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What changed in Enovix Corp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Enovix Corp'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.

+501 added−435 removedSource: 10-K (2023-03-01) vs 10-K (2022-03-25)

Top changes in Enovix Corp's 2023 10-K

501 paragraphs added · 435 removed · 278 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWe have secured a design win in this market with an LMR market leader. Computing — The Li-ion battery can also be credited for helping to usher in an era of portable PC computing. In 2020, laptops, tablets and hybrids (detachable tablets) were estimated to outship traditional desktop PCs by nearly 5-to-1 according to market-watcher IDC.
Biggest changeIn 2020, laptops, tablets and hybrids (detachable tablets) were estimated to outship traditional desktop PCs by nearly 5-to-1 according to market-watcher IDC. As a result, users are demanding higher performance from their portable PCs. Ultimately users want “always on, all day” battery life, similar to that which they experience with their cell phones.
Because these anode faces are small in area, this same 1,500 psi pressure, therefore, creates a force of only 210 pounds in the same size battery. To manage this 210 pounds of force, we invented a very thin (50-micron) stainless steel constraint system to surround the battery. This constraint system limits the battery from swelling and growing in size.
Because these anode faces are small in area, this same 1,500 psi pressure, therefore, creates a force of only 210 pounds in the same size battery. To manage these 210 pounds of force, we invented a very thin (50-micron) stainless steel constraint system to surround the battery. This constraint system limits the battery from swelling and growing in size.
Instead of winding and flattening, electrodes and separators are cut (or punched) into sheets, which are stacked horizontally. Cut-and-stack assembly provides better spatial efficiency than Jelly Roll wind-and-flatten assembly because the volume lost from core is eliminated and space at the outside edges is reduced. Cut-and-stack cells are used in consumer, military and EV applications.
Instead of winding and flattening, electrodes and separators are cut (or punched) into sheets, which are stacked horizontally. Cut-and-stack assembly provides better spatial efficiency than Jelly Roll wind-and-flatten assembly because the volume lost in the core is eliminated and space at the outside edges is reduced. Cut-and-stack cells are used in consumer, military and EV applications.
A silicon anode, by contrast, has a formation efficiency of roughly 50% to 60%, meaning that about 50% to 60% of the lithium is trapped in the silicon anode during formation and is no longer available for repeated cycling, reducing the battery’s capacity in half. Our 3D cell architecture uniquely enables a practical solution to this problem.
A silicon anode, by contrast, has a formation efficiency of roughly 50% to 60%, meaning that about 40% to 50% of the lithium is trapped in the silicon anode during formation and is no longer available for repeated cycling, reducing the battery’s capacity in half. Our 3D cell architecture uniquely enables a practical solution to this problem.
When first charged, a silicon anode can absorb and permanently trap as much as roughly 50% to 60% of the original lithium in the battery, reducing the battery’s capacity by about 50% to 60%. • Cycle swelling.
When first charged, a silicon anode can absorb and permanently trap as much as roughly 40% to 50% of the original lithium in the battery, reducing the battery’s capacity by about 50% to 60%. • Cycle swelling.
Companies subject to the GDPR may be required to give data subjects greater control over their personal information, comply with transparency obligations, establish a lawful basis and purpose for data processing, maintain documentation, protect the security and confidentiality of the personal information, notify individuals and/or supervisory authorities of data breaches, and impose privacy and data security requirements onto data processors in connection with the processing of personal information.
Companies subject to the EU GDPR may be required to give data subjects greater control over their personal data, comply with transparency obligations, establish a lawful basis and purpose for data processing, maintain documentation, protect the security and confidentiality of the personal data, notify individuals and/or supervisory authorities of data breaches, and impose privacy and data security requirements onto data processors in connection with the processing of personal data.
Our Competitive Strengths 100% Active Silicon Maximizes Anode Energy Density — Conventional Li-ion battery architecture only allows small amounts of silicon to be blended with graphite in the anode, limited by swelling. Our proprietary Enovix 3D cell architecture enables use of silicon without graphite to achieve 100% active silicon anode.
Our Competitive Strengths 100% Active Silicon Maximizes Anode Energy Density and Battery Capacity — Conventional Li-ion battery architecture only allows small amounts of silicon to be blended with graphite in the anode, limited by swelling. Our proprietary Enovix 3D cell architecture enables use of silicon without graphite to achieve 100% active silicon anode.
The laser patterning and high-speed stacking of electrodes and separators in our patented 3D cell architecture provides more precise and automatic layer alignment and better spatial efficiency than conventional cut-and-stack cell assembly that typically require slow, optical alignment of each layer.
The laser patterning and high-speed stacking of electrodes and separators in our proprietary 3D cell architecture provides more precise and automatic layer alignment and better spatial efficiency than conventional cut-and-stack cell assembly that typically require slow, optical alignment of each layer.
Problem 1 — Formation expansion In a conventional graphite anode, lithium atoms slip into the vacant spaces between the graphite layers, forming LiC6, resulting in very little graphite anode swelling during cycling ( If a silicon anode were used in a conventional battery architecture, the pressure of anode swelling would act on the large face of the battery, creating a force as large as 1.7 tons for a battery in a 50mm x 30mm x 3mm size battery.
Problem 1 — Formation expansion In a conventional graphite anode, lithium atoms slip into the vacant spaces between the graphite layers, forming LiC6, resulting in very little graphite anode swelling during cycling ( 5 Table of Contents If a silicon anode were used in a conventional battery architecture, the pressure of anode swelling would act on the large face of the battery, creating a force as large as 1.7 tons for a battery in a 50mm x 30mm x 3mm size battery.
These core values and our vision are reinforced in new hire training and everyday interactions. Corporate Information Our principal executive offices are located at 3501 W. Warren Avenue, Fremont, CA 94538 and our telephone number is (510) 695-2350.
Our Core Values are reinforced in new hire training and everyday interactions. Corporate Information Our principal executive offices are located at 3501 W. Warren Avenue, Fremont, CA 94538 and our telephone number is (510) 695-2350.
The GDPR grants certain rights to natural persons physically present in the EEA.
The EU GDPR grants certain rights to natural persons physically present in the EEA.
Battery Packaging and Formation — Our 3D Silicon™ Lithium-ion battery uses the same battery packaging and formation process as a conventional Li-ion battery–with one exception. The first cycle formation efficiency of a graphite anode is about 90% to 95%. The 7 Table of Contents first cycle formation efficiency of a silicon anode is only about 50% to 60%.
Battery Packaging and Formation — Our 3D Silicon™ Lithium-ion battery uses the same battery packaging and formation process as a conventional Li-ion battery–with one exception. The first cycle formation efficiency of a graphite anode is about 90% to 95%. The first cycle formation efficiency of a silicon anode is only about 50% to 60%.
For example, the European Union’s General Data Protection Regulation (“GDPR”) is wide-ranging in scope and applies to companies established in the European Economic Area (“EEA”) and to companies established outside the EEA that process personal information in connection with the offering of goods or services to data subjects in the EEA or the monitoring of the behavior of data subjects in the EEA.
For example, the European Union’s General Data Protection Regulation (“EU GDPR”) is wide-ranging in scope and applies to companies established in the European Economic Area (“EEA”) and to companies established outside the EEA that process personal data in connection with the offering of goods or services to data subjects in the EEA or the monitoring of the behavior of data subjects in the EEA.
Cycle swelling is thus kept under 2%, outperforming even conventional graphite anodes. Our cells that have been cycled over 500 times show minimal expansion by contrast.
Cycle swelling is thus kept under 2%, outperforming even conventional graphite anodes. Our cells that have been cycled over 500 times show minimal expansion of the electrodes by contrast.
The principal purposes of our equity incentive plans are to attract, retain and motivate personnel through 11 Table of Contents the granting of equity-based compensation awards, in order to increase stockholder value and our success by motivating such individuals to perform to the best of their abilities and achieve our objectives.
The principal purposes of our equity incentive plans are to attract, retain and motivate our people through the granting of equity-based compensation awards, in order to increase stockholder value and our success by motivating such individuals to perform to the best of their abilities and achieve our objectives.
When fully charged, a silicon anode can more than double in thickness, resulting in significant swelling that can physically damage the battery, causing failure. 4 Table of Contents • Formation efficiency.
When fully charged, a silicon anode can more than double in thickness, resulting in significant swelling that can physically damage the battery, causing failure. • Formation efficiency.
In our battery architecture, however, the lithium is required to travel a short distance, which can be accomplished in hours.
In our 3D cell architecture, however, the lithium is required to travel a short distance, which can be accomplished in hours.
Mobile Communications Devices — The Li-ion battery, introduced in 1991, also provided the increase in energy density needed for cell phones to evolve from their original “brick-size” into today’s sleek, sophisticated smartphone. Energy requirements continue to become more demanding as device OEMs seek to launch power-hungry 5G cell phones with on-board artificial intelligence (“AI”).
Mobile — The Li-ion battery also provided the increase in energy density needed for cell phones to evolve from their original “brick-size” into today’s sleek, sophisticated smartphone. Energy requirements continue to become more demanding as device OEMs seek to launch power-hungry 5G cell phones with on-board AI.
A Low Cost, “Drop-in” Advanced Li-ion Battery Production Process Standard Li-ion battery production involves: 1) electrode fabrication, 2) cell assembly and 3) battery packaging and formation. Electrode Fabrication — Sony developed and commercialized the first Li-ion battery in 1991 to meet the power requirements of its new handheld camcorder.
Standard Li-ion battery production involves: 1) electrode fabrication, 2) cell assembly and 3) battery packaging and formation. Electrode Fabrication — Sony developed and commercialized the first Li-ion battery in 1991 to meet the power requirements of its new handheld camcorder.
We source materials for our batteries from third party suppliers globally. We have executed master supply agreements with the majority of our suppliers and have identified or are qualifying second sources for many of our battery materials. We seek second sources 9 Table of Contents for materials that are high cost or where a risk to supply has been identified.
We have executed master supply agreements with the majority of our suppliers and have identified or are qualifying second sources for many of our battery materials. We seek second sources for materials that are high cost or where a risk to supply has been identified.
This will help mitigate technology and production risks as we scale up our production process for the EV and energy storage markets. 8 Table of Contents Home Grown IP — Unlike many advanced battery startups, which have licensed core technology from government or academic research laboratories, we have developed and own all of our intellectual property.
This will help mitigate technology and production risks as we scale up our production process for the EV market. Home Grown IP — Unlike many advanced battery startups, which have licensed core technology from government or academic research laboratories, we have developed and own all of our intellectual property. We received our first patents in 2012.
Our team has developed an innovative low-cost approach that uses the conventional Li-ion battery cell manufacturing techniques for process such as electrode coating, cell packaging, test and ageing. We then use our own proprietary tools on steps such as cell assembly where we laser pattern and stack the electrodes and then apply a stainless steel constraint.
We use the conventional Li-ion battery cell manufacturing techniques for process such as electrode coating, cell packaging, test and aging. We then use our own proprietary tools on steps such as cell assembly where we laser pattern and stack the electrodes and then apply a stainless steel constraint.
We protect our technology through a variety of means, including through patent, trademark, copyright and trade secrets laws in the U.S. and similar laws in other countries, confidentiality agreements and other contractual arrangements. As of January 2, 2022, we had 39 issued U.S. patents, 63 issued foreign patents, 33 pending U.S. patent applications and 73 pending foreign counterpart patent applications.
We protect our technology through a variety of means, including through patent, trademark, copyright and trade secrets laws in the U.S. and similar laws in other countries, confidentiality agreements and other contractual arrangements. As of January 1, 2023, we had 45 issued U.S. patents, 96 issued foreign patents, 34 pending U.S. patent applications and 108 pending foreign counterpart patent applications.
We have internally built and verified battery cells based on our proprietary 3D cell architecture with an integrated structural constraint capable of 500 cycles, opening mass-market opportunities. With further enhancements, we expect to increase cycle life to 1,000 cycles or more.
We have internally built and verified battery cells based on our proprietary 3D cell architecture with an integrated structural constraint capable of 500 cycles, opening mass-market opportunities.
By addressing swelling, our 3D cell architecture with its constraint system is designed to enable silicon anodes to achieve the commercial cycling standard of 500 complete charge/discharge cycles to 80% remaining capacity with improvements planned on our roadmap. A complete charge/discharge cycle is where the battery is charged all the way to 4.35V and then discharged to 2.7V.
By addressing swelling, our 3D cell architecture with its constraint system is designed to enable silicon anodes to achieve the commercial cycling standard of 500 complete charge/discharge cycles to 80% remaining capacity with improvements planned on our roadmap.
We believe that our ability to compete against this set of competitors will be driven by a number of factors, including product performance, cost, reliability, product roadmap, customer relationships and ability to scale manufacturing.
Factors within our control include driving competitive pricing, cost, energy density, safety and cycle life. 10 Table of Contents We believe that our ability to compete against this set of competitors will be driven by a number of factors, including product performance, cost, reliability, product roadmap, customer relationships and ability to scale manufacturing.
Privacy and Security Laws We are or may become subject to stringent and changing obligations related to privacy and data security.
Privacy and Security Laws We are or may become subject to stringent and changing U.S. and foreign laws, regulations, rules, contractual obligations, policies and other obligations related to privacy and data security.
Our ability to compete successfully will rely on factors both within and outside our control, including broader economic and industry trends. Factors within our control include driving competitive pricing, cost, energy density, safety and cycle life.
Our ability to compete successfully will rely on factors both within and outside our control, including broader economic and industry trends.
Since even minor process changes can have an immense impact on battery performance, the value of co-locating and coupling the R&D to manufacturing at the same location (Fremont, California) is core to our technology development strategy.
Process Driven Innovation — Our battery development is occurring at the frontier of science, where process innovations are evolving rapidly. Since even minor process changes can have an immense impact on battery performance, the value of co-locating and coupling the research and development (“R&D”) and manufacturing at the same location (Fremont, California) is critical to our technology development strategy.
We believe we will compete well on each of these factors based on advanced battery innovation to date and the ability to continue to design, develop and produce higher performing products for the customers served in our targeted markets. 10 Table of Contents Government Regulation and Compliance Our business activities are global and are subject to various federal, state, local, and foreign laws, rules and regulations.
We believe we will compete well on each of these factors based on advanced battery innovation to date and the ability to continue to design, develop and produce higher performing products for the customers served in our targeted markets.
For example, there are various government regulations pertaining to battery safety, transportation of batteries, use of batteries in cars, factory safety, and disposal of hazardous materials.
Government Regulation and Compliance Our business activities are global and are subject to various federal, state, local, and foreign laws, rules and regulations. For example, there are various government regulations pertaining to battery safety, transportation of batteries, use of batteries in cars, factory safety, and disposal of hazardous materials.
Research and Development We conduct research and development at our headquarters facility in Fremont, California. Our R&D programs are focused on driving improvements in the performance and cost of our 3D cell architecture.
Research and Development We conduct R&D at our headquarters facility in Fremont, California. Our R&D programs are focused on driving improvements in the performance and cost of our 3D cell architecture. Current R&D activities include the following: Energy Density and Capacity — Increase the energy density and capacity of batteries by increasing the percent by volume of active cathode material.
Practical Path to EV and Renewable Energy Markets — We will initially validate our silicon anode Li-ion battery technology and production process in the quality-conscious, high-volume portable electronic device market.
Mass-Market Commercialization — We have begun to generate product revenue in the portable electronic device market and have shipped batteries from our production line to over 25 OEMs. Practical Path to EV Market — We will initially validate our silicon anode Li-ion battery technology and production process in the quality-conscious, high-volume portable electronic device market.
A Fundamentally Better Approach We were founded by a team of individuals with expertise in three dimensional (“3D”) architectures learned from 25 years of experience in the manufacturing of hard disk drives (IBM) and semiconductor wafer probing systems (FormFactor).
The disparity in improvement rates between ICs and batteries has forced the consumer devices industry to compromise the usable feature sets and the operating time between battery charges. 4 Table of Contents A Fundamentally Better Approach We were founded by a team of individuals with expertise in three dimensional (“3D”) architectures learned from 25 years of experience in the manufacturing of hard disk drives (IBM) and semiconductor wafer probing systems (FormFactor).
In 2020, we started procuring equipment for our first production factory (“Fab-1”). The first of this equipment began arriving in early 2021. Fab-1 is now operational with first production revenue forecasted in the second quarter of 2022.
In 2020, we started procuring equipment for our first production line (“Fab-1”). We recognized our first production revenue in the second quarter of 2022 from Fab-1.
In enterprise markets such as Land Mobile Radio (“LMR”), used by police and first responders, increased energy density can be leveraged to reduce product size and weight, while simultaneously enabling new features. We estimate that the Li-ion battery cell total addressable market in mobile communications devices will be $8.2 billion by 2025.
In enterprise markets such as Land Mobile Radio (“LMR”), used by police and first responders, increased energy density can be leveraged to reduce product size and weight, while simultaneously enabling new features. Computing — The Li-ion battery can also be credited for helping to usher in an era of portable PC computing.
The GDPR, CCPA, CPRA, CPA, CDPA, and other laws exemplify the obligations our business may have in responding to the evolving regulatory environment related to personal information. Our compliance costs and potential liability may increase with this scattered regulatory environment.
The EU GDPR, CCPA, and other laws exemplify the obligations our business may have in responding to the evolving regulatory environment related to personal data. Our compliance costs and potential liability may increase with this scattered regulatory environment. Human Capital Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new employees.
This phenomenon, known as “Moore’s Law”, has resulted in electronic components doubling their transistor density (and thus the IC product features) about every two years. The disparity in improvement rates between ICs and batteries has forced the consumer devices industry to compromise the usable feature sets and the operating time between battery charges.
This phenomenon, known as “Moore’s Law”, has resulted in electronic components doubling their transistor density (and thus the IC product features) about every two years.
Wind-and-Flatten Cell Assembly — Wind-and-flatten cell assembly, introduced in the early 1990s, essentially flattens the cylindrical Jelly Roll into a thin, flat package for use in portable electronic devices such as laptop computers and mobile phones.
We have developed a more precise roll-to-stack cell assembly process to enable a silicon anode that increases Li-ion cell energy density and maintains high cycle life. 7 Table of Contents Wind-and-Flatten Cell Assembly — Wind-and-flatten cell assembly, introduced in the early 1990s, essentially flattens the cylindrical Jelly Roll into a thin, flat package for use in portable electronic devices such as laptop computers and mobile phones.
Manufacturing and Supply Chain We manufacture Li-ion batteries at our Fremont, California, headquarters. At this location we develop, assemble and test our finished products. We are currently evaluating options for a second manufacturing location (“Fab-2”) to produce our Li-ion cells with the design points of our next generation equipment in mind.
We are currently evaluating options for a second manufacturing location (“Fab-2”) to produce our Li-ion cells with the design points of our next generation equipment in mind. 9 Table of Contents We source materials for our batteries from third party suppliers globally.
Anodes and Cathodes — Develop batteries with next-generation anodes and cathodes that increase energy density. Cost and Throughput — Develop toolsets and processes to produce batteries with lower cost and higher manufacturing throughput. Larger (EV) Size — Develop electrode and electrolyte chemistries in batteries with silicon anodes which, when scaled up to EV-size cells, meet or exceed EV performance requirements.
Anodes and Cathodes — Develop batteries with next-generation anodes and cathodes that increase energy density. Cost and Throughput — Develop toolsets and processes to produce batteries with lower cost and higher manufacturing throughput.
Historically, advancements in battery performance have come primarily from improvements in the active cathode and anode materials of the battery.
Historically, advancements in battery performance have come primarily from improvements in the active cathode and anode materials of the battery. The process of new materials discovery, development, testing and qualification is by its nature a slow and arduous process and resulted in an anemic rate of battery improvement.
Lower Cost than Conventional Lithium-Ion Batteries — Our 3D cell architecture has been designed for the use of low-cost commodity silicon anode materials as opposed to heavily engineered silicon materials.
Our cell architecture has been designed for the use of low-cost commodity silicon anode materials as opposed to heavily engineered silicon materials in order to drive toward a lower cost cell on a watt hours basis at scale. Our cell architecture also allows for enhanced thermal performance relative to conventional cells, enabling fast charging.
The pre-lithiation process of the 3D Silicon TM Lithium-ion battery overcomes the first-cycle formation efficiency issue, while preserving all the other benefits of silicon over graphite for anodes. Our Products The first technology node we will bring to market is called EX-1, which makes batteries sized for wearables and mobile communications devices with energy densities well above current market standards.
The pre-lithiation process of the 3D Silicon™ Lithium-ion battery overcomes the first-cycle formation efficiency issue, while preserving all the other benefits of silicon over graphite for anodes.
Problems 3 & 4 — Swelling and Cycle Life When conventional Li-ion batteries with graphite anodes are cycled (charged and discharged), they exhibit a modest amount of cyclic swelling ( 5 Table of Contents and discharging can fracture the anode silicon particles and/or electrically disconnect them and limit cycle life to less than 100 cycles, which is not commercially viable in many applications.
Problems 3 & 4 — Swelling and Cycle Life When conventional Li-ion batteries with graphite anodes are cycled (charged and discharged), they exhibit a modest amount of cyclic swelling ( Our unique structural constraint system applies a uniform engineered pressure on the silicon particles within the anode, limiting their fracture and maintaining electrical contact between them for an extended number of cycles.
In 1995, cut-and-stack cell assembly improved spatial efficiency, but it is slow, expensive and imprecise. We have developed a more precise roll-to-stack cell assembly process to enable a silicon anode that increases Li-ion cell energy density and maintains high cycle life.
In 1995, cut-and-stack cell assembly improved spatial efficiency, but it is slow, expensive and imprecise.
As of January 2, 2022, we employed 215 full-time employees and one part-time employee, based primarily in our headquarters in Fremont CA.
As of January 1, 2023, we employed 335 full-time employees and one part-time employee, based primarily in our headquarters in Fremont CA. Culture and Benefits Our people are truly our greatest asset. We strive to live up to our Core Values every day: integrity, respect, innovation, resilience, excellence and customer focus.
Additionally, the California Consumer Privacy Act of 2018 (“CCPA”) imposes different obligations on covered businesses, including affording privacy rights to California residents. The CCPA requires covered companies to provide new disclosures to California consumers and new ways for such consumers to opt-out of certain sharing of personal information, and creates a new cause of action for data breaches.
For example, the California Consumer Privacy Act of 2018, as amended by the California Privacy Rights Act of 2020 (“CPRA”) (collectively, “CCPA”) imposes different obligations on covered businesses, including affording privacy rights to consumers, business representatives and employees who are California residents.
The GDPR also imposes strict rules on the transfer of personal information outside of the EEA, provides for enforcement actions, and authorizes the imposition of penalties for noncompliance including fines of up to the greater of 20 million euros or 4% of annual global revenue.
The EU provides for enforcement actions, and authorizes the imposition of penalties for noncompliance which can result in fines of up to the greater of 20 million euros or 4% of 11 Table of Contents annual global revenue or private litigation related to processing of personal data brought by classes of data subjects or consumer protection organizations authorized at law to represent their interests.
Electric Vehicles — According to BloombergNEF, the number of EVs will grow from 3.1 million in 2020 to 14.0 million in 2025. Replacing internal combustion engine (“ICE”) vehicles with EVs can reduce emissions that contribute to smog and climate change, but mass adoption of EVs requires price parity with ICE vehicles.
Replacing internal combustion engine vehicles with EVs can reduce emissions that contribute to smog and climate change, but mass adoption of EVs hinges on lower cost vehicles and faster charging times that resemble the gas station experience of filling up quickly.
Producing Our 3D Silicon TM Lithium-ion Battery We have developed the advanced manufacturing processes needed to produce our batteries in high volume and at low cost. Manufacturing is where many advanced battery companies have failed historically.
We have demonstrated 0-80% charging in 5.2 minutes on 0.27Ah test cells with EV-class cathodes. Producing Our Battery In addition to designing our battery, we also develop the advanced manufacturing processes needed to produce our batteries in high volume and at low cost.
Between 2007 and 2011, we developed the core processes and architecture of our battery technology. In 2012, we moved to a larger facility in Fremont, California and began work on the manufacturing approach and plans for our products. This was done in conjunction with partnership and investment from several strategic partners in the solar and semiconductor industries.
We have devoted significant funds and resources to develop our battery’s architecture and the unique patterning and stacking assembly process for manufacturing our cells. This was done in conjunction with partnership and investment from several strategic partners in the solar and semiconductor industries. Since 2018, we have sampled batteries to multiple customers that have validated the performance of our products.
Current R&D activities include the following: Energy Density and Capacity — Increase the energy density and capacity of batteries by increasing the percent by volume of active cathode material. Cycle Life and Temperature — Improve the cycle life and high and low temperature performance of batteries by developing new electrolyte chemistries.
Cycle Life and Temperature — Improve the cycle life and high and low temperature performance of batteries by developing new electrolyte chemistries. Safety — Improve battery safety by developing techniques to regulate current flux in the event of a battery short and limit overheating to inhibit thermal runaway.
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Item 1. Business Company Overview Enovix has designed, developed and sampled advanced Lithium-ion, or Li-ion, batteries with energy densities that are five years ahead of current industry standard batteries of similar size.
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Item 1. Business Company Overview Enovix Corporation (the “Company,” “we,” “us,” “our” and “Enovix”) is on a mission to power the technologies of the future. We do this by designing, developing, manufacturing and commercializing next generation Lithium-ion, or Li-ion, battery cells that significantly increase the amount of energy density and storage capacity relative to conventional battery cells.
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“Energy density” is measured as the product of the power a battery puts out in watts times the number of hours the battery can put out that power, divided by the volume (size) of the battery measured in liters. The units of energy density are thus watt-hours per liter or Wh/l.
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Our battery’s mechanical design, or “architecture,” allows us to use high performance chemistries while enabling safety and charge time advantages. The benefit of an enhanced battery for portable electronics is devices that have more power budget available to keep up with user preferences for more advanced features and more attractive form factors.
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As of January 2, 2022, we estimate that our current battery products deliver 24%-133% greater energy density than the batteries in several categories of currently available consumer electronics products. This energy density breakthrough alters a 30-year Li-ion battery industry trajectory of modest (4.2%) annual Li-ion battery energy density improvements through 2021.
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The benefit of an advanced battery for Electric Vehicles (“EVs”) is a faster charging battery that reduces the cost per mile due to higher energy density. Enovix was established in 2007 based on the premise that fundamentally altering battery performance would require a reinvention of the battery’s architecture.
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Assuming this industry improvement rate of 4.2% per year continues, and our estimated greater energy density, it would require five years for the industry to reach energy densities equivalent to our current batteries at similar size.
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Our architecture allows us to use 100% active silicon and no graphite in the battery’s anode, which is the negative electrode that stores lithium ions when a battery is charged. The advantage of silicon over graphite is that it can theoretically store more than twice as much lithium as graphite, which increases a battery’s energy density and overall capacity.
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We expect that market-leading mobile computing customers will use our technology variously to enhance the feature set of their products, reduce their size and weight, or alternatively to extend the battery life of their products.
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The battery industry has historically struggled to incorporate more than a small amount of silicon in the anode because silicon can swell and crack in conventional architectures, impacting safety and performance. By contrast, our architecture is designed to accommodate silicon’s swelling and apply stack pressure that alleviates the cracking problem.
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In addition, we believe that batteries with increased energy density will enable the next mass market computing platform (Augmented Reality, or A/R) and aid in the adoption of Electric Vehicles (“EVs”). We started development of our technology in early 2007 at a small facility in Fremont, California.
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A complete charge/discharge cycle is where the battery is charged all the way to 4.35V and then discharged to 2.7V. 6 Table of Contents Benefits of Our Advanced Li-ion Battery IoT – The Internet-of-Things (“IoT”) market includes many types of devices powered by a Li-ion battery, including wearables, health/wellness devices, camera-based devices, location trackers, portable networking devices, augmented reality/virtual reality devices (“AR/VR”), and computing accessories, among others.
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Between 2012 and 2017, we procured and installed pilot production equipment, representative of the equipment set that would be used in manufacturing. In 2018, we altered our manufacturing approach to a mechanical stacking platform that improved the manufacturability of our products. Since 2018, we have sampled batteries to multiple customers that have validated the performance of our products.
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Products in this market are often power budget constrained due to size. There is also a constant appetite in this market for power-hungry features such as sensors, high-speed connectivity, and utilization of artificial intelligence (“AI”) processing.
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We are a development stage company that has no product revenue to date and has incurred a net loss of $125.9 million, and $39.7 million for the fiscal years 2021 and 2020, respectively. As of January 2, 2022 and December 31, 2020, we had an accumulated deficit of $333.2 million and $207.3 million, respectively.
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Increased energy density is needed for this task, along with enabling more power-hungry features. Electric Vehicles — According to BloombergNEF's Electric Vehicle Outlook 2022, the number of EVs will grow from 6.6 million in 2021 to 20.6 million in 2025.
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Background We were previously known as Rodgers Silicon Valley Acquisition Corp. (“RSVAC”).
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At scale, higher energy density is a key enabler of lowering battery cost as a higher number of watt hours are spread over the cost of the materials.
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On July 14, 2021 (the “Closing Date”), Enovix Corporation, a Delaware corporation (“Legacy Enovix”), RSVAC, and RSVAC Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of RSVAC (“Merger Sub”), consummated the closing of the transactions contemplated by the Agreement and Plan of Merger, dated February 22, 2021, by and among RSVAC, Merger Sub and Legacy Enovix (the “Merger Agreement”), following the approval at a special meeting of the stockholders of RSVAC held on July 12, 2021.
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Our Products Our product strategy is to develop battery “nodes” that share the same set of active materials and mechanical design and then build batteries at different sizes to accommodate customer requirements based on these nodes. Our product roadmap consists of future nodes at higher levels of energy density based on both materials and design innovation.
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Pursuant to the terms of the Merger Agreement, a business combination of RSVAC and Legacy Enovix was effected by the merger of Merger Sub with and into Legacy Enovix, with Legacy Enovix surviving as a wholly owned subsidiary of RSVAC (the “Merger” and, collectively with the other transactions described in the Merger Agreement, the “Business Combination”).
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Our goal is to drive energy density improvements at a faster rate than the Li-ion battery industry’s track record and introduce higher performing battery nodes over time. We have historically built and sampled standard size batteries that have broad application within specific end markets such as wearables, mobile devices, laptops and AR eyewear.
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Following the consummation of the Merger on the Closing Date, RSVAC changed its name to Enovix Corporation (the “Company”), and Legacy Enovix changed its name to Enovix Operations Inc.
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We have also launched custom battery designs with customers that require a unique set of dimensions to accommodate the battery cavity in their device. In the second quarter of 2022, we began production in Fab-1 of a standard battery cell sized for wearable devices such as a smartwatch and other IoT devices.
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Legacy Enovix was deemed to be the accounting acquirer in the Business Combination, and the historical consolidated financial statements of Legacy Enovix therefore became the historical consolidated financial statements of the Company, upon the consummation of the Business Combination.
Added
In 2023, we intend to begin production in Fab-1 of a standard battery cell sized for mobile devices such as smartphones. And by the end of 2023, we intend to install a new higher speed pilot line (“Agility Line”) in Fab-1 to produce custom size batteries more quickly for customer qualification and focus on custom cell development.
Removed
At the effective time of the Merger (the “Effective Time”), each share of Legacy Enovix preferred stock that was then issued and outstanding immediately prior to the Effective Time was canceled and converted into a number of shares of Legacy Enovix common stock in accordance with Legacy Enovix’s certificate of incorporation.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeShould we not be able to convert these design wins into orders our financial performance would be impacted. Batteries are known in the market to have 14 Table of Contents historically faced risk associated with safety (e.g., Samsung Galaxy Note) and therefore customers can be reluctant to take risks on new battery technologies.
Biggest changeBatteries are known in the market to have historically faced risk associated with safety, and therefore customers can be reluctant to take risks on new battery technologies. Since no new battery technology analogues to our technology have entered the market for thirty years, it may be difficult for us to overcome customer risk objections.
In addition, we could become subject to investigations by the stock exchange on which our securities are listed, the SEC, and other regulatory authorities, and become subject to litigation from investors and stockholders, which could harm our reputation and our financial condition, or divert financial and management resources from our core business.
In addition, we could become subject to investigations by the stock exchange on which our securities are listed, the SEC and other regulatory authorities and litigation from investors and stockholders, which could harm our reputation and our financial condition, or divert financial and management resources from our core business.
Maintaining such confidence may be particularly complicated by certain factors including those that are largely outside of our control, such as our limited operating history, market unfamiliarity with our products, any delays in scaling manufacturing, delivery and service operations to meet demand, competition and uncertainty regarding our eventual production and sales performance compared with market expectations.
Maintaining such confidence may be particularly complicated by certain factors including those that are largely outside of our control, such as our limited operating history, market unfamiliarity with our products, any delays in scaling manufacturing, delivery and service operations to meet demand, competition and uncertainty regarding our production and sales performance compared with market expectations.
We rely on third-party suppliers for components necessary to develop and manufacture our lithium-ion batteries, including key supplies, such as our anode, cathode and separator materials. We are collaborating with key suppliers but have not yet entered into agreements for the supply of production quantities of these materials.
We rely on third-party suppliers for components necessary to develop and manufacture our lithium-ion batteries, including key supplies, such as our anode, cathode and separator materials. We are collaborating with key suppliers but have not yet entered into agreements for the supply of volume production quantities of these materials.
We expect to continue to incur losses for the foreseeable future and we anticipate these losses will increase as we continue our manufacturing scale up, add additional manufacturing capacity, prepare for commercialization and continue to operate as a public company and comply with legal, accounting and other regulatory requirements.
We expect to continue to incur losses for the foreseeable future, and we anticipate these losses will increase as we continue our manufacturing scale up, add additional manufacturing capacity, continue commercialization and continue to operate as a public company and comply with legal, accounting and other regulatory requirements.
If Nasdaq delists our securities 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.
If The Nasdaq Global Select Market delists our securities 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.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware (or, if and only if the Court of Chancery of the State of Delaware lacks subject matter jurisdiction, any state court located within the State of Delaware or, if and only if all such state courts lack subject matter jurisdiction, the federal district court for the District of Delaware) is the exclusive forum for: • any derivative action or proceeding brought on our behalf; • any action asserting a claim of breach of fiduciary duty owed by any of our current or former directors, officers or other employees to us or our stockholders; • any action asserting a claim against us by any of our current or former directors, officers or other employees to us or our stockholders arising under the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws; • any action or proceeding to interpret, apply, enforce or determine the validity of the amended and restated certificate of incorporation or the amended or restated bylaws (including any right, obligation or remedy thereunder); • any action or proceeding as to which the General Corporation Law of the State of Delaware (the “DGCL”) confers jurisdiction to the Court of Chancery of the State of Delaware; and • any action asserting a claim against us or any of our current or former directors, officers or other employees that is governed by the internal affairs doctrine, in all cases to the fullest extent permitted by law and subject to the court’s having personal jurisdiction over the indispensable parties named as defendants.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware (or, if and only if the Court of Chancery of the State of Delaware lacks subject matter jurisdiction, any state court located within the State of Delaware or, if and only if all such state courts lack subject matter jurisdiction, the federal district court for the District of Delaware) is the exclusive forum for: • any derivative action or proceeding brought on our behalf; 29 Table of Contents • any action asserting a claim of breach of fiduciary duty owed by any of our current or former directors, officers or other employees to us or our stockholders; • any action asserting a claim against us by any of our current or former directors, officers or other employees to us or our stockholders arising under the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws; • any action or proceeding to interpret, apply, enforce or determine the validity of the amended and restated certificate of incorporation or the amended or restated bylaws (including any right, obligation or remedy thereunder); • any action or proceeding as to which the General Corporation Law of the State of Delaware (the “DGCL”) confers jurisdiction to the Court of Chancery of the State of Delaware; and • any action asserting a claim against us or any of our current or former directors, officers or other employees that is governed by the internal affairs doctrine, in all cases to the fullest extent permitted by law and subject to the court’s having personal jurisdiction over the indispensable parties named as defendants.
The United States and certain foreign governments have taken unprecedented actions in an attempt to address and rectify these extreme market and economic conditions by providing liquidity and stability to the financial markets.
The United States and certain foreign governments have taken actions in an attempt to address and rectify these extreme market and economic conditions by providing liquidity and stability to the financial markets.
We rely on a new and complex manufacturing process for our operations: achieving production involves a significant degree of risk and uncertainty in terms of operational performance and costs.
We rely on a new and complex manufacturing process for our operations: achieving volume production involves a significant degree of risk and uncertainty in terms of operational performance and costs.
Before you make a decision to buy our securities, you should carefully consider the risks and uncertainties described below together with all of the other information contained in this Annual Report on Form 10-K, including our financial statements and related notes and in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” If any of the events or developments described below were to occur, our business, prospects, operating results and financial condition could suffer materially, the trading price of our securities could decline and you could lose all or part of your investment.
Before you make a decision to buy our securities, you should carefully consider the risks and uncertainties described below together with all of the other information contained in this Annual Report on Form 10-K, including our financial statements and related notes and in the section 12 Table of Contents titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” If any of the events or developments described below were to occur, our business, prospects, operating results and financial condition could suffer materially, the trading price of our securities could decline and you could lose all or part of your investment.
Our success depends on our ability to attract and retain our executive officers, key employees and other qualified personnel, and as a relatively small company with key talent residing in a limited number of employees, our operations and prospects may be severely disrupted if we lost any one or more of their services.
Our success depends on our ability to attract and retain our executive officers, key employees and other qualified personnel, and, as a relatively small company with key talent residing in a limited number of employees, our operations and prospects may be severely disrupted if we lose any one or more of their services.
We are subject to requirements relating to environmental and safety regulations and environmental remediation matters which could adversely affect our business, results of operation and reputation. We are subject to numerous federal, state and local environmental laws and regulations governing, among other things, solid and hazardous waste storage, treatment and disposal, and remediation of releases of hazardous materials.
We are subject to requirements relating to environmental and safety regulations and environmental remediation matters which could adversely affect our business, results of operations and reputation. We are subject to numerous federal, state and local environmental laws and regulations governing, among other things, solid and hazardous waste storage, treatment and disposal and remediation of releases of hazardous materials.
In addition, we have not achieved every specification for the products we plan to produce in our first year of production. The failure to achieve all of these specifications or adequately address each of these other challenges could impact the performance of our cells or delay the availability of these products to our customers.
In addition, we have not yet achieved every specification for all of the products we plan to produce in our first year of commercial production. The failure to achieve all of these specifications or adequately address each of these other challenges could impact the performance of our cells or delay the availability of these products to our customers.
Further, as we locate our new manufacturing facility, build it out and bring it online, we will need to hire personnel to staff and maintain this facility with the technical qualifications to do so, which we may not be able to do in the location at which this facility is located.
Further, as we locate our new manufacturing facilities, build it out and bring it online, we will need to hire personnel to staff and maintain this facility with the technical qualifications, which we may not be able to do in the location at which this facility is located.
The Boxhorn complaint alleges, among other things, that the defendants violated Sections 14(a) and 20(a) of the Exchange Act, and that the individual defendants breached their fiduciary duties, in connection with the terms of the Business Combination, and that RSVAC’s registration statement contained materially incomplete and misleading information regarding the Business Combination.
The Boxhorn complaint alleged, among other things, that the defendants violated Sections 14(a) and 20(a) of the Exchange Act, and that the individual defendants breached their fiduciary duties, in connection with the terms of the Business Combination, and that RSVAC’s registration statement contained materially incomplete and misleading information regarding the Business Combination.
We have incurred and will incur significant increased expenses and administrative burdens as a public company, which could negatively impact our business, financial condition and results of operations. We face increased legal, accounting, administrative and other costs and expenses as a public company that Legacy Enovix did not incur as a private company.
We have incurred and will incur significant increased expenses and administrative burdens as a public company, which could negatively impact our business, financial condition and results of operations. We face increased legal, accounting, administrative and other costs and expenses as a public company that we did not incur as a private company.
Failure to adequately protect our intellectual property rights could result in our competitors using our intellectual property to offer products, and competitors’ ability to design around our 21 Table of Contents intellectual property would enable competitors to offer similar or better batteries, in each case potentially resulting in the loss of some of our competitive advantage and a decrease in our revenue, which would adversely affect our business, prospects, financial condition and operating results.
Failure to adequately protect our intellectual property rights could result in our competitors using our intellectual property to offer products, and competitors’ ability to design around our intellectual property would enable competitors to offer similar or better batteries, in each case potentially resulting in the loss of some of our competitive advantage and a decrease in our revenue, which would adversely affect our business, prospects, financial condition and operating results.
Non-compliance with anti-corruption, anti-bribery, anti-money laundering or financial and economic sanctions laws could subject us to whistleblower complaints, adverse media coverage, investigations, and severe administrative, civil and criminal sanctions, collateral consequences, remedial measures and legal expenses, all of which could materially and adversely affect our business, results of operations, financial condition and reputation.
Non-compliance with anti-corruption, anti-bribery, anti-money laundering, import and export control, or financial and economic sanctions laws could subject us to whistleblower complaints, adverse media coverage, investigations, and severe administrative, civil and criminal sanctions, collateral consequences, remedial measures and legal expenses, all of which could materially and adversely affect our business, results of operations, financial condition and reputation.
RISK FACTORS Risks Related to Our Manufacturing and Scale-Up We will need to improve our energy density, which requires us to implement higher energy density materials for both cathodes and anodes, which we may not be able to do. Our roadmap to improve our energy density requires us to implement higher energy density materials for both cathodes and anodes.
Risks Related to Our Manufacturing and Scale-Up We will need to improve our energy density, which requires us to implement higher energy density materials for both cathodes and anodes, which we may not be able to do. Our roadmap to improve our energy density requires us to implement higher energy density materials for both cathodes and anodes.
Many federal, state and local authorities require certification by Underwriters Laboratory, Inc., an independent, not-for-profit corporation engaged in the testing of products for compliance with certain public safety standards, or other safety regulation certification prior to marketing battery cells. Foreign jurisdictions also have regulatory authorities overseeing the safety of consumer products.
Many federal, state and local authorities require certification by Underwriters Laboratory, Inc., an independent, not-for-profit corporation engaged in the testing of products for compliance with certain public safety standards, or other safety regulation certification prior to marketing battery cells. Foreign jurisdictions also have regulatory authorities 26 Table of Contents overseeing the safety of consumer products.
You may be unable to sell your securities unless a market can be established or sustained. There can be no assurance that we will be able to comply with the continued listing standards of Nasdaq.
You may be unable to sell your securities unless a market can be established or sustained. There can be no assurance that we will be able to comply with the continued listing standards of The Nasdaq Global Select Market.
For example, on January 21, 2022, two former machine operator employees filed a putative wage and hour class action lawsuit against Enovix and co-defendant Legendary Staffing, Inc. in the Superior Court of California, County of Alameda. The case is captioned Sopheak Prak & Ricardo Pimentel v Enovix Corporation and Legendary Staffing, Inc. , 22CV005846.
For example, on January 21, 2022, two former machine operator employees filed a putative wage and hour class action lawsuit against Enovix and co-defendant Legendary Staffing, Inc. in the Superior Court of California, County of 30 Table of Contents Alameda. The case is captioned Sopheak Prak & Ricardo Pimentel v Enovix Corporation and Legendary Staffing, Inc. , 22CV005846.
In addition, because this equipment has not been used to build lithium-ion battery cells, the operational performance and costs associated with this equipment can be difficult to predict and may be influenced by factors outside of our control, such as, but not limited to, failures by suppliers to deliver necessary components of our products in a timely manner and at prices and volumes acceptable to us, environmental hazards and remediation, difficulty or delays in obtaining governmental permits, damages or defects in systems, industrial accidents, fires, seismic activity and other natural disasters.
Because this equipment has not previously been used to build lithium-ion battery cells, the 13 Table of Contents operational performance and costs associated with this equipment can be difficult to predict and may be influenced by factors outside of our control, such as, but not limited to, failures by suppliers to deliver necessary components of our products in a timely manner and at prices and volumes acceptable to us, environmental hazards and remediation, difficulty or delays in obtaining governmental permits, damages or defects in systems, industrial accidents, fires, seismic activity and other natural disasters.
Currency fluctuations, trade barriers, tariffs or shortages and other general economic or political conditions may limit our ability to obtain key components for our lithium-ion batteries or significantly increase freight charges, raw material costs and other expenses associated with our business, which could further materially and adversely affect our results of operations, financial condition and prospects.
Currency fluctuations, trade barriers, trade sanctions, export restrictions, tariffs, embargoes or shortages and other general economic or political conditions may limit our ability to obtain key components for our lithium-ion batteries or significantly increase freight charges, raw material costs and other expenses associated with our business, which could further materially and adversely affect our results of operations, financial condition and prospects.
To date, we have focused our efforts on our silicon anode technology, which is being designed to outperform conventional lithium-ion battery technology and other battery technologies.
To date, we have focused our efforts on our silicon anode technology, which has been, and is being, designed to outperform conventional lithium-ion battery technology and other battery technologies.
Further, we will need to make improvements in packaging technology to achieve our energy density roadmap. These improvements could take longer or be more difficult than forecasted. This could reduce the performance or delay the availability of products to customers.
Further, we will need to make improvements in packaging technology to achieve our energy density roadmap. These improvements may not be possible, could take longer or be more difficult than forecasted. This could reduce the performance or delay the availability of products to customers.
Further, product liability claims, injuries, defects, or other problems experienced by other 16 Table of Contents companies in the lithium-ion battery market could lead to unfavorable market conditions for the industry as a whole, and may have an adverse effect on our ability to attract new customers, thus harming our growth and financial performance.
Further, product liability claims, injuries, defects or other problems experienced by other companies in the lithium-ion battery market could lead to unfavorable market conditions for the industry as a whole, and may have an adverse effect on our ability to attract new customers, thus harming our growth and financial performance.
Labor is subject to external factors that are beyond our control, including our industry’s highly competitive market for skilled workers and leaders, cost inflation, the COVID-19 pandemic and workforce participation rates. As we build our brand and become more well known, there is increased risk that competitors or other companies will seek to hire our personnel.
Labor is subject to external factors that are beyond our control, including our industry’s highly competitive market for skilled workers and leaders, cost inflation, and workforce participation rates. As we build our brand and become more well known, there is increased risk that competitors or other companies will seek to hire our personnel.
We are in the process of locating an additional facility which, if we are able to overcome the challenges in designing and refining our manufacturing process, will have multiple lines to produce commercial volumes of our lithium-ion batteries to meet our expected customer demands.
We are in the process of locating additional facilities which, if we are able to overcome the challenges in designing and refining our manufacturing process, will have multiple lines to produce commercial volumes of our lithium-ion batteries to meet our expected customer demands.
We expect the rate at which we will incur losses to be significantly higher in future periods as we, among other things: continue to incur significant expenses in connection with the development of our manufacturing process and the manufacturing of our batteries; secure additional manufacturing facilities and invest in manufacturing capabilities; build up inventories of components for our batteries; increase our sales and marketing activities; develop our distribution infrastructure; and increase our general and administrative functions to support our growing operations.
We expect the rate at which we will incur losses to be significantly higher in future periods as we, among other things: continue to incur significant expenses in connection with the development of our manufacturing process and the manufacturing of our batteries; secure additional manufacturing facilities and invest in manufacturing capabilities; build up inventory of components for our batteries; increase our sales and marketing activities; develop our distribution 17 Table of Contents infrastructure; and increase our general and administrative functions to support our growing operations.
Factors affecting the trading price of our securities: • actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us; • changes in the market’s expectations about our operating results; • success of competitors; • our operating results failing to meet the expectation of securities analysts or investors in a particular period; • changes in financial estimates and recommendations by securities analysts concerning us or the market in general; • operating and stock price performance of other companies that investors deem comparable to us; • our ability to develop product candidates; • changes in laws and regulations affecting our business; • commencement of, or involvement in, litigation involving us; • changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; • the volume of shares of our securities available for public sale; • any major change in our board of directors or management; • sales of substantial amounts of Common Stock by our directors, executive officers or significant stockholders or the perception that such sales could occur; and • general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism. 24 Table of Contents Broad market and industry factors may materially harm the market price of our securities irrespective of our operating performance.
Factors affecting the trading price of our securities: • actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us; • changes in the market’s expectations about our operating results; 27 Table of Contents • success of competitors; • our operating results failing to meet the expectation of securities analysts or investors in a particular period; • changes in financial estimates and recommendations by securities analysts concerning us or the market in general; • operating and stock price performance of other companies that investors deem comparable to us; • our ability to develop product candidates; • changes in laws and regulations affecting our business; • commencement of, or involvement in, litigation involving us; • changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; • the volume of shares of our securities available for public sale; • any major change in our board of directors or management; • sales of substantial amounts of Common Stock by our directors, executive officers or significant stockholders or the perception that such sales could occur; and • general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of war or other armed conflict or terrorism.
Customers will be less likely to purchase our batteries if they are not convinced that our business will succeed in the long term. Similarly, suppliers and other third parties will be less likely to invest time and resources in developing business relationships with us if they are not convinced that our business will succeed in the long term.
Similarly, suppliers and other third parties will be less likely to invest time and resources in developing business relationships with us if they are not convinced that our business will succeed in the long term.
The Sarbanes-Oxley Act, including the requirements of Section 404, as well as rules and regulations subsequently implemented by the SEC, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the rules and regulations promulgated and to be promulgated thereunder, the PCAOB and the securities exchanges, impose additional reporting and other obligations on public companies.
The Sarbanes-Oxley Act of 2002, including the requirements of Section 404, as well as rules and regulations subsequently implemented by the SEC, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 21 Table of Contents 2010 and the rules and regulations promulgated and to be promulgated thereunder, the PCAOB and the securities exchanges, impose additional reporting and other obligations on public companies.
Our long-term financial model assumes we expand both on our own and by partnering with other battery companies. Should we not be able to achieve these partnering goals we would have to expand purely on our own. This would require additional capital and could 20 Table of Contents impact how fast we can ramp revenue and achieve profitability.
Our long-term financial model assumes we expand both on our own and by partnering with other battery companies. Should we not be able to achieve these partnering goals we would have to expand purely on our own. This would require additional capital and could impact how fast we can ramp revenue and achieve profitability.
Any failure to report our financial results on an accurate and timely basis could result in sanctions, lawsuits, delisting of our shares from The Nasdaq Stock Market LLC or other adverse consequences that would materially harm our business.
Any failure to report our financial results on an accurate and timely basis could result in sanctions, lawsuits, delisting of our shares from The Nasdaq Global Select Market or other adverse consequences that would materially harm our business.
We have retained industry experts and designed our factory with appropriate safety precautions to address the fire risk of manufacturing batteries and minimize the impact of any event.
We have retained industry 18 Table of Contents experts and designed our factory with appropriate safety precautions to address the fire risk of manufacturing batteries and minimize the impact of any event.
For example, most of the end products in which our 15 Table of Contents batteries are expected to be used are manufactured in the PRC. If the political situation between the PRC and the United States were to deteriorate, it could prevent our customers from purchasing its batteries.
For example, most of the end products in which our batteries are expected to be used are manufactured in the PRC. If the political situation between the PRC and the United States were to deteriorate, it could prevent our customers from purchasing our batteries.
To successfully use these materials we will have to optimize our cell designs including, but not limited to formulations, thicknesses, geometries, materials, chemistries and manufacturing techniques. It could take us longer to incorporate these new materials, or we might 12 Table of Contents not be able to achieve every cell performance specification required by customers.
To successfully use these materials, we will have to optimize our cell designs including, but not limited to formulations, thicknesses, geometries, materials, chemistries and manufacturing tolerances and techniques. It could take us longer to incorporate these new materials, or we might not be able to achieve every cell performance specification required by customers.
Compliance with public company requirements will increase costs and make certain activities more time consuming. A number of those requirements require us to carry out activities Legacy Enovix has not done previously. For example, we have created new board committees and adopted new internal controls and disclosure controls and procedures.
Compliance with public company requirements will increase costs and make certain activities more time consuming. A number of those requirements require us to carry out activities that we had not done previously. For example, we have created new board committees and adopted new internal controls and disclosure controls and procedures.
There are a number of companies seeking to develop alternative approaches to lithium-ion battery technology. We expect competition in battery technology to intensify. Developments in alternative technologies or improvements in batteries technology made by competitors may materially adversely affect the sales, pricing and gross margins of our batteries.
There are a number of companies seeking to develop alternative approaches to lithium-ion battery technology. We expect competition in battery technology to intensify. Developments in alternative technologies, improvements in batteries technology made by competitors, or changes in our competitors' respective business models may materially adversely affect the sales, pricing and gross margins of our batteries.
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 will afford protection against competitors with similar technology.
As a result, we cannot be certain that the patent 25 Table of Contents applications that we file will result in patents being issued or that our patents and any patents that may be issued to us will afford protection against competitors with similar technology.
The design, manufacture and sale of batteries is a capital-intensive business. As a result of the capital intensive nature of our business, we can be expected to continue to sustain substantial operating expenses without generating sufficient revenues to cover expenditures. We may need to raise additional capital to acquire our next manufacturing facility and build it out.
As a result of the capital-intensive nature of our business, we can be expected to continue to sustain substantial operating expenses without generating sufficient revenues to cover expenditures. We may need to raise additional capital to acquire our next manufacturing facility and build it out.
We are or will be subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws and regulations in various jurisdictions in which we conduct or in the future may conduct activities, including the U.S. Foreign Corrupt Practices Act (“FCPA”), the U.K. Bribery Act 2010 and other anti-corruption laws and regulations. The FCPA and the U.K.
We are subject to anti-corruption, anti-bribery, anti-money laundering, import and export controls, financial and economic sanctions and similar laws and regulations in various jurisdictions in which we conduct or in the future may conduct activities, including the U.S. Foreign Corrupt Practices Act (“FCPA”), the U.K. Bribery Act 2010 and other anti-corruption laws and regulations. The FCPA and the U.K.
These risks include, but are not limited to, (i) increased purchasing power and leverage held by large customers in negotiating contractual arrangements with us and (ii) longer sales cycles and the associated risk that substantial time and resources may be spent on a potential end-customer that elects not to purchase our solutions.
These risks include, but are not limited to, increased purchasing power and leverage held by 16 Table of Contents large customers in negotiating contractual arrangements with us and longer sales cycles and the associated risk that substantial time and resources may be spent on a potential end-customer that elects not to purchase our solutions.
If our securities are not listed on, or become delisted from Nasdaq for any reason, and are quoted on the OTC Bulletin Board, an inter-dealer automated quotation system for equity securities that is not a 25 Table of Contents national securities exchange, the liquidity and price of our securities may be more limited than if we were quoted or listed on Nasdaq or another national securities exchange.
If our securities are not listed on, or for any reason become delisted from, The Nasdaq Global Select Market and are quoted on the OTC Bulletin Board, an inter-dealer automated quotation system for equity securities that is not a national securities exchange, the liquidity and price of our securities may be more limited than if we were quoted or listed on The Nasdaq Global Select Market or another national securities exchange.
The Warrants become exercisable on the later of 30 days after the completion of our initial business combination and 12 months from the closing of the RSVAC IPO, and they expire five years after the completion of the Business Combination or earlier upon redemption or liquidation, as described in our Registration Statement on Form S-1, filed with the SEC on August 2, 2021, as may be amended.
The Warrants became exercisable 12 months from the closing of the RSVAC IPO, and they expire five years after the completion of the Business Combination or earlier upon redemption or liquidation, as described in our Registration Statement on Form S-1, filed with the SEC on August 2, 2021, as may be amended.
Our failure to keep up with rapid technological changes and evolving industry standards may cause our batteries to become less marketable or obsolete, resulting in a decrease in demand for our batteries. The lithium-based battery market is characterized by changing technologies and evolving industry standards, which are difficult to predict.
Our failure to keep up with rapid technological changes and evolving industry standards may cause our batteries to become less marketable or obsolete, resulting in a decrease in demand for our batteries and harm our ability to grow revenue and expand margins. The lithium-based battery market is characterized by changing technologies and evolving industry standards, which are difficult to predict.
If we are unable to implement and maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports, and the market price of our Common Stock may be materially adversely affected.
In the past, we had identified material weaknesses in our internal control over financial reporting. If we are unable to implement and maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports, and the market price of our common stock may be materially adversely affected.
Item 1A. Ris k Factors RISK FACTORS Investing in our securities involves a high degree of risk.
Item 1A. Risk Factors RISK FACTORS Investing in our securities involves a high degree of risk.
We currently do not have a manufacturing facility to produce our lithium-ion battery cell in sufficient quantities to meet expected demand, and if we cannot successfully locate and bring an additional facility online, our business will be negatively impacted and could fail. Currently, we are completing our manufacturing facility in Fremont, California.
We currently do not have manufacturing facilities to produce our lithium-ion battery cell in sufficient quantities to meet expected demand, and if we cannot successfully locate and bring an additional facility online, our business will be negatively impacted and could fail. Currently, we are continuing to build-out our manufacturing facility in Fremont, California.
The future sales of shares by existing stockholders and future exercise of registration rights may adversely affect the market price of our Common Stock. Sales of a substantial number of shares of our Common Stock in the public market could occur at any time.
The future sales of shares by existing stockholders may adversely affect the market price of our Common Stock. Sales of a substantial number of shares of our Common Stock in the public market could occur at any time.
For example, our factory is located in Fremont, California and our products require materials and equipment manufactured outside the country, including the People’s Republic of China (the “PRC”). If tariffs are placed on these materials and equipment, it could materially impact our ability to obtain materials on commercially reasonable terms.
For example, our factory is located in Fremont, California and our products require materials and equipment manufactured outside the country, including the PRC. If tariffs are placed on these materials and equipment, it could materially impact our ability to obtain materials on commercially reasonable terms.
We have not yet produced any lithium-ion battery cells at volume and our forecasted cost advantage for the production of these cells at scale, compared to conventional lithium-ion cells, will require us to achieve rates of throughput, use of electricity and consumables, yield and rate of automation demonstrated for mature battery, battery material and manufacturing processes, that we have not yet achieved.
We have not yet produced any lithium-ion battery cells at significant volume, and our forecasted cost advantage for the production of these cells at scale, compared to conventional lithium-ion cells, will require us to achieve certain goals in connection with rates of throughput, use of electricity and consumables, yield and rate of automation demonstrated for mature battery, battery material and manufacturing processes, that we have not yet achieved and may not achieve in the future.
In general, under Sections 382 and 383 of the Code and corresponding provisions under state law, a corporation that undergoes an “ownership change” is subject to limitations on its ability to use its pre-change net operating loss carryforwards (“NOLs”) and other pre-change tax attributes to offset future taxable income and taxes.
In addition, under Sections 382 and 383 of the Code and corresponding provisions under state law, a corporation that undergoes an “ownership change” is subject to limitations on its ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset future taxable income and taxes.
We may be subject, in the ordinary course of business, to losses resulting from products liability, accidents, acts of God and other claims against us, for which we may have no insurance coverage.
Our insurance coverage may not be adequate to protect us from all business risks. We may be subject, in the ordinary course of business, to losses resulting from products liability, accidents, acts of God and other claims against us, for which we may have no insurance coverage.
We are or will be subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws, and non-compliance with such laws can subject us to administrative, civil and criminal fines and penalties, collateral consequences, 29 Table of Contents remedial measures and legal expenses, all of which could adversely affect our business, results of operations, financial condition and reputation.
We are subject to anti-corruption, anti-bribery, anti-money laundering, import and export controls, financial and economic sanctions and similar laws, and non-compliance with such laws can subject us to administrative, civil and criminal fines and penalties, collateral consequences, remedial measures and legal expenses, all of which could adversely affect our business, results of operations, financial condition and reputation.
Bribery Act 2010 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 a “foreign official” for the purposes of influencing official decisions or obtaining or retaining business or otherwise obtaining favorable treatment.
Bribery Act 2010 prohibit us and our officers, directors, employees and business partners acting on our behalf, including agents, from directly or indirectly corruptly offering, promising, authorizing or providing anything of value to foreign government officials for the purposes of influencing official decisions or obtaining or retaining business or otherwise obtaining favorable treatment.
The amount of capital that we will be required to raise, and our ability to raise substantial additional capital, will depend on many factors, including, but not limited to: • our ability and the cost to develop our new and complex manufacturing process that will produce lithium-ion batteries in a cost-effective manner; • our ability to bring our Fremont manufacturing facility online in a timely and cost-effective manner; • our ability to locate and acquire a new, larger manufacturing facility on commercially reasonable terms; • our ability to build out our new, larger manufacturing facility in a cost-effective manner; • the cost of preparing to manufacture lithium-ion batteries on a larger scale; • the costs of commercialization activities including product sales, marketing, manufacturing and distribution; • our ability to hire additional personnel; • the demand for our lithium-ion batteries and the prices for which we will be able to sell our lithium-ion batteries; • the emergence of competing technologies or other adverse market developments; and • the effects of the COVID-19 pandemic on our business, results of operations and financial condition.
The amount of capital that we will be required to raise, and our ability to raise substantial additional capital, will depend on many factors, including, but not limited to: • our ability and the cost to develop our new and complex manufacturing process that will produce lithium-ion batteries in a cost-effective manner; • our ability to continue to build-out and scale our Fremont manufacturing facility in a timely and cost-effective manner; • our ability to locate and acquire new, larger manufacturing facilities on commercially reasonable terms; • our ability to build out our new, larger manufacturing facilities in a cost-effective manner; • the cost of preparing to manufacture lithium-ion batteries on a larger scale; 23 Table of Contents • the costs of commercialization activities including product sales, marketing, manufacturing and distribution; • our ability to hire additional personnel; • the demand for our lithium-ion batteries and the prices for which we will be able to sell our lithium-ion batteries; • the emergence of competing technologies or other adverse market developments; • the effects of the COVID-19 pandemic on our business, results of operations and financial condition; and • volatility in the equity markets, including as a result of war or other armed conflict, such as Russia’s invasion of Ukraine.
A loss that is uninsured or which exceeds policy limits may require us to pay substantial amounts, which could adversely affect our financial condition and operating results.
A loss that is uninsured or which exceeds policy limits may require us to pay substantial amounts, which could adversely affect our financial condition and operating results. Item 1B. Unresolved Staff Comments None.
Even if we are able to successfully develop this new and complex manufacturing process, we may not be able to produce our lithium-ion batteries in commercial volumes in a cost-effective manner.
Even if we are able to successfully complete development of and modify, as necessary, this new and complex manufacturing process, we may not be able to produce our lithium-ion batteries in commercial volumes in a cost-effective manner.
A loss of investor confidence in the market for battery company stocks or the stocks of other companies which investors perceive to be similar to us could depress our stock price regardless of our business, prospects, financial conditions or results of operations.
The trading prices and valuations of these stocks, and of our securities, is not predictable. A loss of investor confidence in the market for battery company stocks or the stocks of other companies which investors perceive to be similar to us could depress our stock price regardless of our business, prospects, financial conditions or results of operations.
The impact of COVID-19, including changes in consumer and business behavior, pandemic fears and market downturns, restrictions on business and individual activities, labor shortages, supply chain disruptions and inflation, has created significant volatility in the global economy and led to reduced economic activity.
We face various risks related to epidemics, pandemics and other outbreaks, including the recent COVID-19 pandemic. The impact of COVID-19, including changes in consumer and business behavior, pandemic fears and market downturns, restrictions on business and individual activities, labor shortages, supply chain disruptions and inflation, has created significant volatility in the global economy and led to reduced economic activity.
The work required to develop this process and integrate equipment into the production of our lithium-ion battery cells is time intensive and requires us to work closely with developers and equipment providers to ensure that it works properly for our unique battery technology.
The work required to develop these processes and integrate equipment into the production of our lithium-ion battery cells, including achieving our goals for throughput and yield, is time intensive and requires us to work closely with developers and equipment providers to ensure that it works properly for our unique battery technology.
In particular, while it is difficult to anticipate the impact of any of the foregoing on the Company, the conflict and actions taken in response to the conflict could increase our costs, disrupt our supply chain, reduce our sales and earnings, impair our ability to raise additional capital when needed on acceptable terms, if at all, or otherwise adversely affect our business, financial condition and results of operations.
While it is difficult to anticipate the impact of any of the foregoing on the Company, such conflict, and any similar future conflicts, including as a result of rising tensions between China and Taiwan, and actions taken in response could increase our costs, disrupt our supply chain, reduce our sales and earnings, impair our ability to raise additional capital when needed on acceptable terms, if at all, or otherwise adversely affect our business, financial condition and results of operations.
In late February 2022, Russia initiated significant military action against Ukraine. In response, the U.S. and certain other countries imposed significant sanctions and trade actions against Russia, and the U.S. and certain other countries could impose further sanctions, trade restrictions and other retaliatory actions should the conflict continue or worsen.
In response, the U.S. and certain other countries imposed significant sanctions and trade actions against Russia and Belarus, and the U.S. and certain other countries could impose further sanctions, trade restrictions and other retaliatory actions should the conflict continue or worsen.
Risks Related to Our Business We are an early-stage company with a history of financial losses and expect to incur significant expenses and continuing losses for the foreseeable future.
Risks Related to Our Business We have a history of financial losses and expect to incur significant expenses and continuing losses for the foreseeable future.
While some of our employees are bound by non-competition agreements, these may prove to be unenforceable. The failure to attract, integrate, train, motivate and retain these personnel could seriously harm our business and prospects.
While some of our employees are bound by non-competition agreements, these may prove to be unenforceable. The failure to attract, integrate, train, motivate and retain these personnel could seriously harm our business and prospects. We have been, and may in the future be, adversely affected by the global COVID-19 pandemic.
Furthermore, if in the future, we have a material weakness in our internal controls over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated.
During our review and testing, we did not identify any material weakness for the fiscal year 2022 . Furthermore, if, in the future, we have a material weakness in our internal controls over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated.
We face inherent risk of exposure to claims in the event our batteries do not perform as expected or malfunction resulting in personal injury or death. Our risks in this area are particularly pronounced given our batteries have not yet been commercially tested or mass produced.
We face inherent risk of exposure to claims in the event our batteries do not perform as expected or malfunction resulting in personal injury or death. Our risks in this area are particularly pronounced given our batteries have a limited history of commercial testing and mass production.
In addition, the electrodes and separator structure of our battery is different from traditional lithium-ion batteries and therefore could be susceptible to different and unknown failure modes leading our batteries to fail and cause a safety event in the field.
In addition, the electrodes and separator structure of our battery is different from traditional lithium-ion batteries and therefore could be susceptible to different and unknown failure modes leading our batteries to fail and cause a safety event in the field, which could further result in the failure of our end customers’ products as well as the loss of life or property.
The prices for these materials fluctuate and their available supply may be unstable depending on market conditions and global demand for these materials, including as a result of increased global production of electric vehicles and energy storage products, recent inflationary pressures and supply chain disruption caused by the COVID-19 pandemic.
The prices for these materials fluctuate and their available supply has been, and may continue to be, unstable depending on market conditions and global demand for these materials, including as a result of increased global production of EVs and energy storage products, recent inflationary pressures, supply chain disruption caused by the COVID-19 pandemic and war or other armed conflicts, including Russia’s invasion of Ukraine.
It is not possible to predict the broader consequences of the conflict, including related geopolitical tensions, and the measures and retaliatory actions taken by the U.S. and other countries in respect thereof, as well as any counter measures or retaliatory actions by Russia in response, is likely to cause regional instability, geopolitical shifts and could materially adversely affect global trade, currency exchange rates, regional economies and the global economy.
It is not possible to predict the broader consequences of the conflict, including related geopolitical tensions, and the measures and retaliatory actions taken by the U.S. and other countries in respect thereof, as well as any counter measures or retaliatory actions by Russia and Belarus in response, have caused and are likely to continue to cause regional instability and geopolitical shifts.
We cannot assure you that any backup systems will be adequate to protect us from the effects of fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, war, riots, terrorist attacks or similar events.
Our headquarters and initial manufacturing facilities are located in Fremont, California, which is prone to earthquakes. We cannot assure you that any backup systems will be adequate to protect us from the effects of fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, war, riots, terrorist attacks or similar events.
In addition, some of our supply agreements require us to fund some or all of the cost of a recall and replacement of end products affected by our batteries. Our future growth and success depend on our ability to sell effectively to large customers. Our potential customers are manufacturers of products that tend to be large enterprises.
In addition, some of our supply agreements require us to fund some or all of the cost of a recall and replacement of end products affected by our batteries. Our future growth and success depend on our ability to qualify new customers. Our growth will depend in large part on our ability to qualify new customers.
As discussed in the consolidated financial statements, in Part II of this Annual Report on Form 10-K, we are not profitable and have incurred losses in each year since our inception. Our net losses were $125.9 million and $39.7 million for the fiscal years 2021 and 2020, respectively.
As discussed in the consolidated financial statements, in Part II, item 8 of this Annual Report on Form 10-K, we are not profitable and have incurred losses in each year since our inception. We incurred net loss of $51.6 million and $125.9 million, respectively, for the fiscal years ended January 1, 2023 and January 2, 2022.
Private Placement Warrants will become exercisable for our Common Stock, which would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.
Private Placement Warrants are exercisable for our Common Stock, which would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders. In connection with the RSVAC IPO, RSVAC issued Private Placement Warrants to purchase 6,000,000 shares of Common Stock to the Sponsor.
Such an event could result in the failure of our end customer’s product as well as the loss of life or property. Such an event could result in severe financial penalties for us, including the loss of revenue, cancelation of supply contracts and the inability to win new business due to reputational damage in the market.
Such an event could result in severe financial penalties for us, including the loss of revenue, cancellation of supply contracts and the inability to win new business due to damage in the market.
Our failure to timely and effectively implement controls and procedures required by Section 404(a)of the Sarbanes-Oxley Act that are applicable to us could negatively impact our business. Legacy Enovix was not subject to Section 404 of the Sarbanes-Oxley Act. However, having consummated the Business Combination, we are required to provide management’s attestation on internal controls.
Our failure to timely and effectively implement controls and procedures required by Section 404(a)of the Sarbanes-Oxley Act of 2002 that are applicable to us could negatively impact our business. We are subject to Section 404 of the Sarbanes-Oxley Act of 2002.
Historically, lithium-ion batteries in laptops and cellphones have been reported to catch fire or vent smoke and flames, and more recently, news reports have indicated that several electric vehicles that use high-power lithium-ion batteries have caught on fire.
We develop lithium-ion battery cells for industrial and consumer equipment and intend to supply these lithium-ion battery cells for industrial and consumer applications. Historically, lithium-ion batteries in laptops and cellphones have been reported to catch fire or vent smoke and flames, and more recently, news reports have indicated that several EVs that use high-power lithium-ion batteries have caught on fire.
If we are not able to implement the additional requirements of Section 404(a) in a timely manner or with adequate compliance, we may not be able to assess whether our internal controls over financial reporting are effective, which may subject us to adverse regulatory consequences and could harm investor confidence and the market price of our securities. 19 Table of Contents The Company has been in the past, and may be in the future, subject to legal proceedings in connection with the Business Combination that have requested, or may request, the rescission of the Business Combination, and the outcomes of such litigation can be uncertain.
If we are not able to implement the additional requirements of Section 404(a) in a timely manner or with adequate compliance, we may not be able to assess whether our internal controls over financial reporting are effective, which may subject us to adverse regulatory consequences and could harm investor confidence and the market price of our securities.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeMost of the facility is used for our research and development, sales, training, services, support functions, engineering and manufacturing operations.
Biggest changeThe facility is used for our research and development, sales, training, services, support functions, engineering and manufacturing operations.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings The information included under the heading “Litigations” in Note 8 “Commitments and Contingencies” to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K is incorporated herein by reference.
Biggest changeItem 3. Legal Proceedings The information included under the heading “Litigation” in Note 10 “Commitments and Contingencies” to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K is incorporated herein by reference.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest change(2) We did not have any announced plan or programs to repurchase our Common Stock during the fiscal year 2021. Item 6. [Reserved] 31 Table of Contents
Biggest change(2) We did not have any announced plan or programs to repurchase our Common Stock during the fiscal year 2022. Performance Graph The graph below compares the cumulative total stockholder return on our common stock with the cumulative total return on the Nasdaq Composite Index and the Russell 2000 Index over the same period.
Purchases of Equity Securities by the Issuer and Affiliated purchasers During the three-month period ended January 2, 2022, we repurchased unvested shares of our Common Stock that had been issued upon early exercise of stock options. Upon termination of employment of a person holding unvested shares, we are entitled to repurchase the unvested shares.
Purchases of Equity Securities by the Issuer and Affiliated purchasers During the fiscal quarter ended January 1, 2023, we repurchased unvested shares of our Common Stock that had been issued upon early exercise of stock options. Upon termination of employment of a person holding unvested shares, we are entitled to repurchase the unvested shares.
Fiscal Month Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (2) November 1 - November 28, 2021 14,871 $ 0.06 — — November 29 - January 2, 2022 196,037 $ 0.06 — — Total 210,908 — — (1) All of the shares repurchased were repurchases of unvested shares of our Common Stock that had been issued upon early exercise of stock options.
Fiscal Month Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (2) October 3 - October 30, 2022 3,104 $ 0.06 — — October 31 - November 27, 2022 8,304 0.06 — — November 28 - January 1, 2023 6,453 0.06 — — Total 17,861 — — (1) All of the shares repurchased were repurchases of unvested shares of our Common Stock that had been issued upon early exercise of stock options.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our Common Stock is listed on the Nasdaq Stock Market LLC under the symbol “ENVX.” As o f March 21, 202 2, the re were 200 holders of record of our Common Stock shares.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our Common Stock is listed on The Nasdaq Global Select Market under the symbol “ENVX.” As of February 24, 2023, there were 150 holders of record of our Common Stock shares.
Additionally, there were 7 holde rs of record of 6,000,000 Private Placement Warrants, each exercisable for one share of our Common Stock at a price of $11.50 per share. Dividends We have not declared or paid any dividends on our Common Stock and we currently do not anticipate to pay any cash dividends in the foreseeable future.
Dividends We have not declared or paid any dividends on our Common Stock and we currently do not anticipate to pay any cash dividends in the foreseeable future.
Removed
Unregistered Sales of Equity Securities and Use of Proceeds On December 4, 2020, RSVA consummated its initial public offering of 23,000,000 units (the “Units”), each Unit consisting of one share of Common Stock and one-half of one redeemable warrant (“Public Warrant”), each whole Public Warrant entitling the holder thereof to purchase one share of Common Stock for $11.50 per share.
Added
Additionally, there were seven holders of record of 6,000,000 Private Placement Warrants (as defined in Note 4 “Fair Value Measurement” of the notes to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K) , each exercisable for one share of our Common Stock at a price of $11.50 per share.
Removed
We have applied all of the net proceeds from our initial public offering in accordance with the planned use of proceeds described in our final prospectus dated December 1, 2020 and filed with the SEC pursuant to Rule 424(b) under the Securities Act.
Added
Restricted Stock Units Withholding We withhold Common Stock shares with value equivalent to cover employees' tax withholding obligations for certain employees upon the vesting of restricted stock units. During the fiscal year 2022, we withheld 48,739 shares for a total value of $0.6 million for our employees' tax obligations.
Added
This graph assumes an initial investment of $100.00 in our common stock and in each index (assuming the reinvestment of all dividends, as applicable) at the market close on July 14, 2021 (the date of our common stock began trading on the Nasdaq Global Select Market under the symbol “ENVX” after the Business Combination), through December 30, 2022 (the last trading 37 Table of Contents date before our fiscal year ended on January 1, 2023).
Added
The comparisons shown in the graph below are based upon historical data. We caution that the stock price performance shown in the graph below is not necessarily indicative of, nor is it intended to forecast, the potential future performance of our common stock.

Item 7. Management's Discussion & Analysis

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

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Biggest changeBelow is an unaudited reconciliation of net loss on a GAAP basis to the Non-GAAP EBITDA and Adjusted EBITDA financial measures for the periods presented below (in thousands): Fiscal Years 2021 2020 Net loss $ (125,874 ) $ (39,650 ) Interest expense, net 187 107 Depreciation and amortization 1,515 579 EBITDA (124,172 ) (38,964 ) Stock-based compensation 10,711 666 Change in fair value of convertible preferred stock warrants and common stock warrants 56,141 13,789 Issuance of convertible preferred stock warrants — 1,476 Change in fair value of convertible promissory notes — 2,422 Loss (gain) on early debt extinguishment 60 (1,628 ) Adjusted EBITDA $ (57,260 ) $ (22,239 ) Free Cash Flow Below is an unaudited reconciliation of Net cash used in operating activities to the Free Cash Flow financial measures for the periods presented below (in thousands): Fiscal Years 2021 2020 Net cash used in operating activities $ (51,306 ) $ (20,050 ) Capital (expenditures) (43,584 ) (26,953 ) Free Cash Flow (1) $ (94,890 ) $ (47,003 ) (1) We define “Free Cash Flow” as (i) Net cash from operating activities less (ii) capital expenditures, net of proceeds from disposals of property and equipment, all of which are derived from our Consolidated Statements of Cash Flow.
Biggest changeFiscal Years 2022 2021 Net loss $ (51,622) $ (125,874) Interest expense — 187 Depreciation and amortization 7,972 1,515 EBITDA (43,650) (124,172) Stock-based compensation expense 30,367 10,711 Change in fair value of convertible preferred stock warrants and common stock warrants (75,180) 56,141 Impairment of equipment 4,921 — Loss on early debt extinguishment — 60 Adjusted EBITDA $ (83,542) $ (57,260) Free Cash Flow We define “Free Cash Flow” as (i) net cash from operating activities less (ii) capital expenditures, net of proceeds from disposals of property and equipment, all of which are derived from our Consolidated Statements of Cash Flow.
We believe that the use of EBITDA and Adjusted EBITDA provides an additional tool for investors to use in evaluating ongoing operating results, trends, and in comparing our financial measures with those of comparable companies, which may present similar Non-GAAP financial measures to investors.
We believe that the use of EBITDA and Adjusted EBITDA provides an additional tool for investors to use in evaluating ongoing operating results and trends, and in comparing our financial measures with those of comparable companies, which may present similar Non-GAAP financial measures to investors.
Consideration for Service Revenue contracts generally becomes payable when we meet specific contractual milestones, which include the design and approval of custom cells, procurement of fabrication tooling to meet the customer’s specifications, and fabrication and delivery of custom cells from our pilot production line.
Consideration for Service Revenue contracts generally becomes payable when we meet specific contractual milestones, which include the design and approval of custom cells, procurement of fabrication tooling to meet the customer’s specifications, and fabrication and delivery of custom cells from our pilot production line.
We determine the grant date fair value of the equity awards as follows: • The grant date fair value of RSUs is the last reported sales price of our Common Stock on the grant date. • The fair value of shares to be purchased under the ESPP is based on the grant date fair value using the Black-Scholes option pricing model with several assumptions and estimates, including our stock price volatility, projected employee stock purchase contributions, and others. • The fair value of stock options is based on the grant date fair value using the Black-Scholes option pricing model with several significant assumptions and estimates, including the grant date fair value of Legacy Enovix common stock prior to the Business Combination, our stock price volatility, expected life and others.
We determine the grant date fair value of the equity awards as follows: • The grant date fair value of RSUs and PRSUs is the last reported sales price of our Common Stock on the grant date. • The fair value of shares to be purchased under the ESPP is based on the grant date fair value using the Black-Scholes option pricing model with several assumptions and estimates, including our stock price volatility, projected employee stock purchase contributions, and others. • The fair value of stock options is based on the grant date fair value using the Black-Scholes option pricing model with several significant assumptions and estimates, including the grant date fair value of Legacy Enovix common stock prior to the Business Combination, our stock price volatility, expected life and others.
As we ramp up our engineering operations to complete the development of batteries and required process engineering to meet customer specifications, we anticipate that research and development expenses will increase significantly for the foreseeable future as we expand hiring of scientists, engineers, and technicians and continue to invest in additional plant and equipment for product development, building prototypes, and testing of batteries.
As we ramp up our engineering operations to complete the development of batteries and required process engineering to meet customer specifications, we anticipate that research and development expenses will continue to increase for the foreseeable future as we expand hiring of scientists, engineers and technicians and continue to invest in additional plant and equipment for product development, building prototypes and testing of batteries.
In the execution of satisfying the single performance obligation per the existing Service Revenue contracts, certain costs are recognized as an asset if they relate directly to a customer contract, generate or enhance resources of the entity that will be used in satisfying future performance obligations, and are expected to be recovered.
In the execution of satisfying the single performance obligation per the existing revenue contracts, certain costs are recognized as an asset if they relate directly to a customer contract, generate or enhance resources of the entity that will be used in satisfying future performance obligations, and are expected to be recovered.
Critical Accounting Policies and Estimates The preparation of our consolidated financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities in our consolidated financial statements and accompanying notes.
Critical Accounting Estimates The preparation of our consolidated financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities in our consolidated financial statements and accompanying notes.
Operating Expenses Research and Development Expenses Research and development expenses consist of engineering services, allocated facilities costs, depreciation, development expenses, materials, labor and stock-based compensation related primarily to our (i) technology development, (ii) design, construction, and testing of preproduction prototypes and models, and (iii) certain costs related to the design, construction, and operation of our pilot plant that is not of a scale economically feasible to us for commercial production.
Operating Expenses Research and Development Expenses Research and development expenses consist of engineering services, allocated facilities costs, depreciation, development expenses, materials, labor and stock-based compensation related primarily to our (i) technology development, (ii) design, construction, and testing of preproduction prototypes and models, and (iii) certain costs related to the design, construction and operation of our pilot plant that are not of a scale economically feasible to us for commercial production.
Investing Activities Our cash flows used in investing activities to date have been primarily comprised of purchases of property and equipment. We expect the costs to acquire property and equipment to increase substantially in the near future as we complete the build-out of our manufacturing facility for our battery manufacturing production.
Investing Activities Our cash flows used in investing activities to date have been primarily comprised of purchases of property and equipment. We expect the costs to acquire property and equipment to increase substantially in the near future as we continue to build-out our manufacturing facility for our battery manufacturing production.
The initial liability recorded is adjusted for changes in the fair value at each reporting date and recorded in the Consolidated Statement of Operations. The Private Placement Warrants are subject to re-measurement at each balance sheet date until they are exercised or expired.
The initial liability recorded is adjusted for changes in the fair value at each reporting date and recorded in the Consolidated Statement of Operations and Comprehensive Loss. The Private Placement Warrants are subject to re-measurement at each balance sheet date until they are exercised or expired.
Business Combination and Public Company Costs On July 14, 2021 (the “Closing Date”), Legacy Enovix, RSVAC, and RSVAC Merger Sub Inc., a Delaware Corporation and wholly owned subsidiary of RSVAC (“Merger Sub”), consummated the closing of the transactions contemplated by the Agreement and Plan of Merger, dated February 22, 2021 (the “Merger” or the “Business Combination”), by and among RSVAC, Merger Sub and Legacy Enovix (the “Merger Agreement”), following the approval at a special meeting of the stockholders of RSVAC held on July 12, 2021 (the “Special Meeting”).
Business Combination On July 14, 2021 (the “Closing Date”), Legacy Enovix, RSVAC, and RSVAC Merger Sub Inc., a Delaware Corporation and wholly owned subsidiary of RSVAC (“Merger Sub”), consummated the closing of the transactions contemplated by the Agreement and Plan of Merger, dated February 22, 2021 (the “Merger” or the “Business Combination”), by and among RSVAC, Merger Sub and Legacy Enovix (the “Merger Agreement”), following the approval at a special meeting of the stockholders of RSVAC held on July 12, 2021 (the “Special Meeting”).
For further information, see Note 10 “Stock-based Compensation” to Enovix’s consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K. Stock-based compensation cost is measured at the grant date for all stock-based awards made to employees, consultants and directors based on the fair value of the award.
For further information, see Note 14 “Stock-based Compensation” to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K. Stock-based compensation cost is measured at the grant date for all stock-based awards made to employees, consultants and directors based on the fair value of the award.
Capitalization of certain costs are recognized as an asset if they relate directly to a customer contract, generate or enhance resources of the entity that will be used in satisfying future performance obligations, and are expected to be recovered. If these three criteria are 34 Table of Contents not met, the costs are expensed in the period incurred.
Capitalization of certain costs are recognized as an asset if they relate directly to a customer contract, generate or enhance resources of the entity that will be used in satisfying future performance obligations, and are expected to be recovered. If these three criteria are not met, the costs are expensed in the period incurred.
We base these estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amounts of assets and liabilities that are not 40 Table of Contents readily apparent from other sources. Actual results may differ materially from these estimates.
We base these estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates.
Within the existing Service Revenue contracts, the amount of consideration is fixed, the contracts contain a single performance obligation, and revenue is recognized at the point in time the final milestone is met (i.e., a final working prototype meeting all required specifications) and the customer obtains control of the deliverable.
Within the existing Service Revenue contracts, the amount of consideration is fixed, the 49 Table of Contents contracts contain a single performance obligation, and revenue is recognized at the point in time the final milestone is met (i.e., a final working prototype meeting all required specifications) and the customer obtains control of the deliverable.
Estimates and assumptions impacting the fair value measurement include the fair value per share of the underlying shares of our Common Stock, risk free interest rate, expected dividend yield, expected volatility of the price of the underlying 41 Table of Contents Common Stock and a probability weighted expected term of the warrants.
Estimates and assumptions impacting the fair value measurement include the fair value per share of the underlying shares of our Common Stock, risk free interest rate, expected dividend yield, expected volatility of the price of the underlying Common Stock and a probability weighted expected term of the warrants.
In addition to our financial results determined in accordance with GAAP, we believe that EBITDA, and Adjusted EBITDA, and Free Cash Flow (each as defined below), are useful measures in evaluating our financial and operational performance distinct and apart from financing costs, certain non-cash expenses and non-operational expenses.
We refer to these financial measures as “Non-GAAP” financial measures. In addition to our financial results determined in accordance with GAAP, we believe that EBITDA, and Adjusted EBITDA, and Free Cash Flow (each as defined below), are useful measures in evaluating our financial and operational performance distinct and apart from financing costs, certain non-cash expenses and non-operational expenses.
“Adjusted EBITDA” includes additional adjustments to EBITDA such as stock-based compensation expense; change in fair value of convertible preferred stock warrants, common stock warrants and convertible promissory notes; loss on early debt extinguishment and other non-recurring items as determined by management which it does not believe to be indicative of its underlying business trends.
“Adjusted EBITDA” includes additional adjustments to EBITDA such as stock-based compensation expense; change in fair value of convertible preferred stock warrants, common stock warrants and convertible promissory notes; impairment of equipment; loss on early debt extinguishment and other special items as determined by management which it does not believe to be indicative of its underlying business trends.
Following the consummation of the Merger on the Closing Date, Legacy Enovix changed its name to Enovix Operations Inc., and RSVAC changed its name from Rodgers Silicon Valley Acquisition Corp. to Enovix Corporation (“ Enovix”). Enovix raised approximately $373.7 million of net proceeds, after deducting transaction costs and estimated offering related expenses.
Following the consummation of the Merger on the Closing Date, Legacy Enovix changed its name to Enovix Operations Inc., and 39 Table of Contents RSVAC changed its name from Rodgers Silicon Valley Acquisition Corp. to Enovix Corporation (“Enovix”). Enovix raised approximately $373.7 million of net proceeds, after deducting transaction costs and estimated offering related expenses.
Research and development costs are expensed as incurred. To date, research and development expenses have consisted primarily of personnel-related expenses for scientists, experienced engineers and technicians as well as costs associated with the expansion and ramp up of our engineering and manufacturing facility in Fremont, California, including the material and supplies to support the product development and process engineering efforts.
To date, research and development expenses have consisted primarily of personnel-related expenses for scientists, experienced engineers and technicians as well as costs associated with the expansion and ramp up of our engineering and manufacturing facility in Fremont, California, including the material and supplies to support the product development 42 Table of Contents and process engineering efforts.
Other Income (Expense), net Other income and expenses, net primarily consist of interest expense, fair value adjustments for outstanding convertible preferred stock warrants, fair value adjustments for outstanding common stock warrants, and fair value adjustments for convertible promissory notes, the issuance of convertible preferred stock warrants, and loss on early debt extinguishment.
Other Income (Expense) Other income and expenses, net primarily consist of fair value adjustments for the convertible preferred stock warrants and fair value adjustments for the common stock warrants, interest income (expense), net and loss on early debt extinguishment.
We also lease a small office in Fremont, California under a noncancelable operating 39 Table of Contents lease that expires in April 2026 with an option to extend the lease for five years.
We also lease a small office in Fremont, California under a noncancelable operating lease that expires in April 2026 with an option to extend the lease for five years.
We use the Black-Scholes option pricing model to determine the fair value of the Private Placement Warrants as of January 2, 2022 with assumptions and estimates.
We use the Black-Scholes option pricing model to determine the fair value of the Private Placement Warrants as of January 1, 2023 with assumptions and estimates.
The most significant assumptions impacting the fair value of the Private Placement Warrants are the fair value of our common stock warrants as of each re-measurement date and expected price volatility of our Common Stock, which included consideration the most recent sales of the Public Warrants and expected price volatility of our Common Stock, results obtained from third-party valuations and additional factors that were deemed relevant.
The most significant assumptions impacting the fair value of the Private Placement Warrants are the fair value of our common stock as of each re-measurement date and expected price volatility of our Common Stock, which included consideration the most recent sales of the Public Warrants, expected price volatility of our Common Stock and other additional factors that were deemed relevant.
Net cash used in operating activities consists of net loss of $39.7 million, adjusted for non-cash items and the effect of changes in working capital.
Net cash used in operating activities consists of net loss of $51.6 million, adjusted for non-cash items and the effect of changes in working capital.
These estimates and assumptions include but are not limited to: depreciable lives for property and equipment, the valuation allowance on deferred tax assets, assumptions used in stock-based compensation and estimates to fair value preferred and common stock warrants.
These estimates and assumptions include but are not limited to: depreciable lives for property and equipment, impairment of equipment, the valuation allowance on deferred tax assets, assumptions used in stock-based compensation and estimates to fair value the Private Placement Warrants.
We are establishing a research and development center in India that will initially focus on developing machine learning algorithms. Selling, General, and Administrative Expenses Selling, general and administrative expenses consist of personnel-related expenses, marketing expenses, allocated facilities expenses, depreciation expenses, executive management travel, and professional services expenses, including legal, human resources, audit, accounting and tax-related services.
We established a research and development center in India that initially focuses on developing machine learning algorithms. Selling, General, and Administrative Expenses Selling, general and administrative expenses consist of personnel-related expenses, marketing expenses, allocated facilities expenses, depreciation expenses, travel expenses, and professional services expenses, including legal, human resources, audit, accounting and tax-related services.
We issue stock-based compensation to employees and nonemployees generally in the form of stock options or restricted stock units (“RSUs”). Starting in the fourth quarter of 2021, we also offer employee stock purchase plan (the “2021 ESPP”) to our employees.
We issue stock-based compensation to employees and nonemployees generally in the form of stock options or restricted stock units (“RSUs”) and performance-based restricted stock units (“PRSUs”). We also offer employee stock purchase plan (the “2021 ESPP”) to our employees.
For further information, see Note 4 “Fair Value Measurement and Fair Value of Financial Instruments” to Enovix’s consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.
For further information, see Note 4 “Fair Value Measurement” to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Net cash used in investing activities, which were primarily related to equipment purchases, was $43.6 million and $27.0 million for the fiscal years 2021 and 2020, respectively.
Net cash used in investing activities, which were primarily related to equipment purchases, were $36.2 million and $43.6 million for the fiscal years 2022 and 2021, respectively.
Change in Fair Value of Convertible Preferred Stock Warrants and Common Stock Warrants The change in fair value of convertible preferred stock warrants and common stock warrants of $56.1 million for the fiscal year 2021 was comprised of a change in fair value of $51.4 million of Private Placement Warrants assumed in the Business Combination during the second half of fiscal year 2021 and a change in fair value of $4.8 million of Legacy Enovix's convertible preferred stock warrants.
For the fiscal year 2021, the change in fair value of convertible preferred stock warrants and common stock warrants of $(56.1) million consisted of an increase in fair value of $(51.4) million of Private Placement Warrants assumed in the Business Combination and an increase in fair value of $(4.8) million of Legacy Enovix's convertible preferred stock warrants.
If these three criteria are not met, the costs are expensed in the period incurred. Deferred contract costs are recognized as cost of revenue in the period when the related revenue is recognized.
If these three criteria are not met, the costs are expensed in the period incurred. Deferred contract costs are recognized as cost of revenue in the period when the related revenue is recognized. During the fiscal year 2022, we recognized $4.3 million of deferred contract costs as cost of revenue.
Payments due upon cancellation consist only of payments for services provided or expenses incurred, including non-cancellable obligations of service providers, up to the date of cancellation. As of January 2, 2022, our commitments included an estimated amount of approximately $17.4 million relating to our open purchase orders and contractual obligations that occurred in the ordinary course of business.
Payments due upon cancellation consist only of payments for services provided or expenses incurred, including non-cancelable obligations of service providers, up to the date of cancellation. As of January 1, 2023, our commitments included approximately $22.7 million of our open purchase orders and contractual obligations that occurred in the ordinary course of business.
We continue to increase hiring for employees in supporting the ramping up of commercial manufacturing and being a public company. We expect our cash used in operating activities to increase significantly before we start to generate any material cash inflows from commercially manufacturing and selling our batteries.
We continue to increase hiring for employees in supporting the ramping up of commercial manufacturing. We expect our cash used in operating activities to increase significantly before we start to generate any material cash inflows from commercially manufacturing and selling our batteries. Net cash used in operating activities was $82.7 million for the fiscal year 2022.
In the fourth quarter of 2021, our revenue funnel increased to $1.5 billion. Our revenue funnel is defined as the potential value of a full production year for all of the customer projects for which we have been engaged.
Our revenue funnel is defined as the potential value of a full production year for all of the customer projects for which we have been engaged.
The increase of $24.0 million, or 420% was primarily attributable to an increase in our selling, general and administrative employee headcount resulting in a $6.4 million increase in salaries and employee benefits, and a $4.2 million increase in stock-based compensation expenses.
The increase of $22.3 million, or 75%, was primarily attributable to an increase in our selling, general and administrative employee headcount resulting in a $3.8 million increase in salaries and employee benefits and a $11.3 million increase in stock-based compensation expenses.
We generally recognize stock-based compensation expense on a straight-line basis over the requisite service period of the awards, which is generally the vesting period. Forfeitures are accounted for when they occur.
We generally recognize stock-based compensation expense for stock options and RSUs on a straight-line basis over the service period of the awards, which is generally the vesting period. For PRSUs and ESPP shares, we use the graded vesting method to calculate the stock-based compensation expense. Forfeitures are accounted for when they occur.
Non-cash adjustments primarily include stock-based compensation expense of $10.7 million, depreciation and amortization expense of $1.5 million and the change in fair value of convertible preferred stock warrants and common stock warrants of $56.1 million. Net cash used in operating activities was $20.1 million for the fiscal year 2020.
Net cash used in operating activities consists of net loss of $125.9 million, adjusted for non-cash items and the effect of changes in working capital. Non-cash adjustments primarily include the change in fair value of convertible preferred stock warrants and common stock warrants of $56.1 million, stock-based compensation expense of $10.7 million and depreciation and amortization expense of $1.5 million.
Personnel related costs consist of salaries, benefits and stock-based compensation. Facilities costs consist of rent and maintenance of facilities. We are expanding our personnel headcount to support the ramping up of commercial manufacturing and being a public company.
Personnel related costs consist of salaries, benefits and stock-based compensation. Facilities costs consist of rent and maintenance of facilities. We are expanding our personnel headcount to support the ramping up of commercial manufacturing and being a public company. Accordingly, we expect our selling, general and administrative expenses to increase significantly in the near term and for the foreseeable future.
Research and Development Expenses Research and development expenses for the fiscal year 2021 were $37.9 million, compared to $14.4 million for the fiscal year 2020.
Research and Development Expenses Research and development expenses for the fiscal year 2022 were $58.1 million, compared to $37.9 million during the prior fiscal year 2021.
The increase of $23.4 million, or 162% was primarily attributable to an increase in our research and development employee headcount resulting in a $10.9 million increase in salaries and employee benefits, and a $5.7 million increase in stock-based compensation expenses.
The increase of $20.2 million, or 53%, was primarily attributable to an increase in our research and development employee headcount resulting in a $11.1 million increase in salaries and employee benefits, a $6.5 million increase in stock-based compensation expenses, a $3.4 million increase in subcontractor costs and a $2.9 million increase in tooling and materials costs.
The speed by which we capture these indications of demand will ultimately be governed by how fast we qualify customers, improve our manufacturing processes and bring on additional capacity. Product Development We have developed and delivered standardized sample (i.e., prototype) batteries to multiple, industry leading consumer electronics manufacturers.
The speed with which we convert our revenue funnel to purchase orders and revenue will ultimately be governed by how fast we qualify customers, improve our manufacturing processes and bring on additional capacity. 40 Table of Contents Product Development We have developed and delivered standardized sample (i.e., prototype) lithium-ion batteries to multiple, industry leading consumer electronics manufacturers with energy densities higher than industry standard batteries of similar size.
For the lease payment schedule, please see Note 6 “Leases,” of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for further information. In addition, we enter into agreements in the normal course of business with various vendors, which are generally cancelable upon notice.
For the lease payment schedule, please see Note 7 “Leases,” of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for further information.
Our computation of EBITDA and Adjusted EBITDA may 37 Table of Contents not be comparable to other similarly titled measures computed by other companies, because all companies may not calculate EBITDA and Adjusted EBITDA in the same fashion.
Our computation of EBITDA and Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies, because all companies may not calculate EBITDA and Adjusted EBITDA in the same fashion. 46 Table of Contents Below is a reconciliation of net loss on a GAAP basis to the Non-GAAP EBITDA and Adjusted EBITDA financial measures for the periods presented below (in thousands).
For further information, see Note 2 “Summary of Significant Accounting Policies” to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.
A summary of our significant accounting policies are included Note 2 “Summary of Significant Accounting Policies” to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K. The following is a summary of some of the more critical accounting policies and estimates.
During all periods presented, we did not recognize any Service Revenue as final milestones were not yet met. Cost of Revenue Cost of revenue includes materials, labor, allocated depreciation expense, and other direct costs related to Service Revenue contracts. Labor consists of personnel-related expenses such as salaries and benefits, and stock-based compensation.
Cost of Revenue Cost of revenue includes materials, labor, depreciation expense, and other direct costs related to Service Revenue contracts and production lines. Labor consists of personnel-related expenses such as salaries and benefits, and stock-based compensation.
We will continue to increase our property and equipment purchases in the near future for supporting the build-out of our manufacturing facility and our battery manufacturing production.
We will continue to increase our property and equipment purchases in the near future to support the build-out of our manufacturing facilities and our battery manufacturing production. See more discussion on contractual obligations and commitments section below.
Please refer to Note 3 “Business Combination” of Part II, Item 8 of this Annual Report on Form 10-K for further details of the Business Combination.
Please refer to Note 3 “Business Combination” of Part II, Item 8 of this Annual Report on Form 10-K for further details of the Business Combination. Reorganization Merger On January 17, 2023, Legacy Enovix merged with and into Enovix Corporation, with the separate existence of Legacy Enovix ceasing and Enovix Corporation being the surviving corporation of such merger.
To date, we have concentrated our operational effort on researching and developing the cutting-edge technology behind our silicon-anode lithium-ion battery. Over the past several years, we have signed agreements to provide engineering and proof of concept samples to blue-chip companies in the consumer electronic industry (smartwatches, augmented reality/virtual reality, smartphones, fire/life/safety radios, laptops).
Over the past several years, we have signed agreements to provide engineering and proof of concept samples to blue-chip companies in the consumer electronic industry (smartwatches, augmented reality/virtual reality, smartphones, fire/life/safety radios, laptops). In addition to those industries, we are pursuing the deployment of our technology for the electric vehicle (“EV”) market.
We believe we will meet longer-term expected future cash requirements and obligations through a combination of available cash, cash equivalents and future debt financings, and access to other public or private equity 38 Table of Contents offerings. We have made our estimates on historical experience and various other relevant factors and we believe that they are reasonable.
We believe we will meet longer-term expected future cash requirements and obligations through a combination of available cash, cash equivalents and future debt financings, and access to other public or private equity offerings as well as potential strategic arrangements.
As of January 2, 2022 and December 31, 2020, we had $4.6 million and $3.5 million, respectively, of deferred contract costs and $7.9 million and $5.5 million, respectively, of deferred revenue on our Consolidated Balance Sheets.
A portion was previously recorded as deferred revenue on our Consolidated Balance Sheet. As of January 1, 2023 and January 2, 2022, we had $3.8 million and $7.9 million, respectively, of deferred revenue on our Consolidated Balance Sheets.
Net cash provided by financing activities was $451.1 million for the fiscal year 2021, which primarily consisted of $405.2 million of proceeds from the Business Combination and the PIPE financing, $77.2 million of proceeds from the exercises of common stock warrants, $15.0 million of proceed from the borrowing of the Secured Promissory Note and $0.3 million of proceeds from the exercise of stock options and proceeds from the exercise of the convertible preferred stock warrants, which were offset by $31.4 million related to the transaction costs incurred in connection with the Business Combination and PIPE financing, $15.0 million repayment of Secured Promissory Note, and $0.1 million of debt issuance costs.
Net cash provided by financing activities was $451.1 million for the fiscal year 2021, which primarily consisted of $405.2 million of proceeds from the Business Combination and the PIPE financing, $77.2 million of proceeds from the exercises of common stock warrants, $15.0 million proceed from the borrowing of the Secured Promissory Note, which was partially offset by $31.4 million of payments of transaction costs related to Business Combination and PIPE financing and $15.0 million of principal payment of Secured Promissory Note. 48 Table of Contents Contractual Obligations and Commitments We lease our headquarters, engineering, and manufacturing space in Fremont, California under a single non-cancelable operating lease with an expiration date of August 31, 2030.
Commercialization Currently, we are building out our Fab-1 at our headquarters in Fremont, California. We have commenced deliveries of qualification cells from Fab-1. Challenges associated with building out Fab-1 include extended shipping times, supply chain constraints and 33 Table of Contents intermittent vendor support during equipment bring-up resulting from COVID travel restrictions imposed on certain countries in Asia.
Commercialization We commenced deliveries of commercial cells from Fab-1, but we have experienced challenges associated with bringing up the manufacturing equipment in Fab-1, including technical issues negatively impacting yield and volume production, and extended shipping times, supply chain constraints and intermittent vendor support during equipment bring-up resulting from COVID-19 travel restrictions imposed by certain countries in Asia.
Business Overview We design, develop, and plan to commercially manufacture an advanced silicon-anode lithium-ion battery using our proprietary 3D cell architecture that increases energy density and maintains high cycle life. This enables us to use silicon as the only active lithium cycling material in the anode.
The management of Enovix Corporation are referred to as the “Company,” “we,” “us,” “our” and “Enovix.” Business Overview We design, develop and have started to commercially manufacture an advanced silicon-anode lithium-ion battery using our proprietary three-dimensional (“3D”) cell architecture that increases energy density and maintains high cycle life.
Access to Capital Assuming we experience no significant delays in the research and development of our battery, we believe that our cash resources, including the net proceeds from the completion of the Merger, are sufficient to fund the continued build out and production ramp of our Fab-1 manufacturing facility in Fremont, California and lease or purchase and retrofit an existing facility elsewhere as our Fab-2 for growth.
Our goal is to translate this work into partnerships (e.g., joint ventures or licensing) with EV OEMs or battery OEMs in order to commercialize our technology in this end market. 41 Table of Contents Access to Capital Assuming we experience no significant delays in the R&D of our battery nor any deterioration in capital efficiency, we believe that our cash resources are sufficient to fund the continued build-out and production ramp of our Fab-1 manufacturing facility in Fremont, California and lease or purchase and retrofit an existing facility, as well as our Fab-2 for growth.
The increase in fair value of Private Placement Warrants was primarily due to an increase in Enovix's common stock price during the second half of fiscal 2021.
The increase in fair value of Private Placement Warrants was primarily due to an increase in our common stock price during the second half of fiscal 2021. 45 Table of Contents Interest Income (Expense), Net Interest income (expense), net for the fiscal year 2022 primarily consisted of $5.2 million of income earned from the money market funds.
We made the fiscal year change on a prospective basis and would not adjust operating results for prior periods. Our current fiscal year was ended on January 2, 2022 and our 2022 fiscal year will be comprised of four fiscal quarters ending on April 3, 2022, July 3, 2022, October 2, 2022 and January 1, 2023, respectively.
We made the fiscal year change on a prospective basis and did not adjust operating results for prior periods. Our fiscal year-end financial reporting periods are a 52- or 53-week fiscal year. The fiscal years 2022 and 2021 ended on January 1, 2023 and January 2, 2022, respectively.
Based on the anticipated spending, cash received from the Business Combination and gross proceeds from the exercises of the Public Warrants, and timing of expenditure assumptions, we currently expect that our cash will be sufficient to meet our funding requirements over the next twelve months.
Based on the anticipated spending and timing of expenditures to support operational development and market expansion, we currently expect that our cash will be sufficient to meet our funding requirements over the next twelve months from the date this Annual Report on Form 10-K is filed.
We have not commenced commercial manufacturing of our batteries, and thus, no product revenue has been generated to date. Our performance and future success depend on several factors that present significant opportunities, but also pose risks and challenges as described in Part I, Item 1A of this Annual Report on Form 10-K.
Our performance and future success depend on several factors that present significant opportunities, but also pose risks and challenges as described in Part I, Item 1A of this Annual Report on Form 10-K. Fiscal Year 2022 Highlights: • During the first quarter of 2022, we announced BrakeFlow TM , a breakthrough in advanced lithium-ion battery safety.
Actual results may be differ from our estimates, and we could utilize our available capital resources sooner than we expect.
We have made our 47 Table of Contents estimates on historical experience and various other relevant factors and we believe that they are reasonable. Actual results may be differ from our estimates, and we could utilize our available capital resources sooner than we expect.
For contractual obligations, please See Note 8 “Commitments and Contingencies” of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for further information. On May 24, 2021, Legacy Enovix issued to a member of the board of directors the Secured Promissory Note with an aggregate principal balance of $15.0 million.
We expect to place additional purchase orders in the fiscal year 2023 to support our operation development. For contractual obligations, please See Note 10 “Commitments and Contingencies” of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for further information.
In addition to those industries, we are pursuing the deployment of our technology with leading international automobile manufacturers to develop patented battery technology for the electric vehicle (“EV”) market. We currently lease our headquarters, engineering and manufacturing space in Fremont, California. In 2020, we started procuring equipment for our Fab-1. The first of this equipment began arriving in early 2021.
We currently lease our headquarters, engineering and manufacturing space in Fremont, California. In 2020, we started procuring equipment for our first production line (“Fab-1”). The first of this equipment began arriving in early 2021.
Fab-1 features a first-of-its-kind line for battery production. As a result, every day we solve problems needed to improve yield and output. Simultaneously, this work is providing valuable learning, improving our processes and equipment for future lines.
Fab-1 features a first-of-its-kind line for battery production. As a result, we regularly face and overcome new challenges to improve yield and output. Simultaneously, these efforts have provided and continue to provide valuable learning experiences, allowing us to improve our processes and equipment for future lines. With production commenced, our focus in Fab-1 is on increasing volumes and yields.
On July 14, 2021, we paid off the Secured Promissory Note and its accrued interest by using $15.2 million of proceeds from the Business Combination. Off-Balance Sheet Arrangements As of January 2, 2022 and December 31, 2020, we did not have any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
Off-Balance Sheet Arrangements As of January 1, 2023 and January 2, 2022, we did not have any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
The remaining increase of $13.4 million is primarily comprised of a $6.3 million increase in professional fees, 36 Table of Contents training and recruiting expenses, a $2.3 million increase in legal fees, which partially was incurred in connection with the Business Combination, a $1.2 million increase in marketing expenses, and a $1.2 million increase in insurance expenses.
The remaining increase of $7.2 million was primarily comprised of a $5.1 million increase in legal and professional fees, a $3.5 million increase in subcontractors costs and a $1.4 million increase in insurance expense, which were partially offset by $1.2 million decreases in marketing and recruiting expenses and $1.6 million decreases in other miscellaneous expenses, including travel expenses and consultant fees in supporting the Company being a public company.
Comparability of Financial Information Our future results of operations and financial position may not be comparable to historical results as a result of the Merger. Key Trends, Opportunities and Uncertainties We generate revenue from payments received from our customers based on executed engineering revenue contracts (the “Service Revenue”) for the development of silicon-anode lithium-ion battery technology.
Key Trends, Opportunities and Uncertainties We generate revenue from payments received from our customers in connection with (a) the sale of silicon-anode lithium-ion batteries and battery pack products (“Product Revenue”) and (b) executed engineering revenue contracts (“Service Revenue”) for the development of silicon-anode lithium-ion battery technology. We commenced shipment of commercially manufactured batteries in the second quarter of 2022.
At the same time, we are seeding our entry into the EV market by sampling batteries to EV OEMs and continuing work on our three-year grant with the U.S. Department of Energy to demonstrate batteries featuring our silicon anode paired with EV-class cathode materials.
We believe the best approach is to start in premium markets where we can leverage our differentiated technology and solidify our manufacturing process while driving toward profitability At the same time, we are seeding our entry into the EV battery market by sampling batteries to EV OEMs and continuing work on our three-year grant with the U.S.
For further information, see Note 4 “Fair Value Measurement and Fair Value of Financial Instruments” to Enovix’s consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.
For the fiscal year 2022, the change in fair value of common stock warrants of $75.2 million was attributable to a decrease in the fair value of the 6,000,000 Private Placement Warrants (as defined in Note 4 “Fair Value Measurement” of the notes to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K) .
The following table provides a summary of cash flow data for the periods presented below (in thousands): Fiscal Years 2021 2020 Change ($) Net cash used in operating activities $ (51,306 ) $ (20,050 ) $ (31,256 ) Net cash used in investing activities (43,584 ) (26,953 ) (16,631 ) Net cash provided by financing activities 451,090 65,920 385,170 Change in cash, cash equivalents and restricted cash $ 356,200 $ 18,917 $ 337,283 Comparison of Fiscal Year Ended January 2, 2022 to Fiscal Year Ended December 31, 2020 Operating Activities Our cash flows used in operating activities to date have been primarily comprised of operating expenses.
Fiscal Years 2022 2021 Change ($) Net cash used in operating activities $ (82,740) $ (51,306) $ (31,434) Net cash used in investing activities (36,212) (43,584) 7,372 Net cash provided by financing activities 56,510 451,090 (394,580) Change in cash, cash equivalents, and restricted cash $ (62,442) $ 356,200 $ (418,642) Comparison of Fiscal Year 2022 to Prior Fiscal Year 2021 Operating Activities Our cash flows used in operating activities to date have been primarily comprised of operating expenses.
A portion of the outstanding warrants are held by the sponsor and members of Rodgers Capital LLC (the “Private Placement Warrants”) and the Public Warrants. The Public Warrants met the criteria for equity classification and the Private Placement Warrants are classified as liability.
The assumed warrants consisted of the Private Placement Warrants and the Public Warrants. The Public Warrants met the criteria for equity classification and the Private Placement Warrants are classified as liability. As of January 1, 2023, there were 6,000,000 outstanding shares of the Private Placement Warrants and no Public Warrants outstanding.
Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis provide information that the management of Enovix Corporation (referred to as the “Company,” “we,” “us,” “our” and “Enovix”) believes is relevant to an assessment and understanding of Enovix’s consolidated results of operations and financial condition as of January 2, 2022 and for the fiscal years 2021 and 2020 and should be read together with the consolidated financial statements that are included elsewhere in this Annual Report on Form 10-K.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes thereto included elsewhere in this Annual Report on Form 10-K.
Net cash provided by financing activities was $65.9 million for fiscal year 2020, which was primarily related to $63.9 million of proceeds from the issuance of Series P-2 convertible preferred stock, $1.6 million of proceeds from borrowing of the Paycheck Protection Program Loan and proceeds of $0.4 million from the exercise of stock options.
Financing Activities Net cash provided by financing activities was $56.5 million for the fiscal year 2022, which primarily consisted of $52.8 million of net proceeds from the exercises of Public Warrants, $2.4 million of proceeds from the exercise of stock options and $1.9 million of net proceeds from issuance of shares of our common stock, par value $0.0001 per share (“Common Stock”), under our employee stock purchase plan.
We have applied an equally innovative approach to develop proprietary roll-to-stack production tools that ‘drop-in’ to existing lithium-ion battery manufacturing lines and increase megawatt hour capacity. Our silicon anode battery architecture allows lithium-ion batteries to be produced smaller, cheaper, and more efficiently than current alternatives.
This enables us to use silicon as the only active lithium cycling material in the anode whereas industry incumbents have historically combined only a modest amount of silicon with graphite. We have applied an equally innovative approach to develop proprietary roll-to-stack production tools for existing lithium-ion battery manufacturing lines and increase megawatt hour capacity.
The remaining increase of $6.9 million was primarily due to the increased facility, tooling costs, research and development materials, telecommunication and IT costs, and other miscellaneous research and development expenses. Selling, General and Administrative Expenses Selling, general and administrative expenses for the fiscal year 2021 were $29.7 million, compared to $5.7 million during the fiscal year 2020.
Selling, General and Administrative Expenses Selling, general and administrative expenses for the fiscal year 2022 were $52.0 million, compared to $29.7 million during the prior fiscal year 2021.
While we expect certain regulations under President Biden's administration could, if adopted, facilitate market demand and revenue growth, other potential regulations, if adopted, could result in additional operating costs. Components of Results of Operations Service Revenue Service Revenue contracts generally include the design and development efforts to conform our existing battery technology with the customer’s required specifications.
Service Revenue contracts generally include the design and development efforts to conform our existing battery technology with customers’ required specifications.
No such event occurred during the fiscal year 2021. Non-GAAP Financial Measures While we prepare our consolidated financial statements in accordance with GAAP, we also utilize and present certain financial measures that are not based on GAAP. We refer to these financial measures as “Non-GAAP” financial measures.
In July 2021, we repaid all amounts outstanding under the Secured Promissory Note. The interest expense was partially offset by an immaterial amount of dividend income. Non-GAAP Financial Measures While we prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”), we also utilize and present certain financial measures that are not based on GAAP.
Liquidity and Capital Resources We have incurred recurring operating losses and negative cash flows from operations since inception through January 2, 2022 and expect to incur operating losses for the foreseeable future. As of January 2, 2022, we had cash and cash equivalents of $385.3 million, a working capital of $377.5 million and an accumulated deficit of $333.2 million.
Below is a reconciliation of net cash used in operating activities to the Free Cash Flow financial measures for the periods presented below (in thousands): Fiscal Years 2022 2021 Net cash used in operating activities $ (82,740) $ (51,306) Capital expenditures (36,212) (43,584) Free Cash Flow $ (118,952) $ (94,890) Liquidity and Capital Resources We have incurred operating losses and negative cash flows from operations since inception through January 1, 2023 and expect to incur operating losses for the foreseeable future.
Net cash used in operating activities was $51.3 million for the fiscal year 2021. Net cash used in operating activities consists of net loss of $125.9 million, adjusted for non-cash items and the effect of changes in working capital.
Non-cash adjustments primarily include a decrease in fair value of the Private Placement Warrants of $75.2 million, stock-based compensation expense of $30.4 million, depreciation and amortization expense of $8.0 million and impairment of equipment of $4.9 million. Net cash used in operating activities was $51.3 million for the fiscal year 2021.
Removed
Fab-1 is now operational with first production revenue forecasted in the second quarter of 2022. Impact of Coronavirus (“COVID-19”) We closely monitor the impact of the pandemic of COVID-19 on all aspects of our business, including how it will impact our operations.
Added
Our silicon anode battery architecture allows lithium-ion batteries to be produced smaller, cheaper and more efficiently at scale than current alternatives. To date, we have concentrated our operational effort on researching, developing and commercializing the cutting-edge technology behind our silicon-anode lithium-ion battery.

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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 changeInflation Risk There was no material inflation risk for the fiscal years 2021 and 2020 as our activities to date have been primarily related to research and development activities, as well as our Fab-1 construction. 43 Table of Contents
Biggest changeAlthough there was no material inflation risk for the fiscal year ended January 1, 2023 as our activities to date have been primarily related to research and development activities, as well as our Fab-1 construction, if our costs become subject to significant inflationary pressures, we may not be able to fully offset such higher costs with increased revenues.
Interest Rate Risk The market risk inherent in our financial instruments and financial position represents the potential loss arising from adverse changes in interest rates. As of January 2, 2022, we had cash and cash equivalents of $385.3 million, consisting of interest-bearing money market accounts.
Interest Rate Risk The market risk inherent in our financial instruments and financial position represents the potential loss arising from adverse changes in interest rates. As of January 1, 2023, we had cash and cash equivalents of $322.9 million, consisting of interest-bearing money market accounts.
Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest 42 Table of Contents rates. An immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our cash and cash equivalents.
Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. An immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our cash equivalents. As of January 1, 2023, we had no outstanding interest bearing debt.
As of January 2, 2022, we had no outstanding interest bearing debt. Uncertain financial markets could result in a tightening in the credit markets, a reduced level of liquidity in many financial markets, and extreme volatility in fixed income and credit markets. Foreign Currency Risk There was no material foreign currency risk for the fiscal years 2021 and 2020.
Uncertain financial markets could result in a tightening in the credit markets, a reduced level of liquidity in many financial markets, and extreme volatility in fixed income and credit markets. Foreign Currency Risk There was no material foreign currency risk for the fiscal year ended January 1, 2023.
Added
Given the impact of foreign currency exchange rates has not been material to our historical operating results, we have not entered into derivative or hedging transactions, but we may do so in the future if our exposure to foreign currency should become more significant.
Added
As our international operations grow, we will continue to reassess our approach to manage our risk relating to fluctuations in currency rates. Inflation Risk In recent months, inflation has continued to increase significantly in the U.S. and overseas resulting in rising transportation, wages, and other costs. Inflation may generally affect us by increasing our costs and expenses.
Added
Our inability or failure to do so could harm our business, financial condition, and results of operations. 51 Table of Contents

Other ENVX 10-K year-over-year comparisons