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What changed in ESS Tech, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of ESS Tech, 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.

+427 added−387 removedSource: 10-K (2025-03-31) vs 10-K (2024-03-14)

Top changes in ESS Tech, Inc.'s 2024 10-K

427 paragraphs added · 387 removed · 316 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeThese components are protected by trade secrets, patents (both granted and in process) and years of research. The remainder of the Energy Warehouse and the Energy Center are intentionally designed to be easily produced. By using standard pumps and equipment and easily fabricated enclosures, our energy storage products can be assembled almost anywhere and produced at an efficient cost.
Biggest changeThe balance of system components required to build complete solutions are intentionally designed to be easily produced using broadly available pumps, tanks and other equipment and easily fabricated enclosures, allowing energy storage products to be assembled and deployed almost anywhere at an efficient cost. ESS’ Critical Technology Customers Our current and potential customers include utilities, IPPs and C&I end users.
We are an early mover in long-duration energy storage and we believe we will enable more rapid implementation of renewable energy while also improving grid stability. The safety, flexibility and durability of our energy storage products enable customers to use them in nearly any location globally.
We are an early mover in long-duration energy storage and we believe our products will enable more rapid implementation of renewable energy while also improving grid stability. The safety, flexibility and durability of our energy storage products enable customers to use them in nearly any location globally.
To our knowledge, we are the first long-duration energy storage company to receive this type of insurance, which provides a warranty backstop for our proprietary flow battery technology, supporting our performance obligations regardless of project size or location and de-risking the technology for our customers. We have also collaborated with Munich Re to develop separate project coverage for our customers.
To our knowledge, we are the first long-duration energy storage company to receive this type of insurance, which provides a warranty backstop for our proprietary flow battery technology, supporting our performance obligations regardless of project size or location and de-risking the technology for our customers. We have also collaborated with Munich Re to develop separate project coverage for our customers.
Available Information Our investor relations website is located at https://investors.essinc.com/, our Company X account is located at https://twitter.com/ESS_info, and our corporate LinkedIn account is located at https://www.linkedin.com/company/energy-storage-systems/.
Available Information Our investor relations website is located at https://investors.essinc.com/, our Company X account is located at https://x.com/ESS_info, and our corporate LinkedIn account is located at https://www.linkedin.com/company/energy-storage-systems/.
Our energy storage products are intended to supply long-duration power across this expanding spectrum of use cases. As described below in the subsection entitled “—O ur Technology and Products ,” we believe our energy storage products will be capable of addressing customer needs across multiple use cases and markets.
Our energy storage products are intended to supply long-duration power across this expanding spectrum of use cases. As described below in the subsection entitled “O ur Technology and Products ,” we believe our energy storage products will be capable of addressing customer needs across multiple use cases and markets.
EXIM equips U.S. businesses with the financing tools necessary to compete for global sales when private sector lenders are unable or unwilling to provide financing. Our energy storage products are qualified by EXIM and can provide financing for qualified overseas buyers.
EXIM equips U.S. businesses with the financing tools necessary to compete for global sales when private sector lenders are unable or unwilling to provide financing. Our energy storage products are qualified by EXIM, which can provide financing for qualified overseas buyers.
In addition to benefiting from governmental laws and regulations supporting energy storage, we are subject to federal, state and local requirements on the environment, health, safety and employment. Our manufacturing process is subject to environmental regulations, and our products are subject to regulations addressing safety and reliability.
In addition to benefiting from governmental laws and regulations supporting energy storage, we are subject to federal, state and local requirements related to the environment, health, safety and employment. Our manufacturing process is subject to environmental regulations, and our products are subject to regulations addressing safety and reliability.
Human Capital Management We pride ourselves on our clean, innovative technology and our employees are dedicated to our strategic mission to deliver reliable, resilient and safe renewable energy storage solutions to communities worldwide. Approximately half of our employees are involved in product manufacturing in order to refine and grow our operations.
Human Capital Management We pride ourselves on our clean, innovative technology and our employees are dedicated to our strategic mission to deliver reliable, resilient and safe renewable energy storage solutions to communities worldwide. Approximately a third of our employees are involved in product manufacturing in order to refine and grow our operations.
When comparing products on a lifetime levelized cost of storage (“LCOS”) basis, which is the total cost of the investment in an electricity storage technology divided by its cumulative delivered electricity, we expect our batteries to be less expensive on a LCOS basis than lithium-ion alternatives for storage durations greater than four hours, which we believe is the operational maximum for lithium-ion technologies.
When comparing products on a lifetime levelized cost of storage (“LCOS”) basis, which is the total cost of the investment in an electricity storage technology divided by its cumulative delivered electricity, we expect our batteries to be less expensive than lithium-ion alternatives for storage durations greater than eight hours, which we believe is the economic maximum for lithium-ion technologies.
We believe that we have enforceable intellectual property protection over all critical design elements as well as the key enabling technologies for iron flow batteries. We have developed a significant patent portfolio. We have over 250 patents that are granted or in the pipeline and an undisclosed number of trade secrets and identified patents.
We believe that we have enforceable intellectual property protection over all critical design elements as well as the key enabling technologies for iron flow batteries. We have developed a significant patent portfolio. We have over 333 patents that are granted, applied for or in the pipeline for application, and an undisclosed number of trade secrets.
Our cost advantage increases as the storage duration extends beyond four hours because of the scalable nature of our technology. - 4 - Table of Contents Energy storage solutions of various sizes and durations must be installed throughout global electrical grids to enable decarbonization in line with global climate objectives.
Our cost advantage increases as the storage duration extends beyond eight hours because of the scalable nature of our technology. Energy storage solutions of various sizes and durations must be installed throughout global electrical grids to enable decarbonization in line with global climate objectives.
As of December 31, 2023, we employed 231 full-time employees, based primarily in our headquarters in Wilsonville, Oregon. In order to achieve our mission to create a reliable, resilient, and safe renewable energy future, we are committed to investing in our employees and building a respectful and diverse work environment.
As of December 31, 2024, we employed 240 full-time employees, based primarily at our headquarters in Wilsonville, Oregon. In order to achieve our mission to create a reliable, resilient, and safe renewable energy future, we are committed to investing in our employees and building a respectful and diverse work environment.
Renewable energy is a priority for both the Biden administration and for many state and local governments across the country. On the federal level, tax credits are currently in place that incentivize the deployment of renewable energy and battery storage.
Renewable energy is a priority for many national, state and local governments. On the federal level, tax credits are currently in place that incentivize the deployment of renewable energy and battery storage.
Examples of use cases range from localized energy storage at commercial and industrial sites to grid-scale use cases, such as peaker plant replacement and grid stabilization. Our Technology and Products Our long-duration iron flow batteries are the product of nearly 50 years of scientific advancement. In the 1970s, researchers first developed the concept of iron flow batteries.
Examples of use cases range from localized - 4 - Table of Contents energy storage at commercial and industrial sites to grid-scale use cases, such as peaker plant replacement and grid stabilization. Our Technology and Products Our long-duration iron flow batteries are the product of nearly 50 years of scientific advancement.
Research & Development Since January 1, 2019, we have invested approximately $164.6 million on improving our technology and bringing our energy storage products to market. Our research and development efforts are conducted in Oregon and supported by our approximately 44 research and development employees.
Research & Development Since January 1, 2019, we have invested approximately $176.4 million in improving our technology and bringing our energy storage products to market. Our research and development efforts are conducted in Oregon and supported by our approximately 41 research and development employees.
Behind-the-meter customers may include microgrids and small-scale C&I customers. Front-of-the-meter customers, in contrast, are primarily utilities experiencing high rates of renewable energy penetration and requiring energy storage to help balance the grid, and IPPs who can leverage energy storage to improve the economics of renewable energy projects.
Front-of-the-meter customers, in contrast, are primarily utilities experiencing high rates of renewable energy penetration and requiring energy storage to help balance the grid, and IPPs who can leverage energy storage to improve the economics of renewable energy projects.
Our key competitors include different energy storage technologies such as lithium-ion batteries, lithium metal batteries, vanadium or zinc bromine batteries, sodium sulfur batteries, compressed air, hydrogen, fuel cell and pumped-storage hydropower. Key competitors in the traditional lithium-ion space include Contemporary Amperex Technology Co.
Our key competitors include different energy storage technologies such as lithium-ion batteries, lithium metal batteries, vanadium or zinc bromine batteries, sodium sulfur batteries, compressed air, hydrogen, fuel cell and pumped-storage hydropower. Key competitors in the traditional lithium-ion space include Contemporary Amperex Technology Co. Limited, LG Chem, Ltd., Samsung Electronics Co., Ltd., Sungrow Power Supply Co., Ltd., and Tesla, Inc.
We believe each of these elements allows us to increase our total addressable market, as potential customers have reduced technology risk, financing risk and importing risk. We believe that as we scale up our production, our battery technology will be priced competitively.
We believe each of these elements allows us to increase our total addressable market, as potential customers have reduced technology risk, financing risk and importing risk. We believe that as we are able to increase our production, our per unit costs will decrease, allowing our battery technology to be priced more competitively.
Partnerships • Munich Re : Our batteries and technology can be purchased with a ten-year warranty which is backed by investment-grade warranty and project insurance policies from Munich Re, a leading provider of reinsurance, primary insurance and insurance-related risk solutions, which stands behind the performance of our energy storage products.
Partnerships • Munich Re : We offer our customers the opportunity to purchase our batteries and technology with a ten-year warranty which is backed by investment-grade warranty and project insurance policies from Munich Re, a leading - 6 - Table of Contents provider of reinsurance, primary insurance and insurance-related risk solutions, which stands behind the performance of our energy storage products.
New technologies may enter the market that may have additional or superior advantages to our offerings. We believe there is significant government support available for energy storage technologies, and a variety of newer and emerging companies have announced plans to develop energy storage products using a variety of technologies, including compressed air, thermal energy, and solid-state batteries among others.
We believe there is significant government support available for energy storage technologies, and a variety of newer and emerging companies have announced plans to develop energy storage products using a variety of technologies, including compressed air, thermal energy, and solid-state batteries among others.
ITEM 1. BUSINESS Unless the context otherwise requires, all references in this Annual Report on Form 10-K to “ESS,” “we,” “us,” “our,” or the “Company” refer to ESS Tech, Inc. and its subsidiaries. Business Combination On October 8, 2021 (the “Closing Date”), ACON S2 Acquisition Corp.
ITEM 1. BUSINESS Unless the context otherwise requires, all references in this Annual Report on Form 10-K to “ESS,” “we,” “us,” “our,” or the “Company” refer to ESS Tech, Inc. Business Combination ESS Tech, Inc.
Suppliers Our batteries are made predominantly of earth-abundant, environmentally sustainable materials. These materials are considerably less expensive than rare earth metals that make up other batteries and as a result make up a low percentage of the total costs for our batteries. Because these materials are widely available, there are multiple suppliers for each input.
These materials are considerably less expensive than rare earth metals that make up other batteries and as a result make up a low percentage of the total costs for our batteries. Because these materials are widely available, there are multiple suppliers for each input. In addition, we use limited high cost materials such as platinum in our manufacturing.
In addition, we use limited high cost materials such as platinum in our manufacturing. While supply chain disruptions have - 6 - Table of Contents impacted the ability of some of our suppliers to deliver certain components of our batteries to us in a timely manner as described in the section entitled “ Part I—Item 1A.
While supply chain disruptions have in the past impacted the ability of some of our suppliers to deliver certain components of our batteries to us in a timely manner as described in the section entitled “ Part I—Item 1A.
In order to retain top talent, we have designed our compensation program to provide employees with competitive compensation and benefits consistent with positions, skill levels, experience, knowledge, and geographic location. We are also continuously working to improve our recruiting, retention and development processes as our operations grow.
In order to retain top talent, we have designed our compensation program to provide employees with competitive compensation and benefits consistent with positions, skill levels, experience, knowledge, and geographic location.
Unable to prevent the hydroxide from forming, these scientists were forced to abandon their work. After years of neglect, our founders, Craig Evans and Dr. Julia Song, began advancing this technology in 2011 and formed Legacy ESS.
Hydroxide formation caused rapid degradation in early iron flow batteries after only a few cycles. Unable to prevent the hydroxide from forming, these scientists were forced to abandon their work. Our founders, Craig Evans and Dr. Julia Song, began advancing this technology in 2011 and formed Legacy ESS.
Despite realizing the battery’s promising ability to store energy, these researchers found that the reaction between the positive and negative sides created hydroxide formations that clogged the electrodes and reduced the activity of the electrolytes. Hydroxide formation caused rapid degradation in early iron flow batteries after only a few cycles.
In the 1970s, researchers first developed the concept of iron flow batteries. Despite realizing the batteries’ promising ability to store energy, these researchers found that the reaction between the positive and negative sides created hydroxide formations that clogged the electrodes and reduced the activity of the electrolytes.
ESS’ Critical Technology Customers Our current and potential customers include utilities, IPPs and C&I end users. We intend to serve customers in both behind-the-meter and front-of-the-meter markets. In behind-the-meter applications, customers will use our energy storage products to reduce energy costs, integrate with renewable energy solutions to achieve corporate sustainability goals, and to enhance their energy resiliency.
We intend to serve customers in both ‘behind-the-meter’ and ‘front-of-the-meter’ markets. In behind-the-meter applications, customers will use our energy storage products to reduce energy costs, integrate with renewable energy solutions to achieve corporate sustainability goals, and to enhance their energy resiliency. Behind-the-meter customers may include data centers, microgrids, critical infrastructure assets and small-scale C&I customers.
Many of our competitors have substantially greater financial, marketing, personnel and other resources than we do. Although we may be small compared to some of our competitors, we believe we are well-positioned to compete with them in the market supported by our innovative iron flow battery technology, strategic partnerships and premier leadership team with a proven track record of success.
Although we may be small compared to some of our competitors, we believe we are well-positioned to compete with them in the market supported by our innovative iron flow battery technology, strategic partnerships and premier leadership team with a proven track record of success. - 7 - Table of Contents New technologies may enter the market that may have additional or superior advantages to our offerings.
We provide equal employment opportunities to all persons regardless of race, age, color, gender, sexual orientation, national origin, physical or mental - 8 - Table of Contents disability, religion, or any other characteristic protected by federal, state, or local law.
We provide equal employment opportunities to all persons regardless of race, age, color, gender, sexual orientation, national origin, physical or mental disability, religion, or any other characteristic protected by federal, state, or local law. Our employees are key to our success as a company, and we are committed to attracting, developing and retaining the best talent.
Accordingly, we are committed to the health, safety and wellness of our team members worldwide. To date, we have not experienced any work stoppages and we consider our relationship with our employees to be good. None of our employees are represented by a labor union or subject to a collective bargaining agreement.
The success of our business is connected to the well-being of our team members. Accordingly, we are committed to the health, safety and wellness of our team members worldwide. To date, we have not experienced any work stoppages and we consider our relationship with our employees to be good.
Executive management assists our board of directors in its oversight of human capital management including with respect to corporate culture, diversity and inclusion, recruiting, retention, attrition, talent management, career development and progression, succession and employee relations. The success of our business is connected to the well-being of our team members.
We are also continuously working to improve our recruiting, retention and development processes as our operations grow. - 8 - Table of Contents Executive management assists our board of directors in its oversight of human capital management including with respect to corporate culture, diversity and inclusion, recruiting, retention, attrition, talent management, career development and progression, succession and employee relations.
We design and produce long-duration batteries predominantly using earth-abundant materials that we believe can be cycled over 20,000 times without capacity fade. Because we designed our batteries to operate using an electrolyte of primarily salt, iron and water, they are environmentally sustainable and substantially recyclable. Our batteries provide flexibility to grid operators and energy assurance for commercial and industrial customers.
Because we designed our batteries to operate using an electrolyte of primarily salt, iron and water, our products are environmentally sustainable and substantially recyclable or reusable. Our batteries provide flexibility to grid operators and energy assurance for commercial and industrial customers.
These customers use our energy storage products to store energy on a utility scale that they can then utilize or sell to their customers when needed. Over time, we expect our front-of-the-meter customer base to expand to include additional types of energy suppliers.
These customers use our energy storage products to store energy on a utility scale that they can then utilize or sell to their customers when needed and ensure overall grid reliability at a time of increasing demand for energy and grid reliability.
Limited, Energy Vault, LG Chem, Ltd., Samsung Electronics Co., Ltd., Sungrow Power Supply Co., Ltd., and Tesla, Inc. Key competitors in the non-lithium-ion space include CellCube, CMBlu Energy AG, Enerox GmbH, Eos Energy Enterprises, Inc., Highview Power PTY Ltd., Hydrostor, Lockheed Martin, Malta Inc., Redflow, Energy Dome, and VoltStorage GmbH.
Key competitors in the non-lithium-ion space include CellCube, CMBlu Energy AG, Energy Dome Energy Vault, Enerox GmbH, Eos Energy Enterprises, Inc., Form Energy, Highview Power PTY Ltd., Hydrostor, Lockheed Martin (GridStar Flow), Malta Inc., and VoltStorage GmbH. Many of our competitors have substantially greater financial, marketing, personnel and other resources than we do.
This allows for low marginal costs of energy, making our technology attractive for long-duration energy storage. Using our iron flow battery technology, we are developing several products, each of which is able to provide reliable, safe, long-duration energy storage.
This allows for low marginal costs of energy, making our technology attractive for long-duration energy storage. Using our iron flow battery technology, we developed a variety of products to provide reliable, safe, long-duration energy storage solutions. Our first energy storage product, the Energy Warehouse, is designed as a ‘behind-the-meter’ solution and is often used for initial testing and technology verification.
Climate change will also result in more unpredictable weather events including extreme temperatures, hurricanes and wildfires. Our technology can operate efficiently and effectively in - 7 - Table of Contents these extreme weather conditions.
In recent years there have been, and in the future there may continue to be, more unpredictable weather events including extreme temperatures, hurricanes and wildfires. Our technology can operate efficiently and effectively in these extreme weather conditions.
This allows our energy storage products to be located in sites where lithium-ion batteries cannot be placed due to fire, chemical or explosion risks. In addition, our batteries are environmentally sustainable, predominantly utilizing easily sourced materials and recyclable components.
Our batteries are non-flammable and can operate in a wide range of temperatures from -15°C to 50°C with minimal auxiliary loads. This allows our energy storage products to be located in sites where lithium-ion batteries cannot be placed due to fire, chemical or explosion risks.
The modular design of the Energy Center also allows for it to be flexibly configured to meet varying power and energy capacity needs for deployment in a variety of settings. For both of our energy storage products, the intellectual property and points of differentiation are contained within the core technology components, the Proton Pump, power module and electrolyte.
ESS has developed and will continue to expand its documentation, reference design and recommendations to allow customers and partners to build and operate integrated storage solutions based on our core technology. - 5 - Table of Contents For all of our energy storage products, the intellectual property and points of differentiation are contained within the core technology components, the Proton Pump, power module, Battery Management System and electrolyte.
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(“STWO”), a publicly traded special purpose acquisition company, consummated a merger pursuant to the Agreement and Plan of Merger, dated May 6, 2021 (the “Merger Agreement”), by and among STWO, SCharge Merger Sub, Inc., a Delaware corporation and wholly owned direct subsidiary of STWO (“Merger Sub”), and ESS Tech, Inc., a Delaware corporation (“Legacy ESS”) following the approval at a special meeting of the stockholders of STWO held on October 5, 2021.
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(“Legacy ESS”) was founded in 2011 and became a publicly traded company through a business combination with a special purpose acquisition company named ACON S2 Acquisition Corp. (“STWO”) which changed its name to ESS Tech, Inc. upon closing (the “Business Combination”).
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Pursuant to the terms of the Merger Agreement, STWO deregistered by way of continuation under the Cayman Islands Companies Act (2021 Revision) and registered as a corporation in the State of Delaware under Part XII of the Delaware General Corporation Law, and a business combination between STWO and Legacy ESS was effected through the merger of Merger Sub with and into Legacy ESS, with Legacy ESS surviving as a wholly owned subsidiary of STWO (together with the other transactions described in the Merger Agreement, the “Business Combination”).
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As a result of the Business Combination, Legacy ESS survived and became a wholly owned subsidiary of ESS Tech, Inc. On March 31, 2024, Legacy ESS merged with ESS Tech, Inc. leaving ESS Tech, Inc. as the sole remaining legal entity. As of April 1, 2024, the Company does not have any subsidiaries.
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On the Closing Date, STWO changed its name from “ACON S2 Acquisition Corp” to “ESS Tech, Inc.” (the “Company” or “ESS”), and our common stock and Public Warrants (as defined herein) began trading on the NYSE under the ticker symbols “GWH” and “GWH.W,” respectively. Business Overview ESS is a long-duration energy storage company specializing in iron flow battery technology.
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Business Overview ESS is a long-duration energy storage company specializing in iron flow battery technology. We design and produce long-duration batteries predominantly using earth-abundant materials that we believe can be cycled over 20,000 times without capacity fade.
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Using our second-generation S200 iron flow battery technology, we are developing several products, the Energy Warehouse and the Energy Center, each of which is able to provide reliable, safe, long-duration energy storage, and a productized form of the core technology components used therein. As of December 31, 2023, we had a limited number of second-generation products fully deployed.
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We design and build this core technology, including battery stacks, electrolyte and electrolyte health management solutions into a core power train that is then sold in a variety of configurations to create distinct products that meet the various needs of the industry.
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With each battery deployed, we will further our mission to accelerate the transition to a zero-carbon energy future with increased grid reliability. Our batteries are non-flammable, do not have explosion risk and can operate in temperatures ranging from -5°C to 50°C without requiring heating or cooling systems.
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These include our smaller-scale Energy Warehouse, larger containerized Energy Centers, gigawatt-scale fully configurable Energy Base and core power trains that can be assembled at the customer site into complete storage solutions. With each battery deployed, we further our mission to accelerate the transition to a zero-carbon energy future with increased grid reliability.
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Our first energy storage product, the Energy Warehouse, is our “behind-the-meter” solution (referring to solutions that are located on the customers’ premise, behind the service demarcation with the utility) that offers energy storage of 420 kilowatt hours (“kWh”) for over five hours at a rated power level of 75 kilowatt (“kW”).
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In addition, our batteries are environmentally sustainable, predominantly utilizing readily sourced materials and recyclable or reusable components.
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When seeking just 50 kW, the system can realize eight hours of power; the equivalent of 20 homes with a total output of 500 kWh. Energy Warehouses are deployed in shipping container units, allowing for a fully turnkey system that can be installed easily at nearly any customer’s site.
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Our second, larger scale energy storage product, the Energy Center, is designed to be a complete battery solution delivered in a modular, stackable form factor that can be deployed either ‘behind-the-meter’, at commercial/industrial sites or in micro-grid deployments, or ‘front-of-the-meter’ for large-scale grid applications.
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Potential use cases for Energy Warehouses include microgrids, peaker plant replacement on a small-scale and commercial and industrial (“C&I”) demand. For customers who require additional energy storage capacity, multiple units can be added to the same system. The first generation of our Energy Warehouse was deployed in 2015.
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The Energy Center is designed to allow customers to connect multiple units in a variety of configurations, supporting energy storage projects ranging from sub-megawatt to tens-of-megawatt scale. The Energy Center is configured with higher power and longer duration than the Energy Warehouse, and the modular design allows customers to meet the specific requirements of their application as needed.
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Since then, all of our first-generation units have been returned to us except for one. We commenced shipping our second-generation Energy Warehouses in 2021 and began recognizing revenue for fully deployed Energy Warehouses in 2022.
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Our third, gigawatt-scale storage product, the Energy Base, is designed with a fully configurable layout that integrates with any site location and that allows the power (the rate of electricity flow) to be decoupled from the capacity (the total amount of energy held).
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Our second, larger scale energy storage product, the Energy Center, is a “front-of-the-meter” solution, meaning that it is designed for use in front of the service demarcation with the utility. Energy Center solutions are designed specifically for utilities, independent power producers (“IPPs”) and large C&I consumers.
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This, combined with an expectation of unlimited cycling and rapid response time, means that the performance of each Energy Base can be tailored to meet individual customer needs. As a result, users have the flexibility to use the battery for various use cases simultaneously on a project.
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The Energy Center’s modular design allows the - 5 - Table of Contents product to scale to meet IPP and utility-scale applications, including large renewable-plus-storage projects and standalone energy storage projects.
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The same core technology can enable energy storage solutions designed to meet specific customer needs, particularly when much larger ( In this arrangement, we offer core components configured as power trains, which can then be assembled on-site with various ‘balance of system’ components, including tanks, pumps, and plumbing, to create fully integrated storage solutions.
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We have designed the Energy Warehouse and Energy Center to address the needs of these two distinct markets. The Energy Warehouse is intended for behind-the-meter use owing to its small size and convenient turnkey packaging. The Energy Center can be used by larger customers in both the behind-the-meter and front-of-the-meter markets.
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These balance of system components are commercially available products used across a variety of industries and applications.
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Our employees are key to our success as a company, and we are committed to attracting, developing and retaining the best talent.
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These components are protected by trade secrets, patents (both granted and in process) and years of research.
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Over time, we expect our customer base to expand to include additional types of energy suppliers and an even broader variety of use cases. We believe our solutions are well-suited to address these diverse applications and use cases due to their flexibility, longevity and safety, among other factors. Suppliers Our batteries are made predominantly of earth-abundant, environmentally sustainable materials.
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None of our employees are represented by a labor union or subject to a collective bargaining agreement. Recent Developments On February 13, 2025, Eric Dresselhuys, Chief Executive Officer of the Company, separated from the Company and resigned as a member of our board of directors. In connection with Mr. Dresselhuys’ departure, Kelly F.
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Goodman, the Company’s then Vice President of Legal and Corporate Secretary, was appointed as the interim Chief Executive Officer and principal executive officer of the Company, effective February 13, 2025. Ms. Goodman is being supported by an Office of the Interim CEO, which includes Ms. Goodman, Anthony Rabb, Chief Financial Officer, and Ben Heng, EVP of Engineering.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

191 edited+79 added−37 removed348 unchanged
Biggest changeFurthermore, there is risk of harm to persons or property if individuals performing maintenance do not follow applicable maintenance or safety protocols. Any such injury would likely lead to adverse publicity and potentially a safety recall. Any such adverse publicity could adversely affect our reputation, prospects, business, financial condition and results of operations.
Biggest changeAny such incident or harm would likely lead to adverse publicity and potentially a safety recall, decisions or mandates to temporarily halt production or implement an extended suspension of field operations, and expenses related to carrying out site remediation, revising our training programs and updating our maintenance manual, and could also adversely affect our reputation, customer’s willingness to place future orders, our operating results and prospects, business, financial condition and results of operations.
Some of the challenges that could prevent the successful scaling of our iron flow batteries include difficulties with (i) increasing manufacturing capacity to produce the volume of cells needed for our energy storage products, (ii) installing and optimizing higher volume manufacturing equipment, (iii) packaging our batteries to ensure adequate cycle life, (iv) cost reduction, (v) qualifying new vendors and subcomponents, (vi) expanding supply chain capacity, (vii) the completion of rigorous and challenging battery safety testing required by our customers or partners, including but not limited to, performance, life and abuse testing and (viii) the development of the final manufacturing processes and specifications.
Some of the challenges that could prevent the successful scaling of our iron flow battery products include difficulties with (i) increasing manufacturing capacity to produce the volume of cells needed for our energy storage products, (ii) installing and optimizing higher volume manufacturing equipment, (iii) packaging our batteries to ensure adequate cycle life, (iv) cost reduction, (v) qualifying new vendors and subcomponents, (vi) expanding supply chain capacity, (vii) the completion of rigorous and challenging battery safety testing required by our customers or partners, including but not limited to, performance, life and abuse testing and (viii) the development of the final manufacturing processes and specifications.
We have experienced and may continue to experience supply chain issues, delays to deliveries, vendor quality issues, as well as increases in our supply costs of many of our key components, including polypropylene, resin, power electronics, circuit board components and shipping containers. Such issues have also affected the ramping up of our automated production line.
We have experienced and may continue to experience supply chain issues, delays to deliveries, and vendor quality issues, as well as increases in our supply costs of many of our key components, including polypropylene, resin, power electronics, circuit board components and shipping containers. Such issues have also affected the ramping up of our automated production line.
A supplier’s failure to develop and supply components in a timely manner, to supply components that meet our quality, quantity or cost requirements or our technical specifications, to support our warranty claims, or our inability to obtain alternative sources of these components on a timely basis or on terms acceptable to us, could each harm our ability to manufacture and commercialize our energy storage products.
A supplier’s failure to develop and supply components in a timely manner, to supply components that meet our quality, quantity, cost requirements or our technical specifications, to support our warranty claims, or our inability to obtain alternative sources of these components on a timely basis or on terms acceptable to us, could each harm our ability to manufacture and commercialize our energy storage products.
U.S. federal net operating loss carryforwards (“NOLs”) generated after December 31, 2017 do not expire, but for taxable years beginning after December 31, 2020, the deductibility of such U.S. federal NOLs is limited to 80% of our current year taxable income. Our remaining U.S. federal NOLs will expire beginning in 2032.
U.S. federal net operating loss carryforwards (“NOLs”) generated in taxable years beginning after December 31, 2017 do not expire, but for taxable years beginning after December 31, 2020, the deductibility of such U.S. federal NOLs is limited to 80% of our current year taxable income. Our remaining U.S. federal NOLs will expire beginning in 2032.
The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision or correct any mistake, but requires the approval by the holders of 65% of the then-outstanding Public Warrants to make any change that adversely affects the interests of the registered holders of Public Warrants.
The warrant agreement provides that the terms of the Public Warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision or correct any mistake, but requires the approval by the holders of 65% of the then-outstanding Public Warrants to make any change that adversely affects the interests of the registered holders of Public Warrants.
Our operations in such jurisdictions, particularly as a company based in the United States, create risks relating to conforming our products to regulatory and safety requirements and charging and other electric infrastructures; organizing local operating entities; establishing, staffing and managing foreign business locations; attracting local customers; navigating foreign government taxes, regulations and permit requirements; enforceability of our contractual rights; trade restrictions, foreign direct investment review regimes, customs regulations, tariffs and price or exchange controls; and preferences in foreign nations for domestically manufactured products.
Our operations in such jurisdictions, particularly as a company based in the United States, create risks relating to conforming our products to regulatory and safety requirements and charging and other electric infrastructures; organizing local operating entities; establishing, staffing and managing foreign business locations; attracting local customers; navigating foreign government taxes, regulations and permit requirements; enforceability of our contractual rights; trade restrictions, export controls, foreign direct investment review regimes, customs regulations, tariffs and price or exchange controls; and preferences in foreign nations for domestically manufactured products.
The following discussion should be read in conjunction with the consolidated financial statements and notes to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. - 10 - Table of Contents Risks Related to Our Technology, Products and Manufacturing We face significant barriers in our attempts to produce our energy storage products, certain of our energy storage products are still under development, and we may not be able to successfully develop our energy storage products at commercial scale.
The following discussion should be read in conjunction with the financial statements and notes to the financial statements included elsewhere in this Annual Report on Form 10-K. - 10 - Table of Contents Risks Related to Our Technology, Products and Manufacturing We face significant barriers in our attempts to produce our energy storage products, certain of our energy storage products are still under development, and we may not be able to successfully develop our energy storage products at commercial scale.
For example, beginning in January 2022, the Tax Cuts and Jobs Act of 2017 eliminated the right to deduct research and development expenditures for tax purposes in the period such expenses were incurred and instead requires all U.S. and foreign research and development expenditures to be amortized over five and fifteen tax years, respectively, and as a result, we recognized a deferred tax asset for the future tax benefit of the amortization deductions of these capitalized research and development expenditures.
For example, beginning in January 2022, the Tax Cuts and Jobs Act of 2017 eliminated the right to deduct research and development expenditures for tax purposes in the period such expenses were incurred and instead requires all U.S. and foreign research and development expenditures to be amortized over five and fifteen tax years, respectively, and as a result, we have recognized a deferred tax asset for the future tax benefit of the amortization deductions of these capitalized research and development expenditures.
These differences may include regulatory requirements, including tax laws, trade laws, foreign direct investment review regimes, 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, and performance and compatibility requirements.
These differences may include regulatory requirements, including tax laws, trade laws, foreign direct investment review regimes, 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, certifications, and performance and compatibility requirements.
If we experience similar issues in the future, including any delays of deliveries of additional manufacturing automation equipment that we require, they may further delay our ability to produce our products and to recognize additional revenue, particularly for our larger scale Energy Center products (see also “ Part II. Item 7.
If we experience similar issues in the future, including any delays of deliveries of additional manufacturing automation equipment that we require, they may further delay our ability to produce and deliver our products and to recognize additional revenue, particularly for our larger scale Energy Center products (see also “ Part II—Item 7.
Our ability to plan, construct and equip additional manufacturing facilities is subject to significant risks and uncertainties, including but not limited to the following: • The expansion or construction of any manufacturing facilities will be subject to the risks inherent in the development and construction of new facilities, including risks of delays and cost overruns as a result of factors outside our control, which may include delays in government approvals, burdensome permitting conditions, and delays in the delivery or installation of manufacturing equipment and subsystems that we manufacture or obtain from suppliers, similar to or more severe than what we have experienced recently. - 14 - Table of Contents • In order for us to expand internationally, we anticipate entering into strategic partnerships, joint ventures and licensing agreements that allow us to add manufacturing capability outside of the United States.
Our ability to plan, develop and equip additional manufacturing facilities is subject to significant risks and uncertainties, including but not limited to the following: • The expansion or construction of any manufacturing facilities will be subject to the risks inherent in the development and construction of new facilities, including risks of delays and cost overruns as a result of factors outside our control, which may include delays in government approvals, burdensome permitting conditions, and delays in the delivery or installation of manufacturing equipment and subsystems that we manufacture or obtain from suppliers, similar to or more severe than what we have experienced recently. - 14 - Table of Contents • In order for us to expand internationally, we anticipate entering into strategic partnerships, joint ventures and licensing agreements that allow us to add manufacturing capability outside of the United States.
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 product generally comes with an initial one-year manufacturing warranty. We also offer customers an extended performance warranty at an additional cost to the customer.
Furthermore, defective components may give rise to warranty, indemnity, or environmental or product liability claims against us that exceed any revenue or profit we receive from the affected products. Our product generally comes with an initial one-year manufacturing warranty. We also offer customers an extended performance warranty at an additional cost to the customer.
We cannot guarantee that any of our pending applications will be approved or that our existing and future intellectual property rights will be sufficiently broad to protect our proprietary technology, and any failure to obtain such approvals or finding that our intellectual property rights are invalid or unenforceable could force us to, among other things, rebrand or re-design our affected products.
We cannot guarantee that any of our pending applications will be approved or that our existing and future intellectual property rights will be maintained or sufficiently broad to protect our proprietary technology, and any failure to obtain such approvals or finding that our intellectual property rights are invalid or unenforceable could force us to, among other things, rebrand or re-design our affected products.
Our products take many months to manufacture and prepare for delivery and any revenue in future periods may fluctuate based on underlying customer arrangements. Further, we expect our arrangements may have multiple deliverables and performance obligations and the amount and timing of recognizing revenue for those different performance obligations may vary which could cause our revenue to fluctuate.
Our products take months to manufacture and prepare for delivery and any revenue in future periods may fluctuate based on underlying customer arrangements. Further, we expect our arrangements may have multiple deliverables and performance obligations and the amount and timing of recognizing revenue for those different performance obligations may vary which could cause our revenue to fluctuate.
Before making an investment decision, you should consider carefully the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K, including our consolidated financial statements and related notes thereto included elsewhere in this Annual Report on Form 10-K and in our other filings with the SEC.
Before making an investment decision, you should consider carefully the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K, including our financial statements and related notes thereto included elsewhere in this Annual Report on Form 10-K and in our other filings with the SEC.
In addition, because this equipment has never been used to build iron flow batteries, the operational performance and costs associated with this equipment can be difficult to predict and may be influenced by factors outside of our control, such as, but not limited to, failures by suppliers to deliver necessary components of our energy storage products in a timely manner and at prices and volumes acceptable to us, environmental hazards and remediation, difficulty or delays in obtaining governmental permits, damages or defects in systems, industrial accidents, fires, seismic activity and other natural disasters.
In addition, because this equipment has never been used to build iron flow battery products, the operational performance and costs associated with this equipment can be difficult to predict and may be influenced by factors outside of our control, such as, but not limited to, failures by suppliers to deliver necessary components of our energy storage products in a timely manner and at prices and volumes acceptable to us, environmental hazards and remediation, difficulty or delays in obtaining governmental permits, damages or defects in systems, industrial accidents, fires, seismic activity and other natural disasters.
For example, in the past, we had to recall our Gen I battery modules due to vendors not properly manufacturing the parts to our specifications and we have also had to replace, and may again be required to replace, certain components of our Gen I battery modules delivered to customers to date.
For example, in the past, we had to recall our Gen I battery modules due to vendors not properly manufacturing the parts to our specifications and we have also had to replace, and may again be required to replace, certain components of our products delivered to customers to date.
These provisions, among other things: • establish a classified board of directors so that not all members of our board are elected at one time; • permit only the board of directors to establish the number of directors and fill vacancies on the board; - 39 - Table of Contents • provide that directors may only be removed “for cause” and only with the approval of a majority of the voting power of the issued and outstanding capital stock of the Company entitled to vote in the election of directors; • authorize the issuance of “blank check” preferred stock that our board could use to implement a stockholder rights plan (also known as a “poison pill”); • eliminate the ability of our stockholders to call special meetings of stockholders; • prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; • prohibit cumulative voting by stockholders at any election of directors; • authorize our board of directors to amend the bylaws; • establish advance notice requirements for nominations for election to our board or for proposing matters that can be acted upon by stockholders at annual stockholder meetings; and • require a super-majority vote of stockholders to amend some of the provisions described above.
These provisions, among other things: • establish a classified board of directors so that not all members of our board are elected at one time; • permit only the board of directors to establish the number of directors and fill vacancies on the board; • provide that directors may only be removed “for cause” and only with the approval of a majority of the voting power of the issued and outstanding capital stock of the Company entitled to vote in the election of directors; • authorize the issuance of “blank check” preferred stock that our board could use to implement a stockholder rights plan (also known as a “poison pill”); • eliminate the ability of our stockholders to call special meetings of stockholders; • prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; • prohibit cumulative voting by stockholders at any election of directors; • authorize our board of directors to amend the bylaws; • establish advance notice requirements for nominations for election to our board or for proposing matters that can be acted upon by stockholders at annual stockholder meetings; and • require a super-majority vote of stockholders to amend some of the provisions described above.
If we elect to expand our production capacity by constructing one or more new manufacturing facilities, we may encounter challenges relating to the construction, management and operation of such facilities. In order to grow our business, we will need to increase our production capacity.
If we elect to expand our production capacity by constructing or leasing one or more new manufacturing facilities, we may encounter challenges relating to the construction, management and operation of such facilities. In order to grow our business, we will need to increase our production capacity.
We have filed registration statements with the SEC to register shares of our common stock for certain stockholders who have rights, subject to certain conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders.
We have also filed registration statements with the SEC to register shares of our common stock for certain stockholders who have rights, subject to certain conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders.
We have the ability to redeem the outstanding Public Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the closing price of our common stock equals or exceeds $18.00 per share (as adjusted for share subdivisions, share dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 trading-day period ending on the third trading day prior to proper notice of such redemption and provided that certain other conditions are met.
We have the ability to redeem the outstanding Public Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the closing price of our common stock equals or exceeds $270.00 per share (as adjusted for share subdivisions, share dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 trading-day period ending on the third trading day prior to proper notice of such redemption and provided that certain other conditions are met.
If we are required to pay significantly higher premiums for insurance, are not able to maintain insurance coverage at affordable rates or must pay amounts in excess of claims covered by our insurance, then we could experience higher costs that could adversely affect our financial condition and results of operations. - 32 - Table of Contents We are subject to certain restrictions and obligations on our business as a result of grants and/or loans received under certain governmental programs and we may be subject to similar or other restrictions to the extent we utilize governmental grants in the future.
If we are required to pay significantly higher premiums for insurance, are not able to maintain insurance coverage at affordable rates or must pay amounts in excess of claims covered by our insurance, then we could experience higher costs that could adversely affect our financial condition and results of operations. - 33 - Table of Contents We are subject to certain restrictions and obligations on our business as a result of grants and/or loans received under certain governmental programs and we may be subject to similar or other restrictions to the extent we utilize governmental grants in the future.
Many of our potential customers are electric utilities and C&I businesses that tend to be large enterprises. Therefore, our future success will depend on our ability to effectively sell and deliver our products to such large customers.
Our future growth and success depend on our ability to sell effectively to large customers. Many of our potential customers are electric utilities and C&I businesses that tend to be large enterprises. Therefore, our future success will depend on our ability to effectively sell and deliver our products to such large customers.
Such conditions may increase our costs and tax liabilities, impact our ability to sell our products and require significant management attention, and may harm our business if we are unable to manage them effectively.
Such conditions may increase our costs and tax liabilities, impact our ability to sell and service our products and require significant management attention, and may harm our business if we are unable to manage them effectively.
Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, another State court in Delaware or the federal district court for the District of Delaware) is the exclusive forum for the following (except for any claim as to which such court determines that there is an indispensable party not subject to the jurisdiction of such court (and the indispensable party does not consent to the personal jurisdiction of such court within 10 days following such determination), which is vested in the exclusive jurisdiction of a court or forum other than such court or for which such court does not have subject matter jurisdiction): • any derivative action or proceeding brought on our behalf; • any action asserting a claim of breach of fiduciary duty owed by any director, stockholder, officer or other employee of the Company to the Company or to the Company’s stockholders; • any action arising pursuant to any provision of the DGCL, our amended and restated certificate of incorporation or our amended and restated bylaws; and • any action asserting a claim against us that is governed by the internal affairs doctrine.
Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, another State court in Delaware or the federal district court for the District of Delaware) is the exclusive forum for the following (except for any claim as to which such court determines that there is an indispensable party not subject to the jurisdiction of such court (and the indispensable party does not consent to the personal jurisdiction of such court within 10 days following such determination), which is vested in the exclusive jurisdiction of a court or forum other than such court or for which such court does not have subject matter jurisdiction): • any derivative action or proceeding brought on our behalf; • any action asserting a claim of breach of fiduciary duty owed by any director, stockholder, officer or other employee of the Company to the Company or to the Company’s stockholders; • any action arising pursuant to any provision of the DGCL, our Charter or our amended and restated bylaws; and • any action asserting a claim against us that is governed by the internal affairs doctrine.
The value received upon exercise of the warrants (1) may be less than the value the holders would have received if they had exercised their warrants at a later time where the underlying share price is higher and (2) may not compensate the holders for the value of the warrants, including because the number of ordinary shares received is capped at 0.361 shares of common stock per warrant (subject to adjustment) irrespective of the remaining life of the warrants.
The value received upon exercise of the warrants (1) may be less than the value the holders would have received if they had exercised their warrants at a later time where the underlying share price is higher and (2) may not compensate the holders for the value of the warrants, including because the number of ordinary shares received is capped at 0.02407 shares of common stock per warrant (subject to adjustment) irrespective of the remaining life of the warrants.
In addition, any such expansion brings with it the risk of managing larger scale foreign operations. • We may be unable to achieve the production throughput necessary to achieve our target annualized production run rate at our current and future manufacturing facilities. • Manufacturing equipment may take longer and cost more to engineer and build than expected and may not operate as required to meet our production plans. • We may depend on third-party relationships in the development and operation of additional production capacity, which may subject us to the risk that such third parties do not fulfill their obligations to us under our arrangements with them. • We may be unable to attract or retain qualified personnel.
In addition, any such expansion brings with it the risk of managing larger scale foreign operations. • We may be unable to achieve the production throughput necessary to achieve our target annualized production run rate at our current and future manufacturing facilities. • Manufacturing equipment may take longer and cost more to engineer and build than expected and may not operate as required to meet our production plans. • We may depend on third-party relationships in the development and operation of additional production capacity, which may subject us to the risk that such third parties do not fulfill their obligations to us under our arrangements with them. • We may be unable to obtain financing needed to build future manufacturing facilities. • We may be unable to attract or retain qualified personnel.
We may engage in transactions with related parties and such transactions present possible conflicts of interest that could have an adverse effect on us. We may enter into transactions with related parties.
We may engage in transactions with related parties and such transactions present possible conflicts of interest that could have an adverse effect on us. We may enter into further transactions with related parties.
Moreover, a product liability claim could generate substantial negative publicity about our batteries and business and inhibit or prevent commercialization of other future battery candidates, which would have a material adverse effect on our brand, business, prospects and operating results. Any insurance coverage might not be sufficient to cover all potential product liability claims.
Moreover, a product liability claim could generate substantial negative publicity about our products and business and inhibit or prevent commercialization of other future battery candidates, which would have a material adverse effect on our brand, business, prospects and operating results. Any insurance coverage might not be sufficient to cover all potential product liability claims.
To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our amended and restated bylaws further provide that, unless the Company consents in writing to the selection of an alternative forum, the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act against any person in connection with any offering of the Company’s securities, including any auditor, underwriter, expert, control person, or other defendant.
To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other - 43 - Table of Contents considerations, our amended and restated bylaws further provide that, unless the Company consents in writing to the selection of an alternative forum, the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act against any person in connection with any offering of the Company’s securities, including any auditor, underwriter, expert, control person, or other defendant.
In addition, any change in our processes could cause one or more production errors, requiring a temporary suspension or delay in our production line until the errors can be researched, identified, and properly addressed and rectified. This may occur particularly as we introduce new products, modify our engineering and production techniques, and/or expand our capacity.
In addition, any change in our processes could cause one or more production errors, requiring a temporary suspension or delay in our production line until the errors can be researched, identified, and properly addressed and rectified. This may occur particularly as we introduce and transition to new products, modify our engineering and production techniques, and/or expand our capacity.
Our ability to proceed with projects under development and complete construction of projects on schedule and within budget may be adversely affected by escalating costs and lead times for materials and components, tariffs, labor and regulatory compliance, inability to obtain necessary permits, interconnections or other approvals on acceptable terms or on schedule and by other factors.
Our ability to proceed with projects under development and complete construction of projects on schedule and within budget may be adversely affected by escalating costs and lead times for materials and components, tariffs, export controls, labor and regulatory compliance, inability to obtain necessary permits, interconnections or other approvals on acceptable terms or on schedule and by other factors.
As a result of changes made by the IRA, the ITC for solar generation projects is extended until at least 2033, and has been expanded to include stand-alone battery storage projects. This expansion provides significant certainty on the tax incentives that will be available to stand-alone battery storage projects in the future.
As a result of changes made by the IRA, the ITC for solar generation projects is extended until at least 2033, and has been expanded to include stand-alone battery storage projects. This expansion provides more certainty on the tax incentives that will be available to stand-alone battery storage projects in the future.
If we elect to expand our production capacity by constructing one or more new manufacturing facilities, we may encounter challenges relating to the construction, management and operation of such facilities; • If required maintenance is performed incorrectly or if maintenance requirements exceed our current expectations, this could adversely affect our reputation, prospects, business, financial condition and results of operations; • Our relationship with related parties, SBE, an affiliate of SoftBank Group Corp., and Honeywell, is subject to various risks which could adversely affect our business and future prospects; • We have a history of losses and have to deliver significant business growth to achieve sustained, long-term profitability and long-term commercial success; • Our warranty insurance provided by Munich Re is important to many potential customers.
If we elect to expand our production capacity by constructing or leasing one or more new manufacturing facilities, we may encounter challenges relating to the construction, management and operation of such facilities; • If required maintenance is performed incorrectly or if maintenance requirements exceed our current expectations, this could adversely affect our reputation, prospects, business, financial condition and results of operations; • Our relationships with related parties, SBE, an affiliate of SoftBank Group Corp., and Honeywell, are subject to various risks which could adversely affect our business and future prospects; • We have a history of losses and have to deliver significant business growth to achieve sustained, long-term profitability and long-term commercial success; • Our warranty insurance provided by Munich Re is important to many potential customers.
If we do not meet the obligations under these agreements or if our estimates of the projected useful life of our energy storage products are inaccurate, our business and financial results could be adversely affected. We have entered into service agreements with certain customers for our energy storage products with terms of up to 25 years.
If we do not meet the obligations under these agreements or if our estimates of the projected useful life of our energy storage products are inaccurate, our business and financial results could be adversely affected. We have entered into service agreements with certain customers for our energy storage products with terms of up to 10 years.
The occurrence of any such risks may result in diminished potential value of these types of relationships to us. For example, we entered into a strategic partnership with Energy Storage Industries Asia Pacific (“ESI”) in August 2022 and into a framework agreement with Sacramento Municipal Utility District (“SMUD”) in September 2022.
The occurrence of any such risks may result in diminished potential value of these types of relationships to us. For example, in 2022 we entered into a strategic partnership with Energy Storage Industries Asia Pacific (“ESI”) and a framework agreement with Sacramento Municipal Utility District (“SMUD”).
In addition, we have the ability to redeem the outstanding Public Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption - 38 - Table of Contents provided that the closing price of our common stock equals or exceeds $10.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant) for any 20 trading days within a 30 trading-day period ending on the third trading day prior to proper notice of such redemption and provided that certain other conditions are met, including that holders will be able to exercise their warrants prior to redemption for a number of shares of common stock determined based on the redemption date and the fair market value of our common stock.
In addition, we have the ability to redeem the outstanding Public Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that the closing price of our common stock equals or exceeds $150.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant) for any 20 trading days within a 30 trading-day period ending on the third trading day prior to proper notice of such redemption and provided that certain other conditions are met, including that holders will be able to exercise their warrants prior to redemption for a number of shares of common stock determined based on the redemption date and the fair market value of our common stock.
We face inherent risk of exposure to claims in the event our batteries do not perform as expected or malfunction resulting in personal injury or death. Our risks in this area are particularly pronounced given our S200 batteries have not yet been commercially tested at scale or mass produced.
We face inherent risk of exposure to claims in the event our batteries do not perform as expected or malfunction resulting in personal injury or death. Our risks in this area are particularly pronounced given our products have not yet been commercially tested at scale or mass produced.
Such conflicts could cause such executive officer or director to seek to advance his or her economic interests or the economic interests of certain related parties above ours. Further, the appearance of conflicts of interest created by related-party transactions could impair the confidence of our investors. Our audit committee and our board of directors regularly reviews these transactions.
Such conflicts could cause such executive officer or director to seek to advance his or her economic interests or the economic interests of certain related parties above ours. Further, the appearance of conflicts of interest created by related-party transactions could impair the confidence of our investors. Our audit committee and our board of directors regularly review these transactions.
The price of our common stock may fluctuate due to a variety of factors, including: • changes in the industries in which we and our customers operate; • variations in our operating performance and the performance of our competitors in general; • actual or anticipated fluctuations in our quarterly or annual operating results; • the public’s reaction to our press releases, our other public announcements and our filings with the SEC; • our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market; • additions and departures of key personnel; • changes in laws and regulations affecting our business; • commencement of, or involvement in, litigation involving us; • changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; • publication of research reports by securities analysts about us or our competitors or our industry; • sales of shares of our common stock by our existing stockholders; • short selling activities; • the volume of shares of our common stock available for public sale; and • general economic and political conditions such as recessions, interest rates, fuel prices, inflation, instability in the banking sector and financial markets, foreign currency fluctuations, international tariffs, social, political and economic risks, hostilities or the perception that hostilities may be imminent, terrorism, military conflict and acts of war, including an escalation of the situation in Ukraine or the Middle East and the related responses, including sanctions or other restrictive actions, by the United States and/or other countries.
The price of our common stock may fluctuate due to a variety of factors, including: • changes in the industries in which we and our customers operate; • variations in our operating performance and the performance of our competitors in general; • actual or anticipated fluctuations in our quarterly or annual operating results; • the public’s reaction to our press releases, our other public announcements and our filings with the SEC; • our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market; • additions and departures of key personnel; • changes in laws and regulations affecting our business; • commencement of, or involvement in, litigation involving us; - 39 - Table of Contents • changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; • publication of research reports by securities analysts about us or our competitors or our industry; • sales of shares of our common stock by our existing stockholders; • short selling activities; • the volume of shares of our common stock available for public sale; and • general economic and political conditions such as recessions, interest rates, fuel prices, inflation, instability in the banking sector and financial markets, foreign currency fluctuations, changing international trade policies, social, political and economic risks, hostilities or the perception that hostilities may be imminent, terrorism, military conflict and acts of war, including an escalation of the situation in Ukraine or the Middle East and the related responses, including sanctions or other restrictive actions, by the United States and/or other countries.
Any allegation or violation of U.S. federal and state and non-U.S. laws, regulations and policies regarding anti-bribery and anti-corruption could result in substantial fines, sanctions, civil and/or criminal penalties, whistleblower complaints, sanctions, settlements, prosecution, enforcement actions, damages, adverse media coverage, investigations, loss of export privileges, suspension or debarment from government contracts, or other - 31 - Table of Contents curtailment of operations in the United States or other applicable jurisdictions.
Any allegation or violation of U.S. federal and state and non-U.S. laws, regulations and policies regarding anti-bribery and anti-corruption could result in substantial fines, sanctions, civil and/or criminal penalties, whistleblower complaints, sanctions, settlements, prosecution, enforcement actions, damages, adverse media coverage, investigations, loss of export privileges, suspension or debarment from government contracts, or other curtailment of operations in the United States or other applicable jurisdictions.
On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (the “IRA”), which extends the availability of investment tax credits (“ITCs”) and production tax credits (“PTCs”) and makes significant changes to the tax credit regime that applies to solar and energy storage products.
On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (the “IRA”), which extends the availability of investment tax credits (“ITCs”) and production tax credits (“PTCs”) and makes significant changes to the tax credit regime that applies to solar and energy storage projects.
However, in general, flow batteries have suffered challenges running multiple cycles over their lifetime without experiencing degradation in storage capacity and, in particular, earlier iterations of our iron flow batteries, specifically our first-generation units, have failed at cycling reliably in the past.
However, in general, flow batteries have suffered challenges running multiple cycles over their lifetime without experiencing degradation in storage capacity and, in particular, earlier iterations of our iron flow batteries, specifically our first-generation units, failed at cycling reliably.
We believe that, compared to lithium-ion batteries, our energy storage solutions offer significant benefits, including using widely available, low-cost materials with no rare mineral components, being substantially recyclable at end-of-life, having an approximately 25-year product design life, and having a wide thermal operating range that reduces the need for fire suppression and heating (except where otherwise required by applicable law), ventilation and air conditioning equipment, which would otherwise be required for use with lithium-ion batteries.
We believe that, compared to lithium-ion batteries, our energy storage solutions offer significant benefits, including using widely available, low-cost materials with no rare mineral components, being substantially recyclable or reusable at end-of-life, having a 25-year product design life, and having a wide thermal operating range that reduces the need for fire suppression and heating (except where otherwise required by applicable law), ventilation and air conditioning equipment, which would otherwise be required for use with lithium-ion batteries.
Such factors may include the geographic spread of the pandemic, the severity of the disease, the duration of the outbreak, the speed at which vaccines or other effective treatment methods are developed, the actions that may be taken by various governmental authorities in response to the outbreak, such - 23 - Table of Contents as mandatory quarantine or “shelter-in-place” orders and business closures, and the impact on the U.S. or global economy.
Such factors may include the geographic spread of the pandemic, the severity of the disease, the duration of the outbreak, the speed at which vaccines or other effective treatment methods are developed, the actions that may be taken by various governmental authorities in response to the outbreak, such as mandatory quarantine or “shelter-in-place” orders and business closures, and the impact on the U.S. or global economy.
Any security breaches or incidents or other damage to or disruptions to any data centers or other systems used in our business could result in - 26 - Table of Contents lengthy interruptions in our service and may adversely affect our business, prospects, financial condition and operating results.
Any security breaches or incidents or other damage to or disruptions to any data centers or other systems used in our business could result in - 25 - Table of Contents lengthy interruptions in our service and may adversely affect our business, prospects, financial condition and operating results.
We or our products may be a target of computer hackers, organizations or malicious attackers who attempt to: • gain access to our network or Energy Warehouses or networks of our customers; • steal proprietary information related to our business, products, employees, and customers; or • interrupt our systems or those of our customers.
We or our products may be a target of computer hackers, organizations or malicious attackers who attempt to: • gain access to our network or products or networks of our customers; • steal proprietary information related to our business, products, employees, and customers; or • interrupt our systems or those of our customers.
We are an emerging growth company and a smaller reporting company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to “emerging growth companies” or “smaller reporting companies,” this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
We are an emerging growth company and a smaller reporting company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to “emerging growth companies” or - 35 - Table of Contents “smaller reporting companies,” this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
The work required to integrate this equipment into the production of our iron flow batteries is time intensive and requires us to work closely with the equipment provider to ensure that it works properly for our unique iron flow battery technology.
The work required to integrate this equipment into the production of our iron flow battery product is time intensive and requires us to work closely with the equipment provider to ensure that it works properly for our unique iron flow battery technology.
There is also no assurance that we will be able to realize the benefits of any such arrangements even if we do enter into such strategic partnerships, joint ventures and licensing arrangements and there - 16 - Table of Contents is always a risk that either party may be unable to comply with its delivery, payment, or other obligations under any such arrangement.
There is also no assurance that we will be able to realize the benefits of any such arrangements even if we do enter into such strategic partnerships, joint ventures and licensing arrangements and there is always a risk that either party may be unable to comply with its delivery, payment, or other obligations under any such arrangement.
In addition, we have had issues with inconsistent quality and supply of certain key power module components. We do not know whether we will be able to maintain long-term supply relationships with our critical suppliers, or, if required, secure new long-term supply relationships on terms that will allow us to achieve our objectives.
In addition, we have had issues with inconsistent quality and supply of certain key power module components. We do not know whether we will be able to maintain long-term supply - 12 - Table of Contents relationships with our critical suppliers, or, if required, secure new long-term supply relationships on terms that will allow us to achieve our objectives.
If our insurance coverage is not sufficient, we may incur substantial expenses, which could have a material adverse effect on our business. - 27 - Table of Contents Changes in the global trade environment, including the imposition of import tariffs, could adversely affect the amount or timing of our revenues, results of operations or cash flows.
If our insurance coverage is not sufficient, we may incur substantial expenses, which could have a material adverse effect on our business. - 26 - Table of Contents Changes in the global trade environment, including the imposition or escalation of import tariffs, could adversely affect the amount or timing of our revenues, results of operations or cash flows.
If we are unsuccessful in our cost-reduction plans or if we experience design or manufacturing defects or other failures of our S200 battery as a result of these design changes, we could incur significant manufacturing and re-engineering costs.
If we are unsuccessful in our cost-reduction plans or if we experience design or manufacturing defects or other failures as a result of these design changes, we could incur significant manufacturing and re-engineering costs.
Given that our Energy Warehouse product relies on the availability of shipping containers, such shortages may reduce our profitability if we are not able to pass the increased costs to our customers. Moreover, any such attempts to increase product prices may be difficult to achieve and even if achieved, may harm our brand, prospects and operating results.
Given that our product currently relies on the availability of shipping containers, such shortages may reduce our profitability if we are not able to pass the increased costs to our customers. Moreover, any such attempts to increase product prices may be difficult to achieve and even if achieved, may harm our brand, prospects and operating results.
In addition, expanding into new geographic markets will increase our exposure to presently existing and new risks, such as fluctuations in the value of foreign currencies and difficulties and increased expenses in complying with United States and foreign laws, regulations and trade standards, including the Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”).
In addition, expanding into new geographic markets will increase our exposure to presently existing and new risks, such as - 22 - Table of Contents fluctuations in the value of foreign currencies and difficulties and increased expenses in complying with United States and foreign laws, regulations and trade standards, including the Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”).
Additionally, existing or future tariffs may negatively affect key customers and suppliers, and other supply chain partners. Such outcomes could adversely affect the amount or timing of our revenues, results of operations or cash flows, and continuing uncertainty could cause sales volatility, price fluctuations or supply shortages or cause our customers to advance or delay their purchase of our products.
Additionally, existing, future, or potential tariffs may negatively affect key customers and suppliers, and other supply chain partners. Such outcomes could adversely affect the amount or timing of our revenues, results of operations or cash flows, and cause sales volatility, price fluctuations or supply shortages or cause our customers to advance or delay their purchase of our products.
Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could delay or prevent a change of control of the Company or changes in our board of directors that our stockholders might consider favorable.
Our certificate of incorporation (as amended, the “Charter”) and amended and restated bylaws contain provisions that could delay or prevent a change of control of the Company or changes in our board of directors that our stockholders might consider favorable.
Any provision of our amended and restated certificate of incorporation, amended and restated bylaws or Delaware law that has the effect of delaying or preventing a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our capital stock and could also affect the price that some investors are willing to pay for our common stock.
Any provision of our Charter, amended and restated bylaws or Delaware law that has the effect of delaying or preventing a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our capital stock and could also affect the price that some investors are willing to pay for our common stock.
If any development project or construction is not completed, is delayed or is subject to cost - 21 - Table of Contents overruns, we could become obligated to make delay or termination payments or become obligated for other damages under contracts, experience diminished returns or write off all or a portion of our capitalized costs in the project.
If any development project or construction is not completed, is delayed or is subject to cost overruns, we could become obligated to make delay or termination payments or become obligated for other damages under contracts, experience diminished returns or write off all or a portion of our capitalized costs in the project.
In addition to intentional security breaches, the integrity and confidentiality of company and customer data and our intellectual property may be compromised as a result of human error, product defects, or technological failures. Different geographic - 25 - Table of Contents markets may have different regulations regarding data protection, raising potential compliance risks.
In addition to intentional security breaches, the integrity and confidentiality of company and customer data and our intellectual property may be compromised as a result of human error, product defects, or technological failures. Different geographic markets may have different regulations regarding data protection, raising potential compliance risks.
If we cannot license or develop a non-infringing alternative, we would be forced to revise, limit or stop - 35 - Table of Contents sales of our offerings and may be unable to effectively compete and subject to termination and indemnification obligations under our contracts. Any of these results would adversely affect our business, financial condition and results of operations.
If we cannot license or develop a non-infringing alternative, we would be forced to revise, limit or stop sales of our offerings and may be unable to effectively compete and subject to termination and indemnification obligations under our contracts. Any of these results would adversely affect our business, financial condition and results of operations.
We are still in the early stage of commercialization and have faced and may yet face significant challenges in completing the development of our containerized energy storage products and in producing our energy storage products in commercial volumes.
We are still in the early stage of commercialization and have faced and may yet face significant challenges in completing the development of our various energy storage products and in producing our energy storage products in commercial volumes.
However, our revenue may not grow as expected for a number of reasons, many of which are outside of our control, including a decline in global demand for iron flow battery storage products, increased competition, or our failure to continue to capitalize on growth opportunities.
However, our revenue may not grow as expected for a number of reasons, many of which are outside of our control, including a decline in global demand for iron flow battery storage - 16 - Table of Contents products, increased competition, or our failure to continue to capitalize on growth opportunities.
This may make comparison of our financial statements with another public company which is neither an emerging growth company - 34 - Table of Contents nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Many of our current and potential competitors are large entities at a more advanced stage in development and commercialization than we are and, in some cases, have - 19 - Table of Contents substantially greater financial, marketing, personnel and other resources, to increase their market share.
Many of our current and potential competitors are large entities at a more advanced stage in development and commercialization than we are and, in some cases, have substantially greater financial, marketing, personnel and other resources, to increase their market share.
Consequently, investors may need to rely on sales of their shares after price appreciation, which may not occur for some time or not at all, as the only way to realize any future gains on their investment. There can be no assurance that we will be able to comply with the continued listing standards of the NYSE.
Consequently, investors may need to rely on sales of their shares after price appreciation, which may not occur for some time or not at all, as the only way to realize any future gains on their investment. There can be no assurance that we will be able to continue to satisfy the continued listing standards of the NYSE.
The U.S. government and other governments have already imposed severe sanctions and export controls against Russia and Russian interests and may yet impose additional sanctions and controls. The impact of these measures, as well as potential responses to them by Russia, is currently unknown and they could adversely affect our business, supply chain, partners or customers.
The U.S. government and other governments have imposed severe sanctions and export controls against Russia and Russian interests and continue to impose additional sanctions and controls. The impact of these measures, as well as potential responses to them by Russia, is currently unknown and they could adversely affect our business, supply chain, partners or customers.
If these customers fail to pay us, cash flow from operations are impacted and our operating results and financial condition could be harmed.
If these customers fail to pay us or pay us late, cash flow from operations are impacted and our operating results and financial condition could be harmed.
However, any such lawsuits may consume management and financial resources for long periods of time and may not result in outcomes that are favorable or readily enforceable, which may adversely affect our business, financial condition or results of operations.
However, any such lawsuits may consume management and financial - 36 - Table of Contents resources for long periods of time and may not result in outcomes that are favorable or readily enforceable, which may adversely affect our business, financial condition or results of operations.
The additional Performance Warrants will have an exercise price equal to the volume-weighted average price of the Company’s common stock for the last fifteen (15) trading days of the relevant calendar year for which such additional Performance Warrant is being issued.
The additional Performance Warrants will have an exercise price equal to the volume- - 40 - Table of Contents weighted average price of the Company’s common stock for the last fifteen (15) trading days of the relevant calendar year for which such additional Performance Warrant is being issued.
We utilize third-party contractors to perform certain functions for us, and they face security risks similar to us. Further, retaliatory acts by Russia in response to Western sanctions could include cyber attacks that could disrupt the economy more generally or that could also impact our operations directly or indirectly.
We utilize third-party contractors to perform certain functions for us, and they face security risks similar to us. Further, retaliatory acts by Russia - 24 - Table of Contents in response to Western sanctions could include cyber attacks that could disrupt the economy more generally or that could also impact our operations directly or indirectly.
Any actual or perceived breach of our network or systems, or those of our vendors or service providers, could result in claims, litigation, and proceedings against us by governmental entities or others, have negative effects on our business and future prospects, including possible fines, penalties and damages, and could result in reduced demand for our energy storage products and harm to our reputation and brand, resulting in negative impacts to our business, prospects, and financial results.
Any actual or perceived breach of our network or systems, or those of our vendors or service providers, could result in claims, litigation, and proceedings against us by governmental entities or others, have negative effects on our business and future prospects, including possible fines, penalties and damages, or loss of eligibility for government grants and contracts, and could result in reduced demand for our energy storage products and harm to our reputation and brand, resulting in negative impacts to our business, prospects, and financial results.
Additionally, certain of our existing customer contracts were entered into - 13 - Table of Contents based on projections regarding cost reductions that assume continued advances in our manufacturing and services processes that we may be unable to realize.
Additionally, certain of our existing customer contracts were entered into based on projections regarding cost reductions that assume continued advances in our manufacturing and services processes that we may be unable to realize.
While we have conducted tests to determine the overall life of our energy storage products, we have not run certain of our energy storage products over their projected useful life or in all potential conditions prior to large scale commercialization.
While we have conducted tests to determine the overall life of our energy - 20 - Table of Contents storage products, we have not run certain of our energy storage products over their projected useful life or in all potential conditions prior to large scale commercialization.
In addition, we may not have adequate personnel with the appropriate level of knowledge, experience and training in the accounting policies, practices or internal controls over financial reporting required of public companies in the United - 28 - Table of Contents States.
In addition, we may not have adequate personnel with the appropriate level of knowledge, experience and training in the accounting policies, practices or internal controls over financial reporting required of public companies in the United States.
We have warrants outstanding that are exercisable for our common stock, which, if exercised, would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders. As of December 31, 2023, we had outstanding Public Warrants to purchase an aggregate of 11,461,227 shares of our common stock.
We have warrants outstanding that are exercisable for our common stock, which, if exercised, would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders. As of December 31, 2024, we had outstanding 11,461,227 Public Warrants to purchase an aggregate of 764,081 shares of our common stock.
We also depend on vendors for the shipping of our energy storage products. Quality issues or delays in our supply or delivery chain and shipments could harm our ability to manufacture, supply and commercialize our energy storage products.
We also depend on vendors for the shipping of our energy storage products. Quality issues or delays in - 11 - Table of Contents our supply or delivery chain and shipments could harm our ability to manufacture, supply and commercialize our energy storage products.
In addition, we and Honeywell may not be able to agree on activities and endeavors to pursue under the Joint Development Agreement, activities under the Joint Development may not be successful, or the Patent License Agreement may have limited value to us.
In addition, while activities under the Joint Development Agreement have commenced, we and Honeywell may not be able to agree on future activities and endeavors to pursue under the Joint Development Agreement, activities under the Joint Development Agreement may not be successful, or the Patent License Agreement may have limited value to us.
(“Honeywell”), pursuant to which UOP may purchase equipment supplied by us, and we agreed to issue additional warrants to purchase common stock to UOP, consisting of (i) an initial Performance Warrant to issue up to 775,760 shares of common stock, issued on September 21, 2023 in exchange for a prepayment of equipment by UOP in the amount of $15 million, and (ii) additional Performance Warrants (not to exceed an aggregate value of $15 million based on target purchase amounts of up to $300 million by 2030) to be issued on an annual basis for the five-year period beginning in 2026, based on UOP’s purchase of additional equipment after execution of the Supply Agreement.
(“Honeywell”), pursuant to which UOP may purchase equipment supplied by us, and we agreed to issue additional - 28 - Table of Contents warrants to purchase common stock to UOP, consisting of (i) an initial Performance Warrant to issue up to 51,717 shares of common stock, issued on September 21, 2023 in exchange for a prepayment of equipment by UOP in the amount of $15 million, and (ii) additional Performance Warrants (not to exceed an aggregate value of $15 million based on target purchase amounts of up to $300 million by 2030) to be issued on an annual basis for the five-year period beginning in 2026, based on UOP’s purchase of additional equipment after execution of the Supply Agreement.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur Vice President of Information and Business Systems provides quarterly briefings to the audit committee and board of directors regarding our Company’s cybersecurity risks and activities, including any recent cybersecurity incidents and related responses, cybersecurity systems testing, activities of third parties, and the like.
Biggest changeOur Chief Information Officer provides quarterly briefings to the audit committee and board of directors regarding our Company’s cybersecurity program, including risks and activities, reports of recent cybersecurity incidents and related responses (if any, and if not previously reported to the Board pursuant to the incident response plan), cybersecurity systems testing, the status of third party assessments, general updates in the cybersecurity space, relevant disclosures related to SEC reporting, and the like. - 45 - Table of Contents
We also conduct periodic programmatic risk assessments including identification of reasonably foreseeable internal - 41 - Table of Contents and external risks, the likelihood and potential damage that could result from such risks, and the sufficiency of existing policies, procedures, systems, and safeguards in place to manage such risks.
We also conduct periodic programmatic risk assessments including identification of reasonably foreseeable internal and external risks, the likelihood and potential damage that could result from such risks, and the sufficiency of existing policies, procedures, systems, and safeguards in place to manage such risks.
Our Vice President of Information and Business Systems has an advanced degree in management information systems and has managed the Company’s IT processes and policies inclusive of cybersecurity matters throughout his tenure at the Company, in addition to many years of prior experience in various technology roles at a large U.S. public company.
Our Chief Information Officer has an advanced degree in management information systems and has managed the Company’s IT processes and policies inclusive of cybersecurity matters throughout his tenure at the Company, in addition to many years of prior experience in various technology roles at a large U.S. public company.
Our Vice President of Information and Business Systems and members of our management team in accordance with our cybersecurity incident response plan, which includes the following members from the following function – legal, IT, finance, audit, operations, engineering, human resources, communications, and additional executives as applicable under the plan – and external cybersecurity support providers (collectively, “IRP stakeholders”), are primarily responsible to assess and manage our material risks from cybersecurity threats.
In accordance with our cybersecurity incident response plan (“IRP), our Chief Information Officer, members of our management team, including personnel representative of the following functions – legal, IT, finance, audit, operations, engineering, human resources, communications, and additional executives as applicable under the plan – and external cybersecurity support providers (collectively, “IRP stakeholders”), are primarily responsible to assess and manage our material risks from cybersecurity threats.
We routinely assess material risks from cybersecurity threats, including any potential unauthorized occurrence on or conducted through our information systems that may result in adverse effects on the confidentiality, integrity, or availability of our information systems or any information residing therein.
We measure our - 44 - Table of Contents cybersecurity infrastructure against the NIST 800-171 framework and routinely assess material risks from cybersecurity threats, including any potential unauthorized occurrence on or conducted through our information systems that may result in adverse effects on the confidentiality, integrity, or availability of our information systems or any information residing therein.
Our Vice President of Information and Business Systems and our IRP stakeholders oversee our cybersecurity policies and processes, including those described in “Risk Management and Strategy” above.
Our Chief Information Officer and our IRP stakeholders oversee our cybersecurity policies and processes, including those described in “Risk Management and Strategy” above.
We engage external cyber vendor consultants, auditors, and other third parties in connection with our risk assessment processes. These service providers assist us to assess, design and implement our cybersecurity policies and procedures, as well as to monitor and test our safeguards.
These service providers assist us to assess, design and implement our cybersecurity policies and procedures, as well as to monitor and test our safeguards.
We devote significant resources and designate high-level personnel, including our Vice President of Information and Business Systems who reports to our Chief Executive Officer, to manage the risk assessment and mitigation process.
We devote significant resources and designate high-level personnel, including our Chief Information Officer who reports to our Chief Financial Officer, to manage the risk assessment and mitigation process. As part of our overall risk management system, we monitor and test our safeguards and train our employees on these safeguards, in collaboration with human resources, IT, and management.
As part of our overall risk management system, we monitor and test our safeguards and train our employees on these safeguards, in collaboration with human resources, IT, and management. Personnel at all levels and departments are made aware of our cybersecurity policies through trainings and annual policy acknowledgments.
Personnel at all levels and departments are made aware of our cybersecurity policies through trainings and annual policy acknowledgments. We engage external cyber vendor consultants, auditors, and other third parties in connection with our risk assessment processes.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe are currently in the process of procuring a new automated battery manufacturing line sized at 600 MWh and plan to retire our original semi-automated line (112 MWh), thus bringing our total battery manufacturing capacity to 1.288 GWh annually. - 42 - Table of Contents Over time, we plan to increase efficiency at the Wilsonville facility to scale manufacturing capacity up to 2,000 MWh.
Biggest changeThe facility was also retooled to produce ESS’s new Energy Centers. We currently are in the process of commissioning a second automated battery manufacturing line and repurposing our original semi-automated line for research and development activities. This will result in a total battery manufacturing capacity of 1.05 GWh annually.
ITEM 2. PROPERTIES Our corporate headquarters is located in Wilsonville, Oregon. The approximately 200,000 square foot facility contains both our corporate, engineering, and administrative functions as well as our automated and semi-automated battery manufacturing lines. During 2023, the facility had the capacity to manufacture approximately 800 MWh of batteries annually.
ITEM 2. PROPERTIES Our corporate headquarters is located in Wilsonville, Oregon. The approximately 200,000 square foot facility contains both our corporate, engineering, and administrative functions as well as our automated and semi-automated battery manufacturing lines. During 2024, the facility had the capacity to manufacture approximately 560 MWh of batteries annually.
This global expansion plan may include the following levers that are currently under consideration: • Strategic investments in the supply chain to grow capacity; • Rollout of redesigned automation cells, which we expect will increase efficiency in production; • Energy Warehouse and Energy Center production expansion to Europe and/or Australia; • Production of power modules in Europe; and • Vertical integration of power module comportments.
This global expansion plan may include the following levers that are currently under consideration: • Strategic investments in the supply chain to grow capacity; • Production expansion to Europe and/or Australia; and • Vertical integration of power module comportments.
Removed
We also envision opening additional manufacturing facilities globally.
Added
Over time, we plan to increase efficiency at the Wilsonville facility to scale manufacturing capacity up to 2.0 GWh through a combination of additional manufacturing lines as well as substantive improvements to the capacity of each battery produced. We also envision opening additional manufacturing facilities globally.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeIn the future, we may become involved in legal proceedings that arise in the ordinary course of business, the outcome of which, if determined adversely to us, could individually or in the aggregate have a material adverse effect on our business, financial condition and results of operations. ITEM 4.
Biggest changeIn the future, we may become involved in legal proceedings that arise in the ordinary course of business, the outcome of which, if determined adversely to us, could individually or in the aggregate have a material adverse effect on our business, financial condition and results of operations.
Removed
MINE SAFETY DISCLOSURES Not applicable. - 43 - Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIn addition, our ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness we or our subsidiaries incur. We do not anticipate declaring any cash dividends to holders of the common stock in the foreseeable future.
Biggest changeIn addition, our ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness we incur. We do not anticipate declaring any cash dividends to holders of the common stock in the foreseeable future.
Issuer Purchases of Equity Securities During the year ended December 31, 2023, we did not purchase any of our equity securities that are registered under Section 12(b) of the Exchange Act (other than shares that were repurchased pursuant to net settlement to satisfy tax withholding obligations of plan participants upon the vesting of restricted stock unit awards).
Issuer Purchases of Equity Securities During the year ended December 31, 2024, we did not purchase any of our equity securities that are registered under Section 12(b) of the Exchange Act (other than shares that were repurchased pursuant to net settlement to satisfy tax withholding obligations of plan participants upon the vesting of restricted stock unit awards).
As of March 8, 2024, there were 59 holders of record of our common stock and one holder of record of our Public Warrants.
As of March 25, 2025, there were 45 holders of record of our common stock and one holder of record of our Public Warrants.

Item 7. Management's Discussion & Analysis

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

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Biggest changeResults of Operations In this section, we discuss the results of our operations for the year ended December 31, 2023 compared to the year ended December 31, 2022. - 47 - Table of Contents Comparison of Year Ended December 31, 2023 to Year Ended December 31, 2022 The following table sets forth ESS’ operating results for the periods indicated: Year Ended December 31, ($ in thousands) 2023 2022 $ Change % Change Revenue $ 7,540 $ 894 $ 6,646 743% Cost of revenue 20,495 — 20,495 100 Gross profit (loss) (12,955) 894 (13,849) NM Operating expenses: Research and development 42,632 71,979 (29,347) (41) Sales and marketing 7,744 6,938 806 12 General and administrative 22,574 27,469 (4,895) (18) Total operating expenses 72,950 106,386 (33,436) (31) Loss from operations (85,905) (105,492) 19,587 (19) Other income (expenses), net: Interest income, net 5,262 2,187 3,075 141 Gain on revaluation of common stock warrant liabilities 2,292 25,788 (23,496) (91) Other income (expense), net 773 (452) 1,225 N/M Total other income, net 8,327 27,523 (19,196) N/M Net loss and comprehensive loss to common stockholders $ (77,578) $ (77,969) $ 391 (0.5)% __________________ N/M = Not meaningful Revenue Revenue for the year ended December 31, 2023 was $7.5 million compared to $0.9 million for the year ended December 31, 2022.
Biggest changeComparison of Year Ended December 31, 2024 to Year Ended December 31, 2023 The following table sets forth ESS’ operating results for the periods indicated: Year Ended December 31, ($ in thousands) 2024 2023 $ Change % Change Revenue $ 6,295 $ 7,540 $ (1,245) (17)% Cost of revenue 51,653 20,495 31,158 152 Gross profit (loss) (45,358) (12,955) (32,403) 250 Operating expenses Research and development 11,772 42,632 (30,860) (72) Sales and marketing 9,161 7,744 1,417 18 General and administrative 23,507 22,574 933 4 Total operating expenses 44,440 72,950 (28,510) (39) Loss from operations (89,798) (85,905) (3,893) 5 Other income, net Interest income, net 3,574 5,262 (1,688) (32) Gain on revaluation of common stock warrant liabilities 115 2,292 (2,177) (95) Other income (expense), net (113) 773 (886) (115) Total other income, net 3,576 8,327 (4,751) (57) Net loss and comprehensive loss to common stockholders $ (86,222) $ (77,578) $ (8,644) 11% Revenue Revenue for the year ended December 31, 2024 was $6.3 million compared to $7.5 million for the year ended December 31, 2023 as we recognized revenue for the sale of Energy Centers, Energy Warehouses, other related equipment, engineering services related to a product site deployment, and extended warranty services.
The tax credits available to manufacturers include a credit for ten percent of the cost incurred to make electrode active materials in addition to credits of $35 per kWh of capacity of battery cells and $10 per kWh of capacity of battery modules.
The tax credits available to manufacturers include a credit for ten percent of the cost incurred to make electrode active materials in addition to credits of $35 per kWh of capacity for battery cells and $10 per kWh of capacity for battery modules.
Sales and marketing expenses Sales and marketing expenses consist primarily of salaries, bonuses, benefits and stock-based compensation for marketing and sales personnel and related support teams. To a lesser extent, sales and marketing expenses also include professional services costs, travel costs, and trade show sponsorships.
Sales and marketing Sales and marketing expenses consist primarily of salaries, bonuses, benefits and stock-based compensation for marketing and sales personnel and related support teams. To a lesser extent, sales and marketing expenses also include professional services costs, travel costs, and trade show sponsorships.
Net cash used in operating activities was $54.9 million for the year ended December 31, 2023, which is comprised of net loss of $77.6 million, adjusted for noncash interest income of $3.6 million and changes in the fair value of warrant liabilities of $2.3 million, partially offset by inventory write-downs and losses on noncancellable purchase commitments of $11.9 million, stock-based compensation of $10.6 million, and depreciation expense of $6.5 million.
Net cash used in operating activities was $54.9 million for the year ended December 31, 2023, which is comprised of net loss of $77.6 million, adjusted for noncash interest income of $3.6 million and noncash changes in the fair value of warrant liabilities of $2.3 million, partially offset by inventory write-downs and losses on noncancellable purchase commitments of $11.9 million, stock-based compensation of $10.6 million, and depreciation expense of $6.5 million.
These effects could include, among others, slower purchasing decisions by existing and potential new customers, additional delays in timing of payments under our existing customer contracts, further reduction or delays in purchasing decisions by our customers, potential losses of customers as a result of economic distress or bankruptcy, and increased costs for raw materials and freight resulting from continued inflationary cost pressures.
These effects could include, among others, slower purchasing decisions by existing and potential new customers, additional delays in timing of payments under our existing customer contracts, further reduction or delays in purchasing decisions by our customers, potential losses of customers as a result of economic distress or bankruptcy, and increased costs for raw materials and freight resulting from inflationary cost pressures.
GAAP requires that management apply accounting policies and make estimates and assumptions that affect amounts reported in the statements. The following accounting policies represent those that management believes are particularly important to the consolidated financial statements and that require the use of estimates, assumptions, and judgments to determine matters that are inherently uncertain.
GAAP requires that management apply accounting policies and make estimates and assumptions that affect amounts reported in the statements. The following accounting policies represent those that management believes are particularly important to the financial statements and that require the use of estimates, assumptions, and judgments to determine matters that are inherently uncertain.
Other income (expenses), net Interest income, net Interest income, net consists primarily of earned income on our cash equivalents, restricted cash, and short-term investments. These amounts will vary based on our cash, cash equivalents, restricted cash and short-term investment balances, and on market rates. Interest income is partially offset by interest expense on our notes payable.
Other income, net Interest income, net Interest income, net consists primarily of earned income on our cash equivalents, restricted cash, and short-term investments. These amounts will vary based on our cash, cash equivalents, restricted cash and short-term investment balances, and on market rates. Interest income is partially offset by interest expense on notes payable.
Impact of Macroeconomic Developments We are closely monitoring macroeconomic developments, including global supply chain challenges, foreign currency fluctuations, elevated inflation and interest rates and monetary policy changes, as well as global events, such as the Russia-Ukraine conflict, the conflict in the Middle East, and other areas of geopolitical tension around the world, and how they may adversely impact our and our customers’, contractors’, suppliers’ and partners’ respective businesses.
Impact of Macroeconomic Developments We are closely monitoring macroeconomic developments, including global supply chain challenges, foreign currency fluctuations, fluctuations in inflation and interest rates and monetary policy changes, as well as global events, such as the Russia-Ukraine conflict, tensions in the Middle East, and other areas of geopolitical tension around the world, and how they may adversely impact our and our customers’, contractors’, suppliers’ and partners’ respective businesses.
Our technology addresses energy delivery, duration and cycle-life in a single battery platform that compares favorably to lithium-ion batteries, the most widely deployed alternative technology. Using our iron flow battery technology, we are developing several products, each of which is able to provide reliable, safe, long-duration energy storage.
Our technology addresses energy delivery, duration and cycle-life in a single battery platform that compares favorably to lithium-ion batteries, the most widely deployed alternative technology. Using our iron flow battery technology, we are developing several products, each of which is designed to provide reliable, safe, long-duration energy storage.
As a result of changes made by the IRA, the ITC for solar generation projects is extended until at least 2033 and has been expanded to include stand-alone battery storage projects. This expansion provides significant certainty on the tax incentives that will be available to stand-alone battery storage projects in the future.
As a result of changes made by the IRA, the ITC for solar generation projects is extended until at least 2033 and has been expanded to include stand-alone battery storage projects. This expansion provides more certainty on the tax incentives that will be available to stand-alone battery storage projects in the future.
Because we designed our batteries to operate using an electrolyte of primarily salt, iron and water, they are environmentally sustainable and substantially recyclable. Our long-duration iron flow batteries are the product of nearly 50 years of scientific advancement. Our founders, Craig Evans and Dr. Julia Song, began advancing this technology in 2011 and formed Legacy ESS.
Because our batteries are designed to operate using an electrolyte of primarily salt, iron and water, they are environmentally sustainable and substantially recyclable or reusable. Our long-duration iron flow batteries are the product of nearly 50 years of scientific advancement. Our founders, Craig Evans and Dr. Julia Song, began advancing this technology in 2011 and formed Legacy ESS.
Further, unfulfilled noncancellable purchase commitments are recognized as expense for estimated losses in cost of revenue and warranty and fulfillment costs are recorded as a component of cost of revenue rather than research and development expense beginning on the Transition Date.
Further, unfulfilled noncancellable purchase commitments are recognized as expense for estimated losses in cost of revenue and warranty and fulfillment costs are recorded as a component of cost of revenue rather than research and development expense as of the Transition Date.
This may make it difficult or impossible to compare our financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions because of the potential differences in accounting standards used.
This may make it difficult or impossible to compare our financial results with the financial results of another public company that is either not an - 54 - Table of Contents emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions because of the potential differences in accounting standards used.
In particular, weak economic conditions or significant uncertainty regarding the stability of financial markets related to stock market - 45 - Table of Contents volatility, inflation, recession or governmental fiscal, monetary and tax policies, among others, could adversely impact our and our customers’ business, financial condition and operating results.
In particular, weak economic conditions or significant uncertainty regarding the stability of financial markets related to stock market volatility, inflation, recession or governmental fiscal, monetary and tax policies, among others, could adversely impact our and our customers’ business, financial condition and operating results.
We expect that our sales and marketing expenses will increase over time as we continue to hire additional personnel to scale our business. General and administrative expenses General and administrative expenses consist of personnel-related expenses for our corporate, executive, finance, legal, and other administrative functions, as well as expenses for outside professional services and insurance costs.
We expect that our sales and marketing expenses will increase over time as we continue to hire additional personnel to scale our business. - 49 - Table of Contents General and administrative General and administrative expenses consist of personnel-related expenses for our corporate, executive, finance, legal, and other administrative functions, as well as expenses for outside professional services and insurance costs.
Product Warranties - 51 - Table of Contents We generally provide a standard warranty for a period of one year and an optional extended warranty. The standard warranty is accounted for as an assurance-type warranty, which provides customers with assurance that the product complies with agreed-upon specifications and does not represent a separate performance obligation.
Product Warranties We generally provide a standard warranty for a period of one year and an optional extended warranty. The standard warranty is accounted for as an assurance-type warranty, which provides customers with assurance that the product complies with agreed-upon specifications and does not represent a separate performance obligation.
Components of Results of Operations Revenue and Cost of revenue We earn revenue from the sale of our energy storage products and from service contracts. Revenue from service contracts includes extended warranty and maintenance services for our energy storage products.
Components of Results of Operations Revenue and Cost of revenue We earn revenue from the sale of our energy storage products and from service contracts. Revenue from service contracts includes engineering design and extended warranty and maintenance services for our energy storage products.
Off-Balance Sheet Arrangements We are not a party to any off-balance sheet arrangements, including guarantee contracts, retained or contingent interests, or unconsolidated variable interest entities that either have, or are reasonably likely to have, a current or future material effect on our financial statements. Critical Accounting Policies and Estimates The preparation of consolidated financial statements in conformity with U.S.
Off-Balance Sheet Arrangements We are not a party to any off-balance sheet arrangements, including guarantee contracts, retained or contingent interests, or unconsolidated variable interest entities that either have, or are reasonably likely to have, a current or future material effect on our financial statements. - 53 - Table of Contents Critical Accounting Policies and Estimates The preparation of financial statements in conformity with U.S.
Recently Issued Accounting Standards See Note 2, Significant Accounting Policies to our consolidated financial statements for the year ended December 31, 2023 included elsewhere in this Annual Report on Form 10-K.
Recently Issued Accounting Standards See Note 2, Significant Accounting Policies to our financial statements for the year ended December 31, 2024 included elsewhere in this Annual Report on Form 10-K.
Potentially as a result of these macroeconomic forces, during the 2023 we have experienced supply constraints, increased shipping delays for certain customer contracts, and delays in timing of payments from some of our customers. We believe some or all of these negative trends may continue in 2024.
As a result of these macroeconomic forces, during 2023 and 2024 we experienced supply constraints, increased shipping delays for certain customer contracts, and delays in timing of payments from some of our customers. We believe some or all of these negative trends may continue in 2025.
Additionally, we are committed to non-cancellable purchase commitments of $0.6 million as of December 31, 2023 and to reimburse UOP a minimum of $8.0 million for research and development expenses incurred through December 31, 2028 under the JDA (as defined herein).
Additionally, we are committed to non-cancellable purchase commitments of $0.2 million as of December 31, 2024 and to reimburse UOP a minimum of $8.0 million for research and development expenses incurred through December 31, 2028 under the JDA (as defined herein).
Personnel-related expenses consist of salaries, bonuses, benefits and stock-based compensation. To a lesser extent, general and administrative expenses include depreciation and other allocated costs, such as facility-related expenses, and supplies.
Personnel-related expenses consist of salaries, bonuses, benefits and stock-based compensation. To a lesser extent, general and administrative expenses include depreciation and other allocated costs, and supplies.
Cash flows from financing activities: Cash flows from financing activities to date have consisted of the Business Combination, the Honeywell agreements, and the issuance of debt and equity securities and loan agreements.
Cash flows from financing activities: Cash flows from financing activities to date have consisted of the Business Combination, our partnership with Honeywell, and the issuance of debt and equity securities and loan agreements.
We are continuing to evaluate the overall impact and applicability of the IRA as implementing regulations are issued, and the passage of comparable legislation in other jurisdictions, to our results of operations going forward.
We are continuing to evaluate the overall impact and applicability of the IRA as guidance is issued, and the passage of comparable legislation in other jurisdictions, to our results of operations going forward.
Net cash provided by financing activities was $25.7 million for the year ended December 31, 2023 and consisted of $27.1 million of proceeds from the issuance of common stock and common stock warrants, net of issuance costs, proceeds from contributions to our ESPP of $541 thousand and stock options exercised of $237 thousand, partially offset by principal payments on notes payable of $1.7 million and repurchases of shares from employees for income tax withholding purposes of $310 thousand.
Net cash provided by financing activities was $25.7 million for the year ended December 31, 2023 and consisted of $27.1 million of proceeds from the issuance of common stock and common stock warrants, net of issuance costs, proceeds from contributions to our ESPP of $0.5 million and stock options exercised of $0.2 million, partially offset by principal payments on notes payable of $1.7 million and repurchases of shares from employees for income tax withholding purposes of $0.3 million.
Cash flows from investing activities: Our cash flows from investing activities have been comprised primarily of purchases and sales of short-term investments and purchases of property and equipment. Net cash provided by investing activities was $15.1 million for the year ended December 31, 2023, which related to maturities of short-term investments partially offset by purchases of property and equipment.
Cash flows from investing activities: Our cash flows from investing activities have been comprised primarily of purchases and sales of short-term investments and purchases of property and equipment. Net cash provided by investing activities was $64.8 million for the year ended December 31, 2024, which related to maturities of short-term investments partially offset by purchases of property and equipment.
The letter of credit is in effect until the date on which the warranty period under the agreement expires, which is anticipated to be more than a year from the balance sheet date. As of December 31, 2023, $600 thousand was pledged as collateral for the letter of credit and recorded as restricted cash, non-current.
The letter of credit is in effect until the date on which the warranty period under the agreement expires, which is anticipated to be more than a year from the balance sheet date. As of December 31, 2024, $0.6 million was pledged as collateral for the letter of credit and recorded as restricted cash, non-current.
Payment terms generally include advance payments to reserve capacity and/or upon issuance of the customer’s purchase order with the remainder due upon the achievement of various milestones including shipment readiness, delivery, commissioning of the system, and completion of final site testing.
Payment terms generally include advance payments to reserve capacity and/or material procurement or commence upon issuance of the customer’s purchase order with the remainder due upon the achievement of various milestones including shipment readiness, delivery, system start up, and/or completion of final site testing.
We review our warranty accrual at least quarterly and adjust our estimates as needed to ensure our accruals are adequate to meet expected future warranty obligations.
We review our warranty accrual at least quarterly and adjust our estimates as needed to ensure our accruals are adequate to meet expected future warranty obligations. Adjustments to warranty accruals are recorded to cost of revenue.
Our second, larger scale energy storage product, the Energy Center, is currently being designed for “front-of-the-meter” (referring to solutions that are located outside the customer’s premises, typically operated by the utility or by third-party providers who sell energy into the grid, often known as independent power producers) deployments specifically - 44 - Table of Contents for utility and large commercial and industrial consumers.
Our larger scale energy storage products, the Energy Center and Energy Base, are designed for either ‘behind-the meter’ or ‘front-of-the-meter’ (referring to solutions that are located outside the customer’s premises, typically operated by the utility or by third-party providers who sell energy into the grid, often known as independent power producers) - 47 - Table of Contents deployments specifically for utility and large commercial and industrial consumers.
We expect revenue and cost of revenue to increase as we scale the business and deliver our energy storage products to customers. Operating expenses Research and development expenses Following the Transition Date, research and development expenses consist of materials, supplies, personnel-related expenses, allocated facilities costs, consulting services and other direct expenses.
We expect revenue and cost of revenue to increase as we scale the business and deliver our energy storage products to customers. Operating expenses Research and development Following the Transition Date, research and development expenses consist of materials, supplies, personnel-related expenses, consulting services and other direct expenses. Personnel-related expenses consist of salaries, bonuses, benefits and stock-based compensation.
The following table summarizes cash flows from operating, investing and financing activities for the periods presented (in thousands): Years Ended December 31, 2023 2022 Net cash used in operating activities $ (54,896) $ (81,620) Net cash provided by (used in) investing activities 15,071 (117,884) Net cash provided by (used in) financing activities 25,653 (4,073) Cash flows from operating activities: Cash flows used in operating activities to date have primarily consisted of costs related to research and development of our energy storage systems, building awareness of our products’ capabilities and other general and administrative activities.
The following table summarizes cash flows from operating, investing and financing activities for the periods presented (in thousands): Years Ended December 31, 2024 2023 Net cash used in operating activities $ (72,219) $ (54,896) Net cash provided by investing activities 64,757 15,071 Net cash provided by financing activities 174 25,653 Cash flows from operating activities: Cash flows used in operating activities to date have primarily consisted inventory purchases and cost of revenue, costs related to research and development of our energy storage systems, building awareness of our products’ capabilities and other general and administrative activities.
On September 21, 2023 we entered into a Common Stock and Warrant Purchase Agreement with Honeywell Ventures pursuant to which Honeywell Ventures invested $27.5 million in the Company and the Company issued 16,491,754 shares of common stock and the Investment Warrant exercisable for up to 10,631,633 shares of Common Stock.
On September 21, 2023, we entered into a Common Stock and Warrant Purchase Agreement with Honeywell Ventures pursuant to which, Honeywell Ventures invested $27.5 million in the Company and the Company issued 1,099,450 shares of common stock and the Investment Warrant exercisable for up to 708,775 shares of Common Stock.
The changes in fair value of common stock warrant liabilities was driven by changes in the market price of our common stock over the respective period. Other income (expense), net Other income (expense), net for the year ended December 31, 2023 was $773 thousand of income and $452 thousand of expense for the year ended December 31, 2022.
The changes in fair value of common stock warrant liabilities was driven by changes in the market price of our common stock over the respective period. Other income (expense), net Other income (expense), net resulted in $0.8 million of income for the year ended December 31, 2023 and $0.1 million of expense for the year ended December 31, 2024.
For further discussion of the challenges and risks we confront related to macroeconomic conditions and geopolitical tension around the world, please refer to “ Part I—Item 1A. Risk Factors ” of this Annual Report on Form 10-K.
For further discussion of the challenges and risks we confront related to macroeconomic conditions and geopolitical tension around the world, please refer to “ Part I—Item 1A.
Gain on revaluation of common stock warrant liabilities The change in fair value of common stock warrant liabilities resulted in a gain of $2.3 million for the year ended December 31, 2023 and a gain of $25.8 million for the year ended December 31, 2022.
Gain on revaluation of common stock warrant liabilities The change in fair value of common stock warrant liabilities resulted in a gain of $0.1 million and $2.3 million for the years ended December 31, 2024 and 2023, respectively.
Inventory Valuation As of the Transition Date, inventory is stated on a first-in, first-out basis at the lower of cost or net realizable value. Net realizable value is the estimated selling price of inventory in the ordinary course of business, less estimated costs of completion, disposal, and transportation.
Inventory Valuation Inventory is stated on a first-in, first-out basis at the lower of cost or net realizable value. Net realizable value is the estimated selling price of inventory in the ordinary course of business, less estimated costs of completion, disposal, and transportation. We periodically make judgments and estimates regarding the future utility and carrying value of inventory.
Sales and marketing expenses Sales and marketing expenses increased by $0.8 million, or 12%, from $6.9 million for the year ended December 31, 2022 to $7.7 million for the year ended December 31, 2023. The increase is driven by an increase in personnel-related expenses due to expanded sales headcount and an increase in external marketing costs.
The increase is driven by an increase in personnel-related expenses due to expanded sales headcount and an increase in outside services and external marketing costs. General and administrative expenses General and administrative expenses increased by $0.9 million, or 4%, from $22.6 million for the year ended December 31, 2023 to $23.5 million for the year ended December 31, 2024.
Should our estimates of future selling prices or production costs change, additional and potentially material write-downs may be required. A small change in our estimates may result in a material charge to our reported financial results. Revenue Recognition Revenue is earned from the sales of energy storage systems and related services and is derived from customer contracts.
A small change in our estimates may result in a material charge to our reported financial results. Revenue Recognition Revenue is earned from the sales of energy storage systems and related services and is derived from customer contracts.
Our research and development costs have decreased following the transition to commercial inventory accounting in the third quarter of 2023; however, we continue to perform research and development activities to further expand our product roadmap.
Prior to the Transition Date, research and development expenses also included direct product development material costs, including freight charges, and warranty-related costs. Our research and development costs have decreased following the transition to commercial inventory accounting in the third quarter of 2023; however, we continue to perform research and development activities to further expand our product roadmap.
We expect to continue to take advantage of the benefits of the extended transition period for as long as we remain an emerging growth company, although we may decide to early adopt new or revised accounting standards to the extent permitted by such standards.
We expect to continue to take advantage of the benefits of the extended transition period until the end of fiscal year 2025, although we may decide to early adopt new or revised accounting standards to the extent permitted by such standards.
Our first energy storage product, the Energy Warehouse, is our “behind-the-meter” solution (referring to solutions that are located on the customer’s premises, behind the service demarcation with the utility) that offers energy storage ranging from six to twelve-hour duration.
Our first energy storage product, the Energy Warehouse, is our ‘behind-the-meter’ solution (referring to solutions that are located on the customer’s premises, behind the service demarcation with the utility) that is used for initial testing and technology validation.
Inflation Reduction Act of 2022 On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022, which extends the availability of investment tax credits and production tax credits and makes significant changes to the tax credit regime that applies to solar and energy storage products.
Risk Factors ” of this Annual Report on Form 10-K. - 48 - Table of Contents Inflation Reduction Act of 2022 On August 16, 2022, President Biden signed into law the IRA, which extends the availability of ITCs and PTCs and makes significant changes to the tax credit regime that applies to solar and energy storage products.
The change is a result of an increase in funding received from federal agencies for our research and development activities in 2023 as well the increase in unrealized gains rather than unrealized losses reported on trading securities.
The change is a result of funding received from federal agencies for our research and development activities in 2023 that did not recur in 2024, offset by the recognition of year-to-date unrealized losses on trading securities in 2023 rather than unrealized gains in 2024.
The letter of credit is in effect until March 9, 2024. As of December 31, 2023, $200 thousand was pledged as collateral for the letter of credit and - 49 - Table of Contents recorded as restricted cash, current. There were no draws against the letter of credit during the year ended December 31, 2023.
As of December 31, 2024, $0.2 million was pledged as collateral for the letter of credit and recorded as restricted cash, current. There were no draws against the letter of credit during the year ended December 31, 2024.
Other (expense) income, net Interest income, net Interest income, net increased by $3.1 million from $2.2 million of interest income, net for the year ended December 31, 2022 to $5.3 million of interest income, net for the year ended December 31, 2023.
Other income, net Interest income, net Interest income, net decreased by $1.7 million, or 32%, from $5.3 million for the year ended December 31, 2023 to $3.6 million for the year ended December 31, 2024.
During 2023 other revenue also included engineering services the Company performed in support of a customer project site and revenue earned for services performed to date under project contracts that were ultimately terminated. Cost of revenue Cost of revenue for the year ended December 31, 2023 was $20.5 million.
Other revenue was higher in 2023 as a result of revenue earned for one-time engineering services we performed in support of a customer project and services performed to date under two contracts that were ultimately terminated due to customer project complications. - 50 - Table of Contents Cost of revenue Cost of revenue for the year ended December 31, 2024 was $51.7 million compared to $20.5 million for the year ended December 31, 2023.
Net changes in operating assets and liabilities provided $8.5 million of cash driven by increases in accounts payable, accrued and other current liabilities, accrued product warranties, and deferred revenue, partially offset by increases in accounts receivable, prepaid expenses and other assets, and a decrease in operating lease liabilities.
Net changes in operating assets and liabilities used $6.5 million of cash driven by inventory purchases, an increase in prepaid and other current assets, and decreases in accrued and other current liabilities, - 52 - Table of Contents operating lease liabilities, and deferred revenue, offset by increases in accounts payable and accrued product warranties and cash collections on accounts receivable.
Liquidity and Capital Resources Since our inception, we have financed our operations primarily through the issuance and sale of equity and debt securities and loan agreements. We have incurred significant losses and have negative cash flows from operations. As of December 31, 2023, we had an accumulated deficit of $696.2 million.
Liquidity and Capital Resources Since our inception, we have financed our operations primarily through the issuance and sale of equity and debt securities and loan agreements. We have incurred losses since inception and have negative cash flows from operations. We anticipate that losses will continue in the near term.
The change resulted from a decrease in interest expense resulting primarily from a decrease in outstanding notes payable for 2023 compared to 2022 and an increase in interest income driven by interest earned on our short-term investment portfolio during 2023.
The decrease resulted from a decrease in interest income earned on our short-term investment portfolio partially offset by a decrease in expense resulting from the repayment of our notes payable during 2023.
There were no draws against the letter of credit during the years ended December 31, 2023 and 2022. On March 9, 2023, we executed a standby letter of credit with SVB for $200 thousand in support of our customs and duties due on imported materials. In June 2023, the letter of credit was transferred to Bank of America.
There were no draws against the letter of credit during the years ended December 31, 2024 and 2023. We have a standby letter of credit with Bank of America for $0.2 million in support of our customs and duties due on imported materials. The letter of credit is in effect until May 19, 2025.
The credits are cumulative, meaning that companies will be able to claim each of the available tax credits based on the battery components produced and sold through 2029, after which the PTC will begin to gradually phase down through 2032. We expect these credits will have positive impact on our gross margins in the future.
The credits are cumulative, meaning that companies will be able to claim each of the available tax credits based on the battery components produced and sold through 2029, after which the PTC will begin to gradually phase down through the end of 2032. The Section 45X PTC may be refundable by the IRS or saleable to unrelated third parties.
We periodically make judgments and estimates regarding the future utility and carrying value of inventory. When inventory is adjusted to its net realizable value, a new cost basis is established and such cost is not adjusted for any potential recovery or increase in cost. Obsolete inventories are written off to cost of revenue.
When inventory is adjusted to its net realizable value, a new cost basis is established and such cost is not adjusted for any potential recovery or increase in cost. Obsolete inventories are written off to cost of revenue. Should our estimates of future selling prices or production costs change, additional and potentially material write-downs may be required.
The letters of credit related to a customer contract and to support customs and duties due on imported materials are secured by a total of $800 thousand pledged as collateral. There were no draws against the letters of credit during the years ended December 31, 2023 and 2022.
The letters of credit related to a customer contract and to support customs and duties due on imported materials are secured by a total of $0.8 million pledged as collateral.
Our core technology components in the Energy Warehouse and the Energy Center also are under development for integration into third-party systems. Recent Developments Transition to Commercial Inventory Accounting We have historically been in the research and development phase for accounting purposes.
We are developing additional products at larger scale, in addition to productized versions of our core technology components, for integration into third-party systems. Transition to Commercial Inventory Accounting We historically had been in the research and development phase for accounting purposes.
We believe our unique technology provides a compelling value proposition and an opportunity for favorable margins and unit economics in the energy storage industry in the future.
Our near-term and medium-term revenue is expected to be generated from our Energy Centers, second-generation Energy Warehouses, Energy Base, and core technology component productization. We believe our unique technology provides a compelling value proposition and an opportunity for favorable margins and unit economics in the energy storage industry in the future.
Cost of revenue for units associated with the revenue recognized prior to the Transition Date is zero as these costs were recognized as research and development expenses in the respective periods incurred. As the production costs for our units significantly exceed their selling price, after the transition to commercial inventory accounting, we began recognizing LCNRV charges.
Cost of revenue for units associated with the revenue recognized prior to the Transition Date is zero as these costs were recognized as research and development expenses in the respective periods incurred. As such, cost of revenue for the years presented is not comparable.
On September 1, 2022, we executed a standby letter of credit with CitiBank, N.A. for $600 thousand as security for the performance and payment of the Company’s obligations under a customer agreement.
We have a standby letter of credit with Bank of America for $0.6 million as security for the performance and payment of the Company’s obligations under a customer agreement.
Our ability to successfully manage this growth will depend on many factors, including our working capital needs, the availability of equity or debt financing and, over time, our ability to generate cash flows from operations. Contractual Obligations and Commitments Our contractual obligations and other commitments as of December 31, 2023 consist of lease commitments and three standby letters of credit.
Further commercialization, development, and expansion of our business will require a significant amount of cash for expenditures. Our ability to successfully manage this growth will depend on many factors, including our working capital needs, the availability of equity or debt financing and, over time, our ability to generate cash flows from operations.
Net cash used in investing activities was $117.9 million thousand for the year ended December 31, 2022, which related to purchases of short-term investments and purchases of property and equipment, primarily for our investment in automating production.
Net cash provided by investing activities was $15.1 million for the year ended December 31, 2023, which related to maturities of short-term investments partially offset by purchases of property and equipment.
As of December 31, 2023, the letter of credit was reduced to $75 thousand. As of December 31, 2023, the letter of credit was secured by a restricted certificate of deposit account totaling $75 thousand. There were no draws against the letter of credit during the years ended December 31, 2023 and 2022.
We have a standby letter of credit with JP Morgan Chase for $75 thousand as security for an operating lease of office and manufacturing space in Wilsonville, Oregon secured by a restricted certificate of deposit account totaling $75 thousand. There were no draws against the letter of credit during the years ended December 31, 2024 and 2023.
Compared to 2023, we expect our indirect cost of goods and operating expenses to increase as we ramp up our manufacturing and sales activities. We further expect an increase in expenses related to the implementation of cost reduction projects and initiatives in our supply chain, manufacturing engineering and research and development functions.
We further expect an increase in expenses related to the implementation of cost reduction projects and initiatives in our supply chain, manufacturing engineering and research and development functions. Achievement of margin targets and cash flow generation is dependent on the execution of these cost out initiatives.
As discussed in Note 14, Government Grants, to our consolidated financial statements, starting in 2023, there are PTCs that can be claimed on battery components manufactured in the U.S. and sold to U.S. or foreign customers.
As discussed in Note 15, Government Grants, to our financial statements, Section 45X of the Code, as enacted by the IRA, provides a PTC that can be claimed on certain battery components manufactured in the U.S. and sold to unrelated U.S. or foreign customers after 2022, through the end of 2032.
Net cash used in financing activities was $4.1 million for the year ended December 31, 2022 and consisted of repurchases of shares from employees for income tax withholding purposes of $2.8 million and payments on notes payable of $1.9 million, partially offset by proceeds from contributions to our ESPP of $492 thousand. - 50 - Table of Contents Further commercialization, development, and expansion of our business will require a significant amount of cash for expenditures.
Net cash provided by financing activities was $0.2 million for the year ended December 31, 2024 and consisted of proceeds from contributions to our ESPP of $0.4 million and stock options exercised of $86 thousand, partially offset by repurchases of shares from employees for income tax withholding purposes of $0.3 million.
Net cash used in operating activities was $81.6 million for the year ended December 31, 2022, which is comprised of net loss of $78.0 million and noncash changes in the fair value of warrant liabilities of $25.8 million, partially offset by stock-based compensation of $11.9 million.
Net cash used in operating activities was $72.2 million for the year ended December 31, 2024, which is comprised of net loss of $86.2 million, adjusted for noncash interest income of $2.4 million, partially offset by stock-based compensation of $11.6 million, inventory write-downs and losses on noncancellable purchase commitments of $4.9 million, and depreciation expense of $4.7 million.
The decrease resulted from the transition out of research and development accounting in the third quarter of 2023 into commercial inventory accounting as of the Transition Date.
Operating expenses Research and development expenses Research and development expenses decreased by $30.9 million, or 72%, from $42.6 million for the year ended December 31, 2023 to $11.8 million for the year ended December 31, 2024. $30.4 million of the $30.9 million decrease resulted from the transition out of research and development accounting in the third quarter of 2023 into commercial inventory accounting as of the Transition Date.
The decrease is due primarily to reduced board - 48 - Table of Contents member and executive stock-based compensation expense, decreased insurance costs, and decreased professional and outside services costs, partially offset by increased payroll related expenses.
The increase is due to increased professional and outside services costs, and increased personnel-related expenses, partially offset by decreased insurance and reduced facilities costs allocated to general and administrative expenses.
See Note 10, Borrowings to our consolidated financial statements for the year ended December 31, 2023 included elsewhere in this Annual Report on Form 10-K. As of December 31, 2022, we had a standby letter of credit with First Republic Bank totaling $725 thousand as security for an operating lease of office and manufacturing space in Wilsonville, Oregon.
At December 31, 2024, we had no outstanding borrowings under the Credit Agreement. See Note 10, Commitments and Contingencies , to our financial statements for the year ended December 31, 2024 included elsewhere in this Annual Report on Form 10-K for further discussion.
We believe our business model is positioned for scalability due to the ability to leverage the same product platform across our customer base. Significant improvements in manufacturing scale are expected to decrease the cost of materials and direct labor.
We believe our business model is positioned for scalability due to the ability to leverage the same core technology and components across our products and customer base. We anticipate significant reduction in our cost of goods through our cost reduction initiatives, including design optimization from value engineering, strategic supply chain projects, and further automation of our manufacturing processes.
General and administrative expenses General and administrative expenses decreased by $4.9 million, or 18%, from $27.5 million for the year ended December 31, 2022 to $22.6 million for the year ended December 31, 2023.
The remaining decrease is driven by a decrease in personnel-related expenses and hardware and IT costs. Sales and marketing expenses Sales and marketing expenses increased by $1.4 million, or 18%, from $7.7 million for the year ended December 31, 2023 to $9.2 million for the year ended December 31, 2024.
Removed
Honeywell Agreements On September 21, 2023, we entered into a Common Stock and Warrant Purchase Agreement (the “Purchase Agreement”) with Honeywell ACS Ventures LLC (“Honeywell Ventures”), an affiliate of Honeywell, which became a related party as a result.
Added
Additionally, significant improvements in manufacturing scale are expected to decrease the cost of materials and direct labor. Compared to 2024, we expect our indirect cost of revenue and operating expenses to increase as we ramp up our manufacturing and sales activities.
Removed
Pursuant to the Purchase Agreement, Honeywell invested $27.5 million in the Company and we issued 16,491,754 shares of common stock and a warrant to issue up to 10,631,633 shares of common stock (the “Investment Warrant”) to Honeywell Ventures.
Added
We expect these credits will have a positive impact on our gross margins in the future. Further, on October 28, 2024, Treasury and the IRS issued final regulations providing guidance on requirements that taxpayers must satisfy to qualify for the Section 45X PTC, including the definition of a Section 45X manufacturing facility.
Removed
Pursuant to the Purchase Agreement and also as further consideration for the licensing by UOP, an affiliate of Honeywell, of certain intellectual property to us, we issued a warrant to issue up to 6,269,955 shares of common stock (the “IP Warrant”) to UOP.
Added
As we are a project-based business, there is inherent variability in our revenue due to variations in pricing, project complexity and timing of delivery across customer projects. Additionally, increased regulatory uncertainty may create a more challenging customer environment and have significant impacts on the consistency and predictability of our revenue year-over-year.
Removed
On September 21, 2023, the Company and UOP also entered into a Master Supply Agreement (the “Supply Agreement”), pursuant to which UOP may purchase equipment supplied by the Company.
Added
Results of Operations In this section, we discuss the results of our operations for the year ended December 31, 2024 compared to the year ended December 31, 2023.
Removed
Pursuant to the Supply Agreement, the Company agreed to issue additional warrants to purchase common stock to UOP, consisting of (i) an initial performance warrant to issue up to 775,760 shares of common stock, issued on September 21, 2023 in exchange for a prepayment of equipment by UOP in the amount of $15 million, and (ii) additional performance warrants (not to exceed an aggregate value of $15 million based on target purchase amounts of up to $300 million by 2030) to be issued on an annual basis for the five-year period beginning in 2026, based on UOP’s purchase of additional equipment after execution of the Supply Agreement (the “Performance Warrants”).
Added
The decrease of $1.2 million consists of a $0.3 million decrease in product revenue due to customer funding and project delays and a $0.9 million decrease in other revenue.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise reported under this Item. - 52 - Table of Contents
Biggest changeITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise reported under this Item. - 55 - Table of Contents

Other GWH 10-K year-over-year comparisons