Eos Energy Enterprises Inc.

08/05/2026 | Press release | Distributed by Public on 08/05/2026 05:02

Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the accompanying Unaudited Condensed Consolidated Financial Statements for the six months ended June 30, 2026 and 2025 and the Company's Annual Report on Form 10-K for the year ended December 31, 2025, including the financial statements and notes thereto.
Overview
The Company offers an innovative Znyth™ technology battery energy storage system ("BESS") designed to provide the operating flexibility to manage increased grid complexity and price volatility resulting from an overall increase in renewable energy generation and a congested grid coming from an increase in electricity demand growth. The Company's BESS is a validated chemistry with accessible non-precious earth components in a durable design that is intended to deliver results in even the most extreme temperatures and conditions. The system is designed to be safe, flexible, scalable, sustainable and manufactured in the United States, using raw materials primarily sourced in the United States. We believe the Company's Z3 battery module is the core of its innovative systems. The Z3 battery module is the only US designed and manufactured battery module that today provide utilities, independent power producers, renewables developers and C&I customers with an alternative to lithium-ion and lead-acid monopolar batteries for critical 3- to 12-hour discharge duration applications. We believe the Z3 battery will transform how utility, industrial and commercial customers store power.
In addition to its BESS, the Company currently offers: (a) a BMS which provides a remote asset monitoring capability and service to track the performance and health of the Company's BESS and to proactively identify future system performance issues through predictive analytics; (b) project management services to ensure the process of implementing the Company's BESS are coordinated in conjunction with the customer's overall project plans; (c) commissioning services that ensure the customer's installation of the BESS meets the performance expected by the customer; and (d) long-term maintenance plans to maintain optimal operating performance of the Company's systems.
The Company's growth strategy contemplates increasing sales of battery energy storage systems and related software and services through a direct sales team and sales channel partners. The Company's current and target customers include utilities, project developers, independent power producers and C&I companies.
Strategy
Eos's core business is to design, manufacture and sell proprietary zinc-based battery storage systems for stationary energy storage applications. Building on this foundation, our strategy is to evolve beyond a traditional battery original equipment manufacturer ("OEM") into a systems-integrated energy company.
The Company continues to invest in the design, development and production of its next-generation product, the Eos Z3 battery. The Z3 builds upon the same underlying electrochemistry the Company has utilized for over a decade. The Eos Z3 is engineered to reduce cost and weight while improving manufacturability and overall system performance. Compared to the Company's prior Gen 2.3 product, the Z3 incorporates a more cost-effective design, including a simplified tub structure, approximately 50% fewer cells and approximately 98% fewer welds per battery module. The Company believes the Eos Z3 will provide customers with approximately twice the energy density per square foot while maintaining the safety and reliability characteristics of the previous generation.
The Company has successfully transitioned to the Eos Z3 platform, enabled by the commissioning and commercial operation of its first fully automated battery manufacturing line. The Z3 leverages the same proven underlying chemistry, which has demonstrated durability over more than 3 million cycles, while incorporating a redesigned mechanical architecture that enhances performance, reduces costs and improves manufacturability. Z3 battery modules have been shipped since the third quarter of 2023, and the transition reflects over fifteen years of accumulated insights and operational experience. The Company believes this experience will continue to drive manufacturing efficiencies as production scales and its state-of-the-art operations expand.
In 2025, the Company introduced DawnOS, a software platform designed to enhance the value, reliability and safety of the Company's BESS. DawnOS builds upon the Z3 battery architecture through a fully integrated hardware and software solution. It serves as the system's intelligence layer and is designed to manage large numbers of battery modules in real time. The platform provides precise balancing, dynamic switching and continuous system operation, including in situations where individual modules within a string become imbalanced. DawnOS is intended to increase usable energy per cycle, reduce field service requirements and operate with embedded security and automation features. Through its advanced control capabilities, the Company expects DawnOS to be an integral component of its product portfolio going forward, reflecting its role in improving system resilience, efficiency and overall operational performance.
In 2026, the Company introduced Eos Indensity, an energy storage architecture that uses a spatial intelligence design framework to provide high density storage with flexibility and safety in constrained as well as traditional sites. The system targets up to 1 GWh per acre, roughly four times most incumbent footprints, through stackable Indensity Core units that integrate Eos Z3 battery modules with the Eos DawnOS controls platform. The modular self contained form factor enables efficient transport, simplified installation and long term serviceability. Eos Indensity can be deployed indoors or outdoors, including inside existing buildings. It addresses long duration, response driven use cases across data centers, military bases, manufacturing facilities and critical infrastructure, supported by a domestic FEOC compliant supply chain. The Company expects Indensity to be an integral component of its product portfolio going forward.
The Company believes that the simplicity, flexibility and safety characteristics of its products represent important attributes valued by the market. In addition, the Company benefits from legislative incentives, including the Inflation Reduction Act and the One Big Beautiful Bill Act ("OBBBA"), which provide production tax credits ("PTC") for domestically manufactured battery components, as well as tax credits available to customers for projects that satisfy domestic content requirements. The Company also intends to continue working with a consortium of community organizations, universities and supply chain partners to pursue available funding opportunities under the Bipartisan Infrastructure Law of 2021.
Business Update
Frontier Power USA Parent, LLC ("FPUSA")
In May 2026 and June 30, 2026, the Company announced the planned formation of FPUSA, a joint venture with CCM Frontier and HBC. FPUSA is an independent development and investment company established to build, own and operate a diversified portfolio of long-duration battery energy storage projects with the strategy of becoming an Independent Power Producer ("IPP").
FPUSA is expected to enhance the Company's ability to convert its existing commercial pipeline into booked orders and then energy storage systems operating in the field by providing an integrated financing solution to support multiple financing pathways for project deployment. These include sponsor equity contributions from Eos, CCM Frontier and HBC, potential institutional debt financings structured to target investment-grade characteristics supported by the Technology Performance Insurance ("TPI") framework, and project-level debt facilities provided by commercial bank lenders. Management believes that the inclusion of TPI may broaden access to capital which is designed to support lender confidence in system performance. Management believes this structure will reduce execution friction for customers and counterparties and support the acceleration and expansion of the Company's energy storage systems operating in the field.
Governance of Eos's equity interests in FPUSA will be conducted through an independent investment committee, and transactions between the Company and FPUSA are expected to be conducted on arm's-length commercial terms. FPUSA is targeting the development of a multi-gigawatt-hour pipeline of long-duration energy storage projects across data center, utility and industrial end markets, which is expected to further support the growth and visibility of the Company's revenue profile over time.
In connection with these arrangements, Cerberus has agreed to extend the lock-up period on its existing Eos holdings through December 21, 2026.
Rights Offering
In May 2026, in connection with the planned formation of FPUSA, the Company announced a rights offering (the "Rights Offering") targeting approximately $150.0 million. In the Rights Offering, shareholders of Eos common stock and holders of its warrants to purchase common stock issued on April 14, 2023, May 17, 2023, December 19, 2023, and November 21, 2025 as of the record date of 5:00pm New York time on July 1, 2026 (collectively, "Eligible Holders"), would receive rights to acquire a certain number of units, comprised of the Company's common stock and warrants (the "Units") in a rights offering to fund the Company's previously announced capital contribution in the FPUSA joint venture.
On June 30, 2026, the Company announced updated terms for the rights offering such that each right was expected to entitle an Eligible Holder the right to purchase approximately 0.071193 of a Unit at a subscription price equal to $5.481 per whole Unit, an approximate 10% discount to the closing price of the Company's common stock on June 29, 2026. Each Unit would consist of one share of Eos common stock and 0.4388 of a warrant, with each whole warrant entitling the holder to purchase one share of Eos common stock at an exercise price of $5.481 per share, subject to adjustment. The warrants are expected to expire on the 10 year anniversary of the closing of the rights offering.
The Company elected to conduct the rights offering to ensure that all stockholders of record as of July 1, 2026 had the opportunity to participate in the equity financing on a pro rata basis. This structure enabled existing stockholders to participate alongside the Company's largest investors in the capitalization of FPUSA.
Registered Direct Offering
On June 30, 2026, the Company announced the pricing of a registered direct offering pursuant to which it intended to issue 13,683,634 of common stock and 6,004,378 warrants, each warrant exercisable for one share of common stock at an exercise price of $5.481 per share, to HBMF. The Company received aggregate gross proceeds from the registered direct offering of approximately $75.0 million.
Thorn Hill Expansion
In June 2026, the Company successfully launched commercial production at its Thorn Hill manufacturing facility in Marshall Township, Pennsylvania, following successful site acceptance testing for its second Z3 manufacturing line. This milestone reinforces execution confidence by demonstrating a proven, repeatable and scalable production model. The expansion enhances operational flexibility and supports growing customer demand with the fortification of the Company's manufacturing foundation for future growth.
Results of Operations
Revenue
Three Months Ended June 30, Six Months Ended June 30,
($ in thousands)
2026
2025
$ Change % Change
2026
2025
$ Change % Change
Revenue $ 13,741 $ 15,236 $ (1,495) (10) % $ 70,704 $ 25,693 $ 45,011 175 %
Revenue - related party 55,034 - $ 55,034 100 % 55,034 - $ 55,034 100 %
Total revenue $ 68,775 $ 15,236 $ 53,539 351 % $ 125,738 $ 25,693 $ 100,045 389 %
The Company generates revenues from the delivery of its BESS and service-related solutions. The Company expects revenues to increase as it scales production to meet customer demand.
For the three months ended June 30, 2026, Total revenue increased by $53.5 million or 351% from $15.2 million. For the six months ended June 30, 2026, Total revenue increased by $100.0 million or 389% from $25.7 million. The increase for the three and six months ended June 30, 2026 was primarily driven by an increase in deliveries, an increase in the average selling price and higher revenue from third-party materials. These increases were partially offset by a decline in service revenue.
Cost of goods sold
Three Months Ended June 30, Six Months Ended June 30,
($ in thousands)
2026
2025
$ Change % Change
2026
2025
$ Change % Change
Cost of goods sold $ 117,576 $ 46,189 $ 71,387 155 % $ 218,966 $ 81,185 137,781 170 %

Cost of goods sold primarily consists of direct labor, materials, and overhead associated with product assembly as well as project delivery, commissioning and field installation activities prior to projects becoming operational. Indirect costs included in cost of goods sold are manufacturing overhead such as equipment maintenance, environmental health and safety, quality and production control procurement, transportation, logistics, depreciation and facility-related costs.
For the three months ended June 30, 2026, Cost of goods sold increased by $71.4 million or 155% from $46.2 million recognized during the three months ended June 30, 2025. For the six months ended June 30, 2026, Cost of goods sold increased by $137.8 million or 170% from $81.2 million recognized during the six months ended June 30, 2025. The increase in Cost of goods sold for the three and six months ended June 30, 2026 was driven by costs associated with significantly higher cube deliveries, higher direct and indirect labor, higher field service costs associated with increased deliveries and higher volume-driven warranty accruals. These increases were partially offset by tax credit recognition.
Cost of goods sold for the three and six months ended June 30, 2026 reflected continued progress in reducing battery system manufacturing costs, driven by higher production efficiencies and increased output at the Turtle Creek facility. During the second quarter, the Company expanded its manufacturing capacity and commenced commercial production from its second battery line on June 16, 2026. Initial commercial production began during the quarter; however, labor and overhead absorption continued to be impacted by the Eos operating at partial production levels as the expanded facility ramps toward planned
capacity. The Company expects utilization, fixed-cost absorption and manufacturing efficiencies to improve as production volumes increase.
In addition, field-related costs increased during the quarter as the Company's installed base continued to grow and as it advanced the deployment of DawnOS upgrades across legacy customer systems. These activities support long-term product performance and customer experience but increased service and support costs during the period.
Inventory balances also increased during the quarter to support higher production levels and anticipated customer deliveries. Consistent with the Company's negative gross profit position, the related inventory reserve increased during the period.
As the Company ramps production, the Company continues to see the benefit of the PTCs. For the six months ended June 30, 2026 and 2025, the Company recognized $22.8 million and $6.4 million, respectively, reduction of cost of goods sold related to the PTC.
Research and development expenses
Three Months Ended June 30, Six Months Ended June 30,
($ in thousands)
2026
2025
$ Change % Change 2026 2025 $ Change % Change
R&D expenses $ 10,505 $ 7,201 $ 3,304 46 % $ 21,224 $ 14,038 7,186 51 %
Research and development expenses consist primarily of salaries and other personnel-related costs, materials, third-party services, depreciation and amortization of intangible assets.
For the three months ended June 30, 2026 Research and development expenses increased $3.3 million or 46%, compared to the three months ended June 30, 2025. For the six months ended June 30, 2026, Research and development expenses increased $7.2 million or 51% compared to the six months ended June 30, 2025. The increase for the three and six months ended June 30, 2026 was primarily attributable to higher facility costs, materials and supplies, outside services and payroll-related costs.
Selling, general and administrative expenses
Three Months Ended June 30, Six Months Ended June 30,
($ in thousands)
2026
2025
$ Change % Change 2026 2025 $ Change % Change
SG&A expenses $ 24,500 $ 25,488 $ (988) (4) % $ 48,595 $ 46,483 2,112 5 %
Selling, general and administrative expenses primarily consist of payroll and personnel-related, outside professional services, facilities, depreciation, travel, marketing and public company costs.
For the three months ended June 30, 2026 Selling, general and administrative expenses decreased $1.0 million or 4% compared to the three months ended June 30, 2025. The decrease for the three months ended June 30, 2026, was primarily attributable to a decrease in bad debt expense, stock compensation and outside services, partially offset by increases to facility costs, marketing and payroll related items.
For the six months ended June 30, 2026, Selling, general and administrative expenses increased $2.1 million or 5% compared to the six months ended June 30, 2025. The increase for the six months ended June 30, 2026 was primarily attributable to higher facility costs, marketing, outside services and payroll related items, partially offset by a decrease in bad debt expense and stock compensation.
Loss from write-down of property, plant and equipment
Three Months Ended June 30, Six Months Ended June 30,
($ in thousands)
2026
2025
2026
2025
Loss from write-down of property, plant and equipment $ 5 $ 205 $ 76 $ 766
The Company incurred a loss of $0.2 million from write-down of property, plant and equipment for the three months ended June 30, 2025, and a loss of $0.1 million and $0.8 million for the six months ended June 30, 2026 and 2025, respectively. For the three and six months ended June 30, 2026, the write-downs were mainly related to miscellaneous equipment and tooling that could not be repurposed. In 2025, the write-downs were mainly due to design changes from the Z3-Phase 1 to Z3-Phase 2 production in which the Phase 1 production assets could not be utilized or repurposed for Phase 2 production. Additionally, the
loss from write-down of property, plant and equipment contains costs for disposal of miscellaneous equipment and tooling that cannot be repurposed for more automated processes.
Interest expense
Three Months Ended June 30, Six Months Ended June 30,
($ in thousands) 2026 2025 2026 2025
Interest expense $ (11,972) $ (2,980) $ (24,214) $ (3,958)
Interest expense includes expenses for contractual interest, amortization of debt issuance costs and debt discounts, partially offset by capitalized interest costs on CIP assets.
Interest expense increased $9.0 million and $20.3 million for the three and six months ended June 30, 2026, respectively, compared to the three and six months ended June 30, 2025, primarily due to an increased principal balance under the DOE Loan Facility and interest associated with the May 2025 Convertible Notes and November 2025 Convertible Notes, which were outstanding for the entire period for the three and six months ended June 30, 2026. See Note 12, Borrowings to our Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report for further discussion.
Interest expense - related party
Three Months Ended June 30, Six Months Ended June 30,
($ in thousands) 2026 2025 2026 2025
2021 Convertible Note Payable interest and amortization
$ - $ (2,671) $ - $ (6,613)
AFG Convertible Note interest and amortization
- (1,839) - (3,678)
Interest expense, related party
$ - $ (4,510) $ - $ (10,291)
Interest expense - related party decreased $4.5 million and $10.3 million for the three and six months ended June 30, 2026, respectively, compared to the three and six months ended June 30, 2025, due to the fact that the 2021 Convertible Note Payable and the AFG Convertible Note were no longer outstanding during the three and six months ended June 30, 2026. See Note 12, Borrowings to our Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report for further discussion.
Interest income
Three Months Ended June 30, Six Months Ended June 30,
($ in thousands) 2026 2025 2026 2025
Interest income $ 3,654 $ 851 $ 6,441 $ 1,665
Interest income increased $2.8 million and $4.8 million for the three and six months ended June 30, 2026, respectively, compared to the three and six months ended June 30, 2025. The increase is due to the increase in Cash and cash equivalents held by the Company for the respective periods.
Change in fair value of debt - related party
Three Months Ended June 30, Six Months Ended June 30,
($ in thousands) 2026 2025 2026 2025
Change in fair value of debt - related party $ (4,534) $ 31,615 $ (8,766) $ 25,682
The Change in fair value of debt - related party is related to the DDTL. The Change in fair value of debt - related party was $4.5 million income and $31.6 million expense for the three months ended June 30, 2026 and June 30, 2025, respectively, and $8.8 million income and $25.7 million expense for the six months ended June 30, 2026 and June 30, 2025, respectively.
For the three and six months ended June 30, 2026, the primary factor contributing to the change in fair value is the accretion of the DDTL resulting from the passage of time. For the three and six months ended June 30, 2025 the primary factor contributing to the change in fair value was a decrease in the DDTL interest rate from 15% to 7% per annum (as amended), as a result of the modification of the DDTL, partially offset by the accretion of the DDTL resulting in the passage of time. See Note 12,
Borrowings to our Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report for further discussion.
Change in fair value of warrants
For the three and six months ended June 30, 2026 and 2025, the change in fair value of warrants was composed of the items below:
Three Months Ended June 30, Six Months Ended June 30,
($ in thousands) 2026 2025 2026 2025
IPO warrants $ - $ (38) $ - $ 99
April 2023 warrants
(11,680) (20,319) 83,520 (4,080)
May 2023 warrants
(2,737) (4,611) 19,127 (886)
December 2023 warrants
(8,168) (32,968) 43,493 (7,144)
Change in fair value of warrants
$ (22,585) $ (57,936) $ 146,140 $ (12,011)
The change in the fair value of the warrants for the three and six months ended June 30, 2026 and June 30, 2025 is largely driven by the Company's common stock price movement for the periods presented.
Change in fair value of derivatives
Three Months Ended June 30, Six Months Ended June 30,
($ in thousands) 2026 2025 2026 2025
Change in fair value of derivatives $ (70,447) $ - $ 95,488 $ -
For the three and six months ended June 30, 2026, the Change in fair value of derivatives of $70.4 million and $95.5 million, respectively, related to the change in fair value of the embedded derivative associated with the November 2025 Convertible Notes. The change is largely driven by the Company's common stock price movement for the periods presented. The November 2025 Convertible Notes were not outstanding for the comparable periods for the three and six months ended June 30, 2025.
On June 3, 2026, the Company's stockholders approved an amendment to increase authorized common shares from 600 million to 800 million. As a result, the November 2025 Convertible Notes became convertible into the Company's common stock, allowing the conversion feature to qualify for the derivative scope exception under ASC 815 as of that date and eliminating the requirement for subsequent fair value remeasurement.
Change in fair value of derivatives - related parties
Three Months Ended June 30, Six Months Ended June 30,
($ in thousands)
2026
2025
2026 2025
Change in fair value of embedded derivatives - related parties
$ - $ (24,264) $ - $ (7,330)
Change in fair value of warrants - related parties
(50,546) (52,191) 216,684 (34,539)
Change in fair value of derivatives - related parties
$ (50,546) $ (76,455) $ 216,684 $ (41,869)
The Change in the fair value of derivatives - related parties, was due to the 2021 Convertible Note Payable and AFG Convertible Notes (See Note 12, Borrowings) and the Change in fair value of warrants - related parties was due to changes in fair value of our SPA Warrant and Contingent warrants (See Note 13, Warrants Liability). The change is largely driven by the Company's common stock price movement for the periods presented. The 2021 Convertible Note Payable and AFG Convertible Notes were not outstanding for the comparable period for the three and six months ended June 30, 2026.
Loss on contingently issuable securities
Three Months Ended June 30, Six Months Ended June 30,
($ in thousands) 2026 2025 2026 2025
Loss on contingently issuable securities $ (35,662) $ - $ (35,662) $ -
The Loss on contingently issuable securities, was due to the securities to be issued in connection with the registered direct offering (See Note 14, Fair Value Measurement). The loss is driven by the fair value of securities to be issued compared to the consideration to be received. The contingently issuable securities do not impact the three and six months ended June 30, 2025.
Other expense
Three Months Ended June 30, Six Months Ended June 30,
($ in thousands)
2026
2025
2026 2025
Other income (expense) $ 206 $ (606) $ 203 $ (1,166)
For the three and six months ended June 30, 2026, Other income (expense) of $0.2 million primarily relates to insurance claims.
For the three months ended June 30, 2025, Other income (expense) of $(0.6) million primarily relates to costs associated with professional fees related to the Cerberus Amendments and extinguishment of the 2021 Convertible Notes. For the six months ended June 30, 2025, Other income (expense) of $(1.2) million primarily relates to costs associated with professional fees related to the Cerberus Amendments, extinguishment of the 2021 Convertible Notes and recognition of financing issuance costs from the Credit and Securities Purchase Transaction.
Income tax expense (benefit)
Three Months Ended June 30, Six Months Ended June 30,
($ in thousands)
2026
2025
2026 2025
Income tax expense (benefit)
$ 13 $ 6 $ 18 $ 11
The Company incurred income tax expense for the three and six months ended June 30, 2026 and 2025, attributable to taxable earnings from the Company's foreign operations which were insignificant for the periods presented.
Liquidity and Capital Resources
During the six months ended June 30, 2026, the Company incurred Net income of $233.2 million. Adjustments to reconcile the net income to cash used in operations are primarily from non-cash items on the Unaudited Condensed Consolidated Statements of Cash Flows. The non-cash items totaled $370.8 million. The Company incurred negative cash flows from operations of $191.8 million and had an accumulated deficit of $2,302.6 million as of June 30, 2026.
As of June 30, 2026, the Company had $305.5 million of unrestricted cash and cash equivalents available to fund the Company's operations, and working capital of $356.1 million on the Unaudited Condensed Consolidated Balance Sheets. Additionally, the Company had $58.6 million of restricted cash, refer to Note 4, Cash, Cash Equivalents and Restricted Cash for further discussion.
Financing Arrangements
The Company has historically relied on outside capital to fund its cost structure and expects this reliance to continue for the foreseeable future until the Company reaches profitability through its planned revenue generating activities. During the three and six months ended June 30, 2026, the Company did not have any significant capital transactions.
Through June 30, 2026, under the DOE Loan Facility, the Company drew down $90.9 million for the eligible project costs that the Company had incurred through June 4, 2025. These costs represent Tranche 1 of the DOE Loan Facility for eligible costs in connection with the design, construction, installation, startup and shakedown of a battery automation line and related tools. The Company has approximately $186.6 million of availability under the DOE Loan Facility. In the event the Company does not achieve certain funding conditions and the DOE chooses not to continue funding, the Company may need to seek alternative sources of capital, which may not be available on favorable terms or at all.
Capital Expenditures
The Company expects capital expenditures and working capital requirements to increase as it seeks to execute its growth strategy. Total capital expenditures for the six months ended June 30, 2026 and June 30, 2025 were $70.6 million and $12.0 million, respectively. See Note 6, Property, Plant and Equipment and Note 7, Intangible Assets for further discussion.
Discussion and Analysis of Cash Flows
The Company relies heavily on private placement of convertible notes, term loans and issuance of common stock and warrants. Our short-term working capital needs are primarily related to funding of debt interest payments, product manufacturing, research and development and general corporate expenses. The Company's long-term working capital needs are primarily related to repayment of long-term debt obligations and capital expenses for capacity expansion and maintenance, equipment upgrades and repair of equipment.
The following table summarizes the Company's cash flows from operating, investing and financing activities for the periods presented.
Six Months Ended June 30,
($ in thousands) 2026 2025 $ Change % Change
Net cash used in operating activities $ (191,753) $ (95,046) $ (96,707) 102 %
Net cash used in investing activities $ (70,551) $ (11,959) $ (58,592) 490 %
Net cash provided by financing activities $ 1,808 $ 186,820 $ (185,012) (99) %
Cash flows from operating activities:
Cash flows used in operating activities primarily comprise of costs related to research and development, manufacturing of products, project commissioning and other general and administrative activities.
Net cash used in operating activities was $191.8 million for the six months ended June 30, 2026, adjusted for non-cash items of $370.8 million, primarily related to changes in fair value of warrants and derivatives, with offsets of stock compensation expense, depreciation and amortization, non-cash interest expense, and change in fair value of debt - related party. The net cash outflows from changes in operating assets and liabilities was $54.1 million, primarily driven by an increase in grant receivable of $22.8 million due to increased volumes of production, an increase in inventory of $16.6 million to support anticipated customer demand and future shipments, decrease in contract liabilities of $7.6 million and increase in contract assets of $7.4 million driven by revenue recognition and production, an increase in vendor deposits of $5.9 million to supports anticipated customer demand, an increase in accounts receivable related party and accounts receivable of $5.5 million and $1.4 million, respectively, due to the increase in total sales and timing of customer payments and an increase in other of $7.0 million mainly related to IEEPA tariffs. This was partially offset by an increase of accounts payable of $12.5 million relating to increased production and timing of vendor payments and an increase in accrued expenses of $7.5 million which is attributable to timing of payroll and accruals for legal and professional fees and volume related warranty accruals.
Net cash used in operating activities of $95.0 million for the six months ended June 30, 2025, adjusted for non-cash items of $106.9 million, primarily related to stock compensation expense, loss on debt extinguishment and changes in fair value of debt, warrants and derivatives. The net cash inflows from changes in operating assets and liabilities was $5.8 million primarily driven by an increase in contract liabilities of $13.2 million due to customer cash receipts and increase in accounts payable of $10.2 million, partially offset by an increase in vendor deposits of $5.1 million and increase in grant receivable of $4.3 million.
Cash flows from investing activities:
Net cash flows used in investing activities for the six months ended June 30, 2026 were primarily composed of payments made for purchases of property, plant and equipment of $70.5 million and minor investments in internally developed software. The increase in cash flows used in investing activities are primarily to support the growth of manufacturing facilities at our Warrendale location.
Net cash flows used in investing activities for the six months ended June 30, 2025 were primarily composed of payments made for purchases of property, plant and equipment of $12.0 million.
Cash flows from financing activities:
Net cash provided by financing activities was $1.8 million for the six months ended June 30, 2026, primarily due to the proceeds received from the exercise of warrants during the period of $3.3 million. The proceeds were partially offset by debt issuance costs of $0.6 million and share repurchases from employees for tax withholding of $0.8 million.
Net cash provided by financing activities was $186.8 million for the six months ended June 30, 2025, primarily due to the proceeds received from the public offering of $81.1 million, from the issuance of the May 2025 Convertible Notes of $240.0 million, from the Credit and Securities Purchase Transaction of $38.5 million and from the exercise of warrants of $7.8 million. The proceeds were partially offset by the payoff of the 2021 Convertible Notes Payable and Delayed Draw Term Loan of $180.9 million, payments on the equipment financing facility of $0.9 million and share repurchases from employees for tax withholding of $0.5 million. The proceeds from the public offering and issuance of the May 2025 Convertibles Notes were used to repurchase the 2021 Convertible notes and prepay a portion of the DDTL.
Contractual Obligations
The Company has certain obligations and commitments to make future payments under contracts. As of June 30, 2026, this is composed of the following:
•Future lease payments, including interest, under non-cancellable operating and financing leases of $59.4 million. The leases expire at various dates prior to 2030.
•Principal and Interest payments related to the following debt obligations (see Note 11, Borrowings to our Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report):
Future Debt Payments
Delayed Draw Term Loan - due June 2034 (1) (2)
$ 348,386
DOE Loan Facility - due June 2034 (1) (2)
120,284
May 2025 Convertible Notes - due June 2030 63,500
November 2025 Convertible Notes - due December 2031 657,750
Total $ 1,189,920
(1) As of June 30, 2026, the Company is obligated to repay future contractual interest payments for these borrowings in-kind.
(2) The DDTL and DOE Loan Facility contain Springing Maturity Dates that could make the debt due March 14, 2030.
Critical Accounting Estimates ("CAE")
The Company's Unaudited Condensed Consolidated Financial Statements are prepared in conformity with U.S. generally accepted accounting principles (U.S. GAAP). In preparing the Company's Unaudited Condensed Consolidated Financial Statements, management makes assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. We regularly reevaluate our assumptions, judgments and estimates. The Company's significant accounting policies are described in the Company's Annual Report on Form 10-K for the year ended December 31, 2025.
Critical accounting estimates are those estimates that involve a significant level of estimation uncertainty and could have a material impact on our financial condition or results of operations.
There have been no material changes in the CAE's in the Company's Annual Report on Form 10-K for the year ended December 31, 2025.
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