Eos Energy Enterprises, Inc.EOSE
Eos Energy Enterprises, Inc. Fair Value Disclosure
Fair Value Measurement
(a) Included in Warrants liability - Related party on the Consolidated Balance Sheets.
The Company’s financial instruments consist of cash and cash equivalents, restricted cash, accounts receivable, notes receivable, contract assets, accounts payable, accrued expenses, warrants, notes payable — related party, contract liabilities and debt obligations.
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.
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.
The carrying value of cash and cash equivalents, restricted cash, accounts receivable, contract assets, contract liabilities and accounts payable and DOE Loan Facility are considered to be representative of their fair value.
The table below summarizes the fair values of certain liabilities that are included within the Company's accompanying Consolidated Balance Sheets, and their designations among the three fair value measurement categories:
December 31, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||||||||
| Liabilities | |||||||||||||||||||||||||||||||||||
SPA Warrant (a) | $ | — | $ | — | $ | 470,715 | $ | — | $ | — | $ | 188,857 | |||||||||||||||||||||||
Contingent warrants (a) | — | — | — | — | $ | — | 77,773 | ||||||||||||||||||||||||||||
IPO, April, May and December 2023 Warrants (b) | — | — | 313,253 | — | 269 | 189,322 | |||||||||||||||||||||||||||||
| Delayed Draw Term Loan | — | — | 150,427 | — | — | 76,188 | |||||||||||||||||||||||||||||
Embedded derivatives(c) | — | — | 228,719 | — | — | 44,396 | |||||||||||||||||||||||||||||
Total liabilities | $ | — | $ | — | $ | 1,163,114 | $ | — | $ | 269 | $ | 576,536 | |||||||||||||||||||||||
(b) All these instruments are Level 3, except for the IPO warrants (Level 2). These are included in Warrants liability on the Consolidated Balance Sheets.
(c) Included in Long-term debt for the year ended December 31, 2025, and Notes Payable - Related Party for the year ended December 31, 2024 on the Consolidated Balance Sheets.
IPO Warrants
The IPO warrants are classified as Level 2 financial instruments in the table above. They are valued on the basis of the quoted price of the Company’s public warrants, adjusted for insignificant difference between the public warrants and the private placement warrants.
April 2023 warrants, May 2023 warrants and December 2023 warrants
The April 2023 warrants, May 2023 warrants and the December 2023 warrants are classified as Level 3 financial instruments in the table above. The Company estimated the fair value of these warrants using the Black-Scholes model at inception and on subsequent valuation dates. This model incorporates inputs such as the stock price of the Company, risk-free interest rate, volatility and time to expiration. The volatility involves unobservable inputs classified as Level 3 of the fair value hierarchy.
The inputs used to determine the fair value of the April 2023 warrants, May 2023 warrants and the December 2023 warrants are as follows:
| April 2023 warrants | December 31, 2025 | December 31, 2024 | |||||||||
| Time to expiration | 2.79 years | 3.79 years | |||||||||
| Common stock price | $ | 11.46 | $ | 4.86 | |||||||
| Risk-free interest rate | 3.5 | % | 4.3 | % | |||||||
| Volatility | 105.0 | % | 90.0 | % | |||||||
| May 2023 warrants | December 31, 2025 | December 31, 2024 | |||||||||
| Time to expiration | 2.54 years | 3.54 years | |||||||||
| Common stock price | $ | 11.46 | $ | 4.86 | |||||||
| Risk-free interest rate | 3.5 | % | 4.3 | % | |||||||
| Volatility | 105.0 | % | 90.0 | % | |||||||
December 2023 warrants | December 31, 2025 | December 31, 2024 | |||||||||
| Time to expiration | 2.96 years | 3.96 years | |||||||||
| Common stock price | $ | 11.46 | $ | 4.86 | |||||||
| Risk-free interest rate | 3.5 | % | 4.3 | % | |||||||
| Volatility | 105.0 | % | 90.0 | % | |||||||
Embedded derivatives
The Company estimated the fair value of the embedded conversion features in the 2021 Convertible Note and AFG Convertible Notes using a binomial lattice model at inception and on subsequent valuation dates. This model incorporates inputs such as the stock price of the Company, dividend yield, risk-free interest rate, the effective debt yield and expected volatility. The effective debt yield and volatility involve unobservable inputs classified as Level 3 of the fair value hierarchy. On June 3, 2025, the Company repurchased the full $122,868 aggregate principal amount outstanding for the 2021 Convertible Note in a privately negotiated transaction. As such there was no derivative liability associated with the 2021 Convertible Note at December 31, 2025. On August 1, 2025 the Company issued a notice of redemption of Non-Affiliated Purchasers for all outstanding AFG Convertible Notes. On October 24, 2025 the Company issued a notice of redemption to the Affiliated Purchaser for all outstanding AFG Convertible Notes held by the Affiliated Purchaser. As such, there was no derivative liability associated with the AFG Convertible Notes at December 31, 2025. Refer to Note 13, Borrowings for further information on the conversion of AFG Convertible Notes.
In November 2025, the Company settled $200,000 aggregate principal amount of the $250,000 outstanding May 2025 Convertible Notes which was accounted for as induced conversion in accordance with ASC 470-20, Debt with Conversion and Other Options (Subtopic 470-20). In connection with the induced conversion, the Company recognized a non-option embedded derivative of the May 2025 Convertible Notes. The derivative resulted in the recognition of a gain of $23,132, included in Change in fair value of derivatives in the Consolidated Statements of Operations and Comprehensive Loss.
Refer to Note 13, Borrowings, for further information on the induced conversion and the non-option embedded derivative for the May 2025 Convertible Notes.
The inputs used to determine the fair value of the embedded derivative liabilities are as follows:
2021 Convertible Note | June 03, 2025 | December 31, 2024 | |||||||||
| Term | 1.08 Years | 1.50 Years | |||||||||
| Dividend yield | — | % | — | % | |||||||
| Risk-free interest rate | 4.1 | % | 4.2 | % | |||||||
| Volatility | 60.0 | % | 65.0 | % | |||||||
| Effective debt yield | 24.0 | % | 30.0 | % | |||||||
AFG Convertible Note | October 16, 2025 | July 28, 2025 | December 31, 2024 | ||||||||||||||
| Term | 8.96 Years | 0.93 Years | 1.50 years | ||||||||||||||
| Dividend yield | — | % | — | % | — | % | |||||||||||
| Risk-free interest rate | 3.9 | % | 4.1 | % | 4.2 | % | |||||||||||
| Volatility | 60.0 | % | 60.0 | % | 65.0 | % | |||||||||||
| Effective debt yield | 14.5 | % | 23.2 | % | 30.0 | % | |||||||||||
May 2025 Convertible Note | November 24, 2025 | November 19, 2025 | |||||||||
Term | 4.56 Years | 4.57 Years | |||||||||
| Dividend yield | — | % | — | % | |||||||
| Risk-free interest rate | 3.6 | % | 3.7 | % | |||||||
| Volatility | 60.0 | % | 60.0 | % | |||||||
| Effective debt yield | 10.5 | % | 11.5 | % | |||||||
November 2025 Convertible Note | December 31, 2025 | November 24, 2025 | |||||||||
| Term | 5.92 Years | 6.02 Years | |||||||||
| Dividend yield | — | % | — | % | |||||||
| Risk-free interest rate | 3.8 | % | 3.7 | % | |||||||
| Volatility | 60.0 | % | 60.0 | % | |||||||
| Effective debt yield | 11.7 | % | 12.8 | % | |||||||
Accounting for instruments resulting from the Credit and Securities Purchase Transaction
The Loan commitment assets were measured at fair value as of June 21, 2024 (see Note 3, Credit and Securities Purchase Transaction). The fair value was $76,091 at issuance calculated using the discounted cash flow model. They will not be subsequently remeasured at fair value.
The following table summarizes instruments that were initially and subsequently measured at fair value. (see Note 3, Credit and Securities Purchase Transaction):
| Instrument | Initial measurement date | Initial Fair Value | ||||||||||||
| Initial Draw of the Delayed Draw Term Loan | 6/21/2024 | $ | 25,653 | |||||||||||
| SPA Warrant | 6/21/2024 | $ | 32,903 | |||||||||||
| Contingent Warrants | 6/21/2024 | $ | 62,191 | |||||||||||
August 2024 Draw of the Delayed Draw Term Loan | 8/29/2024 | $ | 12,528 | |||||||||||
October 2024 Draw of the Delayed Draw Term Loan | 10/31/2024 | $ | 28,340 | |||||||||||
January 2025 Draw of the Delayed Draw Term Loan | 1/24/2025 | $ | 17,312 | |||||||||||
The fair value of each draw of the Delayed Draw Term Loan was estimated using a discounted cash flow (“DCF”) method, based on the contractual cash flows discounted at a debt yield and considering the probability of achieving certain milestones.
The fair value for the SPA warrant is estimated based on its intrinsic value, using the Eos common stock closing price adjusted by a discount for lack of marketability (“DLOM”), less the exercise price of $0.01 for the SPA Warrant. A DLOM was applied considering the SPA Warrants are unregistered.
The fair value of the Contingent Warrants is estimated based on the underlying Eos common stock closing price adjusted by a DLOM using Black-Scholes option pricing model, considering the probability of achieving certain milestones. A DLOM was applied considering the underlying shares of the Contingent Warrants were unregistered.
The fair values for all the above instruments are designated as level 3 measurements as they rely on significant unobservable inputs. The significant unobservable inputs for each of these instruments are disclosed in the tables below. All other inputs used are observable.
Quantitative information about all significant unobservable inputs used in the fair value measurement for non-recurring level 3 measurements:
Loan Commitment Assets: | June 21, 2024 | |||||||
Milestones achievement expectations | Very high probability | |||||||
Debt yield | 47.5 | % | ||||||
Quantitative information about all significant unobservable inputs used in the fair value measurement for recurring level 3 measurements:
Delayed Draw Term Loan Initial Tranche | December 31, 2025 | December 31, 2024 | June 21, 2024 | |||||||||||||||||
Debt yield | 11.9 | % | 30.0 | % | 47.5 | % | ||||||||||||||
Contingent Warrants- all tranches | December 31, 2024 | June 21, 2024 | ||||||||||||
Milestones achievement expectations | Very high probability | Very high probability | ||||||||||||
Volatility | 65.0 | % | 70.0 | % | ||||||||||
Discount for lack of marketability (“DLOM”) | 10.0 | % | 10.0 | % | ||||||||||
| SPA Warrant | December 31, 2025 | December 31, 2024 | June 21, 2024 | |||||||||||||||||
| Discount for lack of marketability (“DLOM”) | 5.0 | % | 10.0 | % | 10.0 | % | ||||||||||||||
Delayed Draw Term Loan August 2024 Draw | December 31, 2025 | December 31, 2024 | August 31, 2024 | |||||||||||||||||
Debt yield | 11.9 | % | 30.0 | % | 42.5 | % | ||||||||||||||
Delayed Draw Term Loan October 2024 Draw | December 31, 2025 | December 31, 2024 | October 31, 2024 | |||||||||||||||||
Debt yield | 11.9 | % | 30.0 | % | 42.5 | % | ||||||||||||||
Delayed Draw Term Loan January 2025 Draw | December 31, 2025 | January 24, 2025 | |||||||||
Debt yield | 11.9 | % | 30.0 | % | |||||||
Delayed Draw Term Loan Prepayment | June 4, 2025 | |||||||
Debt yield | 25.0 | % | ||||||
Level 3
The following table summarizes the changes in the fair value of liabilities that are included within the Company’s accompanying Consolidated Balance Sheets and are designated as Level 3:
| For the Years Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Delayed Draw Term Loan | |||||||||||
| Balance at beginning of the period | $ | 76,188 | $ | — | |||||||
Additions- Initial Draw | — | 25,653 | |||||||||
Additions- August 2024 Draw | — | 12,528 | |||||||||
Additions- October 2024 Draw | — | 28,340 | |||||||||
Additions - January 2025 Draw | 17,312 | — | |||||||||
Prepayment of the Term Loan | (28,582) | — | |||||||||
| Change in fair value of Term Loan | 85,509 | 9,667 | |||||||||
| Balance at end of the period | $ | 150,427 | $ | 76,188 | |||||||
| SPA Warrant and Contingent Warrants | |||||||||||
| Balance at beginning of the period | $ | 266,630 | $ | — | |||||||
| Additions | — | 95,094 | |||||||||
| Conversion to preferred stock | (102,186) | (193,920) | |||||||||
| Change in fair value of warrants | 306,271 | 365,456 | |||||||||
| Balance at end of the period | $ | 470,715 | $ | 266,630 | |||||||
| Embedded derivatives | |||||||||||
| Balance at beginning of the period | $ | 44,396 | $ | 4,423 | |||||||
Extinguishment of the 2021 Convertible Notes embedded derivatives | (87) | — | |||||||||
Extinguishment of the AFG Convertible Notes embedded derivatives | (121,313) | — | |||||||||
| Additions | 282,054 | 41 | |||||||||
| Change in fair value of derivatives - related party | 77,004 | 39,932 | |||||||||
Change in fair value of derivatives | (76,467) | — | |||||||||
| Settlement of non-option embedded derivative for May 2025 Convertible notes | 23,132 | — | |||||||||
| Balance at end of the period | $ | 228,719 | $ | 44,396 | |||||||
April, May and December 2023 Warrants | |||||||||||
| Balance at beginning of the period | $ | 189,322 | $ | 27,406 | |||||||
Exercised warrants | (155,008) | (9,096) | |||||||||
| Change in fair value of warrants | 278,939 | 171,012 | |||||||||
| Balance at end of the period | $ | 313,253 | $ | 189,322 | |||||||
The estimated fair value of financial instruments not carried at fair value in the Consolidated Balance Sheets was as follows:
Level in fair value hierarchy | December 31, 2025 | December 31, 2024 | ||||||||||||||||||||||||
| Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||||||||||||
| Notes receivable | 3 | $ | — | $ | — | $ | 847 | $ | 740 | |||||||||||||||||
| Loan commitment assets | 3 | — | — | 21,731 | 21,051 | |||||||||||||||||||||
| 2021 Convertible Notes* | 3 | — | — | 109,838 | 91,951 | |||||||||||||||||||||
May 2025 Convertible Notes | 3 | 48,044 | 123,000 | — | — | |||||||||||||||||||||
November 2025 Convertible Notes | 3 | 530,096 | 586,237 | — | — | |||||||||||||||||||||
| Senior Secured Term Loan | 3 | — | — | — | — | |||||||||||||||||||||
AFG Convertible Notes* | 3 | — | — | 63,033 | 65,053 | |||||||||||||||||||||
| Equipment financing facility | 3 | 372 | 375 | 2,385 | 2,097 | |||||||||||||||||||||
| Preferred Stock | 3 | 1,361,542 | 1,292,216 | 488,696 | 454,581 | |||||||||||||||||||||
DOE Loan Facility | 3 | 84,327 | 95,427 | 65,452 | 67,740 | |||||||||||||||||||||
| Total | $ | 2,024,381 | $ | 2,097,255 | $ | 751,982 | $ | 703,213 | ||||||||||||||||||
*Includes the embedded derivative liabilities.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Mar 4, 2025 | |
| 2023 | Mar 4, 2024 | |
| 2022 | Feb 28, 2023 | |
| 2021 | Feb 25, 2022 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.