Inc (“Holtec”) to form the unconsolidated
joint venture HI-POWER LLC (“Hi-Power” or “JV”). The JV was formed in order to manufacture the products
for all of the Company’s projects in North America. Accordingly, the Company will purchase battery storage systems and spare
parts from the JV. The joint venture is in Turtle Creek, Pennsylvania. The Company’s financial commitment is $4,100 in the
form of a combination of cash and special purpose manufacturing equipment. Eos’s initial ownership interest is 49%. Both
the Company and Holtec sell the products manufactured by Hi-Power. The Company will earn five percent of the product price for
any products manufactured by Hi-Power and sold by Holtec or its affiliates.
The
joint venture commenced manufacturing activities in the fourth quarter of 2020. For the year ended December 31, 2020 and
2019, contribution made to the JV were $3,020 and $768, respectively. The investment income (loss) recognized from the unconsolidated
joint venture under the equity method of accounting was $127 and $(178) for the year ended December 31, 2020 and 2019, respectively.
Our investment in the unconsolidated joint venture as of December 31, 2020 and 2019 was $3,736 and $589, respectively.
8.
Commitments and Contingencies
Commitments
On
June 24, 2016, Eos entered into a long-term non-cancelable operating lease for 45,000 sq. ft. of space for its current headquarters
facility in Edison, New Jersey. On April 26, 2017, Eos entered into a lease for an additional 18,000 sq. ft. of adjoining space.
These leases expire in September 2026 with renewal options up to 2036. Further, these leases require monthly rent payments
along with executory costs, which include real estate taxes, repairs, maintenance and insurance. In addition, the terms of the
leases contain cost escalations of approximately 10% annually. The Company also has certain non-cancelable capital lease agreements
for office equipment.
Total
rent expense was $914 and $930, for the years ended December 31, 2020 and 2019, respectively, of which, $— and $102
was recorded as Cost of sales; $713 and $430 as Research and development expenses; and $201 and $398 as General and administrative
expenses in the Statement of Operations, respectively.
EOS
ENERGY ENTERPRISES, INC
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS)
|
8.
Commitments and Contingencies (cont.)
Future
minimum lease commitments as of December 31, 2020 are as follows:
|
|
|
Operating
|
|
|
Capital
|
|
2021
|
|
|
$
|
685
|
|
|
$
|
14
|
|
2022
|
|
|
|
755
|
|
|
|
4
|
|
2023
|
|
|
|
825
|
|
|
|
—
|
|
2024
|
|
|
|
895
|
|
|
|
—
|
|
2025
|
|
|
|
966
|
|
|
|
—
|
|
Later years
|
|
|
|
679
|
|
|
|
—
|
|
Total minimum lease payments
|
|
|
$
|
4,805
|
|
|
$
|
18
|
|
Less amounts representing interest
|
|
|
|
|
|
|
|
3
|
|
Present value of minimum lease payments
|
|
|
|
|
|
|
$
|
15
|
|
Firm
Purchase Commitments — Related Party
In
July 2020, the Company entered into an $8,000 non-cancellable purchase contract with its unconsolidated joint venture partner,
Hi-Power LLC, to supply batteries for existing and future sales orders. For the year ended December 31, 2020, the Company has
made purchases totaling $5,496, resulting in a remaining purchase commitment of $2,504 as of December 31, 2020 under this
contract.
At
the end of each reporting period, the Company evaluates its non-cancellable firm purchase commitments and records a loss, if any,
using a lower of cost or market approach. In assessing the potential loss provision, we use the stated contract price and expected
production volume under the relevant sales contract. The Company records a purchase commitment loss if the market selling price
of Gen 2.3 Battery Systems sold to customers is less than the cost to manufacture the product.
As
of December 31, 2020, the Company recorded a provision for firm purchase commitments of $1,585. The related expense has been included
as a component of cost of sales in the statement of operations.
Loan
commitment
In
December 2020, we entered into a secured debt commitment with one of our customers to provide loan for $1,000 which matures on
December 30, 2022. $100 were drawn on that commitment and recorded in other assets on the consolidated balance sheet as of December 31,
2020.
9.
Grant Expense, Net
Eos
was approved for two grants by the California Energy Commission (CEC) totaling approximately $7,000. In accordance with the grant
agreements, Eos is responsible for conducting studies to demonstrate the benefits of certain energy-saving technologies to utility
companies and consumers in the State of California, and is entitled to receive portions of the grants based upon expenses incurred.
During the years ended December 31, 2020 and 2019, Eos recorded grant expense (income), net of $913 and $(469), respectively,
which comprised of grant income of $381 and $984 and grant costs of $1,294 and $515, respectively. For the year ended December 31,
2020 and 2019, the Company has received payments totaling $1,531 and $3,209, As of December 31, 2020 and 2019, the Company
had $1,136 and $— deferred grant income, respectively, which was recorded in account payable and accrued expense on the
Balance Sheets, as we as a receivable in the amount of $131 and $326, respectively. The expenses incurred by Eos relate to the
performance of studies in accordance with the respective grant agreements, and the grants received or receivable from the CEC
are recorded as an offset to the related expenses for which the grant is intended to compensate the Company.
EOS
ENERGY ENTERPRISES, INC
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS)
|
10.
Income Taxes
Eos
is subject to regulation under U.S. federal and U.S. state tax laws, regulations and policies. Changes to these laws or regulations
may affect the Company’s tax liability, return on investments and business operations.
Earnings
before income taxes
Net
loss before income taxes for domestic operations for the years ended December 31, 2020 and 2019 was $(68,754) and $(79,483),
respectively.
Income
expense (benefit)
Income
tax expense (benefit) for the years ended December 31, 2020 and 2019 was as follows:
|
|
|
2020
|
|
|
|
2019
|
|
Current expense (benefit):
|
|
|
|
|
|
|
|
|
U.S. federal
|
|
$
|
—
|
|
|
$
|
—
|
|
U.S. state and local
|
|
|
—
|
|
|
|
—
|
|
Total current income tax (benefit) provision
|
|
|
—
|
|
|
|
—
|
|
Deferred expense (benefit):
|
|
|
|
|
|
|
|
|
U.S. federal
|
|
$
|
—
|
|
|
$
|
—
|
|
U.S. state and local
|
|
|
—
|
|
|
|
—
|
|
Total deferred income tax (benefit) provision
|
|
|
—
|
|
|
|
—
|
|
Total income tax (benefit) provision
|
|
$
|
—
|
|
|
$
|
—
|
|
Eos
has no tax provision (benefit) for the periods ended December 31, 2020 and 2019 due the generation of taxable losses offset
by a valuation allowance, discussed below, on the deferred tax assets.
Reconciliation
of US Federal Statutory income tax rate to actual income tax rate
The
reconciliation from the statutory U.S. federal income tax rate to the effective tax rate is as follows:
|
|
2020
|
|
|
2019
|
|
Income (loss) before income taxes
|
|
|
(68,754
|
)
|
|
|
(79,483
|
)
|
Statutory U.S. federal income tax (21%)
|
|
|
(14,439
|
)
|
|
|
(16,691
|
)
|
State and local income tax
|
|
|
(3,149
|
)
|
|
|
1,548
|
|
Disallowed interest expense
|
|
|
4,564
|
|
|
|
11,903
|
|
Non-deductible transaction cost
|
|
|
66
|
|
|
|
—
|
|
Non-deductible equity cost
|
|
|
1,698
|
|
|
|
—
|
|
Federal R&D credit
|
|
|
3,660
|
|
|
|
(1,002
|
)
|
Uncertain tax position
|
|
|
322
|
|
|
|
—
|
|
Valuation allowance
|
|
|
7,360
|
|
|
|
4,215
|
|
Other
|
|
|
(82
|
)
|
|
|
27
|
|
Total income tax expense
|
|
|
—
|
|
|
|
—
|
|
Effective tax rate
|
|
|
—
|
|
|
|
—
|
|
EOS
ENERGY ENTERPRISES, INC
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS)
|
10.
Income Taxes (cont.)
The
reported income tax provision differs from the amount computed by applying the statutory US federal income tax rate of 21% to
the income before income taxes primarily due to pretax losses for which no tax benefit has been provided and nondeductible interest
expense for US income tax purposes.
Deferred
Income Taxes
Eos
records deferred income taxes to reflect the net tax effects of temporary differences, if any, between the carrying amounts of
assets and liabilities for financial reporting and the amounts used for income tax purposes. The components of deferred tax assets
and liabilities at December 31, 2020 and 2019 were as follows:
|
|
2020
|
|
|
2019
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
NOL carryforwards
|
|
$
|
40,386
|
|
|
$
|
30,540
|
|
Tax credit carryforwards
|
|
|
1,204
|
|
|
|
4,346
|
|
Employee compensation
|
|
|
1,478
|
|
|
|
187
|
|
Accruals and reserves
|
|
|
1,743
|
|
|
|
543
|
|
Organizational costs
|
|
|
179
|
|
|
|
194
|
|
Transaction costs
|
|
|
324
|
|
|
|
—
|
|
Deferred tax assets, gross
|
|
$
|
45,314
|
|
|
|
35,810
|
|
Valuation allowance
|
|
|
(43,895
|
)
|
|
|
(34,773
|
)
|
Total deferred tax assets, net
|
|
$
|
1,419
|
|
|
$
|
1,037
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Fixed assets
|
|
|
(1,358
|
)
|
|
|
(1,010
|
)
|
Investment in partnership
|
|
|
(61
|
)
|
|
|
(27
|
)
|
Deferred tax liabilities
|
|
|
(1,419
|
)
|
|
|
(1,037
|
)
|
Total deferred tax asset (liability)
|
|
|
—
|
|
|
|
—
|
|
Eos’s
net deferred tax balances consist primarily of federal and state net operating losses (“NOLs”) available for carry
forward, and research and development credits for the years ended December 31, 2020 and 2019. The deferred tax balances and
related disclosures above reflect the adjusted attribute carryforwards and associated deferred tax assets post-sale of the prior
years’ attributes.
During
2019, the Company participated in a tax certificate transfer program with the state of New Jersey and sold a portion of its available
prior year New Jersey state NOLs, in varying amounts from tax years 2016, 2017 and 2018. The deferred tax balances and related
disclosures above reflect the adjusted attribute carryforwards and associated deferred tax assets post-sale of the prior years’
attributes. The Company anticipates participating in the program for the tax year 2019, but as of the balance sheet date, no 2019
attributes had been sold.
The
Company maintains a valuation allowance where it is more-likely-than-not that all or a portion of a deferred tax asset may not
be realized. Changes in the valuation allowance are included in the Company’s income tax provision in the period of change.
In determining whether a valuation allowance is required, the Company evaluates factors such as prior earnings history, expected
future earnings, reversal of existing taxable temporary differences, carry back and carry forward periods and tax planning strategies
that could potentially enhance the likelihood of the realization of a deferred tax asset. Management has determined that it is
more-likely-than not that Eos will not be able to utilize its deferred tax assets at December 31, 2020 and 2019 due to a
history of cumulative losses. As such, Eos has a valuation allowance against its net deferred tax assets.
EOS
ENERGY ENTERPRISES, INC
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS)
|
10.
Income Taxes (cont.)
The
valuation allowance increased by $9,122 between December 31, 2020 and 2019. The increase was primarily attributable to an
increase in NOL and tax credit carryforwards. At December 31, 2020, the valuation allowance is $43,895, of which $1,762 will
be allocated to additional paid-in capital when released. The remaining valuation allowance of $42,133 will be released through
continuing operations.
Net
Operating Losses & Tax Credits
As
of December 31, 2020 and 2019, Eos has federal research and development tax credits (“R&D credit”) of approximately
$4,603 and $3,733, which begin to expire in varying amounts from 2031 – 2040 and 2032 – 2039, respectively, subject
to the annual limitation described below. In addition, Eos has state R&D credits of approximately $1,131 and $613, which will
expire in varying amounts from 2024 – 2027 and 2025 – 2026 for the years ended December 31, 2020 and 2019, respectively.
The
Company has NOL carryforwards for tax purposes and other deferred tax assets that are available to offset future taxable income,
subject to the annual limitation described below.
As of December 31, 2020 and 2019,
Eos has gross federal NOL carryforwards of approximately $174,258 and $137,909. As of December 31, 2020, Eos has state NOL
carryforwards of $60,206. Regarding the federal NOL for the year ended December 31, 2020, $89,051 begins to expire in varying
amounts from 2032 through 2036, while $85,207 has an indefinite carryforward period. The state NOL carryforwards begin to expire
in varying amounts from 2035 through 2040. The US (federal and state) operating loss carryforwards and credits may be subject to
an annual limitation due to the “change in ownership” provisions of the Internal Revenue Code, and similar state provisions.
The Company determined that the merger transaction (described further in Note 2), constitutes a change of ownership as defined
under Internal Revenue Code Section 382 and Section 383. Based on management’s Section 382 Limitation Analysis, it is expected
that all NOL carryforwards that existed as of the transaction date will be allowable under Section 382, however, the deferred tax
asset on the Company’s NOL carryforward is offset by a full valuation allowance at December 31, 2020. Based on management’s
Section 383 Limitation Analysis, it is expected that $4,530 of federal R&D credits will expire unused. As such, these credits
have been written off as of December 31, 2020.
In
March and December, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and the Consolidated
Appropriations Act of 2021 (the “CAA”) were signed into law in response to the Covid-19 pandemic. The CARES Act and
the CAA provided several forms of tax law changes, though Eos does not anticipate that any will have a material impact on the financial
statements.
Unrecognized
Tax Benefits
The
Company is subject to income taxes in the United States (federal and state). Significant judgment is required in evaluating
the Company’s tax positions and determining Eos’s provision for income taxes. During the ordinary course of business,
there are transactions and calculations for which the ultimate tax determination is uncertain. The Company records a liability
for uncertain tax positions on the basis of a two-step process in which (i) management determines whether it is more-likely-than-not
that the tax position will be sustained on the technical merits of the position and (ii) for those tax positions that meet the
more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent
likely to be realized upon ultimate settlement with the related tax authority.
EOS
ENERGY ENTERPRISES, INC
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS)
|
10.
Income Taxes (cont.)
Eos
has unrecognized tax benefits associated with uncertain tax positions as of December 31, 2020 and 2019 as follows:
|
|
2020
|
|
|
2019
|
|
Gross unrecognized tax benefits as of January 1
|
|
|
—
|
|
|
|
—
|
|
Additions:
|
|
|
|
|
|
|
|
|
Current year tax positions
|
|
|
722
|
|
|
|
|
|
Prior year tax positions
|
|
|
—
|
|
|
|
—
|
|
Reduction of prior year tax positions
|
|
|
—
|
|
|
|
—
|
|
Settlements
|
|
|
—
|
|
|
|
—
|
|
Lapse of statute of limitations
|
|
|
—
|
|
|
|
—
|
|
Gross unrecognized tax benefits as of December 31
|
|
|
722
|
|
|
|
—
|
|
Included
in the balance of unrecognized tax benefits at December 31, 2020 are potential benefits of nil that, if recognized, would
affect the effective tax rate on income from continuing operations. The open tax years for federal and state tax returns are generally 2017
and forward. Net operating losses and R&D credits generated in closed years and utilized in open years are subject to adjustment
by the tax authorities. Eos is not currently under examination by any taxing jurisdiction.
The
Company regularly assesses the adequacy of its provision for income tax contingencies in accordance with ASC 740. As a result,
the Company may adjust the reserves for unrecognized tax benefits for the impact of new facts and developments, such as changes
to interpretation of relevant tax law, assessments from taxing authorities, settlements with tax authorities and lapses of statute
of limitations.
11.
Related Party Transactions
Convertible
Notes Payable
During
the years ended December 31, 2020 and 2019, Eos issued convertible notes payable to certain members. Refer to Note 12 for
further discussion.
Management
fee arrangement
During
the years ended December 31, 2020 and 2019, the Company incurred monthly management fees to an entity owned by a board member
in relation to the use of a New York City office. Total costs incurred during the year amounted to $69 and $19, respectively,
which are included in General and administrative expense in the Statements of Operations. Unpaid management fees of $— and
$73 are included in Accounts payable and accrued expenses-related parties as of December 31, 2020 and 2019, respectively.
Accounts
Payable and Accrued Expenses
Accounts
payable and accrued expense-related parties as of December 31, 2020 contains $138 consultant fee payable to affiliate. This
line further includes $2,382 and $1,121 accruals as of December 31, 2020 and December 31, 2019 for payments under the
Joint Venture agreement.
EOS
ENERGY ENTERPRISES, INC
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS)
|
11.
Related Party Transactions (cont.)
Receivable
from disgorgement of short swing profits
As
of December 31, 2020, the Company had a receivable of $432 from its affiliated company B.Riley Securities, Inc resulting
from disgorgement of short swing profits, which is included in Prepaid and other current assets. See Note 16 for a detailed discussion.
Vendor
deposits
As
of December 31, 2020, vendor deposits include a balance of $278 deposits made to Hi-Power.
12.
Convertible Notes Payable
Convertible
Notes Payable -Related party
During
the year ended December 31, 2020 and December 31, 2019, the Company issued Convertible notes payable with aggregate
principals of $5,469 and $19,524, respectively (the “Convertible Notes”). The Convertible Notes are secured by all
assets and intellectual property of the Company. AltEnergy Storage Bridge, LLC (“AltEnergy”) and its affiliates have
combined beneficial ownership in the Company exceeding 10% and therefore constitute a related party of the Company, pursuant to
ASC 850, Related Parties. As of December 31, 2020, AltEnergy owned approximately 14% of the Company’s Common
Stock and as of December 31, 2019 AltEnergy owned approximately 20% of the EES Common and Preferred Units.
The
remaining note holders do not meet the definition of a related party under ASC 850. However, the Convertible Notes were issued
to each of the note holders under identical terms, and AltEnergy serves as the administrative agent of all note holders under
the Convertible Note agreements. Therefore, the disclosures within Note 12 encompass all of the Convertible Notes.
Phase
I Convertible Notes Payable -related party
The
Convertible Notes were issued on various dates through two phases. The first phase with aggregate principal of $13,529 was issued
from February 2019 to May 2019 (the “Phase I Notes”), of which $4,137 was issued to AltEnergy.
The
terms of the Phase I Notes are summarized as follows:
|
●
|
Maturity: On or
after June 30, 2019.
|
|
●
|
Conversion
Option: At any time, the Holder may elect to convert 1.15 times
the outstanding principal balance into the preferred units of the Company at $1.75 per
unit.
|
|
●
|
Liquidation
Amount: Repayment shall be made at the applicable liquidation
amount. The Liquidation Amount applies to all repayments, with the exception of early
repayments made at the Company’s option. The Liquidation Amount applicable to repayments
occurring prior to June 1, 2019 is 1.5 times the outstanding principal balance. At June
1, 2019 and August 1, 2019, the multiple increases to 2.0 and 3.0 times the outstanding
principal balance, respectively.
|
|
●
|
Optional
Prepayment: The Company may prepay the Phase I Notes prior to
maturity at 3.0 times the outstanding principal balance.
|
EOS
ENERGY ENTERPRISES, INC
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS)
|
12.
Convertible Notes Payable (cont.)
|
●
|
Conversion
upon Qualified Financing: In the event that the Company issues
and sells any units to investors through a Qualified Financing, on or before the date
the Phase I Notes are repaid in full, resulting in aggregate gross equity proceeds of
at least $25,000, the Company may at its sole option, force the Holders to convert the
Liquidation Amount into the class of equity issued in the Qualified Financing. The number
of units issued at conversion are variable and shall be based upon the price per unit
paid in the financing. Alternatively, the Company may also elect to settle the 2019 Convertible
Notes in cash.
|
|
●
|
Holders’
put options: If an Event of Default occurs, and at the direction
of 25% of the holders, repayment at the applicable Liquidation Amount becomes immediately
due on demand. Any time prior to September 30, 2019, if Event of Default has not occurred,
and at the direction of a majority of holders, the Liquidation Amount becomes due on
demand.
|
In
conjunction with the Phase II Note issuance, the Phase I maturity date was extended to October 31, 2019. The term extension was
considered a troubled debt restructuring and did not result in a substantial modification and was accounted for as a continuation
of the existing Phase I Notes. An extinguishment charge was not recognized.
2019
Phase II Convertible Notes Payable -Related party
Convertible
Notes with aggregate principal of $5,995 were issued from June 2019 to December 2019 (the “2019 Phase II Notes”),
of which $2,017 was issued to AltEnergy.
The
terms of the Phase II Notes are identical to the Phase I Notes, except as follows:
|
●
|
Maturity: On or
after October 31, 2019.
|
|
●
|
At
any time, the holder may elect to convert 1.15 times the outstanding principal balance
into the Preferred Unites of the Company at $0.50 per unit.
|
|
●
|
The
Liquidation Amount is 6.0 times the outstanding principal balance, regardless of the
repayment date.
|
|
●
|
Holders’
put option: If an Event of Default occurs, and at the direction
of 25% of the holders, repayment at the applicable Liquidation Amount becomes immediately
due on demand. If Event of Default has not occurred, Holders cannot accelerate repayment.
|
|
●
|
2019
Phase II Notes are Senior to Phase I Notes: In the event
that the Company is obligated, or elects, to repay the Convertible Notes and does not
have sufficient funds to repay all Notes in full, payments shall be made in the following
order: first, to the holders of Phase II Notes until each holder has received a repayment
equal to 2.0 times (2.0x) the then outstanding principal balance of holder’s Phase
II Notes; second, to the holders of Phase I Notes until each holder has received a repayment
equal to 1.0 times (1.0x) the then outstanding principal balance of those holder’s
Phase I Notes; and third, to all holders of the 2019 Convertible Notes, pro rata based
on the remaining amount due to each holder pursuant to the terms and provisions of each 2019
Convertible Note held by that holder.
|
Concurrent
to issuance of the Phase II Notes, the Company entered into subscription agreements to sell Preferred Units to the Holders equal
to the principal balance of the 2019 Phase II Notes at a price of $0.50 per unit. Phase II cash proceeds totaled $11,991. The
proceeds were allocated to the Phase II Notes and EES Preferred Units based on their relative fair values at the date of issuance.
The Company recognized $2,031 attributable to the 2019 Phase II Preferred Units, which was recorded as a discount against the
2019 Phase II Notes. Refer to Note 14 for further discussion regarding the EES Preferred Units.
EOS
ENERGY ENTERPRISES, INC
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS)
|
12.
Convertible Notes Payable (cont.)
2020
Phase II Convertible Notes Payable - Related party
During
the year up to the Closing date, the Company issued Convertible Notes (the “2020 Phase II Notes”) concurrently with
EES Preferred Units to certain investors for aggregate cash proceeds of $10,768, including 2020 Phase II Notes of $10,598 with
terms identical to the 2019 Phase II Notes, and $170 of Phase I Notes.
The
proceeds were allocated to the 2020 Phase II Notes and EES Preferred Units based on their relative fair values at the date of
issuance. The Company recognized $1,759 attributable to the 2020 Phase II EES Preferred Units, which was recorded as a discount
against the 2020 Phase II Notes. $1,075 of the 2020 Phase II Notes were issued to AltEnergy. Refer to Note 14 for further discussion
regarding the EES Preferred Units.
Beneficial
Conversion Features
The
conversion option on the Phase I Notes generated a beneficial conversion feature (BCF). A BCF arises when a debt or equity security
is issued with an embedded conversion option that is in the money at inception because the conversion option has an effective
strike price that is less than the fair value of the underlying equity security at the commitment date. The Company recognized
this BCF by allocating the intrinsic value of the conversion option to the Preferred Units, which resulted in a discount on the
Phase I Notes. The Company amortized the discount into interest expense on the commitment date, as the Convertible Notes are immediately
puttable by investors.
Embedded
Derivatives
Both
the occurrence of a Qualified Financing and the exercise of the holders’ put options represent events that can accelerate
repayment of the 2019 Convertible Notes and involve a significant discount. Therefore, these features constitute embedded derivatives
that require bifurcation pursuant to ASC 815-15, Embedded Derivatives.
In
the event of a Qualified Financing occurring prior to July 31, 2019, the Phase I notes can be repaid at a 1.5x or 2.0x Liquidation
Amount, thereby resulting in an embedded derivative at issuance. For the year ended December 31, 2020 , embedded derivative
assets with initial fair value of $411 was recognized. Embedded derivative assets with initial fair value of $181 and embedded
derivative liabilities with initial fair value of $1,145 were recognized during 2019. These amounts were recorded as discounts
on the Convertible Notes. As of December 31, 2019, the embedded derivatives were classified as current liabilities on the
consolidated balance sheet and had fair values of $1,681. The embedded derivatives were fair valued through the Merger date. During
the year ended December 31, 2020 and 2019, a change in fair value of embedded derivative gain of $2,092 and a loss of $716
has been recognized, respectively. The fair value of the embedded derivative was zero as of December 31, 2020 as a result of the
conversion of the notes in connection of the Merger.
EOS
ENERGY ENTERPRISES, INC
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS)
|
12.
Convertible Notes Payable (cont.)
The
Company accounted for the 2019 Convertible Notes as deeply discounted zero coupon debt instruments. The balances payable at maturity
reflect liquidation multiples of 3.0 and 6.0 times the stated face value of the Phase I and 2019 Phase II Notes, respectively.
The following balances were recognized upon issuance of the Convertible Notes during the years ended December 31, 2020 and
2019:
|
|
For the year ended December 31
|
|
|
|
|
|
|
2019
|
|
|
2020
|
|
|
|
|
|
|
Phase I
|
|
|
Phase II
|
|
|
Phase I
|
|
|
Phase II
|
|
|
Total
|
|
Convertible notes payable
|
|
$
|
40,587
|
|
|
$
|
35,973
|
|
|
$
|
510
|
|
|
$
|
31,793
|
|
|
$
|
108,863
|
|
Discount, original issuance
|
|
|
(20,946
|
)
|
|
|
(23,982
|
)
|
|
|
(340
|
)
|
|
|
(21,196
|
)
|
|
$
|
(66,464
|
)
|
Premium (Discount), embedded derivative
|
|
|
181
|
|
|
|
(1,145
|
)
|
|
|
—
|
|
|
|
(411
|
)
|
|
$
|
(1,375
|
)
|
Discount, fair value of preferred units
|
|
|
—
|
|
|
|
(2,031
|
)
|
|
|
—
|
|
|
|
(1,759
|
)
|
|
$
|
(3,790
|
)
|
Discount, beneficial conversion features
|
|
|
(1,799
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
(1,799
|
)
|
Convertible notes payable, net
|
|
$
|
18,023
|
|
|
$
|
8,815
|
|
|
$
|
170
|
|
|
$
|
8,427
|
|
|
$
|
35,435
|
|
Subsequent
Measurement
With
respect to the Phase I Notes, the holders’ put option is immediately exercisable at the 1.5 times the principal amount of
the Notes. Pursuant to ASC 470-10, which states that notes with demand features should be stated at or near the amount of cash
that could be required to satisfy, a corresponding portion of the discount was amortized into interest expense immediately following
issuance. Additionally, the discount attributable to the BCF was immediately amortized into interest expense at issuance. The
remaining discount on the Phase I Notes was amortized into interest expense using the effective interest method through July 31,
2019, the date at which the note becomes payable at 3.0 times the outstanding principal amount.
Discounts
on the Phase II Notes were amortized into interest expense using the effective interest method through the stated maturity date
of October 31, 2019. On October 31, 2019, the Company defaulted under the Phase II note agreements, at which time the note holders’
put option became exercisable. Accordingly, discounts on Phase II Notes issued subsequent to October 31, 2019 were immediately
amortized into interest expense upon issuance.
At
issuance, the annual effective interest rates on the Phase I Notes were in excess of 400%. The Phase II Notes were issued with
annual effective interest rates in excess of 1,200%. During the year ended December 31, 2020 and 2019, the Company recognized
interest expense of $23,706 and $49,708 related to the Convertible Notes, respectively.
In
connection with the business combination, the convertible notes were then exchanged for the common stock of the Company per the
“Conversion upon Qualified Financing” term discussed above. 10,886,300 shares of common stock were issued to the notes
holders based on the liquidation amount of $108.9 million as of the Merger date and purchase price of $10 per shares agreed upon
in the Merger agreement. The balances attributable to the Convertible Notes immediately prior to the Merger were as follows:
|
|
Phase 1
|
|
|
Phase 2
|
|
|
Pre-Merger balance
|
|
Convertible notes payable
|
|
$
|
41,097
|
|
|
$
|
67,766
|
|
|
$
|
108,863
|
|
Discount, original issuance
|
|
|
(21,286
|
)
|
|
|
(45,178
|
)
|
|
|
(66,464
|
)
|
Discount, embedded derivative
|
|
|
181
|
|
|
|
(1,556
|
)
|
|
|
(1,375
|
)
|
Discount, fair value of preferred units
|
|
|
—
|
|
|
|
(3,790
|
)
|
|
|
(3,790
|
)
|
Discount, beneficial conversion features
|
|
|
(1,799
|
)
|
|
|
—
|
|
|
|
(1,799
|
)
|
Discount, accumulated amortization
|
|
|
22,904
|
|
|
|
50,524
|
|
|
|
73,428
|
|
Convertible notes payable, net
|
|
$
|
41,097
|
|
|
$
|
67,766
|
|
|
$
|
108,863
|
|
EOS
ENERGY ENTERPRISES, INC
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS)
|
12.
Convertible Notes Payable (cont.)
As
of December 31, 2019, the total principal and accrued interest on the Phase I Notes, 2019 Phase II Notes, and 2020 Phase
II Notes is equal to the applicable Liquidation Amount of 3.0, 6.0, and 6.0 times the outstanding principal, respectively. The
balances attributable to the 2019 Convertible Notes on December 31, 2019 were as follows:
|
|
Phase 1
|
|
|
Phase 2
|
|
|
December 31,
2019
|
|
Convertible notes payable
|
|
$
|
40,587
|
|
|
$
|
35,973
|
|
|
$
|
76,560
|
|
Discount, original issuance
|
|
|
(20,946
|
)
|
|
|
(23,982
|
)
|
|
|
(44,928
|
)
|
Discount, embedded derivative
|
|
|
181
|
|
|
|
(1,145
|
)
|
|
|
(964
|
)
|
Discount, fair value of preferred units
|
|
|
—
|
|
|
|
(2,031
|
)
|
|
|
(2,031
|
)
|
Discount, beneficial conversion features
|
|
|
(1,799
|
)
|
|
|
—
|
|
|
|
(1,799
|
)
|
Discount, accumulated amortization
|
|
|
22,564
|
|
|
|
27,158
|
|
|
|
49,722
|
|
Convertible notes payable, net
|
|
$
|
40,587
|
|
|
$
|
35,973
|
|
|
$
|
76,560
|
|
As
of December 31, 2019, aggregate Phase I and Phase II Notes attributable to AltEnergy totaled $24,415.
13.
Long-term Debt
The
following is a summary of the Company’s long-term indebtedness (in thousands):
|
|
December 31,
2020
|
|
|
December 31,
2019
|
|
Paycheck Protection Program loan payable
|
|
$
|
1,257
|
|
|
$
|
—
|
|
Other
|
|
|
94
|
|
|
|
—
|
|
Total
|
|
|
1,351
|
|
|
|
—
|
|
Less: long-term debt, current portion
|
|
|
(1,071
|
)
|
|
|
—
|
|
Long-term debt
|
|
$
|
280
|
|
|
$
|
—
|
|
Paycheck
Protection Program
On
April 7, 2020, the Company received $1,257 related to its filing under the Paycheck Protection Program and Coronavirus Aid, Relief,
and Economic Security Act (the “CARES Act”). The payment terms of the note are as follows:
|
●
|
No
payments during the deferral period, which is defined as the ten-month period beginning
on the eight weeks after the cash from the loan was received.
|
|
●
|
Commencing
one month after the expiration of the deferral period, and continuing on the same day
of each month thereafter until the maturity date, the Company shall pay to JPMorgan Chase
Bank, N.A. (the “Lender”), monthly payments of principal and interest, each
in such equal amount required to fully amortize the principal amount outstanding on the
note on the last day of the deferral period by the maturity date (twenty-four months
from the date of the note, or April 7, 2022).
|
|
●
|
On
the maturity date, the Company shall pay the Lender any and all unpaid principal plus
accrued and unpaid interest plus interest accrued during the deferral period.
|
|
●
|
The
Company may prepay this note at any time without payment of any premium.
|
EOS
ENERGY ENTERPRISES, INC
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS)
|
13.
Long-term Debt (cont.)
The
Lender is participating in the Paycheck Protection Program to help businesses impacted by the economic impact from COVID-19. Forgiveness
of this loan is only available for principal that is used for the limited purposes that qualify for forgiveness under the Small
Business Administration’s (the “SBA”) requirements. To obtain forgiveness, the Company must request it and must
provide documentation in accordance with the Small Business Administration (the “SBA”) requirements, and certify that
the amounts the Company is requesting to be forgiven qualify under those requirements. Forgiveness of the loan is dependent upon
approval of the SBA.
14.
Contingently Redeemable Preferred Units
As
of December 31, 2019, the Company had outstanding Series C, Series D, and 2019 Bridge Preferred Units (“EES Preferred
Units), which were issued at $1.10, $1.75, and $0.50 per unit, respectively.
Pursuant
to the EES LLC Agreement, the rights and privileges of the EES Preferred Members were as follows:
Voting —
The EES Preferred Members are entitled to vote together with the holders of EES Common Units on all matters submitted for members’
vote. Additionally, the EES Preferred Members occupy a majority of the seats of the Board of Directors and can therefore control
all decisions subject to the Board’s vote.
The
following actions require a majority vote of the Preferred Members:
|
●
|
Pay
any dividend on any EES Units
|
|
●
|
Agree
or enter into a merger, sale of a material portion of the Assets, or other corporate
reorganization or acquisition or any other transaction resulting in a change of control
of EES.
|
|
●
|
Create
or authorize the creation of any debt security, guarantee, or instrument with similar
effect in excess of $1,000,000, outside the normal course of business.
|
|
●
|
Enter
new lines of business or exit the current line of business.
|
|
●
|
Enter
into an exclusive agreement or arrangement to manufacture or sell EES’s technology.
|
|
●
|
Sell,
assign, transfer, pledge, or encumber material technology or material intellectual property.
|
|
●
|
Take
any action which deviates from the current budget approved by the Board of Directors
by more than 15%.
|
Preferred
Liquidation Preference — In the event of the termination of EES or a Company Sale (as defined within the EES LLC
agreement) the holders of the EES Preferred Units are entitled to receive for each outstanding unit an amount equal to the greater
of: 1) the original issuance price per unit plus an 8% liquidation preference, accrued from the issuance date and (2) the
amount which would have been payable to such EES Preferred Member had the EES Preferred Units been converted into EES Common Units
in connection with a termination or Company Sale.
After
payment of the Preferred Liquidation Preference, any remaining proceeds are distributed proportionally to the Common Unit holders.
A Company Sale is defined as a sale of Units, sale of Assets, merger, recapitalization, reorganization or otherwise, pursuant
to which one or more third parties (other than Voting Members) shall own in excess of fifty percent of the Voting Units or assets
of the Company. As of December 31, 2019, the EES Preferred Liquidation Preference was $136,816. Because the occurrence of
a Company Sale was not probable, the Company concluded the EES Preferred Units were not probable of becoming redeemable. Therefore,
the carrying value had not been remeasured to the Preferred Liquidation Preference.
EOS
ENERGY ENTERPRISES, INC
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS)
|
14.
Contingently Redeemable Preferred Units (cont.)
The
occurrence of a Company Sale requires the approval of both the Board of Directors and Preferred Members. Therefore, the liquidation
provisions are considered contingent redemption provisions as there are certain elements that are not solely within the control
of the Company. Accordingly, the Preferred Units have been presented in the mezzanine section of the consolidated balance sheet.
Conversion —
The Preferred Units are convertible at any time, at the option of the holder, into EES Common Units of the Company. Upon an optional
conversion, distributions payable on such EES Preferred Units that have been declared but remain unpaid, shall be converted into
EES Common Units. Upon the closing of a Qualified Public Offering (as defined within the EES LLC Agreement), EES Preferred Units
will automatically convert to common units.
The
EES Preferred Units are initially convertible on a one-to-one basis into EES Common Units, subject to certain adjustments for
unit splits and combinations. The EES Preferred Units are also subject to full-ratchet, anti-dilution price protection (a “down
round” provision). Under that provision, if the Company issues EES Common Units at an effective price that is less than
the conversion price (the “Dilutive Price”), then the conversion price of the EES Preferred Units is automatically
reduced to be equal to the Dilutive Price. The effect of that reduction is that, upon the issuance of either EES Common Units
or securities convertible into EES Common Units, at a Dilutive Price, the EES Preferred Units would be convertible into a greater
number of EES Common Units.
Bridge
Preferred Units
As
discussed at Note 12, the Company entered into subscription agreements to sell EES Preferred Units to the Holders at a price of
$0.50 per unit concurrently with the issuance of the 2019 Phase II Notes, which resulted in the issuance of approximately 12,000,000
EES Preferred Units (the “2019 EES Bridge Preferred Units”). The Company recognized $2,031 attributable to the 2019
EES Bridge Preferred Units based on the allocated fair value of cash proceeds.
Upon
the issuance of 2019 EES Bridge Preferred Units, the down round provision was triggered for the Series C and Series D EES Preferred
Units whereby the conversion price was adjusted from $1.10 and $1.75, respectively to $0.50 per EES Common Unit, which resulted
in approximately 144,200,000 additional EES Common Units being issuable upon conversion of the Series C and Series D EES Preferred
Units. As the fair value a EES Common Unit was determined to be less than $0.50 on both 1) the original issuance date of the Series
C and Series D EES Preferred Units and 2) immediately following the issuance of the EES Bridge Preferred Units, the down round
did not trigger a BCF. Therefore, a deemed dividend was not recognized.
EOS
ENERGY ENTERPRISES, INC
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS)
|
14.
Contingently Redeemable Preferred Units (cont.)
As
of December 31, 2019, the Preferred Units were convertible into approximately 224,900,000 EES common units. Refer to Note
12 for further discussion regarding the fair value allocated to the EES Preferred Units. During the years ended December 31,
2020 and 2019, activities attributable to the EES Preferred Units was as follows:
|
|
Preferred Units
|
|
|
|
Units
|
|
|
Amount
|
|
Balance,
December 31, 2018
|
|
|
68,716
|
|
|
$
|
105,548
|
|
Contributions allocated to EES Preferred Units
|
|
|
11,991
|
|
|
|
2,031
|
|
Discount on convertible notes, beneficial conversion feature
|
|
|
—
|
|
|
|
1,786
|
|
Balance,
December 31, 2019
|
|
|
80,707
|
|
|
|
109,365
|
|
Contributions allocated to EES Preferred Units
|
|
|
10,598
|
|
|
|
1,759
|
|
Issuance of EES Preferred Units
|
|
|
20,000
|
|
|
|
10,000
|
|
Balance,
November 16, 2020
|
|
|
111,305
|
|
|
$
|
121,124
|
|
In
connection with the Merger on November 16, 2020, the Preferred Units were converted to 255,523,120 EES common units. 14,727,844
shares of the Company’s common stock were issued to the EES Preferred Units holders.
15.
Stock-Based Compensation
Since
2012, Eos has issued stock options to employees and certain service providers under the 2012 Eos Equity Incentive Plan (“2012
Plan”). In addition to stock options, the 2012 Plan provides for the issuance of other forms of stock-based compensation,
including profit interests, unit appreciation rights and restricted units. Subsequent to the closing of the Merger, the Company
approved the 2020 Equity Incentive Plan (the “2020 Incentive Plan”) and reserved 6,000,000 shares of common stock
for issuance thereunder. The Incentive Plan became effective immediately upon the Closing of the Merger and all equity granted
under the 2012 Plan were converted into equivalent equity under the 2020 Incentive Plan. As of December 31, 2020, the Company
has stock options and restricted units issued under the 2020 Incentive Plan.
The
following table summarizes stock option activity during the years ended December 31, 2020 and 2019. All stock option activity
was retroactively restated to reflect the converted options. See Note 2 for the conversion in connection with the Merger.
|
|
|
Shares
|
|
|
Weighted-
Average
Exercise Price
|
|
|
Weighted-
Average
Remaining
Contractual
Term
|
|
Options Outstanding at December 31, 2018
|
|
|
|
303,028
|
|
|
$
|
26.20
|
|
|
|
2.8
|
|
Granted
|
|
|
|
254,882
|
|
|
$
|
9.54
|
|
|
|
|
|
Cancelled/Forfeited
|
|
|
|
(165,072
|
)
|
|
$
|
27.24
|
|
|
|
|
|
Options Outstanding at December 31, 2019
|
|
|
|
392,838
|
|
|
$
|
15.09
|
|
|
|
5.4
|
|
Granted
|
|
|
|
1,972,679
|
|
|
$
|
9.07
|
|
|
|
|
|
Cancelled/Forfeited
|
|
|
|
(221,881
|
)
|
|
$
|
18.57
|
|
|
|
|
|
Options Outstanding at December 31, 2020
|
|
|
|
2,143,636
|
|
|
$
|
9.19
|
|
|
|
9.5
|
|
Options Exercisable at December 31, 2020
|
|
|
|
15,859
|
|
|
$
|
26.81
|
|
|
|
1.7
|
|
EOS
ENERGY ENTERPRISES, INC
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS)
|
15.
Stock-Based Compensation (cont.)
As
of December 31, 2020 and 2019, 3,825,176 and 87,906 shares remain for future issuance, respectively. Options vest generally
over three to five years and have a term of five to ten years. During the year ended December 31, 2020, the Company granted
stock options with both service and performance conditions. Stock compensation is recognized on a straight-line basis over the
requisite service period of the award, which is generally the award vesting term. For awards with performance conditions, compensation
expense is recognized using an accelerated attribution method over the vesting period. The performance conditions primarily relate
to the completion of project milestones, achievement of operational certifications, and the Company’s closing of financing
rounds.
The
Company’s Restricted Units (RU) represent the right to receive one common share, subject to vesting and transferability
restrictions. For the year ended December 31, 2020 and December 31, 2019, 123,478 and — RUs were granted. During
the same periods, 174,761 and — common shares were issued for RUs that had fully vested during the current and prior periods.
As of December 31, 2020, 42,318 RUs were outstanding and unvested. These unvested RUs include (1) 31,188 units issued to
directors of our Board which will vest at the earlier of our next annual shareholders meeting or December 8, 2021 and (2) 11,130
units issued to a member of our senior management which will be vested on December 16, 2021. These RUs were measured at their
grant-date fair value of $13.46 per unit and will be fully vested in 2021.
The
Company recorded stock compensation expense of $5,081 for the year ended December 31, 2020 which includes $977 from RUs and
$4,104 from stock options, respectively. $135 of stock compensation was recorded for the year ended December 31, 2019, including
$4 from RUs and $131 from stock options, respectively. The stock compensation has been recorded in cost of sales, R&D expense
and general and administrative expenses in the Statements of Operations. Unrecognized stock compensation expenses amount to $7,416
and include $472 attributable to RUs, which is expected to be recognized within one year, and $6,944 attributable to stock option,
which is expected to be recognized over the next four years.
The
weighted average assumptions used to determine the fair value of options granted in 2020 and 2019 are as follows:
|
|
2020
|
|
|
2019
|
|
Volatility
|
|
|
52.99
|
%
|
|
|
58.20
|
%
|
Risk free interest rate
|
|
|
0.39
|
%
|
|
|
1.89
|
%
|
Expected life (years)
|
|
|
5.19
|
|
|
|
6.25
|
|
Dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
The
weighted average grant date fair value of all options granted was $5.38 and $1.21 per option for the years ended December 31,
2020 and 2019, respectively.
EOS
ENERGY ENTERPRISES, INC
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS)
|
16.
Shareholder’s Equity
Preferred
Shares
The
Company is authorized to issue 1,000,000 shares of preferred stock with such designations, voting and other rights and preferences
as may be determined from time to time by the Company’s board of directors. At December 31, 2020 and 2019, there were
no shares of preferred stock issued or outstanding.
Common
Stock
The
Company is authorized to issue 200,000,000 shares of common stock with $0.0001 par value. Holders of the Company’s common
stock are entitled to one vote for each share. At December 31, 2020 and 2019, there were 48,943,082 and 3,930,336 common
stocks issued and outstanding.
Warrants
The
Company sold warrants to purchase 9,075,000 shares of the Company’s common stock in the public offering and the private
placement on May 22, 2020. One warrant entitles the holder to purchase one whole share of common stock at a price of $11.50 per
share. At December 31, 2020, there were 9,075,000 warrants outstanding which will become exercisable on May 22, 2021.
Disgorgement
of short swing profits
For
the year ended December 31, 2020, the Company recognized $432 increase to Additional Paid in Capital as a capital contribution
from a stockholder for the disgorgement of short swing profits under Section 16 (b) of the Exchange Act, from B. Riley Securities,
Inc, which is affiliated with B. Riley Financial Inc, a shareholder owning more than 5% of our common stock. The Company received
the full payment in January 2021.
17.
Subsequent Events
On
January 22, 2021, the Triggering Event for the issuance of the Earnout Shares occurred as the Company’s stock price exceeded
$16.00 per share for 20 trading days within a consecutive 30-trading day period during the Earnout Period as described in Note
2. This Triggering Event resulted in the issuance of 2,000,000 shares of the Company’s common stock. In addition, the Block
B Sponsor Earnout Shares (as defined in Note 2) of 859,000 shares were released upon the achievement of the daily milestone of
$16.00 per share as discussed in Note 2.
PART
II
INFORMATION NOT REQUIRED IN PROSPECTUS
|
Item
13.
|
Other Expenses of Issuance and Distribution.
|
The
following table sets forth the estimated expenses to be borne by the registrant in connection with the issuance and distribution
of the shares of common stock being registered hereby.
Expense
|
|
|
Estimated
Amount
|
|
Securities and Exchange Commission registration fee
|
|
$
|
4,422.37
|
|
Accounting fees and expenses
|
|
|
45,000
|
|
Legal fees and expenses
|
|
|
25,000
|
|
Financial printing and miscellaneous expenses
|
|
|
3,000
|
|
Total
|
|
$
|
77,422.37
|
|
|
Item 14.
|
Indemnification of Directors and Officers.
|
Section 145
of the Delaware General Corporation Law, or the DGCL, permits a corporation to indemnify its directors and officers against expenses,
including attorneys’ fees, judgments, fines and amounts paid in settlements actually and reasonably incurred by them in
connection with any action, suit or proceeding brought by third parties. The directors or officers must have acted in good faith
and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to
any criminal action or proceeding, had no reason to believe their conduct was unlawful. In a derivative action, an action only
by or in the right of the corporation, indemnification may be made only for expenses actually and reasonably incurred by directors
and officers in connection with the defense or settlement of an action or suit, and only with respect to a matter as to which
they must have acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the
corporation. No indemnification may be made if such person must have been adjudged liable to the corporation, unless and only
to the extent that the court in which the action or suit was brought must determine upon application that the defendant officers
or directors are fairly and reasonably entitled to indemnity for such expenses despite such adjudication of liability. The current
certificate of incorporation and the bylaw of the registrant provide for indemnification by the registrant of its directors, senior
officers and employees to the fullest extent permitted by applicable law.
Section 102(b)(7)
of the DGCL permits a corporation to provide in its charter that a director of the corporation must not be personally liable to
the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (1) for
any breach of the director’s duty of loyalty to the corporation or its stockholders, (2) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of law, (3) for payments of unlawful dividends
or unlawful stock purchases or redemptions or (4) for any transaction from which the director derived an improper personal
benefit. The current certificate of incorporation of the registrant provide for such limitation of liability.
We
have entered into indemnification agreements with each of our directors and officers in which we have agreed to indemnify, defend
and hold harmless, and also advance expenses as incurred, to the fullest extent permitted under applicable law, from damage arising
from the fact that such person is or was an officer or director of our company or our subsidiaries.
The
indemnification rights set forth above shall not be exclusive of any other right which an indemnified person may have or hereafter
acquire under any statute, our amended and restated certificate of incorporation, our amended and restated bylaws, any agreement,
any vote of stockholders or disinterested directors or otherwise.
We
maintain standard policies of insurance that provide coverage (1) to our directors and officers against loss rising from
claims made by reason of breach of duty or other wrongful act and (2) to us with respect to indemnification payments that
we may make to such directors and officers.
We
have purchased and intend to maintain insurance on behalf of the registrant and any person who is or was a director or officer
against any loss arising from any claim asserted against him or her and incurred by him or her in that capacity, subject to certain
exclusions and limits of the amount of coverage.
|
Item
15.
|
Recent
Sales of Unregistered Securities.
|
Founder
Shares and Subscription Agreements
In
connection with BMRG’s initial formation in June 2019, a wholly-owned subsidiary of B. Riley Financial (which is the parent
of the Sponsor) was issued all of BMRG’s outstanding equity. All founder shares were contributed to the Sponsor in January
2020, resulting in the Sponsor directly and B. Riley Financial indirectly owning all outstanding founder shares. On February 3,
2020, BMRG conducted a 1:575 stock split and reclassification of BMRG’s common stock such that the Sponsor directly and
B. Riley Financial indirectly continued to own all 5,750,000 outstanding founder shares. On April 21, 2020, 20,000 founder shares
were transferred to each of Patrick Bartels, Jamie Kempner, Timothy Presutti and Robert Suss, BMRG’s independent director
nominees, at their par value. On May 19, 2020, the Sponsor returned 718,750 founder shares to BMRG for cancellation, resulting
in a total of 5,031,250 founder shares outstanding. The number of founder shares outstanding was determined based on the expectation
that the founder shares would represent 20% of the outstanding shares after the IPO excluding the private placement shares underlying
the private placement units. On May 28, 2020, the Sponsor forfeited 656,250 founder shares in connection with the determination
by the underwriters of the IPO not to exercise their over-allotment option in whole or in part.
Simultaneously
with the closing of the IPO, the Sponsor purchased an aggregate of 650,000 private placement units at $10.00 per private placement
unit ($6,500,000 in the aggregate). Each private placement unit consists of one share of common stock and one-half of one private
placement warrant. Each whole private placement warrant is exercisable to purchase one share of common stock at an exercise price
of $11.50 per share. The proceeds from the private placement units were added to the proceeds from the IPO held in the trust account.
There will be no redemption rights or liquidating distributions from the trust account with respect to the private placement securities.
Business
Combination and PIPE Investment
On
November 16, 2020, immediately prior to the Closing, BMRG issued to a number of purchasers (each, a “PIPE Investor”)
an aggregate of 4,000,000 shares of BMRG’s Class A common stock (the “PIPE Shares”), for a purchase price of
$10.00 per share and an aggregate purchase price of $40,000,000, pursuant to separate subscription agreements (each, a “Subscription
Agreement”). Pursuant to the Subscription Agreements, the Company gave certain registration rights to the Subscribers with
respect to the PIPE Shares. The shares of Class A common stock issued to the PIPE Investors pursuant to the Subscription Agreements
were not registered under the Securities Act in reliance on the exemption from registration provided by Section 4(a)(2) of the
Securities Act and/or Regulation D promulgated thereunder.
Upon
the Closing, (i) all shares of BMRG’s Class B common stock were reclassified to Class A common stock; and (ii) immediately
following this reclassification, all shares of BMRG’s Class A common stock were reclassified to our common stock. The shares
of Class A common stock issued upon reclassification of the Class B common Stock were not registered under the Securities Act
in reliance on the exemption from registration provided by Section 3(a)(9) of the Securities Act.
The
securities issued to the former equityholders of EES LLC pursuant to the Merger Agreement were not registered under the Securities
Act in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act and/or Regulation D promulgated
thereunder.
The
PIPE Shares issued to the PIPE Investors pursuant to the Subscription Agreements have not been registered under the Securities
Act in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act and/or Regulation D promulgated
thereunder.
|
Item 16.
|
Exhibits
and Financial Statements.
|
(a)
Exhibits
|
|
|
|
Incorporated
by Reference
|
Exhibit
Number
|
|
Description
of Document
|
|
Schedule/Form
|
|
File
Number
|
|
Exhibits
|
|
Filing
Date
|
2.1†
|
|
Agreement and Plan of Merger, dated as of September 7, 2020, by and among the Company, BMRG Merger Sub, LLC, BMRG Merger Sub II, LLC, Eos Energy Storage LLC, New Eos Energy LLC and AltEnergy Storage VI, LLC.
|
|
Form 8-K
|
|
File No. 001-39291
|
|
2.1
|
|
September 8, 2020
|
|
|
|
|
|
|
|
|
|
|
|
3.1
|
|
Third Amended and Restated Certificate of Incorporation of the Company
|
|
From 8-K
|
|
File No. 001-39291
|
|
3.1
|
|
November 20, 2020
|
|
|
|
|
|
|
|
|
|
|
|
3.2
|
|
Amended and Restated Bylaws of the Company
|
|
From 8-K
|
|
File No. 001-39291
|
|
3.2
|
|
November 20, 2020
|
|
|
|
|
|
|
|
|
|
|
|
4.1
|
|
Specimen Common Stock Certificate
|
|
From 8-K
|
|
File No. 001-39291
|
|
4.1
|
|
November 20, 2020
|
|
|
|
|
|
|
|
|
|
|
|
4.2
|
|
Specimen Warrant Certificate
|
|
From 8-K
|
|
File No. 001-39291
|
|
4.2
|
|
November 20, 2020
|
|
|
|
|
|
|
|
|
|
|
|
5.1*
|
|
Opinion of Morrison Cohen LP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.3
|
|
Warrant Agreement, dated May 19, 2020, by and between the Registrant and Continental Stock Transfer & Trust Company
|
|
Form 8-K
|
|
File No. 001-39291
|
|
4.1
|
|
May 22, 2020
|
|
|
|
|
|
|
|
|
|
|
|
10.1
|
|
Business Combination Marketing Agreement, dated as of May 19, 2020 by and between the Registrant and B. Riley FBR, Inc.
|
|
Form 8-K
|
|
File No. 001-39291
|
|
1.2
|
|
May 22, 2020
|
|
|
|
|
|
|
|
|
|
|
|
10.2
|
|
Letter Agreement, dated May 19, 2020, by and among the Registrant, its officers, its directors and B. Riley Principal Sponsor Co. II, LLC
|
|
Form 8-K
|
|
File No. 001-39291
|
|
10.1
|
|
May 22, 2020
|
|
|
|
|
|
|
|
|
|
|
|
10.3
|
|
Investment Management Trust Agreement, dated May 19, 2020, by and between the Registrant and Continental Stock Transfer & Trust Company
|
|
Form 8-K
|
|
File No. 001-39291
|
|
10.2
|
|
May 22, 2020
|
|
|
|
|
|
|
|
|
|
|
|
10.4
|
|
Registration Rights Agreement, dated May 19, 2020, by and between the Registrant, B. Riley Principal Sponsor Co. II, LLC and the Registrant’s independent directors
|
|
Form 8-K
|
|
File No. 001-39291
|
|
10.3
|
|
May 22, 2020
|
10.5
|
|
Private Placement Units Purchase Agreement, dated May 19, 2020, by and between the Registrant and B. Riley Principal Sponsor Co. II, LLC
|
|
Form
8-K
|
|
File
No. 001-39291
|
|
10.4
|
|
May
22, 2020
|
|
|
|
|
|
|
|
|
|
|
|
10.6
|
|
Administrative Support Agreement, dated May 19, 2020, by and between the Registrant and B. Riley Corporate Services, Inc.
|
|
Form 8-K
|
|
File No. 001-39291
|
|
10.6
|
|
May 22, 2020
|
|
|
|
|
|
|
|
|
|
|
|
10.7
|
|
Form of Subscription Agreement
|
|
From 8-K
|
|
File No. 001-39291
|
|
10.7
|
|
November 20, 2020
|
|
|
|
|
|
|
|
|
|
|
|
10.8
|
|
Sponsor Earnout Letter
|
|
From 8-K
|
|
File No. 001-39291
|
|
10.8
|
|
November 20, 2020
|
|
|
|
|
|
|
|
|
|
|
|
10.9
|
|
Registration Rights Agreement, dated November 16, 2020, by and among the Company and the securityholders party thereto.
|
|
From 8-K
|
|
File No. 001-39291
|
|
10.9
|
|
November 20, 2020
|
|
|
|
|
|
|
|
|
|
|
|
10.10
|
|
Eos Energy Enterprises, Inc. 2020 Incentive Plan
|
|
From 8-K
|
|
File No. 001-39291
|
|
10.10
|
|
November 20, 2020
|
|
|
|
|
|
|
|
|
|
|
|
10.11
|
|
Employment Agreement, dated June 22, 2020, by and between the Company and Joe Mastrangelo
|
|
From 8-K
|
|
File No. 001-39291
|
|
10.11
|
|
November 20, 2020
|
|
|
|
|
|
|
|
|
|
|
|
10.12
|
|
Employment Agreement, dated June 1, 2020, by and between the Company and Mack Treece
|
|
From 8-K
|
|
File No. 001-39291
|
|
10.12
|
|
November 20, 2020
|
|
|
|
|
|
|
|
|
|
|
|
10.13
|
|
Form of Indemnity Agreement
|
|
From 8-K
|
|
File No. 001-39291
|
|
10.13
|
|
November 20, 2020
|
|
|
|
|
|
|
|
|
|
|
|
21.1
|
|
Subsidiaries of the Company
|
|
From 8-K
|
|
File No. 001-39291
|
|
21.1
|
|
November 20, 2020
|
|
|
|
|
|
|
|
|
|
|
|
23.1*
|
|
Consent of Deloitte & Touche LLP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23.2*
|
|
Consent of Marcum, LLP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23.3
|
|
Consent of Morrison Cohen LP (included in Exhibit 5.1)
|
|
|
|
|
|
|
|
|
|
†
|
Certain of the exhibits
and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). The Registrant agrees to
furnish a copy of all omitted exhibits and schedules to the SEC upon its request.
|
|
*
|
Filed herewith.
|
|
(b)
|
Financial
Statements. The financial statements filed as part of this registration statement are listed in the
index to the financial statements immediately preceding such financial statements, which index to the financial statements is
incorporated herein by reference.
|
The
undersigned registrant, hereby undertakes:
|
(1)
|
To file, during
any period in which offers or sales are being made, a post-effective amendment to this registration statement:
|
|
(i)
|
To include any prospectus
required by Section 10(a)(3) of the Securities Act of 1933, as amended;
|
|
(ii)
|
To reflect in the
prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate
offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement;
and
|
|
(iii)
|
To include any material
information with respect to the plan of distribution not previously disclosed in the registration statement or any material
change to such information in the registration statement.
|
|
(2)
|
That, for the purpose
of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
|
|
(3)
|
To remove from registration
by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the
offering.
|
|
(4)
|
That, for the purpose
of determining liability under the Securities Act to any purchaser, each prospectus filed pursuant to Rule 424(b) as part
of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than
prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of
the date it is first used after effectiveness. Provided, however, that no statement made in a registration
statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated
by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser
with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration
statement or prospectus that was part of the registration statement or made in any such document immediately prior to such
date of first use.
|
|
(5)
|
That, for the purpose
of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities,
the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this
registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities
are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be
a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
|
|
(i)
|
Any preliminary
prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
|
|
(ii)
|
Any free writing
prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned
registrant;
|
|
(iii)
|
The portion of any
other free writing prospectus relating to the offering containing material information about the undersigned registrant or
its securities provided by or on behalf of the undersigned registrant; and
|
|
(iv)
|
Any other communication
that is an offer in the offering made by the undersigned registrant to the purchaser.
|
Insofar
as indemnification for liabilities arising under the Securities may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the
SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will
be governed by the final adjudication of such issue.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City of Edison, State of New Jersey, on March 8, 2021.
|
EOS
ENERGY ENTERPRISES, INC.
|
|
|
|
By:
|
/s/
Sagar Kurada
|
|
|
Sagar
Kurada Chief Financial Officer
|
Each
person whose signature appears below constitutes and appoints Joe Mastrangelo and Sagar Kurada his or her true and lawful attorney-in-fact
and agent, each with full power of substitution and re-substitution, severally, for him and in his or her name, place and stead,
in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement
on Form S-1, any subsequent registration statements pursuant to Rule 462 of the Securities Act of 1933, as amended, and to file
the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their or his or her
substitute or substitutes, may lawfully do or cause to be done by virtue hereof. This power of attorney may be executed in counterparts.
Pursuant
to the requirements of the Securities Act, this registration statement has been signed by the following persons in the capacities
and on March 8, 2021.
Name
|
|
Position
|
|
|
|
/s/
Joe Mastrangelo
|
|
Chief Executive Officer
and Director
|
Joe
Mastrangelo
|
|
(Principal
Executive Officer)
|
|
|
|
/s/
Sagar Kurada
|
|
Chief Financial Officer
|
Sagar Kurada
|
|
(Principal Financial
and Accounting Officer)
|
|
|
|
/s/
Daniel Shribman
|
|
Director
|
Daniel Shribman
|
|
|
|
|
|
/s/ Russ Stidolph
|
|
Director
|
Russ Stidolph
|
|
|
|
|
|
/s/ Dr. Krishna Singh
|
|
Director
|
Dr. Krishna Singh
|
|
|
|
|
|
/s/ Alex Dimitrief
|
|
Director
|
Alex Dimitrief
|
|
|
|
|
|
/s/ Andrey Zibelman
|
|
Director
|
Andrey Zibelman
|
|
|
|
|
|
/s/
Marian “Mimi” Walters
|
|
Director
|
Marian “Mimi”
Walters
|
|
|
II-6
B Riley Principal Merger... (NYSE:BMRG)
Historical Stock Chart
From Mar 2024 to Apr 2024
B Riley Principal Merger... (NYSE:BMRG)
Historical Stock Chart
From Apr 2023 to Apr 2024