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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, 2022
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 59,650,960 shares of common stock as of July 27, 2022.



Table of Contents
Table of Contents
Page
Item 1a.
Risk Factors












1

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,
2022
December 31,
2021
ASSETS  
Current assets:  
Cash and cash equivalents$16,273 $104,831 
Restricted cash1,255 861 
Accounts receivable, net2,596 1,916 
Inventory, net12,941 12,976 
Vendor deposits22,961 16,653 
Notes receivable, net115 103 
Prepaid expenses1,767 2,595 
Other current assets2,548 2,637 
Total current assets60,456 142,572 
Property, plant and equipment, net20,992 12,890 
Intangible assets, net260 280 
Goodwill4,331 4,331 
Security deposits, net1,226 1,239 
Notes receivable, long-term, net3,740 3,547 
Operating lease right-of-use asset, net4,772 3,468 
Other assets, net1,963 848 
Total assets$97,740 $169,175 
LIABILITIES
Current liabilities:
Accounts payable $29,088 $12,531 
Accrued expenses14,689 7,674 
Accounts payable and accrued expenses - related parties 1,200 
Operating lease liability, current portion1,013 1,084 
Note payable, current portion4,839 4,926 
Long-term debt, current portion1,765 1,644 
Convertible note payable, current portion - related party7,333  
Contract liabilities, current portion879 849 
Other current liabilities13 9 
Total current liabilities59,619 29,917 
Long-term liabilities:
Operating lease liability, long-term4,705 3,224 
Note payable, excluding current portion9,177 13,769 
Long-term debt, excluding current portion3,816 4,727 
Convertible notes payable - related party77,205 84,148 
Contract liabilities, long-term876  
Warrants liability - related party89 926 
Other liabilities82 17 
Total long-term liabilities95,950 106,811 
Total liabilities155,569 136,728 
2

Table of Contents
EOS ENERGY ENTERPRISES, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
June 30,
2022
December 31,
2021
COMMITMENTS AND CONTINGENCIES (NOTE 9)
SHAREHOLDERS' EQUITY (DEFICIT)
Common Stock, $0.0001 par value, 300,000,000 and 200,000,000 shares authorized, 58,519,739 and 53,786,632 shares outstanding at June 30, 2022 and December 31, 2021, respectively
6 5 
Preferred stock, $0.0001 par value, 1,000,000 shares authorized, no shares outstanding at June 30, 2022 and December 31, 2021
  
Additional paid in capital461,165 448,969 
Accumulated deficit(519,005)(416,527)
Accumulated other comprehensive income5  
Total shareholders' equity (deficit)(57,829)32,447 
Total liabilities and shareholders' equity (deficit)$97,740 $169,175 
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 OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except share and per share amounts)
For the three and six months ended June 30, 2022 and 2021
Three Months EndedSix Months Ended
 June 30,
2022
June 30,
2021
June 30,
2022
June 30,
2021
Revenue  
Total revenue$5,895 $612 $9,193 $776 
Costs and expenses
Cost of goods sold36,866 12,364 72,443 12,453 
Research and development expenses5,464 3,647 10,427 8,700 
Selling, general and administrative expenses19,115 11,325 33,394 20,127 
Loss on pre-existing agreement 22,516  30,368 
Loss from write-down of property, plant and equipment1,997  2,005 11 
Grant (income) expense, net(169)(52)4 (44)
Total costs and expenses63,273 49,800 118,273 71,615 
Operating loss(57,378)(49,188)(109,080)(70,839)
Other income (expense)
Interest expense, net(284)(154)(622)(175)
Interest expense - related party(2,664) (4,838) 
Remeasurement of equity method investment (7,480) (7,480)
Change in fair value, embedded derivative - related party3,978  11,673  
Change in fair value, warrants liability - related party270 585 837 361 
Income from equity in unconsolidated joint venture   440 
Sale of state tax attributes 2,194  2,194 
Other income (expense)(632) (513) 
Loss before income taxes$(56,710)$(54,043)$(102,543)$(75,499)
Income tax benefit23  65  
Net loss$(56,687)$(54,043)$(102,478)$(75,499)
Other comprehensive income
 Foreign currency translation adjustment, net of tax5  5  
Comprehensive loss$(56,682)$(54,043)$(102,473)$(75,499)
Basic and diluted loss per share attributable to common shareholders
Basic$(1.01)$(1.04)$(1.86)$(1.46)
Diluted$(1.01)$(1.04)$(1.86)$(1.46)
Weighted average shares of common stock
Basic56,021,185 51,792,365 54,991,475 51,630,088 
Diluted56,021,185 51,792,365 54,991,475 51,630,088 
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 SHAREHOLDERS' EQUITY (DEFICIT)
(In thousands, except share and per share amounts)
For the three months ended June 30, 2022 and 2021
Common StockAdditional Paid in capitalContingently Issuable Common StockAccumulated Other Comprehensive IncomeAccumulated DeficitTotal
SharesAmount
Balance at March 31, 2021
51,801,267 $5 $415,569 $ $ $(313,767)$101,807 
Stock-based compensation— — 3,195 — — — 3,195 
Exercise of stock options87,177 — 756 — — — 756 
Exercise of warrants1,465,414 — 16,852 — — — 16,852 
Net loss— — — — — (54,043)(54,043)
Balance at June 30, 2021
53,353,858 $5 $436,372 $ $ $(367,810)$68,567 
Balance at 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 stock under SEPA3,967,939 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)
Balance at June 30, 2022
58,519,739 $6 $461,165 $ $5 $(519,005)$(57,829)




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EOS ENERGY ENTERPRISES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
(In thousands, except share and per share amounts)
For the six months ended June 30, 2022 and 2021
Common StockAdditional Paid in capitalContingently Issuable Common StockAccumulated Other Comprehensive IncomeAccumulated DeficitTotal
SharesAmount
Balance at December 31, 2020
48,943,082 $5 $395,491 $17,600 $ $(292,311)$120,785 
Stock-based compensation— — 5,673 — — — 5,673 
Release of Block B Sponsor Earnout Shares from restriction859,000 — — — — — — 
Issuance of Contingently Issuable Common Stock
1,999,185 17,600 (17,600)— — — 
Exercise of stock options87,177 — 756 — — — 756 
Exercise of warrants1,465,414 — 16,852 — — — 16,852 
Net loss— — — — — (75,499)(75,499)
Balance at June 30, 2021
53,353,858 $5 $436,372 $ $ $(367,810)$68,567 
Balance at 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 stock under SEPA3,967,939 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)
Balance at June 30, 2022
58,519,739 $6 $461,165 $ $5 $(519,005)$(57,829)
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)
For the six months ended June 30, 2022 and 2021
 
June 30, 2022
June 30, 2021
Cash flows from operating activities  
Net loss$(102,478)$(75,499)
Adjustment to reconcile net loss to net cash used in operating activities
Stock-based compensation7,377 5,673 
Depreciation and amortization2,266 1,097 
Loss from write-down of property, plant and equipment 2,005 11 
Non-cash lease expense409 396 
Income from equity in unconsolidated joint venture (440)
Remeasurement of equity method investment 7,480 
Accreted interest on convertible notes payable - related party1,548  
Amortization of debt issuance cost- related party204  
Commitment fee for SEPA agreement settled by common stock- related party1,061  
Change in fair value, embedded derivative - related party(11,673) 
Change in fair value, warrants liability - related party(837)(361)
Changes in operating assets and liabilities:
Prepaid expenses827 761 
Inventory35 (1,554)
Accounts receivable(686)(170)
Vendor deposits(5,268)(3,221)
Security deposits13 (15)
Accounts payable14,734 2,380 
Accrued expenses7,020 1,540 
Accounts payable and accrued expenses - related parties(1,200)(2,517)
Provision for firm purchase commitments  (3,445)
Operating lease liabilities(303)(374)
Contract liabilities906 1,263 
Note payable(4,679)18,365 
  Other customer receivable  
   Other 1,727 (257)
Net cash used in operating activities(86,992)(48,887)
Cash flows from investing activities
Investment in notes receivable(261)(4,083)
Business acquisition, net of cash acquired (160)
Investment in joint venture (4,000)
Purchases of property, plant and equipment(11,497)(7,541)
Net cash used in investing activities(11,758)(15,784)
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EOS ENERGY ENTERPRISES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except share and per share amounts)
For the six months ended June 30, 2022 and 2021
 
June 30, 2022
June 30, 2021
Cash flows from financing activities
Principal payments on finance (capital) lease obligations(6)(6)
Proceeds from exercise of stock options 756 
Proceeds from exercise of public warrants7 16,852 
Proceeds from issuance of convertible notes - related party, net of issuance cost7,225  
Issuance of common stock under the SEPA5,000  
Repurchase of shares from employees for income tax withholding purposes(852) 
Repayment of other financing (94)
Repayment of equipment financing facility(790) 
Net cash provided by financing activities10,584 17,508 
Effect of exchange rate changes on cash and cash equivalents2  
Net decrease in cash, cash equivalents and restricted cash(88,164)(47,163)
Cash, cash equivalents and restricted cash, beginning of the period105,692 121,853 
Cash, cash equivalents and restricted cash, end of the period$17,528 $74,690 
Non-cash investing and financing activities
Accrued and unpaid capital expenditures$2,402 $ 
Issuance of convertible notes for interest paid in kind3,087  
  Fixed assets acquired with finance lease70  
Right-of-use operating lease assets in exchange for lease liabilities$2,112 $4,351 
Supplemental disclosures
Cash paid for interest$434 $233 
The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the condensed consolidated balance sheets.
 
June 30, 2022
June 30, 2021
  
Cash and cash equivalents$16,273 $74,690 
Restricted cash 1,255  
Total cash, cash equivalents and restricted cash$17,528 $74,690 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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EOS ENERGY ENTERPRISES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)

1.Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations
Eos Energy Enterprises, Inc. (the “Company” or "Eos") designs, develops, manufactures, and sells innovative energy storage solutions for utility-scale microgrid, and commercial & industrial (“C&I”) applications. Eos has developed a broad range of intellectual property with multiple patents ranging from the unique battery chemistry, mechanical product design, energy block configuration and software operating system (Battery Management System). The Battery Management System (“BMS”) software uses proprietary Eos-developed algorithms and includes ambient and battery temperature sensors, as well as voltage and electrical current sensors for the strings and the system. Eos focuses on developing and selling safe, reliable, long-lasting and low-cost turn-key alternating current (“AC”) integrated systems using Eos’ direct current (“DC”) battery energy storage system. The Company has a manufacturing facility in Turtle Creek, Pennsylvania to produce DC energy blocks with an integrated BMS. The Company’s primary applications focus on integrating battery storage solutions with: (1) renewable energy systems that are connected to the utility power grid; (2) renewable energy systems that are not connected to the utility power grid; (3) energy systems utilized to relieve congestion; and (4) storage systems to assist C&I customers in reducing their peak energy usage or participating in the utilities ancillary and demand response markets. The Company’s major market is North America with opportunistic growth opportunities in Europe, Oceania, Africa, and Asia.
Unless the context otherwise requires, the use of the terms “Eos”, “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.
Liquidity and Going Concern
The Company continues to rapidly scale its operations, including deploying capital for capacity expansion to meet the current demand from customers. To date, the Company has had limited revenue generating activities. Accordingly, the Company has incurred significant recurring losses and net operating cash outflows from operations. Operating expenses consist primarily of costs related to the Company’s sales of its battery energy storage system and related services, research and development costs and recurring general and administrative expenses. Management and the Company’s Board of Directors expect the Company will eventually reach a scale of profitability through the sale of battery energy storage systems and other complementary products and services, and therefore, the Company believes the current stage of the Company’s lifecycle justifies continued intensive investment in the development and launch of products. Accordingly, the Company expects to continue to incur significant losses and net operating cash outflows from operations for the foreseeable future and to continue to require additional capital to fund the Company’s operations and obligations as they become due, including funding that is necessary to continue to scale up the Company’s operations to allow for the delivery of order backlog, to secure additional order opportunities for its battery storage systems, and to continue to invest in research and development.
As of June 30, 2022, the Company had total assets of $97,740, which includes total cash and cash equivalents of $16,273, total liabilities of $155,569, which includes the total amounts owed on the Company’s outstanding convertible notes payable of $84,538 (see Note 14), notes payable of $14,016 (see Note 15) and long-term debt of $5,581 (see Note 16) and a total accumulated deficit of $(519,005), which is primarily attributable to the significant recurring losses the Company has accumulated since inception. The Company has historically relied on outside capital to fund its cost structure and expects this reliance to continue for the foreseeable future until the Company reaches profitability through its planned revenue generating activities. However, as of the date the accompanying condensed consolidated financial statements were issued, management concluded that the Company did not have sufficient capital on hand to support its current cost structure for one year after the date the accompanying condensed consolidated financial statements were issued.
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EOS ENERGY ENTERPRISES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
1.Nature of Operations and Summary of Significant Accounting Policies (cont.)
As previously disclosed, the Company continues its efforts to secure additional financing. In July 2022, the Company secured an $85,106 senior secured term loan credit agreement to fund the Company’s manufacturing capacity, repay an existing outstanding note, and for general corporate purposes. Based on the Company’s current financial projections, which are consistent with previous assessments, the Company will continue to seek additional capital to fund its operations or defer or reduce cash expenditures in the second half of 2022 to continue our operations.
The Company believes these uncertainties raise substantial doubt about the Company’s ability to continue as a going concern. If the Company is unable to raise additional capital, on acceptable terms, or at all, the Company may have to significantly delay, scale back or ultimately discontinue the development or commercialization of its product and/or consider a sale or other strategic transaction. The Company continues to pursue various funding options to raise additional capital to support its operations. As previously reported, the Company has moved through Part I of the application under the U.S. Department of Energy’s Loan Guarantee Solicitation for Applications for Renewable Energy Projects and Efficient Energy Projects (the “DOE Loan Program”), and submitted an application under Part II of the loan program in May 2022. In addition, on April 28, 2022, the Company entered into a $200,000 common stock standby equity purchase agreement (the “Original SEPA”) with an affiliate of Yorkville Advisors (“Yorkville”), which was subsequently amended on June 13, 2022 (the “Amendment” and, together with the Original SEPA, the “SEPA”) (see Note 12). There can be no assurance that the Company will successfully complete Part II of the DOE Loan Program or that the Company will be able to utilize the SEPA to its full $200,000 capacity, or otherwise be able to obtain new funding from other sources on terms acceptable to us, on a timely basis, or at all.
The accompanying condensed consolidated financial statements have been prepared on the basis that we will continue to operate as a going-concern, which contemplates we will be able to realize assets and settle liabilities and commitments in the normal course of business for the foreseeable future. The accompanying condensed consolidated financial statements do not include any adjustments that may result from the outcome of these uncertainties.

Basis of Presentation
The accompanying 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 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”). These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements, and the notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. 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.
Foreign Currency Translation

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EOS ENERGY ENTERPRISES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
1.Nature of Operations and Summary of Significant Accounting Policies (cont.)
We follow the provisions of ASC 830, Foreign Currency Matters. Our foreign subsidiaries use the local currency of their respective countries as their functional currency. The assets and liabilities of foreign operations are translated at the exchange rates in effect at the balance sheet date. The operating results of foreign operations are translated at weighted average exchange rates. The related translation gains or losses are reported as a separate component of shareholders’ equity (deficit) in accumulated other comprehensive loss. Gains and losses from foreign currency transactions, which were insignificant for the three and six months ended June 30, 2022 and 2021, are included as other income (expense) in the condensed consolidated statements of operations and comprehensive loss.
Recently Adopted Accounting Pronouncements
On January 1, 2021, the Company adopted ASU 2016-02, Leases (“Topic 842”), using the transition method introduced by ASU 2018-11, which does not require revisions to comparative periods. The adoption of the new standard resulted in the recording of lease assets and lease liabilities of $3,662 and $4,465, respectively, as of January 1, 2021. The difference between the lease assets and lease liabilities primarily relates to deferred rent recorded in accordance with the previous leasing guidance. The new standard did not materially impact our condensed consolidated statements of operations or statements of cash flows.
On January 1, 2021, the Company adopted ASU No. 2016-13, Financial Instruments-Credit Losses (“Topic 326”), and the subsequent amendments. The standard sets forth an expected credit loss model which requires the measurement of expected credit losses for financial instruments based on historical experience, current conditions and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost, and certain off-balance sheet credit exposures. The adoption of this standard did not have a material impact on our condensed consolidated financial statements.
Recent Accounting Pronouncements
As of June 30, 2022, the Company implemented all applicable new accounting standards and updates issued by the Financial Accounting Standards Board (“FASB”) that were in effect. There were no new standards or updates adopted during the six months ended June 30, 2022 that had a material impact on our condensed consolidated financial statements.
2. Acquisition
As previously reported, 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% 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 (see 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 provided that the Company pay an aggregate purchase price of $25,000 for Holtec’s 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 required 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.
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EOS ENERGY ENTERPRISES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)

2. Acquisition (cont.)
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 the agreement, which resulted in a loss on the pre-existing agreement of $22,516 and $30,368 for the three and six months ended June 30, 2021, respectively. The Company paid $10,283 on the date of closing and $5,000 on each of May 31, 2021 and May 31, 2022. The present value of the remaining obligation was recorded as debt, which includes a current portion of $4,839 and a long-term portion of $9,177 as of June 30, 2022.
Prior to the acquisition of the remaining 51% ownership interest in Hi-Power, the Company accounted for its initial 49% ownership interest in Hi-Power as an unconsolidated joint venture under the equity method of accounting (see Note 7). In connection with the acquisition of the remaining 51% ownership interest in Hi-Power, the Company’s condensed consolidated financial statements 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 since the date of acquisition.
The consideration transferred for the 100% ownership interest in connection with the acquisition, net of intercompany balances between the Company and Hi-Power, totaled $418, of which $205 represents the fair value of the Company’s previously held 49% ownership interest in Hi-Power. In accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations, we remeasured the 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 the previously held 49% ownership interest.
The following table summarizes the final allocation of the purchase price to the fair values of the assets acquired and liabilities assumed as of the Acquisition Date.
Amount
Inventory$2,666 
Vendor deposits818 
Property, plant and equipment, net74 
Goodwill4,331 
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 1
$365 
The Company expects the goodwill recognized as part of the acquisition will be deductible for U.S. income tax purposes. The Company also incurred insignificant non-consideration acquisition expenses including legal and accounting services related to the acquisition, which are recorded in selling, general and administrative expenses on the Company’s condensed consolidated statements of operations.
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 recognized at a point in time, and service revenues, which are recognized over time, are as follows:
1 Net assets acquired exclude the intercompany balance between Eos and Hi-Power and cash acquired.
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EOS ENERGY ENTERPRISES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
3. Revenue Recognition (cont.)
For the Three Months EndedFor the Six Months Ended
June 30, 2022
June 30, 2021
June 30, 2022
June 30, 2021
Product revenue$5,771 $599 $9,065 $763 
Service revenue124 13 128 13 
Total$5,895 $612 $9,193 $776 
For contracts for which revenue is recognized over time, the Company performs reviews of the progress and execution of its performance obligations under these contracts periodically. As part of this process, management reviews information including, but not limited to, any outstanding key contract matters, progress towards completion and the related program schedule, identified risks and opportunities and the related changes in estimates of revenues and costs. Based upon these reviews, if at any time management determines that in the case of a particular contract total costs will exceed total contract revenue, a provision for the entire anticipated contract loss is recorded at that time. The Company recognized losses from contracts of $1,249 for the three and six months ended June 30, 2022, respectively. No loss was recognized for the three and six months ended June 30, 2021.
For the three months ended June 30, 2022, we had one customer who accounted for 89.6% of the total revenue and for the six months ended June 30, 2022, we had two customers who accounted for 73.1% and 12.7% of the total revenue, respectively.
For the three months ended June 30, 2021, we had one customer who accounted for 100% of the total revenue and for the six months ended June 30, 2021, we had two customers who accounted for 78.8% and 21.2% of the total revenue, respectively.
Contract assets and Contract liabilities
The following table provides information about contract assets and contract liabilities from contracts with customers. Contract assets are included in other current assets and contract liabilities are included separately on the condensed consolidated balance sheets.
 June 30,
2022
December 31,
2021
Contract assets$938 $1,369 
Contract liabilities$1,755 $849 
The Company recognizes contract assets for certain contracts in which revenue recognition performance obligations have been satisfied, however, invoicing to the customer has not yet occurred. Contract liabilities primarily relate to advance 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 decreased by $431 during the six months ended June 30, 2022 due to reclassifications to accounts receivable from billings on existing contracts. Contract liabilities increased by $906 during the six months ended June 30, 2022, reflecting $1,159 in customer billings, which were not recognized as revenue during the period, offset by the recognition of $253 of revenue during the six months ended June 30, 2022 that was included in the contract liability balance at the beginning of the period.
Contract liabilities of $879 as of June 30, 2022 are expected to be recognized within the next twelve months. $876 of long-term contract liabilities are expected to be recognized as revenue over approximately the next two years.
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EOS ENERGY ENTERPRISES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)

4. Inventory
The following table provides information about inventory balances:
 June 30,
2022
December 31,
2021
Raw materials$12,429 $11,898 
Work-in-process167 43 
Finished goods345 1,035 
     Total Inventory, net$12,941 $12,976 
5. Property, Plant and Equipment, Net
As of June 30, 2022 and December 31, 2021, property, plant and equipment, net consisted of the following:
 20222021Useful lives
Equipment$20,071 $13,489 310 years
Finance lease296 226 5 years
Furniture1,396 808 510 years
Leasehold Improvements4,114 2,933 Lesser of useful life/remaining lease
Tooling3,385 3,053 23 years
Total29,262 20,509 
Less: Accumulated Depreciation (8,270)(7,619)
  Total Property, Plant and Equipment, net$20,992 $12,890 
Depreciation and amortization expense related to property, plant and equipment was $1,261 and $602 for the three months ended June 30, 2022 and 2021, respectively, and $2,246 and $1,077 for the six months ended June 30, 2022 and 2021, respectively.
For the three and six months ended June 30, 2022, the Company recorded a loss from write-down of property, plant and equipment of $1,997 and $2,005, respectively. For the three and six months ended June 30, 2021, the loss from write-down of property, plant and equipment was $ and $11, 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. The company recorded amortization expense of $10 for each period for the three months ended June 30, 2022 and 2021, respectively, and $20 for each period for the six months ended June 30, 2022 and 2021 related to patents, respectively.
Estimated future amortization expense of intangible assets as of June 30, 2022 are as follows:
Remainder of 2022$20 
202340 
202440 
202540 
202640 
Thereafter80 
Total$260 
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EOS ENERGY ENTERPRISES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
7. Investment in Unconsolidated Joint Venture
In August 2019, the Company entered into an agreement with Holtec to form the unconsolidated joint venture HI-POWER LLC (“Hi-Power” or “JV”). The JV was formed in order to manufacture the Company’s products for its projects in North America. Accordingly, the Company had purchased battery energy storage systems and spare parts from the JV. The facility is located in Turtle Creek, 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.
For the three and six months ended June 30, 2021, contributions made to the JV were $ and $4,000, respectively. The investment income recognized from the unconsolidated joint venture under the equity method of accounting was $ and $440 for the three and six months ended June 30, 2021, respectively.
8. Notes Receivable, Net 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. The estimate of credit losses is based on historical trends, customers’ financial condition and current economic trends, all of which are subject to change. 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 $3,855 and $3,650 outstanding as of June 30, 2022 and December 31, 2021, respectively. As of June 30, 2022 and December 31, 2021, the Company recorded an allowance for expected credit loss from the notes receivable of $7 and $6, respectively.
The customers to whom we offer financing through notes receivables are VIEs. However, the Company is not the 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 consolidated financial statements but rather disclosed in the notes to our consolidated financial statements under ASC 810, Consolidation. The maximum loss exposure is limited to the carrying value of notes receivable as of the balances sheet dates.
9. Commitments and Contingencies
Lease Commitments
The Company has lease commitments under lease agreements. Refer to Note 19 for discussion.
Firm Purchase Commitment
To ensure adequate and timely supply of raw material for production, the Company, from time to time, enters into non-cancellable purchase and service contracts with vendors. As of June 30, 2022, the Company had open inventory purchase commitments of $173 under these contracts.
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, 2022, the Company had an open purchase commitment of $232 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 for.
Legal Proceedings
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EOS ENERGY ENTERPRISES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
9. Commitments and Contingencies (cont.)
On July 7, 2022, the Company entered into a settlement agreement with the U.S. Department of Justice (the “DOJ”) and Vincent Icolari (“Relator”) to resolve the previously disclosed investigation by the DOJ for underpayment of certain custom duties in past years in connection with imports of batteries and battery components manufactured abroad. The investigation resulted from a qui tam lawsuit (the “Civil Action”) filed by the Relator in December 2019 alleging violations of the False Claims Act.

Pursuant to the terms of the settlement agreement, the Company has agreed to pay a total of $1,017 to the United States Department of Justice and $70 to Relator’s counsel. Upon receipt of such payments, the DOJ and the Relator have agreed to release the Company from civil monetary and administrative claims under the False Claims Act and the Relator has agreed to release the Company from any claims related to the Civil Action. The Company had estimated the settlement amount and accrued it in the previously filed financial statement and the settlement amount and legal fees were included in accrued expenses on the condensed consolidated balance sheets as of June 30, 2022.
In April 2022, the Company received a subpoena from the U.S. Securities and Exchange Commission requesting information regarding a variety of matters, including negotiations and agreements with customers and the Company’s disclosures to investors. The Company is fully cooperating with the investigation, which is at an early stage, and is endeavoring to address all inquiries raised by the SEC staff as expeditiously as possible.
10. Grant Expense, Net
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, 2022, grant (income) expense, net was $(169) and $4, respectively. For the three and six months ended June 30, 2021, grant (income) expense, net was $(52) and $(44), respectively.
For the three and six months ended of June 30, 2022 and 2021, Eos has received no payments from the CEC. As of June 30, 2022 and December 31, 2021, the Company had grant receivables in the amounts of $1,250 and $1,020 which were included in other current assets, and deferred grant income of $183 and $, which was included in accrued expenses on the condensed consolidated balance sheets, respectively. The expenses incurred by the Company related to the performance of studies in accordance with the respective grant agreements are offset, against the grants revenue received or receivable from the CEC for which the grant is intended to compensate the Company.
11. Income Taxes
For the three and six months ended June 30, 2022, the reported income tax benefit was $23 and $65, respectively. No income tax benefit or expense was recorded for the three and six months ended June 30, 2021. The income tax benefit differs from the amount computed by applying the statutory U.S. federal income tax rate of 21% to the loss before income taxes due to non-taxable gains, foreign operations, and pre-tax losses for which no tax benefit can be recognized for U.S. income tax purposes.
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.
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EOS ENERGY ENTERPRISES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
11. Income Taxes (cont.)
At each balance sheet date, management assesses the likelihood that the Company 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 the Company will be able to utilize its U.S. deferred tax assets at June 30, 2022 and December 31, 2021 due to cumulative losses. Therefore, the Company has a valuation allowance against its net deferred tax assets.
As of June 30, 2022 and December 31, 2021, the Company has unrecognized tax benefits associated with uncertain tax positions that, if recognized, would not affect the effective tax rate on income from continuing operations. The Company is not currently under examination by any taxing jurisdiction, and none of the uncertain tax positions are expected to reverse within the next 12 months.
The Company files income tax returns in U.S. federal and various state jurisdictions, as well as Italy and India. The open tax years for federal returns is 2018 and forward, and open tax years for state returns is generally 2017 and forward. In addition, net operating losses generated in closed years and utilized in open years are subject to adjustment by the tax authorities.
12. 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 the 2021 Convertible Notes, the Company paid $3,000 to B. Riley Securities, Inc., a related party, who acted as a placement agent. This transaction was reviewed and approved as a related party transaction.
For the three and six months ended June 30, 2022, interest expense of $2,558 and $4,731 was recorded for the 2021 Convertible Notes, respectively. The change in fair value of the embedded derivative of $3,978 and $11,673 was recorded for the three and six months ended June 30, 2022 on the condensed consolidated statements of operations, respectively. Refer to Note 14 for more information.
Loss on pre-existing agreement
For the three and six months ended June 30, 2021, $22,516 and $30,368 was charged to loss on pre-existing agreement in connection with the acquisition of Hi-Power, respectively. Refer to Note 2 for the acquisition details.
Disgorgement of short swing profits
For the six months ended June 30, 2021, the Company received $432 from its then affiliated company B. Riley Securities, Inc. resulting from disgorgement of short swing profits under Section 16 (b) of the Exchange Act. This amount was recognized as an increase to Additional Paid in Capital as a capital contribution from stockholder when it was earned.
Warrants liability
The Company has private warrants issued to an affiliated company owned by B. Riley Financial, Inc. as of June 30, 2022 and December 31, 2021. Refer to Note 17 for details.
Settlement Agreement
As disclosed at the time of the Merger Agreement, prior to the execution and delivery of the Merger Agreement, certain unitholders (“Hellman Parties”) of Eos Energy Storage LLC (“EES”), a subsidiary of the Company, asserted claims (“Threatened Claims”) against another director and affiliated investors, including AltEnergy Storage VI, LLC (the "Securityholder Representative"), questioning the dilutive effect of certain historical security issuances on the former EES common unitholders.
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EOS ENERGY ENTERPRISES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
12. Related Party Transactions (cont.)
Under the Merger Agreement, the Securityholder Representative had the obligation to defend against the Threatened Claims, and the Company had the obligation to advance or cause to be advanced to the Securityholder Representative up to $5,000 of defense costs, subject to a deductible of $2,000 (the "Deductible"), in connection with the investigation, defense, or settlement of any Threatened Claims. The Deductible was to be borne by the Company, and any additional amounts advanced were reimbursable by the former unitholders of EES.
On December 1, 2021, a Settlement Agreement was entered into between Hellman Parties and the Securityholder Representative pursuant to which, 300,000 Eos Shares (“Settlement Shares”) were to be transferred to the Hellman parties from the EES unitholders at the time of merger.
On December 28, 2021, the independent members of the Company’s Board of Directors approved a contribution of $1,200 towards the Settlement based on their determination that, among other reasons, this contribution (i) would ensure that the Company would not have to spend the entire $2,000 Deductible towards the costs of defense if the litigation were to continue, (ii) would avoid the distraction, uncertainty, and overhang of litigation relating to the Mergers, (iii) would benefit the Company’s future relationships with its long-term investors, and (iv) would generate future goodwill with such investors during an important growth stage of the Company. Because the Company’s contribution benefited certain Eos shareholders at the time of the Merger Agreement, including AltEnergy LLC and B. Riley Financial, Inc., this transaction was reviewed and approved as a related party transaction. On December 29, 2021, an amendment to the Settlement Agreement was entered into, pursuant to which, $1,200 of the value represented by the Settlement Shares was to be paid in cash, representing the equivalent of 140,023 of the Settlement Shares.
The Company accrued $1,200 in accounts payable and accrued expenses - related party on December 31, 2021, which has been paid on January 4, 2022. The remaining 159,977 in Settlement Shares were transferred to the Hellman Parties from the former EES unitholders, on a pro rata basis, on December 29, 2021.
Standby Equity Purchase Agreement (SEPA)
On April 28, 2022, the Company entered into the SEPA with YA II PN, Ltd. (“Yorkville”). Pursuant to the SEPA, the Company has the right, but not the obligation, to sell to Yorkville up to $200,000 of shares of its common stock at the Company’s request at any time during the commitment period, which commenced on April 28, 2022 and will end on the earlier of (i) May 1, 2024, or (ii) the date on which Yorkville shall have made payment of advances requested by the Company totaling up to the commitment amount of $200,000. Each sale the Company requests under the SEPA (an “Advance”) may be for a number of shares of common stock with an aggregate value of up to $20,000. The SEPA provides for shares to be sold to Yorkville at 97.0% of the Market Price (as defined below) and further provides that Yorkville cannot purchase any shares that would result in it owning more than 9.99% of the Company’s outstanding common stock at the time of an Advance (the "Ownership Limitation") or 19.99% of the Company's outstanding common stock as of the date of the SEPA (the "Exchange Cap"). The Exchange Cap will not apply under certain circumstances, including if the Company’s stockholders approve issuances in excess of the Exchange Cap. On June 28, 2022, shareholder approval was obtained to issue shares under the SEPA in excess of the Exchange Cap. “Market Price” is defined in the SEPA as the average of the VWAPs (as defined below) during each of the three consecutive trading days commencing on the trading day following the Company’s submission of an Advance notice to Yorkville. “VWAP” is defined in the SEPA to mean, for any trading day, the daily volume weighted average price of the Company’s common stock for such date on the Nasdaq Capital Market as reported by Bloomberg L.P. during regular trading hours.
In addition, subject to Yorkville’s consent, the Company may request one or more pre-advance loans in amounts not to exceed $50,000 (each, a “Pre-Advance Loan”) from Yorkville. Pursuant to the terms and conditions set forth in the SEPA and the accompanying promissory note, Pre-Advance Loans must be repaid with the proceeds from sales of equity to Yorkville, to the extent outstanding at the time of an Advance, or otherwise in cash. 465,117 shares were issued as consideration for its irrevocable commitment to purchase the Common Shares upon the terms and subject to the satisfaction of the conditions set forth in the SEPA.
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EOS ENERGY ENTERPRISES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
12. Related Party Transactions (cont.)
As the Company has right, but not the obligation, to sell up to $200,000 of common stock to Yorkville, subject to certain limitations, at the time of our choosing during the term of the agreement, the Company determined that SEPA represents a derivative financial instrument under ASC 815, Derivatives and Hedging, which should be recorded at fair value at inception and each reporting date thereafter. The financial instrument was classified as a derivative asset with a fair value of zero at the inception of the SEPA and as of June 30, 2022. For the three and six months ended June 30, 2022, the Company has received cash of $5,000 from the issuance of 3,967,939 shares. Yorkville owned 4,433,056 shares of common stock or approximately 8% of the Company’s outstanding common stock after this issuance.
Supplemental Agreement to the SEPA and Promissory Note Issuance
On June 13, 2022, the Company issued and sold a convertible promissory note with an aggregate principal amount of $7,500 (the “Promissory Note” or “Yorkville Convertible Notes”) in a private placement to Yorkville under a supplemental agreement dated as of June 13, 2022 (the “Supplemental Agreement”) to the SEPA between the Company and Yorkville. The Supplemental Agreement gave Yorkville the right to deliver notices (each, an “Investor Notice”) requiring the Company to deliver an Advance notice under the SEPA for the issuance and sale of common stock for so long as there was an outstanding balance owed under the Promissory Note. The proceeds of any issuance of common stock pursuant to such Investor Notice will be used to repay amounts owed under the Promissory Note. For the three and six months ended June 30, 2022, interest expense of $108 was recorded for the Yorkville Convertible Notes. Refer to Note 14 for detail.

13. Accrued Expenses
As of June 30, 2022 and December 31, 2021, accrued expenses consisted of the following:
June 30, 2022
December 31, 2021
Accrued payroll$4,602 $3,069 
Warranty reserve3,636 2,112 
Accrued legal and professional expenses3,595 826 
Provision for contract losses1,249  
Other1,607 1,667 
Total$14,689 $7,674 
The following table summarizes warranty reserve activity:
For the Three Months EndedFor the Six Months Ended
June 30, 2022
June 30, 2021
June 30, 2022
June 30, 2021
Warranty reserve - beginning of period$3,240