TIGO ENERGY, INC.
For the period ended Dec 31, 2024. Filed Mar 20, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 20, 2025
TYGO$0.74+1.8%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-21.
0000950170-24-034765
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-20.
0000950170-25-042645
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 138 previous paragraphs and 113 current paragraphs.
54 unchanged; 39 reworded; 20 added; 45 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 9 previous and 9 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (20)
Current report
As a result of these factors, we recognized inventory charges of $23.5 million to write down inventories to their estimated net realizable value for the year ended December 31, 2024. These charges were primarily related to excess and slow-moving inventory within the GO ESS line of energy storage solutions. See Note 9, “Supplementary Balance Sheet and Geographic Information,” of the notes to consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information.
Current report
Further write-downs of inventories and additional cost reduction measures in future quarters could occur if market conditions do not improve or further deteriorate which could continue to have an adverse effect on our results of operations in 2025.
Current report
Net revenue decreased by $91.2 million or 62.8% for the year ended December 31, 2024, as compared to the same period in 2023. The decrease is primarily due to the solar industry experiencing a broad-based slowdown starting in the second half of 2023 in both the U.S. and European markets, which resulted in elevated inventory levels with distributors and installers, and as a result the overall demand for our products and services decreased as distributors and installers responded to this slower demand environment. Please see the section below for a discussion of the factors influencing the fluctuations in net revenue for each of our geographic regions.
Current report
APAC – Net revenue for the APAC region decreased by $2.5 million or 23.0% for the year ended December 31, 2024, as compared to the same period in 2023. The decrease was primarily driven by a $2.2 million decline in sales in China which is primarily attributable to higher interest rates impacting investment decisions and new entrants to the MLPE market, including low-cost Asian manufacturers.
Current report
Cost of revenue decreased by $35.8 million or 38.1% for the year ended December 31, 2024, as compared to the same period in 2023. The decrease is primarily due to a 62.8% decline in net revenues for the year ended December 31, 2024, compared to the same period in 2023. The decrease was primarily offset by inventory charges of $23.5 million during the year ended December 31, 2024, primarily due to excess and slow-moving inventory within the GO ESS line of energy storage solutions as a result of the macroeconomic factors noted above.
Current report
Gross profit decreased from $51.3 million for the year ended December 31, 2023, to a gross loss of $4.2 million for the year ended December 31, 2024, a decrease of $55.5 million or 108.1%. Gross margin decreased by 43.0 percentage points for the year ended December 31, 2024, as compared to the same period in 2023. The decreases are primarily due to inventory reserve charges of $23.5 million during the year ended December 31, 2024 primarily due to excess and slow-moving inventory within the GO ESS line of energy storage solutions and lower sales volume due to the unfavorable macroeconomic and market conditions noted above, in addition to sales promotions and discounts related to our GO ESS product line.
Current report
Research and development expense increased by $0.4 million or 3.8% for the year ended December 31, 2024, as compared to the same period in 2023. The increase was primarily driven by an increase in consulting and personnel-related stock-based compensation expenses, and is partially offset by a decrease in payroll related expenses from a lower headcount during the year ended December 31, 2024, compared to the same period in 2023.
Current report
Sales and marketing expense decreased by $4.4 million or 20.5% for the year ended December 31, 2024, as compared to the same period in 2023. The decrease was primarily due to reduced payroll and travel expenses resulting from a lower headcount by $5.1 million, and was partially offset by an increase in personnel-related stock-based compensation expenses by $0.9 million.
Current report
General and administrative expense decreased by $7.7 million or 26.9% for the year ended December 31, 2024, as compared to the same period in 2023. The decrease is primarily due to a decline of bad debt expense associated with our accounts receivable by $5.6 million, a decrease in legal expense by $4.4 million which was higher in 2023 due to the Business Combination, as defined below, and is partially offset by an increase in personnel-related stock-based compensation expenses by $2.6 million.
Current report
Other Expenses (Income), Net
Current report
Interest expense increased by $3.3 million or 40.7% for the year ended December 31, 2024, as compared to the same period in 2023. This increase is primarily due to the timing of the amortization of the debt discount of $23.5 million that was recorded upon the bifurcation of the conversion options at the time of the Business Combination. Please see Note 9, “Long-Term Debt,” of the notes to consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information.
Current report
Interest income decreased by $1.5 million or 62.7% for the year ended December 31, 2024, as compared to the same period in 2023, primarily due to a lower balance of marketable securities available to generate interest income in 2024 compared to the same period in 2023.
Current report
Other income, net of $37,000 decreased to other expenses, net of $0.2 million for the year ended December 31, 2024, as compared to the same period in 2023. This is primarily due to a reduction of finance fees charged to customers for the year ended December 31, 2024, compared to same period in 2023.
Current report
Liquidity, Going Concern and Capital Resources
Current report
As of December 31, 2024, our principal sources of liquidity were cash and cash equivalents and marketable securities of $19.9 million and total working capital, which we define as current assets less current liabilities, of $36.3 million. Our principal uses of cash are for funding our operations, capital expenditures, other working capital requirements, other investments and the repayment of our Convertible Promissory Note (as defined below) due in January 2026.
Current report
In accordance with ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern(“Subtopic 205-40”), we evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the consolidated financial statements are issued. The Convertible Promissory Note, which has an aggregate principal amount outstanding of $50.0 million as of December 31, 2024, has a maturity date of January 9, 2026. See Note 9, “Long-Term Debt,” of the notes to consolidated financial statements for additional information regarding the Convertible Promissory Note. Management determined as a result of this evaluation, our current cash, working capital position, and upcoming maturity date of its Convertible Promissory Note, raises substantial doubt about our ability to continue as a going concern within one year after the date that the consolidated financial statements are issued.
Current report
Our plan is to continue exploring options for raising additional capital through a combination of equity financing to supplement our liquidity and/or refinancing of the Convertible Promissory Note. Our ability to raise capital may be constrained by the price of and demand for our common stock. Additional capital may not be available on favorable terms or at all, and could further dilute our current stockholders. Management cannot conclude as of the date of this filing that its plans are probable of being successfully implemented. There can be no assurance that we will be able to raise sufficient additional capital or obtain financing that will provide it with sufficient liquidity to satisfy its Convertible Promissory Note obligation in January 2026.
Current report
The consolidated financial statements have been prepared on a basis that assumes we will continue as a going concern which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business. Accordingly, the accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Current report
At-the-market offering. In November 2024, we entered into the ATM Agreement with the Sales Agent, pursuant to which we may offer and sell shares of our common stock having an aggregate gross sales price of up to $14.2 million, from time to time, through the Sales Agent in transactions deemed to be “at-the-market” offerings under federal securities laws (the “2024 ATM Program”). The offering of Shares pursuant to the ATM Agreement will terminate upon (a) five business days’ advance notice from us to the Sales Agent or five business days’ advance notice from the Sales Agent to us or (b) otherwise by mutual agreement of the parties pursuant to the terms of the ATM Agreement. Sales under the 2024 ATM Program are subject to a maximum commission of up to 3.0% of the gross proceeds per share sold through the Sales Agent.
Current report
During the year ended December 31, 2024, a total of 16,336 shares of common stock were issued pursuant to the Sales Agreement for aggregate gross proceeds of approximately $17,000, before deducting commissions and offering expenses payable by us. At December 31, 2024, $14.2 million remained available under the ATM Agreement. Refer to Note 11, in Part II, Item 8 of this Annual Report on Form 10-K for more information on the at-the-market offering.
Removed paragraphs (45)
Previous report
Acquisition of Foresight Energy Ltd.
Previous report
On January 25, 2023 (“Acquisition Closing Date”), Legacy Tigo completed the acquisition of 100% of the equity interests of Foresight Energy Ltd. (“fSight”). Total consideration paid for the acquisition was approximately $13.7 million, which consisted of 5.6 million shares of Legacy Tigo’s common stock (which represents 1.3 million shares of Common Stock on an as-converted basis as a result of the Business Combination) issued at the Acquisition Closing Date, 0.7 million shares of Legacy Tigo’s common stock (which represents 0.2 million shares of Common Stock on an as-converted basis as a result of the Business Combination) to be issued 12 months from the Acquisition Closing Date and 0.4 million shares of Legacy Tigo’s common stock (which represents 0.1 million shares of Common Stock on an as-converted basis as a result of the Business Combination) to be issued 18 months from the Acquisition Closing Date, in addition to $0.5 million in relation to a loan that was issued by the Company to fSight prior to the acquisition closing, and was deemed settled immediately following the Acquisition Closing Date. The transaction was accounted for as a business combination pursuant to Financial Accounting Standards Board (“FASB”)Accounting Standards Codification (“ASC”) Topic 805, Business Combinations, using the acquisition method of accounting.
Previous report
fSight is an energy data analytics software company based in Had HaSharon, Israel. Legacy Tigo’s acquisition of fSight is expected to expand its ability to leverage energy consumption and production data for solar energy producers, adding a powerful prediction platform that provides rich and actionable system performance data, from the grid down to the module level. See Note 4, “Acquisition of Foresight Energy, Ltd.,” of the notes to the consolidated financial statements included in Part 2, Item 8 of this Annual Report on Form 10-K for additional information.
Previous report
The Business Combination
Previous report
On December 5, 2022, Roth CH Acquisition IV Co., a Delaware corporation (“ROCG”), Roth IV Merger Sub Inc., a Delaware corporation and a wholly-owned subsidiary of ROCG (“Merger Sub”), and Legacy Tigo, entered into an Agreement and Plan of Merger, as amended on April 6, 2023 (the “Merger Agreement”), pursuant to which, among other transactions, on May 23, 2023 (the “Closing Date”), Merger Sub merged with and into Legacy Tigo (the “Merger”), with Legacy Tigo surviving the Merger as a wholly-owned subsidiary of ROCG (the Merger, together with the other transactions described in the Merger Agreement, the “Business Combination”). In connection with the closing of the Business Combination, ROCG changed its name to “Tigo Energy, Inc.”
Previous report
Under the terms of the Merger Agreement, immediately prior to the effective time of the Business Combination (the “Effective Time”), Legacy Tigo (i) caused each share of Legacy Tigo preferred stock issued and outstanding to be automatically converted into a number of shares of Legacy Tigo common stock (the “Legacy Tigo common stock”) in accordance with Legacy Tigo’s charter (the “preferred stock conversion”) and (ii) used reasonable best efforts to cause the “cashless” exercise of Legacy Tigo warrants (each, a “Legacy Tigo warrant”), in accordance with their terms, for Legacy Tigo common stock (the “warrant exercise”). As of the closing date of the Business Combination, all holders of Legacy Tigo have exercised such warrants for shares of Legacy Tigo common stock.
Previous report
Pursuant to the Merger Agreement, at the Effective Time, each share of Legacy Tigo common stock issued and outstanding immediately prior to the Closing (including shares of Legacy Tigo common stock issued in the preferred stock conversion and warrant exercise prior to the closing but excluding shares owned by Legacy Tigo or any direct or indirect wholly owned subsidiary of Legacy Tigo as treasury stock, shares owned by ROCG, and shares of Legacy Tigo common stock issued and outstanding immediately prior to the Effective Time held by a holder who has not voted in favor of adoption of the Merger Agreement or consented thereto in writing and who is entitled to demand and has properly exercised appraisal rights of such shares in accordance with Section 262 of the Delaware General Corporation Law (as it may be amended from time to time, the “DGCL”) and otherwise complied with all of the provisions of the DGCL relevant to the exercise and perfection of dissenters’ rights) were canceled and converted into the right to receive 0.233335 shares of common stock, par value $0.0001 per share, of the Company (the “Common Stock”).
Previous report
At the Effective Time, each outstanding Legacy Tigo stock option (each, a “Legacy Tigo stock option”), whether vested or unvested, converted into an option to purchase a number of shares of Common Stock equal to the product of (x) the number of shares of Legacy Tigo common stock underlying such Legacy Tigo stock option immediately prior to the Closing and (y) 0.233335, at an exercise price per share equal to (A) the exercise price per share of Legacy Tigo common stock underlying such Legacy Tigo stock option immediately prior to the Closing divided by (B) 0.233335.
Previous report
At the Effective Time, after giving effect to the warrant exercise, each outstanding Legacy Tigo warrant to purchase Legacy Tigo common stock, whether or not exercisable, converted into a warrant to purchase a number of shares of Common Stock equal to the product of (x) the number of shares of Legacy Tigo common stock underlying such Legacy Tigo warrant immediately prior to the Closing and (y) 0.233335.
Previous report
Upon consummation of the Business Combination, the separate corporate existence of Merger Sub ceased, and Legacy Tigo survived the Business Combination and became a wholly-owned subsidiary of ROCG (also herein after referred to as the “Combined Company”). In connection with the consummation of the Business Combination, the Combined Company was renamed “Tigo Energy, Inc.” Immediately after giving effect to the Business Combination, there were 58,144,543 issued and outstanding shares of New Tigo common stock.
Previous report
Accounting Impact of the Business Combination
Previous report
The Business Combination was accounted for as a reverse recapitalization in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Under the guidance in ASC Topic 805, “Business Combinations”, ROCG, which is the legal acquirer, was treated as the “acquired” company for financial reporting purposes and Legacy Tigo was treated as the accounting acquirer. This determination was primarily based on the following:
Previous report
(i)
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Legacy Tigo having a majority of the voting power of the Combined Company;
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(ii)
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Legacy Tigo’s senior management comprising substantially all of the senior management of the Combined Company;
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(iii)
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Legacy Tigo’s relative size compared to ROCG; and
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(iv)
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Legacy Tigo’s operations comprising the ongoing operation of the post-combination company.
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Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of a capital transaction in which we are issuing stock for the net assets of ROCG. The net assets of ROCG were stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination will be the Company’s.
Previous report
The most significant change in the Company’s financial position and results upon consummation of the business combination is the conversion of the convertible preferred stock into common stock and additional paid in capital (as compared to the Company’s consolidated balance sheet as of December 31, 2022).
Previous report
Subsequent to the Business Combination, the Combined Company is an SEC-registered and Nasdaq-listed company. The Company has hired and expects to hire additional staff and implement new processes and procedures to address public company requirements in anticipation of and following the completion of the Business Combination. The Company also has incurred and expects to incur substantial additional expenses for, among other things, directors’ and officers’ liability insurance, director fees, internal control compliance, and additional costs for investor relations, accounting, audit, legal and other functions.
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Common Stock Warrant Redemption
Previous report
In connection with the Business Combination, we assumed 5,750,000 Public Warrants and 18,750 Private Warrants, which, in each case, entitled the holder to purchase one share of Common Stock at an exercise price of $11.50 per share. Except with respect to certain registration rights and transfer restrictions, the Private Warrants are identical to the Public Warrants. On August 9, 2023, we announced the redemption of all outstanding Public Warrants and Private Warrants to purchase shares of Common Stock that were issued under the Warrant Agreement Under the terms of the Warrant Agreement, we were entitled to redeem all outstanding Warrants for $0.01 per Warrant if the reported closing price of our Common Stock was at least $18.00 per share on each of twenty trading days within a thirty trading day period ending on the third trading day prior to the date on which a notice of redemption is given. This performance threshold was achieved following the market close on August 4, 2023. A total of 324,546 Warrants were exercised through September 8, 2023, resulting in proceeds, net of issuance costs, of $3.7 million. All other Warrants were redeemed on September 8, 2023. We paid $0.1 million for the remaining Warrants that were not exercised as of September 8, 2023, which was recorded as a reduction to additional paid-in capital on our consolidated balance sheet.
Previous report
Expansion of New Products and Services. We have made substantial investments in research and development and sales and marketing to achieve a leading position in our market and grow revenues. Our revenue is primarily generated from the sales and offerings of our MLPE systems. While we will continue to invest in research and development to expand the capabilities of our existing products and solutions, we intend to continue the development and promotion of our GO ESS product line, including the introduction of the GO ESS EV Charger that launched in the German market in January 2024. We generated revenues from our GO ESS product offerings of $13.4 million and $3.2 million in the years ended December 31, 2023 and 2022, respectively.
Previous report
Net revenue increased by $63.9 million or 78.6% for the year ended December 31, 2023, as compared to the same period in 2022, primarily due to higher sales volumes as a result of increased acceptance of our products in the marketplace in the first half of 2023 and increased marketing activities. The increase in net revenues was partially offset in the second of half of 2023, when the solar industry experienced a broad-based slowdown in both the U.S. and European markets, that resulted in elevated inventory with distributors and installers, and as a result the overall demand for our products and services decreased as distributors and installers responded to this slower demand environment. In the United States, this slowdown was primarily the result of higher interest rates and the transition from NEM 2.0 to NEM 3.0 in California. In Europe, this slowdown was primarily the result of a decrease in customer purchases after a surge of sales were realized in 2022 and going into the first half of 2023 due to higher energy prices in Europe related to the onset of the armed conflict in Ukraine in 2022, and overall channel inventory correction.
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MLPE and GO ESS product lines during the first half of 2023. During the second half of 2023, demand for our solutions slowed primarily due to higher interest rates impacting customers’ investment decisions and the transition from NEM 2.0 to NEM 3.0 in California.
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APAC – Net revenue for the APAC region increased $3.9 million or 57.1% for the year ended December 31, 2023, as compared to the same period in 2022, primarily due to increased orders for our MLPE product line throughout 2023.
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Cost of revenue increased by $37.4 million or 66.1% for the year ended December 31, 2023, as compared to the same period in 2022, primarily due to a 68.5% increase in MLPE product sales for the year ended December 31, 2023 compared to the same period in 2022.
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Gross profit increased by $26.5 million or 107.1% for the year ended December 31, 2023, as compared to the same period in 2022, primarily due to cost reduction efforts on certain products and lower freight costs in the last three quarters of 2023.
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Sales and marketing expense increased by $10.3 million or 94.3% for the year ended December 31, 2023, as compared to the same period in 2022. The increase was primarily due to higher personnel-related expenses resulting from an 11.9% increase in headcount, in addition to an increase in travel and entertainment related expenses primarily due to attending additional tradeshows in 2023 compared to 2022.
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General and administrative expense increased by $19.8 million or 218.9% for the year ended December 31, 2023, as compared to the same period in 2022. The increase was primarily related to an increase in personnel-related expenses due to a 64.3% increase in headcount, an increase in facility-related costs, an increase in allowance for credit losses on certain aged receivable balances, an increase in professional fees, incremental increases associated with non-capitalizable merger related consulting expenses incurred in in connection with the Business Combination, an increase in legal expense associated with the Merger and Business Combination, and an increase in insurance related expenses primarily due to additional director and officer insurance.
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Other (Income) Expenses, Net
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Interest expense for the year ended December 31, 2023, primarily consists of interest expense and the amortization of deferred debt issuance costs incurred on our Convertible Promissory Note. Interest expense for the year ended December 31, 2022, primarily consists of interest expense primarily related to our Series 2022-1 Notes.
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Interest income for the year ended December 31, 2023 increased by $2.1 million primarily due to the Company’s marketable securities which were purchased in the second quarter of 2023.
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Liquidity and Capital Resources
Previous report
As of December 31, 2023, our principal sources of liquidity were cash and cash equivalents and marketable securities of $33.2 million, which were held primarily for working capital purposes. As of December 31, 2023 and 2022, our working capital, which we define as current assets less current liabilities, increased $32.8 million to $78.3 million from $45.5 million as of December 31, 2022. The increase in working capital during 2023 is primarily attributable to higher inventory. During the second half of 2023, we experienced a significant decline in sales activity compared to the first half of 2023 due to an industry-wide inventory oversupply, higher interest rates and governmental changes to net metering programs in the U.S. and Europe. While we have been actively working on reducing our inventory levels, these efforts were constrained by short-term purchase commitments in place during the year. The substantial majority of these commitments have been fulfilled as of December 31, 2023 and we expect lower inventory levels and positive working capital cash conversion in 2024. We believe that our cash position is sufficient to meet our capital and liquidity requirements for at least the next 12 months from the date of this Annual Report on Form 10-K.
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In the future, our ability to sustain operations and invest in new technologies may necessitate seeking additional equity or debt financing. Our capital needs will be influenced by several factors, including our revenue growth rate, the success of our future product development and capital investments, and the timing and extent of spending to support further sales and marketing and research and development efforts. In addition, we have incurred and expect to continue to incur additional costs as a result of operating as a public company. In the event that additional financing is required from outside sources, we cannot be certain that any additional financing will be available to us on acceptable terms, or at all. If we are required but unable to raise additional capital or generate cash flows to sustain or expand our business, our business, operating results, and financial condition could be adversely affected.
Previous report
For the year ended December 31, 2022, we received proceeds of $41.0 million from the sale of Series E convertible preferred stock and proceeds of $25.0 million from the Series 2022-1 Notes. This was partially offset by the $10.0 million repayment of our Senior Bonds (as defined above), $3.5 million of payments due to financing costs, and $4.2 million in repayment of the Series 2022-1 Notes.
Showing the first 40 of 45 passages. Open the source sections for the rest.
Reworded paragraphs (39)
Previous wording
Our mission is to deliver smart systems solutions, combining hardware and software, that enhance safety, increase energy yield, and lower operating costs of residential, commercial, and utility-scale solar systems. We believe we are a worldwide leader in the development and delivery of products and solutions that are flexible and dependable, increase the energy generation of solar energy systems and address the need for change. We primarily offer products and services through distributors and solar installers. We have a worldwide footprint with product installations in over 100 countries and on all seven continents.
Current wording
Our mission is to deliver smart systems solutions, combining hardware and software, which enhance safety, increase energy yield, and lower operating costs of residential, commercial, and utility-scale solar systems. We believe we are a worldwide leader in the development and delivery of products and solutions that are flexible and dependable, increase the energy generation of solar energy systems and address the need for change. We primarily offer products and services through distributors and solar installers. We have a worldwide footprint with product installations in over 100 countries and on all seven continents.
Previous wording
Demand for Products. The demand for our products in Europe and the United States experienced a notable slowdown beginning in the second quarter of 2023. In Europe, the slowdown was primarily attributable to a decrease in customer purchases in the second half of 2023 primarily due to an overall surplus in the inventory channel. Additionally, there has been uncertainty surrounding the net energy metering policies and solar export penalties in the European markets, such as Germany, Belgium, Italy and the United Kingdom, which also contributed to the overall slowdown in demand in Europe. In the United States, the slowdown was primarily attributable due to higher interest rates than recent prior periods and the transition from NEM 2.0 to NEM 3.0 in California. The factors noted above have led to elevated inventory levels with distributors and installers in both regions. Given these factors, revenues may to continue to be adversely affected into 2024.
Current wording
Demand for Products. The demand for our products in Europe and the United States experienced a notable slowdown beginning in the second quarter in 2023 and has continued into 2024. Although our net revenue has increased on a sequential basis in each quarter of 2024, our year-to-date results remain substantially lower than the comparable period in the prior year. In Europe, the slowdown was primarily due to elevated inventory levels with distributors and an overall channel inventory correction as they responded to a slower demand environment. Additionally, there has been uncertainty surrounding the net energy metering policies and solar export penalties in the European markets, such as Germany, Belgium, Italy and the United Kingdom, which also contributed to the overall slowdown in demand in Europe. In the United States, the slowdown was primarily attributable due to higher interest rates than recent prior periods and the transition from the second iteration of net metering (“NEM 2.0”) to the third iteration of net metering (“NEM 3.0”) in California.
Previous wording
In response to the factors noted above, we reduced staffing levels across all geographies in December 2023 by approximately 15% to better align our cost structure with the current environment. As a result, we expect to reduce cash expenditures by approximately $3.8 million in 2024.
Current wording
In addition, in response to the factors noted above, we reduced staffing levels across all geographies in December 2023 by approximately 15%, and in April 2024 by approximately 10%.
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Unfavorable Macroeconomic and Market Conditions. The global macroeconomic and market uncertainty, including higher interest rates and inflation, has caused disruptions in financial markets and may continue to have an adverse effect on the U.S. and world economies. Starting in the second quarter of 2023 and continuing throughout the year, we experienced a significant number of customer requests to delay purchase order deliveries to the fourth quarter of 2023 or early 2024, in addition to a smaller number of unanticipated purchase order cancellations and returns. Other customers may decide to delay purchasing our products and services or not purchase at all. A tighter credit market for consumer and business spending could, in turn, adversely affect spending levels of installers and end users and lead to increased price competition for our products. Reductions in customer spending in response to unfavorable or uncertain macroeconomic and market conditions, globally or in a particular region where we operate, have adversely affected, and could continue to adversely affect our business, results of operations and financial condition.
Current wording
Unfavorable Macroeconomic and Market Conditions. The global macroeconomic and market uncertainty, including higher interest rates and inflation, has caused disruptions in financial markets and may continue to have an adverse effect on the U.S. and world economies. Since the second quarter of 2023, we have experienced a significant number of customer requests to delay purchase order deliveries and a smaller number of purchase order cancellations and returns. Other customers may decide to delay purchasing our products and services or not purchase at all. A tighter credit market for consumer and business spending could, in turn, adversely affect the spending levels of installers and end users and lead to increased price competition for our products. Reductions in customer spending in response to unfavorable or uncertain macroeconomic and market conditions, globally or in a particular region where we operate, have adversely affected, and could continue to adversely affect our business, results of operations and financial condition.
Previous wording
Expansion of Sales with Existing Customers and Adding New Customers. Our future revenue growth is, in part, dependent on our ability to expand product offerings and services in the U.S. residential market. In our North American market, revenue is generally generated from our product offerings and services in the C&I markets. In order to continue growth of revenues, we plan to expand our presence in the residential market through offerings with residential solar providers. We also expect to continue to evaluate and invest in new market opportunities internationally. We believe that our entry into new markets will continue to facilitate revenue growth and customer diversification. We primarily acquire new customers through collaboration with our industry partners and distributors. While we expect that a substantial portion of our future revenues in the near-term will be generated from our existing customers, we expect to invest in our sales and marketing to broaden reach with new residential customers in the U.S. and customers in EMEA.
Current wording
Expansion of Sales with Existing Customers and Adding New Customers. Our future revenue growth is, in part, dependent on our ability to expand product offerings and services in the U.S. residential market. In our North American market, revenue is generally generated from our product offerings and services in the commercial and industrial markets. In order to continue growth of revenues, we plan to expand our presence in the residential market through offerings with residential solar providers. We also expect to continue to evaluate and invest in new market opportunities internationally. We believe that our entry into new markets will continue to facilitate revenue growth and customer diversification. We primarily acquire new customers through collaboration with our industry partners and distributors. While we expect that a substantial portion of our future revenues in the near-term will be generated from our existing customers, we expect to invest in our sales and marketing to broaden reach with new residential customers in the U.S. and customers in EMEA.
Previous wording
We regularly review a number of metrics, including the following key operating and financial metrics, to evaluate our business, measure our performance, identify trends in our business, prepare financial projections and make strategic decisions. The Company believes the operating and financial metrics presented are useful in evaluating our operating performance, as they are similar to measures used by our public competitors and are regularly used by security analysts, institutional investors, and other interested parties in analyzing operating performance and prospects.
Current wording
We regularly review a number of metrics, including the following key operating and financial metrics, to evaluate our business, measure our performance, identify trends in our business, prepare financial projections and make strategic decisions. We believe the operating and financial metrics presented are useful in evaluating our operating performance, as they are similar to measures used by our public competitors and are regularly used by securities analysts, institutional investors, and other interested parties in analyzing operating performance and prospects.
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The following tables sets forth these metrics for the periods presented:
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The following table sets forth these metrics for the periods presented:
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Gross Profit and Gross Margin
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Gross (Loss) Profit and Gross Margin
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We define gross profit as total net revenue less cost of revenue, and define gross margin, expressed as a percentage, as the ratio of gross profit to revenue. Gross profit and margin can be used to understand our financial performance and efficiency and allow investors to evaluate its pricing strategy and compare it against competitors. We use these metrics to make strategic decisions identifying areas for improvement, set targets for future performance and make informed decisions about how to allocate resources going forward.
Current wording
We define gross (loss) profit as total net revenue less cost of revenue, and define gross margin expressed as a percentage, as the ratio of gross profit to revenue. Gross (loss) profit and margin can be used to understand our financial performance and efficiency and allow investors to evaluate its pricing strategy and compare it against competitors. We use these metrics to make strategic decisions identifying areas for improvement, set targets for future performance and make informed decisions about how to allocate resources going forward.
Previous wording
We generate revenue primarily through the sale of our hardware products, complemented by our web-based monitoring services and SaaS platform, Predict+. Our revenue model is structured around the delivery of fully functional hardware products at the time of shipment, requiring no further modification for customer use. These products are sold mainly to distributors who then resell to end users, with our revenue recognition practices ensuring that revenue is recognized when control of the products is transferred to the customer.
Current wording
We generate revenue primarily through the sale of our hardware products, SaaS platform, Predict+, our web-based monitoring services and royalties. Our revenue model is structured around the delivery of fully functional hardware products at the time of shipment, requiring no further modification for customer use. These products are sold primarily to distributors who then resell to end users, with our revenue recognition practices ensuring that revenue is recognized when control of the products is transferred to the customer.
Previous wording
EMEA – Net revenue for the EMEA region increased by $57.3 million or 110.1% for the year ended December 31, 2023, as compared to the same period in 2022, increased in the first half of 2023 primarily due to an overall increase in demand for cost-effective energy solutions as energy costs across the region have increased due to the higher energy prices caused by the armed conflict in Ukraine. The level of demand slowed going into the second half of 2023 due to elevated inventory levels at distributors and installers.
Current wording
EMEA – Net revenue for the EMEA region decreased by $76.7 million or 70.2% for the year ended December 31, 2024, as compared to the same period in 2023. We saw increased revenues in the region beginning in 2022 and through the first half of 2023 primarily due to higher energy prices following the onset of the armed conflict in Ukraine. Beginning in the second half of 2023 and continuing into 2024, the industry experienced a broad-based slowdown as higher interest rates, policy changes, and elevated inventory levels at distributors and installers reduced demand for solar solutions in the region.
Previous wording
Americas – Net revenue for the Americas region increased $2.7 million or 12.1% for the year ended December 31, 2023, as compared to the same period in 2022, primarily due to increased orders for our
Current wording
Americas – Net revenue for the Americas region decreased by $12.0 million or 47.8% for the year ended December 31, 2024, as compared to the same period in 2023. The decrease is primarily due to lower demand for our solutions as a result of higher interest rates and the transition from NEM 2.0 to NEM 3.0 in California.
Previous wording
Our cost of revenues consists primarily of product costs, warranty costs, and logistics costs, as well as inventory write-downs, shipping and handling costs, hosting service costs related to the monitoring service, and depreciation and amortization of manufacturing test equipment. We outsource our manufacturing to third-party contract manufacturers and negotiate product pricing on a quarterly basis. Our product costs are affected by advancement of technology in both our hardware and services, economies of scale resulting in lower component costs, and improvements in our overall manufacturing and production processes.
Current wording
Our cost of revenues consists primarily of product costs, warranty costs, and logistics costs, as well as inventory write-downs, shipping and handling costs, hosting service costs related to the monitoring service, and depreciation and amortization of manufacturing test equipment. We outsource our manufacturing to third-party contract manufacturers and negotiate product pricing on a quarterly basis. Our product costs are affected by the advancement of technology in both our hardware and services, economies of scale resulting in lower component costs, and improvements in our overall manufacturing and production processes.
Previous wording
Research and development expenses consistent of personnel-related expenses and facility-related expenses. Research and development employees are primarily engaged in the design and development of our MLPE and GO ESS solutions. We devote substantial resources to research and development programs that focus on enhancements to, and cost efficiencies in, our existing products or services and timely development of new products and services that utilize technological innovation to drive down product costs, improve functionality and enhance reliability. We intend to continue to invest appropriate resources in our research and development efforts because we believe they are critical to maintaining our competitive position.
Current wording
Research and development expenses consist of personnel-related expenses and facility-related expenses. Research and development employees are primarily engaged in the design and development of our MLPE, GO ESS solutions and Predict+. We devote substantial resources to research and development programs that focus on enhancements to, and cost efficiencies in, our existing products or services and timely development of new products and services that utilize technological innovation to drive down product costs, improve functionality and enhance reliability. We intend to continue to invest appropriate resources in our research and development efforts because we believe they are critical to maintaining our competitive position.
Previous wording
Research and development expense increased by $3.8 million or 67.1% for the year ended December 31, 2023, as compared to the same period in 2022. The overall increase was primarily driven by an increase in personnel-related expenses resulting from a 25.9% increase in headcount, in addition to an increase in professional fees primarily related to consultant expense. Research and development expense as percentage of net revenue decreased to 6.5% for the year ended December 31, 2023, compared to 7.0% for the same period in 2022. The amount of research and development expenses may fluctuate from period to period due to differing levels and stages of development activity.
Current wording
The amount of research and development expenses may fluctuate from period to period due to differing levels and stages of development activity.
Previous wording
Other (income) expenses, net, primarily consist of interest income earned on our cash and short term investments, realized gains and losses on short-term and long-term marketable securities, interest expense and fees under our convertible note, non-cash interest expense related to the amortization of debt issuance costs, and non-cash charges recognized for the change in fair value of our convertible notes embedded derivative, and convertible preferred stock warrants and losses or gains on debt extinguishment. Refer below for further details on the separate components of other (income) expenses, net.
Current wording
Other expenses (income), net, primarily consist of interest income earned on our cash and short term investments, realized gains and losses on short-term and long-term marketable securities, interest expense and fees under our convertible note, non-cash interest expense related to the amortization of debt issuance costs, and non-cash charges recognized for the change in fair value of our convertible notes embedded derivative, and convertible preferred stock warrants and losses or gains on debt extinguishment. Refer below for further details on the separate components of other (income) expenses, net.
Previous wording
Change in fair value of preferred stock warrant and contingent shares liability decreased by $2.1 million or 208.7% for the year ended December 31, 2023, as compared to the same period in 2022, primarily due to an increase in the fair value of the Series C convertible preferred stock and the incremental increase contributed from the contingent shares related to the fSight acquisition. The Series C convertible preferred stock was converted to shares of Common Stock on May 23, 2023, as part of the Business Combination. See Note 3, “Merger with Roth CH Acquisition IV Co.,” of the notes to consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information.
Current wording
Change in fair value of preferred stock warrant and contingent shares liability decreased by $1.0 million or 86.3% for the year ended December 31, 2024, as compared to the same period in 2023, primarily due to a decrease in mark-to-market expense associated with the contingent shares related to the fSight acquisition as a result of a reduction in the number of contingent shares issued in 2024 compared to the same period in 2023, which included the maximum number of contingent shares that we could have been required to issue. The final tranche of the contingent shares was released on July 25, 2024. See Note 4, “Acquisition of Foresight Energy, Ltd.,” of the notes to consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information.
Previous wording
Change in fair value of derivative liability was an incremental increase of $12.2 million for the year ended December 31, 2023, as compared to the same period in 2022. The Convertible Promissory Note contained conversion options that met the requirements for separate accounting and is accounted for as a convertible note derivative liability. The derivative instrument was recorded at fair value upon recognition on the Merger Date and was subject to remeasurement at the end of the reporting period. On September 24, 2023, we entered into the Convertible Note Amendment (as defined below) with L1 Energy (as defined below) to modify the conversion terms of the Convertible Promissory Note and, as a result of such amendment, the conversion options no longer meet the requirements to be bifurcated in accordance with ASC Topic 815, “Derivatives and Hedging”. The convertible note derivative liability was remeasured immediately prior to the execution of the Convertible Note Amendment. The carrying value of the convertible note derivative liability was reclassified to equity and was recorded into additional paid-in capital on our consolidated balance sheet. See Note 6, “Fair Value of Financial Instruments” and Note 9, “Long-Term Debt,” of the notes to consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information.
Current wording
The change in fair value of derivative liability for the year ended December 31, 2023, is related to the Convertible Promissory Note which contained conversion options that met the requirements for separate accounting and was accounted for as a convertible note derivative liability. The derivative instrument was recorded at fair value upon recognition on the Merger Date and was subject to remeasurement at the end of the reporting period. On September 24, 2023, we entered into the Convertible Note Amendment (as defined above) with L1 Energy (as defined above) to modify the conversion terms of the Convertible Promissory Note and, as a result of such amendment, the conversion options no longer meet the requirements to be bifurcated in accordance with ASC Topic 815, “Derivatives and Hedging”. See Note 9, “Long-Term Debt,” of the notes to consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information.
Previous wording
The loss on debt extinguishment for the year ended December 31, 2023, is primarily related to the repayment of our Series 2022-1 Notes. The loss on debt extinguishment during the year ended December 31, 2022, was related to the repayment of our Senior Bonds.
Current wording
The loss on debt extinguishment for the year ended December 31, 2023, is primarily related to the repayment of our Series 2022-1 Notes.
Previous wording
Convertible Note. As of December 31, 2023, our Convertible Note obligation was $50.0 million. Upon conversion of the Convertible Note due in 2026, we will pay cash or issue shares of common stock equal to the aggregate principal amount of the Convertible Note to be converted. Refer to Note 9, in Part II, Item 8 of this Annual Report on Form 10-K for more information on our outstanding Convertible Note.
Current wording
Convertible Note. As of December 31, 2024, our Convertible Note obligation was $50.0 million. Upon conversion of the Convertible Note due in January 2026, we would need to pay cash or issue shares of common stock equal to the aggregate principal amount of the Convertible Note to be converted. As noted above, there is substantial doubt about our ability to continue as a going concern within one year after the date that the consolidated financial statements are issued due to the upcoming maturity date of the Convertible Note. Management continues to explore options to address the substantial doubt, however there can be no assurance that we will be able to raise sufficient additional capital or obtain financing that will provide it with sufficient liquidity to satisfy the Convertible Promissory Note obligation. Refer to the section above for more information regarding our going concern analysis and management’s plan to address the substantial doubt. Refer to Note 9, in Part II, Item 8 of this Annual Report on Form 10-K for more information on our outstanding Convertible Note.
Previous wording
Operating Leases. We have entered into various non-cancelable operating leases primarily for our facilities with original lease periods expiring through the year 2029, with our most significant leases relating to our facilities in Campbell, California and Ra’anana, Israel. As of December 31, 2023, we had total lease obligations of $2.6 million recorded on our consolidated balance sheet.
Current wording
Operating Leases. We have entered into various non-cancelable operating leases primarily for our facilities with original lease periods expiring through the year 2029, with our most significant leases relating to our facilities in Campbell, California and Ra’anana, Israel. As of December 31, 2024, we had total lease obligations of $1.6 million recorded on our consolidated balance sheet.
Previous wording
Operating cash flows consists primarily of net loss adjusted for certain non-cash items and changes in operating assets and liabilities. Cash used in operating activities increased by $20.8 million in the year ended December 31, 2023, as compared to the same period in 2022. The increase in cash used in operating activities was driven primarily by inventory purchases. During the first half of 2023, we placed purchase commitments with our manufacturing partners at anticipated levels that were higher than needed to fulfill actual sales volumes in the second half of 2023, which led to increased inventory purchases of $22.2 million.
Current wording
Operating cash flows consists primarily of net loss adjusted for certain non-cash items and changes in operating assets and liabilities. Cash used in operating activities decreased by $24.8 million in the year ended December 31, 2024, as compared to the same period in 2023. The decrease in cash used in operating activities was primarily driven by a decrease in inventory purchases, in addition to inventory charges for excess and slow-moving inventory within our GO ESS line of energy storage solutions.
Previous wording
Cash Flows Used in Investing Activities
Current wording
Cash Flows Provided by (Used in) Investing Activities
Previous wording
Net cash used in investing activities increased by $29.3 million for the year ended December 31, 2023, compared to the same period in 2022, primarily due to the purchase of marketable securities and property and equipment. This was partially offset by an increase in cash provided by the proceeds from the sale and maturities of a portion of the marketable securities.
Current wording
Net cash provided by investing activities was $19.8 million for the year ended December 31, 2024, which is primarily attributable to the sale and maturities of marketable securities and was partially offset by the purchase of additional marketable securities and property and equipment. Net cash used in investing activities was $30.9 million for the year ended December 31, 2023, which is primarily attributable to the purchase of marketable securities and property and equipment and was partially offset by the sale and maturities of marketable securities.
Previous wording
Cash Flows Provided by Financing Activities
Current wording
Cash Flows (Used in) Provided by Financing Activities
Previous wording
Net cash provided by financing activities decreased by $13.5 million for the year ended December 31, 2023, compared to the same period in 2022. For the year ended December 31, 2023, we received proceeds of $50.0 million from the Convertible Promissory Note, proceeds of $3.7 million from the redemption of the common stock warrants, and proceeds of $2.2 million from the Merger (as defined above), which was partially offset by the $20.8 million repayment of the Series 2022-1 Notes.
Current wording
Net cash used in financing activities was $61,000 for the year ended December 31, 2024, which is primarily attributable to the payments of offering costs related to our at-the-market offering and payments of tax withholdings on stock options. This was partially offset by proceeds from the exercise of stock options. Net cash provided by financing activities was $34.8 million for the year ended December 31, 2023, which is primarily attributable to proceeds of $50.0 million from the Convertible Promissory Note, proceeds of $3.7 million from the redemptions of common stock warrants and proceeds of $2.2 million from the Business Combination, which was partially offset by the $20.8 million repayment of the Series 2022-1 Notes.
Previous wording
We have based our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates due to risks and uncertainties, including uncertainty in the current economic environment due to the global impact of inflation, interest rate fluctuations, new regulations, and geopolitical conflicts in Ukraine and Israel. As of the date of issuance of these financial statements, we are not aware of any specific event or circumstance that would require us to update our estimates, judgments or revise the carrying value of our assets or liabilities. For a description of our significant accounting policies, see Note 2. “Summary of Significant Accounting Policies,” in Part II, Item 8 of this Annual Report on Form 10-K. An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the consolidated financial statements. We believe the following critical accounting policies reflect the more significant estimates and assumptions used in the preparation of our consolidated financial statements.
Current wording
We have based our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates due to risks and uncertainties, including uncertainty in the current economic environment due to the global impact of inflation, interest rate fluctuations, new regulations, and geopolitical conflicts. As of the date of issuance of these financial statements, we are not aware of any specific event or circumstance that would require us to update our estimates, judgments or revise the carrying value of our assets or liabilities. For a description of our significant accounting policies, see Note 2. “Summary of Significant Accounting Policies,” in Part II, Item 8 of this Annual Report on Form 10-K. An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the consolidated financial statements. We believe the following critical accounting policies reflect the more significant estimates and assumptions used in the preparation of our consolidated financial statements.
Previous wording
We do not believe that there is a reasonable likelihood that there will be a material change in future estimates or assumptions that we use to record inventory at the lower of cost or net realizable value. However, if estimates regarding customer demand are inaccurate or changes in technology affect demand for certain products in an unforeseen manner, we may be exposed to potential losses.
Current wording
If estimates regarding customer demand are inaccurate or changes in technology affect demand for certain products in an unforeseen manner, we may be exposed to potential losses. For example, we incurred inventory charges for the year ended December 31, 2024 of $23.5 million, primarily for excess and slow-moving inventory within our GO ESS line of energy storage solutions, reflecting the fact that this business line has not performed as well as was originally forecasted due to the macroeconomic factors noted above.
Previous wording
We provide a standard limited product warranty for our solar products against defects in materials and workmanship under normal use and service conditions. Our standard warranty period is 25 years for our MLPE devices, 12.5 years for our inverters, and 11 years for our batteries. Other products are sold with standard limited warranties that typically range in duration from five to ten years. In certain cases, customers can purchase an extended warranty for our battery storage products and for our batteries for PV applications that extend the standard warranty period. In addition, customers in the United States can purchase extended warranties for inverters that extend the warranty period for an additional 25 years.
Current wording
We provide a standard limited product warranty for our solar products against defects in materials and workmanship under normal use and service conditions. Our standard warranty period is 25 years for our MLPE devices, 12.5 years for our inverters, and 11 years for our batteries. Other products are sold with standard limited warranties that typically range in duration from five to ten years. In addition, customers in the United States can purchase extended warranties for inverters that extend the warranty period up to 25 years.
Previous wording
We accrue estimated warranty costs at the time of sale based on anticipated warranty claims and actual historical warranty claims experience. Warranty provisions, computed on a per-unit sold basis, are based on our best estimate of such costs and are included in our cost of revenues. The warranty obligation is determined based on actual and predicted failure rates of the products, cost of replacement and service and delivery costs incurred to correct a defective product. Our warranty obligation requires management to make assumptions regarding estimated failure rates and replacement costs. If actual warranty costs differ significantly from these estimates, adjustments may be required in the future, which could adversely affect our gross profit and results of operations. Warranty obligations are classified as short-term and long-term warranty obligations, based on the period in which the warranty is expected to be claimed. The product warranty liability (short and long-term) was $5.6 million and $4.4 million, in the year ended December 31, 2023 and 2022, respectively.
Current wording
We accrue estimated warranty costs at the time of sale based on anticipated warranty claims, which are estimated based on actual historical warranty claims experience. Warranty provisions, computed on a per-unit sold basis, are based on our best estimate of such costs and are included in our cost of revenues. The warranty obligation is determined based on actual and predicted failure rates of the products, cost of replacement and service and delivery costs incurred to correct a defective product. Our warranty obligation requires management to make assumptions regarding estimated failure rates and replacement costs. If actual warranty costs differ significantly from these estimates, adjustments may be required in the future, which could adversely affect our gross profit and results of operations. Warranty obligations are classified as short-term and long-term warranty obligations, based on the period in which the warranty is expected to be claimed. The product warranty liability (short and long-term) was $5.8 million and $5.6 million, for the years ended December 31, 2024, and 2023, respectively.
Previous wording
The Company reviews its long-lived assets, which consists of property and equipment and operating lease right-of-use assets, for impairment when specific triggering events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets held and used is measured by comparison of the carrying amount of an asset to future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of their carrying cost amount or fair value less cost to sell. No impairment losses were identified for the years ended December 31, 2023 and 2022.
Current wording
We review our long-lived assets, which consist of property and equipment and operating lease right of use assets, for impairment when specific triggering events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets held and used is measured by comparison of the carrying amount of an asset to future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of their carrying cost amount or fair value less cost to sell. No impairment losses were identified for the years ended December 31, 2024, and 2023.
Previous wording
We evaluate the recoverability of finite-lived intangible assets for impairment at least annually, we conduct our analysis in the fourth quarter of each year, or whenever there are triggering events or circumstances that may indicate the carrying amount of such assets may not be recoverable. The evaluation is performed at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If such review indicates that the carrying amount of intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value. No impairment losses were identified for the years ended December 31, 2023 and 2022.
Current wording
We evaluate the recoverability of finite-lived intangible assets for impairment whenever there are triggering events or circumstances that may indicate the carrying amount of such assets may not be recoverable. The evaluation is performed at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If such review indicates that the carrying amount of intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value. No impairment losses were identified for the years ended December 31, 2024, and 2023.
Previous wording
The valuation of long-lived assets and finite-lived intangible assets inherently involves a degree of uncertainty, particularly as it relates to the Company’s future undiscounted cash flows and performance. In the second half of 2023, the Company saw a decrease in cash flow generation primarily due to the Company being affected by an industry-wide inventory oversupply, higher interest rates, and other macroeconomic trends. These considerations were factored into the 2023 annual analysis, and we did not believe this has led to impairment of long-lived assets or finite-lived intangible assets, as of the assessment date. If these macroeconomic trends, noted above, persists into 2024, there is a possibility that the Company may record impairment charges against these assets. The Company closely monitors these conditions and is prepared to perform interim impairment tests, as applicable, should there be indications of triggering events leading to impairment.
Current wording
The valuation of long-lived assets and finite-lived intangible assets inherently involves a degree of uncertainty, particularly as it relates to our future undiscounted cash flows and performance. Beginning in the second half of 2023 and continuing into 2024, we saw a decrease in cash flow generation primarily due to being affected by an industry-wide inventory oversupply, higher interest rates, and other macroeconomic trends. These considerations were factored into the 2024 annual impairment analysis, and we did not believe this has led to impairment of long-lived assets or finite-lived intangible assets, as of the assessment date. If these macroeconomic trends, noted above, persists into 2025, there is a possibility that we may record impairment charges against these assets. We closely monitor these conditions and are prepared to perform interim impairment tests, as applicable, should there be indications of triggering events leading to impairment.
Previous wording
If the Company concludes it is more likely than not that the fair value of the reporting unit is less than its carrying amount, a quantitative fair value test is performed. An impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value is recognized.
Current wording
If we conclude it is more likely than not that the fair value of the reporting unit is less than its carrying amount, a quantitative fair value test is performed. An impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value is recognized.
Previous wording
As the Company operates as a single reporting unit, with a straightforward business model, the Company used the market approach to estimate the fair value of the reporting unit. The market approach allows the use of the market price of an individual equity security at the assessment date to calculate the fair value of the reporting unit. The Company used the closing stock price at the date of assessment to calculate our fair value. As the Company is considered one reporting unit, we used the consolidated balance sheet to derive the carrying amount of the reporting unit, with the inclusion of goodwill.
Current wording
As we operate as a single reporting unit, with a centralized business model, we used the market approach to estimate the fair value of the reporting unit. The market approach allows the use of the market price of an individual equity security at the assessment date to calculate the fair value of the reporting unit. We used the closing stock price at the date of assessment to calculate our fair value. As we are considered one reporting unit, we used the consolidated balance sheet to derive the carrying amount of the reporting unit, with the inclusion of goodwill.
Previous wording
We complete the required annual testing of goodwill impairment for the reporting unit in the fourth quarter of each year to determine if goodwill should be impaired. During the year ended December 31, 2023, no impairment of goodwill has been identified. For the annual test impairment test that was conducted in the fourth quarter of 2023, fair value exceeded the carrying value by 64.7%.
Current wording
We complete the required annual testing of goodwill impairment for the reporting unit in the fourth quarter of each year to determine if goodwill should be impaired. During the year ended December 31, 2024, no impairment of goodwill has been identified. For the annual test impairment test that was conducted in the fourth quarter of 2024, fair value exceeded the carrying value by 531.5%.
Previous wording
The valuation of goodwill inherently involves a degree of uncertainty, particularly as it relates to the Company’s stock price and the calculation of the Company’s fair value. Throughout 2023, the Company’s stock price has decreased primarily due to the performance of the Company being affected by an industry-wide inventory oversupply, higher interest rates, and other macroeconomic trends. Additionally, should the Company’s share price continue to decline, reflecting broader industry or economic concerns, this could indicate a decline in the fair value of the reporting unit, potentially leading to an impairment of goodwill. The Company closely monitors these conditions and is prepared to perform interim impairment tests should there be indications that the fair value of the reporting unit may have declined below its carrying amount.
Current wording
The valuation of goodwill inherently involves a degree of uncertainty, particularly as it relates to our stock price and the calculation of our fair value. Throughout 2024, our stock price has decreased primarily due to our performance being affected by an industry-wide inventory oversupply, higher interest rates, and other macroeconomic trends. Additionally, should our share price continue to decline, reflecting broader industry or economic concerns, this could indicate a decline in the fair value of the reporting unit, potentially leading to an impairment of goodwill. We closely monitor these conditions and are prepared to perform interim impairment tests should there be indications that the fair value of the reporting unit may have declined below its carrying amount.
Previous wording
As of December 31, 2023, our net DTA balance on a consolidated basis was $21,000, after reduction of a valuation allowance of $24.3 million. Significant domestic DTAs were generated, primarily due to net operating losses, research and development tax credits, along with capitalized expenditures including research and development. We assessed the ability to realize the benefits of our DTAs in each reporting period by evaluating all available positive and negative evidence, objective and subjective in nature, including, but not limited to, (1) cumulative results of operations in recent years, (2) sources of recent pre-tax income, (3) estimates of future taxable income, (4) respective carryback and/or carryforward periods of tax attributes available to date, and (5) limitation on NOL utilization against taxable income. We measured our current DTA balances against estimates of future income based on objectively verifiable operating results from our recent history, and concluded that sufficient future taxable income will not be generated to realize the benefits of our federal, state and certain foreign DTAs. Therefore, the Company continues to maintain a valuation allowance against our domestic and certain foreign net deferred tax assets.
Current wording
As of December 31, 2024, our net DTA balance on a consolidated basis was $0.2 million, after reduction of a valuation allowance of $36.9 million. Significant domestic DTAs were generated, primarily due to net operating losses, research and development tax credits, along with capitalized expenditures including research and development. We assessed the ability to realize the benefits of our DTAs in each reporting period by evaluating all available positive and negative evidence, objective and subjective in nature, including, but not limited to, (1) cumulative results of operations in recent years, (2) sources of recent pre-tax income, (3) estimates of future taxable income, (4) respective carryback and/or carryforward periods of tax attributes available to date, and (5) limitation on NOL utilization against taxable income. We measured our current DTA balances against estimates of future income based on objectively verifiable operating results from our recent history, and concluded that sufficient future taxable income will not be generated to realize the benefits of our federal, state and certain foreign DTAs. Therefore, we continue to maintain a valuation allowance against our domestic and certain foreign net deferred tax assets.
Previous wording
The Company follows ASC Topic 740 that prescribes a financial statement recognition threshold and measurement process for uncertain tax positions taken or expected to be taken on our income tax returns. We recognize income tax benefits from uncertain tax positions only if we believe that it is more likely than not that the tax position will be sustained upon examination by the taxing authorities based on the technical merits of the position. We include interest and penalties related to unrecognized tax benefits within income tax expense in the accompanying consolidated statements of operations.
Current wording
We follow ASC Topic 740 that prescribes a financial statement recognition threshold and measurement process for uncertain tax positions taken or expected to be taken on our income tax returns. We recognize income tax benefits from uncertain tax positions only if we believe that it is more likely than not that the tax position will be sustained upon examination by the taxing authorities based on the technical merits of the position. We include interest and penalties related to unrecognized tax benefits within income tax expense in the accompanying consolidated statements of operations.