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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2023
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from   to

Commission file number 001-39291
EOS ENERGY ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
Delaware84-4290188
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
3920 Park Avenue
EdisonNJ08820
(Address of Principal Executive Offices)(Zip Code)
(732) 225-8400
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $0.0001 per shareEOSEThe Nasdaq Stock Market LLC
Warrants, each exercisable for one share of common stockEOSEWThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes    No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).     Yes   ☐     No  
The registrant had outstanding 133,994,506 shares of common stock as of August 9, 2023.



Table of Contents
Table of Contents
Page
Unaudited Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022
Item 1a.
Risk Factors
1

Table of Contents
FORWARD-LOOKING INFORMATION
All statements included in this Quarterly Report on Form 10-Q (“Quarterly Report”), other than statements or characterizations of historical fact, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions, as they relate to us, are intended to identify forward-looking statements. These statements appear in a number of places in this Quarterly Report and include statements regarding the intent, belief or current expectations of Eos Energy Enterprises, Inc. Forward-looking statements are based on our management’s beliefs, as well as assumptions made by, and information currently available to, them. Because such statements are based on expectations as to future financial and operating results and are not statements of fact, actual results may differ materially from those projected. Factors which may cause actual results to differ materially from current expectations include, but are not limited to:    
changes adversely affecting the business in which we are engaged;
our ability to forecast trends accurately;
our ability to generate cash, service indebtedness and incur additional indebtedness;
our ability to raise financing in the future;
our customer’s ability to secure project financing;
the amount of final tax credits available to our customers or to Eos Energy Enterprises, Inc. pursuant to the Inflation Reduction Act;
uncertainties around our ability to secure conditional commitment in a timely manner or at all, or final approval of a loan from the Department of Energy, the Loan Programs Office, or the timing of funding and the final size of any loan if approved;
the possibility of a government shutdown while we remain in the due diligence phase with the U.S. Department of Energy Loan Programs Office or while we await notice of a decision regarding the issuance of a loan from the Department of Energy Loan Programs Office;
our ability to develop efficient manufacturing processes to scale and to forecast related costs and efficiencies accurately;
fluctuations in our revenue and operating results;
competition from existing or new competitors;
the failure to convert firm order backlog and pipeline to revenue;
risks associated with security breaches in our information technology systems;
risks related to legal proceedings or claims;
risks associated with evolving energy policies in the United States and other countries and the potential costs of regulatory compliance;
risks associated with changes to U.S. trade environment;
risks resulting from the impact of global pandemics, including the novel coronavirus, Covid-19;
our ability to maintain the listing of our shares of common stock on NASDAQ;
our ability to grow our business and manage growth profitably, maintain relationships with customers and suppliers and retain our management and key employees;
risks related to adverse changes in general economic conditions, including inflationary pressures and increased interest rates;
risk from supply chain disruptions and other impacts of geopolitical conflict;
changes in applicable laws or regulations;
other factors detailed under the section entitled “Risk Factors” herein.
2

Table of Contents
Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. Forward-looking statements speak only as of the date they are made. Readers are cautioned not to put undue reliance on forward-looking statements, and, except as required by law, the Company assumes no obligation and does not intend to update or revise these forward-looking statements, whether as a result of new information, future events, or otherwise. See also Part I, Item 1A, “Risk Factors” disclosures contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 for additional discussion of the risks and uncertainties that could cause the Company’s actual results to differ materially from those expressed or implied in its forward-looking statements.









3

Table of Contents
Part I - Financial Information
EOS ENERGY ENTERPRISES, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)

June 30,
2023
December 31,
2022
ASSETS 
Current assets:  
Cash and cash equivalents$23,243 $17,076 
Restricted cash3,363 2,725 
Accounts receivable, net 1,521 1,666 
Inventory, net16,630 23,260 
Vendor deposits13,289 4,789 
Notes receivable, net55 36 
Contract assets, current2,036 1,859 
Prepaid expenses1,350 2,289 
Other current assets2,484 1,447 
Total current assets63,971 55,147 
Property, plant and equipment, net19,683 27,169 
Intangible assets, net329 240 
Goodwill4,331 4,331 
Notes receivable, long-term, net808 827 
Operating lease right-of-use asset, net4,198 4,316 
Long-term restricted cash11,550 11,422 
Other assets4,080 3,336 
Total assets$108,950 $106,788 
LIABILITIES
Current liabilities:
Accounts payable $15,401 $34,669 
Accrued expenses20,887 15,359 
Operating lease liability, current 1,246 1,106 
Long-term debt, current 3,093 2,872 
Convertible notes payable, current - related party 2,688 
Contract liabilities, current 2,379 3,850 
Other current liabilities35 32 
Total current liabilities43,041 60,576 
Long-term liabilities:
Operating lease liability3,813 4,130 
Long-term debt87,606 87,321 
Convertible notes payable - related party141,915 82,950 
Contract liabilities, long-term956 956 
Warrants liability - related party57,360 78 
Other liabilities3,800 3,488 
Total long-term liabilities295,450 178,923 
Total liabilities338,491 239,499 
COMMITMENTS AND CONTINGENCIES (NOTE 15)
4

Table of Contents
EOS ENERGY ENTERPRISES, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
June 30,
2023
December 31,
2022
SHAREHOLDERS' DEFICIT
Common stock, $0.0001 par value, 300,000,000 and 300,000,000 shares authorized, 127,309,960 and 82,653,781 shares outstanding on June 30, 2023 and December 31, 2022, respectively
14 9 
Preferred stock, $0.0001 par value, 1,000,000 shares authorized, no shares outstanding on June 30, 2023 and December 31, 2022
  
Additional paid in capital620,006 513,614 
Accumulated deficit(849,570)(646,340)
Accumulated other comprehensive income9 6 
Total shareholders' deficit(229,541)(132,711)
Total liabilities and shareholders' deficit$108,950 $106,788 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5

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EOS ENERGY ENTERPRISES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except share and per share amounts)
Three Months Ended June 30,Six Months Ended June 30,
 2023202220232022
Revenue
Total revenue$249 $5,895 $9,084 $9,193 
Costs and expenses
Cost of goods sold11,246 36,866 38,186 72,443 
Research and development expenses5,026 5,464 10,471 10,427 
Selling, general and administrative expenses13,138 19,115 27,093 33,394 
Loss from write-down of property, plant and equipment5,436 1,997 6,196 2,005 
Grant (income) expense, net (169) 4 
Total costs and expenses34,846 63,273 81,946 118,273 
Operating loss(34,597)(57,378)(72,862)(109,080)
Other (expense) income
Interest expense, net(4,886)(284)(9,715)(622)
Interest expense - related party(14,758)(2,664)(28,513)(4,838)
(Loss) gain on change in fair value of derivatives - related party(74,633)4,248 (87,723)12,510 
Loss on debt extinguishment(1,876) (3,510) 
Other expense(878)(632)(895)(513)
Loss before income taxes$(131,628)$(56,710)$(203,218)$(102,543)
Income tax expense (benefit)2 (23)12 (65)
Net loss$(131,630)$(56,687)$(203,230)$(102,478)
Other comprehensive income
Foreign currency translation adjustment, net of tax2 5 3 5 
Comprehensive loss$(131,628)$(56,682)$(203,227)$(102,473)
Basic and diluted loss per share attributable to common shareholders
Basic$(1.12)$(1.01)$(1.99)$(1.86)
Diluted$(1.12)$(1.01)$(1.99)$(1.86)
Weighted average shares of common stock
Basic117,320,802 56,021,185 102,106,041 54,991,475 
Diluted117,320,802 56,021,185 102,106,041 54,991,475 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6

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EOS ENERGY ENTERPRISES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' (DEFICIT) EQUITY
(In thousands, except share and per share amounts)
Common StockAdditional Paid in capitalAccumulated Other Comprehensive IncomeAccumulated DeficitTotal
SharesAmount
Balances on March 31, 2022
53,980,608 $5 $452,093 $ $(462,318)(10,220)
Stock-based compensation— — 3,434 — — 3,434 
Release of restricted stock units121,956 — — — — — 
Cancellation of shares used to settle payroll tax withholding(15,881)— (26)— — (26)
Issuance of common stock3,967,939 1 4,603 — — 4,604 
Commitment fee for SEPA settled by common stock465,117 — 1,061 — — 1,061 
Foreign currency translation adjustment— — — 5 — 5 
Net loss— — — — (56,687)(56,687)
Balances on June 30, 2022
58,519,739 $6 $461,165 $5 $(519,005)$(57,829)
Balances on March 31, 2023
95,222,670 $10 $542,326 $7 $(717,940)$(175,597)
Stock-based compensation— — 2,304 — — 2,304 
Exercise of stock options200,000 — 268 — — 268 
Release of restricted stock units598,127 — — — — — 
Cancellation of shares used to settle payroll tax withholding(43,354)— (106)— — (106)
Issuance of common stock 31,332,517 4 75,214 — — 75,218 
Foreign currency translation adjustment— — — 2 — 2 
Net loss— — — — (131,630)(131,630)
Balances on June 30, 2023
127,309,960 $14 $620,006 $9 $(849,570)$(229,541)




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EOS ENERGY ENTERPRISES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' (DEFICIT) EQUITY
(In thousands, except share and per share amounts)
Common StockAdditional Paid in capitalAccumulated Other Comprehensive IncomeAccumulated DeficitTotal
SharesAmount
Balances on December 31, 2021
53,786,632 $5 $448,969 $ $(416,527)$32,447 
Stock-based compensation— — 7,377 — — 7,377 
Exercise of warrants600 — 7 — — 7 
Release of restricted stock units427,607 — — — — — 
Cancellation of shares used to settle payroll tax withholding(128,156)— (852)— — (852)
Issuance of common stock3,967,939 1 4,603 — — 4,604 
Commitment fee for SEPA settled by common stock465,117 — 1,061 — — 1,061 
Foreign currency translation adjustment— — — 5 — 5 
Net loss— — — — (102,478)(102,478)
Balances on June 30, 2022
58,519,739 $6 $461,165 $5 $(519,005)$(57,829)
Balances on December 31, 2022
82,653,781 $9 $513,614 $6 $(646,340)$(132,711)
Stock-based compensation— — 5,667 — — 5,667 
Exercise of stock options200,000 — 268 — — 268 
Release of restricted stock units1,513,333 — — — — — 
Cancellation of shares used to settle payroll tax withholding(290,071)— (451)— — (451)
Issuance of common stock 43,232,917 5 100,908 — — 100,913 
Foreign currency translation adjustment— — — 3 — 3 
Net loss— — — — (203,230)(203,230)
Balances on June 30, 2023
127,309,960 $14 $620,006 $9 $(849,570)$(229,541)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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EOS ENERGY ENTERPRISES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except share and per share amounts)
Six Months Ended June 30,
 20232022
Cash flows from operating activities  
Net loss$(203,230)$(102,478)
Adjustment to reconcile net loss to net cash used in operating activities
Stock-based compensation5,667 7,377 
Depreciation and amortization5,151 2,266 
Loss on debt extinguishment3,510  
Loss from write-down of property, plant and equipment 6,196 2,005 
Amortization of right-of-use assets481 409 
Non-cash interest expense2,469  
Non-cash interest expense - related party23,580 1,752 
Loss (gain) on change in fair value of derivatives - related party87,723 (12,510)
Commitment fee for SEPA agreement settled by common stock - related party 1,061 
Other5,555 2,690 
Changes in operating assets and liabilities:
Prepaid expenses939 827 
Inventory6,630 35 
Accounts receivable155 (686)
Vendor deposits(5,423)(5,268)
Contract assets(106) 
Accounts payable(16,196)14,734 
Accrued expenses5,184 7,020 
Accounts payable and accrued expenses - related party (1,200)
Operating lease liabilities(540)(303)
Contract liabilities(1,471)906 
Note payable (4,679)
   Other (1,856)(950)
Net cash used in operating activities(75,582)(86,992)
Cash flows from investing activities
Investment in notes receivable (261)
Purchases of property, plant and equipment(10,100)(11,497)
Net cash used in investing activities(10,100)(11,758)
Cash flows from financing activities
Principal payments on finance lease obligations(15)(6)
Proceeds from exercise of options355  
Proceeds from exercise of public warrants 7 
Proceeds from issuance of convertible notes - related party48,050 7,225 
Payment of debt issuance costs - related party(1,116) 
Repayment of equipment financing facility(1,381)(790)
Proceeds from issuance of common stock and warrants - related party49,250 5,000 
Payment of equity issuance costs - related party(2,080) 
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EOS ENERGY ENTERPRISES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except share and per share amounts)
Six Months Ended June 30,
 20232022
Repurchase of shares from employees for income tax withholding purposes(451)(852)
Net cash provided by financing activities92,612 10,584 
Effect of exchange rate changes on cash, cash equivalents and restricted cash3 2 
Net increase (decrease) in cash, cash equivalents and restricted cash6,933 (88,164)
Cash, cash equivalents and restricted cash, beginning of the period31,223 105,692 
Cash, cash equivalents and restricted cash, end of the period$38,156 $17,528 
Non-cash investing and financing activities
Accrued and unpaid capital expenditures$ $2,402 
Issuance of convertible notes for interest paid in kind4,915 3,087 
Fixed assets acquired with finance lease 70 
Right-of-use operating lease assets in exchange for lease liabilities363 2,112 
Issuance of common stock upon settlement of Yorkville convertible notes51,023  
Accrued and unpaid capitalized internal-use software130  
Supplemental disclosures
Cash paid for interest$7,434 $434 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)

1.Overview
Nature of Operations
Eos Energy Enterprises, Inc. (the “Company,” “we,” “us,” “our,” and “Eos”) designs, develops, manufactures, and markets innovative energy storage solutions for utility-scale, microgrid, and commercial & industrial (“C&I”) applications. Eos developed a broad range of intellectual property with multiple patents covering unique battery chemistry, mechanical product design, energy block configuration and a software operating system (Battery Management System). The Company has only one operating and reportable segment.
Liquidity and Going Concern
As a growth company in the early commercialization stage of its lifecycle, Eos is subject to inherent risks and uncertainties associated with the development of an enterprise. In this regard, substantially all of the Company’s efforts to date have been devoted to the development and manufacturing of battery energy storage systems and complimentary products and services, recruitment of management and technical staff, deployment of capital to expand the Company’s operations to meet customer demand and raising capital to fund the Company’s development. As a result of these efforts, the Company has incurred significant losses and negative cash flows from operations since its inception and expects to continue to incur such losses and negative cash flows for the foreseeable future until such time that the Company can reach a scale of profitability to sustain its operations.
In order to execute its development strategy, the Company has historically relied on outside capital through the issuance of equity, debt, and borrowings under financing arrangements (collectively “outside capital”) to fund its cost structure and expects to continue to rely on outside capital for the foreseeable future. While the Company believes it will eventually reach a scale of profitability to sustain its operations, there can be no assurance the Company will be able to achieve such profitability or do so in a manner that does not require its continued reliance on outside capital. Moreover, while the Company has historically been successful in raising outside capital, there can be no assurance the Company will be able to continue to obtain outside capital in the future or do so on terms that are acceptable to the Company.
As of the date the accompanying unaudited condensed consolidated financial statements were issued (the “issuance date”), management evaluated the significance of the following negative financial conditions in accordance with Accounting Standard Codification 205-40, Going Concern:
Since its inception, the Company has incurred significant losses and negative cash from operations in order to fund its development. During the six months ended June 30, 2023, the Company incurred a net loss of $203,230, incurred negative cash flows from operations of $75,582, and had an accumulated deficit of $849,570 as of June 30, 2023.
As of June 30, 2023, the Company had $23,243 of unrestricted cash and cash equivalents available to fund the Company’s operations, no additional borrowings available to fund its operations under pre-existing financing arrangements (see Note 12, Borrowings) and working capital of $20,930, inclusive of $3,093 of outstanding debt that is currently scheduled to mature within the next twelve months beyond the issuance date.
While the Company has available capacity under certain pre-existing arrangements to issue shares of the Company’s common stock, including under the Standby Equity Purchase Agreement with YA II PN, Ltd. (“SEPA”), subject to the exchange cap, and at-the-market (“ATM”) offering program, (see Note 18, Shareholders’ Deficit) to aid in funding the Company’s operations, the Company’s ability to secure such funding is dependent upon certain conditions, such as investors’ willingness to purchase the Company’s common stock and at a price that is acceptable to the Company. Accordingly, as of the issuance date there is no assurance the Company will be able to secure funding under these pre-existing arrangements or on terms that are acceptable to the Company.
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EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)

1. Overview (cont.)
Similarly, while the Company has historically been successful in raising additional outside capital to fund the Company’s operations, as of the issuance date no assurance can be provided the Company will be successful in obtaining additional outside capital or on terms that are acceptable to the Company. In this regard, the Company continues to progress through the Department of Energy (“DOE”) Loan Programs Office’s (“LPO”) process for its Title XVII loan and is awaiting a conditional approval decision. There can be no assurance that the Company will be able to secure such a loan or on terms that are acceptable to the Company.
The Company is required to remain in compliance with a quarterly minimum financial liquidity covenant under its Senior Secured Term Loan Credit Agreement (“Senior Secured Term Loan”). While the Company was in compliance with this covenant as of June 30, 2023, and expects to remain in compliance as of September 30, 2023, absent the Company’s ability to secure additional outside capital, the Company may be unable to remain in compliance with this covenant beginning on December 31, 2023 and thereafter. In the event the Company is unable to remain in compliance with the minimum financial liquidity covenant and the other nonfinancial covenants required by the Senior Secured Term Loan, and the Company is further unable to cure such noncompliance or secure a waiver, Atlas Credit Partners (ACP) Post Oak Credit I LLC may, at its discretion, exercise any and all of its existing rights and remedies, which may include, among other things, entering into a forbearance agreement with the Company, and/or asserting its rights in the Company’s assets securing the loan. Moreover, the Company’s other lenders may exercise similar rights and remedies under the cross-default provisions of their respective borrowing arrangements with the Company.
Absent an ability to secure additional outside capital in the near term, the Company will be unable to meet its obligations as they become due over the next twelve months beyond the issuance date.
In the event the Company’s ongoing efforts to raise additional outside capital prove unsuccessful, management will be required to seek other strategic alternatives, which may include, among others, a significant curtailment in the Company’s operations, a sale of certain of the Company’s assets, a sale of the entire Company to strategic or financial investors, and/or allowing the Company to become insolvent.
These uncertainties raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying unaudited condensed consolidated financial statements have been prepared on the basis that the Company will continue to operate as a going concern, which contemplates that the Company will be able to realize assets and settle liabilities and commitments in the normal course of business for the foreseeable future. Accordingly, the accompanying unaudited condensed consolidated financial statements do not include any adjustments that may result from the outcome of these uncertainties.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its 100% owned, direct and indirect subsidiaries and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). All intercompany transactions and balances have been eliminated in the preparation of the unaudited condensed consolidated financial statements. These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The interim financial statements should be read in conjunction with the audited consolidated financial statements, including the notes thereto, included in our 2022 Annual Report on Form 10-K. These interim results are not necessarily indicative of results for the full year.
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EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
2. Summary of Significant Accounting Policies (cont.)
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Reclassification of Prior Year Presentation
Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations.
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. The Company recognizes grant money once it is reasonably assured that the Company will comply with the conditions of the grant.
Recent Accounting Pronouncements
There were no new accounting standards or updates during the six months ended June 30, 2023 that would have a material impact on the Company’s unaudited condensed consolidated financial statements.
3. Revenue Recognition
The Company primarily earns revenue from sales of its energy storage systems and services including installation, commissioning, and extended warranty services. Product revenues, which are generally recognized at a point in time, and service revenues, which are generally recognized over time, are as follows:
For the Three Months Ended June 30,For the Six Months Ended
June 30,
2023202220232022
Product revenue$249 $5,771 $8,924 $9,065 
Service revenue 124 $160 $128 
Total revenues$249 $5,895 $9,084 $9,193 
For the three months ended June 30, 2023, the Company had one customer that accounted for 100.0% of the total revenue and for the six months ended June 30, 2023, we had one customer that accounted for 97.8% of the total revenue, respectively.
For the three months ended June 30, 2022, the Company had one customer that accounted for 89.6% of the total revenue and for the six months ended June 30, 2022, we had two customers that accounted for 73.1% and 12.7%, respectively.
Lessor revenue
The Company leases battery energy storage systems to one customer through a sales-type lease with a 20-year term. For the three and six months ended June 30, 2022, the Company recognized revenue of $128 and $1,166 from the sales-type lease, respectively. No revenue was recognized from the sales-type lease for the three and six months ended June 30, 2023.
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EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
3. Revenue Recognition (cont.)
Contract assets and Contract liabilities
The following table provides information about contract assets and contract liabilities from contracts with customers. Contract assets, current and contract liabilities, current and long-term are included separately on the unaudited condensed consolidated balance sheets and contract assets, long-term are included under other assets, net.
 June 30,
2023
December 31,
2022
Contract assets$2,106 $2,000 
Contract liabilities$3,335 $4,806 
The Company recognizes contract assets for certain contracts in which revenue recognition performance obligations have been satisfied but invoicing to the customer has not yet occurred. Contract liabilities primarily relate to consideration received from customers in advance of the Company’s satisfying performance obligations under contractual arrangements. Contract balances are reported in a net contract asset or liability position on a contract-by-contract basis at the end of each reporting period.
Contract assets increased by $106 during the six months ended June 30, 2023 due to recognition of revenues for which invoicing has not yet occurred. Contract liabilities decreased by $1,471 during the six months ended June 30, 2023, reflecting $3,450 of revenue recognized from customers, partially offset by $1,979 in customer advance payments during the six months ended June 30, 2023 that was included in the contract liability balance at the beginning of the period.
Contract liabilities of $2,379 as of June 30, 2023 are expected to be recognized within the next twelve months and long-term contract liabilities of $956 are expected to be recognized as revenue over approximately the next one to two years. Contract assets of $2,036 as of June 30, 2023 are expected to be recognized within the next twelve months. Long-term contract assets of $70 are expected to be recognized as accounts receivable over approximately the next two years.
4. Cash, Cash Equivalents and Restricted Cash
Restricted cash - current consists of escrow deposits related to U.S. Custom Bonds insurance and escrow deposits related to our credit card program agreements. Additionally, long-term restricted cash relates to interest that is required to be held in escrow per the Senior Secured Term Loan agreement in an amount equal to the aggregate amount of the four immediately following interest payments owed (see Note 12, Borrowings for further discussion).
The following table reconciles reported amounts from the unaudited condensed consolidated balance sheets to cash, cash equivalents and restricted cash reported within the unaudited condensed consolidated statements of cash flows:

June 30,
2023
June 30,
2022
Cash and cash equivalents$23,243 $16,273 
Restricted cash (1)
3,363 1,255 
Long-term restricted cash11,550  
    Total cash, cash equivalents, and restricted cash $38,156 $17,528 
(1) Restricted cash, current.
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EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)

5. Inventory
The following table provides information about inventory balances:
 June 30,
2023
December 31,
2022
Raw materials$16,186 $22,899 
Work-in-process444 361 
Finished goods  
     Total inventory, net$16,630 $23,260 
6. Property, Plant and Equipment, Net
The following table provides information about property, plant and equipment, net balances:
 Estimated Useful livesJune 30,
2023
December 31,
2022
Equipment
5 to 10 years
$20,887 $23,653 
Finance lease5 years379 379 
Furniture
5 to 10 years
1,895 1,868 
Leasehold improvementsLesser of useful life/
remaining lease
7,098 6,303 
Tooling
2 to 3 years
3,408 6,926 
     Total33,667 39,129 
Less: Accumulated depreciation (13,984)(11,960)
Total property, plant and equipment, net$19,683 $27,169 
Depreciation expense related to property, plant and equipment was $2,444 and $1,261 for the three months ended June 30, 2023 and 2022, respectively and $5,111 and $2,246 for the six months ended June 30, 2023 and 2022, respectively.
7. Intangible Assets
Intangible assets include patents valued at $400, which represents the cost to acquire the patents. These patents are determined to have useful lives and are amortized into the results of operations over ten years. The Company recorded amortization expense of $10 for each period for the three months ended June 30, 2023 and 2022 and $20 for each period for the six months ended June 30, 2023 and 2022, related to patents.
During the six months ended June 30, 2023, the Company capitalized $130 of costs for internal-use software. The software has a useful life and is amortized into the results of operations over 3 years. The Company recorded amortization expense of $10 and $20 for the three and six months ended June 30, 2023 related to software, respectively.
8. Notes Receivable, Net and Variable Interest Entities (“VIEs”) Consideration
Notes receivable primarily consist of amounts due to the Company related to the financing offered to certain customers. The Company reports notes receivable at the principal balance outstanding less an allowance for losses. The estimate of credit losses is based on historical trends, customers’ financial condition and current economic trends. The Company charges interest at a fixed rate and calculates interest income by applying the effective rate to the outstanding principal balance.
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EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
8. Notes Receivable, Net and Variable Interest Entities (“VIEs”) Consideration (cont.)

The Company had notes receivable, net of $863 and $863 outstanding as of June 30, 2023 and December 31, 2022, respectively. As of June 30, 2023 and December 31, 2022, the Company recorded an allowance for expected credit loss from the notes receivable of $2 and $2, respectively.
The customers to whom the Company offers financing through notes receivables are VIEs. However, the Company is not the primary beneficiary, because the Company does not have power to direct the activities of the VIEs that most significantly impact the VIEs’ economic performance. Therefore, the VIEs are not consolidated into the Company’s unaudited condensed consolidated financial statements. The maximum loss exposure is limited to the carrying value of notes receivable as of the balances sheet dates.
9. Accrued Expenses
Accrued expenses were as follows:
June 30,
2023
December 31,
2022
Accrued payroll$4,232 $2,706 
Warranty reserve (1)
4,421 3,836 
Accrued legal and professional expenses2,574 840 
Provision for contract losses2,166 2,561 
Insurance premium payable, current2,861 2,607 
Other4,633 2,809 
Total accrued expenses$20,887 $15,359 
(1) Refer to the table below for the warranty reserve activity for the three and six months ended June 30, 2023.

The following table summarizes warranty reserve activity:

Three Months Ended
June 30,
Six Months Ended
June 30,
2023202220232022
Warranty reserve - beginning of period$3,972 $3,240 $3,836 2,112 
Additions for current period deliveries41 828 398 1,501 
Changes in the warranty reserve estimate708 366 708 1,321 
Warranty costs incurred(300)(798)(521)(1,298)
Warranty reserve - end of period$4,421 $3,636 $4,421 $3,636 
10. Government Grants
California Energy Commission
From time-to-time, the Company has entered into grant agreements with the California Energy Commission (“CEC”) for conducting studies to demonstrate the benefits of certain energy-saving technologies to utility companies and consumers in the State of California. Under such agreements, the Company is entitled to receive reimbursement of costs incurred by the Company covered by the grants.
For the three and six months ended June 30, 2023, grant expense, net was $0 for both periods. For the three and six months ended June 30, 2022, grant (income) expense, net was $(169) and $4, respectively.
As of June 30, 2023 and December 31, 2022, the Company had grant receivables related to the CEC in the amounts of $245 and $263, which were included in other current assets on the unaudited condensed consolidated balance sheets, respectively. There was no deferred grant income as of June 30, 2023 and December 31, 2022. Related expenses incurred by the Company are offset against grant income earned or received from the CEC.
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EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
10. Government Grants (cont.)

Inflation Reduction Act of 2022 (“IRA”)
On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 into law. The IRA has significant economic incentives for both energy storage customers and manufacturers for projects placed in service after December 31, 2022. Starting in 2023, there are Production Tax Credits under Internal Revenue Code 45X (“PTC”), that can be claimed on battery components manufactured in the U.S. and sold to U.S. or foreign customers. These tax credits available to manufacturers include a credit for ten percent of the cost incurred to make electrode active materials in addition to credits of $35 per kWh of capacity of battery cells and $10 per kWh of capacity of battery modules. These credits are cumulative, meaning that companies will be able to claim each of the available tax credits based on the battery components produced and sold through 2029, after which the PTC will begin to gradually phase down through 2032. In June 2023, the IRS issued temporary and proposed regulations related to applicable tax credit transferability and direct pay provisions of the Inflation Reduction Act. The Company has reviewed these regulations and believe they do not have a material impact on the financial statements.
Since the PTC is a refundable credit (i.e., a credit with a direct-pay option available), the PTC is outside the scope of ASC 740. Therefore, the Company accounts for the PTC under a government grant model. GAAP does not address the accounting for government grants received by a business entity that are outside the scope of ASC 740. The Company’s accounting policy is to analogize to IAS 20, Accounting for Government Grants and Disclosure of Government Assistance, under IFRS Accounting Standards. Under IAS 20, once it is reasonably assured that the entity will comply with the conditions of the grant, the grant money should be recognized on a systematic basis over the periods in which the entity recognizes the related expenses or losses for which the grant money is intended to compensate. The Company recognizes grants once it is probable that both of the following conditions will be met: (1) the Company is eligible to receive the grant and (2) the Company is able to comply with the relevant conditions of the grant.
The PTC is recorded as the applicable items are produced and sold. For the three and six months ended June 30, 2023, the Company recognized PTC of $45 and $844 as a reduction of cost of goods sold on the unaudited condensed consolidated statement of operations and comprehensive loss, respectively. As of June 30, 2023, grant receivable related to the PTC in the amount of $844 is recorded in other assets on the unaudited condensed consolidated balance sheets.
11. Related Party Transactions
2021 Convertible Notes Payable
In July 2021, the Company issued $100,000 aggregate principal amount of convertible notes to Spring Creek Capital, LLC, a wholly-owned, indirect subsidiary of Koch Industries, Inc. (the “2021 Convertible Notes”). In connection with these 2021 Convertible Notes, the Company paid $3,000 to B. Riley Securities, Inc., a related party, who acted as a placement agent. Refer to Note 12, Borrowings, for additional information.
AFG Convertible Notes
In January 2023, the Company issued and sold $13,750 of 26.5% Convertible Senior PIK Notes due 2026 (“AFG Convertible Notes”) to Great American Insurance Company, Ardsley Partners Renewable Energy, LP, CCI SPV III, LP, Denman Street LLC, John B. Berding Irrevocable Children’s Trust, John B. Berding, and AE Convert, LLC, a Delaware limited liability company managed by Russell Stidolph, a related party as Mr. Stidolph is a director of the Company (together, the “Purchasers”). In connection with the issuance and sale of the AFG Convertible Notes, the Company entered into an investment agreement (the “Investment Agreement”) with the Purchasers. Refer to Note 12, Borrowings, for additional information.
Warrants Liability
The Company has issued private placement warrants to various counterparties since the initial public offering (“IPO”), some of which are exercisable and outstanding as of June 30, 2023 and December 31, 2022. Refer to Note 13, Warrants Liability - Related Party, for additional information.
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EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
11. Related Party Transactions (cont.)
In April 2023 and May 2023, respectively, the Company issued common stock and private placement warrants (the “April 2023 Transaction” and “May 2023 Transaction”, respectively). Refer to Note 18, Shareholders’ Equity and Note 13, Warrants Liability - Related Party for additional information.
Standby Equity Purchase Agreement
On April 28, 2022, the Company entered into the SEPA. Pursuant to the SEPA, the Company has the right, but not the obligation, to sell to Yorkville shares of its common stock at the Company’s request. See Note 12, Borrowings for pre-advance loans in form of convertible promissory notes and Note 18, Shareholders' Deficit for additional information.
12. Borrowings

The Company’s debt obligations at carrying value consist of the following related and third-party borrowings:
June 30, 2023
December 31, 2022
Borrowing OutstandingCarrying Value*Borrowing OutstandingCarrying Value*
2021 Convertible Notes Payable - due June 2026$112,442 $91,862 $109,167 $82,950 
Senior Secured Term Loan - due March 2026100,000 83,503 100,000 81,616 
AFG Convertible Note - due June 202615,390 50,053   
Equipment financing facility - due April 20257,196 7,196 8,577 8,577 
Yorkville Convertible Promissory Note - due June 2023  2,000 2,688 
  Total borrowings235,028 232,614 219,744 175,831 
   Current portion3,093 3,093 5,560 5,560 
      Total borrowings, non-current$231,935 $229,521 $214,184 $170,271 
*Carrying value includes unamortized deferred financing costs, unamortized discounts, and fair value of embedded derivative liabilities.
Yorkville Convertible Promissory Notes - Related Party
On December 29, 2022, the Company issued and sold a convertible promissory note (the “December 2022 Promissory Note”) with an aggregate principal amount of $2,000 in a private placement to Yorkville under a second supplemental agreement to the SEPA (the “Second Supplemental Agreement”). In January 2023, Yorkville delivered Investor Notices requiring the Company to issue and sell an aggregate of 1,953,612 shares of common stock to Yorkville to offset all outstanding amounts owed to Yorkville under the December 2022 Promissory Note.
On February 1, 2023, the Company issued a convertible promissory note (the “February 2023 Promissory Note”) with an aggregate principal amount of $5,000 in a private placement to Yorkville under the Second Supplemental Agreement. The fair value of the February 2023 Promissory Note at issuance was $5,887, which was greater than the proceeds received. As such, the Company recorded the excess of fair value of the February 2023 Promissory Note over the proceeds received as interest expense in the amount of $987, which is reflected in the unaudited condensed consolidated statements of operations and comprehensive loss.
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EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
12. Borrowings (cont.)
In February 2023, Yorkville delivered Investor Notices requiring the Company to issue and sell an aggregate of 3,879,706 shares of common stock to Yorkville, in order to offset all outstanding amounts owed to Yorkville under the February 2023 Promissory Note.
On March 17, 2023, the Company issued a convertible promissory note (the “March 2023 Promissory Note”) with an aggregate principal amount of $15,000 in a private placement to Yorkville under a third supplemental agreement to the SEPA. The fair value of the March 2023 Promissory Note at issuance was $20,665, which was greater than the proceeds received. As such, the Company recorded the excess of fair value of the March 2023 Promissory Note over the proceeds received as interest expense in the amount of $5,965, which is reflected in the unaudited condensed consolidated statements of operations and comprehensive loss.
In March and April 2023, Yorkville delivered Investor Notices requiring the Company to issue and sell an aggregate of 8,641,918 shares of common stock to Yorkville, in order to offset all outstanding amounts owed to Yorkville under the March 2023 Promissory Note.
On April 10, 2023, the Company issued a convertible promissory note (the “April 2023 Promissory Note”) with an aggregate principal amount of $15,000 in a private placement to Yorkville under a fourth supplemental agreement to the SEPA. The fair value of the April 2023 Promissory Note at issuance was $25,319, which was greater than the proceeds received. As such, the Company recorded the excess of fair value of the April 2023 Promissory Note over the proceeds received as interest expense in the amount of $10,619, which is reflected in the unaudited condensed consolidated statements of operations and comprehensive loss.
During the second quarter of 2023, Yorkville delivered Investor Notices requiring the Company to issue and sell an aggregate of 8,471,793 shares of common stock to Yorkville, in order to offset all outstanding amounts owed to Yorkville under the April 2023 Promissory Note.
The Company recognized a loss on debt extinguishment from the issuance of common stock from the Yorkville Convertible Promissory Notes of $1,876 and $3,510 for the three and six months ended at June 30, 2023, respectively which is reflected in the unaudited condensed consolidated statements of operations and comprehensive loss.
Embedded derivatives- Yorkville Convertible Promissory Notes - Related party
The conversion feature for each of the Yorkville Convertible Promissory Notes discussed above did not qualify for the scope exception to derivative accounting, therefore bifurcation was required for each issuance. Upon extinguishment of each Yorkville Promissory Note, the embedded derivatives were adjusted to fair value. This remeasurement resulted in net gains of $8,818 and $6,922 for the three and six months ended June 30, 2023, respectively, which is included in (loss) gain on change in fair value of derivatives - related party on the unaudited condensed consolidated statements of operations and comprehensive loss.
At June 30, 2023, there were no outstanding Yorkville Convertible Notes.
2021 Convertible Notes Payable – Related Party
On July 6, 2021, the Company entered into an investment agreement with Spring Creek Capital, LLC, a wholly-owned, indirect subsidiary of Koch Industries, Inc. The investment agreement provides for the issuance and sale to Koch Industries of the 2021 Convertible Notes in the aggregate principal amount of $100,000. The maturity date of the 2021 Convertible Notes is June 30, 2026, subject to earlier conversion, redemption, or repurchase.
See Note 14, Fair Value Measurement for the assumptions used to determine the fair value of the embedded derivative as of June 30, 2023 and as of December 31, 2022. As of June 30, 2023 and December 31, 2022, the fair value of the embedded conversion feature was $3,976 and $918, respectively. The (loss) gain from the change in fair value of the embedded derivative conversion feature for the three months ended June 30, 2023 and 2022 amounted to $(2,176) and $3,978 and for the six months ended June 30, 2023 and 2022 amounted to $(2,942) and $11,673, respectively.
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EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
12. Borrowings (cont.)
Interest expense recognized on the 2021 Convertible Notes is as follows:
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Contractual interest expense$1,637 $1,544 $3,274 $3,087 
Amortization of debt discount1,250 924 2,457 1,467 
Amortization of debt issuance costs122 90 239 177 
    Total$3,009 $2,558 $5,970 $4,731 

The balances for the 2021 Convertible Notes are as follows:
June 30, 2023
December 31, 2022
Principal$112,442 $109,167 
Unamortized debt discount(22,392)(24,733)
Unamortized debt issuance costs(2,164)(2,402)
Embedded conversion feature3,976 918 
     Aggregate carrying value$91,862 $82,950 
The Company is obligated to repay all contractual interest attributable to the 2021 Convertible Notes in-kind in accordance with the terms under the Senior Secured Term Loan. Therefore, as of June 30, 2023, and December 31, 2022, interest payable attributable to the 2021 Convertible Notes was $0 and $0, respectively.
AFG Convertible Notes - Related Party
On January 18, 2023, the Company entered into the Investment Agreement with the Purchasers relating to the issuance and sale to the Purchasers of $13,750 in aggregate principal amount of the Company’s AFG Convertible Notes.
Contractual Interest Rates - The AFG Convertible Notes will bear interest at a rate of 26.5% per annum, which shall be entirely paid-in-kind. All interest payments shall be made through an increase in the principal amount of the outstanding AFG Convertible Notes or through the issuance of additional notes (such interest is referred to herein as “PIK Interest”). Interest on the AFG Convertible Notes is payable semi-annually in arrears on June 30 and December 30, commencing on June 30, 2023. It is expected that the Notes will mature on June 30, 2026, subject to earlier conversion, redemption or repurchase.
Conversion Rights - The AFG Convertible Notes are convertible at the option of the holder (the “Conversion Option”) at any time until the business day prior to the maturity date, including in connection with a redemption by the Company. The AFG Convertible Notes will be convertible into shares of the Company’s common stock, par value $0.0001 per share, based on an initial conversion price of approximately $1.67 per share subject to customary anti-dilution and other adjustments. The Company has the right to settle conversions in shares of common stock, cash, or any combination thereof.
Optional Redemption - On or after June 30, 2024, provided that the Company has obtained stockholder approval, the AFG Convertible Notes will be redeemable by the Company in the event that the closing sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides the redemption notice. The redemption price shall be equal to the then current principal amount of the AFG Convertible Notes (inclusive of all PIK Interest), plus the aggregate amount of all interest payments on the AFG Convertible Notes that the holders of the AFG Convertible Notes to be redeemed would have been entitled to receive had the AFG Convertible Notes remained outstanding to the maturity date.
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EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
12. Borrowings (cont.)
Contingent Redemption - With certain exceptions, upon the occurrence of certain events and fundamental changes described in the AFG Convertible Notes Agreement, the holders of the AFG Convertible Notes may require that the Company repurchase all or part of the principal amount of the AFG Convertible Notes at a purchase price of 100% of the principal amount of the AFG Convertible Notes, plus accrued and unpaid interest.
Embedded Derivative - The Conversion Option includes an exercise contingency, which requires the Company to obtain shareholder approval for conversions subject to the Exchange Cap. If shareholder approval is not obtained, following commercially reasonable efforts, the Company will be required to settle the conversion in excess of the Exchange Cap in cash. Since settlement in cash may be required in absence of shareholder approval, the embedded conversion feature fails the equity classification guidance in ASC 815 and is thus precluded from being classified in equity. Therefore, the embedded conversion feature is required to be bifurcated from the AFG Convertible Notes and accounted for at fair value at each reporting date, with changes in fair value recognized on the unaudited condensed consolidated statements of operations and comprehensive loss.
The fair value of the embedded derivative upon issuance was $6,451. The embedded derivative is presented on the unaudited condensed consolidated balance sheet as a component of Convertible notes payable - related party. The loss from the change in fair value of the embedded derivative for the three and six months ended June 30, 2023 amounted to $22,068 and $32,340, respectively. See Note 14, Fair Value Measurement for the assumptions used to determine the fair value of the embedded derivative as of June 30, 2023 and as of the date of issuance.
The fair value of the AFG Convertible Notes at issuance was $16,623, which was greater than the proceeds received. The Company recorded the difference of $2,873 as interest expense on the unaudited condensed consolidated statement of operations and comprehensive loss.
Interest expense recognized on the AFG Convertible Notes is as follows:
Three Months Ended
June 30, 2023
Six Months Ended
June 30, 2023
Contractual interest expense$860 $1,639 
Amortization of debt discount210 358 
Amortization of debt issuance costs59 101 
    Total$1,129 $2,098 
The balance for the AFG Convertible Notes is as follows:
June 30, 2023
Principal$15,390 
Unamortized debt discount(3,220)
Unamortized debt issuance costs(908)
Embedded conversion feature38,791 
     Aggregate carrying value$50,053 
As of June 30, 2023, the Company was obligated to repay all contractual interest attributable to the AFG Convertible Notes in-kind in accordance with the terms of the Investment Agreement by increasing the principal amount of the outstanding Convertible Note. Therefore, as of June 30, 2023, interest payable attributable to the AFG Convertible Notes was $0.
Senior Secured Term Loan
On July 29, 2022, the Company entered into a $100,000 Senior Secured Term Loan Credit Agreement with Atlas Credit Partners (ACP) Post Oak Credit I LLC., as administrative agent for the lenders and collateral agent for the secured parties. As of June 30, 2023, the Company had total borrowings of $100,000 under the Senior Secured Term Loan.
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EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
12. Borrowings (cont.)
The Senior Secured Term Loan is scheduled to mature on the earlier of (i) July 29, 2026, and (ii) 91 days prior to the current maturity date of the 2021 Convertible Notes of June 30, 2026. The Company has the right at any time to prepay any Borrowing in whole or in part in an amount of not less than $500.
The outstanding principal balance of the Senior Secured Term Loan bears interest, at the applicable margin plus, at the Company’s election, either (i) the benchmark secured overnight financing rate (“SOFR”), which is a per annum rate equal to (y) the Adjusted Term SOFR (as defined in the agreement) plus 0.2616%, or (ii) the alternate base rate (“ABR”), which is a per annum rate equal to the greatest of (x) the Prime Rate (as defined in the agreement), (y) the NYFRB Rate (as defined in the agreement) plus 0.5% and (z) the SOFR. The applicable margin under the Credit Agreement is 8.5% per annum with respect to SOFR loans, and 7.5% per annum with respect to ABR loans. Interest on the Senior Secured Term Loan accrues at a variable interest rate, and interest payments are due quarterly. The Company may elect to convert SOFR Loans to ABR (and ABR Loans to SOFR). As of June 30, 2023, the interest rate in effect for the Senior Secured Term Loan for the second quarter of 2023 interest payment was 14.00%.
Any repayment of principal prior to the second anniversary of the issuance date is subject to a call premium. The call premium is equal to the present value of all interest payments due through June 30, 2024, calculated using a discount rate equal to the applicable treasury rate as of the repayment date plus 50 basis points. The Company deemed that the fair value of the embedded derivative features which qualify for bifurcation was de minimis.
Concurrently, the Company entered into a Guarantee and Collateral Agreement which secures and guarantees the Senior Secured Term Loan with substantially all the assets of the Company and its subsidiaries, other than the Company’s equity interests in Hi-Power and assets of Hi-Power. Additionally, interest is required to be escrowed in an amount equal to the aggregate amount of the four immediately following interest payments owed on the Loans which was $11,550 at June 30, 2023. This escrowed and restricted cash is presented on a separate line item on the unaudited condensed consolidated balance sheets as long-term restricted cash.
The agreements also contain customary affirmative and negative covenants. They limit the Company’s and its subsidiaries’ ability to incur indebtedness, make restricted payments, including cash dividends on its common stock, make certain investments, loans and advances, enter into mergers and acquisitions, sell, assign, transfer or otherwise dispose of its assets, enter into transactions with its affiliates and engage in sale and leaseback transactions, among other restrictions. Furthermore, the limitation on the Company’s ability to incur indebtedness also (i) limits the amount of Pre-Advance Loans that the Company may have outstanding at any time to $15,000 under the SEPA and (ii) requires the payment of principal and interest in kind on each of the Pre-Advance Loans (if any) and the 2021 Convertible Notes. While the Company was in compliance with this covenant as of June 30, 2023 and currently expects to remain in compliance as of September 30, 2023, absent the Company’s ability to secure additional outside capital, the Company may be unable to remain in compliance with this covenant beginning on December 31, 2023 and thereafter (see Note 1, Overview for further discussion).
The following table summarizes interest expense recognized:
Three Months Ended June 30,Six Months Ended June 30,
20232023
Contractual interest expense$3,453 $6,826 
Amortization of debt discount99 192 
Amortization of debt issuance costs873 1,695 
Total $4,425 $8,713 
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EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
12. Borrowings (cont.)
The Senior Secured Term Loan balance is as follows:
June 30, 2023
December 31, 2022
Principal$100,000 $100,000 
Unamortized debt discount(1,674)(1,866)
Unamortized debt issuance costs(14,823)(16,518)
     Aggregate carrying value$83,503 $81,616 
Equipment Financing facility
The Company entered into an agreement on September 30, 2021 with Trinity Capital Inc. (“Trinity”) for a $25,000 equipment financing facility, the proceeds of which will be used to acquire certain manufacturing equipment, subject to Trinity’s approval. Each draw is executed under a separate payment schedule (a “Schedule”) that constitutes a separate financial instrument. The financing fees included in each Schedule are established through monthly payment factors determined by Trinity. Such monthly payment factors are based on the Prime Rate reported in The Wall Street Journal in effect on the first day of the month in which a Schedule is executed. The Company has drawn a portion of the facility as follows:
Date of Draw
Gross Amount of Initial Draw
Coupon Interest RateDebt Issuance Costs
September 2021$7,000 14.3%$175 
September 20224,216 16.2%96 
    Total Equipment Financing loans$11,216 $271 
On September 30, 2022, the equipment facility’s unused commitment of $13,784 expired.
As of June 30, 2023 and December 31, 2022, total equipment financing debt outstanding was $7,196 and $8,577, respectively of which $3,093 and $2,872 are recorded as a current liability on the unaudited condensed consolidated balance sheets, respectively. The Company recognized $292 and $205 for the three months ended June 30, 2023 and 2022, and $609 and $424 for the six months ended June 30, 2023 and 2022 as interest expense attributable to the equipment financing agreement, respectively.
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EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
13. Warrants Liability - Related Party
The Company issued private placement warrants to purchase shares of common stock to the sponsor of B. Riley Principal Merger Corp. II (“BMRG”) in conjunction with its initial public offering in 2020 (the “IPO warrants”). As of June 30, 2023 and December 31, 2022, 325,000 IPO warrants were outstanding with fair values of $455 and $78, respectively.
In April 2023, the Company issued 16,000,000 shares of common stock and 16,000,000 private placement warrants to purchase shares of common stock, and in May 2023, the Company issued another 3,601,980 shares of common stock and 3,601,980 private placement warrants to purchase shares of common stock. The proceeds from the April 2023 and May 2023 Transactions were $40,000, and $8,000, respectively. The fair value of the warrants and common stock for the April 2023 and May 2023 Transactions at issuance was $66,366 and $13,267, respectively, which was greater than the proceeds. As such, the Company recorded the excess as losses in the amounts of $26,366 and $5,267, respectively, as a component of (loss) gain on change in fair value of derivatives - related party in the Company’s unaudited condensed consolidated statements of operations and comprehensive loss.
The warrants issued as part of the April 2023 Transaction and May 2023 Transaction (“April 2023 warrants” and “May 2023 warrants”, respectively) are classified as Level 3 financial instruments in the fair value hierarchy (refer to Note 15, Fair Value Measurement). As of June 30, 2023, the April 2023 and May 2023 warrants were outstanding with fair values of $45,980 and $10,925, respectively.
For all warrants in aggregate, the change in fair value for the three months ended June 30, 2023 and 2022 amounted to increases in the liability of $27,574 and $270 , respectively. The fair value of the warrant liability for the six months ended June 30, 2023 and 2022 increased by $27,730 and $837, respectively. The change has been recognized in (loss) gain on change in fair value of derivatives - related party in the Company’s unaudited condensed consolidated statements of operations and comprehensive loss.
14. Fair Value Measurement
The Company’s financial instruments consist of cash and cash equivalents, restricted cash, accounts receivable, notes receivable, contract assets, accounts payable, warrants, convertible notes payable — related party, contract liabilities 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 the exercise of this judgment may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.
The carrying value of cash and cash equivalents, restricted cash, accounts receivable, contract assets, contract liabilities and accounts payable are considered to be representative of their fair value due to the short maturity of these instruments.
The table below summarizes the fair values of certain liabilities that are included within the Company’s accompanying unaudited condensed consolidated balance sheets, and their designations among the three fair value measurement categories:
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EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)

14. Fair Value Measurement (cont.)
June 30, 2023
December 31, 2022
Level 1Level 2Level 3Level 1Level 2Level 3
Liabilities
Warrants liabilities$ $455 $56,905 $ $78 $ 
Embedded derivative liabilities$ $ $42,767 $ $ $1,945 
Warrants Liabilities
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.
The April 2023 warrants and May 2023 warrants are classified as Level 3 financial instruments in the table above. The Company estimated the fair value of the April 2023 warrants and May 2023 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 assumptions used to determine the fair value of the April 2023 and May 2023 warrants are as follows:
April 2023 warrants
June 30,
2023
April 12, 2023
Time to expiration5.29 years5.51 years
Common stock price$4.34 $2.61 
Risk-free interest rate4.1 %3.4 %
Volatility65.0 %70.0 %
May 2023 warrants
June 30,
2023
May 15, 2023
Time to expiration5.04 years5.17 years
Common stock price$4.34 $2.31 
Risk-free interest rate4.1 %3.4 %
Volatility65.0 %70.0 %
Embedded derivatives
The Company estimated the fair value of the embedded conversion features 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. The assumptions used to determine the fair value of the embedded derivative liabilities are as follows:
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EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)

14. Fair Value Measurement (cont.)
2021 Convertible Notes Payable
June 30, 2023
December 31, 2022
Term3.0 years3.5 years
Dividend yield % %
Risk-free interest rate4.4 %4.1 %
Volatility65.0 %80.0 %
Effective debt yield40.0 %25.0 %
AFG Convertible Notes PayableJune 30, 2023January 18, 2023
Term3.0 years3.5 years
Dividend yield % %
Risk-free interest rate4.4 %3.6 %
Volatility65.0 %70.0 %
Effective debt yield40.0 %40.0 %
Level 3 liabilities are measured at fair value on a recurring basis using significant unobservable inputs. The following table summarizes the changes in the fair value of liabilities that are included within the Company’s accompanying unaudited condensed consolidated balance sheets and are designated as Level 3:
Level 3Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Embedded derivatives
Balance at beginning of the period$21,255 $4,664 $1,945 $12,359 
Additions15,820 21 42,191 21 
Loss (gain) on change in fair value of derivatives - related party5,692 (3,978)(1,369)(11,673)
Balance at end of the period$42,767 $707 $42,767 $707 
Warrants
Balance at beginning of the period$ $ $ $ 
Additions29,553  29,553  
Loss on change in fair value of derivatives - related party27,352  27,352  
Balance at end of the period$56,905 $ $56,905 $ 

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EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)

14. Fair Value Measurement (cont.)
The estimated fair value of financial instruments not carried at fair value in the unaudited condensed consolidated balance sheets was as follows:
Level in Fair Value Hierarchy
June 30, 2023
December 31, 2022
Carrying ValueFair ValueCarrying ValueFair Value
Notes receivable3$863 $707 $863 $677 
2021 Convertible Notes*391,862 52,860 82,950 62,421 
Senior Secured Term Loan 383,503 60,430 81,616 77,576 
AFG Convertible Notes*350,053 50,613   
Equipment financing facility37,196 3,432 8,577 6,282 
Yorkville Convertible Notes*3  2,688 2,908 
  Total$233,477 $168,042 $176,694 $149,864 
*Includes the embedded derivative liabilities.
15. Commitments and Contingencies
Lease Commitments
The Company has lease commitments under lease agreements. As of June 30, 2023, future lease payments amounted to $6,165.
Minimum Volume Commitment
In June 2022, the Company entered into a long-term supply agreement with a minimum volume commitment with a third party, which provides services to process certain raw materials. Any purchase order issued under this supply agreement will be non-cancellable. To the extent the Company fails to order the guaranteed minimum volume defined in the contract at the end of the term, the Company is required to pay the counterparty an amount equal to the shortfall, if any, multiplied by a fee. As of June 30, 2023, the Company had open purchase commitments of $231 under this agreement. The Company believes that the probability of failing to meet the minimum volume commitment is remote and no shortfall penalty has been accrued as of June 30, 2023.
Legal Proceedings
Delaware Section 205 Petition
On November 12, 2020, BMRG, the predecessor to the Company, held a special meeting of stockholders (the “BMRG Special Meeting”) to approve certain matters relating to the business combination between BMRG and Eos Energy Storage LLC.
One of these matters was a proposal to amend and restate BMRG’s certificate of incorporation in order to, among other things, increase the number of authorized shares of common stock from 125,000,000 shares of common stock, consisting of 100,000,000 shares of Class A common stock and 25,000,000 shares of Class B common stock, to 200,000,000 shares of common stock, and to reclassify all Class A common stock and Class B common stock as a single class of common stock (the “Charter Amendment Proposal”). The Charter Amendment Proposal was approved by a majority of the outstanding shares of Class A common stock and Class B common stock of BMRG as of the record date for the BMRG Special Meeting, voting together as a single class, although voting records indicate that a majority of each of the shares of Class A common stock and Class B common stock also approved the Charter Amendment Proposal. After the BMRG Special Meeting, BMRG and Eos Energy Storage LLC closed the business combination and the Company’s certificate of incorporation, as amended to give effect to the Charter Amendment Proposal, became effective.
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EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
15. Commitments and Contingencies (cont.)
A recent ruling by the Delaware Court of Chancery introduced uncertainty as to whether Section 242(b)(2) of the Delaware General Corporation Law (the “DGCL”) would have required the Charter Amendment Proposal to be approved by separate votes of the majority of BMRG’s then-outstanding shares of Class A common stock and Class B common stock. To resolve potential uncertainty with respect to the Company’s capital structure, the Company filed a petition in the Delaware Court of Chancery under Section 205 of the DGCL to seek validation of the Charter Amendment Proposal. Section 205 of the DGCL permits the Court of Chancery, in its discretion, to ratify and validate potentially defective corporate acts.
On February 27, 2023, the Court of Chancery approved the Company’s request for relief and entered an order under Section 205 of the Delaware General Corporation Law (1) declaring the Company’s Third Amended and Restated Certificate of Incorporation (the “Charter”), including the filing and effectiveness thereof, as validated and effective retroactive to the date of its filing with the Office of the Secretary of State of the State of Delaware on November 16, 2020, and all amendments effected thereby and (2) ordering that the Company’s securities (and the issuance of the securities) described in the Petition and any other securities issued in reliance on the validity of the Charter are validated and declared effective, each as of the original issuance dates.
Class Action Complaints
On March 8, 2023, Plaintiff Richard Delman filed a class action complaint (the “March Complaint”) in the Court of Chancery of the State of Delaware. The March Complaint names certain of the Company’s former directors as defendants. Neither the Company nor Eos Energy Storage LLC was named as a defendant in the March Complaint, but each was identified as a relevant non-party and the Company owes certain indemnification obligations relating to the lawsuit to the Company’s former directors.
On August 1, 2023, a class action complaint was filed against the Company, its Chief Executive Officer, its Chief Financial Officer, and its former Chief Financial Officer (the “August Complaint”) in the United States District Court, District of New Jersey. The August Complaint asserts violations of the federal securities laws in connection with statements and alleged omissions relating to the Company’s business, prospects and reported backlog. The Company believes the August Complaint is without merit and intends to vigorously defend against this action.
16. Stock-Based Compensation
Our stock-based compensation expense is associated with restricted stock units (“RSU”s) and stock options. Stock-based compensation expense is recognized on a straight-line basis over the requisite service period of the award, which is generally the award vesting term. Stock options generally have a term of five to ten years and vest over periods ranging from three months to five years. RSUs generally vest over periods from three to four years. For awards with performance conditions, stock-based compensation expense is recognized on a straight-line basis based on management’s estimation of achievement of performance conditions. The estimated performance conditions primarily relate to achievement of sales and financing targets. In June 2023, the Company modified 550,000 of performance-based stock options that were issued in June 2022 and December 2022 by extending the period to meet certain performance conditions.
Stock-based compensation expense included in the unaudited condensed consolidated statements of operations and comprehensive loss was as follows:
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Stock options$239 $509 $979 $1,420 
Restricted stock units2,065 2,925 4,688 5,957 
Total$2,304 $3,434 $