SEC Filing | Eos Energy Enterprises, Inc.

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eose-20210630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021


o			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)

Delaware

08-7654321

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

3920 Park Avenue

Edison

08820

(Address of Principal Executive Offices)

(Zip Code)

(732) 225-8400

Registrant's telephone number, including area code

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.0001 per share	EOSE	The Nasdaq Stock Market LLC
Warrants, each exercisable for one share of common stock	EOSEW	The 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 x No o

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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 x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	x	Smaller reporting company	x
		Emerging growth company	x

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. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. ☐ Yes x No

APPLICABLE ONLY TO CORPORATE ISSUERS:

The registrant had outstanding 53,636,190 shares of common stock as of August 6, 2021.

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		Page
	PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets As Of June 30, 2021 (Unaudited) And December 31, 2020	2
	Condensed Consolidated Statements Of Operations For The Three M onths and Six Months Ended June 30, 2021 (Unaudited) And June 30, 2020 (Unaudited)	3
	Condensed Consolidated Statements Of Shareholders’ Equity (Deficit) For The Six Months Ended June 30, 2021 (Unaudited) And June 30, 2020 (Unaudited)	4
	Condensed Consolidated Statements Of Cash Flows For The Six Months Ended June 30, 2021 (Unaudited) And June 30, 2020 (Unaudited)	5
	Notes To Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management's Discussion And Analysis Of Financial Condition And Results Of Operations	24
Item 3.	Quantitative And Qualitative Disclosures About Market Risk	36
Item 4.	Controls And Procedures	36

	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	38
Item 1a.	Risk Factors	38
Item 2.	Unregistered Sales Of Equity Securities And Use Of Proceeds	38
Item 3.	Defaults Upon Senior Securities	38
Item 4.	Mine Safety Disclosures	38
Item 5.	Other Information	38
Item 6.	Exhibits	39
Signatures		41

Part I - Financial Information

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EOS ENERGY ENTERPRISES, INC. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATED BALANCE SHEETS ($ IN THOUSANDS) As of June 30, 2021 and December 31, 2020


	June 30, 2021		December 31, 2020
ASSETS
Current assets
Cash and cash equivalents	$	74,690	$	121,853
Grants receivable	204		131
Accounts receivable	170		—
Inventory	4,434		214
Vendor deposits	9,843		2,390
Notes receivable	67		—
Prepaid and other current assets	2,334		2,779
Total current assets	91,742		127,367

Property and equipment, net	8,392		5,653
Intangible assets, net	300		320
Goodwill	4,331		—
Investment in joint venture	—		3,736
Security deposits	840		825
Notes receivable, long term	4,055		100
Other assets	194		263
Total assets	$	109,854	$	138,264

LIABILITIES AND MEMBERS EQUITY (DEFICIT)
Current liabilities
Accounts payable and accrued expenses	$	15,161	$	8,471
Accounts payable and accrued expenses - related parties	—		2,517
Provision for firm purchase commitments	2,030		1,585
Capital lease, current portion	9		11
Long-term debt, current portion	6,082		924
Contract liabilities	1,340		77

Total current liabilities	24,622		13,585
Long term liabilities
Deferred rent	785		762
Capital lease	—		4
Long-term debt	13,540		427
Warrants liability	2,340		2,701

Total long term liabilities	16,665		3,894
Total liabilities	41,287		17,479

COMMITMENTS AND CONTINGENCIES (NOTE 9)
SHAREHOLDERS' EQUITY
Common Stock, $0.0001 par value, 200,000,000 shares authorized, 53,353,858 and 48,943,082 shares outstanding at June 30, 2021 and December 31, 2020, respectively	5		5
Contingently Issuable Common Stock	—		17,600
Preferred stock, $0.0001 par value, 1,000,000 shares authorized, no shares outstanding at June 30, 2021 and December 31, 2020	—		—
Additional paid in capital	436,372		395,491
Accumulated deficit	(367,810)		(292,311)
Total shareholders' equity	68,567		120,785
Total liabilities and shareholders’ equity	$	109,854	$	138,264

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 FINANCIAL STATEMENTS CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS ($ IN THOUSANDS) For the three months and six months ended June 30, 2021 and 2020


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Revenue
Total revenue	$	612	$	—	$	776	$	—

Costs and expenses
Cost of goods sold	12,364		53		12,464		110
Research and development expenses	3,647		2,248		8,700		4,478
General and administrative expenses	11,325		1,408		20,127		2,989
Loss on pre-existing agreement	22,516		217		30,368		995
Grant (income) expense, net	(52)		263		(44)		609
Total costs and expenses	49,800		4,189		71,615		9,181

Operating loss	(49,188)		(4,189)		(70,839)		(9,181)

Other income (expense)
Interest expense, net	(154)		(15)		(175)		(110)
Interest expense, related party	—		(3,030)		—		(6,745)
Remeasurement of equity method investment	(7,480)		—		(7,480)		—
Change in fair value, embedded derivative	—		1,358		—		843
Change in fair value, warrants liability	585		—		361		—
Income (loss) from equity in unconsolidated joint venture	—		(8)		440		(39)
Sale of state tax attributes	2,194		—		2,194		—
Net loss	$	(54,043)	$	(5,884)	$	(75,499)	$	(15,232)

Basic and diluted loss per share attributable to common shareholders1
Basic	$	(1.04)	$	(1.50)	(1.46)		(3.88)
Diluted	$	(1.04)	$	(1.50)	(1.46)		(3.88)

Weighted average shares of Common Stock2
Basic	51,792,365		3,930,336		51,630,088		3,930,336
Diluted	51,792,365		3,930,336		51,630,088		3,930,336

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

1 Retroactive application of recapitalization given effect herein

2 Retroactive application of recapitalization given effect herein

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EOS ENERGY ENTERPRISES, INC. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT) ($ IN THOUSANDS) For the six months ended June 30, 2021 and 2020


	Common Stock3			Additional		Contingently		Accumulated		Total
	Shares	Amount		Paid in capital		Issuable Common Stock		Deficit
Balance, December 31, 2019	3,930,336	$	—	$	20,346	$	—	$	(204,068)	$	(183,722)
Stock-based compensation		—		19		—		—		19
Net loss	—	—		—		—		(9,348)		(9,348)
Balance, March 31, 2020	3,930,336	$	—	$	20,365	$	—	$	(213,416)	$	(193,051)
Stock-based compensation	—	—		37		—		—		37
Net loss	—	—		—		—		(5,884)		(5,884)
Balance, June 30, 2020	3,930,336	$	—	$	20,402	$	—	$	(219,300)	$	(198,898)

Balance, December 31, 2020	48,943,082	$	5	$	395,491	$	17,600	$	(292,311)	$	120,785
Stock-based compensation	—	—		2,478		—		—		2,478
Release of Block B Sponsor Earnout Shares from restriction4	859,000	—		—		—		—		—
Issuance of Contingently Issuable Common Stock5	1,999,185	—		17,600		(17,600)		—		—
Net loss	—	—		—		—		(21,456)		(21,456)
Balance, March 31, 2021	51,801,267	$	5	$	415,569	$	—	$	(313,767)	$	101,807
Stock-based compensation	—	—		3,195		—		—		3,195
Exercise of stock options	87,177	—		756		—		—		756
Exercise of public warrants	1,465,414	—		16,852		—		—		16,852
Net loss	—	—		—		—		(54,043)		(54,043)
Balance, June 30, 2021	53,353,858	$	5	$	436,372	$	—	$	(367,810)	$	68,567

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3 Retroactive application of recapitalization given effect herein

4 See Note 18 for discussion of Sponsor Earnout Shares

5 See Note 18 for discussion of Contingently Issuable Common Stock

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EOS ENERGY ENTERPRISES, INC. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ($ IN THOUSANDS) For the six months ended June 30, 2021 and 2020


	June 30, 2021		June 30, 2020
Cash flows from operating activities
Net loss	$	(75,499)	$	(15,232)
Adjustment to reconcile net loss to net cash used in operating activities
Stock-based compensation	5,673		56
Depreciation and amortization	1,097		750
Loss from disposal of property and equipment	11		—
Remeasurement of equity method investment	7,480		—
Loss (income) from equity in unconsolidated joint venture	(440)		39
Accreted interest on convertible notes payable-related party	—		6,745
Change in fair value, embedded derivative	—		(843)
Change in fair value, warrants liability	(361)		—
Changes in operating assets and liabilities:
Receivable on sale of state tax attributes	—		4,060
Prepaid and other assets	506		450
Inventory	(1,554)		—
Grants receivable	(73)		212
Accounts receivable	(170)		(76)
Vendor deposits	(3,221)		96
Security deposits	(15)		13
Accounts payable and accrued expenses	3,920		2,606
Accounts payable and accrued expenses-related parties	(2,517)		—
Provision for firm purchase commitments	(3,445)		—
Contract liabilities	1,263		77
Deferred rent	23		50
Notes payable	18,365		—
Other assets	70		(15)
Net cash used in operating activities	(48,887)		(1,012)

Cash flows from investing activities
Investment in notes receivable	(4,083)		—
Business acquisition, net of cash acquired	(160)		—
Investment in joint venture	(4,000)		(550)
Purchases of property and equipment	(7,541)		(1,401)
Net cash used in investing activities	(15,784)		(1,951)

Cash flows from financing activities
Capital lease payments	(6)		(5)
Proceeds from exercise of stock options	756		—
Proceeds from exercise of public warrants	16,852		—
Proceeds from issuance of convertible notes payable -related party	—		2,557
Repayment of other financing	(94)		—
Issuance of contingently redeemable preferred units	—		469
Net cash provided by financing activities	17,508		3,021

Net increase (decrease) in cash and cash equivalents	(47,163)		58
Cash and cash equivalents, beginning of the period	121,853		862
Cash and cash equivalents, end of the period	$	74,690	$	920

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Non-cash investing and financing activities
Accrued and unpaid capital expenditures	$	—	$	206

Supplemental disclosures
Cash paid for interest	233		33

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 FINANCIAL STATEMENTS NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS)

1. Nature of Operations and Summary of Significant Accounting Policies

Nature of Operations

Eos Energy Enterprises, Inc. (f/k/a B. Riley Principal Merger Corp. II (“BMRG”)) (the “Company” or "Eos") designs, develops, manufactures, and sells innovative energy storage solutions for electric utilities as well as commercial and industrial end users. Eos has developed and has received patents on an innovative battery design relying on a unique zinc oxidation/reduction cycle to generate output current and to recharge. The Battery Management System (“BMS”) software uses proprietary Eos-developed algorithms and includes ambient and battery temperature sensors, as well as voltage and current sensors for the strings and the system. Eos and its partners focus on a collaborative approach to jointly develop and sell safe, reliable, long-lasting low-cost turn-key alternating current (“AC”) integrated systems using Eos’s direct current (“DC”) Battery System. The Company has a manufacturing facility located in Pittsburgh, Pennsylvania to manufacture the DC Battery Systems integrated with the BMS for DC Battery Systems. The Company’s primary markets focus on integrating battery storage solutions with (1) solar systems that are connected to the utility power grid (2) solar systems that are not connected to the utility power grid (3) storage systems utilized to relieve congestion and (4) storage systems to assist commercial and industrial customers in reducing their peak energy usage or participating in the utilities ancillary and demand response markets. The location of the Company’s major markets are seen in North America, Europe, Africa, and Asia.

Unless the context otherwise requires, the use of the terms “the Company”, “we,” “us,” and “our” in these notes to the unaudited condensed consolidated financial statements refers to Eos Energy Enterprises, Inc. and its consolidated subsidiaries.

Basis of Presentation

The unaudited condensed 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 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 generally accepted accounting principles in the United States (U.S. GAAP) have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Annual Report on Form 10-K of the Company for the year ended December 31, 2020. These interim results are not necessarily indicative of results for the full year.

Reclassification of Prior Year Presentation

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. Adjustment has been made to the Consolidated Balance sheet for the year ended December 31, 2020, to reclassify notes receivable from other assets. In addition, the loss from pre-existing agreement for the three months ended March 31, 2021 and for the three and six months ended June 30, 2020 were reclassified from general and administrative expense to loss from pre-existing agreement on the Condensed Consolidated Statement of Operations.

Recent Accounting Pronouncements

In December 2019, the FASB issued Accounting Standards Update No. 2019-12 – Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes, as part of its initiative to reduce complexity in the accounting standards. The amendments in ASU 2019-12 eliminate certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also clarifies and simplifies other aspects of the accounting for income taxes. The Company has adopted this ASU in Q1 2021. The adoption did not have an impact on the Company's consolidated financial statements.

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EOS ENERGY ENTERPRISES, INC. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS)

2. Acquisition

On April 8, 2021, the Company entered into a unit purchase agreement (the “Purchase Agreement”) with Holtec Power, Inc. (“Holtec”), in accordance with the terms and conditions of which the Company purchased from Holtec the remaining 51% percent interest in HI-POWER, LLC (“Hi-Power”) that was not already owned by the Company. Hi-Power was incorporated as a joint venture between the Company and Holtec in 2019 (refer to Note 7). In connection with the transaction, the Company also entered into a transition services agreement and a sublease with Holtec. The transaction closed on April 9, 2021 (“Acquisition Date”). Following the consummation of the transactions set forth in the Purchase Agreement (the “Transactions”), Hi-Power became a 100% indirect, wholly-owned subsidiary of the Company and the obligations of the parties under the Hi-Power joint venture terminated.

The Purchase Agreement provides that the Company will pay an aggregate purchase price of $25,000 for 51% interest in Hi-Power, pursuant to the following schedule: $5,000 on each of May 31, 2021, May 31, 2022, May 31, 2023, May 31, 2024, and May 31, 2025, evidenced by a secured promissory note secured by the assets of the Company. The Purchase Agreement also requires that the Company pay to Holtec, on the closing of the Transactions, an amount in cash equal to $10,283. Payments to Holtec under this Purchase Agreement totaled $35,283. The fair value of these payments was $33,474 at the Acquisition Date and included $32,750 allocated to the termination of a pre-existing agreement with Holtec and $724 allocated to the acquisition.

The obligations and rights of both parties under the pre-existing Joint Venture Agreement were terminated at the time of acquisition and $32,750 of the fair value of the consideration transferred was allocated to the termination of such agreement, which resulted in a loss on pre-existing agreement of $22,516 and $30,368 during the three and six months ended June 30, 2021, respectively. As of June 30, 2021, the Company had paid $10,283 on the date of closing and $5,000 notes payable due on May 31, 2021. The present value of the remaining payments was recorded as debt, which as of June 30, 2021 includes a current portion of $4,825 and a long-term portion of $13,540.

Prior to the acquisition of the remaining 51% ownership interest in Hi-Power, we accounted for our initial 49% ownership interest in Hi-Power as an unconsolidated joint venture under the equity method of accounting (refer to Note 7). In connection with the acquisition of the remaining 51% ownership interest in Hi-Power, our consolidated financial statements now include all of the accounts of Hi-Power, and all intercompany balances and transactions have been eliminated in consolidation. The results of operations of Hi-Power have been included in the Company’s condensed consolidated financial statements from the date of acquisition. The acquisition of Hi-Power did not have a material impact on the Company’s condensed consolidated financial statements, and therefore historical and pro forma disclosures have not been presented.

The consideration transferred for our now 100% ownership interest in connection with this acquisition, net of intercompany balances between the Company and Hi-Power, totaled $418, of which $205 represents the fair value of our previously held 49% ownership interest in Hi-Power. In accordance with ASC Topic 805-10-25-10, we remeasured our previously held 49% ownership interest in Hi-Power at its acquisition date fair value. As of the acquisition date, a loss of $7,480 was recognized in earnings for the remeasurement of our previously held 49% ownership interest.

The following table summarizes the fair values of the assets acquired and liabilities assumed as of the Acquisition Date:

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EOS ENERGY ENTERPRISES, INC. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS)

2. Acquisition (cont.)


	Amount
Inventory	2,666
Vendor deposits	818
Property and equipment, net	74
Goodwill	4,331
Accounts payable and accrued expenses	(3,634)
Provision for firm purchase commitments	(3,890)
Net assets acquired, net of cash and cash equivalents of $53 6	$	365

The purchase price allocation and the measurement for acquisition consideration are based on management’s best estimates and assumptions as of the reporting date and are considered preliminary. The provisional measurements of identifiable assets and liabilities, and the resulting goodwill related to these acquisitions are subject to change and the final purchase price accounting could be different from the amounts presented herein. We expect to finalize the valuation as soon as practicable, but not later than one year from the acquisition date.

The Company expects the goodwill recognized as part of the acquisition will be deductible for U.S. income tax purposes. The Company also incurred non-consideration acquisition expenses including legal and accounting services related to the acquisition. The acquisition costs are recorded in general and administrative expenses on the Company’s condensed consolidated statement of operations.

3. Revenue Recognition

Contract Balances

The following table provides information about contract assets and liabilities from contracts with customers:


	June 30, 2021		December 31, 2020		June 30, 2020		December 31, 2019
Contract Assets	$	603	$	—	$	—	$	—
Contract Liabilities	1,340		$	77	$	327	$	300

The Company recognizes contract assets resulting from the timing of revenue recognition and invoicing. Contract liabilities primarily relate to advance consideration received from customers in advance of the Company 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. The contract assets were recorded in prepaid expenses and other current assets as of June 30, 2021.

Contract assets increased by $603 and $— during the six months ended June 30, 2021 and 2020, respectively. Contract liabilities increased by $1,263 during the six months ended June 30, 2021 and increased by $27 during the six months ended June 30, 2020, respectively.

The Company recognized $77 and $— of revenue during the three and six months ended June 30, 2021 and June 30, 2020 that was included in the contract liability balance at the beginning of the period.

Transaction Price Allocated to Remaining Performance Obligations

Contract liabilities of $1,340 as of June 30, 2021 are expected to be recognized within the next twelve months.

6 Net assets acquired exclude the intercompany balance between Eos and Hi-Power and cash acquired.

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EOS ENERGY ENTERPRISES, INC. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS)

4. Inventory

Since we acquired the remaining 51% interest in Hi-Power on April 9, 2021, our inventory balances as of June 30, 2021 include all inventories held at our manufacturing facility, Hi-Power. The following table provides information about inventory balances:


	June 30, 2021		December 31, 2020
Finished goods	$	1,387	$	214
Work-in-process	52		—
Raw materials	2,994		—
Total Inventory, net	$	4,434	$	214

5. Property and Equipment, net

Property and equipment, net consisted of the following:


	June 30, 2021		December 31, 2020		Useful lives
Equipment	$	9,143	$	7,055	5	—	10 years
Capital Lease	201		201		5 years
Furniture	343		211		5	—	10 years
Leasehold Improvements	2,806		2,732		Lesser of useful life/remaining lease
Tooling	2,041		523		2	—	3 years
Total	14,534		10,722
Less: Accumulated Depreciation	(6,142)		(5,069)
	$	8,392	$	5,653

Depreciation and amortization expense related to property and equipment was $602 and $375 during the three months ended June 30, 2021 and 2020, and $1,077 and $730 during the six months ended June 30, 2021 and 2020, respectively.

6. Intangible Assets

Intangible assets consist of various patents valued at $400, which represents the cost to acquire the patents. These patents are determined to have useful lives and are amortized into the results of operations over ten years.

During the three months ended June 30, 2021 and 2020, the Company recorded amortization expenses of $10 for each period related to patents. During the six months ended June 30, 2021 and 2020, the Company recorded amortization expenses of $20 for each period related to patents.

Estimated future amortization expense of intangible assets as of June 30, 2021 are as follows:


Remainder of 2021	$	20
2022	40
2023	40
2024	40
2025	40
Thereafter	120
Total	$	300

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EOS ENERGY ENTERPRISES, INC. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS)

7. Investment in unconsolidated joint venture

In August 2019, the Company entered into an agreement with Holtec Power, Inc. (“Holtec”) to form the unconsolidated joint venture (“JV”) Hi-Power. The JV was formed in order to manufacture the products for all of the Company’s projects in North America. Accordingly, the Company has purchased battery storage systems and spare parts from the JV. The facility is located in Pittsburgh, Pennsylvania. The Company’s financial commitment to the JV upon inception was $4,100 in the form of a combination of cash and special purpose manufacturing equipment. The Company’s initial ownership interest was 49%. On April 9, 2021, the Company acquired the remaining 51% ownership interest and Hi-Power became a wholly owned subsidiary thereafter. Refer to Note 2 for the acquisition details.

The joint venture commenced manufacturing activities in the fourth quarter of 2020. Contributions made to the JV were $— and $329, respectively for the three months ended June 30, 2021 and 2020 and $4,000 and $550, respectively for the six months ended June 30, 2021 and 2020.

The investment income (loss) recognized from the unconsolidated joint venture under the equity method of accounting was $— and $(8) for the three months ended June 30, 2021 and 2020, respectively and $440 and $(39) for the six months ended June 30, 2021 and 2020, respectively. Our investment in the unconsolidated joint venture as of December 31, 2020 was $3,736.

8. Notes receivable and Variable interest entities (“VIEs”) consideration

Notes receivable consist primarily of amounts due to us related to the financing we offered to customers. We report notes receivable at the principal balance outstanding less an allowance for losses. We monitor the financial condition of the notes receivable and record provisions for estimated losses when we believe it is probable that the holders of the notes receivable will be unable to make their required payments. We charge interest at a fixed rate and interest income is calculated by applying the effective rate to the outstanding principal balance. The Company had notes receivable of $4,122 and $100 outstanding as of June 30, 2021 and December 31, 2020, respectively, with no loss reserved for the uncollectible balances.

The customers to whom we offer financing through notes receivables are VIEs. However, the Company is not a primary beneficiary, because we do not have power to direct the activities of the VIEs that most significantly impact the VIEs’ economic performance. The VIEs are not consolidated into the Company’s financial statements but rather disclosed in the notes to our financial statements under ASC 810-10-50-4. The maximum loss exposure is limited to the carrying value of notes receivable as of the balances sheet dates.

At June 30, 2021, we had agreements to provide loans to our customers for $11,348. $4,183 was drawn on those commitments as of June 30, 2021. The funding under certain loan agreements is contingent on reaching certain milestones defined by the agreements.

9. Commitments and Contingencies

Lease Commitments

On June 24, 2016, Eos entered into a long-term non-cancelable, operating lease for 45,000 sq. ft. of space for our current headquarters facility in Edison, New Jersey. On April 26, 2017, Eos entered into a lease for an additional 18,000 sq. ft. of adjoining space. These leases expire in September 2026 with renewal options up to 2036. Further, these leases require monthly rent payments along with executory costs, which include real estate taxes, repairs, maintenance, and insurance. In addition, the terms of the leases contain cost escalations of approximately 10% annually. On April 8, 2021, in connection with the acquisition, Hi-Power entered into a sublease agreement with Holtec, with the lease expiring on December 31, 2022. This lease requires monthly rent payments, consisting of a base rent along with executory costs. The Company also has certain non-cancelable capital lease agreements for office equipment.

Total rent expense including common area maintenance was $319 and $219 for the three months ended June 30, 2021 and 2020, and $547 and $447 for the six months ended June 30, 2021 and 2020, respectively.

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9. Commitments and Contingencies (cont.)

Future minimum lease commitments as of June 30, 2021 are as follows:


	Operating		Capital
Remainder of 2021	$	549	$	5
2022	1,172		4
2023	825		—
2024	895		—
2025	966		—
Later years	679		—
Total minimum lease payments	$	5,086	$	9
Less amounts representing interest			2
Present value of minimum lease payments			$	7

Firm Purchase Commitments

To ensure adequate and timely supply of raw material for production, the Company from time to time enters into non-cancellable purchase contracts with vendors. As of June 30, 2021, the Company has open purchase commitments of $20,602 under these contracts. At the end of each reporting period, the Company evaluates its non-cancellable firm purchase commitments and records a loss, if any, using the same lower of cost or market approach. In assessing the potential loss provision, we use the stated contract price and expected production volume under the relevant sales contract. The Company records a purchase commitment loss if the net realizable value of the inventory is less than the cost.

10. Grant Expense, Net

Eos was approved for two grants by the California Energy Commission (CEC) totaling approximately $7,000. In accordance with the grant agreements, Eos is responsible for conducting studies to demonstrate the benefits of certain energy-saving technologies to utility companies and consumers in the State of California and is entitled to receive portions of the grants based upon expenses incurred.

During the three months ended June 30, 2021 and 2020, Eos recorded grant (income) expense, net of $(52) and $263, respectively, which comprised of grant income of $648 and $209 and grant costs of $596 and $472. During the six months ended June 30, 2021 and 2020, Eos recorded grant (income) expense, net of $(44) and $609, respectively, which comprised of grant income of $977 and $209 and grant costs of $933 and $818. For the three and six months ended June 30, 2020, Eos received payments of $1,376 from the CEC. The Company did not receive any payments from the CEC for the three and six months ended June 30, 2021.

As of June 30, 2021 and December 31, 2020, the Company had $232 and $1,136 of deferred grant income, which were recorded in accounts payable and accrued expense on the Balance Sheets, as well as a receivable in the amount of $204 and $131, respectively. The expenses incurred by Eos relate to the performance of studies in accordance with the respective grant agreements, and the grants received or receivable from the CEC are recorded as an offset to the related expenses for which the grant is intended to compensate the Company.

11. Income Taxes

For the six months ended June 30, 2021, the reported income tax provision was nil and differs from the amount computed by applying the statutory US federal income tax rates of 21% to the income before income taxes due to pretax losses for which no tax benefit can be recognized, state and local taxes, and nondeductible expense for US income tax purposes.

For the six months ended June 30, 2020, the reported income tax provision was nil and differs from the amount computed by applying the statutory US federal income tax rates of 21% to the income before income taxes due to pretax losses for which no tax benefit can be recognized, state and local taxes, and nondeductible expenses for US income tax purposes.

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11. Income Taxes (cont.)

The Company estimates and applies the annual effective tax rate to its ordinary earnings each interim period. Any significant unusual or infrequent items, if any, are not included in the estimation of the annual effective tax rate. Rather, these items and their related income tax expense (benefit) are separately stated in the interim period in which they occur. The quarterly estimate of the annual effective tax rate and related tax expense is subject to variation due to a multitude of factors. Factors may include but are not limited to the inability to accurately predict the Company’s pre-tax and taxable income and loss.

At each balance sheet date, management assesses the likelihood that Eos will be able to realize its deferred tax assets. Management considered all available positive and negative evidence in assessing the need for a valuation allowance. The realization of deferred tax assets depends on the generation of sufficient taxable income of the appropriate character and in the appropriate taxing jurisdiction during the future periods in which the related temporary differences become deductible. Management has determined that it is unlikely that Eos will be able to utilize its deferred tax assets at June 30, 2021 and June 30, 2020 due to cumulative losses. Therefore, Eos has a valuation allowance against its net deferred tax assets.

At June 30, 2021, Eos has unrecognized tax benefits associated with uncertain tax positions that, if recognized, would not affect the effective tax rate on income from continuing operations. Eos is not currently under examination by any taxing jurisdiction, and none of the uncertain tax positions is expected to reverse within the next 12 months.

At June 30, 2020, Eos has not recorded any unrecognized tax benefits associated with uncertain tax positions.

During the six-month period ending June 30, 2021, the Company participated in the New Jersey Economic Development Authority Technology Business Tax Certificate Transfer Program and sold a portion of its available 2019 and 2017 New Jersey net operating losses (“NOLs”) and 2019 research and development credits in the amounts of $20,126 and $548, respectively. For the three and six months ended June 30, 2021, the Company has recognized a gain of $2,194 related to the sale in the statement of operations. The lifetime cap of the transfer program is $20,000 of tax-effected attributes and the Company has sold approximately $14,000 as of June 30, 2021, leaving the Company with approximately $6,000 tax-effected attributes that may be sold in the future.

Eos files income tax returns in federal and various state jurisdictions. The open tax years for federal and state returns is generally 2016 and forward. In addition, NOLs generated in closed years and utilized in open years are subject to adjustment by the tax authorities. Eos is not currently under examination by any taxing jurisdiction.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law in response to the Covid-19 pandemic. The CARES Act provided several forms of tax law changes, though Eos does not expect that any will have a material impact on the tax provision.

12. Related Party Transactions

Convertible Notes Payable

During the six months ended June 30, 2020, Eos issued convertible notes payable to certain members. Refer to Note 13 for further discussion.

Accounts Payable and Accrued Expenses

As of December 31, 2020, accounts payable and accrued expense-related parties contained $138 consultant fee payable to an affiliate. Additionally, amounts accrued to Holtec under the Joint Venture Agreement were $— and $2,382 as of June 30, 2021 and December 31, 2020, respectively, which was paid off in connection with the acquisition of Hi-Power. For the three and six months ended June 30, 2020, $217 and $995 were charged to loss on pre-existing agreement, respectively. For the three and six months ended June 30, 2021, $22,516 and $30,368 were charged to loss on pre-existing agreement in connection with the Hi-Power acquisition, respectively. Refer to Note 2 for the acquisition details.

Vendor deposits

As of December 31, 2020, vendor deposits included a balance of $278 for deposits made to Hi-Power.

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13. Convertible Notes Payable

During the six months ended June 30, 2020, the Company had Convertible notes payable — related party (the “Convertible Notes”) outstanding which includes Convertible Notes issued from February 2019 to May 2019 (“Phase I Note”), 2019 Phase II notes Convertible Notes issued from June 2019 to December 31, 2019 (“2019 Phase II Notes”), and Convertible Notes issued in 2020 (“2020 Phase II Notes”). The 2020 Phase II notes with aggregate principal of $1,524 (the “Convertible Notes”) were issued during the six months ended June 30, 2020. The Convertible Notes are secured by all assets and intellectual property of the Company. AltEnergy Storage Bridge, LLC (“AltEnergy”) and its affiliates have combined beneficial ownership in the Company exceeding 10% and therefore constitute a related party of the Company, pursuant to ASC 850, Related Parties. As of June 30, 2020, AltEnergy owned approximately 20% of the Company’s Common and Preferred Units.

The remaining note holders do not meet the definition of a related party under ASC 850. However, the Convertible Notes were issued to each of the note holders under identical terms, and AltEnergy serves as the administrative agent of all note holders under the Convertible Note agreements. Therefore, the disclosures within Note 13 encompass all of the Convertible Notes.

Concurrent to issuance of the 2019 and 2020 Phase II Notes, the Company entered into subscription agreements to sell Preferred Units to the Holders equal to the principal balance of the 2019 and 2020 Phase II Notes at a price of $0.50 per unit. The proceeds were allocated to the 2019 and 2020 Phase II Notes and Preferred Units based on their relative fair values at the date of issuance.

During the six months ended June 30, 2020, the Company issued 2020 Phase II Notes, concurrently with Preferred Units to certain investors for aggregate cash proceeds of $3,026.

The proceeds were allocated to the 2020 Phase II Notes and Preferred Units based on their relative fair values at the date of issuance. During the six months ended June 30, 2020, the Company recognized $469 attributable to the 2020 Phase II Preferred Units, which was recorded as a discount against the 2020 Phase II Notes. $825 of the of the 2020 Phase II Notes were issued to AltEnergy.

Beneficial Conversion Features

The conversion option on the Phase I Notes generated a beneficial conversion feature (BCF). A BCF arises when a debt or equity security is issued with an embedded conversion option that is in the money at inception because the conversion option has an effective strike price that is less than the fair value of the underlying equity security at the commitment date. The Company recognized this BCF by allocating the intrinsic value of the conversion option to additional paid-in capital, which resulted in a discount on the Phase I Notes. The Company amortized the discount into interest expense on the commitment date, as the conversion option is immediately exercisable.

Embedded Derivatives

Both the occurrence of a Qualified Financing and the exercise of the holders’ put options represent contingent events outside the Company’s control that can accelerate repayment of the Convertible Notes. Therefore, these features constitute embedded derivatives that require bifurcation pursuant to ASC 815-15, Embedded Derivatives.

During the six months ended June 30, 2020, embedded derivative liabilities with initial fair value of $199 were recognized. These amounts were recorded as discounts on the Convertible Notes. During the three and six months ended June 30, 2020, a change in fair value of embedded derivative gain of $1,358 and $843 has been recognized, respectively.

The Company accounted for the Convertible Notes as deeply discounted zero coupon debt instruments. The balances payable at maturity reflect liquidation multiples of 3.0 and 6.0 times the stated face value of the Phase I Note and Phase II Notes, respectively. The following balances were recognized upon issuance of the Convertible Notes during the six months ended June 30, 2020:

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13. Convertible Notes Payable (cont.)


	June 30, 2020
	Phase I		Phase II		Total
Convertible notes payable	$	40,587	$	45,050	$	85,637
Discount, original issuance	(20,946)		(30,033)		(50,979)
Premium (discount), embedded derivative	181		(1,344)		(1,163)
Discount, fair value of preferred units	—		(2,500)		(2,500)
Discount, beneficial conversion features	(1,799)		—		(1,799)
Convertible notes payable, net	$	18,023	$	11,173	$	29,196

During the three and six months ended June 30, 2020, the Company recognized aggregate interest expense of $3,030 and $6,745 related to the Convertible Notes, respectively.

In connection with the business combination on November 16, 2020 (the “Merger Date”), the Convertible Notes were then exchanged for the common stock of the Company per the “Conversion upon Qualified Financing” term in the convertible note agreement. 10,886,300 shares of common stock were issued to the notes holders based on the liquidation amount of $108,900 as of the Merger Date and purchase price of $10 per shares agreed upon in the agreement and plan for merger.

14. Long-term debt

The following is a summary of the Company’s long-term indebtedness:


	June 30, 2021		December 31, 2020
Paycheck Protection Program loan payable	$	1,257	$	1,257
Notes payable	18,365		—
Other	—		94
Total	19,622		1,351
Less: Long-term debt, current portion	(6,082)		(924)
Long-term debt	$	13,540	$	427

Paycheck Protection Program

On April 7, 2020, the Company received $1,257 related to its filing under the Paycheck Protection Program and Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The payment terms of the note are as follows:

•No payments during the deferral period, which is defined as the ten-month period beginning eight weeks after the cash from the loan was received.

•Commencing one month after the expiration of the deferral period, and continuing on the same day of each month thereafter until the maturity date, the Company shall pay to JPMorgan Chase Bank, N.A. (the “Lender”), monthly payments of principal and interest, each in such equal amount required to fully amortize the principal amount outstanding on the note on the last day of the deferral period by the maturity date (twenty-four months from the date of the note, or April 7, 2022). In April 2021, the deferral period was extended to July 29, 2021 and the first payment is due on August 16, 2021.

•On the maturity date, the Company shall pay the Lender any and all unpaid principal plus accrued and unpaid interest plus interest accrued during the deferral period.

•The Company may prepay this note at any time without payment of any premium.

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14. Long-term debt (cont.)

The Lender is participating in the Paycheck Protection Program to help businesses impacted by the economic impact from COVID-19. Forgiveness of this loan is only available for amounts used for the limited purposes specified within the Small Business Administration’s (the “SBA”) requirements. To obtain forgiveness, the Company must certify that the loan was used in accordance with the requirements and provide supporting documentation. The Company used all proceeds from the PPP Loan to retain employees, maintain payroll, lease and utility payments and other operational expenses to support business continuity throughout the COVID-19 pandemic, which amounts we believe to be eligible for forgiveness, subject to the provisions of the CARES Act. As of the date of this report, the Company has applied for forgiveness of the loan which is dependent upon approval of the SBA.

Notes Payable

In connection with the Hi-Power acquisition (Refer to Note 2 - Acquisition), the Company agreed to pay an aggregate purchase price of $25,000. $5,000 of the $25,000 purchase price was paid in May 2021. The fair value of the notes payable was estimated using active market quotes, based on our current incremental borrowing rates for similar types of borrowing arrangements, which are Level 2 inputs. Based on the analysis performed, the fair value and the carrying value of the remaining payments of the notes payable was recorded as debt, which includes a current portion of $4,825 and a long-term portion of $13,540 as of June 30, 2021.

15. Contingently Redeemable Preferred Units

During the six months ended June 30, 2020, the Company had outstanding Series C, Series D, and 2019-2020 Bridge Preferred Units, which were issued at $1.10, $1.75, and $0.50 per unit, respectively. The activity attributable to the Preferred Units was as follows:


	Preferred Units
	Units	Amount
Balance, December 31, 2019	80,707	$	109,365
Contributions allocated to preferred units	1,666	259
Balance, March 31, 2020	82,373	$	109,624
Contributions allocated to preferred units	1,359	217
Balance, June 30, 2020	83,732	$	109,841

In connection with the Merger on November 16, 2020, the Preferred Units were converted to 255,523,120 EOS Energy Storage LLC (“EES”) common units. 14,727,844 shares of the Company's common stock were issued to the EES Preferred Units holders.

16. Warrants liability

The Company’s outstanding warrants were issued by BMRG in connection with its initial public offering (the “Public Warrants”) and concurrent private placement (the “Private Warrants” and, together with the Public Warrants, the “Warrants”) on May 22, 2020. Upon consummation of the Merger on November 16, 2020, the Public Warrants and Private Placement Warrants were set to become exercisable on May 22, 2021 for shares of the Company’s common stock with the same terms and exercise provisions prior to the Merger. The Private Placement Warrants meet the definition of a derivative. On the basis of the SEC Division of Corporation Finance’s April 12, 2021 Public Statement-Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACS”), the Private Placement Warrants do not meet the scope exception as prescribed by ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity. Accordingly, the Company recognized the Private Placement Warrants as of the Merger Date on November 16, 2020 at fair value and classified them as a liability in the Company’s consolidated balance sheet. Thereafter, changes in fair value are recognized in earnings as a derivative gain (loss) in the Company’s consolidated Statement of Operations.

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16. Warrants liability (cont.)

The Private Placement Warrants are classified as Level 2 financial instruments in the fair value hierarchy. They are valued on the basis of the quoted price of the Public Warrants, adjusted for insignificant differences between the Public Warrants and Private Placement Warrants. 325,000 Private Placement Warrants were outstanding with a fair value of $2,340 and $2,701 as of June 30, 2021 and December 31, 2020, respectively. The change in fair value for the three and six months ended June 30, 2021 amounted to $585 and $361, respectively. The change has been recognized as a derivative income in the Company’s consolidated Statement of Operations for the three and six months ended June 30, 2021.

17. Stock-Based Compensation

Since 2012, Eos has issued stock options to employees and certain service providers under the 2012 Eos Equity Incentive Plan (“2012 Plan”). In addition to stock options, the 2012 Plan provides for the issuance of other forms of stock-based compensation, including profit interests, unit appreciation rights and restricted units. Subsequent to the closing of the Merger, the Company approved the 2020 Equity Incentive Plan (the “2020 Incentive Plan”) and reserved 6,000,000 shares of common stock for issuance thereunder. In 2021, the Company reserved additional 498,021 shares for the 2020 Incentive Plan. The 2020 Incentive Plan became effective immediately upon the Closing of the Merger and all equity granted under the 2012 Plan were converted into equivalent equity under the 2020 Incentive Plan. As of June 30, 2021 and December 31, 2020, the Company has stock options and restricted units issued under the 2020 Incentive Plan.

Stock-based compensation expense included in condensed consolidated statement of operations was as follows:


	For the three months ended June 30				For the six months ended June 30
	2021		2020		2021		2020
Stock options	$	1,025	$	37	$	2,547	$	56
Restricted units	$	2,170	$	—	$	3,126	$	—
Total	$	3,195	$	37	$	5,673	$	56

The following table summarizes stock option activity during the six months ended June 30, 2021:


	Units	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (years)
Options Outstanding at December 31, 2020	2,143,636	$	9.19	9.5
Granted	49,535	$	17.16
Cancelled/Forfeited	(6,434)	$	11.15
Exercised	(87,177)	$	8.67
Options Outstanding at June 30, 2021	2,099,560	$	9.39	9.1
Options Exercisable at June 30, 2021	830,857	$	10.01	8.3

A summary of Restricted Units (RU) activity during the six months ended June 30, 2021 under our 2020 Incentive Plan is as follows:


	Units	Weighted-Average Grant-Data Fair Value
RU Outstanding at January 1, 2021	42,318	$	13.46
Granted	2,012,600	$	17.52
RU Outstanding at June 30, 2021	2,054,918	$	17.43

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17. Stock-Based Compensation (cont.)

As of June 30, 2021 and December 31, 2020, 2,537,090 and 4,094,770 shares remain for future issuance, respectively. Options vest generally over three to five years and have a term of five to ten years. During the six months ended June 30, 2021 and 2020, the Company granted stock options with both service and performance conditions. Stock compensation is recognized on a straight-line basis over the requisite service period of the award, which is generally the award vesting term. For awards with performance conditions, compensation expense is recognized using an accelerated attribution method over the vesting period. The performance conditions primarily relate to the completion of project milestones, achievement of operational certifications, and the Company’s closing of financing rounds. As of June 30, 2021, within the total options outstanding, there were 74,929 performance-based stock options, all of which are expected to vest in the next five years.

As of June 30, 2021, unrecognized stock compensation expenses amount to $37,383 and include $32,597 attributable to RUs and $4,786 attributable to stock options. The weighted average remaining vesting period for the RUs and stock options was 2.7 years and 1.5 years as of June 30, 2021, respectively.

The weighted average assumptions used to determine the fair value of options granted in the six months ended June 30, 2021 and 2020 are as follows:


	2021		2020
Volatility	57.31	%	50.00	%
Risk free interest rate	1.09	%	0.49	%
Expected life (years)	6.13		6.25
Dividend yield	0	%	0	%

The RUs issued were valued at the stock prices of the Company on the grant date.

The weighted average grant date fair value of all options granted was $9.08 and $2.08 per option for the six months ended June 30, 2021 and 2020.

18. Shareholders’ Equity

Preferred Shares

The Company is authorized to issue 1,000,000 shares of preferred stock with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s Board of Directors. At June 30, 2021 and December 31, 2020, there were no shares of preferred stock issued or outstanding.

Common Stock

The Company is authorized to issue 200,000,000 shares of common stock with $0.0001 par value. Holders of the Company’s common stock are entitled to one vote for each share. At June 30, 2021 and December 31, 2020, there were 53,353,858 and 48,943,082 common stocks issued and outstanding.

Contingently Issuable Common Stock

Following the closing of the Merger, and as additional consideration for the transaction, the Company was obligated to issue within five years from the closing date to each unitholder of EES its pro-rata proportion of a one-time issuance of an aggregate of 2,000,000 Shares (the “Earnout Shares” or "Contingently Issuable Common Stock"), within 5 business days after (i) the closing share price of the Company's shares traded equaling or exceeding $16.00 per share for any 20 trading days within any consecutive 30-trading day period during the Earnout Period or (ii) a Change of Control (or a definitive agreement providing for a Change of Control having been entered into) during the Earnout Period (each of clauses (i) and (ii), a “Triggering Event”).

On January 22, 2021, the Triggering Event for the issuance of the Earnout Shares occurred as the Company's stock price exceeded $16.00 per share for 20 trading days within a consecutive 30-trading day period during the Earnout Period. Accordingly, 1,999,185 Shares were issued to the unitholders of EES.

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18. Shareholders’ Equity (cont.)

Sponsor Earnout Shares

Pursuant to the Sponsor Earnout letter signed in connection with the Merger, 1,718,000 shares of common stock issued and outstanding held by BMRG ("Sponsor Earnout Shares") were subject to certain transfer and other restrictions, under which (a) 859,000 Sponsor Earnout Shares ("Block A Sponsor Earnout Shares") are restricted from being transferred unless and until either, for a period of five years after the Closing, (i) the share price of our common stock equals or exceeds $12.00 per share for any 20 trading days within any consecutive 30-trading day period or (ii) a change of control occurs for a share price equaling or exceeding $12.00 per share, and (b) the remaining 859,000 Sponsor Earnout Shares ("Block B Sponsor Earnout Shares") are subject to similar restrictions except that the threshold is increased from $12.00 to $16.00. If after the five-year period, there are no triggering events, the Sponsor Earnout Shares will be forfeited and canceled for no consideration. If after the five-year period, only the triggering event described in clause (a) above has occurred, the remaining 859,000 Sponsor Earnout Shares described in clause (b) will be forfeited and canceled for no consideration.

On January 22, 2021, as the Company's stock price exceeded $16.00 per share for 20 trading days within a consecutive 30-trading day period, Block B Sponsor Earnout Shares were released from restriction.

Warrants

The Company sold warrants to purchase 9,075,000 shares of the Company's common stock in the public offering and the private placement on May 22, 2020. One warrant entitles the holder to purchase one whole share of common stock at a price of $11.50 per share. At December 31, 2020, there were 8,750,000 Public Warrants outstanding recorded as equity, which became exercisable on May 22, 2021. For the three and six months ended June 30, 2021, 1,465,414 Public Warrants were exercised. At June 30, 2021, there were 7,284,586 Public Warrants outstanding.

Earnings (loss) Per Share

Basic earnings per share (“EPS”) is computed by dividing earnings available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Other potentially dilutive common shares, and the related impact to earnings, are considered when calculating EPS on a diluted basis. As we incurred a net loss for the three and six months ended June 30, 2021 and 2020, the potential dilutive shares from stock option, restricted units and warrants were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive for the periods presented. Therefore, basic and diluted EPS are computed using the same number of weighted average shares for the three and six months ended June 30, 2021 and 2020.

19. Revision of Previously Reported Consolidated Financial Statements as of and for the year ended December 31, 2020

On April 12, 2021, the SEC Division of Corporation of Finance released Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”) (the “Statement”). Upon review and analysis of the Statement, management determined that the Company’s Private Placement Warrants issued in connection with BMRG's IPO on May 22, 2020 (see Notes 1 and Note 15) do not meet the scope exception from derivative accounting prescribed by ASC 815-40. Accordingly, the Private Placement Warrants should have been recognized by the Company at fair value as of the November 16, 2020 Merger Date and classified as a liability, rather than equity in the Company’s previously reported consolidated balance sheet as of December 31, 2020. Thereafter, the change in fair value of the outstanding Warrants should have been recognized as a derivative gain (loss) each reporting period in the Company’s consolidated Statement of Operations. The fair value of the Private Placement Warrants as of the Merger Date on November 16, 2020 and December 31, 2020 amounted to $559 and $2,701, respectively.

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19. Revision of Previously Reported Consolidated Financial Statements as of and for the year ended December 31, 2020 (cont.)

The change in fair value from the Merger Date on November 16, 2020 through December 31, 2020 amounted to $2,142 and has been recognized as a derivative loss in the Company’s consolidated Statement of Operations for the year ended December 31, 2020. Management concluded the effect of this error is not quantitatively or qualitatively material on the Company’s previously reported consolidated financial statements as of and for the year ended December 31, 2020. However, the Company has elected to correct the impact of this immaterial error in the accompanying Condensed Consolidated Balance Sheet as of December 31, 2020 and Condensed Consolidated Statement of Shareholders’ Equity for the six months ended June 30, 2021 by increasing previously reported Accumulated Deficit and decreasing Additional Paid-In Capital by $2,142 and $559, respectively and increasing Warrants liability by $2,701 as of December 31, 2020.

In addition to the correction noted above, the Company identified and has elected to correct certain other errors that originated in 2020 which management has concluded are not quantitatively or qualitatively material to the Company’s previously reported consolidated financial statements as of and for the year ended December 31, 2020. The nature of these other errors pertains to immaterial reconciling adjustments in certain of the Company’s accounts payable and financing account balances as of December 31, 2020. Accordingly, the accompanying Condensed Consolidated Balance Sheet as of December 31, 2020 and Condensed Consolidated Statement of Shareholders’ Equity for the six months ended June 30, 2021 have been revised to give effect to the correction of these other errors by decreasing previously reported Accounts payable and accrued expenses by $390, reclassifying $147 from Long Term Debt, Current Portion, to Long Term Debt, decreasing Contingently Issuable Common Stock by $344, increasing Additional Paid-In Capital by $137, and decreasing Accumulated Deficit by $597 as of December 31, 2020.

The following tables reflect the impact of the correction of all the above errors on the Company’s previously reported consolidated financial statements as of and for the year ended December 31, 2020 (in thousands, except per share amounts):


	As of December 31, 2020
	As Originally Reported	Warrants adjustments	Other Immaterial adjustments	As Revised
Consolidated Balance Sheet
Current liabilities
Accounts payable and accrued expenses	8,861	—	(390)	8,471
Long term debt, current portion	1,071	—	(147)	924
Total current liabilities	14,122	—	(537)	13,585
Long term liabilities
Long term debt	280	—	147	427
Warrants liability	—	2,701	—	2,701
Total long term liabilities	1,046	2,701	147	3,894
Total liabilities	15,168	2,701	(390)	17,479

Shareholders' equity
Contingently Issuable Common Stock	17,944	—	(344)