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What changed in Energy Vault Holdings, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Energy Vault Holdings, Inc.'s 2022 and 2023 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 2023 report.

+471 added−475 removedSource: 10-K (2024-03-13) vs 10-K (2023-04-13)

Top changes in Energy Vault Holdings, Inc.'s 2023 10-K

471 paragraphs added · 475 removed · 339 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWe expect to generate revenue in the future from the sale and licensing of the Company’s energy storage solutions, EMS, additional software applications, and long-term services agreements, including pursuant to tolling arrangements in connection with energy storage systems that we intend to own and operate. 4 Table of Contents Industry Overview The growth of the energy storage market that we address is primarily driven by the decreasing cost of renewable power generation sources, government mandates, financial incentives to reduce CO2 emissions, and increasing geopolitical pressures driving energy independence goals.
Biggest changeThe growth of the energy storage market that we address is primarily driven by the decreasing cost of energy storage technologies and renewable power generation sources, government mandates, financial incentives to reduce GHG emissions, and increasing geopolitical pressures driving energy independence goals.
Item 1. Business Energy Vault Holdings, Inc., (together with its subsidiaries “Energy Vault” or the “Company”) was originally incorporated under the name Novus Capital Corporation II (“Novus”) as a special purpose acquisition company in the state of Delaware in September 2020 with the purpose of effecting a merger with one or more operating businesses.
ITEM 1. BUSINESS Organization Energy Vault Holdings, Inc., (together with its subsidiaries “Energy Vault” or the “Company”) was originally incorporated under the name Novus Capital Corporation II (“Novus”) as a special purpose acquisition company in the state of Delaware in September 2020 with the purpose of effecting a merger with one or more operating businesses.
We also engage in a range of other traditional marketing activities such as tradeshows and events, internal / partner sources, and various digital marketing activities such as website, search engine optimization, social media integration, online events, and forums. • Sales Model : Our sales model focuses on winning large and sophisticated energy storage projects where the customers and their use cases demand, and benefit from, the agility of our solutions and organization to provide them with the best-fit for their project requirements today and well into the future.
We also engage in a range of other traditional marketing activities such as tradeshows and events, internal / partner sources, and various digital marketing activities such as website, search engine optimization, social media integration, online events, and forums. • Sales Model : Our sales model focuses on winning large and sophisticated energy storage projects where the customers and their use cases demand, and benefit from, the agility of our solutions and organization to provide 8 Table of Contents them with the best-fit for their project requirements today and well into the future.
Supply Chain We proactively maximize our beneficial involvement in key aspects of the global, domestic, regional, and local supply chains that support our solutions. Through our extensive supply chain procurement process, we deliver our customers a thoroughly vetted and secure source of integrated components for their energy storage needs.
Supply Chain We proactively maximize our beneficial involvement in key aspects of the global, domestic, regional, and local supply chains that support our solutions. Through our extensive supply chain procurement process, we aim to deliver our customers a thoroughly vetted and secure source of integrated components for their energy storage needs.
As part of our overall strategy to protect our intellectual property, we may take legal actions to prevent third parties from infringing or misappropriating our intellectual property or from otherwise gaining access to our technology. U.S.
As part of our overall strategy to protect our intellectual property, we may take legal actions to prevent third parties from infringing or misappropriating our intellectual property or from otherwise gaining access to our technology.
For example, we have partnered with Cemex to reduce carbon content and test remediated waste in our GESS mobile masses and have created relationships with institutes of higher learning. ESG Conclusion Maintaining an environment of transparency and accountability allows us to share our passions and commitments with all of our stakeholders.
For example, we have partnered with Cemex to reduce carbon content and test remediated waste in our G-Vault mobile masses and have created relationships with institutes of higher learning. ESG Conclusion: Maintaining an environment of transparency and accountability allows us to share our passions and commitments with all of our stakeholders.
We primarily rely on copyright, trade secret laws, confidentiality procedures and contractual restrictions to protect our software. We also pursue the registration of our domain names and trademarks and service marks in the United States and internationally.
We primarily rely on copyright, trade secret laws, confidentiality procedures and contractual restrictions to protect our software. We also pursue the registration of our domain names and trademarks and service marks in the United States and 9 Table of Contents internationally.
Once stored in our storage solutions, energy can be discharged to the grid in a controlled and reliable manner at any time, regardless of the then current ability of the renewable sources to generate power.
Once energy is stored in our solutions, it can be discharged to the grid in a controlled and reliable manner at any time, regardless of the then current ability of the renewable sources to generate power.
The information posted on our website is 10 Table of Contents not incorporated by reference into this Annual Report or any of our other securities filings unless specifically incorporated herein by reference. 11 Table of Contents
The information posted on our website is not incorporated by reference into this Annual Report or any of our other securities filings unless specifically incorporated herein by reference. 12 Table of Contents
The resulting improved economics are expected to reduce the cost to implement storage within the domestic market and may amplify and accelerate the adoption of energy storage systems for shorter, longer, and extended duration use cases, like those offered by Energy Vault.
The resulting improved economics are expected to reduce the cost to implement storage within the domestic market and may amplify and accelerate the adoption of energy storage systems for short, long, and extended duration use cases, like those offered by Energy Vault.
We completed our first Corporate Sustainability Assessment with S&P Global and we will work closely with our vendors and partners to evaluate and assess all components and materials for a chain of custody that identifies responsible and ethical sourcing, environmental product declarations, and end-of-life solutions.
We continue to complete the Corporate Sustainability Assessment with S&P Global and we will work closely with our vendors and partners to evaluate and assess components and materials for a chain of custody that identifies responsible and ethical sourcing, environmental product declarations, and end-of-life solutions.
Some of the power components of our BESS and gHESS are common and we strive for economies of scale when appropriate. We typically procure BESS batteries at either the cell, module, or rack level, and then use other contractors to integrate and assemble the batteries into outdoor enclosures that are then shipped to the project site.
Some of the power components used in these solutions are common and we strive for economies of scale when appropriate. We typically procure batteries at either the cell, module, or rack level, and then use other contractors to integrate and assemble the batteries into outdoor enclosures that are then shipped to the project site.
Our solutions are designed to address the intermittency inherent in the predominant sources of renewable energy production by storing energy produced when renewable energy production is active.
Our Products and Services Our solutions are designed to address the intermittency issues inherent in the predominant sources of renewable energy production by storing energy produced when renewable energy production is active.
We demonstrate our commitment to resource preservation and environmental impacts by investing significant resources into the research and development of low carbon materials, innovative construction practices, materials, and methods, and a strong push for circular economy solutions.
We demonstrate our commitment to resource preservation and environmental impacts by investing significant resources into the research and development of low carbon, innovative materials and construction practices.
As of December 31, 2022, we had five issued patents and 14 patent applications pending in the U.S. Outside the U.S., we have three issued patents and 69 patent applications pending in other countries throughout the world. Our issued patents are expected to start expiring in 2039.
As of December 31, 2023, we had 12 issued patents and 19 patent applications pending in the U.S. Outside the U.S., we have seven issued patents and 118 patent applications pending in other countries throughout the world. Our issued patents are expected to start expiring in 2039.
We believe we are well-positioned to capitalize on this opportunity through our competitive pricing and scalability, and the environmentally friendly attributes of our energy storage solutions that cover the spectrum from shorter durations to extended durations. During 2022, the United States Congress passed the Inflation Reduction Act (“IRA”).
We believe we are well-positioned to capitalize on this opportunity through our competitive pricing and scalability, and the environmentally friendly attributes of our energy storage solutions that cover the spectrum from short durations to extended durations.
Energy storage installations are supported in certain states by state public utility commission policies that require utilities to consider alternatives such as energy storage before they can build a new generation facility.
Several states in the U.S. have an energy storage mandate or policies designed to encourage the adoption of energy storage. Energy storage installations are supported in certain states by state public utility commission policies that require utilities to consider alternatives such as energy storage before they can build a new generation facility.
In the United States, governments continuously modify these statutes and regulations. Governments, often acting through state utility or public service commissions, change and adopt different rates for commercial customers on a regular basis.
In the United States, governments continuously modify these statutes and regulations. Governments, often acting through state utility or public service commissions, change and adopt different rates for commercial customers on a regular basis. These changes could affect our ability to deliver cost savings to our current and future customers for the purchase of electricity.
We have performed several material science projects to reduce the carbon content of materials, introduce the use of waste materials in our mobile masses for GESS, understand end-of-life solutions, and contribute to a circular economy. Our energy storage systems have and will continue to undergo life cycle analysis based on ISO 14040 standards.
We have performed several material science projects to reduce the carbon content of materials, introduce the use of waste materials in our mobile masses for G-Vault, help understand end-of-life management for our energy storage solutions, and help contribute to a circular economy.
Battery Energy Storage Systems (BESS) Energy Vault’s B ESSs are expected to meet shorter-duration energy storage needs, typically in the range of one to four hours. Our BESSs are designed to utilize a purpose-built battery and inverter system with an innovative architecture that lowers cost, improves performance, and ensures the highest level of project safety.
Our solutions include: • B-Vault: Our electrochemical battery energy storage solutions that meet short-duration energy storage needs, typically, in the range of one to four hours. Our B-Vault solutions are designed to utilize purpose-built battery and inverter systems with an innovative architecture that lowers costs, improves performance, and promotes project safety.
As a result, we have strategically chosen to design an agile and agnostic software platform that can orchestrate the management of one or more of our diverse storage mediums and the underlying power generation assets to harmonize asset operation and maximize economic return for our customers.
Alternatively, we have strategically chosen to design an agile and agnostic software platform that can orchestrate the management of not just one energy storage technology, but rather one or more of our diverse storage mediums and the underlying power generation assets to harmonize asset operation and drive competitive operational performance.
When energy is needed, the motors act as generators and the system discharges electricity generated from the kinetic energy of the controlled gravitational lowering of the mobile masses.
An EVx lifts composite blocks to an elevated position to store kinetic energy, and when energy is needed, the motors in the EVx act as generators and the system discharges electricity generated from the kinetic energy of the controlled gravitational lowering of the composite blocks.
There are government regulations pertaining to the disposal of hazardous materials. We and our suppliers, as applicable, are required to comply with these regulations to sell our systems into the market. Environmental, Social, and Governance We develop and deploy utility-scale energy storage solutions to help enable a sustainably energized world.
There are government regulations pertaining to the disposal of hazardous materials. We and our suppliers, as applicable, are required to comply with these regulations to sell our systems into the market.
The foundation for the successful delivery of our energy storage solutions starts with quality and environmental management systems that are globally recognized and accepted. As part of delivering quality products, Energy Vault is certified to ISO 9001, a quality management standard that promotes a commitment to customer satisfaction, purpose-driven leadership, and equitable involvement for all employees.
As part of delivering quality products, Energy Vault is certified to Internal Organization for Standardization (“ISO”) 9001, a quality management standard that promotes a commitment to customer satisfaction, purpose-driven leadership, and equitable involvement for all employees.
Our technology agnostic EMS platform once fully functional will orchestrate the management of one or more of our diverse storage mediums and the underlying generation assets to enable the delivery of power to our customers for their varied and multiple use cases.
Our software solutions include: ◦ Vault-OS Energy Management System (“EMS”) : Our EMS manages one or more of our diverse energy storage mediums and the underlying generation assets to optimize the delivery of power to our customers for their varied and multiple use cases.
Our software incorporates artificial intelligence, predictive analytics, and software optimization algorithms to provide our customers with efficient and profitable operations of their power generation assets. Commercially, the Company currently includes a baseline EMS as part of the sale of an energy storage system.
Our software incorporates artificial intelligence, predictive analytics, and software optimization algorithms to provide our customers with efficient and profitable operation of their power generation assets.
Because of the unique advantages of our solutions-based approach with maximum optionality through its agnostic nature and agile architecture, we believe there is significant demand for our systems to help address the accelerating growth in global energy storage capacity. 7 Table of Contents Competition We expect competition in energy storage technology to intensify due to a regulatory push for lower-carbon energy sources such as wind and solar, continuing globalization, and consolidation in the energy industry.
Because of the unique advantages of our solutions-based approach that offer maximum optionality through its agnostic nature and agile architecture, we believe there is significant demand for our systems to help address the accelerating growth and needs of the global energy storage market.
Corporate Information We file or furnish periodic reports and amendments thereto, including our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, proxy statements, and other information with the Securities and Exchange Commission (“SEC”).
By December 31, 2023, we achieved an 81.3% activation rate on this platform, further reflecting our commitment to a workplace that honors and celebrates every employee's contribution. 11 Table of Contents Corporate Information We file or furnish periodic reports and amendments thereto, including our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, proxy statements, and other information with the Securities and Exchange Commission (“SEC”).
Global energy storage additions are on track to grow at a 21% compound annual growth rate through 2030, with annual additions reaching 233 GWhs and cumulative capacity reaching nearly 400 GWhs. Both government mandates and companies focused on reducing energy use, cost, and emissions will propel the shift to renewable sources of power.
According to the 2H 2023 Energy Storage Market Outlook published by BloombergNEF in October 2023, the energy storage market is expected to grow at a “27% compound annual growth rate through 2030, with annual additions reaching 6 Table of Contents 110 GW/372 GWh, or 2.6 times expected 2023 gigawatt installations.” Both government mandates and companies focused on reducing energy use, cost, and emissions are expected to propel the shift to renewable sources of power.
Some of these components are made at the suppliers factories, while some are made closer to, or at, the project site itself.
Some of these components are made at the supplier’s factories, while some are made closer to, or at, the project site itself. Most of the electrical system components are off-the-shelf in nature and can be procured from multiple sources worldwide.
This full spectrum of energy storage solutions assures our customers that we not only have what they need today, but that we also have what they will need in the future, thereby protecting their investments in our products. For these reasons, we believe we are well positioned to compete successfully in the evolving market for energy storage solutions.
Our range of energy storage solutions assures our customers have what they need today, as well as what they will need in the future, thereby protecting their investments in our products within this high-growth market and its rapidly evolving use cases and requirements.
Our GESS leverages the core, proven energy storage technology of pumped hydroelectric energy storage, while not being constrained by the same geological factors of pumped hydroelectricity by incorporating a simplified building design that is modular and flexible. Our solution combines advanced materials science and proprietary machine-vision software to autonomously coordinate the charge, storage, and discharge of electricity in grid-scale applications.
Our EVx solution combines advanced materials science and proprietary machine-vision software to autonomously coordinate the charge, storage, and discharge of electricity in grid-scale applications.
We anticipate that our market will be characterized by high growth and rapidly evolving use cases and requirements.
We anticipate that our market will be characterized by high growth and rapidly evolving use cases and requirements. We believe that the majority of our competitors are primarily focused on the development and marketing of vertically siloed solutions based on a singular energy storage technology.
Partnerships The Company believes that strong partnerships are a key to its success. Our partnerships are aligned with a shared pursuit to accelerate the decarbonization of our planet. This includes incorporating considerations from standards and sustainability frameworks such as the Internal Organization for Standardization (“ISO”), Global Reporting Initiative (“GRI”), and UN Sustainability Goals.
Our partnerships are aligned with a shared pursuit to accelerate the decarbonization of our planet, which includes incorporating considerations from standards and sustainability frameworks such as those from the ISO, Global Reporting Initiative (“GRI”), United Nations (“UN”), Science Based Targets initiative (“SBTi”), and Task Force on Climate-related Financial Disclosures (“TCFD”).
We believe that our work culture has fostered an environment where employees feel safe, are provided resources to be successful, and are empowered to perform their work. Products Offering products of good quality and that provide environmental benefits are the key to delivering energy storage solutions of which we can be proud.
Products: Offering high-quality products that provide environmental benefits is the key to delivering energy storage solutions of which we can be proud. The foundation for the successful delivery of our energy storage solutions starts with quality and environmental management systems that are globally recognized and accepted.
Strategy, Strengths, and Differentiation We leverage our sustainable and differentiated technology to provide our customers with an economical solution to meet their shorter, longer, and extended-duration renewable energy storage needs. We believe that the majority of our competitors are primarily focused on the development and marketing of vertically siloed solutions based on a singular energy storage technology.
Strategy, Strengths, and Differentiation We leverage our sustainable and differentiated technologies to provide our customers with economical solutions to meet their short, long, and extended-duration renewable energy storage needs. Our energy storage solutions are designed to accommodate a wide variety of renewable power sources and to achieve an attractive levelized cost of energy relative to fossil fuels.
Most of the electrical system components of our GESS are off-the-shelf in nature and can be procured from multiple sources worldwide. 6 Table of Contents The components of our BESS and gHESS are primarily off-the-shelf in nature and can be procured from multiple sources worldwide.
Manufacturing and Customer Support Our manufacturing, assembly, and construction model is designed to support rapid growth, local jobs, and global execution. 7 Table of Contents The components of our B-Vault and H-Vault solutions are primarily off-the-shelf in nature and can be procured from multiple sources worldwide.
Project Delivery Our project delivery generally relies on third-party engineering, procurement, construction (“EPC”) firms to construct our storage systems, under our supervision with dedicated teams tasked with project management.
Under the EPC model, we generally rely on third-party EPC firms to construct our storage systems, under our supervision with dedicated teams tasked with project management. Under the EEQ model, we are responsible for the delivery and installation of the equipment we provide, as well as resolving issues within our scope of supply.
Marketing and Sales We believe that our marketing strategy positions us as a leadership brand and a respected and sought-after long-term strategic partner that will contribute to our customers’ growth and profitability.
For more information, see our risk factor titled “The failure or inability of our suppliers to deliver necessary components or raw materials for construction of our energy storage systems and their failure or inability to deliver them in a timely manner could cause installation delays, cancellations, penalty payments, and damage to our reputation.” Marketing and Sales We believe that our marketing strategy positions us as a leadership brand and a respected and sought-after long-term strategic partner that will contribute to our customers’ growth and profitability.
These dynamics are in turn driving demand for additional renewable power generation and increased capacity and storage duration in energy storage solutions. According to a BloombergNEF analysis published in October 2022, demand for clean energy is growing rapidly, with renewable energy expected to supply nearly two-thirds of the world's electricity demand by 2050.
These dynamics are driving demand for additional renewable power generation and increased capacity and storage duration in energy storage solutions.
As of December 31, 2022, we employed 170 full-time employees and 7 part-time employees, based primarily in our offices in Lugano, Switzerland, Westlake Village, California, and Vienna, Virginia. To date, we have not experienced any work stoppages. None of our employees are represented by labor unions and one employee is subject to a collective bargaining agreement.
In the United States, none of our employees are represented by a labor union. In Switzerland, one of our employees is subject to a collective bargaining agreement. We have not encountered any employment-related work stoppages, and we believe we maintain strong relations with our employees.
Mission Energy Vault provides energy storage solutions to accelerate the global transition to renewable energy. About Us Energy Vault is a grid-scale energy storage company that is driving a faster transition to renewable power by solving the intermittence issues that are inherent to the most prevalent sources of renewable energy, solar and wind.
Mission Our mission is to provide energy storage solutions to accelerate the global transition to renewable energy. About Us Energy Vault develops and deploys utility-scale energy storage solutions designed to aid in the global transition to a clean energy future.
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While solar and wind power generation have become increasingly cost-competitive with fossil fuels, their use is economically constrained by their inherent intermittency. The continued growth of solar and wind power generation as an economically viable alternative to fossil fuels depends on better energy storage solutions.
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Our Company’s comprehensive offerings include proprietary gravity, battery, and green hydrogen energy storage solutions, supported by our technology-agnostic energy management software solutions. We incorporate a customer-centric, solutions-based approach toward helping utilities, independent power producers, and large industrial energy users reduce their energy costs while maintaining power reliability.
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We believe that Energy Vault provides the energy storage solutions that will enable solar, wind, and other renewable energy sources to reach their full potential. Our solutions are designed on a software platform that orchestrates the delivery of power from a broad range of storage mediums and across a variety of storage durations.
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As the world transitions to an economy powered by increasingly intermittent renewable energy such as solar and wind, the ability to provide clean and affordable electricity to a growing global population will depend heavily on the ability to store and distribute energy at appropriate times.
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This allows stored energy to be dispensed at a variety of magnitudes for shorter, longer, and extended durations of time. We believe that this agnostic approach to power generation, combined with flexible storage architecture, will enable a faster transition to renewable energy.
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We are striving to create a world powered by renewable resources so that everyone will have access to clean, sustainable, and affordable energy. The core of our existence lies in a sense of urgency to meet today’s energy demands, while enabling prosperity for future generations.
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The majority of the energy storage solutions we are deploying today will store energy generated from solar, wind, and hydrogen power, however, our energy storage architecture is designed to accommodate multiple renewable power sources across a variety of energy storage technologies.
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We are driven by our respect and commitment to the environment, society, and the economy, and are committed to continuously develop new energy storage solutions that will be powered by renewable resources.
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We anticipate that this approach will allow our solutions to address not only the energy storage needs of today, but to also seamlessly adapt to the evolving needs of our customers well into the future.
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We believe electrochemical battery energy storage (inclusive of lithium-ion, flow, metal air, and other battery chemistry technologies) is currently the most widely accepted and fastest growing technology for short-duration energy storage applications. During 2023, we completed construction on two B-Vault systems and as of December 31, 2023, one B-Vault system was under construction.
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The Company’s portfolio of market-ready turnkey energy storage solutions currently includes: • Battery energy storage systems (“BESS”) are our integrated solutions to meet shorter-duration storage needs. • Gravity energy storage systems (“GESS”) include our proprietary EVx solution to meet longer-duration storage needs. • Green hydrogen energy storage systems (“gHESS”) are our integrated solutions to meet extended duration storage needs. • Hybrid energy storage systems (“HESS”) are our uniquely integrated solutions which allow the pairing of various energy storage mediums to meet specific customer needs. • Energy management software platform (“EMS”) is our proprietary solution designed by our Energy Vault Solutions (“EVS”) division that orchestrates the management of one or more of our diverse storage mediums, along with the underlying generation assets to enable the delivery of power to our customers for their varied and multiple use cases.
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All three of these systems were sold to customers. • G-Vault : Our proprietary gravity energy storage solutions that meet long-duration energy storage needs, typically, in the range of four to twelve hours. G-Vault solutions leverage the core, proven energy storage technology of pumped hydroelectric storage, while not being constrained by the same geological factors of pumped hydroelectricity.
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Prior to 2022, the Company was primarily involved in research and development activities. The Company began generating revenue from its product offerings during 2022, primarily from the licensing of our GESS EVx solution and from the sale of our BESSs.
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Our EVx gravity energy storage system incorporates a simplified building design that is modular 5 Table of Contents and flexible, which utilizes a patented mechanical process of lifting and lowering composite blocks to store and dispatch electrical energy to support grid reliability and enable renewable energy integration.
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Our Solutions Our energy storage and software solutions allow utilities, independent power producers, and large energy users to manage their power portfolios. We provide turnkey energy storage solutions that meet the demands of the market for shorter duration with our BESSs and longer duration with our GESSs.
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As of December 31, 2023, one G-Vault demonstration system was under construction in Snyder, Texas, which will be owned and operated by the Company as a customer demonstration unit. • H-Vault: Our hybrid energy storage solutions (“HESS”), including systems that integrate green hydrogen, are designed to meet customer specific energy storage needs.
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In addition, our hybrid systems that incorporate other energy storage mediums, such as green hydrogen, address demand for extended duration energy storage.
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For example, our H-Vault solutions when combined with B-Vault solutions, enable ultra-long-duration energy storage needs and provide black start and grid forming capabilities for communities supported by microgrids or other critical infrastructure. H-Vault supports community-scale microgrid generation that can be less carbon-intensive than using diesel-fueled generators for emergency backup power.
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The Company’s agnostic EMS platform has been designed to drive better economics and delivery timelines for our customers as it will enable a BESS to integrate hardware components from a diverse network of battery and power electronics manufacturers. Our BESSs also are designed to utilize flexible system architecture for long-term asset resiliency as grid conditions and market parameters change.
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For example, green hydrogen is produced via electrolysis and powered by renewable energy, which does not directly emit carbon emissions when used to store energy for long periods of time.
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Gravity Energy Storage Systems (GESS) Our proprietary gravity-based systems use motors/generators to lift and lower custom-made composite blocks, or “mobile masses.” The GESS lifts the mobile masses to an elevated position to store potential energy.
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As of December 31, 2023, one H-Vault system was under construction, which will be owned and operated by Energy Vault, while providing dispatchable power to a customer under a 10.5 year tolling arrangement. • Software Solutions: Our proprietary software solutions offer technology-agnostic management systems designed to maximize the economic and environmental value of energy generation and storage assets.
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Our GESS is expected to meet the market demand for longer storage duration, typically in the range of four to twelve hours.
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Two customers are currently utilizing the Company’s EMS in their B-Vault systems. ◦ Vault-Bidder: Vault-Bidder utilizes machine learning algorithms to match node-specific data with real-time weather and asset performance information to generate tailored load, generation, dispatch, and price forecasting across all assets.
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The construction and operation of our GESS offers a highly attractive opportunity for significant local, regional, and domestic economic participation, primarily in the form of labor and materials, which aligns well with current geopolitical 5 Table of Contents sentiments.
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No customers are currently utilizing the Vault-Bidder platform. ◦ Vault-Manager: Vault-Manager incorporates a forward-looking design to safeguard asset management and to help blend developing technologies seamlessly into existing solutions. No customers are currently using the Vault-Bidder platform. The Company generates revenue from the sale and licensing of our energy storage solutions.
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One example of this is that the mobile masses can be made from local soil, waste, and remediation material, which provide additional environmental benefits.
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To date, the Company has primarily generated revenue from the sale of our battery energy storage systems (“BESSs) and from licensing our EVx technology.
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Hybrid Energy Storage Solutions The energy storage market is very dynamic and evolving as increasingly more variable forms of renewable power and energy are deployed and the use cases for corresponding storage expands dramatically in breadth, depth, and duration.
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In addition to these sources of revenue, in the future we expect to generate revenue from the sale of our gravity energy storage systems (“GESSs”), the sale or licensing of the Company’s software solutions, the sale of long-term service agreements to maintain customer owned energy storage systems, and through tolling arrangements in connection with energy storage systems that we intend to own and operate.
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To proactively embrace this opportunity, we continuously research and accelerate the development and commercial introduction of complementary energy storage solutions to our existing portfolio. In this manner, we provide customers with energy storage solutions across an increasingly variety of different mediums, currently including battery, gravity, and green hydrogen.
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Industry Overview We believe climate change poses a monumental risk to humanity and decreasing human generated GHG emissions is currently among the world’s most pressing challenges. Carbon dioxide is the primary GHG emitted through human activities and, according to the International Energy Agency, the energy sector is estimated to account for more than 75% of global human generated GHG emissions.
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Energy Management Software (EMS) Our EMS platform is a technology agnostic energy storage software solution. Once fully functional, we anticipate that it will manage one or more of our diverse storage mediums and the underlying generation assets to optimize delivery of power to our customers for their varied and multiple use cases.
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Burning fossil fuels contributes to climate change by releasing carbon dioxide and nitrous oxide into the atmosphere. Renewable energy sources present environmental advantages over fossil fuels in terms of finite natural resource usage and GHG emission profile.
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The EMS platform is designed to allow future storage and generation technologies to blend into the Company’s existing solutions portfolio and thereby provide optionality for our customers in the future. We intend to continue to enhance the EMS platform, as well as expand our software ecosystem with additional modules for a variety of use cases and applications.
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A major obstacle to transitioning to renewable sources of energy such as wind and solar is the intermittent availability of these types of energy sources. Energy storage solutions are needed to balance the production intermittency of variable renewable energy to support a clean-energy future and a balanced electrical grid infrastructure.
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Subsequent to the sale of energy storage system, the Company expects that customers will purchase a multi-year, recurring revenue software license agreement from us that will provide customers with ongoing software updates and support.
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Governments in countries throughout the world have announced and implemented various policies, regulations, and legislation to support the transition from fossil fuels to low-carbon form of energy, including through the use of energy storage solutions. For example, in August 2022, the United States Congress passed the Inflation Reduction Act (“IRA”).

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

188 edited+46 added−40 removed278 unchanged
Biggest changeAs a result, our operating results and cash flows may be materially lower than our expected results of operations. • The failure or inability of our suppliers to deliver necessary components or raw materials for construction of our energy storage systems and their failure or inability to deliver them in a timely manner could cause installation delays, cancellations, penalty payments and damage to our reputation. • Our business is subject to risks associated with construction, cost overruns and delays, including those related to obtaining government permits and approvals, electrical interconnection, and other contingencies that may arise in the course of completing installations. • During an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2022, management identified a material weakness in our internal control over financial reporting.
Biggest changeAs a result, our operating results and cash flows may be materially lower than our expected results of operations. • The failure or inability of our suppliers to deliver necessary components or raw materials for construction of our energy storage systems and their failure or inability to deliver them in a timely manner or to the quality standards required, could cause installation delays, cancellations, penalty payments and damage to our reputation. • Our business is subject to risks associated with construction, cost overruns and delays, including those related to obtaining government permits and approvals, electrical interconnection, and other contingencies that may arise in the course of completing installations. • Material weaknesses in our internal control over financial reporting could have a significant adverse effect on our business and the price of our common stock. • We are an early-stage company with a history of losses, and expect to incur significant expenses and continuing losses for the foreseeable future, and we may not be able to achieve profitability in the future. • Our total backlog and bookings may not be indicative of our future revenue, which could have a material adverse impact on our business, financial condition, and results of operations. • Our energy storage systems involve a lengthy sales and installation cycle, and if we fail to close sales on a regular and timely basis it could harm our business.
As a result, our projected revenues, market share, expenses and profitability may differ materially from our expectations. Our projections are subject to significant risks, assumptions, estimates and uncertainties.
Our projections are subject to significant risks, assumptions, estimates and uncertainties. As a result, our projected revenues, market share, expenses and profitability may differ materially from our expectations. Our projections are subject to significant risks, assumptions, estimates and uncertainties.
In addition, patent applications filed in foreign countries are subject to laws, rules, and procedures that differ from those of the United States, and thus we cannot be certain that foreign patent related to issued U.S. patents will be issued in other regions.
In addition, patent applications filed in foreign countries are subject to laws, rules, and procedures that differ from those of the United States, and thus we cannot be certain that foreign patent applications related to issued U.S. patents will be issued in other regions.
However, our ability to do so may be limited until such time as we are able to generate cash flow from operations or otherwise raise sufficient capital to continue to invest in our intellectual property.
However, our ability to do so may be limited until such time as we are able to generate sufficient cash flow from operations or otherwise raise sufficient capital to continue to invest in our intellectual property.
Any defects or errors in product or services offerings, or the perception of such defects or errors, or other performance problems could result in any of the following, each of which could adversely affect our business, financial condition, and results of operations: • expenditure of significant financial and product development resources, including recalls, in efforts to analyze, correct, eliminate, or work around errors or defects; • significant re-engineering work; • loss of existing or potential customers or partners; • interruptions or delays in sales; • delayed or lost revenue; • delay or failure to attain market acceptance; • delay in the development or release of new functionality or improvements; • negative publicity and reputational harm; • sales credits or refunds; 34 Table of Contents • security vulnerabilities, data breaches, and exposure of confidential or proprietary information; • diversion of development and customer service resources; • breach of warranty claims; • legal claims and regulatory actions under applicable laws, rules, and regulations; and • the expense and risk of litigation.
Any defects or errors in product or services offerings, or the perception of such defects or errors, or other performance problems could result in any of the following, each of which could adversely affect our business, financial condition, and results of operations: • expenditure of significant financial and product development resources, including recalls, in efforts to analyze, correct, eliminate, or work around errors or defects; • significant re-engineering work; • loss of existing or potential customers or partners; • interruptions or delays in sales; • delayed or lost revenue; • delay or failure to attain market acceptance; • delay in the development or release of new functionality or improvements; • negative publicity and reputational harm; • sales credits or refunds; • security vulnerabilities, data breaches, and exposure of confidential or proprietary information; • diversion of development and customer service resources; • breach of warranty claims; 35 Table of Contents • legal claims and regulatory actions under applicable laws, rules, and regulations; and • the expense and risk of litigation.
If a union sought to organize any of our employees, such organizing efforts or collective bargaining negotiations could potentially lead to work stoppages and/or slowdowns or strikes by certain of our employees. Additionally, the EPC firms that we rely upon to install our energy storage systems may have employees represented by unions or collective bargaining agreements.
If a union sought to organize any of our other employees, such organizing efforts or collective bargaining negotiations could potentially lead to work stoppages and/or slowdowns or strikes by certain of our employees. Additionally, the EPC firms that we rely upon to install our energy storage systems may have employees represented by unions or collective bargaining agreements.
In addition, environmental laws and regulations such as the Comprehensive Environmental Response, Compensation and Liability Act in the United States impose liability on several grounds including for the investigation and cleanup of contaminated soil and ground water, for building contamination, for impacts to human health and for damages to natural resources.
In addition, EHS laws and regulations such as the Comprehensive Environmental Response, Compensation and Liability Act in the United States impose liability on several grounds including for the investigation and cleanup of contaminated soil and ground water, for building contamination, for impacts to human health and for damages to natural resources.
In particular, we are highly dependent on the services of Robert Piconi, our Chief Executive Officer, Marco Terruzzin, our Chief Product Officer, Andrea Pedretti, our Chief Technology Officer. N one of our key employees is bound by an employment agreement for any specific term.
In particular, we are highly dependent on the services of Robert Piconi, our Chief Executive Officer, Marco Terruzzin, our Chief Product Officer, and Andrea Pedretti, our Chief Technology Officer. N one of our key employees is bound by an employment agreement for any specific term.
Additionally, our energy storage systems will use a substantial amount of software to operate which may require modification and updates over the life of such systems. Software products are inherently complex and often contain defects and errors when first introduced.
Additionally, our energy storage systems use a substantial amount of software to operate which may require modification and updates over the life of such systems. Software products are inherently complex and often contain defects and errors when first introduced.
As a result, we cannot be certain that the patent applications that we file will result in patents being issued or that our patents and any patents that may be issued to us in the future will afford protection against competitors with similar technology.
As a result, we cannot be certain that the patent applications that we file will result in patents being issued or that our patents and any patents that may be issued to us in the future will afford sufficient protection against competitors with similar technology.
The Company will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which the market value of our common stock that is held by non-affiliates exceeds $700 million as of June 30 of that fiscal year, (ii) the last day of the fiscal year in which we have total annual gross revenue of $1.07 billion or more during such fiscal year (as indexed for inflation), (iii) the date on which we have issued more than $1 billion in non-convertible debt in the prior three-year period or (iv) December 31, 2026.
The Company will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which the market value of our common stock that is held by non-affiliates exceeds $700 million as of June 30 of that fiscal year, (ii) the last day of the fiscal year in which we have total annual gross revenue of $1.235 billion or more during such fiscal year (as indexed for inflation), (iii) the date on which we have issued more than $1 billion in non-convertible debt in the prior three-year period or (iv) December 31, 2026.
Any expansion internationally could subject our business to risks associated with international operations, including: • conformity with applicable business customs, including translation into foreign languages and associated expenses; • lack of availability of government incentives and subsidies; • challenges in arranging, and availability of, financing for our customers; • potential changes to our established business model; • cost of alternative power sources, which could be meaningfully lower outside the United States; • availability and cost of raw materials, labor, equipment for manufacturing or assembling our energy storage systems; • difficulties in staffing and managing foreign operations in an environment of diverse culture, laws, and customers, and the increased travel, infrastructure, and legal and compliance costs associated with international operations; • installation challenges which we have not encountered before which may require the development of a unique model for each country; • compliance with multiple, potentially conflicting and changing governmental laws, regulations, and permitting processes including construction, environmental, banking, employment, tax, privacy, safety, security, grid minimum performances, and data protection laws and regulations; • compliance with U.S. and foreign anti-bribery laws including the Foreign Corrupt Practices Act and the U.K.
Any expansion internationally could subject our business to risks associated with international operations, including: • conformity with applicable business customs, including translation into foreign languages and associated expenses; • lack of availability of government incentives and subsidies; • challenges in arranging, and availability of, financing for our customers; 21 Table of Contents • potential changes to our established business model; • cost of alternative power sources, which could be meaningfully lower outside the United States; • availability and cost of raw materials, labor, equipment for manufacturing or assembling our energy storage systems; • difficulties in staffing and managing foreign operations in an environment of diverse culture, laws, and customers, and the increased travel, infrastructure, finance, and legal and compliance costs associated with international operations; • installation challenges which we have not encountered before which may require the development of a unique model for each country; • compliance with multiple, potentially conflicting and changing governmental laws, regulations, and permitting processes including construction, environmental, banking, employment, tax, safety, security, grid minimum performances, and data privacy and protection laws and regulations; • compliance with U.S. and foreign anti-bribery laws including the Foreign Corrupt Practices Act and the U.K.
Although we have obtained certain required permits and believe that obtaining and renewing any remaining certificates and/or licenses will be routine, we can provide no assurance that all required certificates and/or licenses will be obtained or renewed in a timely manner.
Although we have obtained certain required permits and believe that obtaining and renewing any remaining permits and/or licenses will be routine, we can provide no assurance that all required permits and/or licenses will be obtained or renewed in a timely manner.
Even after the Company no longer qualifies as an emerging growth company, we may still qualify as a “smaller reporting company,” which would allow it to continue to take advantage of many of the same exemptions from disclosure requirements, including not being required to comply with the auditor attestation requirements, Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements.
Even after the Company no longer qualifies as an emerging growth company, we may in the future qualify as a “smaller reporting company,” which would allow it to continue to take advantage of many of the same exemptions from disclosure requirements, including not being required to comply with the auditor attestation requirements, Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements.
You may not be able to resell your shares at an attractive price due to a number of factors such as the following: • our operating and financial performance and prospects; • our quarterly or annual earnings or those of other companies in our industry compared to market expectations; • conditions that impact demand for our services; • future announcements concerning our business, our customers’ businesses, or our competitors’ businesses; • the public’s reaction to our press releases, other public announcements, and filings with the SEC; • the market’s reaction to our reduced disclosure and other requirements as a result of being an “emerging growth company” under the JOBS Act or a “smaller reporting company”; • the size of our public float; • coverage by or changes in financial estimates by securities analysts or failure to meet their expectations; • market and industry perception of our success, or lack thereof, in pursuing our growth strategy; • strategic actions by us or our competitors, such as acquisitions or restructurings; • changes in laws or regulations which adversely affect the energy storage industry generally or Energy Vault specifically; • changes in accounting standards, policies, guidance, interpretations, or principles; • impacts from bank failures, reducing the financing options for the Company and its customers and suppliers; • changes in senior management or key personnel; • issuances, exchanges or sales, or expected issuances, exchanges, or sales of our capital stock; • changes in our dividend policy; • sales of shares of our common stock by significant shareholders; • adverse resolution of new or pending litigation against us; and • changes in general market, economic, and political conditions in the United States and global economies or financial markets, including those resulting from inflation including the effects of upward changes to the interest rate curves, natural disasters, terrorist attacks, acts of war, and responses to such events.
You may not be able to resell your shares at an attractive price due to a number of factors such as the following: • our operating and financial performance and prospects; • our quarterly or annual earnings or those of other companies in our industry compared to market expectations; • conditions that impact demand for our services; • future announcements concerning our business, our customers’ businesses, or our competitors’ businesses; • the public’s reaction to our press releases, other public announcements, and filings with the SEC; • the market’s reaction to our reduced disclosure and other requirements as a result of being an “emerging growth company” under the JOBS Act or relying on “smaller reporting company” exemptions; • the size of our public float; • coverage by or changes in financial estimates by securities analysts or failure to meet their expectations; • market and industry perception of our success, or lack thereof, in pursuing our growth strategy; • strategic actions by us or our competitors, such as acquisitions or restructurings; • changes in laws or regulations which adversely affect the energy storage industry generally or Energy Vault specifically; • changes in accounting standards, policies, guidance, interpretations, or principles; • impacts from bank failures, reducing the financing options for the Company and its customers and suppliers; • changes in senior management or key personnel; • issuances, exchanges or sales, or expected issuances, exchanges, or sales of our capital stock; • changes in our dividend policy; • sales of shares of our common stock by significant shareholders; • adverse resolution of new or pending litigation against us; and 41 Table of Contents • changes in general market, economic, and political conditions in the United States and global economies or financial markets, including those resulting from inflation including the effects of upward changes to the interest rate curves, natural disasters, terrorist attacks, acts of war, and responses to such events.
The installation and operation of our energy storage systems at a particular site is generally subject to oversight and regulation in accordance with national, state and local laws and ordinances relating to building codes, safety, environmental protection, FERC and specific Independent System Operators regulation and related matters, and typically requires obtaining and keeping in good standing various local and other governmental approvals and permits, including environmental approvals and permits, that vary by jurisdiction.
The installation and operation of our energy storage systems at a particular site is generally subject to oversight and regulation in accordance with national, state, tribal, and local laws and ordinances relating to building codes, health and safety, environmental protection, FERC and specific Independent System Operators regulation and related matters, and typically requires obtaining and keeping in good standing various local and other governmental approvals and permits, including environmental approvals and permits, that vary by jurisdiction.
Should operational risks materialize, it may result in the personal injury to or death of workers, the loss of production equipment, damage to manufacturing facilities, monetary losses, delays and unanticipated fluctuations in production, environmental damage, administrative fines, increased insurance costs and potential legal liabilities, all which could have a material adverse effect on our business, results of operations, cash flows, financial condition or prospects.
Should operational risks materialize, it may result in the personal injury to or death of workers, the loss of production equipment, damage to demonstration facilities, monetary losses, delays and unanticipated fluctuations in production, environmental damage, administrative fines, increased insurance costs and potential legal liabilities, all which could have a material adverse effect on our business, results of operations, cash flows, financial condition or prospects.
We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal hazardous materials.
We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of hazardous materials.
If a claim is successfully brought in the future and we or our products or services are determined to have infringed, misappropriated, or otherwise violated a third party’s intellectual property rights, we may be required to do one or more of the following: • cease selling or using our products or services that incorporate the challenged intellectual property; • pay substantial damages (including treble damages and attorneys’ fees if our infringement is determined to be willful); • obtain a license from the holder of the relevant intellectual property rights, which may not be available on reasonable terms or at all; or • redesign our products, services, or means of production, which may not be possible or cost-effective.
If a claim is 31 Table of Contents successfully brought in the future and we or our products or services are determined to have infringed, misappropriated, or otherwise violated a third party’s intellectual property rights, we may be required to do one or more of the following: • cease selling or using our products or services that incorporate the challenged intellectual property; • pay substantial damages (including treble damages and attorneys’ fees if our infringement is determined to be willful); • obtain a license from the holder of the relevant intellectual property rights, which may not be available on reasonable terms or at all; or • redesign our products, services, or means of production, which may not be possible or cost-effective.
If the NYSE delists the common stock from trading on its exchange for failure to meet the listing standards, we and our stockholders could face significant material adverse consequences including: • a limited availability of market quotations for our securities 38 Table of Contents • a determination that our common stock is a “penny stock,” which will require brokers trading in our common stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our common stock; • a limited amount of analyst coverage; and • a decreased ability to issue additional securities or obtain additional financing in the future.
If the NYSE delists the common stock from trading on its exchange for failure to meet the listing standards, we and our stockholders could face significant material adverse consequences including: • a limited availability of market quotations for our securities • a determination that our common stock is a “penny stock,” which will require brokers trading in our common stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our common stock; • a limited amount of analyst coverage; and • a decreased ability to issue additional securities or obtain additional financing in the future.
We depend upon component and product manufacturing and logistical services provided by third parties, many of whom are located outside of the U.S. A significant amount of our components, including batteries utilized in our BESS offerings, and products are manufactured in whole or in part by a few third-party manufactures.
We depend upon component and product manufacturing and logistical services provided by third parties, many of whom are located outside of the U.S. A significant amount of our components, including batteries utilized in our BESS offerings, and products are manufactured in whole or in part by a few third-party manufactures. Many of these manufacturers are located outside of the U.S.
We could face additional risks when we own and operate energy storage systems, compared to when the customer owns and operates energy storage systems that we build.
We could face additional risks when we own and operate energy storage systems, as compared to when the customer owns and operates energy storage systems that we build.
In addition to the other risks described herein, the following factors could also cause our financial condition and results of operations to fluctuate on a quarterly basis: • fluctuations in costs associated with the first group of energy storage systems that we deploy; • the timing of customer installations of our energy storage systems, which may depend on many factors such as availability of inventory, product quality or performance issues, or local permitting requirements, utility requirements, environmental, health and safety requirements, weather and customer facility construction schedules, availability and schedule of our third-party general contractors; • size of particular customer installations and number of sites involved in any particular quarter; • delays or cancellations of purchases and installations; • the timing of when control of uninstalled materials transfers to the customer; • fluctuations in our service costs; • weaker than anticipated demand for our energy storage systems due to changes in government regulation, incentives and policies; • weaker than anticipated demand for our energy storage systems due to our customers’ inability to finance their projects; • interruptions in our supply chain; • the timing and level of additional purchases by existing customers; • unanticipated expenses incurred due to changes in governmental regulations, permitting requirements by local authorities at particular sites, utility requirements and environmental, health and safety requirements; 28 Table of Contents • disruptions in our sales, production, service or other business activities resulting from our inability to attract and retain qualified personnel; • shortage of raw materials from our suppliers and associated price increases due to fluctuations in commodities prices; and • availability of spare parts from our suppliers.
In addition to the other risks described herein, the following factors could also cause our financial condition and results of operations to fluctuate on a quarterly basis: • fluctuations in costs associated with the first few groups of energy storage systems that we deploy; • the timing of customer installations of our energy storage systems, which may depend on many factors such as availability of inventory, product quality or performance issues, or local permitting requirements, utility requirements, environmental, health and safety requirements, weather and customer facility construction schedules, customer interconnection timing, availability and schedule of our third-party general contractors; • size of particular customer installations and number of sites involved in any particular quarter; • delays or cancellations of purchases and installations; • the timing of when control of uninstalled materials transfers to the customer; • fluctuations in our service costs; • weaker than anticipated demand for our energy storage systems due to changes in government regulation, incentives and policies; • weaker than anticipated demand for our energy storage systems due to our customers’ inability to finance their projects; • interruptions in our supply chain; • the timing and level of additional purchases by existing customers; • unanticipated expenses incurred due to changes in governmental regulations, permitting requirements by local authorities at particular sites, utility requirements and environmental, health and safety requirements; • disruptions in our sales, production, service or other business activities resulting from our inability to attract and retain qualified personnel; • shortage of raw materials from our suppliers and associated price increases due to fluctuations in commodities prices; and • availability of spare parts from our suppliers.
Additionally, there are increasing expectations in various jurisdictions that companies monitor the environmental and social performance of their suppliers, including compliance with a variety of labor practices, as well as consider a wider range of potential environmental and social matters, including the end of life considerations for products.
Additionally, there are increasing expectations in various jurisdictions that companies monitor the environmental and social performance of their suppliers, including sourcing of materials and compliance with a variety of labor practices, as well as consider a wider range of potential environmental and social matters, including the end-of-life considerations for products.
Even if an inquiry does not result in these types of determinations, regulatory authorities could cause us to incur substantial costs or require us to change our business practices in a manner materially adverse to our business, and it potentially could create negative publicity which could harm our business and/or reputation.
Even if an inquiry does not result in these types of determinations, regulatory authorities could cause us to incur substantial costs or require us to change our business practices in a manner materially adverse to our business and could create negative publicity, which could harm our business and/or reputation.
If adequate capital is not available to us, including due to the cost and availability of funding in the capital markets, our business, operating results and financial condition may be harmed. The development, design, manufacture and sale of our energy storage systems is a capital-intensive business.
If adequate capital is not available to us, including due to the cost and availability of funding in the capital markets, our business, operating results and financial condition may be harmed. The development, design, construction, and sale of our energy storage systems is a capital-intensive business.
The costs of complying with environmental laws, regulations, and customer requirements, and any claims concerning noncompliance or liability with respect to contamination in the future, could have a material adverse effect on our financial condition or our operating results.
The costs of complying with EHS laws, regulations, and customer requirements, and any claims concerning noncompliance or liability with respect to contamination in the future, could have a material adverse effect on our financial condition or our operating results.
Energy and environmental regulation is constantly changing, and policy or changes in enforcement of existing laws or regulations applicable to our business, or reexamination of current practices, could adversely impact our profitability, limit our ability to continue existing or pursue new business activities, require us to change certain of our business practices, affect retention of key personnel, or expose us to additional costs (including increased compliance costs and/or customer remediation).
Energy and EHS regulation is constantly changing, and changes in policy, changes in interpretation or enforcement of existing laws or regulations applicable to our business, or reexamination of current practices, could adversely impact our profitability, limit our ability to continue existing or pursue new business activities, require us to change certain of our business practices, affect retention of key personnel, or expose us to additional costs (including increased compliance costs and/or customer remediation).
As a result of our current or future use of open-source software, we may face claims or litigation, be required to release our proprietary source code, pay damages for breach of contract, re-engineer our solutions, discontinue making our solutions available in the event re-engineering cannot be accomplished on a timely basis, or take other remedial action.
As a result of our current or future use of open- 32 Table of Contents source software, we may face claims or litigation, be required to release our proprietary source code, pay damages for breach of contract, re-engineer our solutions, discontinue making our solutions available in the event re-engineering cannot be accomplished on a timely basis, or take other remedial action.
These laws generally prohibit us and our officers, directors, employees and business partners acting on our behalf, including agents, from corruptly offering, promising, authorizing or providing anything of value to obtain or retain business or otherwise obtain favorable treatment and require companies to maintain accurate books and records and a system of internal controls or adequate procedures to prevent bribery.
These laws generally prohibit us and our officers, directors, employees and business partners acting on our behalf, including 37 Table of Contents agents, from corruptly offering, promising, authorizing or providing anything of value to obtain or retain business or otherwise obtain favorable treatment and require companies to maintain accurate books and records and a system of internal controls or adequate procedures to prevent bribery.
For more information, see our risk factor titled “We are subject to a series of risks related to climate change.”. The severity of such factors and frequency at which they occur are also outside our control. If 24 Table of Contents such factors occur our business, financial condition and results of operations, including revenues, could be materially adversely affected.
For more information, see our risk factor titled “We are subject to a series of risks related to climate change.”. The severity of such factors and frequency at which they occur are also outside our control. If such factors occur our business, financial condition and results of operations, including revenues, could be materially adversely affected.
In addition, our revenue, key operating metrics and other operating results in future quarters may fall short of the expectations of investors and financial analysts, which could have an adverse effect on the price of our common stock.
Finally, our revenue, key operating metrics, and other operating results in future quarters may fall short of the expectations of investors and financial analysts, which could have an adverse effect on the price of our common stock.
In the event that our agreements with any of our third-party service providers is terminated, or we add additional cloud infrastructure service providers, we may experience significant costs or downtime in connection with the transfer to, or the addition of, new cloud infrastructure service providers.
In the event that our agreements with any of our third-party service providers are terminated, or we add additional cloud infrastructure service providers, we may experience significant costs or downtime in connection with the transfer to, or the addition of, new cloud infrastructure service providers.
In particular, our handling of data relating to individuals is subject to a variety of laws and regulations relating to privacy, data protection, and information security, and it may become subject to additional obligations, including contractual obligations, relating to our maintenance and other processing of this data.
In particular, our handling of data relating to individuals is subject to a variety of laws and regulations relating to privacy, data protection, and information security, and we may become subject to additional obligations, including contractual obligations, relating to our maintenance and other processing of this data.
In addition, certain of our energy storage systems’ generation may be curtailed without compensation due to distribution and transmission limitations, reducing our revenues and impairing our ability to capitalize fully on a particular customer project’s potential. Such a failure or curtailment at levels above our expectations could adversely affect our business.
In addition, certain of our energy storage systems’ generation may be curtailed without compensation due to distribution and transmission limitations, reducing our revenues and impairing our ability to capitalize fully on a 18 Table of Contents particular customer project’s potential. Such a failure or curtailment at levels above our expectations could adversely affect our business.
Limited, have already commercialized their respective energy storage solution products. Companies such as Tesla, Inc., Fluence Energy, Inc. and Wartsila Corporation are also developing their own energy management software. If our competitors continue to penetrate the renewable energy, energy storage and energy management software markets, we may experience a reduction in potential and actual market share.
Limited, have already commercialized their respective energy storage solution products. Companies such as Tesla, Inc., Fluence Energy, Inc. and Wartsila Corporation have developed or are developing their own energy management software. If our competitors continue to penetrate the renewable energy, energy storage and energy management software markets, we may experience a reduction in potential and actual market share.
Our insurance coverage, customer indemnifications or other liability protections may be unavailable or inadequate to cover all of our significant risks, which could adversely affect our profitability and overall financial position. We endeavor to obtain insurance to cover significant risks and liabilities (including, for example, natural disasters, cyber security, defective hardware and software and products liability).
Our insurance coverage, customer indemnifications or other liability protections may be unavailable or inadequate to cover all of our significant risks, which could adversely affect our profitability and overall financial position. We endeavor to obtain insurance to cover significant risks and liabilities (including, for example, natural disasters, cybersecurity, defective hardware and software and products liability).
Any failure to maintain high-quality and highly-responsive technical support, or a market perception that we do not maintain high-quality and highly-responsive support, could adversely affect our reputation, our ability to sell our products to existing and prospective customers, and our business, financial condition and results of operations. We intend to offer technical support services alongside our systems.
Any failure to maintain high-quality and highly-responsive technical support, or a market perception that we do not maintain high-quality and highly-responsive support, could adversely affect our reputation, our ability to sell our products to existing and prospective customers, and our business, financial condition and results of operations. 34 Table of Contents We intend to offer technical support services alongside our systems.
We may not successfully evaluate or utilize the acquired technology or personnel, realize anticipated synergies 20 Table of Contents from the acquisition, or accurately forecast the financial impact of an acquisition transaction and integration of such acquisition, including accounting charges and any potential impairment of goodwill and intangible assets recognized in connection with such acquisitions.
We may not successfully evaluate or utilize the acquired technology or personnel, realize anticipated synergies from the acquisition, or accurately forecast the financial impact of an acquisition transaction and integration of such acquisition, including accounting charges and any potential impairment of goodwill and intangible assets recognized in connection with such acquisitions.
We depend on a limited number of customers for the majority of our revenue, and the loss of any one of these customers could substantially reduce our revenue and impact our liquidity. The loss of any significant customers or partners or reduction in our business activities could cause our revenues to decrease significantly and increase our losses from operations.
We depend on a limited number of customers for the majority of our revenue, and the loss of any one of these customers could substantially reduce our revenue and impact our liquidity. 14 Table of Contents The loss of any significant customers or partners or reduction in our business activities could cause our revenues to decrease significantly and increase our losses from operations.
To comply with the Sarbanes-Oxley Act, the requirements of being a reporting company under the Exchange Act and any complex accounting rules in the future, we may need to upgrade our information technology systems; 40 Table of Contents implement additional financial and management controls, reporting systems and procedures; and hire additional accounting and finance staff.
To comply with the Sarbanes-Oxley Act, the requirements of being a reporting company under the Exchange Act and any complex accounting rules in the future, we may need to upgrade our information technology systems; implement additional financial and management controls, reporting systems and procedures; and hire additional accounting and finance staff.
If we lose a member of our management team or key employee, it may prove difficult for us to replace him or her with a similarly qualified individual with experience in the renewable energy and energy storage industry, which could impact our business and operating success.
If we lose a member of our management team or key employee, it may prove difficult for us to replace such employee with a similarly qualified individual with experience in the renewable energy and energy storage industry, which could impact our business and operating success.
Some licenses governing the use of open-source software contain requirements that we make available source code for modifications or derivative works we create based upon the open-source software, and that we license such modifications or derivative works under the terms of a particular open-source 31 Table of Contents license or other license granting third parties certain rights of further use.
Some licenses governing the use of open-source software contain requirements that we make available source code for modifications or derivative works we create based upon the open-source software, and that we license such modifications or derivative works under the terms of a particular open-source license or other license granting third parties certain rights of further use.
We cannot assure you, however, that any such policies and procedures will be sufficient or that directors, officers, employees, representatives, consultants and agents have not engaged, and will not engage, in conduct for which we may be held responsible, nor can we assure you that our business partners have not engaged, and will not engage, in conduct that could materially affect their ability to perform their contractual obligations to 36 Table of Contents us or result in our being held liable for such conduct.
We cannot assure you, however, that any such policies and procedures will be sufficient or that directors, officers, employees, representatives, consultants and agents have not engaged, and will not engage, in conduct for which we may be held responsible, nor can we assure you that our business partners have not engaged, and will not engage, in conduct that could materially affect their ability to perform their contractual obligations to us or result in our being held liable for such conduct.
In addition, we rely on third-party manufacturers to adhere to the terms and 17 Table of Contents conditions of the agreements in place with each party. For example, although arrangements with such manufacturers may contain provisions for warranty expense reimbursement, we may remain responsible to the customer for warranty service in the event of product defects.
In addition, we rely on third-party manufacturers to adhere to the terms and conditions of the agreements in place with each party. For example, although arrangements with such manufacturers may contain provisions for warranty expense reimbursement, we may remain responsible to the customer for warranty service in the event of product defects.
We may experience ownership changes in the future as a result of subsequent changes in our stock ownership, some of which are outside our control. Similar provisions of state and foreign tax law may apply and future regulatory changes could also limit our ability to utilize NOL carryforwards to offset future taxable income.
We may experience ownership changes in the future as a result of subsequent changes in our stock ownership, some of which are outside our control. Similar provisions of state and foreign tax law may apply and future regulatory changes could also limit our ability to utilize NOL carryforwards.
Additionally, potential customers who previously invested in alternatives to our GESS solution may not deem a transition to our existing or future GESS solutions to be cost-effective. Moreover, given the limited history of our GESS technology, potential customers may be hesitant to make a significant investment in our products.
Additionally, potential customers who previously invested in alternatives to our GESS solution may not deem a transition to our existing or future GESS solutions to be cost-effective. Moreover, given the limited history of our GESS 19 Table of Contents technology, potential customers may be hesitant to make a significant investment in our products.
Our energy storage systems have significant upfront costs, and certain customers may need, or may prefer to acquire, third-party financing to purchase our systems. Therefore, our growth, including the deployment of our energy storage systems, may to an extent depend on our customers’ ability to attract third-party financing partners.
Our energy storage systems have significant upfront costs, and certain customers may need, or may prefer to acquire, third-party financing to purchase our systems. 15 Table of Contents Therefore, our growth, including the deployment of our energy storage systems, may to an extent depend on our customers’ ability to attract third-party financing partners.
Such legal and regulatory restrictions could increase the costs of 19 Table of Contents compliance and potentially subject us to threatened or actual litigation or administrative proceedings, each of which could have a material adverse effect on our business, operating results and financial condition.
Such legal and regulatory restrictions could increase the costs of compliance and potentially subject us to threatened or actual litigation or administrative proceedings, each of which could have a material adverse effect on our business, operating results and financial condition.
To date, we have focused our efforts on recruiting management and other employees, business planning, raising capital, selecting applicable third party technologies, establishing and attempting to establish 22 Table of Contents partnerships with potential suppliers, customers and ecosystem partners, developing our gravity, battery, and green hydrogen energy storage systems, a digital platform, and general corporate development.
To date, we have focused our efforts on recruiting management and other employees, business planning, raising capital, selecting applicable third-party technologies, establishing and attempting to establish partnerships with potential suppliers, customers and ecosystem partners, developing our gravity, battery, and green hydrogen energy storage systems, a digital platform, and general corporate development.
If insurance coverage, customer indemnifications and/or other legal protections are not available or are not sufficient to cover risks or losses, it could have a material adverse effect on our financial position, results of operations and/or cash flows.
If 26 Table of Contents insurance coverage, customer indemnifications and/or other legal protections are not available or are not sufficient to cover risks or losses, it could have a material adverse effect on our financial position, results of operations and/or cash flows.
Any decision to declare and pay dividends will be made at the discretion of the Company’s Board and will depend on, among other things, the Company’s results of operations, financial condition, cash requirements, contractual restrictions and other factors that the Company’s Board may deem relevant.
Any decision to declare and pay dividends will be made at the discretion of the Company’s Board and will depend on, among other things, the Company’s results of operations, financial 40 Table of Contents condition, cash requirements, contractual restrictions and other factors that the Company’s Board may deem relevant.
These competitors may engage in more extensive research and development efforts, undertake more far-reaching marketing campaigns and adopt more aggressive pricing policies, which may allow them to more effectively compete for new energy storage projects and energy management software customers. We intend to continue committing significant resources to establish a competitive position.
These competitors may engage in more extensive research and development efforts, 23 Table of Contents undertake more far-reaching marketing campaigns and adopt more aggressive pricing policies, which may allow them to more effectively compete for new energy storage projects and energy management software customers. We intend to continue committing significant resources to establish a competitive position.
We cannot assure you that, collectively, our process and procedures to recover from a disaster or catastrophe will be adequate to protect us from the effects of fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, war, riots, terrorist attacks, pandemics, or similar events outside of our control, certain of which may become more frequent or intense as a result of climate change.
We cannot assure you that, collectively, our process and procedures to recover from a disaster or catastrophe will be adequate to protect us from the effects of fire, floods, typhoons, earthquakes, power loss, telecommunications failures, cyberattacks and other information security incidents, break-ins, war, riots, terrorist attacks, pandemics, or similar events outside of our control, certain of which may become more frequent or intense as a result of climate change.
Any of the above circumstances or events may harm our reputation and brand or increase our costs, any of which could adversely affect our business, financial condition, and results of operations.
Any of the above circumstances or events may harm our reputation and brand or increase our costs, and adversely affect our business, financial condition, and results of operations.
For example, there have been increasing allegations of greenwashing against companies making significant ESG claims due to a variety of perceived deficiencies in performance or methodology, including as stakeholder perceptions of sustainability continue to evolve.
For example, there have been increasing allegations of greenwashing against 20 Table of Contents companies making significant ESG claims due to a variety of perceived deficiencies in performance or methodology, including as stakeholder perceptions of sustainability continue to evolve.
It may be difficult or impossible to perform some or all recovery steps and continue normal business operations due to the nature of a particular disaster or catastrophe, especially during peak periods, which could cause additional reputational damages, or loss of revenues, any of which could adversely affect our business and financial results.
It may be difficult or impossible to perform some or all recovery steps and continue normal business operations due to the nature of a particular cyber incident, disaster or catastrophe, especially during peak periods, which could cause additional reputational damage, or loss of revenues, any of which could adversely affect our business, results of operations, and financial results.
Changes in the rates offered by local electric utilities and/or in the applicability or amounts of charges and other fees 15 Table of Contents imposed by such utilities on customers acquiring our energy storage systems could adversely affect the demand for our energy storage systems.
Changes in the rates offered by local electric utilities and/or in the applicability or amounts of charges and other fees imposed by such utilities on customers acquiring our energy storage systems could adversely affect the demand for our energy storage systems.
If our estimates of the useful life for our energy storage systems are inaccurate or we do not meet service and warranties and performance guarantees, our business and financial results could be adversely affected. We expect to provide warranties and performance guarantees of our systems.
If our estimates of the useful life for our energy storage systems are inaccurate or we do not meet service and warranties and performance guarantees, our business and financial results could be adversely affected. We provide limited warranties and performance guarantees for our energy systems.
Many of our customers who have agreed to purchase our energy storage systems have high sustainability standards, and any environmental noncompliance by us could harm our reputation and impact a current or potential customer’s buying decision.
Many of our customers who have agreed to purchase our energy storage systems have high standards, and any EHS noncompliance by us could harm our reputation and impact a current or potential customer’s buying decision.
We maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from exposure to hazardous materials with a policy limit that we believe is customary for similarly situated companies and adequate to provide us with insurance coverage for foreseeable risks; however, this insurance may not provide adequate coverage against potential liabilities.
We maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from exposure to hazardous materials with a policy limit that we believe is customary for similarly situated companies and adequate to provide us with insurance coverage for foreseeable risks; however, this insurance may not provide adequate coverage against potential liabilities and not all workers have or may agree to our workers’ compensation policy.
Violations of the FCPA, Bribery Act, other anti-corruption laws, economic sanctions, export control laws and/or anti-money laundering and anti-terrorism laws or regulations may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could have a material adverse effect on our business, financial condition and results of operations.
Violations of the FCPA, Bribery Act, other anti-corruption laws, economic sanctions, export control laws and/or anti-money laundering and anti-terrorism laws or regulations may result in severe criminal or civil sanctions, and we may be subject to other liabilities, as well as damage to our business continuity or brand, which could have a material adverse effect on our business, financial condition and results of operations.
Our failure to hold a given license or certificate would impair our ability to perform our obligations under our customer contracts. The number of laws affecting our business continues to grow. If our licenses or certificates were impaired, whether by expiration, nonrenewal or modification or termination, our business would be adversely impaired.
Our failure to hold a given permit or certificate would impair our ability to perform our obligations under our customer contracts. The number of laws affecting our business continues to grow. If our licenses or permits were impaired, whether by expiration, nonrenewal, modification, or termination, our business would be adversely impaired.
Moreover, smaller reporting companies may choose to present only the two most recent fiscal years of audited financial statements in their Annual Reports on Form 10-K.
Moreover, smaller reporting companies may choose to present only the two most recent fiscal years of audited 39 Table of Contents financial statements in their Annual Reports on Form 10-K.
In addition, our sales process is likely to depend highly on the quality of our hardware and software-enabled services, on our business 33 Table of Contents reputation, and on strong recommendations from our existing customers.
In addition, our sales process is likely to depend highly on the quality of our hardware and software-enabled services, on our business reputation, and on strong recommendations from our existing customers.
Any work 23 Table of Contents stoppages and/or slowdowns by certain of our employees or certain employees at the EPC firms we contract with, could adversely affect our ability to serve our customers.
Any work stoppages and/or slowdowns by certain of our employees or certain employees at the EPC firms we contract with, could adversely affect our ability to serve our customers.
Failure to meet these warranties and performance guarantee levels may require the purchase price to be adjusted downward based on agreed-upon performance targets, or require us to make cash payments to the customer based on actual performance, as compared to expected performance.
Failure to meet these 16 Table of Contents warranties and performance guarantee levels may require the purchase price to be adjusted downward based on agreed-upon performance targets, or require us to make cash payments to the customer based on actual performance, as compared to expected performance.
Additionally, in many cases we contractually commit to performing all necessary installation work on a fixed-price basis, and unanticipated costs associated with environmental remediation and/or compliance expenses may cause the 35 Table of Contents cost of performing such work to exceed our revenue.
Additionally, in many cases we contractually commit to performing all necessary installation work on a fixed-price basis, and 36 Table of Contents unanticipated costs associated with environmental remediation, worker safety, and/or EHS compliance expenses may cause the cost of performing such work to exceed our revenue.
We intend to explore alternative, co-active use case opportunities for our systems, but there is no assurance that such opportunities exist or that they would be as beneficial to us as we expect. 16 Table of Contents We intend to explore alternative, co-active use case opportunities for our energy storage systems.
We intend to explore alternative, co-active use case opportunities for our systems, but there is no assurance that such opportunities exist or that they would be as beneficial to us as we expect. We intend to explore alternative, co-active use case opportunities for our energy storage systems.
We cannot assure you that we will be able to successfully attract and retain senior leadership necessary to grow our business. Furthermore, there is increasing competition for talented individuals in our field, and competition for qualified personnel is especially intense in the renewable energy and energy storage industry in the USA and Switzerland, where, collectively, our primary offices are located.
We cannot assure you that we will be able to successfully attract and retain senior leadership necessary to grow our business. Furthermore, there is increasing competition for talented individuals in our field, and competition for qualified personnel is especially intense in the renewable energy and energy storage industry in the U.S., Australia, and Switzerland, where our offices are located.
We are subject to licensing and operational requirements that result in substantial compliance costs, and our business would be adversely affected if we fail to obtain or maintain required licenses or if our licenses are impaired. Our business is subject to numerous federal, state, and local laws and regulations.
We are subject to licensing, permitting, and operational requirements that result in substantial compliance costs, and our business would be adversely affected if we fail to obtain or maintain required licenses or if our licenses are impaired. Our business is subject to numerous federal, state, and local laws and regulations in the jurisdictions in which we operate.
Our backlog represents the amount of revenue we expect to realize in the future on uncompleted construction contracts, including new contracts under which work has not yet begun, as well as the remaining revenue to be recognized under the Company’s intellectual property licensing agreements. As of December 31, 2022 , backlog totaled $331.0 million .
Our backlog represents the amount of revenue we expect to realize in the future on uncompleted construction contracts, including new contracts under which work has not yet begun, as well as the remaining revenue to be recognized under the Company’s intellectual property licensing agreements. As of December 31, 2023 , backlog totaled $144.2 million.
For example, we may ultimately be unable to complete certain initiatives or targets, either on the timelines initially announced or at all, due to technological, cost, or other constraints, which may be within or outside of our control.
For example, we may ultimately be unable to complete certain initiatives or targets, or execute on any opportunities we have identified, either on the timelines initially announced or at all, due to technological, cost, or other constraints, which may be within or outside of our control.
We have also outsourced much of our transportation and logistics management. While these arrangements may lower operating costs, they also reduce our direct control over production and distribution. Such diminished control could have an adverse effect on the quality or quantity of our products as well as our flexibility to respond to changing conditions.
While these arrangements may lower operating costs, they also reduce our direct control over production and distribution. Such diminished control could have an adverse effect on the quality or quantity of our products as well as our flexibility to respond to changing conditions.
If we fail to, or are perceived to fail to, comply with or advance certain ESG initiatives (including the timeline and manner in which we complete such initiatives), we may be subject to various adverse impacts, including reputational damage and potential stakeholder engagement and/or litigation, even if such initiatives are currently voluntary.
If we fail to, or are perceived to fail to, comply with or advance certain ESG initiatives (including the timeline and manner in which we complete such initiatives), or to not keep pace with peers on ESG initiatives and/or disclosures, we may be subject to various adverse impacts, including reputational damage and potential stakeholder engagement and/or litigation, even if such initiatives are currently voluntary.
Risks Related to Ownership of Energy Vault’s Securities Concentration of ownership among our executive officers, directors, and their affiliates may prevent new investors from influencing significant corporate decisions. As of December 31, 2022, our executive officers, directors and their affiliates as a group beneficially own approximately 38.4% of our outstanding common stock.
Risks Related to Ownership of Energy Vault’s Securities Concentration of ownership among our executive officers, directors, and their affiliates may prevent new investors from influencing significant corporate decisions. As of December 31, 2023, our executive officers, directors and their affiliates as a group beneficially own approximately 30.6% of our outstanding common stock.
Anti-Bribery Act; • greater difficulties in securing or enforcing our intellectual property rights in certain jurisdictions, or greater chance potential infringement of third-party intellectual property rights in new jurisdictions; • difficulties in funding our international operations; • difficulties in collecting payments in foreign currencies and associated foreign currency exposure; • restrictions on repatriation of earnings; • compliance with potentially conflicting and changing laws of taxing jurisdictions where we conduct business and compliance with applicable U.S. tax laws as they relate to international operations, the complexity and adverse consequences of such tax laws, and potentially adverse tax consequences due to changes in such tax laws; • increases or decreases in our expenses caused by fluctuation in foreign currency exchange rates; • changes in import tariffs imposed by local governments; • changes in regulations regarding the use of waste materials in our products; • changes in regulations that would prevent us from doing business in specified countries; • failure of the supply chain in local countries to provide us with materials of a sufficient quality and quantity delivered on timelines we expect; • the outbreak of war or other hostilities; and 21 Table of Contents • regional economic and political conditions.
Anti-Bribery Act; • greater difficulties in securing or enforcing our intellectual property rights in certain jurisdictions, or greater chance potential infringement of third-party intellectual property rights in new jurisdictions; • difficulties in funding our international operations; • difficulties in collecting payments in foreign currencies and associated foreign currency exposure; • restrictions on repatriation of earnings; • compliance with potentially conflicting and changing laws of taxing jurisdictions where we conduct business and compliance with applicable U.S. tax laws as they relate to international operations, the complexity and adverse consequences of such tax laws, and potentially adverse tax consequences due to changes in such tax laws; • increases or decreases in our expenses caused by fluctuation in foreign currency exchange rates; • changes in import tariffs imposed by local governments; • changes in regulations regarding the use of waste materials in our products; • changes in regulations that would prevent us from doing business in specified countries; • failure of the supply chain in local countries to provide us with materials of a sufficient quality and quantity delivered on timelines we expect; • the impacts of government spending on infrastructure projects and more broadly, including any impacts of government debt defaults or budget crises (including in the United States); • the outbreak of war or other hostilities; and • regional economic and political conditions.
The relative success of these systems will be dependent upon a number of factors, including their ability to provide our customers with reliable and dependable energy storage for the durations that they require, while still being cost-effective.
The relative success of our energy systems will be dependent upon a number of factors, including their ability to provide our customers with reliable and dependable energy storage for the durations that they require, while still being cost-effective, and our ability to effectively manage any customer concerns.
Any failure to offer high-quality technical support services may adversely affect our relationships with our customers and adversely affect our financial results. As we complete our initial energy storage projects, we anticipate that our customers will depend on our support organization to resolve any technical issues relating to the hardware and software included in our systems.
Any failure to offer high-quality technical support services may adversely affect our relationships with our customers and adversely affect our financial results. We anticipate that our customers will depend on our support organization to resolve any technical issues relating to the hardware and software included in our systems.
Finally, these provisions establish advance notice requirements for nominations for election to the Board or for proposing matters that can be acted upon at stockholder meetings. These provisions would apply even if the offer may be considered beneficial by some stockholders.
Finally, these provisions establish advance notice requirements for nominations for election to the Board or for proposing matters that can be acted upon at stockholder meetings. These provisions would apply even if the offer may be considered beneficial by some stockholders. ITEM 1B. UNRESOLVED STAFF COMMENTS None.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe Lugano facility is under a lease that expires in July 2027. The Vienna facility is under a lease that expires in January 2024.
Biggest changeThe Lugano facility is under a lease that expires in July 2027. The Vienna facility is under a lease that expires in January 2025.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeFrom time to time, Energy Vault may become involved in additional legal proceedings arising in the ordinary course of its business. Item 4. Mine Safety Disclosures Not applicable. 42 Table of Contents Part II
Biggest changeFrom time to time, Energy Vault may become involved in additional legal proceedings arising in the ordinary course of its business. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 44 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, the Board is not currently contemplating and does not anticipate declaring any stock dividends in the foreseeable future. Securities Authorized for Issuance under Equity Compensation Plans For information relating to securities authorized for issuance under equity compensation plans, see Part III, Item 12 of this Form 10-K.
Biggest changeIn addition, the Board is not currently contemplating and does not anticipate declaring any stock dividends in the foreseeable future. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of the Company’s equity securities during 2023. Repurchase of Equity Securities There were no repurchases of the Company’s equity securities during 2023. ITEM 6. [RESERVED]
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information for Common Stock Our common stock is listed on the New York Stock Exchange under the ticker symbol “NRGV.” Prior to February 14, 2022 and before the completion of the Merger, Novus’ Class A common stock traded on the New York Stock Exchange under the ticker symbol “NXU.” Holders of Record At April 7, 2023, there were 118 holders of rec ord of our common stock.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information for Common Stock Our common stock is listed on the New York Stock Exchange under the ticker symbol “NRGV.” Prior to February 14, 2022 and before the completion of the Merger, Novus’ Class A common stock traded on the New York Stock Exchange under the ticker symbol “NXU.” Holders of Record At March 7, 2024, there were 123 holders of record of our common stock.
Removed
Unregistered Sales of Equity Securities and Use of Proceeds On the closing date of the Merger (as defined in “Management’s Discussion and Analysis in Part II, Item 7 of this Annual Report), we consummated a private placement financing (“PIPE”) in which certain investors purchased an aggregate of 19.5 million shares of common stock (such investors, the “Subscribers”) for an aggregate purchase price of $195.0 million.
Removed
The shares of common stock issued in connection with the PIPE were not registered under the Securities Act, in reliance upon the exemption provided in Section 4(a)(2) of the Securities Act. We have used and continue to use the proceeds to fund our operations.
Removed
These shares issued were subsequently registered with the United States Securities and Exchange Commission in connection with Energy Vault’s Registration Statement on Form S-1 filed on February 14, 2022, which became effective as of May 6, 2022. Repurchase of Equity Securities There were no repurchases of the Company’s equity securities during 2022. Item 6. [Reserved]

Item 7. Management's Discussion & Analysis

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

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Biggest changeThe presentation of this non-GAAP measure is not meant to be considered in isolation or as an alternative to GAAP net loss as an indicator of our performance. 53 Table of Contents The following table provides a reconciliation from non-GAAP adjusted EBITDA to GAAP net loss, the most directly comparable GAAP measure (amounts in thousands): Year Ended December 31, 2022 2021 Net loss (GAAP) $ (78,299) $ (31,338) Non-GAAP Adjustments: Interest income, net (3,693) (57) Income tax expense 427 1 Depreciation and amortization 7,743 2,320 Stock-based compensation expense 41,058 500 Change in fair value of warrant liability (2,330) — Transaction costs 20,586 — Asset impairment 2,828 2,724 Foreign exchange losses 316 1,878 Adjusted EBITDA (non-GAAP) $ (11,364) $ (23,972) We present adjusted EBITDA, which is net loss excluding adjustments that are outlined in the quantitative reconciliation provided above, as a supplemental measure of our performance and because we believe this measure is frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry.
Biggest changeThe following table provides a reconciliation from GAAP S&M expenses to non-GAAP adjusted S&M expenses (amounts in thousands): Year Ended December 31, 2023 2022 S&M expenses (GAAP) $ 18,210 $ 12,582 Non-GAAP adjustments: Stock-based compensation expense 7,143 5,111 Reorganization expenses 84 — Adjusted S&M expenses (non-GAAP) $ 10,983 $ 7,471 55 Table of Contents The following table provides a reconciliation from GAAP R&D expenses to non-GAAP adjusted R&D expenses (amounts in thousands): Year Ended December 31, 2023 2022 R&D expenses (GAAP) $ 37,104 $ 42,605 Non-GAAP adjustments: Stock-based compensation expense 10,057 14,775 Reorganization expenses 182 — Adjusted R&D expenses (non-GAAP) $ 26,865 $ 27,830 The following table provides a reconciliation from GAAP G&A expenses to non-GAAP adjusted G&A expenses (amounts in thousands): Year Ended December 31, 2023 2022 G&A expenses (GAAP) $ 68,060 $ 56,622 Non-GAAP adjustments: Stock-based compensation expense 25,897 21,172 Reorganization expenses 318 — Adjusted G&A expenses (non-GAAP) $ 41,845 $ 35,450 The following table provides a reconciliation from GAAP net loss to non-GAAP adjusted EBITDA, with net loss being the most directly comparable GAAP measure (amounts in thousands): Year Ended December 31, 2023 2022 Net loss (GAAP) $ (98,443) $ (78,299) Non-GAAP adjustments: Interest income, net (8,117) (3,693) Income tax expense (349) 427 Depreciation and amortization 893 7,743 Stock-based compensation expense 43,097 41,058 Reorganization expenses 584 — Change in fair value of warrant liability — (2,330) Transaction costs — 20,586 Asset impairment — 2,828 Foreign exchange losses 222 316 Adjusted EBITDA (non-GAAP) $ (62,113) $ (11,364) We present adjusted EBITDA, which is net loss excluding adjustments that are outlined in the quantitative reconciliation provided above, as a supplemental measure of our performance and because we believe this measure is frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry.
Intellectual Property Licensing: The Company enters into licensing agreements of its intellectual property that are within the scope of ASC 606. The terms of such licensing agreements include the license of functional intellectual property, given the functionality of the intellectual property is not expected to change substantially as a result of the licensor’s ongoing activities.
Licensing of Intellectual Property: The Company enters into licensing agreements of its intellectual property that are within the scope of ASC 606. The terms of such licensing agreements include the license of functional intellectual property, given the functionality of the intellectual property is not expected to change substantially as a result of the licensor’s ongoing activities.
The Company’s stock-based compensation arrangements are accounted for in accordance with ASC Topic 718, “Share Based Payments.” Compensation expense is recognized over the requisite service period (usually the vesting period) on a straight-line basis and adjusted for actual forfeitures of unvested awards as they occur.
Stock-Based Compensation The Company’s stock-based compensation arrangements are accounted for in accordance with ASC Topic 718, “Share Based Payments.” Compensation expense is recognized over the requisite service period (usually the vesting period) on a straight-line basis and adjusted for actual forfeitures of unvested awards as they occur.
The Company has determined that it is probable that the entire $25.0 million will be collected from Atlas, and therefore has included that amount in the contract’s transaction price. Certain licensing agreements contain a significant financing component due to the customer having extended payment terms.
The Company has determined that it is probable that the entire $25.0 million will be collected from the customer, and therefore has included that amount in the contract’s transaction price. Certain licensing agreements contain a significant financing component due to the customer having extended payment terms.
Cash used in investing activities for the year ended December 31, 2022 consisted of $9.0 million for the purchase of equity securities, $2.3 million for the purchase of property and equipment, and $2.0 million for the purchase of a convertible note.
Cash used in investing activities for the year ended December 31, 2022 consisted of $9.0 million for the purchase of equity securities in KORE, $2.3 million for the purchase of property and equipment, and $2.0 million for the purchase of a convertible note.
If our market share declines due to increased competition or if we are not able to compete as we expect, our revenue and ability to generate profits in the future may be adversely affected. Inflation In the markets in which we operate, there have been higher rates of inflation in recent months.
If our market share declines due to increased competition or if we are not able to compete as we expect, our revenue and ability to generate profits in the future may be adversely affected. Inflation In the markets in which we operate, there have been higher rates of inflation in recent years.
The global supply chain, on which Energy Vault relies, has been significantly impacted by (i) the COVID-19 pandemic, (ii) economic uncertainties, including the war in Ukraine, and (iii) high inflation pressure on project budgeting resulting in potential significant delays and cost fluctuations, particularly with respect to microchips and many other raw materials that are within the motor and power electronic supply chains.
The global supply chain, on which Energy Vault relies, has been significantly impacted by (i) the COVID-19 pandemic, (ii) economic uncertainties, including the war in Ukraine and the conflict in the Middle East, and (iii) high inflation pressure on project budgeting resulting in potential significant delays and cost fluctuations, particularly with respect to microchips and many other raw materials that are within the motor and power electronic supply chains.
The non-cash charges primarily consisted of $41.1 million in stock-based compensation expense, $7.7 million in depreciation and amortization expense, and $2.8 million in asset impairments, partially offset by a $2.3 million gain from the change in fair value of the Company’s warrant liability.
The non-cash charges primarily consisted of $41.1 million in stock-based compensation expense, $7.7 million in depreciation and amortization expense, and $2.8 million in asset impairment charges, partially offset by a $2.3 million gain from a change in the fair value of the Company’s warrant liability.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis provide information which Energy Vault’s management believes is relevant to an assessment and understanding of Energy Vault’s consolidated results of operations and financial condition as of December 31, 2022 and for the fiscal year ended December 31, 2022.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis provide information which Energy Vault’s management believes is relevant to an assessment and understanding of Energy Vault’s consolidated results of operations and financial condition as of December 31, 2023 and for the fiscal year ended December 31, 2023.
The Company’s contracts generally provide customers the right to liquidated damages (“LDs”) against Energy Vault in the event specified milestones are not met on time, or certain performance metrics are not met upon or after the substantial completion date.
The Company’s contracts generally provide customers with a right to liquidated damages (“LDs”) against Energy Vault in the event specified milestones are not met on time, or certain performance metrics are not met upon or after the substantial completion date.
For the year ended December 31, 2022, cash provided by financing activities was primarily attributable to $235.9 million in proceeds from the reverse recapitalization and PIPE financing, net, and $7.9 million in proceeds from the exercise of warrants.
During the year ended December 31, 2022, cash provided by financing activities was primarily attributable to $235.9 million in proceeds from the reverse recapitalization and PIPE financing, net, and $7.9 million in proceeds from the exercise of warrants.
Additionally, gross profit and gross profit margin may vary from period to period due to our sales volume, product prices, product costs, product mix, geographical mix, and the timing of when we perform installation and construction services.
Additionally, gross profit and gross profit margin may vary from period to period due to our sales volume, product prices, product costs, product mix, geographical mix, along with the timing of when we perform installation and construction services.
Since the revenue recognition of these contracts depends on estimates, which are assessed continually during the term of the contract, recognized revenues and profit are subject to revisions as the contract progresses to completion.
Since the revenue recognition of these contracts depends on estimates, which are assessed continually during the term of the contract, recognized revenues and profits are subject to revisions as the contract progresses to completion.
There can be no assurance as to our customer’s requirements or if actual results will be consistent with our estimates. As a result, our backlog as of any particular date is an uncertain indicator of future revenue and earnings. Backlog is a common measurement used in our industry.
There can be no 48 Table of Contents assurance as to our customer’s requirements or if actual results will be consistent with our estimates. As a result, our backlog as of any particular date is an uncertain indicator of future revenue and earnings. Backlog is a common measurement used in our industry.
Operating cash flows were positively impacted by non-cash charges of $49.6 million, an increase in accounts payable and accrued expenses of $67.9 million, and an increase in contract liabilities of $49.4 million.
Operating cash flows were positively impacted by non-cash charges of $49.3 million, an increase in accounts payable and accrued expenses of $67.9 million, and an increase in contract liabilities of $49.4 million.
LDs are accounted for as variable consideration, and the contract price is reduced by the expected penalty 55 Table of Contents or LD amount when recognizing revenue.
LDs are accounted for as variable consideration, and the contract price is reduced by the expected penalty 57 Table of Contents or LD amount when recognizing revenue.
Key Operating Metrics Bookings Bookings represents the total MWhs to be delivered and the aggregate contracted value for energy storage systems, tolling arrangements, and license and service agreements signed during the period. The aggregate contracted value excludes any potential future variable payments or royalties.
Key Operating Metrics Bookings Bookings represents the total MWhs to be delivered and the aggregate contracted value for energy storage systems, tolling arrangements, and intellectual property license agreements, and software service agreements signed during the period. The aggregate contracted value excludes any potential future variable payments or royalties.
We are expected to remain an emerging growth company through the end of 2023 and expect to continue to take advantage of the benefits of the extended transition period.
We are expected to remain an emerging growth company through the end of 2026 and expect to continue to take advantage of the benefits of the extended transition period.
Once stored in our storage solutions, energy can be discharged to the grid in a controlled and reliable manner at any time, regardless of the then current ability of the renewable sources to generate power.
Once energy is stored in our solutions, it can be discharged to the grid in a controlled and reliable manner at any time, regardless of the then current ability of the renewable sources to generate power.
General and Administrative Expenses General and administrative expenses consist of information technology expenses, legal and professional fees, travel costs, and personnel-related expenses for our corporate, executive, finance, and other administrative functions, including expenses for professional and contract services. Personnel-related expenses consist of salaries, benefits, and stock-based compensation expense.
Personnel-related expenses consist of salaries, benefits, and stock-based compensation expense. General and Administrative (“G&A”) Expenses G&A expenses consist of information technology expenses, legal and professional fees, travel costs, and personnel-related expenses for our corporate, executive, finance, and other administrative functions, including expenses for professional and contract services. Personnel-related expenses consist of salaries, benefits, and stock-based compensation expense.
Recently Adopted and Issued Accounting Pronouncements Recently issued and adopted/unadopted accounting pronouncements are described in Note 2 of the consolidated financial statements included elsewhere in this Annual Report.
Recently Adopted and Issued Accounting Pronouncements Recently issued and adopted/unadopted accounting pronouncements are described in Note 2 of the consolidated financial statements included elsewhere in this Annual Report. 58 Table of Contents
The following table presents bookings for the periods indicated ($ in thousands): Year Ended December 31, 2022 2021 Change Bookings [MWh] 1,635 — 1,635 Bookings [$] $ 540,086 $ — $ 540,086 Backlog Backlog represents the amount of revenue we expect to realize in the future on uncompleted construction contracts, including new contracts under which work has not yet begun, as well as the remaining revenue to be recognized under the Company’s intellectual property licensing agreements.
The following table presents bookings for the periods indicated ($ in thousands): Year Ended December 31, 2023 2022 Change Bookings [MWh] 400 1,635 (1,235) Bookings [$] $ 205,776 $ 540,086 $ (334,310) Backlog Backlog represents the amount of revenue we expect to realize in the future on uncompleted construction contracts, including new contracts under which work has not yet begun, as well as the remaining revenue to be recognized under the Company’s intellectual property licensing agreements.
Gross Profit and Gross Profit Margin Gross profit and gross profit margin may vary from period to period due to the timing of when control of significant uninstalled materials are transferred to customers under contracts to sell energy storage systems.
Gross Profit and Gross Profit Margin Gross profit and gross profit margin may vary from period to period due to the timing of transferring control of significant uninstalled materials to customers under contracts to sell energy storage systems.
Research and Development Expenses Research and development expenses consist primarily of internal and external expenses incurred in connection with our research activities and development programs that include materials costs directly related to product development, testing and evaluation costs, construction costs including labor and transportation of material, overhead related costs and other direct expenses consisting of personnel-related expenses and consulting expenses relating to study of product safety, reliability and development.
Research and Development (“R&D”) Expenses R&D expenses consist primarily of internal and external expenses incurred in connection with our research activities and development programs that include materials costs directly related to product development, testing and evaluation costs, 49 Table of Contents construction costs including labor and transportation of material, overhead related costs and other direct expenses consisting of personnel-related expenses and consulting expenses relating to study of product safety, reliability and development.
When control of significant uninstalled materials are transferred to customers, the Company recognizes revenue in an amount equal to the cost of those materials. The profit margin inherit in these materials is deferred until the Company performs on its obligation to install the materials during construction of the energy storage systems.
When control of significant uninstalled materials is transferred to customers, the Company recognizes revenue in an amount equal to the cost of those materials. The profit margin inherent in these materials is deferred until the Company fulfills its obligation to install the materials during construction of the energy storage systems.
Energy Storage Industry The growth of the energy storage market that we address is primarily driven by the decreasing cost of renewable power generation sources, government mandates, financial incentives to reduce CO2 emissions, and increasing geopolitical pressures driving energy independence goals.
The growth of the energy storage market that we address is primarily driven by the decreasing cost of energy storage technologies and renewable power generation sources, government mandates, financial incentives to reduce GHG 46 Table of Contents emissions, and increasing geopolitical pressures driving energy independence goals.
If we raise funds by issuing debt securities, these debt securities would have rights, preferences and privileges senior to those of holders of common stock. The terms of debt securities or borrowings could impose significant restrictions on our operations.
Any equity securities issued may also provide for rights, preferences or privileges senior to those of holders of our common stock. If we raise funds by issuing debt securities, these debt securities would have rights, preferences and privileges senior to those of holders of common stock. The terms of debt securities or borrowings could impose significant restrictions on our operations.
Sales and Marketing Expenses Sales and marketing expenses consist primarily of internal personnel-related costs for marketing, sales, and related support teams and external costs such as professional service costs, trade shows, marketing and sales related promotional materials, public relations expenses, website operating and maintenance costs. Personnel-related expenses consist of salaries, benefits, and stock-based compensation expense.
Sales and Marketing (“S&M”) Expenses S&M expenses consist primarily of internal personnel-related costs for marketing, sales, and related support teams, as well as external costs such as professional service fees, trade shows, marketing and sales-related promotional materials, public relations expenses, website operating and maintenance costs. Personnel-related expenses include salaries, benefits, and stock-based compensation expenses.
The credit market and financial services industry have in the past, and may in the future, experience periods of uncertainty that could impact the availability and cost of equity and debt financing. Licensing Agreements with Extended Payment Terms The Company has licensed its EVx intellectual property and certain of these agreements contain extended payment terms.
The credit market and financial services industry have in the past, and may in the future, experience periods of uncertainty that could impact the availability and cost of equity and debt financing. 53 Table of Contents Licensing Agreements with Extended Payment Terms The Company has licensed its gravity storage technology and certain of these agreements contain extended payment terms.
During the year ended December 31, 2022, cash used in operating activities was negatively impacted by a net loss of $78.3 million, an increase in accounts receivable of $37.5 million, an increase in contract assets of $29.0 million, an increase in prepaid and other current assets of $29.6 million, an increase in customer financings receivable of $9.7 million, and an increase in inventory of $4.4 million .
During the year ended December 31, 2022, cash used in operating activities of $23.3 million was negatively impacted by a net loss of $78.3 million, an increase in accounts receivable of $37.5 million, an increase in contract assets of $29.0 million, an increase in advances to suppliers of $24.3 million, an increase in customer financing receivable of $9.7 million, 54 Table of Contents an increase in prepaid and other current assets of $5.3 million, and an increase in inventory of $4.4 million.
Energy Vault and Novus paid $44.8 million in transaction costs, resulting in total net cash proceeds to Energy Vault from the Merger and PIPE of $191.1 million. See Note 1 and Note 3, in Part II, Item 8.
Energy Vault and Novus paid $44.8 million in transaction costs, resulting in total net cash proceeds to Energy Vault from the Merger and PIPE of $191.1 million. See Note 1 and Note 3, in Part II, Item 8. “Financial Statements and Supplementary Data” for additional information about the Merger.
Adjusted EBITDA is not a measurement of our financial performance under GAAP and should not be considered as an alternative to net loss, operating loss, or any other performance measures derived in accordance with GAAP or as an alternative to cash flow from operating activities as a measure of our liquidity.
Adjusted EBITDA is not a measurement of our financial performance under GAAP and should not be considered as an alternative to net loss, operating loss, or any other performance measures derived in accordance with GAAP or as an alternative to cash flow from operating activities as a measure of our liquidity. 56 Table of Contents Our adjusted EBITDA measure has limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP.
December 31, (amounts in thousands) 2022 2021 Cash, cash equivalents, and restricted cash: Cash and cash equivalents $ 203,037 $ 105,125 Restricted cash 83,145 — Total cash, cash equivalents, and restricted cash $ 286,182 $ 105,125 Short-Term Liquidity M anagement believes that its cash, cash equivalents, and restricted cash on hand as of December 31, 2022 will be sufficient to fund our operating activities for at least the next twelve months without regard to any cash proceeds we received or may in the future receive upon the exercise for cash of our private warrants.
The following tables summarizes our cash, cash equivalents, and restricted cash balances as of December 31, 2023 and 2022 (amounts in thousands): December 31, 2023 2022 Cash and cash equivalents $ 109,923 $ 203,037 Restricted cash 35,632 83,145 Total cash, cash equivalents, and restricted cash $ 145,555 $ 286,182 Short-Term Liquidity M anagement believes that its cash and cash equivalents on hand as of the filing date of this Annual Report will be sufficient to fund our operating activities for at least the next twelve months without regard to any cash proceeds we may receive in the future upon the exercise of our private warrants.
The resulting improved economics are expected to reduce the cost to implement storage within the domestic market and may amplify and accelerate the adoption of energy storage systems for shorter, longer, and extended duration use cases, like those offered by Energy Vault. Our business depends on the acceptance of our energy storage products in the marketplace.
The resulting improved economics are expected to reduce the cost to implement storage within the domestic market and may amplify and accelerate the adoption of energy storage systems for short, long, and extended duration use cases, like those offered by Energy Vault.
Accounting for stock-based compensation requires us to make a number of judgments, estimates, and assumptions. If any of the estimates prove to be inaccurate, Energy Vault’s net loss and operating results could be affected adversely.
Accounting for stock-based compensation requires us to make a number of judgments, estimates, and assumptions. If any of the estimates prove to be inaccurate, Energy Vault’s net loss and operating results could be affected adversely. Stock-based compensation for stock options is estimated on the date of grant using the Black-Scholes option-pricing model.
Financing Activities During the years ended December 31, 2022 and 2021, cash provided by financing activities totaled $217.8 million and $116.4 million, respectively.
Financing Activities During the years ended December 31, 2023 and 2022, cash (used in) provided by financing activities totaled $(5.5) million and $217.8 million, respectively.
Critical Accounting Policies and Use of Estimates Our consolidated financial statements are prepared in conformity with GAAP. In preparing our financial statements, we make assumptions, judgments, and estimates based on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions and conditions.
In preparing our financial statements, we make assumptions, judgments, and estimates based on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions and conditions. We believe that the following accounting policies involve a high degree of judgment and complexity.
Asset Impairment Asset impairment was $2.8 million for the year ended December 31, 2022, compared $2.7 million for the year ended December 31, 2021. Asset impairment for the year ended December 31, 2022 related to the CDU and the brick machines used to manufacture bricks for the EV1 tower design. The Company completed the dismantling of the CDU during 2022.
Asset Impairment There was no asset impairment expense for the year ended December 31, 2023, compared to $2.8 million for the year ended December 31, 2022. Asset impairment for the year ended December 31, 2022 related to the EV1 CDU and the brick machines used to manufacture bricks for the EV1 tower design.
The exercise price for our private warrants is $11.50 per warrant, subject to certain specified adjustments. To the extent that the price of our common stock exceeds $11.50 per share, it is more likely that our private warrant holders will exercise their warrants.
To the extent that the price of our common stock exceeds $11.50 per share, it is more likely that our private warrant holders will exercise their warrants. To the extent that the price of our common stock declines, including a decline below $11.50 per share, it is less likely that our private warrant holders will exercise their warrants.
To a lesser extent, general and administrative expense includes depreciation, investor relations costs, insurance costs, rent, office expenses, and maintenance costs.
To a lesser extent, general and administrative expense includes investor relations costs, insurance costs, rent, office expenses, and maintenance costs. Depreciation and Amortization Expense Depreciation and amortization expense consists of costs associated with property and equipment, and amortization of intangibles.
Revenue for these performance obligations is recognized using the percentage of completion method based on cost incurred as a percentage of total estimated contract costs. Contract costs include all direct materials and labor costs related to contract performance.
The Company utilizes the percentage of completion method based on costs incurred as a percentage of total estimated contract costs to determine the amount of revenue to recognize. Contract costs include all direct materials and labor costs related to contract performance.
Variable consideration is included in the transaction price only to the extent that it is improbable that a significant reversal in the amount of cumulative revenue recognized will occur when the uncertainty is resolved. Estimating variable consideration requires certain estimates and assumptions, including whether and by how much a project will be delayed.
Variable consideration is included in the transaction price only to the extent that it is improbable that a significant reversal in the amount of cumulative revenue recognized will occur when the uncertainty is resolved.
Expected cash inflows from all licensing agreements with extended payment terms as of December 31, 2022 are as follows: Year ended December 31, Amount 2023 $ 1,600 2024 1,500 2025 5,250 2026 2,750 2027 2,750 Thereafter 13,750 Total $ 27,600 Contractual Obligations Our principal commitments as of December 31, 2022 consisted primarily of obligations under operating leases, finance leases, deferred pensions, a nd issued purchase orders.
Anticipated cash inflows from licensing agreements with extended payment terms as of December 31, 2023 were as follows (amounts in thousands): Year ended December 31, Amount 2024 $ 6,600 2025 9,250 2026 6,750 2027 7,250 2028 7,250 Thereafter 60,000 Total $ 97,100 Contractual Obligations Our principal commitments as of December 31, 2023 consisted primarily of obligations under operating leases, finance leases, warranty obligations, deferred pensions, a nd issued purchase orders.
Furthermore, as we expand our services and digital applications in the future, we may face other competitors including software providers and hardware manufacturers that offer software solutions.
Competition The market for our products is competitive, and we may face increased competition as new and existing competitors introduce energy storage solutions and components. Furthermore, as we expand our services and digital applications in the future, we may face other competitors including software providers and hardware manufacturers that offer software solutions.
We expect to generate revenue in the future from the sale and licensing of the Company’s energy storage solutions, EMS, additional software applications, and long-term services agreements, including pursuant to tolling arrangements in connection with energy storage systems that we intend to own and operate.
In addition to these sources of revenue, in the future we expect to generate revenue from the sale of our GESSs, the sale or licensing of the Company’s software solutions, the sale of long-term service agreements to maintain customer owned energy storage systems, and through tolling arrangements in connection with energy storage systems that we intend to own and operate.
As a result, we have strategically chosen to design an agile and agnostic software platform that can orchestrate the management of one or more of our diverse storage mediums and the underlying power generation assets to harmonize asset operation and maximize economic return for our customers.
Alternatively, we have strategically chosen to design an agile and agnostic software platform that can orchestrate the management of not just one energy storage technology, but rather one or more of our diverse storage mediums and the underlying power generation assets to harmonize asset operation and drive competitive operational performance.
Our non-cancellable purchase obligations as of December 31, 2022 totaled approximately $50.2 million . 52 Table of Contents Cash Flows The following table summarizes cash flows from operating, investing, and financing activities for the periods indicated (amounts in thousands): Year Ended December 31, 2022 2021 Net cash used in operating activities $ (23,346) $ (22,066) Net cash used in investing activities (13,319) (1,170) Net cash provided by financing activities 217,771 116,379 Effects of exchange rate changes on cash (49) 1,931 Net increase in cash, cash equivalents, and restricted cash $ 181,057 $ 95,074 Operating Activities During the years ended December 31, 2022 and 2021, cash used in operating activities totaled $23.3 million and $22.1 million, respectively.
Cash Flows The following table summarizes cash flows from operating, investing, and financing activities for the periods indicated (amounts in thousands): Year Ended December 31, 2023 2022 Net cash used in operating activities $ (92,655) $ (23,346) Net cash used in investing activities (42,542) (13,319) Net cash (used in) provided by financing activities (5,482) 217,771 Effects of exchange rate changes on cash 52 (49) Net (decrease) increase in cash, cash equivalents, and restricted cash $ (140,627) $ 181,057 Operating Activities During the years ended December 31, 2023 and 2022, cash used in operating activities totaled $92.7 million and $23.3 million, respectively.
For more information on our significant accounting policies, refer to Note 2 - Summary of Significant Accounting Policies of our audited consolidated financial statements included in this Annual Report on Form 10-K.
Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations. For more information on our significant accounting policies, refer to Note 2 - Summary of Significant Accounting Policies of our audited consolidated financial statements included in this Annual Report on Form 10-K.
Energy storage is critical to reducing the intermittency and volatility of renewable energy generation. However, there is no guarantee that the deployment of renewable energy will occur at the rate that is expected.
Increasing Deployment of Renewable Energy Deployment of renewable energy resources has accelerated over the last decade, and solar and wind have become a low cost energy source. Energy storage is critical to reducing the intermittency and volatility of renewable energy generation. However, there is no guarantee that the deployment of renewable energy will occur at the rate that is expected.
Business Combination and Public Company Costs On February 11, 2022, Legacy Energy Vault completed the Merger. Immediately following the completion of the Merger, Novus changed its name to Energy Vault Holdings, Inc. On February 14, 2022, Energy Vault’s common stock and warrants began trading on the New York Stock Exchange under the symbols “NRGV” and “NRGV WS,” respectively.
Business Combination and Public Company Costs On February 11, 2022, Legacy Energy Vault completed the Merger. Immediately following the completion of the Merger, Novus changed its name to Energy Vault Holdings, Inc.
Additionally, our revenue growth is dependent on our ability to continue to develop and commercialize new and innovative products to meet our customer’s energy storage needs. 47 Table of Contents Cost of Revenue Cost of revenue primarily consists of product costs, including batteries and supplies, as well as subcontractor costs, direct labor, and consulting expenses associated with constructing energy storage systems and providing construction support services to Atlas.
Additionally, our revenue growth is dependent on our ability to continue to develop and commercialize new and innovative products to meet our customer’s energy storage needs. Cost of Revenue Cost of revenue primarily consists of product costs, including purchased materials and supplies, as well as costs related to subcontractors, direct labor, and product warranties.
Gross Profit and Gross Profit Margin Gross profit was $59.3 million and gross profit margin was 40.6% for the year ended December 31, 2022. Gross profit in 2022 was primarily attributable to the Company’s intellectual property licensing revenue, which did not have any associated cost of revenue.
Gross profit during 2022 was primarily attributable to the Company’s intellectual property licensing revenue, which did not have any associated cost of revenue. S&M Expenses S&M expenses increased by $5.6 million to $18.2 million for the year ended December 31, 2023, compared to $12.6 million for the year ended December 31, 2022.
Energy Vault has incurred negative operating cash flows and operating losses in the past. We may continue to incur operating losses in the future due to our-going research and development activities. We may seek additional capital through equity and/or debt financings depending on market conditions.
We may continue to incur operating losses in the future due to our on-going research and development activities. We may seek additional capital through equity and/or debt financings depending on market conditions. If we are required to raise additional funds by issuing equity securities, dilution to stockholders would result.
As of December 31, 2022, t he Company has contributed all $25.0 million. The refundable contribution will be returned to the Company upon Atlas’ first GESS reaching substantial completion, subject to adjustment for potential liquidated damages if certain performance metrics are not met.
The refundable contribution will be returned to Energy Vault upon the customer’s first GESS reaching substantial completion, subject to adjustment for potential liquidated damages if certain performance metrics are not met.
Inflationary pressures, supply chain disruptions, geopolitical stresses, and other factors could result in fluctuations in demand for and deployment of renewable energy resources, adversely affecting our revenue and ability to generate profits in the future. Competition The market for our products is competitive, and we may face increased competition as new and existing competitors introduce energy storage solutions and components.
Inflationary pressures, supply chain disruptions, geopolitical conflicts, government regulations, and other factors could result in fluctuations in demand for and deployment of renewable energy resources, adversely affecting our revenue and ability to generate profits in the future.
Even if renewable energy and energy storage become more widely adopted than they have been to date, potential customers may choose energy storage products from our competitors. Increasing Deployment of Renewable Energy Deployment of renewable energy resources has accelerated over the last decade, and solar and wind have become a low cost energy source.
Our business depends on the acceptance of our energy storage products in the marketplace. Even if renewable energy and energy storage become more widely adopted than they have been to date, potential customers may choose energy storage products from our competitors.
Partially offsetting these cash inflows was $20.7 million in transaction cost payments related to the reverse recapitalization and $5.5 million in tax payments related to the net settlement of equity awards.
Partially offsetting these cash inflows was $20.7 million transaction cost payments related to the reverse recapitalization and $5.5 million in tax payments related to the net settlement of equity awards. Non-GAAP Financial Measures To complement our consolidated statements of operations, we use non-GAAP financial measures of adjusted S&M expenses, adjusted R&D expenses, adjusted G&A expenses, and adjusted EBITDA.
Multiple contracts entered into with the same customer and near the same time to construct energy storage projects are combined in accordance with ASC 606. In these situations, the contract prices are aggregated and then allocated to each energy storage project based upon their relative stand-alone selling price.
Generally, each contract to design and construct an energy storage project contains one performance obligation. Multiple contracts entered into with the same customer and near the same time to construct energy storage projects are combined in accordance with ASC 606.
Revenue for the year ended December 31, 2022 consisted of $85.6 million from the building and transferring of energy storage products and $58.5 million from the licensing of the Company’s EVx intellectual property. Additionally, the Company recognized other revenue of $1.8 million related the Company providing construction support services to Atlas during the year ended December 31, 2022 .
Revenue from three customers accounted for 64%, 22%, and 13% respectively, of the Company’s total revenue for the year ended December 31, 2023. Revenue for the year ended December 31, 2022 primarily consisted of $85.6 million attributable to the building and transferring of energy storage products and $58.5 million attributable to licensing the Company’s EVx intellectual property.
The Merger was accounted for as a reverse recapitalization in accordance with United States Generally Accepted Accounting Principles (“GAAP”). Under this method of accounting, Novus was treated as the “acquired” company for financial reporting purposes.
Under this method of accounting, Novus was treated as the “acquired” company for financial reporting purposes.
Sales and Marketing Expenses Sales and marketing expenses increased by $11.8 million to $12.6 million for the year ended December 31, 2022, compared to $0.8 million for the year ended December 31, 2021.
G&A Expenses G&A expenses increased by $11.4 million to $68.1 million for the year ended December 31, 2023, compared to $56.6 million for the year ended December 31, 2022.
Our solutions are designed to address the intermittency inherent in the predominant sources of renewable energy production by storing energy produced when renewable energy production is active.
We are striving to create a world powered by renewable resources so that everyone will have access to clean, sustainable, and affordable energy. 45 Table of Contents Our solutions are designed to address the intermittency issues inherent in the predominant sources of renewable energy production by storing energy produced when renewable energy production is active.
Our cost of revenue is affected by underlying costs for batteries, inverters, enclosures, and cables, as well as the cost of subcontractors to provide construction services.
Our cost of revenue is affected by underlying costs of materials such as batteries, inverters, enclosures, transformers, and cables, as well as the cost of subcontractors to provide construction services. We do not currently hedge against changes in the price of raw materials as we do not purchase raw materials. We purchase energy storage system components from our suppliers.
The Company’s agreement with Atlas includes variable consideration of $25.0 million, which represents a refundable contribution the Company made to Atlas during the construction period for their first GESS. The refundable contribution will be returned to Energy Vault upon Atlas’ first GESS reaching substantial completion, subject to adjustment for potential liquidated damages if certain performance metrics are not met.
One of the Company’s agreement with a customer includes variable consideration of $25.0 million, which represents a refundable contribution the Company made to the customer during the construction period for their first GESS.
The Company’s backlog agrees with the amount of our remaining performance obligations, which are described in Note 4 - Revenue Recognition . 49 Table of Contents Results of Operations Consolidated Comparison of Year Ended December 31, 2022 to Year Ended December 31, 2021 The following table sets forth our results of operations for the periods indicated (amounts in thousands): Year Ended December 31, 2022 2021 $ Change Revenue $ 145,877 $ — $ 145,877 Operating Expenses: Cost of revenue 86,580 — 86,580 Sales and marketing 12,582 845 11,737 Research and development 50,058 7,912 42,146 General and administrative 56,912 18,056 38,856 Asset impairment 2,828 2,724 104 Loss from operations (63,083) (29,537) (33,546) Other Income (Expense): Interest expense (2) (7) 5 Change in fair value of warrant liability 2,330 — 2,330 Transaction costs (20,586) — (20,586) Other income (expenses), net 3,469 (1,793) 5,262 Loss before income taxes $ (77,872) $ (31,337) $ (46,535) Revenue The Company recognized revenue for the product and service categories as follows for the years ended December 31, 2022 and 2021 (amounts in thousands): Year Ended December 31, 2022 2021 Build and transfer energy storage products $ 85,636 $ — Licensing of intellectual property 58,483 — Other 1,758 — Total revenue $ 145,877 $ — Revenue for the year ended December 31, 2022 was $145.9 million compared to no revenue for the year ended December 31, 2021.
Transaction Costs Transaction costs consist of legal, accounting, banking fees, and other costs directly related to the consummation of the Merger and the PIPE. 50 Table of Contents Results of Operations Consolidated Comparison of Year Ended December 31, 2023 to Year Ended December 31, 2022 The following table sets forth our results of operations for the periods indicated (amounts in thousands): Year Ended December 31, 2023 2022 $ Change Revenue $ 341,543 $ 145,877 $ 195,666 Cost of revenue 324,012 86,580 237,432 Gross profit 17,531 59,297 (41,766) Operating expenses: Sales and marketing 18,210 12,582 5,628 Research and development 37,104 42,605 (5,501) General and administrative 68,060 56,622 11,438 Depreciation and amortization 893 7,743 (6,850) Asset impairment — 2,828 (2,828) Loss from operations (106,736) (63,083) (43,653) Other income (expense): Interest expense (35) (2) (33) Interest income 8,152 3,695 4,457 Change in fair value of warrant liability — 2,330 (2,330) Transaction costs — (20,586) 20,586 Other expense, net (173) (226) 53 Loss before income taxes $ (98,792) $ (77,872) $ (20,920) Revenue The Company recognized revenue for the product and service categories as follows for the years ended December 31, 2023 and 2022 (amounts in thousands): Year Ended December 31, 2023 2022 Build and transfer energy storage products $ 339,891 $ 85,636 Licensing of intellectual property 735 58,483 Other 917 1,758 Total revenue $ 341,543 $ 145,877 Revenue for the year ended December 31, 2023 increased by $195.7 million to $341.5 million comp ared to $145.9 million for the year ended December 31, 2022.
The increase was primarily attributable to a $22.3 million increase in personnel-related expenses, a $7.5 million increase in depreciation expense, a $7.0 million increase in engineering and development costs, a $3.1 million increase in software expenses, a $1.2 million increase in consulting costs, and a $1.0 million increase in travel related expenses.
The decrease was primarily attributable to a $2.7 million decrease in engineering and development costs, a $2.0 million decrease in personnel-related expenses, and a $0.8 million decrease in consulting costs. These cost decreases were primarily attributable to a focus on cost controls and a reduction in personnel.
The improvement was primarily attributable to an increase in interest income and positive fluctuations in foreign currency transaction gain and losses. Liquidity and Capital Resources Sources of Liquidity Since inception , we have financed our operations primarily through the issuance and sale of equity and the proceeds from the Merger and the PIPE.
The transaction costs in 2022 related to the consummation of the Merger. Liquidity and Capital Resources Sources of Liquidity Since inception , we have financed our net cash used in operating and investing activities primarily through the issuance and sale of equity, and with the proceeds from the Merger and the PIPE.
During the year ended December 31, 2021, cash used in operating activities of $22.1 million was negatively impacted by a net loss of $31.3 million. Operating cash flows were positively impacted by non-cash charges of $6.3 million and an increase in accounts payable and accrued expenses of $3.0 million.
During the year ended December 31, 2023, cash used in operating activities was negatively impacted by a net loss of $98.4 million, an increase in contract assets of $57.0 million, and a decrease in contract liabilities of $44.5 million.
The Company determines the transaction price based on the consideration expected to be received, which includes estimates of liquidated damages or other variable consideration. Generally, each contract to design and construct an energy storage project contains one performance obligation.
Revenue Build and Transfer Energy Storage Projects : The Company enters into contracts with utility companies and independent power producers to build energy storage projects. The Company determines the transaction price based on the consideration expected to be received, which includes estimates of liquidated damages or other variable consideration.
The discount rate used in the discounted cash flow analysis is highly subjective as it is dependent on the Company’s assessment of the customer’s credit risk. Stock-Based Compensation We have granted stock-based awards consisting primarily of incentive and non-qualified stock options and restricted stock units (“RSUs”) to employees, members of our Board, and non-employees.
The discount rate used in the discounted cash flow analysis is highly subjective as it is dependent on the Company’s assessment of the customer’s credit risk.
The increase was primarily attributable to a $25.7 million increase in personnel-related expenses, a $6.3 million increase in legal and professional fees, a $2.5 million increase in consulting costs, a $1.8 million in travel related expenses, a $1.7 million increase in insurance costs, a $1.1 million increase in software expenses, and a $0.8 million increase in employee recruiting costs.
The increase was primarily attributable to a $9.8 million increase in personnel-related expenses, a $1.4 million increase in software and IT costs, a $1.1 million increase in insurance costs, and a $0.6 million increase in consulting costs. The increase in personnel costs was due to expanded headcount and an increase in stock-based compensation expense.
Our project delivery generally relies on third-party EPC firms to construct our storage systems, under our supervision with dedicated teams tasked with project management.
Under the EPC model, we generally rely on third-party EPC firms to construct our storage systems, under our supervision with dedicated teams tasked with project management. Under the EEQ model, we are responsible for the delivery and installation of the equipment we provide, as well as resolving issues within our scope of supply.
“Risk Factors.” Product Development and Deployment Plan We leverage our sustainable and differentiated technology to provide our customers with an economical solution to meet their shorter, longer, and extended-duration renewable energy storage needs. We believe that the majority of our competitors are primarily focused on the development and marketing of vertically siloed solutions based on a singular energy storage technology.
“Risk Factors.” Product Development and Deployment Plan We leverage our sustainable and differentiated technologies to provide our customers with economical solutions to meet their short, long, and extended-duration renewable energy storage needs. Our energy storage solutions are designed to accommodate a wide variety of renewable power sources and to achieve an attractive levelized cost of energy relative to fossil fuels.
Global energy storage additions are on track to grow at a 21% compound annual growth rate through 2030, with annual additions reaching 233 GWhs and cumulative capacity reaching nearly 400 GWhs. Both government mandates and companies focused on 46 Table of Contents reducing energy use, cost, and emissions will propel the shift to renewable sources of power.
According to the 2H 2023 Energy Storage Market Outlook published by BloombergNEF in October 2023, the energy storage market is expected to grow at a “27% compound annual growth rate through 2030, with annual additions reaching 110 GW/372 GWh, or 2.6 times expected 2023 gigawatt installations.” Both government mandates and companies focused on reducing energy use, cost, and emissions are expected to propel the shift to renewable sources of power..
Revenue from two customers represented 57% and 35%, respectively, of the Company’s total revenue for the year ended December 31, 2022. Cost of Revenue Cost of revenue was $86.6 million for the year ended December 31, 2022 compared to no cost of revenue for the year ended December 31, 2021.
Revenue from the building and transferring of energy storage products was attributable to the Company’s physical advancement on its BESS projects during the year. Revenue from two customers accounted for 57% and 35%, respectively, of the Company’s total revenue for the year ended December 31, 2022.
The increase in personnel costs was due to expanded headcount and an increase in stock-based compensation expense. Stock-based compensation expense was $21.2 million for the year ended December 31, 2022, compared to $0.1 million for the year ended December 31, 2021.
The increase was primarily attributable to an increase in personnel-related expenses of $4.7 million and an increase in consulting costs of $0.7 million. The increase in personnel costs was due to expanded headcount and increased stock-based compensation expense.
This full spectrum of energy storage solutions assures our customers that we not only have what they need today, but that we also have what they will need in the future, thereby protecting their investments in our products. For these reasons, we believe we are well positioned to compete successfully in the evolving market for energy storage solutions.
Our range of energy storage solutions assures our customers have what they need today, as well as what they will need in the future, thereby protecting their investments in our products within this high-growth market and its rapidly evolving use cases and requirements.
Asset Impairment Energy Vault began building a prototype of the EV1 in March 2020, resulting in the CDU, which was connected to the Swiss national grid in July 2020. Thereafter, through design improvements and refinements of its technology, Energy Vault announced the new EVx platform in 2021 and the Company dismantled the CDU in September 2022.
Thereafter, through design improvements and refinements of its technology, Energy Vault announced the new EVx platform in 2021 and the Company dismantled the EV1 CDU in September 2022. The Company has recognized various impairments related to the EV1 CDU when components have been damaged or become obsolete.
We anticipate that our market will be characterized by high growth and rapidly evolving use cases and requirements.
We anticipate that our market will be characterized by high growth and rapidly evolving use cases and requirements. We believe that the majority of our competitors are primarily focused on the development and marketing of vertically siloed solutions based on a singular energy storage technology.
Non-cash charges primarily consisted of $3.2 million related to the write-down of inventory, $2.3 million in depreciation and amortization expense, $0.5 million in stock-based compensation expense, and $0.1 million in non-cash lease expenses. Investing Activities During the years ended December 31, 2022 and 2021, cash used in investing activities totaled $13.3 million and $1.2 million, respectively.
Investing Activities During the years ended December 31, 2023 and 2022, cash used in investing activities totaled $42.5 million and $13.3 million, respectively.

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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 changeCommodity Price Risk We are subject to risk from fluctuating market prices of certain commodity raw materials, including cement, steel, aluminum, and lithium, that are used in the components from suppliers that are inputs into our products. Prices of these raw materials may be affected by supply restrictions or other logistic costs market factors from time to time.
Biggest changeCommodity Price Risk We are subject to risk from fluctuating market prices of certain commodity raw materials, including cement, steel, aluminum, and lithium, that are used in the components that we purchase from our suppliers and then as inputs to our products.
Significant price changes for these raw materials could reduce our operating margins if suppliers increase component prices and we are unable to recover such increases from our customers and could harm our business, financial condition, and results of operations. 58 Table of Contents
Significant price changes for these raw materials could reduce our operating margins if suppliers increase component prices and we are unable to recover such increases from our customers and could harm our business, financial condition, and results of operations. 59 Table of Contents
While it is difficult to measure the impact of inflation for such estimates accurately, we believe, if our costs are affected 57 Table of Contents due to significant inflationary pressures, we may not be able to fully offset higher costs through price increases or other corrective measures, which may adversely affect our business, financial condition, and results of operations.
While it is difficult to measure the impact of inflation for such estimates accurately, we believe, if our costs are affected due to significant inflationary pressures, we may not be able to fully offset higher costs through price increases or other corrective measures, which may adversely affect our business, financial condition, and results of operations.
Credit Risk Credit risk refers to the risk that a counterparty may default on its contractual obligations resulting in a loss to us. Our customers include the counterparties for the sale of our energy storage systems or the licensees of our intellectual property.
Credit Risk Credit risk refers to the risk that a counterparty may default on its contractual obligations resulting in a loss to us. Our customers include the counterparties for the sale of our energy storage products and solutions and the licensees of our intellectual property.
In addition, an increasing portion of our operating expenses is incurred outside the United States, is denominated in foreign currencies, such as the euro and the Swiss franc, and is subject to fluctuations due to changes in foreign currency exchange rates.
In addition, a portion of our operating expenses are incurred outside the United States and are denominated in foreign currencies, such as the euro and the Swiss franc, and are subject to fluctuations due to changes in foreign currency exchange rates.
If we become more exposed to currency fluctuations and are not able to successfully hedge against the risks associated with currency fluctuations, our results of operations could be adversely affected. Inflation Risk Our operations could be adversely impacted by inflation, primarily from higher material, labor, and construction costs.
If we increase our exposure to foreign currencies and are not able to successfully hedge against the risks associated with currency fluctuations, our results of operations could be adversely affected. Inflation Risk Our operations could be adversely impacted by inflation, primarily from higher material, labor, and construction costs.
Foreign Currency Risk Nearly all of our letters of intent are denominated in U.S. dollars, and certain of our definitive agreements could be denominated in currencies other than the U.S. dollar, including the Euro, the Australian dollar, the Brazilian real, and the Saudi riyal.
Foreign Currency Risk The majority of our contracts with customers are denominated in U.S. dollars, and certain of our definitive agreements could be denominated in currencies other than the U.S. dollar, including the Euro, the Swiss franc, the Australian dollar, the South African rand, the Brazilian real, and the Saudi riyal.
A loss of one or more of our significant customers, their inability to perform under their contracts, or their default in payment could harm our business and negatively impact revenue, results of operations, and cash flows.
A loss of one or more of our significant customers, their inability to perform under their contracts, or their default in payment could harm our business and negatively impact revenue, results of operations, and cash flows. Credit policies have been approved and implemented to assess our existing and potential customers with the objective of mitigating credit losses.
As we are not the direct buyer of these raw materials, we do not enter into hedging arrangements to mitigate commodity risk.
Prices of these raw materials may be affected by supply restrictions or other logistic costs market factors from time to time. As we are not the direct buyer of these raw materials, we do not enter into hedging arrangements to mitigate commodity risk.
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These policies establish guidelines, controls, and credit limits to manage credit risk within approved tolerances by mandating an appropriate evaluation of the financial condition of existing and potential customers, monitoring agency credit ratings, and by implementing credit practices that limit exposure according to the risk profiles of the counterparties.
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In addition, customers are required to make milestone payments based on their project’s progress. We may also, at times, require letters of credit, parent guarantees, or cash collateral when deemed necessary. Our overall exposure may be affected positively or negatively by macroeconomic or regulatory changes that may impact our counterparties.
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Currently, management does not anticipate a material adverse effect in our financial position or results of operations from non-performance of a customer. We continuously monitor the creditworthiness of all our customers.

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