Eos Energy Enterprises(EOSE) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis Item 1. Financial Statements Presents unaudited condensed consolidated financial statements, including balance sheets, operations, equity, cash flows, and detailed notes Unaudited Condensed Consolidated Balance Sheets Provides a snapshot of the company's financial position, detailing assets, liabilities, and shareholders' deficit Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | Change | % Change | | :-------------------------------- | :------------ | :---------------- | :----- | :------- | | Total Assets | $360,995 | $260,318 | $100,677 | 38.7% | | Total Liabilities | $931,693 | $842,085 | $89,608 | 10.6% | | Total Shareholders' Deficit | $(1,102,967) | $(1,070,463) | $(32,504) | 3.0% | - Cash and cash equivalents increased significantly from $74,292 thousand at December 31, 2024, to $120,225 thousand at June 30, 2025, indicating improved liquidity[10] - Long-term debt saw a substantial increase from $65,823 thousand to $307,274 thousand, reflecting new financing activities[10] Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss Outlines financial performance over periods, including revenue, cost of goods sold, and net loss Condensed Consolidated Statements of Operations Highlights (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $15,236 | $898 | $25,693 | $7,499 | | Cost of goods sold | $46,189 | $14,121 | $81,185 | $42,350 | | Gross profit (loss) | $(30,953) | $(13,223) | $(55,492) | $(34,851) | | Operating Loss | $(63,847) | $(29,037) | $(116,779) | $(70,172) | | Net Loss attributable to shareholders | $(222,937) | $(28,172) | $(207,801) | $(74,880) | | Basic and diluted Loss per share | $(1.05) | $(0.25) | $(0.66) | $(0.48) | - Revenue increased significantly by 1,597% for the three months and 243% for the six months ended June 30, 2025, driven by higher product sales and selling prices[16][251][252] - Net Loss attributable to shareholders increased substantially to $(222,937) thousand for the three months ended June 30, 2025, primarily due to significant changes in fair value of warrants and derivatives, and a loss on debt extinguishment[16][266][267] Unaudited Condensed Consolidated Statements of Shareholders' Deficit Details changes in equity accounts, including common stock, additional paid-in capital, and accumulated deficit Shareholders' Deficit Changes (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Common Stock Shares | 256,476,521 | 221,791,205 | | Additional Paid in Capital | $720,680 | $534,726 | | Accumulated Deficit | $(1,773,973) | $(1,561,716) | | Total Shareholders' Deficit | $(1,102,967) | $(1,070,463) | - The Company's common stock shares outstanding increased from 221,791,205 at December 31, 2024, to 256,476,521 at June 30, 2025, primarily due to a public offering[12][18][20][223] - Additional paid-in capital increased by $185,954 thousand, reflecting proceeds from a public offering and stock-based compensation, partially offset by remeasurement of Preferred Stock[12][18][20][223] Unaudited Condensed Consolidated Statements of Cash Flows Summarizes cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30, in thousands) | Cash Flow Activity | 2025 | 2024 | Change | | :-------------------------------- | :--------- | :--------- | :--------- | | Net cash used in operating activities | $(95,046) | $(66,807) | $(28,239) | | Net cash used in investing activities | $(11,959) | $(10,299) | $(1,660) | | Net cash provided by financing activities | $186,820 | $50,024 | $136,796 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $79,813 | $(27,088) | $106,901 | | Cash, cash equivalents and restricted cash, end of period | $183,175 | $57,579 | $125,596 | - Net cash used in operating activities increased to $(95,046) thousand for the six months ended June 30, 2025, primarily due to higher net loss, partially offset by non-cash adjustments[22][287][288] - Net cash provided by financing activities significantly increased to $186,820 thousand, driven by proceeds from a public offering ($81.1 million), issuance of 2025 Convertible Notes ($240.0 million), and the Credit and Securities Purchase Transaction ($38.5 million), partially offset by debt payoffs[24][290] Notes to the Unaudited Condensed Consolidated Financial Statements Provides detailed explanations and disclosures supporting the condensed consolidated financial statements 1. Overview Introduces Eos Energy Enterprises, Inc., its core business, and significant financial developments, including recent financing activities - Eos Energy Enterprises, Inc. designs, develops, manufactures, and markets innovative energy storage solutions, primarily zinc-based battery energy storage systems (BESS) for utility-scale, microgrid, and commercial & industrial applications[26] - The Company has incurred significant losses and negative cash flows since inception, raising substantial doubt about its ability to continue as a going concern, but management believes recent financing transactions have significantly improved its capital position[27][28][35] - Recent financing activities include a $210.5 million secured multi-draw facility from Cerberus (fully funded), up to $303.45 million from the DOE Loan Facility (Tranche 1 funded $68.279 million), a public offering of common stock raising $81.075 million, and issuance of $250.0 million in 2025 Convertible Notes[29][30][31][32][33] 2. Summary of Significant Accounting Policies Outlines the key accounting principles and methods used in preparing the financial statements - The financial statements are prepared in accordance with U.S. GAAP, with certain disclosures condensed or omitted per SEC rules for interim reporting[36] - The Company accounts for Production Tax Credits (PTC) under a government grant model, analogizing to IAS 20, recognizing grants when eligibility and compliance conditions are probable[41][105] - The Company elected the fair value option for the Delayed Draw Term Loan, reporting unrealized gains and losses in the statements of operations, with changes attributable to instrument-specific risk included in accumulated other comprehensive loss[42] 3. Credit and Securities Purchase Transaction Details the financing agreement with Cerberus, including the secured multi-draw facility and related equity issuances - The Company entered into a Credit Agreement with Cerberus, providing a $210.5 million secured multi-draw facility (Delayed Draw Term Loan) and a $105.0 million revolving credit facility, with the DDTL fully funded by January 24, 2025[48][33] - Amendments to the Credit Agreement deferred Consolidated Revenue and EBITDA financial covenants until March 31, 2027, and reduced the interest rate on outstanding borrowings from 15% to 7% per annum[51][126] - As part of the transaction, Cerberus received warrants (SPA Warrant and Contingent Warrants) and Series B Preferred Stock, resulting in a 33% ownership position as of January 24, 2025[29][56][58][64][65] 4. Revenue Recognition Explains the company's policies for recognizing revenue from product sales and services, including remaining performance obligations Revenue Breakdown (in thousands) | Revenue Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Product revenue | $14,055 | $597 | $23,982 | $7,097 | | Service revenue | $1,181 | $301 | $1,711 | $402 | | Total revenues | $15,236 | $898 | $25,693 | $7,499 | - Total revenues increased significantly by 1,597% for the three months and 243% for the six months ended June 30, 2025, primarily due to higher product sales and selling prices[78][251][252] - Remaining performance obligations as of June 30, 2025, were approximately $104,636 thousand, with about 85% expected to be recognized as revenue over the next twelve months[84] 5. Cash, Cash Equivalents and Restricted Cash Provides a breakdown of cash and cash equivalents, including amounts held as restricted cash for specific purposes Cash, Cash Equivalents and Restricted Cash (in thousands) | Category | June 30, 2025 | June 30, 2024 | | :--------------------------------------- | :------------ | :------------ | | Cash and cash equivalents | $120,225 | $52,454 | | Restricted cash - current | $31,830 | $2,625 | | Long-term restricted cash | $31,120 | $2,500 | | Total cash, cash equivalents and restricted cash | $183,175 | $57,579 | - Restricted cash includes amounts for the DOE Loan Facility (warranty claims, debt servicing, interest reserve) and minimum liquidity covenants under the Credit Agreement[85][87] 6. Inventory Details the composition and changes in the company's inventory, including raw materials, work-in-process, and finished goods Inventory Balances (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :------------- | :------------ | :---------------- | | Raw materials | $27,868 | $25,126 | | Work-in-process | $12,563 | $6,665 | | Finished goods | $697 | $1,035 | | Total Inventory | $41,128 | $32,826 | - Total inventory increased by $8,302 thousand from December 31, 2024, to June 30, 2025, primarily driven by an increase in work-in-process and raw materials[90] 7. Property, Plant and Equipment, Net Presents the net book value of the company's tangible assets, including additions, depreciation, and write-downs Property, Plant and Equipment, Net (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Total | $109,477 | $74,376 | | Less: Accumulated depreciation | $(33,944) | $(28,716) | | Total property, plant and equipment, net | $75,533 | $45,660 | - Net property, plant and equipment increased by $29,873 thousand, largely due to an increase in construction in progress, reflecting ongoing investment in manufacturing facilities[91] - The Company recorded a loss from write-down of property, plant and equipment of $766 thousand for the six months ended June 30, 2025, mainly due to design changes from Z3™-Phase 1 to Z3™-Phase 2 production, rendering Phase 1 assets unusable[92] 8. Intangible Assets Outlines the company's intangible assets, primarily patents and software, and their amortization policies Intangible Assets (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :---------------- | :------------ | :---------------- | | Intangible assets, net | $192 | $240 | - Intangible assets, primarily patents and internal-use software, are amortized over their useful lives (10 years for patents, 3 years for software)[94][96] 9. Notes Receivable, Net and Variable Interest Entities ("VIEs") Consideration Discusses the company's notes receivable, including allowances for credit losses, and any considerations for VIEs - The Company recorded a full allowance against notes receivable during Q2 2025, resulting in a zero balance as of June 30, 2025, compared to $847 thousand outstanding at December 31, 2024[98] - The allowance for expected credit loss related to notes receivable increased from $37 thousand at December 31, 2024, to $884 thousand at June 30, 2025[99] 10. Accrued Expenses Provides a breakdown of various accrued liabilities, such as payroll, warranty reserves, and legal expenses Accrued Expenses (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Accrued payroll | $6,895 | $4,811 | | Warranty reserve | $5,917 | $5,102 | | Accrued legal and professional expenses | $3,240 | $1,709 | | Provision for contract losses | $3,772 | $4,724 | | Accrued Interest | $1,238 | $41 | | Other | $2,585 | $5,645 | | Total accrued expenses | $23,647 | $22,032 | - Total accrued expenses increased by $1,615 thousand, primarily due to increases in accrued payroll, warranty reserve, and legal/professional expenses, partially offset by a decrease in provision for contract losses and other accrued expenses[101] 11. Government Grants Details the impact of government incentives, including Production Tax Credits (PTC) from the Inflation Reduction Act - The Inflation Reduction Act of 2022 (IRA) provides significant economic incentives, including Production Tax Credits (PTC) for domestically manufactured battery components, which Eos believes its products qualify for[102][243][247][248] - The One Big Beautiful Bill Act (OBBBA) introduces new limitations on material sourcing from prohibited foreign entities after December 31, 2025, but the Company does not anticipate a material impact[104][249] PTC Credits Recognized (in thousands) | Period | 2025 | 2024 | | :------------------------------------ | :----- | :----- | | Three Months Ended June 30, PTC credits | $4,562 | $125 | | Six Months Ended June 30, PTC credits | $6,361 | $1,667 | 12. Related Party Transactions Discloses transactions with affiliated entities, including convertible notes and manufacturing/advisory fees - Related party transactions include the 2021 Convertible Notes with Spring Creek Capital, LLC (a Koch Industries subsidiary), AFG Convertible Notes with an affiliated purchaser, and the Credit and Securities Purchase Transaction with Cerberus[110][111][112] - During the three and six months ended June 30, 2025, the Company incurred manufacturing costs of $1,133 thousand and $1,374 thousand, and advisory fees of $1,821 thousand and $2,491 thousand, respectively, from vendors affiliated with Cerberus[113] 13. Borrowings Provides a comprehensive overview of the company's debt instruments, including convertible notes, term loans, and their terms Total Borrowings (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--------------- | :------------ | :---------------- | | Total borrowings | $445,277 | $316,896 | | Current portion | $1,073 | $2,014 | | Non-current portion | $444,204 | $314,882 | - Total borrowings increased significantly by $128,381 thousand, primarily due to the issuance of $250.0 million in 2025 Convertible Notes and draws from the DOE Loan Facility, partially offset by the payoff of the 2021 Convertible Notes and prepayment of the Delayed Draw Term Loan[114][115][136][141] - The 2025 Convertible Notes, issued in June 2025 for $250.0 million principal, accrue interest at 6.75% per annum and mature on June 15, 2030, with the conversion feature not bifurcated as a derivative[115][116][122] - The Delayed Draw Term Loan (DDTL) from Cerberus was fully funded by January 2025, with a prepayment of $47,619 thousand made in May 2025, and the interest rate reduced from 15% to 7% per annum[123][133][136] - The DOE Loan Facility provides up to $277,497 thousand in principal, with $68,279 thousand drawn under Tranche 1 by June 30, 2025, bearing interest at the U.S. Treasury rate plus 0.375%, paid in-kind until 2028[143][147][148] - The 2021 Convertible Notes were repurchased in full for $131.0 million in June 2025, resulting in a loss on debt extinguishment of $10,688 thousand[141][142] - The AFG Convertible Notes bear interest at 26.5% PIK and mature in June 2026 (amended to September 30, 2034, post-period), with the embedded conversion feature bifurcated and accounted for at fair value[153][154][157] 14. Warrants Liability Details the company's warrant liabilities, including related party and non-related party warrants, measured at fair value Warrants Liability (in thousands) | Category | June 30, 2025 Fair Value | December 31, 2024 Fair Value | | :-------------------------- | :----------------------- | :-------------------------- | | Warrants liability (non-related party) | $181,198 | $189,591 | | Warrants liability - related party | $198,984 | $266,630 | | Total Warrants Liability | $380,182 | $456,221 | - The SPA Warrant (related party) to purchase 43,276,194 common shares has a $0.01 exercise price and a ten-year term, classified as a liability and measured at fair value[170] - Contingent Warrants (related party) are recognized at fair value, with changes reported in the statements of operations, and represent future issuable shares based on milestone achievements[172] - Non-related party warrants (IPO, April, May, December 2023) are also measured at fair value, with changes recognized in the statements of operations, and 4,893,102 December 2023 warrants were exercised during the six months ended June 30, 2025[166][169] 15. Fair Value Measurement Explains the methodologies and inputs used to determine the fair value of financial instruments, categorized by levels - The Company categorizes fair value measurements into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[174][175][176] Financial Liabilities Measured at Fair Value (in thousands) | Liability | June 30, 2025 Fair Value | December 31, 2024 Fair Value | | :-------------------------------- | :----------------------- | :-------------------------- | | SPA Warrant (Level 3) | $198,984 | $188,857 | | Contingent warrants (Level 3) | $0 | $77,773 | | IPO, April, May, Dec 2023 Warrants (Level 2/3) | $181,198 | $189,591 | | Delayed Draw Term Loan (Level 3) | $61,705 | $76,188 | | Embedded derivatives (Level 3) | $51,639 | $44,396 | | Total liabilities | $493,526 | $576,705 | - The fair value of the Delayed Draw Term Loan decreased from $76,188 thousand to $61,705 thousand, resulting in a gain of $31,615 thousand for the three months ended June 30, 2025, primarily due to a reduction in the contractual interest rate and prepayment[130][263][264] 16. Commitments and Contingencies Outlines the company's contractual obligations and potential liabilities, including legal proceedings and supply agreements - The Company settled a minimum volume commitment with a third-party supplier in Q4 2024 by paying a $1,250 thousand penalty and transferring equipment, and subsequently entered into a new long-term supply agreement without minimum volume commitments[197][198] - A class action lawsuit (Houck Complaint) alleging federal securities law violations was dismissed by the District Court on March 13, 2025, and the case is closed[199][301] - A shareholder derivative lawsuit (Hyung Complaint) alleging breach of fiduciary duties was voluntarily dismissed on June 10, 2025, and the case is closed[200][302] 17. Stock-Based Compensation Details the expense recognized for equity-settled awards, including restricted stock units and performance-based units Stock-Based Compensation Expense (in thousands) | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Restricted stock units (RSU) | $5,863 | $1,767 | $9,345 | $4,534 | | Performance-based restricted stock units (PRSU) | $1,264 | $0 | $5,356 | $0 | | Stock options | $0 | $90 | $0 | $264 | | Total | $7,127 | $1,857 | $14,701 | $4,798 | - Total stock-based compensation expense increased significantly to $14,701 thousand for the six months ended June 30, 2025, from $4,798 thousand in the prior year, primarily due to higher RSU and PRSU expenses[201] - As of June 30, 2025, unrecognized compensation expense for unvested RSUs was $31,355 thousand (2.3 years weighted-average vesting) and for PRSUs was $8,684 thousand (2.6 years weighted-average vesting)[202][209] 18. Income Taxes Discusses the company's income tax expense, deferred tax assets, and the impact of recent tax legislation Income Tax Expense (in thousands) | Period | 2025 | 2024 | | :----------------------- | :--- | :--- | | Three Months Ended June 30, | $6 | $8 | | Six Months Ended June 30, | $11 | $33 | - Income tax expense is minimal and primarily relates to taxable earnings from foreign operations, with a valuation allowance against U.S. deferred tax assets due to cumulative losses[210][212][271] - The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025, extending key provisions of the 2017 Tax Cuts and Jobs Act, but is not expected to have a material impact on the Company's consolidated financial statements[215] 19. Shareholders' Deficit Provides details on changes in common stock, additional paid-in capital, and accumulated deficit, including public offerings - As of June 30, 2025, the Company had 256,476,521 shares of common stock issued and outstanding, an increase from 221,791,205 shares at December 31, 2024[218] - A public offering completed in June 2025 resulted in the issuance and sale of 21,562,500 shares of common stock, raising net proceeds of $81,075 thousand[223] - The Company retired treasury stock of $488 thousand for the six months ended June 30, 2025, for shares withheld from employees to cover payroll tax liability of vested RSUs[219] 20. Earnings Per Share Presents the basic and diluted loss per share, explaining the anti-dilutive effect of potential common shares Basic and Diluted Loss Per Share | Period | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic Loss per share | $(1.05) | $(0.25) | $(0.66) | $(0.48) | | Diluted Loss per share | $(1.05) | $(0.25) | $(0.66) | $(0.48) | - Basic and diluted EPS are the same due to the Company incurring a net loss, making potential dilutive shares (stock options, RSUs, warrants, convertible notes, Series B Preferred Stock) anti-dilutive[226] 21. Segment Reporting Describes the company's operating and reportable segments, primarily focusing on zinc-based energy storage solutions - The Company operates in one operating and one reportable segment, focusing on zinc-based energy storage solutions for utility-scale, microgrid, and C&I applications, with nearly all revenue from U.S. customers[227][228] Segment Financial Performance (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenue | $15,236 | $898 | $25,693 | $7,499 | | Gross profit (loss) | $(30,953) | $(13,223) | $(55,492) | $(34,851) | | Net income (loss) | $(222,937) | $(28,172) | $(207,801) | $(74,880) | 22. Subsequent Events Discloses significant events that occurred after the reporting period, impacting the company's financial position or operations - On July 1, 2025, the FFB funded an additional $22,666 thousand under the DOE Loan Facility (second loan advance)[231] - The measurement period for achieving Sales Milestone 4 under the Credit Agreement was extended to October 31, 2025, with potential for Cerberus to receive additional warrants or preferred stock if not met[232] - The AFG Convertible Notes were amended on July 29, 2025, to extend maturity to September 30, 2034, reduce the interest rate to 7.0% from June 30, 2026, and amend optional redemption provisions[233] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion and analysis of financial condition, results of operations, liquidity, capital resources, and strategic initiatives Overview Introduces Eos's Znyth™ technology battery energy storage systems and related services, emphasizing their market applications - Eos offers innovative Znyth™ technology battery energy storage systems (BESS) for utility-scale, microgrid, and commercial & industrial (C&I) applications, utilizing accessible non-precious earth components[238] - The Z3™ battery module is highlighted as a core product, designed and manufactured in the U.S., offering an alternative to lithium-ion and lead-acid batteries for 3-to 12-hour discharge durations[238] - Beyond BESS, the Company provides a Battery Management System (BMS), project management, commissioning, and long-term maintenance services[239] Strategy Outlines the company's growth strategy, focusing on sales expansion, product development, and manufacturing efficiency - The Company's growth strategy focuses on increasing sales of BESS and related software/services through direct sales and channel partners, targeting utilities, project developers, and C&I customers[240] - Eos is investing in its next-generation Z3 battery, aiming to reduce costs and weight, enhance manufacturability, and improve system performance, building on its existing electrochemistry[241] - The Z3 battery module began commercial production on its first fully-automated manufacturing line in Q3 2023, incorporating lessons from 15 years of experience to drive efficiencies[242] U.S. Department of Energy ("DOE") Details the significance and funding structure of the DOE Loan Facility for expanding Eos's manufacturing capacity - The DOE Loan Facility, closed on November 26, 2024, is crucial for Project AMAZE, aiming to expand Eos' manufacturing capacity to 8 GWh by 2027[244] - The facility provides up to $303.5 million in funding across multiple tranches, covering 80% of eligible project costs for corresponding production lines[245][246] - As of June 30, 2025, $68.3 million has been funded under Tranche 1 for eligible project costs, with an additional $22.7 million funded on July 1, 2025[246] Inflation Reduction Act of 2022 ("IRA") Discusses the economic incentives provided by the IRA, including tax credits for domestically manufactured battery components - The IRA provides significant economic incentives, including a 10-year term investment tax credit (ITC) for new energy storage facilities and Production Tax Credits (PTC) for domestically manufactured battery components[247][248] - Eos believes its American-made batteries qualify for the 10% domestic content bonus credit, offering a strategic advantage[247] - The Company is observing accelerated customer activity in 2025 to secure eligibility for current ITC safe harbor provisions before transitioning to the technology-neutral Section 48E framework[247] Company Highlights Summarizes key operational and strategic achievements, including financing milestones and significant customer orders - In January 2025, Eos achieved all operational milestones for the final $40.5 million draw under the $210.5 million Delayed Draw Term Loan, fully funding it and solidifying its capital position[250] - Key operational achievements include surpassing raw materials cost-out targets by 6% and delivering manufacturing cycle times below 10 seconds[253] - Strategic developments include an $8 million BESS order for the Naval Base of San Diego, a 5 GWh energy storage framework agreement with Frontier Power Ltd. (UK), and a 3 MW / 15 MWh Eos Z3™ system order for Faraday Microgrids[253] - The Company completed a public offering of common stock in June 2025, raising $81.1 million, and issued $250.0 million in 6.75% convertible senior notes due 2030[253] Results of Operations Analyzes the company's financial performance, detailing revenue, cost of goods sold, and various expense categories Revenue Analyzes the company's revenue performance, highlighting significant increases driven by product sales and pricing Revenue Performance (in thousands) | Period | 2025 | 2024 | $ Change | % Change | | :------------------------------- | :----- | :----- | :------- | :------- | | Three Months Ended June 30, Revenue | $15,236 | $898 | $14,338 | 1597% | | Six Months Ended June 30, Revenue | $25,693 | $7,499 | $18,194 | 243% | - The significant increase in revenue for both periods is attributed to higher product sales and increased selling prices, as the Company scales production to meet customer demand[252] Cost of goods sold Discusses the changes in cost of goods sold, attributing increases to sales volume and expectations for future trends Cost of Goods Sold Performance (in thousands) | Period | 2025 | 2024 | $ Change | % Change | | :------------------------------- | :----- | :----- | :------- | :------- | | Three Months Ended June 30, COGS | $46,189 | $14,121 | $32,068 | 227% | | Six Months Ended June 30, COGS | $81,185 | $42,350 | $38,835 | 92% | - Cost of goods sold increased due to higher product sales volume, partially offset by a decrease in unit production cost, as the Company continues to scale production[255] - The Company expects COGS to exceed revenues in the near term due to production start-up and commissioning costs for its nascent technology and new manufacturing process[254] Research and development expenses Analyzes the increase in R&D expenses, linking it to business scaling, payroll, and consulting costs R&D Expenses Performance (in thousands) | Period | 2025 | 2024 | $ Change | % Change | | :------------------------------- | :----- | :----- | :------- | :------- | | Three Months Ended June 30, R&D | $7,201 | $4,250 | $2,951 | 69% | | Six Months Ended June 30, R&D | $14,038 | $9,450 | $4,588 | 49% | - The increase in R&D expenses was driven by higher payroll, stock-based compensation, and consulting costs to support business scaling and key growth areas[257] Selling, general and administrative expenses Details the increase in SG&A expenses, primarily due to expanded headcount and associated compensation costs SG&A Expenses Performance (in thousands) | Period | 2025 | 2024 | $ Change | % Change | | :------------------------------- | :----- | :----- | :------- | :------- | | Three Months Ended June 30, SG&A | $25,488 | $11,293 | $14,195 | 126% | | Six Months Ended June 30, SG&A | $46,483 | $25,535 | $20,948 | 82% | - SG&A expenses increased primarily due to expanded headcount in key growth areas, leading to higher payroll and stock-based compensation costs, including $3.7 million in one-time costs for the six months ended June 30, 2025[259] Loss from write-down of property, plant and equipment Explains losses incurred from asset write-downs, mainly due to design changes in manufacturing processes Loss from Write-Down of PP&E (in thousands) | Period | 2025 | 2024 | | :------------------------------------ | :--- | :--- | | Three Months Ended June 30, Loss | $205 | $271 | | Six Months Ended June 30, Loss | $766 | $336 | - Losses from write-downs were mainly due to design changes from Z3™-Phase 1 to Z3™-Phase 2 production, rendering Phase 1 assets unusable or not repurposable for Phase 2[260] Interest expense, net Analyzes the decrease in net interest expense, primarily due to the payoff of a senior secured term loan Interest Expense, Net (in thousands) | Period | 2025 | 2024 | | :------------------------------- | :--------- | :--------- | | Three Months Ended June 30, Interest | $(2,129) | $(3,515) | | Six Months Ended June 30, Interest | $(2,293) | $(7,782) | - Interest expense, net decreased by $1.4 million and $5.5 million for the three and six months ended June 30, 2025, respectively, primarily due to lower interest expense from the payoff of the Senior Secured Term Loan in 2024[261] Interest expense - related party Discusses changes in interest expense from related party borrowings, including convertible notes Related Party Interest Expense (in thousands) | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | 2021 Convertible Note Payable | $(2,671) | $(3,479) | $(6,613) | $(6,895) | | AFG Convertible Note | $(1,839) | $(1,433) | $(3,678) | $(2,868) | | Total | $(4,510) | $(4,912) | $(10,291) | $(9,763) | - Total related party interest expense increased for the six months ended June 30, 2025, primarily due to higher interest and amortization on AFG Convertible Notes, partially offset by the payoff of the 2021 Convertible Notes[262][141] Change in fair value of debt - related party Explains the significant gain recognized from changes in the fair value of related party debt, driven by interest rate reductions and prepayments Change in Fair Value of Debt - Related Party (in thousands) | Period | 2025 | 2024 | | :------------------------------------ | :------- | :----- | | Three Months Ended June 30, Change | $31,615 | $(240) | | Six Months Ended June 30, Change | $25,682 | $(240) | - A significant gain of $31.6 million and $25.7 million was recognized for the three and six months ended June 30, 2025, respectively, related to the Delayed Draw Term Loan, driven by a reduction in the contractual interest rate (15% to 7%) and a decrease in the loan balance due to prepayment[16][263][264] Change in fair value of warrants Analyzes the loss incurred from changes in the fair value of warrants, reflecting market fluctuations and exercises Change in Fair Value of Warrants (in thousands) | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | IPO warrants | $(38) | $(3) | $99 | $3 | | April 2023 warrants | $(20,319) | $(1,874) | $(4,080) | $(1,092) | | May 2023 warrants | $(4,611) | $(461) | $(886) | $(274) | | December 2023 warrants | $(32,968) | $(5,603) | $(7,144) | $(3,678) | | Total | $(57,936) | $(7,941) | $(12,011) | $(5,041) | - The change in fair value of warrants resulted in a loss of $57.9 million for the three months and $12.0 million for the six months ended June 30, 2025, significantly higher than the prior year, reflecting market fluctuations and warrant exercises[266] Change in fair value of derivatives - related parties Details the loss from changes in the fair value of related party derivatives, including warrants and embedded features Change in Fair Value of Derivatives - Related Parties (in thousands) | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Embedded derivatives | $(24,264) | $(1,525) | $(7,330) | $(991) | | Warrants - related parties | $(52,191) | $(46,202) | $(34,539) | $(46,202) | | Total | $(76,455) | $(47,727) | $(41,869) | $(47,193) | - The change in fair value of derivatives from related parties resulted in a loss of $76.5 million for the three months and $41.9 million for the six months ended June 30, 2025, primarily driven by changes in the fair value of related party warrants and embedded derivatives in convertible debt[266] (Loss) gain on debt extinguishment Explains the loss recognized from debt extinguishment due to the payoff of convertible notes and prepayment of a term loan (Loss) Gain on Debt Extinguishment (in thousands) | Period | 2025 | 2024 | | :------------------------------------ | :--------- | :------- | | Three Months Ended June 30, (Loss) gain | $(49,063) | $68,478 | | Six Months Ended June 30, (Loss) gain | $(49,063) | $68,478 | - The Company recognized a loss of $49.1 million on debt extinguishment for the three and six months ended June 30, 2025, due to the payoff of the 2021 Convertible Notes and prepayment of the Delayed Draw Term Loan[267] - In contrast, a gain of $68.5 million was recognized for the same periods in 2024 from the payoff of the Senior Secured Term Loan[268] Other expense Details other expenses, primarily professional fees related to financing activities and debt extinguishment Other Expense (in thousands) | Period | 2025 | 2024 | | :----------------------- | :----- | :----- | | Three Months Ended June 30, | $(606) | $(3,270) | | Six Months Ended June 30, | $(1,166) | $(3,134) | - Other expense for the six months ended June 30, 2025, primarily relates to professional fees for the Cerberus Amendments, extinguishment of the 2021 Convertible Notes, and financing issuance costs[269] Income tax expense Discusses the minimal income tax expense, primarily from foreign operations, and the impact of tax legislation Income Tax Expense (in thousands) | Period | 2025 | 2024 | | :----------------------- | :--- | :--- | | Three Months Ended June 30, | $6 | $8 | | Six Months Ended June 30, | $11 | $33 | - Income tax expense remains insignificant, primarily attributable to foreign operations, with no material impact expected from recent tax legislation[271] Liquidity and Going Concern Addresses the company's ability to meet its short-term and long-term obligations, including recent financing activities and capital position - Eos has incurred significant losses and negative cash flows from operations since inception, raising substantial doubt about its ability to continue as a going concern[272][279][280] - Recent financing activities, including the fully funded $210.5 million Delayed Draw Term Loan from Cerberus, the DOE Loan Facility (up to $303.5 million), a $81.1 million public offering, and $250.0 million in 2025 Convertible Notes, have significantly improved the Company's capital position[274][275][277][278][286] - As of June 30, 2025, the Company had $120.2 million of unrestricted cash and cash equivalents and $128.0 million in working capital, and was in compliance with the Minimum Liquidity financial covenant[279] Financing Arrangements Outlines the company's reliance on external capital, detailing key transactions like convertible notes and equity issuances - The Company relies on outside capital (convertible notes, term loans, equipment financing, equity issuance) to fund its cost structure and expects this reliance to continue until profitability is achieved[281][273] - Key capital transactions in the six months ended June 30, 2025, include the full funding of the Cerberus DDTL, a public offering raising $81.1 million, and the issuance of $250.0 million in 2025 Convertible Notes[286] Capital Expenditures Discusses the company's investments in property, plant, and equipment, driven by its growth strategy and manufacturing expansion Capital Expenditures (in thousands) | Period | 2025 | 2024 | | :------------------------------------ | :--------- | :--------- | | Six Months Ended June 30, Capital Expenditures | $12,000 | $10,300 | - Capital expenditures and working capital requirements are expected to increase as the Company executes its growth strategy, with $12.0 million spent in the first six months of 2025 for manufacturing facility improvements[281][289] Discussion and Analysis of Cash Flows Provides a detailed analysis of cash flows from operating, investing, and financing activities, highlighting significant changes Cash Flow Summary (Six Months Ended June 30, in thousands) | Cash Flow Activity | 2025 | 2024 | $ Change | | :-------------------------------- | :--------- | :--------- | :--------- | | Net cash used in operating activities | $(95,046) | $(66,807) | $(28,239) | | Net cash used in investing activities | $(11,959) | $(10,299) | $(1,660) | | Net cash provided by financing activities | $186,820 | $50,024 | $136,796 | - Operating cash outflows increased due to higher net loss, partially offset by non-cash adjustments and net cash inflows from changes in operating assets and liabilities[287][288] - Financing cash inflows significantly increased, driven by proceeds from the public offering ($81.1 million), 2025 Convertible Notes ($240.0 million), and Cerberus transaction ($38.5 million), used to repay other debts[290][291] Contractual Obligations Summarizes the company's future payment obligations under various debt instruments and lease agreements Future Debt Payments (in thousands) | Debt Obligation | Due Date | Amount | | :-------------------------------- | :--------- | :--------- | | Delayed Draw Term Loan | June 2034 | $348,411 | | AFG Convertible Notes | June 2026 (amended to Sept 2034) | $32,468 | | Equipment financing facility | April 2026 | $1,147 | | DOE Loan Facility | June 2034 | $91,470 | | 2025 Convertible Notes | June 2030 | $336,114 | | Total | | $809,610 | - The Company also has future lease payments of $3.5 million under non-cancellable operating and financing leases expiring before 2030[293] Critical Accounting Estimates ("CAE") Highlights the significant accounting judgments and estimates that could materially impact the financial statements - The Company's financial statements rely on management's assumptions, judgments, and estimates, which could differ materially from actual results[294] - There have been no material changes in the critical accounting estimates as compared to those disclosed in the 2024 Annual Report on Form 10-K[295] Item 3. Quantitative and Qualitative Disclosures About Market Risk States no material changes to market risk exposures for the six months ended June 30, 2025, compared to the 2024 Annual Report on Form 10-K - No material changes in market risk exposures for the six months ended June 30, 2025, compared to the prior fiscal year[296] Item 4. Controls and Procedures Details management's evaluation of the Company's disclosure controls and procedures and internal control over financial reporting - Management, with CEO and CFO participation, concluded that disclosure controls and procedures were effective as of June 30, 2025, providing reasonable assurance of timely and accurate information reporting[297] - There were no changes in internal control over financial reporting during the quarter ended June 30, 2025, that materially affected or are reasonably likely to materially affect such controls[298] PART II - OTHER INFORMATION Provides updates on legal proceedings, risk factors, equity sales, defaults, and other significant events Item 1. Legal Proceedings Provides an update on legal proceedings, noting that while the Company may be involved in litigation, management does not expect material adverse effects - A class action lawsuit (Houck Complaint) alleging federal securities law violations was dismissed by the District Court on March 13, 2025, and the case is considered closed[199][301] - A shareholder derivative lawsuit (Hyung Complaint) alleging breach of fiduciary duties was voluntarily dismissed on June 10, 2025, and the case is considered closed[200][302] Item 1A. Risk Factors States no additional material changes to the risk factors previously disclosed in the 2024 Annual Report on Form 10-K - No additional material changes to the risk factors disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2024[303] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Indicates no unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities and use of proceeds to report[304] Item 3. Defaults Upon Senior Securities States no defaults upon senior securities to report for the period - No defaults upon senior securities to report[304] Item 4. Mine Safety Disclosures Indicates no mine safety disclosures to report for the period - No mine safety disclosures to report[304] Item 5. Other Information Provides updates on significant events occurring after the reporting period, including amendments to the AFG Convertible Notes and an extension for achieving Sales Milestone 4 under the Credit Agreement - On July 29, 2025, the AFG Convertible Notes were amended to extend maturity, reduce interest rates, and modify optional redemption provisions[305] - The measurement period for achieving Sales Milestone 4 under the Credit Agreement was extended to October 31, 2025, with potential for additional equity issuance to Cerberus if not met[306] Item 6. Exhibits Lists all exhibits filed as part of the Form 10-Q, including corporate governance documents, debt agreements, and certifications - The exhibit list includes various corporate documents, such as Certificates of Incorporation and Bylaws, as well as debt agreements like the Indenture for 2025 Convertible Notes and amendments to the Credit Agreement[309][310] - Certifications from the Chief Executive Officer and Chief Financial Officer, pursuant to Exchange Act Rules and Sarbanes-Oxley Act, are filed herewith[310]