SEC Filing Document

Company: ERock, Inc.
Ticker: 
CIK: 2110029
Filing Type: DRS
Document Type: DRS
Date Filed: 2026-02-17
Accession Number: 0001193125-26-054926
Exchange: 
SIC Code: 3620
SIC Description: Electrical Industrial Apparatus
URL: https://www.sec.gov/Archives/edgar/data/2110029/000119312526054926/filename1.htm

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may be exercisable equal to the aggregate principal amount of the note purchased divided by 1,497. As of December 31, 2024, the Company had issued the December 2024 Convertible Note worth $10.0 million of the minimum aggregate amount of $20.0 million. The contingently issuable warrants related to the remaining $10.0 million commitment are deemed issued for accounting purposes, and are recognized as a warrant liability recorded at fair value and marked-to-market each reporting period with changes in fair value being reflected in the consolidated statement of operations (see Note 3 — Fair Value). A corresponding loan commitment asset was recorded and included in other assets in the consolidated balance sheet, which will be reclassified as a debt discount upon future issuances of convertible notes and related warrants. As of the issuance date and as of December 31, 2024, the fair value of the contingently issuable warrant liability was $7.0 million.

The Company reviewed the terms of the 2024 Note Purchase Agreement to determine whether there are embedded derivative
instruments which are required to be bifurcated and accounted for separately. The Company determined the 2024 Note Purchase Agreement contained several embedded derivative instruments that are required to be bifurcated, and accounted for these as a
single, compound derivative instrument. The embedded derivative instruments in the 2024 Note Purchase Agreement the Company determined were required to be bifurcated included the conversion upon consummation of an equity financing, redemption upon
consummation of an equity financing, redemption upon a liquidity event, conversion upon maturity of the loan, and redemption upon event of default. The Company recorded the single, compound derivative instrument at fair value and marked-to-market each reporting period with changes in fair value being reflected in the consolidated statement of operations (see Note 3 — Fair Value).

December 2024 Convertible Note

Pursuant to the 2024 Note Purchase Agreement, on December 27, 2024, the Company issued a $10.0 million convertible
promissory note (the “December 2024 Convertible Note”) to an investor with a maturity date of December 27, 2026, provided that, for so long as the 2024 Credit Agreement remains outstanding, the maturity date of the December 2024
Convertible Note will be the date that is six months following the stated

Table of Contents

Enchanted Rock Holdings, LLC

Notes to Consolidated Financial Statements

December

maturity date of the 2024 Credit Agreement. The December 2024 Convertible Note bears an interest rate of 15% per annum, compounding quarterly and payable in kind (“PIK interest”) by
adding accrued interest to the outstanding principal amount. Interest accrual commences on the issue date and concludes either on maturity of the note or upon any event that triggers conversion or repayment prior to maturity.

The Company recorded the bifurcated embedded derivative features related to the issuance of the December 2024 Convertible Note
at fair value in accordance with ASC 815. As of the issuance date and as of December 31, 2024, the fair value of the derivative liability was $1.5 million and is included within other noncurrent liabilities in the consolidated balance
sheet with changes in fair value recognized in the consolidated statement of operations.

Per the terms of the 2024 Note
Purchase Agreement, a warrant was issued to the investor in conjunction with the December 2024 Convertible Note, which can be exercised in whole or in part up to an aggregate of 6,680 common units with an exercise price of $0.01 and has a maturity
date of December 27, 2034. If the holder has not exercised the warrant by the expiration date, the warrant will automatically be exercised. Based on the Company’s analysis of the criteria contained in ASC 815, the Company determined that
the warrant issued in conjunction with the December 2024 Convertible Note met the definition of a warrant liability. The warrant liability is recorded at fair value and
marked-to-market each reporting period with changes in fair value being reflected in the consolidated statement of operations (see Note 3 — Fair Value). A
corresponding debt discount contra-liability was recorded and will be amortized to interest expense over the term of the agreement using the effective interest rate method. As of the issuance date and as of December 31, 2024, the fair value of
the warrant liability was $7.0 million. As of the issuance date and as of December 31, 2024, the fair value of both the legally issued warrants and the contingently issuable warrants related to the 2024 Note Purchase Agreement and the
December 2024 Convertible Note was $14 million, and is included in warrant unit liabilities in the consolidated balance sheet.

On the issuance date of the December 2024 Convertible Note, the Company recorded a total debt discount of $8.5 million
consisting of the fair value of the derivative liability and the fair value of the warrant liability. The discount will be amortized to interest expense over the term of the December 2024 Convertible Note using the effective interest rate method. As
of December 31, 2024, the unamortized debt discount related to the December 2024 Convertible Note was $8.5 million.

In connection with the issuance of the December 2024 Convertible Note, the Company incurred debt issuance costs of $0.2
million which were recorded as a contra-liability and will be amortized to interest expense over the term of the December 2024 Convertible Note using the effective interest rate method. As of December 31, 2024, the unamortized debt issuance
costs related to the December 2024 Convertible Note was $0.2 million.

During the year ended December 31, 2024, the
effective interest rate on the December 2024 Convertible Note was 126%. During the year ended December 31, 2024, interest expense recognized related to the December 2024 Convertible Note was $18 thousand which includes $16 thousand attributable
to PIK interest and $2 thousand attributable to amortization of the issuance costs and debt discount.

The December 2024
Convertible Note is measured at amortized cost and has a net carrying value of $1.3 million as of December 31, 2024.

Table of Contents

Enchanted Rock Holdings, LLC

Notes to Consolidated Financial Statements

December

2023 Loan and Security Agreement

On August 4, 2023, the Company entered into a three-year term credit agreement for a revolving line of credit equal to the
lesser of (i) $40.0 million or (ii) the borrowing base as determined by the bank from time to time in accordance with the credit agreement (the “2023 Loan and Security Agreement”), with a maturity date of August 4, 2026.

On February 27, 2024, the Company paid off the outstanding $38.0 million of the note payable. During the year
ended December 31, 2024, interest expense recognized related to the 2023 Loan and Security Agreement was $1.4 million.

Deferred Financing Costs

Debt Issuance Costs

The Company paid approximately $5.5 million of debt issuance costs for the year ended December 31, 2024, of which
approximately $5.3 million was related to the 2024 Credit Agreement, and $0.2 million was related to the December 2024 Convertible Note. The debt issuance costs were recorded as a contra-liability and netted against the notes payable balance in
the consolidated balance sheet, and amortized over the terms of the respective agreements. Amortization of debt issuance costs for the year ended December 31, 202 was $0.4 million.

Debt Discount

The Company recorded a debt discount of approximately $13.6 million during the year ended December 31, 2024, of which
approximately $5.1 million was related to the 2024 Credit Agreement, and $8.5 million was related to the December 2024 Convertible Note. Of the $5.1 million debt discount related to the 2024 Credit Agreement, approximately
$1.9 million was attributable to a discount paid to the lender, and approximately $3.2 million was attributable to the fair value of the warrants issued. Of the $8.5 million debt discount related to the December 2024 Convertible Note,
approximately $7.0 million was attributable to the fair value of the warrant liability, and approximately $1.5 million was attributable to the fair value of the derivative liability. The debt discount was recorded as a contra-liability and
netted against the notes payable balance in the consolidated balance sheet, and amortized over the terms of the respective agreements. Debt discount amortization for the year ended December 31, 2024 was $0.4 million.

Loan Commitment Asset

The Company paid $0.75 million to a lender in relation to the delayed draw term loan portion of the 2024 Credit Agreement
during the year ended December 31, 2024. These costs were recorded as a loan commitment asset and included in other assets in the consolidated balance sheet, and amortized straight-line over the term of access to the lines of credit.
Amortization of the loan commitment asset for the year ended December 31, 2024 was $0.9 million, which included $0.5 million of expense related to the 2023 Loan and Security Agreement as it was paid off during 2024. These costs are included in
interest expense in the consolidated statement of operations.

12. MEZZANINE EQUITY

Series A Preferred Units