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What changed in TIGO ENERGY, INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of TIGO ENERGY, INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+319 added−324 removedSource: 10-K (2024-12-31) vs 10-K (2023-12-31)

Top changes in TIGO ENERGY, INC.'s 2024 10-K

319 paragraphs added · 324 removed · 215 edited across 2 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

135 edited+72 added−60 removed363 unchanged
Biggest changeBecause our customers’ sales of solar power are typically into the on-grid market, the reduction, elimination or expiration of government subsidies and economic incentives for on-grid solar electricity may negatively affect the competitiveness of solar electricity relative to conventional and non-solar renewable sources of electricity and could harm or halt the growth of the solar electricity industry and our business. 25 National, state and local government bodies in many countries, including the United States, have provided incentives in the form of feed-in tariffs (“FiTs”), rebates, tax credits and other incentives to system owners, distributors, system integrators and manufacturers of solar PV systems and battery energy storage systems to bolster the cost competitiveness of solar electricity in on-grid applications relative to the cost of utility power, and to reduce dependency on other forms of energy.
Biggest changeNational, state and local government bodies in many countries, including the United States, have provided incentives in the form of feed-in tariffs (“FiTs”), NEM tariffs and related policies, rebates, tax credits, tax incentives and other incentives to system owners, distributors, system integrators and manufacturers of solar PV systems and battery energy storage systems to bolster the cost competitiveness of solar electricity in on-grid applications relative to the cost of utility power, and to reduce dependency on other forms of energy.
While we do have accrued reserves for warranty claims, our estimated warranty costs for previously sold products may change to the extent future products are not compatible with earlier generation products under warranty. Our warranty accruals are based on our assumptions, and we do not have a long history of making such assumptions.
While we do have accrued reserves for warranty claims, our estimated warranty costs for previously sold products may change to the extent future products are not compatible with the earlier generation products under warranty. Our warranty accruals are based on our assumptions, and we do not have a long history of making such assumptions.
We also depend on the skills and knowledge of our Chief Financial Officer, Vice President of Hardware R&D and Vice President of Software R&D. We cannot assure you that we will be able to successfully attract and retain the senior leadership necessary to grow our business.
We also depend on the skills and knowledge of our Chief Financial Officer and Vice President of Software and Hardware R&D. We cannot assure you that we will be able to successfully attract and retain the senior leadership necessary to grow our business.
Our international operations may fail to succeed due to risks inherent in operating businesses internationally, such as: • our lack of familiarity with commercial and social norms and customs in countries which may adversely affect our ability to recruit, retain and manage employees in these countries; • difficulties and costs associated with staffing and managing foreign operations; • the potential diversion of management’s attention to oversee and direct operations that are geographically distant from our U.S. headquarters; • compliance with multiple, conflicting and changing governmental laws and regulations, including employment, tax, privacy and data protection laws and regulations; • legal systems in which our ability to enforce and protect our rights may be different or less effective than in the United States and in which the ultimate result of dispute resolution is more difficult to predict; 28 • higher employee costs and difficulty in terminating non-performing employees; • differences in workplace cultures; • unexpected changes in regulatory requirements; • tariffs, export controls and other non-tariff barriers such as quotas and local content rules; • more limited protection for intellectual property rights in some countries; • adverse tax consequences, including as a result of transfer pricing adjustments involving our foreign operations; • fluctuations in currency exchange rates; • anti-bribery compliance by us or our partners; • restrictions on the transfer of funds; • global epidemics, pandemics, or contagious diseases; and • new and different sources of competition.
Our international operations may fail to succeed due to risks inherent in operating businesses internationally, such as: • our lack of familiarity with commercial and social norms and customs in countries which may adversely affect our ability to recruit, retain and manage employees in these countries; • difficulties and costs associated with staffing and managing foreign operations; • the potential diversion of management’s attention to oversee and direct operations that are geographically distant from our U.S. headquarters; • compliance with multiple, conflicting and changing governmental laws and regulations, including employment, tax, privacy and data protection laws and regulations; • legal systems in which our ability to enforce and protect our rights may be different or less effective than in the United States and in which the ultimate result of dispute resolution is more difficult to predict; • higher employee costs and difficulty in terminating non-performing employees; • differences in workplace cultures; • unexpected changes in regulatory requirements; • tariffs, export controls and other non-tariff barriers such as quotas and local content rules; • more limited protection for intellectual property rights in some countries; • adverse tax consequences, including as a result of transfer pricing adjustments involving our foreign operations; • fluctuations in currency exchange rates; • anti-bribery compliance by us or our partners; • restrictions on the transfer of funds; • global epidemics, pandemics, or contagious diseases; and • new and different sources of competition.
The Charter provides that unless we consent in writing to the selection of an alternative forum, the (a) Court of Chancery (the “Chancery Court”) of the State of Delaware (or, in the event that the Chancery Court does not have 53 jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware) shall, to the fullest extent permitted by law, be the sole and exclusive forum for: (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action, suit or proceeding asserting a claim of breach of a fiduciary duty owed by any current or former director, officer or other employee, agent or stockholder of the Company to the Company or to the Company’s stockholders, (iii) any action, suit or proceeding asserting a claim against the Company, its current or former directors, officers, or employees, agents or stockholders arising pursuant to any provision of the DGCL or our Charter or Bylaws, or (iv) any action, suit or proceeding asserting a claim against the Company, its current or former directors, officers, or employees, agents or stockholders governed by the internal affairs doctrine; and (b) subject to the foregoing, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.
The Charter provides that unless we consent in writing to the selection of an alternative forum, the (a) Court of Chancery (the “Chancery Court”) of the State of Delaware (or, in the event that the Chancery Court does not have jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware) shall, to the fullest extent permitted by law, be the sole and exclusive forum for: (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action, suit or proceeding asserting a claim of breach of a fiduciary duty owed by any current or former director, officer or other employee, agent or stockholder of the Company to the Company or to the Company’s stockholders, (iii) any action, suit or proceeding asserting a claim against the Company, its current or former directors, officers, or employees, agents or stockholders arising pursuant to any provision of the DGCL or our Charter or Bylaws, or (iv) any action, suit or proceeding asserting a claim against the Company, its current or former directors, officers, or employees, agents or stockholders governed by the internal affairs doctrine; and (b) subject to the foregoing, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.
Our ability to achieve broader market acceptance for our products will be impacted by a number of factors, including: • our ability to produce products that compete favorably against other solutions on the basis of price, quality, reliability and performance; 22 • our ability to timely introduce and complete new designs and timely qualify and certify our products; • whether installers, system owners and solar financing providers will continue to adopt our systems, which have a relatively limited history with respect to reliability and performance; • whether installers, system owners and solar financing providers will adopt our storage solution, which is a relatively new technology with a limited history with respect to reliability and performance; • the ability of prospective system owners to obtain long-term financing for solar PV installations based on our product platform on acceptable terms or at all; • our ability to develop products that comply with local standards and regulatory requirements, as well as potential in-country manufacturing requirements; and • our ability to develop and maintain successful relationships with our customers and suppliers.
Our ability to achieve broader market acceptance for our products will be impacted by a number of factors, including: • our ability to produce products that compete favorably against other solutions on the basis of price, quality, reliability and performance; • our ability to timely introduce and complete new designs and timely qualify and certify our products; • whether installers, system owners and solar financing providers will continue to adopt our systems, which have a relatively limited history with respect to reliability and performance; • whether installers, system owners and solar financing providers will adopt our storage solution, which is a relatively new technology with a limited history with respect to reliability and performance; • the ability of prospective system owners to obtain long-term financing for solar PV installations based on our product platform on acceptable terms or at all; • our ability to develop products that comply with local standards and regulatory requirements, as well as potential in-country manufacturing requirements; and • our ability to develop and maintain successful relationships with our customers and suppliers.
We are subject to, among other things, the following factors that may negatively affect our operating results: • seasonal and other fluctuations in demand for our products; • the timing, volume and product mix of sales of our products, which may have different average selling prices or profit margins; • changes in our pricing and sales policies or the pricing and sales policies of our competitors; • our ability to design, manufacture and deliver products to our customers in a timely and cost-effective manner and that meet customer requirements; • our ability to manage our relationships with our contract manufacturers, customers and suppliers; • quality control or yield problems in our manufacturing operations; • the anticipation, announcement or introductions of new or enhanced products by our competitors and ourselves; • reductions in the retail price of electricity; • changes in laws, regulations and policies applicable to our business and products, particularly those relating to government incentives for solar energy applications; • the impact of tariffs on the solar industry in general and our products in particular; • unanticipated increases in costs or expenses; • the amount and timing of operating costs and capital expenditures related to the maintenance and expansion of our business operations; • the impact of government-sponsored programs on our customers; • our exposure to the credit risks of our customers, particularly in light of the fact that some of our customers are relatively new entrants to the solar market without long operating or credit histories; • our ability to estimate future warranty obligations due to product failure rates, claim rates or replacement costs; • our ability to forecast our customer demand and manufacturing requirements, and manage our inventory; • our ability to predict our revenue and plan our expenses appropriately; 33 • fluctuations in foreign currency exchange rates; • announcement of acquisitions or dispositions of our assets or business operations; • changes in our management; and • general economic conditions and changes in such conditions specific to our target markets.
We are subject to, among other things, the following factors that may negatively affect our operating results: • seasonal and other fluctuations in demand for our products; • the timing, volume and product mix of sales of our products, which may have different average selling prices or profit margins; • changes in our pricing and sales policies or the pricing and sales policies of our competitors; • our ability to design, manufacture and deliver products to our customers in a timely and cost-effective manner and that meet customer requirements; • our ability to manage our relationships with our contract manufacturers, customers and suppliers; • quality control or yield problems in our manufacturing operations; • the anticipation, announcement or introductions of new or enhanced products by our competitors and ourselves; • reductions in the retail price of electricity; • changes in laws, regulations and policies applicable to our business and products, particularly those relating to government incentives for solar energy applications; • the impact of tariffs on the solar industry in general and our products in particular; 32 • unanticipated increases in costs or expenses; • the amount and timing of operating costs and capital expenditures related to the maintenance and expansion of our business operations; • the impact of government-sponsored programs on our customers; • our exposure to the credit risks of our customers, particularly in light of the fact that some of our customers are relatively new entrants to the solar market without long operating or credit histories; • our ability to estimate future warranty obligations due to product failure rates, claim rates or replacement costs; • our ability to forecast our customer demand and manufacturing requirements, and manage our inventory; • our ability to predict our revenue and plan our expenses appropriately; • fluctuations in foreign currency exchange rates; • announcement of acquisitions or dispositions of our assets or business operations; • changes in our management; and • general economic conditions and changes in such conditions specific to our target markets.
Many factors may influence the widespread adoption of renewable energy generation and demand for our hardware and software-enabled services, including, but not limited to the cost-effectiveness of renewable energy technologies as compared with conventional and competitive technologies, the performance and reliability of renewable energy products as compared with conventional and non-renewable products, fluctuations in economic and market conditions that impact the viability of conventional and competitive alternative energy sources, increases or decreases in the prices of oil, coal and natural gas, continued deregulation of the electric power industry and broader energy industry, and the availability or effectiveness of government subsidies and incentives.
Many factors may influence the widespread adoption of renewable energy generation and demand for our hardware and software-enabled services, including, but not limited to the cost-effectiveness of renewable energy technologies as compared with conventional and competitive technologies, the performance and reliability of renewable energy products as compared with conventional and non-renewable products, fluctuations in economic and 31 market conditions that impact the viability of conventional and competitive alternative energy sources, increases or decreases in the prices of oil, coal and natural gas, continued deregulation of the electric power industry and broader energy industry, and the availability or effectiveness of government subsidies and incentives.
In addition, any testing by the Company conducted in connection with Section 404 of the Sarbanes-Oxley Act (“Section 404”) or any subsequent testing by the Company’s independent registered public accounting firm, may reveal deficiencies in the Company’s internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to the Company’s financial statements or identify other areas for further attention or improvement.
In addition, any testing by the Company conducted in connection with Section 404 of the Sarbanes-Oxley Act (“Section 404”) or any subsequent testing by the Company’s independent 52 registered public accounting firm, may reveal deficiencies in the Company’s internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to the Company’s financial statements or identify other areas for further attention or improvement.
Any significant 21 interruption in manufacturing would require us to reduce our supply of products to our customers or increase our shipping costs to make up for delays in manufacturing, which in turn could reduce our revenues, harm our relationships with our customers, subject us to liquidated damages for late deliveries, and damage our reputation with local installers and potential end-users, all of which will cause us to forego potential revenue opportunities.
Any significant interruption in manufacturing would require us to reduce our supply of products to our customers or increase our shipping costs to make up for delays in manufacturing, which in turn could reduce our revenues, harm our relationships with our customers, subject us to liquidated damages for late deliveries, and damage our reputation with local installers and potential end-users, all of which will cause us to forego potential revenue opportunities.
In addition, on August 16, 2022, the IRA, among other provisions, imposes a 15% minimum tax on the adjusted financial 29 statement income of certain large corporations and a 1% excise tax on corporate stock repurchases by U.S. publicly traded corporations and certain U.S. subsidiaries of non-U.S. publicly traded corporations, as well as significant enhancements of U.S. tax incentives relating to climate and energy investments.
In addition, on August 16, 2022, the IRA, among other provisions, imposes a 15% minimum tax on the adjusted financial statement income of certain large corporations and a 1% excise tax on corporate stock repurchases by U.S. publicly traded corporations and certain U.S. subsidiaries of non-U.S. publicly traded corporations, as well as significant enhancements of U.S. tax incentives relating to climate and energy investments.
Despite our efforts to minimize foreign currency risks, primarily by maintaining cash balances in New Israeli Shekels, significant long-term fluctuations in relative currency values, in particular a significant change in the 37 relative values of the Euro and, New Israeli Shekel, Yuan and other currencies, against the U.S. dollar could have an adverse effect on our profitability and financial condition.
Despite our efforts to minimize foreign currency risks, primarily by maintaining cash balances in New Israeli Shekels, significant long-term fluctuations in relative currency values, in particular a significant change in the relative values of the Euro and, New Israeli Shekel, Yuan and other currencies, against the U.S. dollar could have an adverse effect on our profitability and financial condition.
Complying with these and other laws, regulations, amendments to or re-interpretations of existing laws and regulations, and contractual or other obligations relating to privacy, data protection, data transfers, data localization, or information security may require us to make changes to our services to enable us or our customers to meet new legal requirements, incur substantial operational costs, modify our data practices and policies, and restrict our business operations.
Complying with these and other laws, regulations, amendments to or re-interpretations of existing laws and regulations, and contractual or other obligations relating to privacy, data protection, data transfers, data localization, or information security may require us to make changes to 39 our services to enable us or our customers to meet new legal requirements, incur substantial operational costs, modify our data practices and policies, and restrict our business operations.
This may be particularly complicated by factors such as: • our limited operating history at current scale; • unfamiliarity with or uncertainty about our energy storage and management systems and the overall perception of the distributed and renewable energy generation markets; • inexperience with new product offerings and services and difficulties arising from the successful rollout thereof; • delivery and service operations to meet demand; • prices for electricity in particular markets; • competition from alternate sources of energy; 39 • warranty or unanticipated service issues we may experience in connection with third-party manufactured hardware and our proprietary software; • the environmental consciousness and perceived value of environmental programs to our customers; • the size of our expansion plans in comparison to our existing capital base and the scope and history of operations; and • the availability and amount of incentives, credits, subsidies or other programs to promote installation of energy storage systems.
This may be particularly complicated by factors such as: • our limited operating history at current scale; • unfamiliarity with or uncertainty about our energy storage and management systems and the overall perception of the distributed and renewable energy generation markets; 38 • inexperience with new product offerings and services and difficulties arising from the successful rollout thereof; • delivery and service operations to meet demand; • prices for electricity in particular markets; • competition from alternate sources of energy; • warranty or unanticipated service issues we may experience in connection with third-party manufactured hardware and our proprietary software; • the environmental consciousness and perceived value of environmental programs to our customers; • the size of our expansion plans in comparison to our existing capital base and the scope and history of operations; and • the availability and amount of incentives, credits, subsidies or other programs to promote installation of energy storage systems.
These differences include differing regulatory requirements, including tax laws, trade laws, labor regulations, tariffs, export quotas, customs duties, or other trade restrictions, limited or unfavorable intellectual property protection, international, political or economic conditions, restrictions on the repatriation of earnings, longer sales cycles, warranty expectations, product return policies and cost, performance and compatibility requirements.
These differences include differing regulatory requirements, including tax laws, trade laws, labor regulations, tariffs, export quotas, customs duties, or other trade restrictions, 23 limited or unfavorable intellectual property protection, international, political or economic conditions, restrictions on the repatriation of earnings, longer sales cycles, warranty expectations, product return policies and cost, performance and compatibility requirements.
The reduction in the investment tax credit could reduce the demand for solar system solutions in the U.S. which would have an adverse impact on our business, financial condition and results of operations. Federal, state, local and foreign tax credits, grants and other incentive programs have had a positive effect on our sales since inception.
The reduction in the investment tax credit could reduce the demand for solar system solutions in the U.S. which would have an adverse impact on our business, financial condition and results of operations. Federal, state, local and foreign tax credits, grants and other incentive programs have in the past had a positive effect on our sales since inception.
For instance, the European sovereign debt crisis in recent years has caused and may continue to cause European governments to reduce, eliminate or allow to expire government subsidies and economic incentives for solar energy, which could limit our growth or cause our net sales to decline and materially and adversely affect our business, financial condition, and results of operations.
For instance, the European sovereign debt crisis in recent years has caused and may continue to cause European governments to reduce, eliminate or allow to expire government subsidies and economic incentives for solar energy, 36 which could limit our growth or cause our net sales to decline and materially and adversely affect our business, financial condition, and results of operations.
In addition, we may be required to incur significant costs to protect against and remediate damage caused by these disruptions or security breaches in the future. Competition Risks We currently face and will continue to face significant competition. We compete for customers, financing partners and incentive dollars with other solar energy hardware and software solution providers.
In addition, we may be required to incur significant costs to protect against and remediate damage caused by these disruptions or security breaches in the future. 42 Competition Risks We currently face and will continue to face significant competition. We compete for customers, financing partners and incentive dollars with other solar energy hardware and software solution providers.
Furthermore, we do not have long-term purchase commitments from our distributors or end customers, and our sales are generally made by purchase orders that may be canceled, changed or deferred without notice to us or penalty. As a result, it is difficult to forecast future customer demand to plan our operations.
Furthermore, 48 we do not have long-term purchase commitments from our distributors or end customers, and our sales are generally made by purchase orders that may be canceled, changed or deferred without notice to us or penalty. As a result, it is difficult to forecast future customer demand to plan our operations.
Furthermore, there is increasing competition for talented individuals in our field, and competition for qualified personnel is especially intense in the San Francisco Bay Area, where our principal offices are located. 24 All of our employees, including our senior management, are free to terminate their employment relationships with us at any time.
Furthermore, there is increasing competition for talented individuals in our field, and competition for qualified personnel is especially intense in the San Francisco Bay Area, where our principal offices are located. All of our employees, including our senior management, are free to terminate their employment relationships with us at any time.
A product recall of a competitor’s product may also result in negative publicity towards the market we operate in and damage our brand. 20 Furthermore, defective components may give rise to warranty, indemnity, or product liability claims against us that exceed any revenue or profit we receive from the affected products.
A product recall of a competitor’s product may also result in negative publicity towards the market we operate in and damage our brand. Furthermore, defective components may give rise to warranty, indemnity, or product liability claims against us that exceed any revenue or profit we receive from the affected products.
Our operating expenses are based on anticipated sales levels, and many of our expenses are fixed. If we are unsuccessful in closing sales after expending significant resources or if we experience delays or cancellations, our business, financial condition and results of operations could be adversely affected. 36 Additionally, we have ongoing arrangements with our customers and target customers.
Our operating expenses are based on anticipated sales levels, and many of our expenses are fixed. If we are unsuccessful in closing sales after expending significant resources or if we experience delays or cancellations, our business, financial condition and results of operations could be adversely affected. Additionally, we have ongoing arrangements with our customers and target customers.
The UK NIS Regulations and the NIS Directive require that in-scope entities take appropriate and proportionate measures (having regard to the state of the art) to manage risks posed to the security of the network and information systems on which their services rely and to minimize the impact of incidents with a view to ensuring the continuity of service.
The UK NIS Regulations and the NIS Directive require that in-scope entities take appropriate and proportionate measures (having regard to the state of the art) to manage risks posed to the security of the network and information 40 systems on which their services rely and to minimize the impact of incidents with a view to ensuring the continuity of service.
Finally, any perceived or actual unauthorized access to, or use or disclosure of, such information could harm our reputation, substantially impair our ability to attract and retain customers and have an adverse impact on our business, financial condition and results of operations. 42 A failure of our information technology and data security infrastructure could adversely affect our business and operations.
Finally, any perceived or actual unauthorized access to, or use or disclosure of, such information could harm our reputation, substantially impair our ability to attract and retain customers and have an adverse impact on our business, financial condition and results of operations. A failure of our information technology and data security infrastructure could adversely affect our business and operations.
The potential impact of any future rules or regulations to address the tax challenges arising from the digitization of the global economy could have a material adverse effect on our consolidated financial statements. Significant judgment is required in evaluating our tax positions and our worldwide provision for taxes.
The potential impact of any future rules or regulations to address the tax challenges arising from the digitization of the global economy could have a material adverse effect on our consolidated financial statements. 29 Significant judgment is required in evaluating our tax positions and our worldwide provision for taxes.
In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We could encounter delays and incur significant costs, in product or service introductions while we attempt to develop alternative products or services, or redesign our products or services, to avoid infringing third party patents or proprietary rights.
In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We could encounter delays and incur significant costs, in product or service introductions while we attempt to develop alternative products or services, or 45 redesign our products or services, to avoid infringing third party patents or proprietary rights.
We are subject to national, state and local environmental laws and regulations, as well as environmental laws in those foreign jurisdictions in which we operate. Environmental laws and regulations can be complex and may change 27 often. These laws can give rise to liability for administrative oversight costs, cleanup costs, property damage, bodily injury, fines and penalties.
We are subject to national, state and local environmental laws and regulations, as well as environmental laws in those foreign jurisdictions in which we operate. Environmental laws and regulations can be complex and may change often. These laws can give rise to liability for administrative oversight costs, cleanup costs, property damage, bodily injury, fines and penalties.
The Convertible Note is convertible into Common Stock at a number 48 equal to the outstanding principal balance as of the date of conversion divided by an amount equal to the quotient of (x) $550,000,000 divided by (y) the aggregate number of outstanding shares of Legacy Tigo’s common stock, in each case subject to adjustment in accordance with the terms of the Convertible Note.
The Convertible Note is convertible into common stock at a number equal to the outstanding principal balance as of the date of conversion divided by an amount equal to the quotient of (x) $550,000,000 divided by (y) the aggregate number of outstanding shares of Legacy Tigo’s common stock, in each case subject to adjustment in accordance with the terms of the Convertible Note.
Any events or 32 change in the regulatory framework or electricity energy market that negatively impact the growth and development of renewable energy, particularly wind and solar energy, will have a negative impact on our business and financial condition. The failure of battery storage cost to continue to decline would have a negative impact on our business and financial condition.
Any events or change in the regulatory framework or electricity energy market that negatively impact the growth and development of renewable energy, particularly wind and solar energy, will have a negative impact on our business and financial condition. The failure of battery storage cost to continue to decline would have a negative impact on our business and financial condition.
The UK 40 GDPR applies in the same manner, with respect to the UK, following the UK’s departure from the EU. The GDPR/UK GDPR impose strict requirements to implement appropriate technical and organizational measures to keep personal information secure, and to report data breaches to data protection authorities, and potentially to affected individuals, within specified timescales.
The UK GDPR applies in the same manner, with respect to the UK, following the UK’s departure from the EU. The GDPR/UK GDPR impose strict requirements to implement appropriate technical and organizational measures to keep personal information secure, and to report data breaches to data protection authorities, and potentially to affected individuals, within specified timescales.
Accordingly, our business and quarterly results of operations could be affected by seasonal fluctuations in the future. We depend upon a small number of outside contract manufacturers, and our business and operations could be disrupted if we encounter problems with these contract manufacturers. We heavily rely upon our contract manufacturers to manufacture most of our products.
Accordingly, our business and quarterly results of operations could be affected by seasonal fluctuations in the future. 21 We depend upon a small number of outside contract manufacturers, and our business and operations could be disrupted if we encounter problems with these contract manufacturers. We heavily rely upon our contract manufacturers to manufacture most of our products.
Our new products are complex and require significant preparation, precautionary safety measures, time-consuming string calculations, extensive design expertise and specialized installation equipment, training and 44 knowledge. Together, these factors significantly increase complexity and cost of installation and limit overall productivity for the installer.
Our new products are complex and require significant preparation, precautionary safety measures, time-consuming string calculations, extensive design expertise and specialized installation equipment, training and knowledge. Together, these factors significantly increase complexity and cost of installation and limit overall productivity for the installer.
As a result, in addition to their day-to-day management roles, the Company’s executive officers and directors are able to exercise significant influence on the Company’s 54 business as stockholders, including influence over election of members of the board of directors and the authorization of other corporate actions requiring stockholder approval.
As a result, in addition to their day-to-day management roles, the Company’s executive officers and directors are able to exercise significant influence on the Company’s business as stockholders, including influence over election of members of the board of directors and the authorization of other corporate actions requiring stockholder approval.
The cancellation or deferral of product orders, or overproduction due to a change in anticipated order volumes could result in us holding excess or obsolete inventory, which could result in inventory write-downs and, in turn, could have a material adverse effect on our financial condition.
The cancellation or deferral of product orders, or overproduction due to a change in anticipated order volumes could result in us holding excess or obsolete inventory, which could result in inventory write-downs and, in 20 turn, could have a material adverse effect on our financial condition.
As ESG best practices, reporting standards and disclosure requirements continue to develop, we may incur increasing costs related to ESG monitoring and reporting. Our significant international operations subject us to additional risks that could adversely affect our business, results of operations and financial condition.
As ESG best practices, reporting standards and disclosure requirements continue to develop, we may incur increasing costs related to ESG monitoring and reporting. 27 Our significant international operations subject us to additional risks that could adversely affect our business, results of operations and financial condition.
The period between initial discussions with a potential customer and the sale of even one of our various products typically depends on a number of factors, including the potential customer’s budget and decision as to the type of financing it chooses to use, as well as the arrangement of such financing.
The period between initial discussions 35 with a potential customer and the sale of even one of our various products typically depends on a number of factors, including the potential customer’s budget and decision as to the type of financing it chooses to use, as well as the arrangement of such financing.
If we are unable to reduce our cost structure in the future, our net profits may decrease, which could have a material adverse effect on our business and prospects. We may fail to capture customers in the new product and geographic markets that we are pursuing.
If we are unable to reduce our cost structure in the future, our net profits may decrease, which could have a material adverse effect on our business and prospects. 43 We may fail to capture customers in the new product and geographic markets that we are pursuing.
In addition, in-scope entities are required to notify relevant authorities without undue delay of any incident 41 having a significant impact on the continuity of the service (in the UK, organizations have 72 hours from the moment of becoming aware of such an incident to notify).
In addition, in-scope entities are required to notify relevant authorities without undue delay of any incident having a significant impact on the continuity of the service (in the UK, organizations have 72 hours from the moment of becoming aware of such an incident to notify).
If any such unauthorized use or disclosure of, or access to, such personal information was to occur, our operations could be seriously disrupted, and we could be subject to demands, claims and litigation by private parties, and investigations, related actions, and penalties by regulatory authorities.
If any such unauthorized use or disclosure of, or access to, such personal information was to occur, our operations could be seriously disrupted, and we could be subject to demands, claims and litigation by private parties, and investigations, 41 related actions, and penalties by regulatory authorities.
Significant developments in 43 alternative energy technologies or improvements in the efficiency or cost of traditional energy sources, including coal, oil, natural gas used in combustion or nuclear power, may materially and adversely affect our business and prospects in ways we cannot anticipate.
Significant developments in alternative energy technologies or improvements in the efficiency or cost of traditional energy sources, including coal, oil, natural gas used in combustion or nuclear power, may materially and adversely affect our business and prospects in ways we cannot anticipate.
Some open source software licenses require users who distribute open source software as part 46 of their products to publicly disclose all or part of the source code in their software and make any derivative works of the open source code available for limited fees or at no cost.
Some open-source software licenses require users who distribute open-source software as part of their products to publicly disclose all or part of the source code in their software and make any derivative works of the open-source code available for limited fees or at no cost.
For example, in particular, in recent years, tensions between China and Taiwan have further escalated, with China accelerating the development of military capabilities and threatening the use of military force to gain control over Taiwan in certain circumstances.
For example, in particular, in recent years, tensions between China and Taiwan have further 37 escalated, with China accelerating the development of military capabilities and threatening the use of military force to gain control over Taiwan in certain circumstances.
All 50 states have laws requiring businesses to provide notification of certain breaches of personal information to affected individuals, state agencies and others. On May 25, 2018, the EU began enforcement of the GDPR.
Additionally, all 50 states have laws requiring businesses to provide notification of certain breaches of personal information to affected individuals, state agencies and others. On May 25, 2018, the EU began enforcement of the GDPR.
Inferior internal controls could also cause investors to lose confidence in the Company’s reported financial information, which could have a negative effect on the trading price of the Company’s stock.
Inferior internal controls could also cause investors to lose confidence in the Company’s reported financial information, which could have a negative effect on the trading price of the Company’s common stock.
In addition, a number of the risks associated with our business, which are disclosed in these risk factors, may increase in likelihood, magnitude or duration, and we may face new risks that we have not yet identified. In the past, unfavorable global macroeconomic and market conditions, including higher interest rates and inflation, have resulted in sustained periods of decreased demand.
In addition, a number of the risks associated with our business, which are disclosed in these risk factors, may increase in likelihood, magnitude or duration, and we may face new risks that we have not yet identified. Unfavorable global macroeconomic and market conditions, including higher interest rates, tariffs and inflation, have resulted in sustained periods of decreased demand.
The market for on-grid applications, where solar power, on a standalone basis or paired with energy storage systems, is used to supplement a customer’s electricity purchased from the utility network or sold to a utility under tariff, depends in large part on the availability and size of government and economic incentives that vary by geographic market.
The market for on-grid applications, where solar power, on a standalone basis or paired with energy storage systems, is used to supplement a customer’s electricity purchased from the utility network or sold to a utility under tariff, depends in large part on the availability and size of government-issued subsidies and economic incentives that vary by geographic market.
In addition, if the value of such stock awards does not appreciate as measured by the performance of the price of our common stock, or if our share-based compensation otherwise ceases to be viewed as a valuable benefit, our ability to attract, retain and motivate our executives and employees could be weakened, which could harm our business and results of operations.
In addition, if the value of such stock awards continues to decline and does not appreciate as measured by the performance of the price of our common stock, or if our share-based compensation otherwise ceases to be viewed as a valuable benefit, our ability to attract, retain and motivate our executives and employees could be weakened, which could harm our business and results of operations.
In addition, macroeconomic and market conditions could be adversely affected by a variety of political, economic or other factors in the U.S. and international markets, which could, in turn, adversely 19 affect spending levels of installers and end users and could create volatility or deteriorating conditions in the markets in which we operate.
Macroeconomic and market conditions could be adversely affected by a variety of political, economic or other factors in the U.S. and international markets, which could, in turn, adversely affect spending levels of installers and end users and could create volatility or deteriorating conditions in the markets in which we operate.
These types of modifications to net energy metering incentives have impacted and could further harm our business, both in California, where we have derived a significant portion of historical revenues in the United States, and in other jurisdictions, if pursued there.
These types of modifications to net energy metering policies have impacted and could further harm our business, both in California, where we have derived a significant portion of historical revenues in the United States, and in other jurisdictions, if pursued there.
The recent decline in our stock price and our cost reduction initiatives may adversely affect our ability to attract and retain highly qualified personnel, and we may experience increased attrition or we may need to provide additional cash or equity compensation to retain employees.
The recent significant decline in our stock price and our cost reduction 24 initiatives may adversely affect our ability to attract and retain highly qualified personnel, and we may experience increased attrition or we may need to provide additional cash or equity compensation to retain employees.
Where personal information is transferred without SCCs in place, and/or any other valid transfer mechanism, this creates a risk of enforcement action for non-compliance with the requirements of the GDPR. On June 28, 2021, the European Commission announced a decision of “adequacy” concluding that the UK ensures an equivalent level of data protection to the GDPR.
Where personal information is transferred without updated SCCs/UK Addendum/UK IDTA in place, and/or any other valid transfer mechanism, this creates a risk of enforcement action for non-compliance with the requirements of the GDPR/UK GDPR. On June 28, 2021, the European Commission announced a decision of “adequacy” concluding that the UK ensures an equivalent level of data protection to the GDPR.
For example, during the second part of 2023, the solar industry began to experience a downturn, particularly in Europe, which led to a large amount of requests to cancel or delay orders and the buildup of significant backlog of our products.
For example, beginning in the second part of 2023, the solar industry began to experience a downturn, particularly in Europe, which led to a large amount of requests to cancel or delay orders and the buildup of significant backlog of our products.
In addition, we have reduced our prices ahead of planned cost reductions of our products, which has adversely affected our gross margins. When seeking to maintain or increase their market share, our competitors may also reduce the prices of their products.
We have reduced our prices ahead of planned cost reductions of our products, which has adversely affected our gross margins. When seeking to maintain or increase their market share, our competitors may also reduce the prices of their products.
The issuance of Common Stock upon conversion of the Convertible Note (as defined below) could substantially dilute your investment and could impede our ability to obtain additional financing. On January 9, 2023, we issued to L1 Energy the Convertible Note, an unsecured convertible promissory note in an aggregate principal amount of $50.0 million.
The issuance of common stock upon conversion of the Convertible Note could substantially dilute your investment and could impede our ability to obtain additional financing. On January 9, 2023, we issued to L1 Energy the Convertible Note, an unsecured convertible promissory note in an aggregate principal amount of $50.0 million.
Although the NIS 2 Directive broadens the range of specific cybersecurity measures that in-scope entities must adopt, these measures only represent minimum requirements. It remains open to EU Member States to impose more stringent requirements on in-scope entities with respect to cybersecurity than provided for under the text of the NIS 2 Directive.
Although the NIS 2 Directive broadens the range of specific cybersecurity measures that in-scope entities must adopt, these measures only represent minimum requirements. EU Member States may impose more stringent requirements on in-scope entities with respect to cybersecurity than provided for under the text of the NIS 2 Directive.
Factors affecting the trading price of the Company’s securities may include: • actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us; • changes in the market’s expectations about the Company’s operating results; • success of competitors; • operating results failing to meet the expectations of securities analysts or investors in a particular period; • changes in financial estimates and recommendations by securities analysts concerning the Company or the industry in which the Company operates in general; • operating and stock price performance of other companies that investors deem comparable to the Company; 51 • ability to market new and enhanced products and services on a timely basis; • changes in laws and regulations affecting our business; • commencement of, or involvement in, litigation involving the Company; • changes in the Company’s capital structure, such as future issuances of securities or the incurrence of additional debt; • the volume of shares of the Company’s common stock available for public sale; • any major change in the Company’s board or management; • sales of substantial amounts of the Company’s common stock by our directors, executive officers or significant stockholders or the perception that such sales could occur; and • general economic and political conditions such as recessions, changes in interest rates, changes in fuel prices, international currency fluctuations and acts of war or terrorism.
Factors affecting the trading price of the Company’s securities may include: • actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us; • changes in the market’s expectations about the Company’s operating results; • success of competitors; • operating results failing to meet the expectations of securities analysts or investors in a particular period; • changes in financial estimates and recommendations by securities analysts concerning the Company or the industry in which the Company operates in general; • operating and stock price performance of other companies that investors deem comparable to the Company; • ability to market new and enhanced products and services on a timely basis; 51 • changes in laws and regulations affecting our business; • commencement of, or involvement in, litigation involving the Company; • changes in the Company’s capital structure, such as future issuances of securities or the incurrence of additional debt; • the volume of shares of the Company’s common stock available for public sale; • any major change in the Company’s board or management; • sales of substantial amounts of the Company’s common stock by our directors, executive officers or significant stockholders or the perception that such sales could occur; and • general economic and political conditions, such as recessions, changes in interest rates, changes in fuel prices, international currency fluctuations, an escalation of sanctions, tariffs, or other trade tensions between the U.S. and China, Mexico, Canada and/or other countries and acts of war or terrorism.
Our indebtedness could have material adverse consequences for our security holders and our business, results of operations and financial condition by, among other things: • increasing our vulnerability to adverse economic and industry conditions; • limiting our ability to obtain additional financing; • limiting our flexibility to plan for, or react to, changes in our business; • diluting the interests of our existing security holders as a result of issuing common stock upon conversion of the Convertible Note; and • placing us at a possible competitive disadvantage with competitors that are less leveraged than us or have better access to capital.
Our indebtedness could have material adverse consequences for our security holders and our business, results of operations and financial condition by, among other things: • increasing our vulnerability to adverse economic and industry conditions; • limiting our ability to obtain additional financing; • limiting our flexibility to plan for, or react to, changes in our business; • diluting the interests of our existing security holders as a result of issuing common stock upon conversion of the Convertible Note; and • placing us at a possible competitive disadvantage with competitors that are less leveraged than us or have better access to capital. 47 The Convertible Note includes financially restrictive covenants that, among other things, limit our ability to incur additional debt.
During the years ended December 31, 2023 and 2022, our largest customer accounted for approximately 7.4% and 10.6%, respectively, of our annual net revenue for such period. Our customers’ decisions to purchase our products are influenced by a number of factors outside of our control.
During the years ended December 31, 2024 and 2023, our largest customer accounted for approximately 7.9% and 7.4%, respectively, of our annual net revenue for such period. Our customers’ decisions to purchase our products are influenced by a number of factors outside of our control.
Risks Related to Our Business and Industry We have a history of generating net losses, and if we are unable to achieve adequate revenue growth while our expenses increase, we may not achieve or maintain profitability in the future or have sufficient cash to fund our future operations.
Risks Related to Our Business and Industry We have a history of generating net losses, and if we are unable to control our costs or achieve adequate revenue growth, we may not achieve or maintain profitability in the future or have sufficient cash to fund our future operations.
Reductions in incentives and uncertainty around future energy policy, including local content requirements, have negatively affected and may continue to negatively affect our business, financial condition, and results of operations as we seek to increase our business domestically and abroad.
Reductions in incentives and uncertainty around future energy policy, including local content requirements, have in the past and could in the future negatively affect us and may continue to negatively affect our business, financial condition, and results of operations as we seek to increase our business domestically and abroad.
The filing of a lawsuit against the Company, regardless of the outcome, could have a negative effect on the Company’s business, financial condition and results of operations, as it could result in substantial legal costs and a diversion of management’s attention and resources, and require the Company to make substantial payments to satisfy judgments or to settle litigation.
The filing of a lawsuit against the Company, regardless of the outcome, could have a negative effect on the Company’s business, financial condition and results of operations, as it could result in substantial legal costs and a diversion of management’s attention and resources, and require the Company to make substantial payments to satisfy judgments or to settle litigation. 54 The Company’s board of directors and management have significant control over the Company’s business.
For example, starting in the second quarter of 2023 and continuing throughout the year, we experienced a significant decline in sales activity compared to the first half of 2023 due to an industry-wide inventory oversupply, higher interest rates and governmental changes to net metering programs in the U.S. and Europe.
For example, starting in the second quarter of 2023, we experienced a significant decline in sales activity due to an industry-wide inventory oversupply, higher interest rates and governmental changes to net metering programs in the U.S. and Europe.
The growth and profitability of our business is dependent upon the continued decline in the cost of battery storage. Over the last decade, the cost of battery storage systems, particularly lithium-ion based battery storage systems, has declined significantly.
The growth and profitability of our GO ESS product line is dependent upon the continued decline in the cost of battery storage. Over the last decade, the cost of battery storage systems, particularly lithium-ion based battery storage systems, has declined significantly.
We have a history of incurring net losses, and we may not achieve or maintain profitability in the future. We experienced net losses of $1.0 million and $7.0 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, we had an accumulated deficit of $75.8 million.
We have a history of incurring net losses, and we may not achieve or maintain profitability in the future. We experienced net losses of $62.7 million and $1.0 million for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, we had an accumulated deficit of $138.5 million.
However, predicting our future revenue and appropriately budgeting for our expenses is difficult, and we have limited insight into trends that may emerge and affect our business.
Because we have a limited operating history, predicting our future revenue and appropriately budgeting for our expenses is difficult, and we have limited insight into trends that may emerge and affect our business.
Risks Related to Our Financial Condition and Liquidity We may require additional capital, which additional financing may result in restrictions on our operations or substantial dilution to our stockholders, to support the growth of our business, and this capital might not be available on acceptable terms, if at all.
Risks Related to Our Financial Condition and Liquidity We will likely require additional capital, which additional financing may result in restrictions on our operations or substantial dilution to our stockholders, to sustain and grow our business, and this capital might not be available on acceptable terms, if at all.
However, on December 15, 2022, the CPUC adopted a “NEM 3.0” policy, also known as the Net Billing Tariff, that unbundles export compensation from retail rates and instead bases it on a tool called the Avoided Cost Calculator (“ACC”), which estimates the hourly utility costs that are avoided by exports from distributed generation.
For example, in December 2022, the CPUC adopted a “NEM 3.0” policy, also known as the Net Billing Tariff, that unbundles export compensation from retail rates and instead bases it on a tool called the Avoided Cost Calculator (“ACC”), which estimates the utility costs that are avoided by exports from distributed generation for each hour of the year.
If for whatever reason, our OEM suppliers are unable to continue to reduce the price of their battery storage systems, our business and financial condition will be negatively impacted. Operating Risks Our operating results may fluctuate significantly as a result of a variety of factors, many of which are outside of our control.
If for whatever reason, our OEM suppliers are unable to continue to reduce the price of their battery storage systems, our GO ESS product line could be negatively impacted. Operating Risks Our operating results may fluctuate significantly as a result of a variety of factors, many of which are outside of our control.
Many of these government incentives expire, phase out over time, terminate upon the exhaustion of the allocated funding, require renewal by the applicable authority or are being changed by governments due to changing market circumstances or changes to national, state or local energy policy.
Many of these government incentives expire, phase out over time, have limited funding allocations that require renewal by the applicable jurisdictional authority, or are being changed by governments due to changing market circumstances or changes to national, state or local energy policy.
Over the past few years, several new entrants to the inverter and MLPE market, including low-cost Asian manufacturers, have announced plans to ship or have already shipped products in markets in which we sell our products, including, with respect to sales in Australia and in Europe. We expect competition to intensify as new and existing competitors enter the market.
We principally compete with traditional inverter manufacturers as well as microinverter manufacturers. Over the past few years, several new entrants to the inverter and MLPE market, including low-cost Asian manufacturers, have announced plans to ship or have already shipped products in markets in which we sell our products, including, with respect to sales in Australia and in Europe.
In addition, there are several new entrants, including ourselves, that are proposing or have proposed solutions to the rapid shutdown functionality which has become a regulatory requirement for PV rooftop solar systems in the United States.
We expect competition to intensify as new and existing competitors enter the market. In addition, there are several new entrants, including ourselves, that are proposing or have proposed solutions to the rapid shutdown functionality which has become a regulatory requirement for PV rooftop solar systems in the United States.
The Convertible Note matures on January 9, 2026. At maturity, unless converted or redeemed, we will need to repay the principal amount under the Convertible Note.
The Convertible Note matures on January 9, 2026. At maturity, unless converted at the election of the holder or redeemed by us with the consent of the holder, we will need to repay the principal amount under the Convertible Note.
The intensity and duration of Israel’s current war against 34 Hamas and military conflicts at some of its borders are difficult to predict, as are its economic implications on the Company’s business and operations in Israel and on Israel’s economy in general.
Military conflicts at some of Israel’s borders are difficult 33 to predict, as are its economic implications on the Company’s business and operations in Israel and on Israel’s economy in general.
These installers often have made substantial investments in design, installation resources and training in traditional central or string inverter systems, DC optimizers, or energy storage systems, which may create challenges for us to achieve their adoption of our solutions. Mergers in the solar industry among our current or potential customers may adversely affect our competitive position.
These installers often have made substantial investments in design, installation resources and training in traditional central or string inverter systems, DC optimizers, or energy storage systems, which may create challenges for us to achieve their adoption of our solutions.
Failure to meet these performance warranties and guarantee levels may require us to refund our service contract payments to the customer, or require us to make cash payments to the customer based on actual performance, as compared to expected performance. 35 Further, the occurrence of any defects, errors, disruptions in service, or other performance problems, interruptions, or delays with our solar energy and management systems, whether in connection with day-to-day operations or otherwise, could result in: • loss of customers; • loss or delayed market acceptance and sales of our hardware and software-enabled services; • delays in payment to us by customers; • injury to our reputation and brand; • legal claims, including warranty and service level agreement claims, against us; or • diversion of our resources, including through increased service and warranty expenses or financial concessions, and increased insurance costs.
Further, the occurrence of any defects, errors, disruptions in service, or other performance problems, interruptions, or delays with our solar energy and management systems, whether in connection with day-to-day operations or otherwise, could result in: • loss of customers; • loss or delayed market acceptance and sales of our hardware and software-enabled services; • delays in payment to us by customers; • injury to our reputation and brand; • legal claims, including warranty and service level agreement claims, against us; or • diversion of our resources, including through increased service and warranty expenses or financial concessions, and increased insurance costs.
As of December 31, 2023, the Company’s directors and executive officers beneficially owned, directly or indirectly, in the aggregate, approximately 30,238,755 shares of Common Stock, representing an aggregate of approximately 51.5% of the combined voting power of the Company’s outstanding capital stock (excluding any options or other securities exercisable for Common Stock).
As of December 31, 2024, the Company’s directors and executive officers beneficially owned, directly or indirectly, in the aggregate, approximately 16,845,311 shares of common stock, representing an aggregate of approximately 27.7% of the combined voting power of the Company’s outstanding capital stock (excluding any options or other securities exercisable for common stock).
As a result, we may not be able to protect our proprietary rights adequately abroad. 45 We may need to defend ourselves against claims that we infringe, have misappropriated, or otherwise violate the intellectual property rights of others, which may be time-consuming and would cause us to incur substantial costs.
We may need to defend ourselves against claims that we infringe, have misappropriated, or otherwise violate the intellectual property rights of others, which may be time-consuming and would cause us to incur substantial costs.
Additionally, future equity financings may result in new investors receiving rights superior to our existing stockholders. Because our decision to issue securities in the future will depend on numerous considerations, including factors beyond our control, we cannot predict or estimate the amount, timing, or nature of any future issuances of debt or equity securities.
Because our decision to issue securities in the future will depend on numerous considerations, including factors beyond our control, we cannot predict or estimate the amount, timing, or nature of any future issuances of debt or equity securities.
As a result of macroeconomic or market uncertainty, including inflation concerns, rising interest rates, recessionary concerns, geopolitical conflicts, and higher inventory channels customers may decide to delay purchasing our products and services or not purchase at all.
As a result of macroeconomic or market uncertainty, including inflation concerns, tariffs and rising interest rates, potential economic slowdowns or recessions, geopolitical conflicts, and higher inventory channels have caused and may continue to cause customers to delay purchasing our products and services or not 19 purchase at all.
If we are unable to use ocean transportation to deliver our products, our business and financial condition could be materially and adversely impacted.
We are dependent on ocean transportation to deliver our products in a timely and cost-efficient manner. If we are unable to use ocean transportation to deliver our products, our business and financial condition could be materially and adversely impacted.

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Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

80 edited+32 added−49 removed47 unchanged
Biggest changeYear Ended December 31, Increase/(Decrease) (in thousands) 2023 2022 Amount Percent Change in fair value of preferred stock warrant and contingent shares liability $ (1,109 ) $ 1,020 $ (2,129 ) (208.7 )% Change in fair value of derivative liability (12,247 ) — (12,247 ) 100.0 % Loss on debt extinguishment 171 3,613 (3,442 ) (95.3 )% Interest expense 8,115 1,494 6,621 443.2 % Interest income (2,322 ) (199 ) (2,123 ) 1,066.8 % Other (income) expense, net (37 ) 142 (179 ) (126.1 )% Total other (income) expenses, net $ (7,429 ) $ 6,070 $ (13,499 ) (222.4 )% Years ended December 31, 2023 and 2022 Change in fair value of preferred stock warrant and contingent shares liability decreased by $2.1 million or 208.7% for the year ended December 31, 2023, as compared to the same period in 2022, primarily due to an increase in the fair value of the Series C convertible preferred stock and the incremental increase contributed from the contingent shares related to the fSight acquisition.
Biggest changeYear Ended December 31, Change in (in thousands, except percentages) 2024 2023 $ % Change in fair value of preferred stock warrant and contingent shares liability $ (152 ) $ (1,109 ) $ 957 (86.3 )% Change in fair value of derivative liability — (12,247 ) 12,247 100.0 % Loss on debt extinguishment — 171 (171 ) (100.0 )% Interest expense 11,420 8,115 3,305 40.7 % Interest income (867 ) (2,322 ) 1,455 (62.7 )% Other expenses (income), net 245 (37 ) 282 762.2 % Total other expenses (income), net $ 10,646 $ (7,429 ) $ 18,075 243.3 % Years ended December 31, 2024 and 2023 Change in fair value of preferred stock warrant and contingent shares liability decreased by $1.0 million or 86.3% for the year ended December 31, 2024, as compared to the same period in 2023, primarily due to a decrease in mark-to-market expense associated with the contingent shares related to the fSight acquisition as a result of a reduction in the number of contingent shares issued in 2024 compared to the same period in 2023, which included the maximum number of contingent shares that we could have been required to issue.
We assessed the ability to realize the benefits of our DTAs in each reporting period by evaluating all available positive and negative evidence, objective and subjective in nature, including, but not limited to, (1) cumulative results of operations in recent years, (2) sources of recent pre-tax income, (3) estimates of future taxable income, (4) respective carryback and/or carryforward periods of tax attributes available to date, and (5) limitation on NOL utilization against taxable income.
We assessed the ability to realize the benefits of our DTAs in each reporting period by evaluating all available positive and negative evidence, objective and subjective in nature, including, but not limited to, (1) cumulative results of operations in recent years, (2) sources of recent pre-tax income, (3) estimates of future taxable income, (4) respective carryback and/or carryforward periods of tax attributes available to date, and (5) limitation on NOL utilization against 69 taxable income.
Sellable finished goods and raw material inventories are valued at the lower of cost or net realizable value, based on the first-in, first-out (“FIFO”) method. Certain factors could affect the realizable value of our inventories, including market and economic conditions, technological changes, existing product changes (mainly due to cost reduction 68 activities) and new product introductions.
Sellable finished goods and raw material inventories are valued at the lower of cost or net realizable value, based on the first-in, first-out (“FIFO”) method. Certain factors could affect the realizable value of our inventories, including market and economic conditions, technological changes, existing product changes (mainly due to cost reduction activities) and new product introductions.
Reductions in customer spending in response to unfavorable or uncertain macroeconomic and market conditions, globally or in a particular region where we operate, have adversely affected, and could continue to adversely affect our business, results of operations and financial condition. 61 Managing Supply Chain . We rely on contract manufacturers and suppliers to produce our components.
Reductions in customer spending in response to unfavorable or uncertain macroeconomic and market conditions, globally or in a particular region where we operate, have adversely affected, and could continue to adversely affect our business, results of operations and financial condition. Managing Supply Chain . We rely on contract manufacturers and suppliers to produce our components.
Our warranty obligation requires management to make assumptions regarding estimated failure rates and replacement costs. If actual warranty costs differ significantly from these estimates, adjustments may be required in the future, which could adversely affect our gross profit and results of operations.
Our warranty obligation requires management to make assumptions regarding estimated failure rates and replacement costs. If actual warranty costs differ significantly from these estimates, adjustments may 67 be required in the future, which could adversely affect our gross profit and results of operations.
We outsource our manufacturing to third-party contract manufacturers and negotiate product pricing on a quarterly basis. Our product costs are affected by advancement of technology in both our hardware and services, economies of scale resulting in lower component costs, and improvements in our overall manufacturing and production processes.
We outsource our manufacturing to third-party contract manufacturers and negotiate product pricing on a quarterly basis. Our product costs are affected by the advancement of technology in both our hardware and services, economies of scale resulting in lower component costs, and improvements in our overall manufacturing and production processes.
Inherent in this estimation is the requirement for us to estimate future book and taxable income and possible tax planning strategies. These estimates require us to exercise judgment about our 71 future results, the prudence and feasibility of possible tax planning strategies, and the economic environment in which we do business.
Inherent in this estimation is the requirement for us to estimate future book and taxable income and possible tax planning strategies. These estimates require us to exercise judgment about our future results, the prudence and feasibility of possible tax planning strategies, and the economic environment in which we do business.
We devote substantial resources to research and development programs that focus on enhancements to, and cost efficiencies in, our existing products or services and timely development of new products and services that utilize technological innovation to drive down product costs, improve functionality and enhance reliability.
We devote substantial resources to research and development programs that focus on enhancements to, and cost efficiencies in, our existing products or services and timely development of new products and services that utilize technological innovation to drive down product costs, improve functionality and enhance 62 reliability.
If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of their carrying 69 cost amount or fair value less cost to sell.
If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of their carrying cost amount or fair value less cost to sell.
An initial qualitative assessment may be performed to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount; 2.
An initial qualitative assessment may be performed to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount; 68 2.
Gross profit and margin can be used to understand our financial performance and efficiency and allow investors to evaluate its pricing strategy and compare it against competitors.
Gross (loss) profit and margin can be used to understand our financial performance and efficiency and allow investors to evaluate its pricing strategy and compare it against competitors.
If such review indicates that the carrying amount of intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value. No impairment losses were identified for the years ended December 31, 2023 and 2022. Acquired identifiable finite-lived intangible assets are amortized on a straight-line basis over the estimated useful lives of the assets.
If such review indicates that the carrying amount of intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value. No impairment losses were identified for the years ended December 31, 2024, and 2023. Acquired identifiable finite-lived intangible assets are amortized on a straight-line basis over the estimated useful lives of the assets.
Our revenue model is structured around the delivery of fully functional hardware products at the time of shipment, requiring no further modification for customer use. These products are sold mainly to distributors who then resell to end users, with our revenue recognition practices ensuring that revenue is recognized when control of the products is transferred to the customer.
Our revenue model is structured around the delivery of fully functional hardware products at the time of shipment, requiring no further modification for customer use. These products are sold primarily to distributors who then resell to end users, with our revenue recognition practices ensuring that revenue is recognized when control of the products is transferred to the customer.
On September 24, 2023, we entered into the Convertible Note Amendment (as defined below) with L1 Energy (as defined below) to modify the conversion terms of the Convertible Promissory Note and, as a result of such amendment, the conversion options no longer meet the requirements to be bifurcated in accordance with ASC Topic 815, “Derivatives and Hedging” .
On September 24, 2023, we entered into the Convertible Note Amendment (as defined above) with L1 Energy (as defined above) to modify the conversion terms of the Convertible Promissory Note and, as a result of such amendment, the conversion options no longer meet the requirements to be bifurcated in accordance with ASC Topic 815, “Derivatives and Hedging” .
See Note 2 and 15 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information related to income taxes. 72 Ite m 7A. Quantitative and Qualitative Disclosures About Market Risk.
See Note 2 and 15 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information related to income taxes. 70 Ite m 7A. Quantitative and Qualitative Disclosures About Market Risk.
However, since our history in selling MLPE devices, batteries, inverters and other hardware is shorter than the warranty period, the calculation of warranty provisions is inherently uncertain. We accrue estimated warranty costs at the time of sale based on anticipated warranty claims and actual historical warranty claims experience.
However, since our history in selling MLPE devices, batteries, inverters and other hardware is shorter than the warranty period, the calculation of warranty provisions is inherently uncertain. We accrue estimated warranty costs at the time of sale based on anticipated warranty claims, which are estimated based on actual historical warranty claims experience.
Additionally, our historical results are not necessarily indicative of the results that may be expected for any period in the future. Business Overview and 2023 Full Year Results Our mission is to deliver smart systems solutions, combining hardware and software, that enhance safety, increase energy yield, and lower operating costs of residential, commercial, and utility-scale solar systems.
Additionally, our historical results are not necessarily indicative of the results that may be expected for any period in the future. Business Overview and 2024 Full Year Results Our mission is to deliver smart systems solutions, combining hardware and software, which enhance safety, increase energy yield, and lower operating costs of residential, commercial, and utility-scale solar systems.
We complete the required annual testing of goodwill impairment for the reporting unit in the fourth quarter of each year to determine if goodwill should be impaired. During the year ended December 31, 2023, no impairment of goodwill has been identified.
We complete the required annual testing of goodwill impairment for the reporting unit in the fourth quarter of each year to determine if goodwill should be impaired. During the year ended December 31, 2024, no impairment of goodwill has been identified.
Actual results may differ from these estimates due to risks and uncertainties, including uncertainty in the current economic environment due to the global impact of inflation, interest rate fluctuations, new regulations, and geopolitical conflicts in Ukraine and Israel.
Actual results may differ from these estimates due to risks and uncertainties, including uncertainty in the current economic environment due to the global impact of inflation, interest rate fluctuations, new regulations, and geopolitical conflicts.
These considerations were factored into the 2023 annual analysis, and we did not believe this has led to impairment of long-lived assets or finite-lived intangible assets, as of the assessment date. If these macroeconomic trends, noted above, persists into 2024, there is a possibility that the Company may record impairment charges against these assets.
These considerations were factored into the 2024 annual impairment analysis, and we did not believe this has led to impairment of long-lived assets or finite-lived intangible assets, as of the assessment date. If these macroeconomic trends, noted above, persists into 2025, there is a possibility that we may record impairment charges against these assets.
In addition, customers in the United States can purchase extended warranties for inverters that extend the warranty period for an additional 25 years. Our products are designed to meet the warranty periods and our reliability procedures cover component selection, design, accelerated life cycle tests, and end-of-manufacturing line testing.
In addition, customers in the United States can purchase extended warranties for inverters that extend the warranty period up to 25 years. Our products are designed to meet the warranty periods, and our reliability procedures cover component selection, design, accelerated life cycle tests, and end-of-manufacturing line testing.
The valuation of long-lived assets and finite-lived intangible assets inherently involves a degree of uncertainty, particularly as it relates to the Company’s future undiscounted cash flows and performance.
The valuation of long-lived assets and finite-lived intangible assets inherently involves a degree of uncertainty, particularly as it relates to our future undiscounted cash flows and performance.
We have entered into various non-cancelable operating leases primarily for our facilities with original lease periods expiring through the year 2029, with our most significant leases relating to our facilities in Campbell, California and Ra’anana, Israel. As of December 31, 2023, we had total lease obligations of $2.6 million recorded on our consolidated balance sheet.
We have entered into various non-cancelable operating leases primarily for our facilities with original lease periods expiring through the year 2029, with our most significant leases relating to our facilities in Campbell, California and Ra’anana, Israel. As of December 31, 2024, we had total lease obligations of $1.6 million recorded on our consolidated balance sheet.
The Company used the closing stock price at the date of assessment to calculate our fair value. As the Company is considered one reporting unit, we used the consolidated balance sheet to derive the carrying amount of the reporting unit, with the inclusion of goodwill.
We used the closing stock price at the date of assessment to calculate our fair value. As we are considered one reporting unit, we used the consolidated balance sheet to derive the carrying amount of the reporting unit, with the inclusion of goodwill.
We use these metrics to make strategic decisions identifying areas for improvement, set targets for future performance and make informed decisions about how to allocate resources going forward. 62 Key Components and Comparison of Results of Operations Net Revenue We generate revenue primarily through the sale of our hardware products, complemented by our web-based monitoring services and SaaS platform, Predict+.
We use these metrics to make strategic decisions identifying areas for improvement, set targets for future performance and make informed decisions about how to allocate resources going forward. 60 Key Components and Comparison of Results of Operations Net Revenue We generate revenue primarily through the sale of our hardware products, SaaS platform, Predict+, our web-based monitoring services and royalties.
See Note 6, “Fair Value of Financial Instruments” and Note 9, “Long-Term Debt,” of the notes to consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information. The loss on debt extinguishment for the year ended December 31, 2023, is primarily related to the repayment of our Series 2022-1 Notes.
See Note 9, “Long-Term Debt,” of the notes to consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information. The loss on debt extinguishment for the year ended December 31, 2023, is primarily related to the repayment of our Series 2022-1 Notes.
We have a worldwide footprint with product installations in over 100 countries and on all seven continents. Further information regarding our business is provided in “Part 1, Item 1. Business” of this Annual Report on Form 10-K. Acquisition of Foresight Energy Ltd.
We have a worldwide footprint with product installations in over 100 countries and on all seven continents. Further information regarding our business is provided in “Part 1, Item 1. Business” of this Annual Report on Form 10-K.
The Company closely monitors these conditions and is prepared to perform interim impairment tests, as applicable, should there be indications of triggering events leading to impairment. See Note 2, 8 and 14 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information related to long-lived assets and intangibles.
We closely monitor these conditions and are prepared to perform interim impairment tests, as applicable, should there be indications of triggering events leading to impairment. See Note 2, 8 and 14 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information related to long-lived assets and intangibles.
If the Company concludes it is more likely than not that the fair value of the reporting unit is less than its carrying amount, a quantitative fair value test is performed. An impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value is recognized.
If we conclude it is more likely than not that the fair value of the reporting unit is less than its carrying amount, a quantitative fair value test is performed. An impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value is recognized.
Our future revenue growth is, in part, dependent on our ability to expand product offerings and services in the U.S. residential market. In our North American market, revenue is generally generated from our product offerings and services in the C&I markets.
Our future revenue growth is, in part, dependent on our ability to expand product offerings and services in the U.S. residential market. In our North American market, revenue is generally generated from our product offerings and services in the commercial and industrial markets.
Personnel-related costs are the most significant component of each of these expense categories and include salaries, benefits, payroll taxes, sales commissions, incentive compensation and stock-based compensation. Refer below for further details on the separate components of operating expenses. Research and Development Research and development expenses consistent of personnel-related expenses and facility-related expenses.
Operating Expenses Operating expenses consist of research and development, sales and marketing and general and administrative expenses. Personnel-related costs are the most significant component of each of these expense categories and include salaries, benefits, payroll taxes, sales commissions, incentive compensation and stock-based compensation. Refer below for further details on the separate components of operating expenses.
Cash Flows Used in Operating Activities Operating cash flows consists primarily of net loss adjusted for certain non-cash items and changes in operating assets and liabilities. Cash used in operating activities increased by $20.8 million in the year ended December 31, 2023, as compared to the same period in 2022.
Cash Flows Used in Operating Activities Operating cash flows consists primarily of net loss adjusted for certain non-cash items and changes in operating assets and liabilities. Cash used in operating activities decreased by $24.8 million in the year ended December 31, 2024, as compared to the same period in 2023.
See Note 2 and 4 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information related to our business combination. Income Taxes Income taxes are accounted for under the asset-and-liability method as required by ASC Topic 740, Income Taxes (“ASC Topic 740”).
See Note 2 and 14 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information related to goodwill. Income Taxes Income taxes are accounted for under the asset-and-liability method as required by ASC Topic 740, “Income Taxes” (“ASC Topic 740”).
Therefore, the Company continues to maintain a valuation allowance against our domestic and certain foreign net deferred tax assets. Uncertain Tax Positions The Company follows ASC Topic 740 that prescribes a financial statement recognition threshold and measurement process for uncertain tax positions taken or expected to be taken on our income tax returns.
Therefore, we continue to maintain a valuation allowance against our domestic and certain foreign net deferred tax assets. Uncertain Tax Positions We follow ASC Topic 740 that prescribes a financial statement recognition threshold and measurement process for uncertain tax positions taken or expected to be taken on our income tax returns.
The Company believes the operating and financial metrics presented are useful in evaluating our operating performance, as they are similar to measures used by our public competitors and are regularly used by security analysts, institutional investors, and other interested parties in analyzing operating performance and prospects.
We believe the operating and financial metrics presented are useful in evaluating our operating performance, as they are similar to measures used by our public competitors and are regularly used by securities analysts, institutional investors, and other interested parties in analyzing operating performance and prospects.
In the second half of 2023, the Company saw a decrease in cash flow generation primarily due to the Company being affected by an industry-wide inventory oversupply, higher interest rates, and other macroeconomic trends.
Beginning in the second half of 2023 and continuing into 2024, we saw a decrease in cash flow generation primarily due to being affected by an industry-wide inventory oversupply, higher interest rates, and other macroeconomic trends.
As the Company operates as a single reporting unit, with a straightforward business model, the Company used the market approach to estimate the fair value of the reporting unit. The market approach allows the use of the market price of an individual equity security at the assessment date to calculate the fair value of the reporting unit.
As we operate as a single reporting unit, with a centralized business model, we used the market approach to estimate the fair value of the reporting unit. The market approach allows the use of the market price of an individual equity security at the assessment date to calculate the fair value of the reporting unit.
The Company closely monitors these conditions and is prepared to perform interim impairment tests should there be indications that the fair value of the reporting unit may have declined below its carrying amount.
We closely monitor these conditions and are prepared to perform interim impairment tests should there be indications that the fair value of the reporting unit may have declined below its carrying amount.
Warranty obligations are classified as short-term and long-term warranty obligations, based on the period in which the warranty is expected to be claimed. The product warranty liability (short and long-term) was $5.6 million and $4.4 million, in the year ended December 31, 2023 and 2022, respectively.
Warranty obligations are classified as short-term and long-term warranty obligations, based on the period in which the warranty is expected to be claimed. The product warranty liability (short and long-term) was $5.8 million and $5.6 million, for the years ended December 31, 2024, and 2023, respectively.
Impairment of Long-Lived Assets and Intangibles The Company reviews its long-lived assets, which consists of property and equipment and operating lease right-of-use assets, for impairment when specific triggering events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.
Impairment of Long-Lived Assets and Intangibles We review our long-lived assets, which consist of property and equipment and operating lease right of use assets, for impairment when specific triggering events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.
It is possible that the actual results will differ from the assumptions and require adjustments to the allowance. Adjustments to the allowance would affect future net income. As of December 31, 2023, our net DTA balance on a consolidated basis was $21,000, after reduction of a valuation allowance of $24.3 million.
It is possible that the actual results will differ from the assumptions and require adjustments to the allowance. Adjustments to the allowance would affect future net income. As of December 31, 2024, our net DTA balance on a consolidated basis was $0.2 million, after reduction of a valuation allowance of $36.9 million.
For the annual test impairment test that was conducted in the fourth quarter of 2023, fair value exceeded the carrying value by 64.7%. 70 The valuation of goodwill inherently involves a degree of uncertainty, particularly as it relates to the Company’s stock price and the calculation of the Company’s fair value.
For the annual test impairment test that was conducted in the fourth quarter of 2024, fair value exceeded the carrying value by 531.5%. The valuation of goodwill inherently involves a degree of uncertainty, particularly as it relates to our stock price and the calculation of our fair value.
No impairment losses were identified for the years ended December 31, 2023 and 2022. We evaluate the recoverability of finite-lived intangible assets for impairment at least annually, we conduct our analysis in the fourth quarter of each year, or whenever there are triggering events or circumstances that may indicate the carrying amount of such assets may not be recoverable.
No impairment losses were identified for the years ended December 31, 2024, and 2023. We evaluate the recoverability of finite-lived intangible assets for impairment whenever there are triggering events or circumstances that may indicate the carrying amount of such assets may not be recoverable.
See Note 4, “Acquisition of Foresight Energy, Ltd.,” of the notes to the consolidated financial statements included in Part 2, Item 8 of this Annual Report on Form 10-K for additional information.
The final tranche of the contingent shares was released on July 25, 2024. See Note 4, “Acquisition of Foresight Energy, Ltd.,” of the notes to consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information.
Cash Flows The following table summarizes our cash flows for the periods presented: Year Ended December 31, (in thousands, except percentages) 2023 2022 Net cash used in operating activities $ (37,222 ) $ (16,472 ) Net cash used in investing activities (30,914 ) (1,603 ) Net cash provided by financing activities 34,824 48,318 Net (decrease) increase in cash, cash equivalents and restricted cash $ (33,312 ) $ 30,243 Management closely monitors expenditures and is focused on obtaining new customers and continuing to develop our products.
Cash Flows The following table summarizes our cash flows for the periods presented: Year Ended December 31, (in thousands) 2024 2023 Net cash used in operating activities $ (12,354 ) $ (37,222 ) Net cash provided by (used in) investing activities 19,756 (30,914 ) Net cash (used in) provided by financing activities (61 ) 34,824 Net increase (decrease) in cash and cash equivalents $ 7,341 $ (33,312 ) Management closely monitors expenditures and is focused on obtaining new customers and continuing to develop our products.
Research and development employees are primarily engaged in the design and development of our MLPE and GO ESS solutions.
Research and Development Research and development expenses consist of personnel-related expenses and facility-related expenses. Research and development employees are primarily engaged in the design and development of our MLPE, GO ESS solutions and Predict+.
Change in fair value of derivative liability was an incremental increase of $12.2 million for the year ended December 31, 2023, as compared to the same period in 2022. The Convertible Promissory Note contained conversion options that met the requirements for separate accounting and is accounted for as a convertible note derivative liability.
The change in fair value of derivative liability for the year ended December 31, 2023, is related to the Convertible Promissory Note which contained conversion options that met the requirements for separate accounting and was accounted for as a convertible note derivative liability.
The increase in net revenues was partially offset in the second of half of 2023, when the solar industry experienced a broad-based slowdown in both the U.S. and European markets, that resulted in elevated inventory with distributors and installers, and as a result the overall demand for our products and services decreased as distributors and installers responded to this slower demand environment.
The decrease is primarily due to the solar industry experiencing a broad-based slowdown starting in the second half of 2023 in both the U.S. and European markets, which resulted in elevated inventory levels with distributors and installers, and as a result the overall demand for our products and services decreased as distributors and installers responded to this slower demand environment.
We have based our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Critical Accounting Estimates The preparation of our audited consolidated financial statements and related notes requires us to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. 66 We have based our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Other customers may decide to delay purchasing our products and services or not purchase at all. A tighter credit market for consumer and business spending could, in turn, adversely affect spending levels of installers and end users and lead to increased price competition for our products.
A tighter 59 credit market for consumer and business spending could, in turn, adversely affect the spending levels of installers and end users and lead to increased price competition for our products.
Year Ended December 31, Increase/(Decrease) (in thousands, except percentages) 2023 2022 Amount Percent Sales and marketing $ 21,281 $ 10,953 $ 10,328 94.3 % Percentage of net revenue 14.7 % 13.5 % Years ended December 31, 2023 and 2022 Sales and marketing expense increased by $10.3 million or 94.3% for the year ended December 31, 2023, as compared to the same period in 2022.
Year Ended December 31, Change in (in thousands, except percentages) 2024 2023 $ % Sales and marketing $ 16,921 $ 21,281 $ (4,360 ) (20.5 )% Percentage of net revenue 31.3 % 14.7 % Years ended December 31, 2024 and 2023 Sales and marketing expense decreased by $4.4 million or 20.5% for the year ended December 31, 2024, as compared to the same period in 2023.
For the year ended December 31, 2023, we received proceeds of $50.0 million from the Convertible Promissory Note, proceeds of $3.7 million from the redemption of the common stock warrants, and proceeds of $2.2 million from the Merger (as defined above), which was partially offset by the $20.8 million repayment of the Series 2022-1 Notes.
Net cash provided by financing activities was $34.8 million for the year ended December 31, 2023, which is primarily attributable to proceeds of $50.0 million from the Convertible Promissory Note, proceeds of $3.7 million from the redemptions of common stock warrants and proceeds of $2.2 million from the Business Combination, which was partially offset by the $20.8 million repayment of the Series 2022-1 Notes.
Year Ended December 31, Increase/(Decrease) (in thousands, except percentages) 2023 2022 Amount Percent General and administrative $ 28,807 $ 9,032 $ 19,775 218.9 % Percentage of net revenue 19.8 % 11.1 % Years ended December 31, 2023 and 2022 General and administrative expense increased by $19.8 million or 218.9% for the year ended December 31, 2023, as compared to the same period in 2022.
Year Ended December 31, Change in (in thousands, except percentages) 2024 2023 $ % General and administrative $ 21,060 $ 28,807 $ (7,747 ) (26.9 )% Percentage of net revenue 39.0 % 19.8 % Years ended December 31, 2024 and 2023 General and administrative expense decreased by $7.7 million or 26.9% for the year ended December 31, 2024, as compared to the same period in 2023.
The increase was primarily related to an increase in personnel-related expenses due to a 64.3% increase in headcount, an increase in facility-related costs, an increase in allowance for credit losses on certain aged receivable balances, an increase in professional fees, incremental increases associated with non-capitalizable merger related consulting expenses incurred in in connection with the Business Combination, an increase in legal expense associated with the Merger and Business Combination, and an increase in insurance related expenses primarily due to additional director and officer insurance. 65 Other (Income) Expenses, Net Other (income) expenses, net, primarily consist of interest income earned on our cash and short term investments, realized gains and losses on short-term and long-term marketable securities, interest expense and fees under our convertible note, non-cash interest expense related to the amortization of debt issuance costs, and non-cash charges recognized for the change in fair value of our convertible notes embedded derivative, and convertible preferred stock warrants and losses or gains on debt extinguishment.
The decrease is primarily due to a decline of bad debt expense associated with our accounts receivable by $5.6 million, a decrease in legal expense by $4.4 million which was higher in 2023 due to the Business Combination, as defined below, and is partially offset by an increase in personnel-related stock-based compensation expenses by $2.6 million. 63 Other Expenses (Income), Net Other expenses (income), net, primarily consist of interest income earned on our cash and short term investments, realized gains and losses on short-term and long-term marketable securities, interest expense and fees under our convertible note, non-cash interest expense related to the amortization of debt issuance costs, and non-cash charges recognized for the change in fair value of our convertible notes embedded derivative, and convertible preferred stock warrants and losses or gains on debt extinguishment.
Cash Flows Used in Investing Activities Net cash used in investing activities increased by $29.3 million for the year ended December 31, 2023, compared to the same period in 2022, primarily due to the purchase of marketable securities and property and equipment.
Net cash used in investing activities was $30.9 million for the year ended December 31, 2023, which is primarily attributable to the purchase of marketable securities and property and equipment and was partially offset by the sale and maturities of marketable securities.
Additionally, should the Company’s share price continue to decline, reflecting broader industry or economic concerns, this could indicate a decline in the fair value of the reporting unit, potentially leading to an impairment of goodwill.
Throughout 2024, our stock price has decreased primarily due to our performance being affected by an industry-wide inventory oversupply, higher interest rates, and other macroeconomic trends. Additionally, should our share price continue to decline, reflecting broader industry or economic concerns, this could indicate a decline in the fair value of the reporting unit, potentially leading to an impairment of goodwill.
During the second half of 2023, demand for our solutions slowed primarily due to higher interest rates impacting customers’ investment decisions and the transition from NEM 2.0 to NEM 3.0 in California. • APAC – Net revenue for the APAC region increased $3.9 million or 57.1% for the year ended December 31, 2023, as compared to the same period in 2022, primarily due to increased orders for our MLPE product line throughout 2023.
The decrease is primarily due to lower demand for our solutions as a result of higher interest rates and the transition from NEM 2.0 to NEM 3.0 in California. 61 • APAC – Net revenue for the APAC region decreased by $2.5 million or 23.0% for the year ended December 31, 2024, as compared to the same period in 2023.
Other products are sold with standard limited warranties that typically range in duration from five to ten years. In certain cases, customers can purchase an extended warranty for our battery storage products and for our batteries for PV applications that extend the standard warranty period.
Our standard warranty period is 25 years for our MLPE devices, 12.5 years for our inverters, and 11 years for our batteries. Other products are sold with standard limited warranties that typically range in duration from five to ten years.
We intend to continue to invest appropriate resources in our research and development efforts because we believe they are critical to maintaining our competitive position. 64 Year Ended December 31, Increase/(Decrease) (in thousands, except percentages) 2023 2022 Amount Percent Research and development $ 9,496 $ 5,682 $ 3,814 67.1 % Percentage of net revenue 6.5 % 7.0 % Years ended December 31, 2023 and 2022 Research and development expense increased by $3.8 million or 67.1% for the year ended December 31, 2023, as compared to the same period in 2022.
Year Ended December 31, Change in (in thousands, except percentages) 2024 2023 $ % Research and development $ 9,860 $ 9,496 $ 364 3.8 % Percentage of net revenue 18.3 % 6.5 % Years ended December 31, 2024 and 2023 Research and development expense increased by $0.4 million or 3.8% for the year ended December 31, 2024, as compared to the same period in 2023.
The following tables sets forth these metrics for the periods presented: Year Ended December 31, Increase/(Decrease) (in thousands, except percentages) 2023 2022 Amount Percent Net revenue $ 145,233 $ 81,323 $ 63,910 78.6 % Gross profit $ 51,309 $ 24,771 $ 26,538 107.1 % Gross margin 35.3 % 30.5 % 4.9 % n/a Operating loss $ (8,275 ) $ (896 ) $ (7,379 ) 823.5 % Net loss $ (984 ) $ (7,037 ) $ 6,053 (86.0 )% Gross Profit and Gross Margin We define gross profit as total net revenue less cost of revenue, and define gross margin, expressed as a percentage, as the ratio of gross profit to revenue.
The following table sets forth these metrics for the periods presented: Year Ended December 31, Change in (in thousands, except percentages) 2024 2023 $ % Net revenue $ 54,014 $ 145,233 $ (91,219 ) (62.8 )% Gross (loss) profit $ (4,156 ) $ 51,309 $ (55,465 ) (108.1 )% Gross margin (7.7 )% 35.3 % Operating loss $ (51,997 ) $ (8,275 ) $ (43,722 ) (528.4 )% Net loss $ (62,746 ) $ (984 ) $ (61,762 ) (6,276.6 )% Gross (Loss) Profit and Gross Margin We define gross (loss) profit as total net revenue less cost of revenue, and define gross margin expressed as a percentage, as the ratio of gross profit to revenue.
In the United States, this slowdown was primarily the result of higher interest rates and the transition from NEM 2.0 to NEM 3.0 in California.
In the United States, the slowdown was primarily attributable due to higher interest rates than recent prior periods and the transition from the second iteration of net metering (“NEM 2.0”) to the third iteration of net metering (“NEM 3.0”) in California.
Upon conversion of the Convertible Note due in 2026, we will pay cash or issue shares of common stock equal to the aggregate principal amount of the Convertible Note to be converted. Refer to Note 9, in Part II, Item 8 of this Annual Report on Form 10-K for more information on our outstanding Convertible Note. Operating Leases.
Upon conversion of the Convertible Note due in January 2026, we would need to pay cash or issue shares of common stock equal to the aggregate principal amount of the Convertible Note to be converted.
However, if estimates regarding customer demand are inaccurate or changes in technology affect demand for certain products in an unforeseen manner, we may be exposed to potential losses. See Note 2 and Note 8 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information related to inventory valuation.
Inventory write downs are recorded as cost of revenues in the accompanying consolidated statements of operations and comprehensive loss. If estimates regarding customer demand are inaccurate or changes in technology affect demand for certain products in an unforeseen manner, we may be exposed to potential losses.
Starting in the second quarter of 2023 and continuing throughout the year, we experienced a significant number of customer requests to delay purchase order deliveries to the fourth quarter of 2023 or early 2024, in addition to a smaller number of unanticipated purchase order cancellations and returns.
Since the second quarter of 2023, we have experienced a significant number of customer requests to delay purchase order deliveries and a smaller number of purchase order cancellations and returns. Other customers may decide to delay purchasing our products and services or not purchase at all.
The Series C convertible preferred stock was converted to shares of Common Stock on May 23, 2023, as part of the Business Combination. See Note 3, “Merger with Roth CH Acquisition IV Co.,” of the notes to consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information.
Please see Note 9, “Long-Term Debt,” of the notes to consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information.
See Note 2 and 14 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information related to goodwill. Business Combinations Assets acquired and liabilities assumed as part of a business acquisition are generally recorded at their fair value at the date of acquisition.
See Note 9, “Supplementary Balance Sheet and Geographic Information,” of the notes to consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information.
In response to the factors noted above, we reduced staffing levels across all geographies in December 2023 by approximately 15% to better align our cost structure with the current environment. As a result, we expect to reduce cash expenditures by approximately $3.8 million in 2024. Unfavorable Macroeconomic and Market Conditions.
In addition, in response to the factors noted above, we reduced staffing levels across all geographies in December 2023 by approximately 15%, and in April 2024 by approximately 10%.
This was partially offset by an increase in cash provided by the proceeds from the sale and maturities of a portion of the marketable securities. Cash Flows Provided by Financing Activities Net cash provided by financing activities decreased by $13.5 million for the year ended December 31, 2023, compared to the same period in 2022.
Cash Flows Provided by (Used in) Investing Activities Net cash provided by investing activities was $19.8 million for the year ended December 31, 2024, which is primarily attributable to the sale and maturities of marketable securities and was partially offset by the purchase of additional marketable securities and property and equipment.
Year Ended December 31, Increase/(Decrease) (in thousands, except percentages) 2023 2022 Amount Percent Cost of revenue $ 93,924 $ 56,552 $ 37,372 66.1 % Gross profit $ 51,309 $ 24,771 $ 26,538 107.1 % Years ended December 31, 2023 and 2022 Cost of revenue increased by $37.4 million or 66.1% for the year ended December 31, 2023, as compared to the same period in 2022, primarily due to a 68.5% increase in MLPE product sales for the year ended December 31, 2023 compared to the same period in 2022.
Year Ended December 31, Change in (in thousands, except percentages) 2024 2023 $ % Cost of revenue $ 58,170 $ 93,924 $ (35,754 ) (38.1 )% Gross (loss) profit $ (4,156 ) $ 51,309 $ (55,465 ) (108.1 )% Gross margin (7.7 )% 35.3 % Years ended December 31, 2024 and 2023 Cost of revenue decreased by $35.8 million or 38.1% for the year ended December 31, 2024, as compared to the same period in 2023.
The level of demand slowed going into the second half of 2023 due to elevated inventory levels at distributors and installers. • Americas – Net revenue for the Americas region increased $2.7 million or 12.1% for the year ended December 31, 2023, as compared to the same period in 2022, primarily due to increased orders for our 63 MLPE and GO ESS product lines during the first half of 2023.
Beginning in the second half of 2023 and continuing into 2024, the industry experienced a broad-based slowdown as higher interest rates, policy changes, and elevated inventory levels at distributors and installers reduced demand for solar solutions in the region. • Americas – Net revenue for the Americas region decreased by $12.0 million or 47.8% for the year ended December 31, 2024, as compared to the same period in 2023.
Interest income for the year ended December 31, 2023 increased by $2.1 million primarily due to the Company’s marketable securities which were purchased in the second quarter of 2023. 66 Liquidity and Capital Resources As of December 31, 2023, our principal sources of liquidity were cash and cash equivalents and marketable securities of $33.2 million, which were held primarily for working capital purposes.
This is primarily due to a reduction of finance fees charged to customers for the year ended December 31, 2024, compared to same period in 2023. 64 Liquidity, Going Concern and Capital Resources As of December 31, 2024, our principal sources of liquidity were cash and cash equivalents and marketable securities of $19.9 million and total working capital, which we define as current assets less current liabilities, of $36.3 million.
Key factors affecting our results of operations are summarized below. Demand for Products. The demand for our products in Europe and the United States experienced a notable slowdown beginning in the second quarter of 2023.
The demand for our products in Europe and the United States experienced a notable slowdown beginning in the second quarter in 2023 and has continued into 2024. Although our net revenue has increased on a sequential basis in each quarter of 2024, our year-to-date results remain substantially lower than the comparable period in the prior year.
The overall increase was primarily driven by an increase in personnel-related expenses resulting from a 25.9% increase in headcount, in addition to an increase in professional fees primarily related to consultant expense. Research and development expense as percentage of net revenue decreased to 6.5% for the year ended December 31, 2023, compared to 7.0% for the same period in 2022.
The increase was primarily driven by an increase in consulting and personnel-related stock-based compensation expenses, and is partially offset by a decrease in payroll related expenses from a lower headcount during the year ended December 31, 2024, compared to the same period in 2023.
The increase was primarily due to higher personnel-related expenses resulting from an 11.9% increase in headcount, in addition to an increase in travel and entertainment related expenses primarily due to attending additional tradeshows in 2023 compared to 2022.
The decrease was primarily due to reduced payroll and travel expenses resulting from a lower headcount by $5.1 million, and was partially offset by an increase in personnel-related stock-based compensation expenses by $0.9 million.
Years ended December 31, 2023 and 2022 Year Ended December 31, Increase/(Decrease) (in thousands, except percentages) 2023 2022 Amount Percent Net revenue $ 145,233 $ 81,323 $ 63,910 78.6 % Net revenue increased by $63.9 million or 78.6% for the year ended December 31, 2023, as compared to the same period in 2022, primarily due to higher sales volumes as a result of increased acceptance of our products in the marketplace in the first half of 2023 and increased marketing activities.
Years ended December 31, 2024 and 2023 Year Ended December 31, Change in (in thousands, except percentages) 2024 2023 $ % Net revenue $ 54,014 $ 145,233 $ (91,219 ) (62.8 )% Net revenue decreased by $91.2 million or 62.8% for the year ended December 31, 2024, as compared to the same period in 2023.
We paid $0.1 million for the remaining Warrants that were not exercised as of September 8, 2023, which was recorded as a reduction to additional paid-in capital on our consolidated balance sheet. Key Factors that May Influence Future Results of Operations Our financial results of operations may not be comparable from period to period due to several factors.
Key Factors that May Influence Future Results of Operations Our financial results of operations may not be comparable from period to period due to several factors. Key factors affecting our results of operations are summarized below. Demand for Products.
Product Warranties We provide a standard limited product warranty for our solar products against defects in materials and workmanship under normal use and service conditions. Our standard warranty period is 25 years for our MLPE devices, 12.5 years for our inverters, and 11 years for our batteries.
See Note 2 and Note 8 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information related to inventory valuation. Product Warranties We provide a standard limited product warranty for our solar products against defects in materials and workmanship under normal use and service conditions.
In Europe, this slowdown was primarily the result of a decrease in customer purchases after a surge of sales were realized in 2022 and going into the first half of 2023 due to higher energy prices in Europe related to the onset of the armed conflict in Ukraine in 2022, and overall channel inventory correction.
We saw increased revenues in the region beginning in 2022 and through the first half of 2023 primarily due to higher energy prices following the onset of the armed conflict in Ukraine.
In Europe, the slowdown was primarily attributable to a decrease in customer purchases in the second half of 2023 primarily due to an overall surplus in the inventory channel.
In Europe, the slowdown was primarily due to elevated inventory levels with distributors and an overall channel inventory correction as they responded to a slower demand environment.
Gross profit increased by $26.5 million or 107.1% for the year ended December 31, 2023, as compared to the same period in 2022, primarily due to cost reduction efforts on certain products and lower freight costs in the last three quarters of 2023. Operating Expenses Operating expenses consist of research and development, sales and marketing and general and administrative expenses.
Interest income decreased by $1.5 million or 62.7% for the year ended December 31, 2024, as compared to the same period in 2023, primarily due to a lower balance of marketable securities available to generate interest income in 2024 compared to the same period in 2023.

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