This presentation may contain trademarks, service marks, trade names and copyrights of other companies, which are the property of their respective owners. Solely for convenience, some of the trademarks, service marks, trade names and copyrights referred to in this presentation may be listed without the TM, SM © or ® symbols, but Eos will assert, the fullest extent under applicable law, the rights of the applicable owners, if any, to these trademarks, service marks, trade names and copyrights. Znyth, Eos Zny ...

EDISON, N.J., March 04, 2024 (GLOBE NEWSWIRE) -- Eos Energy Enterprises, Inc. (NASDAQ:EOSE) ("Eos" or the "Company"), a leading provider of safe, scalable, efficient, and sustainable zinc-based long duration energy storage systems, today announced financial results for the fourth quarter and full year ended December 31, 2023, and announced 2024 outlook. Fourth Quarter Highlights Revenue totaled $6.6 million, a 148% increase compared to prior year, as the Company fully transitioned production to the Eos Z3TM ...

Part I [Business](index=4&type=section&id=Item%201.%20Business) Eos Energy designs and manufactures zinc-based battery energy storage systems, primarily the Znyth™ BESS with Z3™ modules, for long-duration utility, microgrid, and C&I applications in North America - Eos designs, manufactures, and markets innovative zinc-based energy storage solutions for **utility-scale, microgrid, and commercial & industrial (C&I) applications**, positioned as an alternative to Lithium-ion batteries[13](index=13&type=chunk) - The company's flagship product is the **Znyth™ BESS** with the newest **Z3™ battery module**, designed for **3- to 12-hour discharge applications** and offering improved cost-effectiveness, energy density, and manufacturing simplicity[14](index=14&type=chunk)[21](index=21&type=chunk) - Eos's strategy focuses on scaling **Z3 battery production** in the U.S. to leverage **Production Tax Credits (PTC)** and **customer Investment Tax Credits (ITC)** under the Inflation Reduction Act (IRA)[21](index=21&type=chunk)[23](index=23&type=chunk)[32](index=32&type=chunk) - In August 2023, the Department of Energy (DOE) issued a Conditional Commitment Letter for a loan of up to **$398.6 million** to fund **80% of eligible costs** for manufacturing expansion in Turtle Creek, Pennsylvania[30](index=30&type=chunk) - The company competes with traditional **Li-ion manufacturers** like Tesla and LG Chem, and other **long-duration storage companies** such as ESS Inc. and Form Energy[36](index=36&type=chunk) - For fiscal year 2023, two customers accounted for **49.9%** and **45.2% of total revenue**, indicating significant customer concentration[39](index=39&type=chunk) - As of December 31, 2023, the company had **420 full-time employees**, none of whom are represented by a labor union[43](index=43&type=chunk) [Risk Factors](index=10&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including historical losses, negative cash flows, material weaknesses in internal controls, reliance on external capital, and manufacturing challenges, raising substantial doubt about its going concern ability - The company has a history of **net losses ($229.5 million in 2023)** and **negative operating cash flows**, raising substantial doubt about its ability to continue as a going concern for the next 12 months[57](index=57&type=chunk) - Management identified **material weaknesses in internal controls over financial reporting** as of December 31, 2023, potentially leading to reporting failures or material misstatements[65](index=65&type=chunk)[68](index=68&type=chunk) - Eos requires **significant additional financing** to achieve its goals, and failure to obtain it on acceptable terms could adversely impact business growth and continued operations[122](index=122&type=chunk)[61](index=61&type=chunk) - The company may be unable to remain in compliance with the **minimum financial liquidity covenant** in its Senior Secured Term Loan beginning **June 30, 2024**, potentially leading to default[123](index=123&type=chunk) - Eos has **limited experience in commercial-scale manufacturing** and may face difficulties in scaling production, potentially leading to delays, quality control issues, and cost overruns[97](index=97&type=chunk)[99](index=99&type=chunk) - The business is heavily dependent on **third-party suppliers**, and supply chain disruptions could adversely affect operations[109](index=109&type=chunk) - The company's ability to utilize its significant **net operating loss (NOL) carryforwards of approximately $638.5 million** is likely to be substantially limited due to an "ownership change" under Section 382 of the Internal Revenue Code[62](index=62&type=chunk)[64](index=64&type=chunk) [Unresolved Staff Comments](index=32&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the Securities and Exchange Commission - None [Cybersecurity](index=32&type=section&id=Item%201C.%20Cybersecurity) Eos employs a cybersecurity model focused on prevention, detection, assessment, and remediation, managed by its IT Department with Board and CFO oversight, identifying no material threats in 2023 - The company's cybersecurity program is managed by the Director of ITD, reporting to the CFO, with overall oversight from the Board of Directors[166](index=166&type=chunk) - In 2023, the company identified no cybersecurity threats that materially affected or are reasonably likely to materially affect its business, operations, or financial condition[167](index=167&type=chunk) [Properties](index=33&type=section&id=Item%202.%20Properties) The company's corporate headquarters, comprising office, testing, and design space, is located in Edison, New Jersey, and its manufacturing facility is in Turtle Creek, Pennsylvania, where it expanded its leased space in 2023 - Corporate headquarters are located in a **63,000 sq. ft. leased facility** in Edison, New Jersey, with the lease expiring in **September 2026**[168](index=168&type=chunk) - The primary manufacturing facility is in **Turtle Creek, Pennsylvania**, where the company expanded its leased space in 2023[169](index=169&type=chunk) [Legal Proceedings](index=33&type=section&id=Item%203.%20Legal%20Proceedings) Eos is involved in two significant legal matters: the settled Delman Complaint, primarily funded by D&O insurance, and the ongoing Houck Complaint, which the company intends to vigorously defend - The Delman Complaint, a class action against former directors, was settled for **$8.5 million**, primarily funded by **$1.0 million in cash** and **$7.5 million from D&O liability insurance policies**[172](index=172&type=chunk) - The Houck Complaint, a class action filed in **August 2023**, alleges false or misleading statements by the company and three officers, which the company denies and intends to defend against[173](index=173&type=chunk) [Mine Safety Disclosures](index=34&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company reports no mine safety disclosures - None Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=34&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Eos's common stock and warrants are traded on The Nasdaq Capital Market under the symbols "EOSE" and "EOSEW," and the company has never paid cash dividends nor anticipates doing so - Common stock and warrants trade on **The Nasdaq Capital Market** under ticker symbols **"EOSE"** and **"EOSEW"**[175](index=175&type=chunk) - The company has never declared or paid cash dividends and does not plan to in the foreseeable future[176](index=176&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2023, Eos Energy's revenue remained flat at $16.4 million while cost of goods sold decreased 41% to $89.8 million due to the Z3 battery transition, resulting in a $229.5 million net loss and raising substantial doubt about its going concern ability, despite significant capital raises and a conditional DOE loan commitment [Results of Operations](index=39&type=section&id=Results%20of%20Operations) For 2023, revenue decreased 9% to $16.4 million, while cost of goods sold significantly reduced by 41% to $89.8 million due to Z3 battery production, yet the company reported a $229.5 million net loss, similar to 2022, heavily impacted by non-operating expenses Comparison of Operations for the Years Ended December 31, 2023 and 2022 (in thousands) | Financial Metric | 2023 | 2022 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **Revenue** | **$16,378** | **$17,924** | **($1,546)** | **(9)%** | | Cost of goods sold | $89,798 | $153,260 | ($63,462) | (41)% | | R&D expenses | $18,708 | $18,469 | $239 | 1% | | SG&A expenses | $53,650 | $60,623 | ($6,973) | (12)% | | **Operating loss** | **($152,937)** | **($221,258)** | **$68,321** | **(31)%** | | Interest expense, net | ($18,770) | ($7,915) | ($10,855) | 137% | | Interest expense – related party | ($37,466) | ($10,898) | ($26,568) | 244% | | Change in fair value of warrants | ($24,980) | $848 | ($25,828) | N/A | | **Net loss** | **($229,506)** | **($229,813)** | **$307** | **(0.1)%** | - The decrease in cost of goods sold was primarily due to approximately **44% fewer containers delivered** in 2023 and the transition to the lower-cost **Z3 system** from the higher-cost Gen 2.3 battery system[196](index=196&type=chunk) - For the year ended December 31, 2023, the Company recognized the IRA's **Production Tax Credit of $3.3 million** as a reduction of cost of goods sold[192](index=192&type=chunk) - The net loss was significantly impacted by a **$25.0 million loss** on the change in fair value of warrants and a **$37.5 million interest expense** from related parties[203](index=203&type=chunk)[205](index=205&type=chunk) [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) The company's financial condition raises substantial doubt about its going concern ability, with $69.5 million in cash as of December 31, 2023, relying on external financing, having raised significant capital in 2023, and facing potential non-compliance with its Senior Secured Term Loan covenant - Management concluded there is **substantial doubt** about the Company's ability to continue as a going concern due to a history of significant losses, negative cash flows, and reliance on outside capital[212](index=212&type=chunk)[215](index=215&type=chunk) - As of December 31, 2023, the company had **$69.5 million of unrestricted cash and cash equivalents**, compared to **$17.1 million** at the end of 2022[215](index=215&type=chunk)[295](index=295&type=chunk) Cash Flow Summary (in thousands) | Financial Metric | For the Year Ended Dec 31, 2023 | For the Year Ended Dec 31, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($145,018) | ($196,857) | | Net cash used in investing activities | ($29,461) | ($17,170) | | Net cash provided by financing activities | $227,918 | $139,544 | - In 2023, the company raised significant capital through various financing activities, including **$92.9 million** from an at-the-market (ATM) offering, **$50.0 million** from a public offering in December, and **$48.0 million** from registered direct offerings in April and May[218](index=218&type=chunk) - The company may be unable to remain in compliance with the **minimum financial liquidity covenant** of its Senior Secured Term Loan beginning on **June 30, 2024**, without securing additional outside capital[215](index=215&type=chunk) [Critical Accounting Estimates](index=46&type=section&id=Critical%20Accounting%20Estimates) The company's critical accounting estimates, including Warranty Liability, Warrants Liability, and Convertible Notes and Embedded Derivatives, involve significant judgment and rely on subjective, unobservable inputs, potentially leading to material financial impacts - Warranty Liability: Accruals are based on management's best estimate of projected costs, but are subject to material changes due to **limited historical claim experience**[233](index=233&type=chunk) - Warrants Liability: Fair value is estimated using the **Black-Scholes model**, relying on **Level 3 unobservable inputs**, particularly expected volatility[234](index=234&type=chunk) - Convertible Notes and Embedded Derivatives: Fair value is estimated using a **binomial lattice model**, relying on **Level 3 unobservable inputs** like effective debt yield and volatility[235](index=235&type=chunk) [Quantitative and Qualitative Disclosure about Market Risk](index=47&type=section&id=Item%207A.Quantitative%20and%20Qualitative%20Disclosure%20about%20Market%20Risk) The company's primary market risks are liquidity risk, stemming from ongoing funding needs and going concern doubts, and equity price risk, impacting the fair value measurement of liability-classified warrants due to stock price volatility - The company's primary market risk is **liquidity risk**, driven by its need to raise funds and sustain operations, leading to substantial doubt about its ability to continue as a going concern[237](index=237&type=chunk) - The company is exposed to **equity price risk** due to outstanding warrants measured at fair value, where stock price volatility can significantly impact liability valuation[238](index=238&type=chunk) [Financial Statements and Supplementary Data](index=48&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's consolidated financial statements and the independent auditor's report, which includes a "Going Concern" paragraph and identifies the valuation of convertible notes and warrants as a Critical Audit Matter - The independent auditor's report includes a **"Going Concern" paragraph**, citing recurring losses and potential non-compliance with a financial covenant, raising substantial doubt about the company's ability to continue as a going concern[283](index=283&type=chunk) - The auditor identified the valuation of **Convertible Notes Payable and Warrants Liability** as a Critical Audit Matter due to subjective and complex fair value estimation judgments[288](index=288&type=chunk)[291](index=291&type=chunk) Key Financial Data (in thousands) | Financial Metric | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | **Balance Sheet** | | | | Total Assets | $186,492 | $106,788 | | Total Liabilities | $297,292 | $239,499 | | Total Shareholders' Deficit | ($110,800) | ($132,711) | | **Statement of Operations** | | | | Total Revenue | $16,378 | $17,924 | | Net Loss | ($229,506) | ($229,813) | | **Basic and Diluted Loss Per Share** | **($1.81)** | **($3.68)** | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosures](index=48&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosures) The company reports no disagreements with its accountants regarding accounting principles, practices, or financial statement disclosure - None [Controls and Procedures](index=48&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were ineffective as of December 31, 2023, due to material weaknesses in internal control over financial reporting, for which a remediation plan is underway - Management concluded that disclosure controls and procedures were **not effective** as of December 31, 2023[241](index=241&type=chunk) - The ineffectiveness is due to **material weaknesses**, including a lack of a formalized internal control framework (COSO), inadequate segregation of duties, and insufficient management review controls[246](index=246&type=chunk) - A remediation plan is in progress, involving developing a risk framework, enhancing policies, redesigning controls, and engaging external experts, though weaknesses are not yet fully remediated[247](index=247&type=chunk)[248](index=248&type=chunk)[249](index=249&type=chunk) [Other Information](index=49&type=section&id=Item%209B.%20Other%20Information) Director Audrey Zibelman notified the board on February 28, 2024, of her decision not to stand for reelection at the 2024 Annual Meeting of Stockholders, unrelated to any disagreement with the company - Director Audrey Zibelman will not stand for reelection at the **2024 Annual Meeting of Stockholders**[251](index=251&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=50&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information for this item is incorporated by reference from the company's Proxy Statement for the 2023 Annual Meeting of Stockholders, to be filed within 120 days of fiscal year-end - The information required by this item is incorporated by reference to the company's Proxy Statement to be filed within **120 days** of the fiscal year ended December 31, 2023[253](index=253&type=chunk) [Executive Compensation](index=50&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's Proxy Statement for the 2023 Annual Meeting of Stockholders, to be filed within 120 days of fiscal year-end - The information required by this item is incorporated by reference to the company's Proxy Statement to be filed within **120 days** of the fiscal year ended December 31, 2023[255](index=255&type=chunk) [Security Ownership of Certain Beneficial Owner and Management and Related Stockholder Matters](index=50&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owner%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership of certain beneficial owners, management, and related stockholder matters is incorporated by reference from the company's Proxy Statement for the 2023 Annual Meeting of Stockholders, to be filed within 120 days of fiscal year-end - The information required by this item is incorporated by reference to the company's Proxy Statement to be filed within **120 days** of the fiscal year ended December 31, 2023[256](index=256&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=50&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the company's Proxy Statement for the 2023 Annual Meeting of Stockholders, to be filed within 120 days of fiscal year-end - The information required by this item is incorporated by reference to the company's Proxy Statement to be filed within **120 days** of the fiscal year ended December 31, 2023[257](index=257&type=chunk) [Principal Accounting Fees and Services](index=50&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information regarding principal accounting fees and services is incorporated by reference from the company's Proxy Statement for the 2023 Annual Meeting of Stockholders, to be filed within 120 days of fiscal year-end - The information required by this item is incorporated by reference to the company's Proxy Statement to be filed within **120 days** of the fiscal year ended December 31, 2023[258](index=258&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=50&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements, financial statement schedules, and exhibits filed as part of the Annual Report on Form 10-K, including consolidated financial statements and the independent auditor's report - This item contains the **consolidated financial statements** and a list of all exhibits filed with the Annual Report[259](index=259&type=chunk)[260](index=260&type=chunk) [Form 10-K Summary](index=117&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is not applicable to the report - Not applicable

Investors are always looking for stocks that are poised to beat at earnings season and Eos Energy Enterprises, Inc. (EOSE) may be one such company. The firm has earnings coming up pretty soon, and events are shaping up quite nicely for their report.That is because Eos Energy is seeing favorable earnings estimate revision activity as of late, which is generally a precursor to an earnings beat. After all, analysts raising estimates right before earnings — with the most up-to-date information possible — is a p ...

EDISON, N.J., Feb. 26, 2024 (GLOBE NEWSWIRE) -- Eos Energy Enterprises, Inc. (NASDAQ: EOSE) ("Eos" or the “Company”), a leading provider of safe, scalable, efficient, and sustainable zinc-based long duration energy storage systems, today announced it will release its fourth quarter and full year 2023 financial results after the U.S. market closes on March 4, 2024. A conference call to discuss its results will take place the following morning on March 5 at 8:30 a.m. Eastern Time. Registration Information A l ...

EDISON, N.J., Feb. 13, 2024 (GLOBE NEWSWIRE) -- Eos Energy Enterprises, Inc. (NASDAQ:EOSE) ("Eos" or the "Company"), a leading provider of safe, scalable, efficient, and sustainable zinc-based energy storage systems, today announced that it achieved "Power On" status of all motion systems on its first state-of-the-art manufacturing line and expects to record revenue of $6.6 million for the fourth quarter, a 148% increase versus fourth quarter 2022. Full year 2023 revenue is expected to be $16.4 million as t ...

TURTLE CREEK, Pa., Feb. 01, 2024 (GLOBE NEWSWIRE) -- Eos Energy Enterprises, Inc. (NASDAQ:EOSE) ("Eos" or the "Company"), a leading provider of safe, scalable, efficient, and sustainable zinc-based long duration energy storage systems, today entered a multiyear agreement with SABIC Specialties' US business unit, SHPP US LLC, a Saudi Basic Industries Corporation ("SABIC") affiliate, to supply conductive composite thermoplastic for the Eos Z3 battery module. Over the past four years, Eos and SABIC worked coll ...

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 September 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-39291 EOS ENERGY ENTERPRISES, INC. (Exact name of registrant as specified in its charter) Delaware 84-4290188 (State or other jurisdict ...

Eos. Positively ingenious. Eos Energy Enterprises Q2 2023 Financial Results Disclaimer Industry and Market Data Trademarks Key Metrics Booked Orders. Booked orders are orders where we have legally binding agreements with a Purchase Order ("PO") or Master Supply Agreement ("MSA") executed by both parties. 2 2 1 1 1H Booked Orders $86.9 million representing 349 MWh Orders Backlog at 6/30 $533.6 million representing 2.2 GWh (1) Numbers shown as of 6/30/2023 (2) For the six months ended 6/30/2023 (3) Numbers sh ...

PART I - FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The financial statements for the period ending June 30, 2023, indicate a deteriorating financial position with increased liabilities, a larger shareholders' deficit, and a substantial net loss driven by non-cash derivative losses and higher interest expenses [Unaudited Condensed Consolidated Balance Sheets](index=6&type=page&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Data (in thousands) | Balance Sheet Items | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Total Assets** | **$108,950** | **$106,788** | | Total Current Assets | $63,971 | $55,147 | | Cash and cash equivalents | $23,243 | $17,076 | | **Total Liabilities** | **$338,491** | **$239,499** | | Total Current Liabilities | $43,041 | $60,576 | | Convertible notes payable - related party | $141,915 | $82,950 | | Warrants liability - related party | $57,360 | $78 | | **Total Shareholders' Deficit** | **($229,541)** | **($132,711)** | - Total liabilities increased by approximately **41%** from December 31, 2022, to June 30, 2023, primarily due to increases in convertible notes and warrants liability. This contributed to a **73%** increase in the total shareholders' deficit over the same period[11](index=11&type=chunk)[14](index=14&type=chunk) [Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss](index=8&type=page&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $249 | $5,895 | $9,084 | $9,193 | | Cost of goods sold | $11,246 | $36,866 | $38,186 | $72,443 | | Operating loss | ($34,597) | ($57,378) | ($72,862) | ($109,080) | | (Loss) gain on change in fair value of derivatives - related party | ($74,633) | $4,248 | ($87,723) | $12,510 | | **Net loss** | **($131,630)** | **($56,687)** | **($203,230)** | **($102,478)** | | **Basic and diluted loss per share** | **($1.12)** | **($1.01)** | **($1.99)** | **($1.86)** | - Revenue for Q2 2023 plummeted by **96%** year-over-year. The net loss for the quarter more than doubled to **$131.6 million**, largely due to a **$74.6 million** loss on the change in fair value of derivative instruments, compared to a **$4.2 million** gain in the prior-year period[17](index=17&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=11&type=page&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($75,582) | ($86,992) | | Net cash used in investing activities | ($10,100) | ($11,758) | | Net cash provided by financing activities | $92,612 | $10,584 | | **Net increase (decrease) in cash** | **$6,933** | **($88,164)** | - For the first six months of 2023, the company used **$75.6 million** in cash for operations. This was more than offset by **$92.6 million** in cash provided by financing activities, primarily from the issuance of convertible notes, common stock, and warrants[26](index=26&type=chunk)[28](index=28&type=chunk) [Notes to the Unaudited Condensed Consolidated Financial Statements](index=13&type=page&id=Notes%20to%20the%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) The notes reveal substantial doubt about the company's going concern ability, significant customer concentration, new complex financing arrangements, the impact of the Inflation Reduction Act, and recent legal proceedings - Management has concluded that there is substantial doubt about the Company's ability to continue as a going concern due to a history of significant losses, negative cash flows, and the need to secure additional outside capital to meet obligations over the next twelve months[35](index=35&type=chunk) - In Q2 2023, one customer accounted for **100%** of total revenue. For the six months ended June 30, 2023, one customer accounted for **97.8%** of total revenue, indicating significant customer concentration risk[41](index=41&type=chunk) - The company recognized Production Tax Credits (PTC) of **$0.844 million** for the six months ended June 30, 2023, under the Inflation Reduction Act, which are recorded as a reduction of cost of goods sold[63](index=63&type=chunk) - The company has entered into multiple complex financing arrangements, including convertible notes with Yorkville and AFG, and a Senior Secured Term Loan, resulting in significant debt obligations and embedded derivatives that require fair value accounting[69](index=69&type=chunk)[70](index=70&type=chunk)[83](index=83&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the strategic shift to the Eos Z3™ battery, the competitive advantages from the Inflation Reduction Act, the significant revenue decline and increased net loss, and the ongoing liquidity challenges and reliance on external financing [Strategy and Company Highlights](index=34&type=page&id=Strategy%20and%20Company%20Highlights) - The company is transitioning to its next-generation Eos Z3™ battery, which is designed to reduce cost, improve manufacturability, and double energy density per square foot. The first semi-automated manufacturing line is installed, with initial customer deliveries expected in Q3 2023[154](index=154&type=chunk) - The Inflation Reduction Act (IRA) is considered a competitive advantage, providing Production Tax Credits (PTC) for domestic manufacturing and an Investment Tax Credit (ITC) for customers, with a potential bonus for using domestic content[155](index=155&type=chunk)[157](index=157&type=chunk) - During the first half of 2023, the company raised significant capital through various transactions, including a **$13.75 million** convertible note sale, **$48.0 million** from registered direct offerings of stock and warrants, and multiple convertible promissory notes issued to Yorkville[160](index=160&type=chunk) [Results of Operations](index=37&type=page&id=Results%20of%20Operations) Revenue and Cost of Goods Sold Comparison (in thousands) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $249 | $5,895 | -96% | | Cost of goods sold | $11,246 | $36,866 | -69% | - The **96%** decrease in Q2 2023 revenue was attributed to reduced production and deliveries resulting from the strategic shift to the next-generation Eos Z3 technology[163](index=163&type=chunk) - Selling, general and administrative (SG&A) expenses decreased by **31%** in Q2 2023 compared to Q2 2022, primarily due to reductions in outside consulting, legal, and stock compensation costs[167](index=167&type=chunk)[168](index=168&type=chunk) - The company recorded a **$74.6 million** loss on the change in fair value of derivatives in Q2 2023, a significant reversal from the **$4.2 million** gain in Q2 2022. This change was largely driven by the company's stock price fluctuations and new warrant issuances[176](index=176&type=chunk) [Liquidity and Capital Resources](index=40&type=page&id=Liquidity%20and%20Capital%20Resources) - Management reiterates that uncertainties related to recurring losses, negative cash flow, and reliance on external financing raise substantial doubt about the company's ability to continue as a going concern[182](index=182&type=chunk)[186](index=186&type=chunk) - As of June 30, 2023, the company had **$23.2 million** in unrestricted cash and cash equivalents. Absent securing additional capital, the company may be unable to comply with the minimum financial liquidity covenant of its Senior Secured Term Loan beginning December 31, 2023[187](index=187&type=chunk) Summary of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($75,582) | ($86,992) | | Net cash used in investing activities | ($10,100) | ($11,758) | | Net cash provided by financing activities | $92,612 | $10,584 | - Future contractual obligations are substantial, including debt payments totaling **$313.8 million** related to convertible notes, the senior secured term loan, and equipment financing[200](index=200&type=chunk)[201](index=201&type=chunk) [Critical Accounting Estimates](index=43&type=page&id=Critical%20Accounting%20Estimates) - Key critical accounting estimates involve significant judgment and include the warranty liability, the fair value of warrants, and the fair value of convertible notes and their embedded derivatives[203](index=203&type=chunk) - The warranty reserve estimate is subject to material changes due to limited historical claim experience for the company's products[204](index=204&type=chunk) - The fair value of warrants and embedded derivatives in convertible notes are calculated using models (Black-Scholes, binomial lattice) with unobservable inputs like volatility and effective debt yield, making them sensitive to assumptions[205](index=205&type=chunk)[206](index=206&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=44&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reported no material changes in its market risk exposures during the first six months of 2023 compared to its 2022 Annual Report on Form 10-K - There were no material changes to the company's market risk exposures for the six months ended June 30, 2023[207](index=207&type=chunk) [Item 4. Controls and Procedures](index=44&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were not effective as of June 30, 2023, due to material weaknesses in internal control framework, segregation of duties, and review controls - The CEO and CFO concluded that the company's disclosure controls and procedures were not effective as of June 30, 2023[208](index=208&type=chunk) - The ineffectiveness is due to material weaknesses, including a lack of a formalized internal control framework (COSO), inadequate segregation of duties, and lack of management review controls[208](index=208&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings](index=45&type=section&id=Item%201.%20Legal%20Proceedings) A new class action complaint was filed on August 1, 2023, alleging violations of federal securities laws related to company statements, which the company intends to vigorously defend - A class action complaint was filed against the company and its officers on August 1, 2023[213](index=213&type=chunk) - The complaint alleges violations of federal securities laws concerning statements about the company's business, prospects, and backlog. The company intends to defend against the action vigorously[213](index=213&type=chunk) [Item 1a. Risk Factors](index=45&type=section&id=Item%201a.%20Risk%20Factors) A new risk factor highlights the concentration of cash and cash equivalents at a single financial institution, exceeding FDIC insurance limits and posing a liquidity risk - A new risk factor was added regarding assets held at financial institutions that may exceed FDIC insurance coverage[214](index=214&type=chunk)[215](index=215&type=chunk) - The company holds cash and cash equivalents at a single financial institution in excess of the **$250,000** FDIC insurance limit, posing a risk of loss in the event of a bank failure[215](index=215&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=45&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no previously undisclosed unregistered sales of equity securities or use of proceeds - None reported for the period[216](index=216&type=chunk) [Item 6. Exhibits](index=47&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including amendments to financing agreements, warrant forms, and officer certifications