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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 March 31, 2023
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from   to

Commission file number 001-39291
EOS ENERGY ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
Delaware84-4290188
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
3920 Park Avenue
EdisonNJ08820
(Address of Principal Executive Offices)(Zip Code)
(732) 225-8400
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $0.0001 per shareEOSEThe Nasdaq Stock Market LLC
Warrants, each exercisable for one share of common stockEOSEWThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes    No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).     Yes   ☐     No  
The registrant had outstanding 115,848,976 shares of common stock as of May 4, 2023.



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

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

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









3

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

March 31,
2023
December 31,
2022
ASSETS 
Current assets:  
Cash and cash equivalents$16,127 $17,076 
Restricted cash2,725 2,725 
Accounts receivable, net 3,660 1,666 
Inventory, net14,075 23,260 
Vendor deposits5,668 4,789 
Notes receivable, net45 36 
Contract assets, current3,844 1,859 
Prepaid expenses1,884 2,289 
Other current assets1,999 1,447 
Total current assets50,027 55,147 
Property, plant and equipment, net24,617 27,169 
Intangible assets, net350 240 
Goodwill4,331 4,331 
Notes receivable, long-term, net817 827 
Operating lease right-of-use asset, net4,083 4,316 
Long-term restricted cash11,450 11,422 
Other assets4,050 3,336 
Total assets$99,725 $106,788 
LIABILITIES
Current liabilities:
Accounts payable $32,531 $34,669 
Accrued expenses20,351 15,359 
Operating lease liability, current 1,149 1,106 
Long-term debt, current 2,981 2,872 
Convertible notes payable, current - related party8,240 2,688 
Contract liabilities, current 400 3,850 
Other current liabilities34 32 
Total current liabilities65,686 60,576 
Long-term liabilities:
Operating lease liability3,825 4,130 
Long-term debt87,450 87,321 
Convertible notes payable - related party111,114 82,950 
Interest payable - related party2,417  
Contract liabilities, long-term956 956 
Warrants liability - related party234 78 
Other liabilities3,640 3,488 
Total long-term liabilities209,636 178,923 
Total liabilities275,322 239,499 
COMMITMENTS AND CONTINGENCIES (NOTE 15)
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EOS ENERGY ENTERPRISES, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
March 31,
2023
December 31,
2022
SHAREHOLDERS' DEFICIT
Common Stock, $0.0001 par value, 300,000,000 and 300,000,000 shares authorized, 95,222,670 and 82,653,781 shares outstanding on March 31, 2023 and December 31, 2022, respectively
10 9 
Preferred stock, $0.0001 par value, 1,000,000 shares authorized, no shares outstanding on March 31, 2023 and December 31, 2022
  
Additional paid in capital542,326 513,614 
Accumulated deficit(717,940)(646,340)
Accumulated other comprehensive income7 6 
Total shareholders' deficit(175,597)(132,711)
Total liabilities and shareholders' deficit$99,725 $106,788 
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)
Three Months Ended March 31,
 20232022
Revenue
Total revenue$8,835 $3,298 
Costs and expenses
Cost of goods sold26,940 35,577 
Research and development expenses5,445 4,963 
Selling, general and administrative expenses13,955 14,279 
Loss from write-down of property, plant and equipment760 8 
Grant expense, net 173 
Total costs and expenses47,100 55,000 
Operating loss(38,265)(51,702)
Other (expense) income
Interest expense, net(4,829)(338)
Interest expense - related party(13,755)(2,174)
(Loss) gain on change in fair value of derivatives - related parties(13,090)8,262 
Loss on debt extinguishment(1,634) 
Other (expense) income(17)119 
Loss before income taxes$(71,590)$(45,833)
Income tax expense (benefit)10 (42)
Net loss$(71,600)$(45,791)
Other comprehensive income
Foreign currency translation adjustment, net of tax1  
Comprehensive loss$(71,599)$(45,791)
Basic and diluted loss per share attributable to common shareholders
Basic$(0.82)$(0.85)
Diluted$(0.82)$(0.85)
Weighted average shares of common stock
Basic86,797,669 53,961,553 
Diluted86,797,669 53,961,553 
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' (DEFICIT) EQUITY
(In thousands, except share and per share amounts)
Common StockAdditional Paid in capitalAccumulated Other Comprehensive IncomeAccumulated DeficitTotal
SharesAmount
Balances on December 31, 2021
53,786,632 $5 $448,969 $ $(416,527)$32,447 
Stock-based compensation— — 3,943 — — 3,943 
Exercise of warrants600 — 7 — — 7 
Release of restricted stock units305,651 — — — — — 
Cancellation of shares used to settle payroll tax withholding(112,275)— (826)— — (826)
Net loss— — — — (45,791)(45,791)
Balances on March 31, 2022
53,980,608 $5 $452,093 $ $(462,318)$(10,220)
Balances on December 31, 2022
82,653,781 $9 $513,614 $6 $(646,340)$(132,711)
Stock-based compensation— — 3,363 — — 3,363 
Release of restricted stock units915,206 — — — — — 
Cancellation of shares used to settle payroll tax withholding(246,717)— (345)— — (345)
Issuance of common stock under Yorkville Promissory Notes11,216,492 1 24,422 — — 24,423 
Issuance of common stock under SEPA683,908  1,272 — — 1,272 
Foreign currency translation adjustment— — — 1 — 1 
Net loss— — — — (71,600)(71,600)
Balances on March 31, 2023
95,222,670 $10 $542,326 $7 $(717,940)$(175,597)
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)
Three Months Ended March 31,
 20232022
Cash flows from operating activities  
Net loss$(71,600)$(45,791)
Adjustment to reconcile net loss to net cash used in operating activities
Stock-based compensation3,363 3,943 
Depreciation and amortization2,686 995 
Loss on debt extinguishment1,634  
Loss from write-down of property, plant and equipment 760 8 
Amortization of right-of-use assets233 192 
Non-cash interest expense915  
Non-cash interest expense - related parties11,338 630 
Loss (gain) on change in fair value of derivatives - related parties13,090 (8,262)
Changes in operating assets and liabilities:
Prepaid expenses406 102 
Inventory9,185 2,684 
Accounts receivable(1,984)(768)
Vendor deposits(917)(2,258)
Contract assets(1,914)431 
Accounts payable(208)(1,172)
Accrued expenses4,991 5,126 
Accounts payable and accrued expenses - related parties (1,200)
Interest payable - related party2,417 1,544 
Operating lease liabilities(262)(179)
Contract liabilities(3,450)2,074 
Note payable 167 
   Other (1,161)(998)
Net cash used in operating activities(30,478)(42,732)
Cash flows from investing activities
Purchases of property, plant and equipment(2,897)(5,132)
Net cash used in investing activities(2,897)(5,132)
Cash flows from financing activities
Principal payments on finance lease obligations(7)(4)
Proceeds from exercise of public warrants 7 
Proceeds from issuance of convertible notes - related parties33,350  
Payment of debt issuance costs - related parties(1,116) 
Repayment of equipment financing facility(677)(389)
Issuance of common stock under SEPA1,250  
Repurchase of shares from employees for income tax withholding purposes(345)(826)
Net cash provided by (used in) financing activities32,455 (1,212)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(1) 
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EOS ENERGY ENTERPRISES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except share and per share amounts)
Three Months Ended March 31,
 20232022
Net decrease in cash, cash equivalents and restricted cash(921)(49,076)
Cash, cash equivalents and restricted cash, beginning of the period31,223 105,692 
Cash, cash equivalents and restricted cash, end of the period$30,302 $56,616 
Non-cash investing and financing activities
Accrued and unpaid capital expenditures$603 $878 
Issuance of common stock upon settlement of Yorkville convertible notes24,422  
Right-of-use operating lease assets in exchange for lease liabilities 2,112 
Accrued and unpaid capitalized internal-use software130  
Supplemental disclosures
Cash paid for interest$3,690 $224 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)

1.Overview
Nature of Operations
Eos Energy Enterprises, Inc. (the “Company,” “we,” “us,” “our,” and “Eos”) designs, develops, manufactures, and markets innovative energy storage solutions for utility-scale, microgrid, and commercial & industrial (“C&I”) applications. Eos developed a broad range of intellectual property with multiple patents covering unique battery chemistry, mechanical product design, energy block configuration and a software operating system (Battery Management System). The Company has only one operating and reportable segment.
Liquidity and Going Concern
As a growth company in the early commercialization stage of its lifecycle, Eos is subject to inherent risks and uncertainties associated with the development of an enterprise. In this regard, substantially all of the Company’s efforts to date have been devoted to the development and manufacturing of battery energy storage systems and complimentary products and services, recruitment of management and technical staff, deployment of capital to expand the Company’s operations to meet customer demand and raising capital to fund the Company’s development. As a result of these efforts, the Company has incurred significant losses and negative cash flows from operations since its inception and expects to continue to incur such losses and negative cash flows for the foreseeable future until such time that the Company can reach a scale of profitability to sustain its operations.
In order to execute its development strategy, the Company has historically relied on outside capital through the issuance of equity, debt, and borrowings under financing arrangements (collectively “outside capital”) to fund its cost structure and expects to continue to rely on outside capital for the foreseeable future. While the Company believes it will eventually reach a scale of profitability to sustain its operations, there can be no assurance the Company will be able to achieve such profitability or do so in a manner that does not require its continued reliance on outside capital. Moreover, while the Company has historically been successful in raising outside capital, there can be no assurance the Company will be able to continue to obtain outside capital in the future or do so on terms that are acceptable to the Company.
As of the date the accompanying unaudited condensed consolidated financial statements were issued (the “issuance date”), management evaluated the significance of the following negative financial conditions in accordance with Accounting Standard Codification 205-40, Going Concern:
Since its inception, the Company has incurred significant losses and negative cash from operations in order to fund its development. During the three months ended March 31, 2023, the Company incurred a net loss of $71,600, incurred negative cash flows from operations of $30,478, and had an accumulated deficit of $717,940 as of March 31, 2023.
As of March 31, 2023, the Company had $16,127 of unrestricted cash and cash equivalents available to fund the Company’s operations, no additional borrowings available to fund its operations under pre-existing financing arrangements (see Note 12, Borrowings) and negative working capital of $15,659, inclusive of $11,221 of outstanding debt that is currently scheduled to mature within the next twelve months beyond the issuance date.
While the Company has available capacity under certain pre-existing arrangements to issue shares of the Company’s common stock, including under the Standby Equity Purchase Agreement with YA II PN, Ltd. (“SEPA”), subject to the exchange cap, and at-the-market (“ATM”) offering program, (see Note 18, Shareholders’ Deficit) to aid in funding the Company’s operations, the Company’s ability to secure such funding is dependent upon certain conditions, such as investors’ willingness to purchase the Company’s common stock and at a price that is acceptable to the Company. Accordingly, as of the issuance date there is no assurance the Company will be able to secure funding under these pre-existing arrangements or on terms that are acceptable to the Company.
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EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)

1. Overview (cont.)
Similarly, while the Company has historically been successful in raising additional outside capital to fund the Company’s operations, as of the issuance date no assurance can be provided the Company will be successful in obtaining additional outside capital or on terms that are acceptable to the Company. In this regard, the Company has substantially completed the due diligence phase of negotiating additional outside capital under the U.S. Department of Energy’s (“DOE”) Loan Guarantee Solicitation for Applications for Renewable Energy Projects and Efficient Energy Projects (the “DOE Loan Program”). There can be no assurance that the Company will be able to secure such a loan or on terms that are acceptable to the Company.
The Company is required to remain in compliance with a quarterly minimum financial liquidity covenant under its Senior Secured Term Loan Credit Agreement (“Senior Secured Term Loan”). While the Company was in compliance with this covenant as of March 31, 2023, and expects to remain in compliance as of June 30, 2023, absent the Company’s ability to secure additional outside capital, the Company may be unable to remain in compliance with this covenant beginning on September 30, 2023 and thereafter. In the event the Company is unable to remain in compliance with the minimum financial liquidity covenant and the other nonfinancial covenants required by the Senior Secured Term Loan, and the Company is further unable to cure such noncompliance or secure a waiver, Atlas Credit Partners (ACP) Post Oak Credit I LLC may, at its discretion, exercise any and all of its existing rights and remedies, which may include, among other things, entering into a forbearance agreement with the Company, and/or asserting its rights in the Company’s assets securing the loan. Moreover, the Company’s other lenders may exercise similar rights and remedies under the cross-default provisions of their respective borrowing arrangements with the Company.
Absent an ability to secure additional outside capital in the near term, the Company will be unable to meet its obligations as they become due over the next twelve months beyond the issuance date.
In the event the Company’s ongoing efforts to raise additional outside capital prove unsuccessful, management will be required to seek other strategic alternatives, which may include, among others, a significant curtailment in the Company’s operations, a sale of certain of the Company’s assets, a sale of the entire Company to strategic or financial investors, and/or allowing the Company to become insolvent.
These uncertainties raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying unaudited condensed consolidated financial statements have been prepared on the basis that the Company will continue to operate as a going concern, which contemplates that the Company will be able to realize assets and settle liabilities and commitments in the normal course of business for the foreseeable future. Accordingly, the accompanying unaudited condensed consolidated financial statements do not include any adjustments that may result from the outcome of these uncertainties.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its 100% owned, direct and indirect subsidiaries and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). All intercompany transactions and balances have been eliminated in the preparation of the unaudited condensed consolidated financial statements. These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The interim financial statements should be read in conjunction with the audited consolidated financial statements, including the notes thereto, included in our 2022 Annual Report on Form 10-K. These interim results are not necessarily indicative of results for the full year.
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EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
2. Summary of Significant Accounting Policies (cont.)
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Reclassification of Prior Year Presentation
Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations.
Recent Accounting Pronouncements
There were no new accounting standards or updates during the three months ended March 31, 2023 that would have a material impact on the Company’s unaudited condensed consolidated financial statements.
3. Revenue Recognition
The Company primarily earns revenue from sales of its energy storage systems and services including installation, commissioning, and extended warranty services. Product revenues, which are generally recognized at a point in time, and service revenues, which are generally recognized over time, are as follows:
For the Three Months Ended March 31,
20232022
Product revenue$8,675 $3,293 
Service revenue160 5 
Total revenues$8,835 $3,298 
For the three months ended March 31, 2023, the Company had one customer who accounted for approximately 97.0% of the total revenue. For the three months ended March 31, 2022, the Company had three customers who accounted for 43.6%, 31.5% and 15.1% 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, current and contract liabilities, current and long-term are included separately on the unaudited condensed consolidated balance sheets and contract assets, long-term are included under other assets, net.
 March 31,
2023
December 31,
2022
Contract assets$3,914 $2,000 
Contract liabilities$1,356 $4,806 
The Company recognizes contract assets for certain contracts in which revenue recognition performance obligations have been satisfied but invoicing to the customer has not yet occurred. Contract liabilities primarily relate to consideration received from customers in advance of the Company’s satisfying performance obligations under contractual arrangements. Contract balances are reported in a net contract asset or liability position on a contract-by-contract basis at the end of each reporting period.
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EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
3. Revenue Recognition (cont.)
Contract assets increased by $1,914 during the three months ended March 31, 2023 due to recognition of revenues for which invoicing has not yet occurred. Contract liabilities decreased by $3,450 during the three months ended March 31, 2023, due to the recognition of $3,450 of revenue during the three months ended March 31, 2023 that was included in the contract liability balance at the beginning of the period.
Contract liabilities of $400 as of March 31, 2023 are expected to be recognized within the next twelve months and long-term contract liabilities of $956 are expected to be recognized as revenue over approximately the next one to two years. Contract assets of $3,844 as of March 31, 2023 are expected to be recognized within the next twelve months. Long-term contract assets of $70 are expected to be recognized as accounts receivable over approximately the next two years.
4. Cash, Cash Equivalents and Restricted Cash
Restricted cash - current consists of escrow deposits related to U.S. Custom Bonds insurance and escrow deposits related to our credit card program agreements. Additionally, long-term restricted cash relates to interest that is required to be held in escrow per the Senior Secured Term Loan agreement in an amount equal to the aggregate amount of the four immediately following interest payments owed (see Note 12, Borrowings for further discussion).
The following table reconciles reported amounts from the unaudited condensed consolidated balance sheets to cash, cash equivalents and restricted cash reported within the unaudited condensed consolidated statements of cash flows:

March 31,
2023
March 31,
2022
Cash and cash equivalents$16,127 $55,361 
Restricted cash (1)
2,725  
Long-term restricted cash11,450 1,255 
    Total cash, cash equivalents, and restricted cash $30,302 $56,616 
(1) Restricted cash, current.
5. Inventory
The following table provides information about inventory balances:
 March 31,
2023
December 31,
2022
Raw materials$13,896 $22,899 
Work-in-process64 361 
Finished goods115  
     Total inventory, net$14,075 $23,260 
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EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
6. Property, Plant and Equipment, Net
The following table provides information about property, plant and equipment, net balances:
 Estimated Useful livesMarch 31,
2023
December 31,
2022
Equipment
5 to 10 years
$23,622 $23,653 
Finance lease5 years379 379 
Furniture
5 to 10 years
1,892 1,868 
Leasehold improvementsLesser of useful life/
remaining lease
6,629 6,303 
Tooling
2 to 3 years
6,654 6,926 
     Total39,176 39,129 
Less: Accumulated depreciation (14,559)(11,960)
Total property, plant and equipment, net$24,617 $27,169 
Depreciation expense related to property, plant and equipment was $2,667 and $985 for the three months ended March 31, 2023 and 2022, respectively.
7. Intangible Assets
Intangible assets include patents valued at $400, which represents the cost to acquire the patents. These patents are determined to have useful lives and are amortized into the results of operations over ten years. The Company recorded amortization expense of $10 for each period for the three months ended March 31, 2023 and 2022 related to patents.
During the three months ended March 31, 2023, the Company capitalized $130 of costs for internal-use software. The software has a useful life and is amortized into the results of operations over 3 years. The company recorded amortization expense of $9 for the three months ended March 31, 2023 related to software.
8. Notes Receivable, Net and Variable Interest Entities (“VIEs”) Consideration
Notes receivable primarily consist of amounts due to the Company related to the financing offered to certain customers. The Company reports notes receivable at the principal balance outstanding less an allowance for losses. The estimate of credit losses is based on historical trends, customers’ financial condition and current economic trends. The Company charges interest at a fixed rate and calculates interest income by applying the effective rate to the outstanding principal balance.
The Company had notes receivable, net of $862 and $863 outstanding as of March 31, 2023 and December 31, 2022, respectively. As of March 31, 2023 and December 31, 2022, the Company recorded an allowance for expected credit loss from the notes receivable of $2 and $2, respectively.
The customers to whom the Company offers financing through notes receivables are VIEs. However, the Company is not the primary beneficiary, because the Company does not have power to direct the activities of the VIEs that most significantly impact the VIEs’ economic performance. Therefore, the VIEs are not consolidated into the Company’s unaudited condensed consolidated financial statements. The maximum loss exposure is limited to the carrying value of notes receivable as of the balances sheet dates.
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EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
9. Accrued Expenses
Accrued expenses were as follows:
March 31,
2023
December 31,
2022
Accrued payroll$4,636 $2,706 
Warranty reserve (1)
3,972 3,836 
Accrued legal and professional expenses2,087 840 
Provision for contract losses1,936 2,561 
Insurance premium payable, current2,730 2,607 
Other4,990 2,809 
Total accrued expenses$20,351 $15,359 
(1) Refer to the table below for the warranty reserve activity for the three months ended March 31, 2023.

The following table summarizes warranty reserve activity:
Three Months Ended
March 31,
20232022
Warranty reserve - beginning of period$3,836 $2,112 
Additions for current period deliveries357 673 
Changes in the warranty reserve estimate 955 
Warranty costs incurred(221)(500)
Warranty reserve - end of period$3,972 $3,240 
10. Government Grants
California Energy Commission
From time-to-time, the Company has entered into grant agreements with the California Energy Commission (“CEC”) for conducting studies to demonstrate the benefits of certain energy-saving technologies to utility companies and consumers in the State of California. Under such agreements, the Company is entitled to receive reimbursement of costs incurred by the Company covered by the grants.
For the three months ended March 31, 2023 and 2022, grant expense, net was $0 and $173, respectively.
As of March 31, 2023 and December 31, 2022, the Company had grant receivables related to the CEC in the amounts of $245 and $263, which were included in other current assets on the unaudited condensed consolidated balance sheets, respectively. There was no deferred grant income as of March 31, 2023 and December 31, 2022. Related expenses incurred by the Company are offset against grant income earned or received from the CEC.
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EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
10. Government Grants (cont.)

Inflation Reduction Act of 2022 (“IRA”)
On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 into law. The IRA has significant economic incentives for both energy storage customers and manufacturers for projects placed in service after December 31, 2022. Starting in 2023, there are Production Tax Credits under Internal Revenue Code 45X (“PTC”), that can be claimed on battery components manufactured in the U.S. and sold to U.S. or foreign customers. These tax credits available to manufacturers include a credit for ten percent of the cost incurred to make electrode active materials in addition to credits of $35 per kWh of capacity of battery cells and $10 per kWh of capacity of battery modules. These credits are cumulative, meaning that companies will be able to claim each of the available tax credits based on the battery components produced and sold through 2029, after which the PTC will begin to gradually phase down through 2032.
Since the PTC is a refundable credit (i.e., a credit with a direct-pay option available), the PTC is outside the scope of ASC 740. Therefore, the Company accounts for the PTC under a government grant model. GAAP does not address the accounting for government grants received by a business entity that are outside the scope of ASC 740. The Company’s accounting policy is to analogize to IAS 20, Accounting for Government Grants and Disclosure of Government Assistance, under IFRS Accounting Standards. Under IAS 20, once it is reasonably assured that the entity will comply with the conditions of the grant, the grant money should be recognized on a systematic basis over the periods in which the entity recognizes the related expenses or losses for which the grant money is intended to compensate. The Company recognizes grants once it is probable that both of the following conditions will be met: (1) the Company is eligible to receive the grant, and (2) the Company is able to comply with the relevant conditions of the grant.
The PTC is recorded as the applicable items are produced and sold. For the three months ended March 31, 2023, the Company recognized PTC in the amount of $798 as a reduction of cost of goods sold on the unaudited condensed consolidated statement of operations and comprehensive loss. As of March 31, 2023, grant receivable related to the PTC in the amount of $798 is recorded in other assets on the unaudited condensed consolidated balance sheets.
11. Related Party Transactions
2021 Convertible Notes Payable
In July 2021, the Company issued $100,000 aggregate principal amount of convertible notes to Spring Creek Capital, LLC, a wholly-owned, indirect subsidiary of Koch Industries, Inc. (the “2021 Convertible Notes”). In connection with these 2021 Convertible Notes, the Company paid $3,000 to B. Riley Securities, Inc., a related party, who acted as a placement agent. Refer to Note 12, Borrowings, for additional information.
AFG Convertible Notes
In January 2023, the Company issued and sold $13,750 of 26.5% Convertible Senior PIK Notes due 2026 (“AFG Convertible Notes”) to Great American Insurance Company, Ardsley Partners Renewable Energy, LP, CCI SPV III, LP, Denman Street LLC, John B. Berding Irrevocable Children’s Trust, John B. Berding, and AE Convert, LLC, a Delaware limited liability company managed by Russell Stidolph, a related party as Mr. Stidolph is a director of the Company (together, the “Purchasers”). In connection with the issuance and sale of the AFG Convertible Notes, the Company entered into an investment agreement (the “Investment Agreement”) with the Purchasers. Refer to Note 12, Borrowings, for additional information.
Warrants liability
The Company issued private warrants to an affiliated company owned by B. Riley Financial, Inc. which were outstanding as of March 31, 2023 and December 31, 2022. Refer to Note 13, Warrants Liability - Related Party, for additional information.
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EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
11. Related Party Transactions (cont.)
Standby Equity Purchase Agreement
On April 28, 2022, the Company entered into the SEPA. Pursuant to the SEPA, the Company has the right, but not the obligation, to sell to Yorkville shares of its common stock at the Company’s request. See Note 12, Borrowings and Note 18, Shareholders' Deficit for additional information.
12. Borrowings

The Company’s debt obligations at carrying value consist of the following related and third-party borrowings:
March 31, 2023
December 31, 2022
Borrowing OutstandingCarrying Value*Borrowing OutstandingCarrying Value*
Yorkville Convertible Promissory Note - due August 2023$6,000 $8,240 $2,000 $2,688 
2021 Convertible Notes Payable - due June 2026109,167 85,039 109,167 82,950 
AFG Convertible Note - due June 202613,750 26,075   
Senior Secured Term Loan - due March 2026100,000 82,531 $100,000 $81,616 
Equipment financing facility - due April 20257,900 7,900 8,577 8,577 
  Total borrowings236,817 209,785 219,744 175,831 
   Current portion11,221 11,221 5,560 5,560 
      Total borrowings, non-current$225,596 $198,564 $214,184 $170,271 
*Carrying value includes unamortized deferred financing costs, unamortized discounts, and fair value of embedded derivative liabilities.
Yorkville Convertible Promissory Notes - Related Party
On December 29, 2022, the Company issued and sold a convertible promissory note (the “December 2022 Promissory Note”) with an aggregate principal amount of $2,000 in a private placement to Yorkville under a second supplemental agreement to the SEPA (the “Second Supplemental Agreement”). In January 2023, Yorkville delivered Investor Notices requiring the Company to issue and sell an aggregate of 1,953,612 shares of common stock to Yorkville to offset all outstanding amounts owed to Yorkville under the December 2022 Promissory Note. This resulted in a loss on debt extinguishment of $338 which is reflected in the unaudited condensed consolidated statements of operations and comprehensive loss.
On February 1, 2023, the Company issued a convertible promissory note (the “February 2023 Promissory Note”) with an aggregate principal amount of $5,000 in a private placement to Yorkville under the Second Supplemental Agreement. The February 2023 Promissory Note has a maturity date of June 29, 2023, was issued with an original issue discount of 2%, debt issuance costs of $43, and bears an annual interest rate of 5% which shall increase to an annual rate of 15% upon an Event of Default (as defined in the SEPA) for so long as it remains uncured. The February 2023 Promissory Note is convertible into shares of the Company’s common stock at a conversion price equal to the lower of $1.4883 or 96.5% of the lowest daily volume weighted average price of the Company’s common stock during the seven consecutive trading days immediately preceding the conversion date (the “Conversion Price”). The number of shares issuable upon conversion of the February 2023 Promissory Note is subject to the Exchange Cap limitation under the SEPA, unless shareholder approval is obtained. Because shareholder approval is not an input that is indexed to the Company’s shares, the conversion feature is not indexed to the Company’s own stock. Therefore, the conversion feature does not qualify for the scope exception to derivative accounting and bifurcation is required at issuance.
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EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
12. Borrowings (cont.)
The fair value of the embedded derivative in the February 2023 Promissory Note was estimated using the intrinsic and discounted cash flow model at inception and on subsequent valuation dates. These models incorporate inputs such as the stock price of the Company and its debt yield. The fair value of the embedded derivative upon issuance was $1,323. The fair value of the February 2023 Promissory Note at issuance was $5,887, which was greater than the proceeds received. As such, the Company recorded the excess of fair value of the February 2023 Promissory Note over the proceeds received as interest expense in the amount of $987, which is reflected in the unaudited condensed consolidated statements of operations and comprehensive loss.
In February 2023, Yorkville delivered Investor Notices requiring the Company to issue and sell an aggregate of 3,879,706 shares of common stock to Yorkville, in order to offset all outstanding amounts owed to Yorkville under the February 2023 Promissory Note. This resulted in a loss on debt extinguishment of $479 which is reflected in the unaudited condensed consolidated statements of operations and comprehensive loss.
On March 17, 2023, the Company issued a convertible promissory note (the “March 2023 Promissory Note” and, together with the December 2022 Promissory Note and the February 2023 Promissory Note, the “Yorkville Convertible Promissory Notes”) with an aggregate principal amount of $15,000 in a private placement to Yorkville under a third supplemental agreement to the SEPA (the “Third Supplemental Agreement”). The March 2023 Promissory Note has a maturity date of August 17, 2023, was issued with an original issue discount of 2%, debt issuance costs of $64, and bears an annual interest rate of 5% which shall increase to an annual rate of 15% upon an Event of Default (as defined in the SEPA) for so long as it remains uncured. The March 2023 Promissory Note is convertible into shares of the Company’s common stock at a conversion price equal to the lower of $1.9368 or 92.5% of the lowest daily volume weighted average price of the Company’s common stock during the seven consecutive trading days immediately preceding the conversion date (the “Conversion Price”). The number of shares issuable upon conversion of the March 2023 Promissory Note is subject to the Exchange Cap limitation under the SEPA, unless shareholder approval is obtained. Because shareholder approval is not an input that is indexed to the Company’s shares, the conversion feature is not indexed to the Company’s own stock. Therefore, the conversion feature does not qualify for the scope exception to derivative accounting and bifurcation is required at issuance.
The fair value of the March 2023 Promissory Note at issuance was $20,665, which was greater than the proceeds received. As such, the Company recorded the excess of fair value of the March 2023 Promissory Note over the proceeds received as interest expense in the amount of $5,965, which is reflected in the unaudited condensed consolidated statements of operations and comprehensive loss.
The fair value of the embedded derivative upon issuance was $7,026. The fair value of the embedded derivative in the March 2023 Promissory Note was estimated using the intrinsic and discounted cash flow model at inception and on subsequent valuation dates. These models incorporate inputs such as the stock price of the Company and its debt yield. The assumptions used to determine the fair value of the embedded derivatives at issuance and at March 31, 2023 are as follows:
March 17, 2023March 31, 2023
EOSE Common Stock Price$2.24 $2.57 
Debt Yield40.00 %40.00 %
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EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
12. Borrowings (cont.)
In March 2023, Yorkville delivered Investor Notices requiring the Company to issue and sell an aggregate of 5,383,174 shares of common stock to Yorkville, in order to offset a portion of outstanding amounts owed to Yorkville under the March 2023 Promissory Note. This resulted in a loss on debt extinguishment of $817 which is reflected in the unaudited condensed consolidated statements of operations and comprehensive loss.
The carrying value of the March 2023 Promissory Note is as follows:
March 31, 2023
Principal$6,000 
Unamortized debt discount(545)
Unamortized debt issuance costs(64)
Embedded derivative liability2,849 
Aggregate carrying value$8,240 
In April 2023, Yorkville delivered Investor Notices requiring the Company to issue and sell shares of common stock to Yorkville, in order to offset the remaining outstanding amounts owed to Yorkville under the March 2023 Promissory Note. See Note 19, Subsequent Events for additional information.

2021 Convertible Notes Payable – Related Party
On July 6, 2021, the Company entered into an investment agreement with Spring Creek Capital, LLC, a wholly-owned, indirect subsidiary of Koch Industries, Inc. The investment agreement provides for the issuance and sale to Koch Industries of the 2021 Convertible Notes in the aggregate principal amount of $100,000. The maturity date of the 2021 Convertible Notes is June 30, 2026, subject to earlier conversion, redemption, or repurchase.
The Company estimated the fair value of the embedded conversion feature using a binomial lattice model at inception and on subsequent valuation dates. This model incorporates inputs such as the stock price of the Company, dividend yield, risk-free interest rate, the effective debt yield and expected volatility. The effective debt yield and volatility involve unobservable inputs classified as Level 3 of the fair value hierarchy (refer to Note 14, Fair Value Measurement). The assumptions used to determine the fair value of the embedded conversion feature are as follows:
March 31, 2023
December 31, 2022
Term3.25 years3.5 years
Dividend yield % %
Risk-free interest rate3.7 %4.1 %
Volatility70.0 %80.0 %
Effective debt yield40.0 %25.0 %
As of March 31, 2023 and December 31, 2022, the fair value of the embedded conversion feature was $1,684 and $918, respectively. The (loss) gain from the change in fair value of the embedded derivative conversion feature for the three months ended March 31, 2023 and 2022 amounted to $(766) and $7,695, respectively.
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EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
12. Borrowings (cont.)
Interest expense recognized on the 2021 Convertible Notes is as follows:
Three months Ended March 31,
20232022
Contractual interest expense$1,637 $1,544 
Amortization of debt discount1,207 543 
Amortization of debt issuance costs117 87 
    Total$2,961 $2,174 

The balances for the 2021 Convertible Notes are as follows:
March 31, 2023
December 31, 2022
Principal$109,167 $109,167 
Unamortized debt discount(23,526)(24,733)
Unamortized debt issuance costs(2,286)(2,402)
Embedded conversion feature1,684 918 
     Aggregate carrying value$85,039 $82,950 
As of March 31, 2023 and December 31, 2022, interest payable attributable to the 2021 Convertible Notes was $1,637 and $, respectively. As of March 31, 2023, the Company was obligated to repay all contractual interest attributable to the 2021 Convertible Notes in-kind in accordance with the terms under the Senior Secured Term Loan (see below). Therefore, such interest was recorded as a long-term liability on the unaudited condensed consolidated balance sheets.
AFG Convertible Notes - Related Party
On January 18, 2023, the Company entered into the Investment Agreement with the Purchasers relating to the issuance and sale to the Purchasers of $13,750 in aggregate principal amount of the Company’s AFG Convertible Notes.
Contractual Interest Rates - The AFG Convertible Notes will bear interest at a rate of 26.5% per annum, which shall be entirely paid-in-kind. All interest payments shall be made through an increase in the principal amount of the outstanding AFG Convertible Notes or through the issuance of additional notes (such interest is referred to herein as “PIK Interest”). Interest on the AFG Convertible Notes is payable semi-annually in arrears on June 30 and December 30, commencing on June 30, 2023. It is expected that the Notes will mature on June 30, 2026, subject to earlier conversion, redemption or repurchase.
Conversion Rights - The AFG Convertible Notes are convertible at the option of the holder (the “Conversion Option”) at any time until the business day prior to the maturity date, including in connection with a redemption by the Company. The AFG Convertible Notes will be convertible into shares of the Company’s common stock, par value $0.0001 per share, based on an initial conversion price of approximately $1.67 per share subject to customary anti-dilution and other adjustments. As of March 31, 2023, 8,233,533 shares of the Company’s common stock were issuable upon conversion of the AFG Convertible Notes including the principal and interest payment in-kind. The Company has the right to settle conversions in shares of common stock, cash, or any combination thereof.
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EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
12. Borrowings (cont.)
Optional Redemption - On or after June 30, 2024, provided that the Company has obtained stockholder approval, the AFG Convertible Notes will be redeemable by the Company in the event that the closing sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides the redemption notice at a redemption price equal to the then current principal amount of the AFG Convertible Notes (inclusive of all PIK Interest), plus the aggregate amount of all interest payments on the AFG Convertible Notes that the holders of the AFG Convertible Notes to be redeemed would have been entitled to receive had the AFG Convertible Notes remained outstanding to the maturity date.
Contingent Redemption - With certain exceptions, upon the occurrence of certain events and fundamental changes described in the AFG Convertible Notes Agreement, the holders of the AFG Convertible Notes may require that the Company repurchase all or part of the principal amount of the AFG Convertible Notes at a purchase price of 100% of the principal amount of the AFG Convertible Notes, plus accrued and unpaid interest.
Embedded Derivative - The Conversion Option includes an exercise contingency, which requires the Company to obtain shareholder approval for conversions subject to the Exchange Cap. If shareholder approval is not obtained, following commercially reasonable efforts, the Company will be required to settle the conversion in excess of the Exchange Cap in cash. Since settlement in cash may be required in absence of shareholder approval, the embedded conversion feature fails the equity classification guidance in ASC 815 and is thus precluded from being classified in equity. Therefore, the embedded conversion feature is required to be bifurcated from the AFG Convertible Notes and accounted for at fair value at each reporting date, with changes in fair value recognized on the unaudited condensed consolidated statements of operations and comprehensive loss.
The fair value of the embedded derivative upon issuance was $6,451. The embedded derivative is presented on the unaudited condensed consolidated balance sheet as a component of Convertible notes payable - related party. The loss from the change in fair value of the embedded derivative for the three months ended March 31, 2023 amounted to $10,272.
The Company estimated the fair value of the embedded derivative using a binomial lattice model at the inception and on subsequent valuation dates. This model incorporates inputs such as the stock price of the Company, dividend yield, risk-free interest rate, the effective debt yield and expected volatility. The effective debt yield and volatility involve unobservable inputs classified as Level 3 of the fair value hierarchy (see Note 14, Fair Value Measurement for further discussion). The assumptions used to determine the fair value of the embedded derivative as of March 31, 2023 and as of the date of issuance are as follows:
March 31, 2023
January 18, 2023
Term3.25 years3.5 years
Dividend yield % %
Risk-free interest rate3.7 %3.6 %
Volatility70.0 %70.0 %
Effective debt yield40.0 %40.0 %
The fair value of the AFG Convertible Notes at issuance was $16,623, which was greater than the proceeds received. The Company recorded the difference of $2,873 as interest expense on the unaudited condensed consolidated statement of operations and comprehensive loss.
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EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
12. Borrowings (cont.)
Interest expense recognized on the AFG Convertible Notes is as follows:
Three Months Ended
March 31, 2023
Contractual interest expense$779 
Amortization of debt discount148 
Amortization of debt issuance costs42 
    Total$969 
The balance for the AFG Convertible Notes is as follows:
March 31, 2023
Principal$13,750 
Unamortized debt discount(3,430)
Unamortized debt issuance costs(968)
Embedded conversion feature16,723 
     Aggregate carrying value$26,075 
Senior Secured Term Loan
On July 29, 2022, the Company entered into a $100,000 Senior Secured Term Loan Credit Agreement with Atlas Credit Partners (ACP) Post Oak Credit I LLC., as administrative agent for the lenders and collateral agent for the secured parties. As of March 31, 2023, the Company had total borrowings of $100,000 under the Senior Secured Term Loan.
The Senior Secured Term Loan is scheduled to mature on the earlier of (i) July 29, 2026, and (ii) 91 days prior to the current maturity date of the 2021 Convertible Notes of June 30, 2026. The Company has the right at any time to prepay any Borrowing in whole or in part in an amount of not less than $500.
The outstanding principal balance of the Senior Secured Term Loan bears interest, at the applicable margin plus, at the Company’s election, either (i) the benchmark secured overnight financing rate (“SOFR”), which is a per annum rate equal to (y) the Adjusted Term SOFR (as defined in the agreement) plus 0.2616%, or (ii) the alternate base rate (“ABR”), which is a per annum rate equal to the greatest of (x) the Prime Rate (as defined in the agreement), (y) the NYFRB Rate (as defined in the agreement) plus 0.5% and (z) the SOFR. The applicable margin under the Credit Agreement is 8.5% per annum with respect to SOFR loans, and 7.5% per annum with respect to ABR loans. Interest on the Senior Secured Term Loan accrues at a variable interest rate, and interest payments are due quarterly. The Company may elect to convert SOFR Loans to ABR (and ABR Loans to SOFR). As of March 31, 2023, the interest rate in effect for the Senior Secured Term Loan for the first quarter of 2023 interest payment was 13.66%.
Any repayment of principal prior to the second anniversary of the issuance date is subject to a call premium. The call premium is equal to the present value of all interest payments due through June 30, 2024, calculated using a discount rate equal to the applicable treasury rate as of the repayment date plus 50 basis points. The Company deemed that the fair value of the embedded derivative features which qualify for bifurcation was de minimis.
Concurrently, the Company entered into a Guarantee and Collateral Agreement which secures and guarantees the Senior Secured Term Loan with substantially all the assets of the Company and its subsidiaries, other than the Company’s equity interests in Hi-Power and assets of Hi-Power. Additionally, interest is required to be escrowed in an amount equal to the aggregate amount of the four immediately following interest payments owed on the Loans which was $11,450 at March 31, 2023. This escrowed and restricted cash is presented on a separate line item on the unaudited condensed consolidated balance sheets as long-term restricted cash.
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EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
12. Borrowings (cont.)
The agreements also contain customary affirmative and negative covenants. They limit the Company’s and its subsidiaries’ ability to incur indebtedness, make restricted payments, including cash dividends on its common stock, make certain investments, loans and advances, enter into mergers and acquisitions, sell, assign, transfer or otherwise dispose of its assets, enter into transactions with its affiliates and engage in sale and leaseback transactions, among other restrictions. Furthermore, the limitation on the Company’s ability to incur indebtedness also (i) limits the amount of Pre-Advance Loans that the Company may have outstanding at any time to $15,000 under the SEPA and (ii) requires the payment of principal and interest in kind on each of the Pre-Advance Loans (if any) and the 2021 Convertible Notes. While the Company was in compliance with this covenant as of March 31, 2023 and currently expects to remain in compliance as of June 30, 2023, absent the Company’s ability to secure additional outside capital, the Company may be unable to remain in compliance with this covenant beginning on September 30, 2023 and thereafter (see Note 1, Overview for further discussion).
The following table summarizes interest expense recognized:
Three Months Ended March 31,
2023
Contractual interest expense$3,373 
Amortization of debt discount93 
Amortization of debt issuance costs822 
Total $4,288 
The Senior Secured Term Loan balance is as follows:
March 31, 2023
December 31, 2022
Principal$100,000 $100,000 
Unamortized debt discount(1,773)(1,866)
Unamortized debt issuance costs(15,696)(16,518)
     Aggregate carrying value$82,531 $81,616 
Equipment Financing facility
The Company entered into an agreement on September 30, 2021 with Trinity Capital Inc. (“Trinity”) for a $25,000 equipment financing facility, the proceeds of which will be used to acquire certain manufacturing equipment, subject to Trinity’s approval. Each draw is executed under a separate payment schedule (a “Schedule”) that constitutes a separate financial instrument. The financing fees included in each Schedule are established through monthly payment factors determined by Trinity. Such monthly payment factors are based on the Prime Rate reported in The Wall Street Journal in effect on the first day of the month in which a Schedule is executed.
Date of Draw
Gross Amount of Initial Draw
Coupon Interest RateDebt Issuance Costs
September 2021$7,000 14.3%$175 
September 20224,216 16.2%96 
    Total Equipment Financing loans$11,216 $271 
On September 30, 2022, the equipment facility’s unused commitment of $13,784 expired.
As of March 31, 2023 and December 31, 2022, total equipment financing debt outstanding was $7,900 and $8,577, respectively of which $2,981 and $2,872 are recorded as a current liability on the unaudited condensed consolidated balance sheets, respectively. For the three months ended March 31, 2023 and 2022, the Company recognized $317 and $219 as interest expense attributable to the equipment financing agreement, respectively.
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EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
13. Warrants Liability - Related Party
Private placement warrants issued to the Sponsor of BMRG in its initial public offering on May 22, 2020 became exercisable on May 22, 2021. These warrants are classified as Level 2 financial instruments in the fair value hierarchy (refer to Note 15, Fair Value Measurement). They are valued on the basis of the quoted price of the Company’s public warrants, adjusted for insignificant difference between the public warrants and the private placement warrants. As of March 31, 2023 and December 31, 2022, 325,000 private placement warrants were outstanding with a fair value of $234 and $78, respectively.
The change in fair value for the three months ended March 31, 2023 and 2022 amounted to $156 and $567, respectively. The change has been recognized in (loss) gain on change in fair value of derivatives - related parties in the Company’s unaudited condensed consolidated statements of operations and comprehensive loss.
14. Fair Value Measurement
The Company’s financial instruments consist of cash and cash equivalents, restricted cash, private placement warrants, accounts receivable, notes receivable, contract assets, accounts payable, note payable, convertible notes payable — related party, contract liabilities and long-term debt.
Accounting standards establish a hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three levels. The fair value hierarchy gives the highest priority to quoted market prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Accounting standards require financial assets and liabilities to be classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and the exercise of this judgment may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.
The carrying value of cash and cash equivalents, restricted cash, accounts receivable, contract assets, contract liabilities and accounts payable are considered to be representative of their fair value due to the short maturity of these instruments.
The table below summarizes the fair values of certain liabilities that are included within the Company’s accompanying unaudited condensed consolidated balance sheets, and their designations among the three fair value measurement categories:
March 31, 2023
December 31, 2022
Level 1Level 2Level 3Level 1Level 2Level 3
Liabilities
Private placement warrants$ $234 $ $ $78 $ 
Embedded derivative liabilities$ $ $21,255 $ $ $1,945 
The following table presents a roll-forward of the activity of the embedded derivative liabilities within the convertible notes discussed in Note 12, Borrowings. These liabilities were measured at fair value on a recurring basis using significant unobservable inputs (Level 3).

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

14. Fair Value Measurement (cont.)
Three Months Ended March 31,
20232022
Balance at beginning of the period$1,945 $12,359 
Additions14,799  
Extinguishment from Yorkville Promissory Notes Conversions(8,423) 
Change in fair value included in earnings12,934 (7,695)
Balance at end of the period$21,255 $4,664 
The estimated fair value of financial instruments not carried at fair value in the unaudited condensed consolidated balance sheets was as follows:
Level in Fair Value Hierarchy
March 31, 2023
December 31, 2022
Carrying ValueFair ValueCarrying ValueFair Value
Notes receivable3$862 $688 $863 $677 
AFG Convertible Notes*326,075 27,593   
2021 Convertible Notes*385,039 46,634 82,950 62,421 
Senior Secured Term Loan 382,531 67,410 81,616 77,576 
Equipment financing facility3