ESS Tech Inc

ESS TECH, INC.NOTES TO CONDENSED FINANCIAL STATEMENTS(unaudited)

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of Business—ESS Tech, Inc. (“ESS” or the “Company”) is a long-duration energy storage company specializing in iron flow battery technology. ESS develops long-duration iron flow batteries for commercial and utility-scale energy storage applications requiring up totwelve hours of flexible energy capacity predominantly using earth-abundant materials.

The Company was originally incorporated as a Cayman Islands exempted company on July 21, 2020 as a publicly traded special purpose acquisition company under the name ACON S2 Acquisition Corp. (“STWO”) for the purpose of effecting a business combination. On October 8, 2021 (the “Closing Date”), the Company consummated a business combination (the “Business Combination”) pursuant to the merger agreement, dated May 6, 2021, by and among STWO, SCharge Merger Sub, Inc., a Delaware corporation and wholly owned direct subsidiary of STWO (“Merger Sub”), and ESS Tech, Inc., a Delaware corporation (“Legacy ESS”), wherein Merger Sub merged with and into Legacy ESS, with Legacy ESS surviving as a wholly owned subsidiary of STWO. On the Closing Date, STWO changed its name from “ACON S2 Acquisition Corp.” to “ESS Tech, Inc.”, and its shares of common stock and warrants for shares of common stock commenced trading on the New York Stock Exchange under the ticker symbols “GWH” and “GWH.W,” respectively. On March 31, 2024, Legacy ESS merged with ESS Tech, Inc. leaving ESS Tech, Inc. as the sole remaining legal entity. As of April 1, 2024, the Company does not have any subsidiaries.

Basis of Presentation—The accompanying condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Condensed Financial Statements—The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. GAAP for interim financial information and in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim financial reporting. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The condensed financial statements reflect all normal and recurring adjustments that are, in the opinion of the Company’s management, necessary in order to make the condensed financial statements not misleading. Operating results for the three and nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. These condensed financial statements should be read in conjunction with the financial statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the SEC on March 13, 2024.

Reclassifications—Certain immaterial prior year amounts have been reclassified to conform with the current year presentation. These reclassifications had no effect on the reported results of operations.

Liquidity and Capital Resources -The Company has incurred operating losses and cash outflows from operations since inception and the Company anticipates that losses will continue in the near term. During the nine months ended September 30, 2024, the Company incurred net losses of $62.7 million and used $51.7 million of cash in operating activities. As of September 30, 2024, the Company had unrestricted cash and cash equivalents of $12.8 million and short-term investments of $42.3 million, or total liquid assets of $55.1 million.

The continuation of the Company as a going concern is dependent upon generating profit from its operations and its ability to obtain additional debt or equity financing. Management is evaluating various strategies to obtain additional funding, which may include additional offerings of equity, issuance of debt, or other capital sources. There is no assurance that the Company will be able to generate sufficient profits, obtain such financings, or obtain them on favorable terms. Any such financing activities are subject to market conditions, and accordingly involves factors that are outside the Company’s control. These uncertainties cause substantial doubt to exist as to the Company’s ability to continue as a going concern for 12 months from the issuance of these financial statements. The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The consolidated financial statements do not reflect any adjustments that might result from the outcome of this uncertainty.

2. SIGNIFICANT ACCOUNTING POLICIES

The Company’s significant accounting policies have not changed from those disclosed in the annual audited financial statements and accompanying notes in the Annual Report on Form 10-K for the fiscal year ended December 31, 2023. As of July 1, 2023 (the “Transition Date”), the Company transitioned out of the research and development phase and into commercial inventory accounting. As a result of the transition, all inventoriable costs incurred are capitalized, net

• 9 - of any lower of cost or net realizable value (“LCNRV”) charges, which are recognized as cost of revenue. Further, unfulfilled noncancellable purchase commitments are recognized as expense for estimated losses in cost of revenue and warranty and fulfillment costs are recorded as a component of cost of revenue rather than research and development expense beginning on the Transition Date. Refer to the annual audited financial statements and accompanying notes in the Annual Report on Form 10-K for the fiscal year ended December 31, 2023 for further details on the accounting policies resulting from the transition.

Reverse Stock Split

On August 23, 2024, the Company filed a certificate of amendment to the Company’s Certificate of Incorporation with the Secretary of State of the State of Delaware to effect a reverse stock split of all shares of the Company’s common stock that were issued and outstanding at a ratio of 1-for-15 ( the “Reverse Stock Split”) and reduce the total number of authorized shares of common stock from 2,000,000,000 to 1,000,000,000. The amendment became effective as of 4:01 p.m., Eastern Time, on August 23, 2024. The par value of the Company’s common stock remained unchanged at $0.0001 per share. Proportionate adjustments were made to the number of shares issuable upon the exercise or vesting of all warrants, RSUs (as defined herein) and options outstanding at the effective time of the Reverse Stock Split, as well as to their corresponding exercise prices. All share-based balances, including warrants, RSUs and options, herein are reported on a retroactively adjusted basis.

Recently Issued Accounting Pronouncements - Not Yet Adopted

In November 2024, the FASB issued ASU No. 2024-03, Income Statement-Reporting Comprehensive Income (Topic 220): Expense Disaggregation Disclosures. The ASU requires entities to disaggregate operating expenses into specific categories within the notes to the financial statements to provide enhanced transparency. The ASU will be effective for fiscal years beginning after December 15, 2026, with early adoption permitted, and may be applied retrospectively or prospectively. The Company is currently evaluating the effect of this new standard on the Company's disclosures.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU requires greater disaggregation of income tax disclosures primarily on the income tax rate reconciliation and income taxes paid. The ASU will be effective for the Company starting in fiscal year ending December 31, 2025, with early adoption permitted. The Company is currently evaluating the effect of this new standard on the Company's disclosures.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures(“ASU 2023-07”). ASU 2023-07 updates reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses. ASU 2023-07 requires disclosures to include significant segment expenses that are regularly provided to the chief operating decision maker, a description of other segment items by reportable segment, and any additional measures of a segment's profit or loss used by the chief operating decision maker when deciding how to allocate resources. ASU 2023-07 also requires all annual disclosures currently required by Topic 280 to be included in interim periods. The update is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted, and requires retrospective application to all prior periods presented in the financial statements. The Company is currently evaluating the effect that the adoption of this ASU may have on the Company’s disclosures.

3. INVENTORY

Inventory consists of the following (in thousands):

The balance of the Company’s inventory was written down by $16.3 million and $11.3 million from its cost to its net realizable value as of September 30, 2024 and December 31, 2023, respectively. Additionally, the Company has LCNRV losses related to noncancellable purchase commitments which were $0.8 million and $0.6 million as of September 30, 2024 and December 31, 2023, respectively. These LCNRV losses related to noncancellable purchase

• 10 - commitments are reflected in the materials and related purchases component of accrued and other liabilities on the condensed balance sheets. For further details, refer to Note 8, Commitments and Contingencies.

4. PROPERTY AND EQUIPMENT, NET

Property and equipment, net consists of the following (in thousands):

Depreciation expense related to property and equipment, net was $0.7 million and $1.1 million for the three months ended September 30, 2024 and 2023, respectively, and $3.1 million and $3.2 million for the nine months ended September 30, 2024 and 2023, respectively.

5. INTANGIBLE ASSETS, NET

In September 2023, the Company acquired patent rights valued at $5.0 million under a Patent License Agreement with UOP LLC (“UOP”), an affiliate of Honeywell International Inc. (“Honeywell”), a related party. These patent rights were recorded at fair value based on the value of the IP Warrants issued, as defined in Note 9, Common Stock Warrants, and are amortized over an average useful life of 19 years based on the remaining useful lives of the patents acquired. Amortization expense for the three and nine months ended September 30, 2024 was $67 thousand and $200 thousand andimmaterial for the three and nine months ended September 30, 2023, respectively.

Intangible assets, net consisted of the following (in thousands):

6. ACCRUED AND OTHER CURRENT LIABILITIES

Accrued and other current liabilities consist of the following (in thousands):

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7. ACCRUED PRODUCT WARRANTIES

The following table summarizes product warranty activity (in thousands):

8. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

The Company, from time to time, is a party to various claims, legal actions, and complaints arising in the ordinary course of business. The Company is not aware of any material legal proceedings or other claims, legal actions, or complaints through the date of issuance of these condensed financial statements.

Letters of Credit

The Company has a standby letter of credit with First Republic Bank for $75 thousand as security for an operating lease of office and manufacturing space in Wilsonville, Oregon secured by a restricted certificate of deposit account totaling $75 thousand. As of September 30, 2024 the letter of credit was recorded as restricted cash, non-current. There wereno draws against the letter of credit during the three and nine months ended September 30, 2024 and 2023.

The Company has a standby letter of credit with Bank of America for $600 thousand as security for the performance and payment of the Company’s obligations under a customer agreement. The letter of credit is in effect until the date on which the warranty period under the agreement expires, which is anticipated to be more than a year from the balance sheet date. As of September 30, 2024, $600 thousand was pledged as collateral for the letter of credit and recorded as restricted cash, non-current. There wereno draws against the letter of credit during the three and nine months ended September 30, 2024 and 2023.

The Company has a standby letter of credit with Bank of America for $200 thousand in support of the Company’s customs and duties due on imported materials. The letter of credit is in effect until May 19, 2025. As of September 30, 2024, $200 thousand was pledged as collateral for the letter of credit and recorded as restricted cash, current. There wereno draws against the letter of credit during the three and nine months ended September 30, 2024 and 2023.

Purchase Commitments

The Company purchases materials from numerous suppliers and has entered into agreements with various contract manufacturers, which include cancellable and noncancellable purchase commitments. As of September 30, 2024 and December 31, 2023, total unfulfilled noncancellable purchase commitments were $0.8 million and $0.6 million, respectively. In addition, total unfulfilled cancellable purchase commitments amounted to $11.9 million and $7.7 million as of September 30, 2024, and December 31, 2023, respectively.

Joint Development Agreement

In September 2023, the Company entered into a Joint Development Agreement (“JDA”) with UOP, an affiliate of Honeywell, a related party, under which the parties agreed to work collaboratively to engage in certain research and development activities generally related to flow battery technology. Pursuant to the JDA, the Company agreed to reimburse UOP a minimum of $8.0 million for research and development expenses incurred through December 31, 2028. No expenses were incurred under the JDA during the three and nine months ended September 30, 2024.

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9. COMMON STOCK WARRANTS

The following table consists of the number of shares of common stock issuable upon exercise of the respective warrants as of the dates indicated:

Public Warrants

As part of STWO’s initial public offering,8,333,287 warrants to purchase common stock (the “Public Warrants”) were sold. Simultaneously with STWO’s initial public offering, STWO issued in a private placement 4,666,667 warrants to purchase common stock (the “Private Warrants”) to STWO’s sponsor. In connection with the Business Combination, STWO’s sponsor agreed to forfeit 583,333 Private Warrants. Of the remaining 4,083,334 Private Warrants,3,500,000 were immediately vested and 583,334 warrants (the “Earnout Warrants”) were vested upon meeting certain earnout milestone events on November 9, 2021. The Private Warrants, including the Earnout Warrants, automatically converted on a 1:1 basis into Public Warrants upon the transfer of such warrants by the initial holder to a third party during the fourth quarter of 2023.

The Public Warrants are listed on the NYSE under the ticker symbol “GWH.W.” Following the Reverse Stock Split, fifteen Public Warrants entitle the holder thereof to purchaseone share of common stock at a price of $172.50 per share, subject to adjustments. The Public Warrants may be exercised only for a whole number of shares of common stock. No fractional shares will be issued upon exercise of the warrants. The Public Warrants expire on October 8, 2026, five years after completion of the Business Combination, or earlier upon redemption or liquidation.

The Company may call the Public Warrants for redemption starting any time, in whole and not in part, at a price of $0.01 per warrant, so long as the Company provides no less than 30 days prior written notice of redemption to each warrant holder, and if, and only if, the reported last sale price of common stock equals or exceeds $270.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date the Company sends the notice of redemption to the warrant holders provided there is an effective registration statement covering the shares of common stock issuable upon exercise of the warrants.

The Company may call the Public Warrants for redemption starting any time, in whole and not in part, at a price of $0.10 per warrant, so long as the Company provides no less than 30 days prior written notice of redemption to each warrant holder; provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive a number of shares determined based on the redemption date fair market value of the shares, and if, and only if, the reported last sale price of common stock equals or exceeds $150.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date the Company sends the notice of redemption to the warrant holders provided there is an effective registration statement covering the shares of common stock issuable upon exercise of the warrants.

The Company’s common stock warrants were initially recorded at fair value upon completion of the Business Combination and are adjusted to fair value at each reporting date based on the market price of the Public Warrants, with the change in fair value recorded as a component of other income in the condensed statements of operations and comprehensive loss. For the three and nine months ending September 30, 2024, the Company recorded a net decrease to the liabilities for Public Warrants of $0.3 million and $0.5 million, respectively. For the three and nine months ended September 30, 2023, the Company recorded a net decrease to the liabilities for Earnout Warrants, Public Warrants and Private Warrants (excluding Earnout Warrants) of $0.3 million and $0.9 million, respectively.

SMUD Warrant

On September 16, 2022, the Company entered into a warrant agreement with the Sacramento Municipal Utility District (“SMUD”), whereby the Company agreed to issue a warrant for up to 33,333 shares of the Company’s common stock at an exercise price of $64.44 per share. The vesting of the shares underlying the warrant will be subject to the

• 13 - achievement of certain commercial milestones through December 31, 2030 pursuant to a related commercial agreement. As of September 30, 2024 and December 31, 2023,833 shares underlying the warrant were vested.

Honeywell Warrants

On September 21, 2023, the Company entered into a Common Stock and Warrant Purchase Agreement (the “Purchase Agreement”) with Honeywell ACS Ventures LLC (“Honeywell Ventures”), an affiliate of Honeywell, a related party. Pursuant to the Purchase Agreement, Honeywell invested $27.5 million in the Company and the Company issued 1,099,450 shares of common stock and a warrant to issue up to 708,775 shares of common stock (the “Investment Warrant”) to Honeywell Ventures. Pursuant to the Purchase Agreement and also as further consideration for the licensing by UOP, an affiliate of Honeywell, of certain intellectual property to the Company, the Company issued a warrant to issue up to 417,997 shares of common stock (the “IP Warrant”) to UOP, which UOP subsequently transferred to Honeywell Ventures. The Investment Warrant has an exercise price of $28.35, and the IP Warrant has an exercise price of $43.50. Each warrant will expire on September 21, 2028.

On September 21, 2023, the Company and UOP also entered into a Master Supply Agreement (the “Supply Agreement”), pursuant to which UOP may purchase equipment supplied by the Company. Pursuant to the Supply Agreement, the Company agreed to issue additional warrants to purchase common stock to UOP, consisting of (i) an initial performance warrant to issue up to 51,717 shares of common stock, issued on September 21, 2023 in exchange for a prepayment of equipment by UOP in the amount of $15 million, and (ii) additional performance warrants (not to exceed an aggregate value of $15 million based on target purchase amounts of up to $300 million by 2030) to be issued on an annual basis for thefive-year period beginning in 2026, based on UOP’s purchase of additional equipment after execution of the Supply Agreement (the “Performance Warrants”). The initial Performance Warrant has an exercise price of $21.75 and the additional Performance Warrants will have an exercise price equal to the volume-weighted average price of the Company’s common stock for the last fifteen (15) trading days of the relevant calendar year for which such Performance Warrant is being issued. The initial Performance Warrant will expire on September 21, 2028 and each additional Performance Warrant will have afive-year term from its respective date of issuance.

The table below summarizes the common stock warrant activities in the number of shares of common stock issuable upon exercise of the respective warrants during the nine months ended September 30, 2024:

The table below shows the common stock warrant activities in the number of shares of common stock issuable upon exercise of the respective warrants during the nine months ended September 30, 2023:

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10. STOCK-BASED COMPENSATION

Stock-based compensation expense is allocated on a departmental basis based on the classification of the award holder. The following table presents the amount of stock-based compensation related to stock-based awards issued to employees on the Company’s condensed statements of operations and comprehensive loss (in thousands):

2021 Equity Incentive Plan

In October 2021, the Board of Directors of the Company adopted the ESS Tech, Inc. 2021 Equity Incentive Plan (the “2021 Plan”). The 2021 Plan became effective upon consummation of the Business Combination. Stock awards under the plan may be issued as Incentive Stock Options (“ISO”), Non-statutory Stock Options (“NSO”), Stock Appreciation Rights, and Restricted Stock Awards (“RSU”). Only employees are eligible to receive ISO awards. Employees, directors, and consultants who provide continuous service to the Company are eligible to receive stock awards other than ISOs. The number of shares available for issuance under the 2021 Plan will be increased on the first day of each fiscal year beginning with the 2022 fiscal year and ending with the 2031 fiscal year, in an amount equal to the lesser of (i)1,017,333 shares, (ii) five percent (5%) of the outstanding shares on the last day of the immediately preceding fiscal year, or (iii) such number of shares determined by the Company no later than the last day of the immediately preceding fiscal year. As of January 1, 2024, the number of shares available for issuance under the 2021 Plan was increased by 580,000 shares in accordance with the plan and as approved by the Board. Under the 2021 Plan, the Company is authorized to issue 1,754,000 shares of common stock as of September 30, 2024.

Option prices for incentive stock options are set at the fair market value of the Company’s common stock at the date of grant. The fair market value of RSUs is set at the closing sales price of the Company’s common stock at the date of grant. Employee new hire grants generally cliff vest 1/4 th at the end of the first year and then vest 1/16 th each quarter over the remaining three years. Grants expire 10 years from the date of grant. All other grants vest quarterly over four years.

As of September 30, 2024, there were 314,846 shares available for future grant under the 2021 Plan.

Stock Options and Restricted Stock Units

Stock option and RSU activity, prices, and values during the nine months ended September 30, 2024 are as follows (in thousands, except for share, per share, and contractual term data):

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No options were granted during the three and nine months ended September 30, 2024 and 2023.

As of September 30, 2024, there was approximately $22.0 million of unamortized stock-based compensation expense related to unvested stock options and RSUs, which is expected to be recognized over a weighted-average period of 2.66 years.

Employee Stock Purchase Plan

In May 2022, the Company commenced its first offering period under the ESS Tech, Inc. Employee Stock Purchase Plan (“ESPP”), which assists employees in acquiring a stock ownership interest in the Company. The ESPP permits eligible employees to purchase common stock at a discount through payroll deductions during specified offering periods. No employee may purchase more than $25,000 worth of stock in any calendar year. The price of shares purchased under the ESPP is equal to 85% of the fair market value of the common stock on the first or last day of the offering period, whichever is lower. Total ESPP expense for the three and nine months ended September 30, 2024 and 2023 was $47 thousand and $0.2 million and $89 thousand and $0.2 million, respectively.

11. FAIR VALUE MEASUREMENTS

The following tables present the Company’s fair value hierarchy for its financial assets measured at fair value on a recurring basis (in thousands):

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The following tables present the Company’s fair value hierarchy for its financial liabilities measured at fair value on a recurring basis (in thousands):

There were no transfers among Level 1, Level 2, or Level 3 categories during the periods presented. The carrying amounts of the Company’s accounts payable approximate their fair values due to their short maturities.

Level 1 Assets: The Company invests in money market funds and U.S. Treasury securities. These assets are valued using observable inputs that reflect quoted prices for securities with identical characteristics.

Level 2 Assets: The Company invests in a certificate of deposit, U.S. agency securities, commercial paper, and corporate debt securities. These assets are valued using observable inputs that reflect quoted prices for securities with similar characteristics and other observable inputs (such as interest rates that are observable at commonly quoted intervals).

Level 1 Liabilities: The Company values its public common stock warrants based on the market price of the warrants.

For trading securities held at the reporting date, net losses recorded during the three and nine months ended September 30, 2024 and 2023 were immaterial.

12. INCOME TAXES

The Company didnot record an income tax provision for the three and nine months ended September 30, 2024 and 2023, respectively, due to the Company’s history of losses, and accordingly, has recorded a valuation allowance against substantially all of the Company’s net deferred tax assets. The Company records a valuation allowance when it is more likely than not that some portion, or all, of the Company’s deferred tax assets will not be realized.

13. GOVERNMENT GRANTS

Inflation Reduction Act of 2022 (“IRA”)

On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 into law. The IRA has significant economic incentives for both energy storage customers and manufacturers for projects placed in service after December 31, 2022. Starting in 2023, there are Production Tax Credits under Internal Revenue Code 45X (“PTC”), that can be claimed on battery components manufactured in the U.S. and sold to U.S. or foreign customers. The tax credits available to manufacturers include a credit for ten percent of the cost incurred to make electrode active materials in addition to credits of $35 per kWh of capacity of battery cells and $10 per kWh of capacity of battery modules. The credits are cumulative, meaning that companies will be able to claim each of the available tax credits based on the battery components produced and sold through 2029, after which the PTC will begin to gradually phase down through 2032.

Since the PTC is a refundable credit (i.e., a credit with a direct-pay option available), the PTC is outside the scope of ASC 740, Income Taxes(“ASC 740”). Therefore, the Company accounts for the PTC under a government grant model. GAAP does not address the accounting for government grants received by a business entity that are outside the scope of ASC 740. The Company’s accounting policy is to analogize to IAS 20, Accounting for Government Grants and Disclosure of Government Assistance, under IFRS Accounting Standards. Under IAS 20, once it is reasonably assured that the entity will comply with the conditions of the grant, the grant money should be recognized on a systematic basis over the periods in which the entity recognizes the related expenses or losses for which the grant money is intended to compensate. The Company recognizes grants once it is probable that both of the following conditions will be met: (1) the Company is eligible to receive the grant and (2) the Company is able to comply with the relevant conditions of the grant.

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The PTC is recorded as the applicable items are produced and sold. The Company began earning PTCs in the third quarter of 2023. For the three months ended September 30, 2024, the Company recognized a reduction to PTC’s due to net fair value adjustments of $140 thousand. For the nine months ended September 30, 2024, the Company recognized net PTC benefit of $143 thousand. PTCs are recorded to cost of revenue on the condensed statements of operations and comprehensive loss. For the three and nine months ended September 30, 2023, the Company recognized PTC benefit of $0.7 million. As of September 30, 2024 and December 31, 2023, grant receivable related to the PTC in the amount of $1.0 million and $0.8 million, respectively, is recorded in prepaid expenses andother current assets on the condensed balance sheets.

14. REVENUE

Disaggregated Revenue

The following table presents the Company’s revenue, disaggregated by source (in thousands):

The majority of the Company’s revenue is derived from product sales of energy storage systems. During 2024 other revenue included engineering services related to product site deployment, customer reimbursements for freight, travel, and other expenses, and revenue earned for work performed to date under project contracts that were ultimately terminated.

Contract Balances

Contract assets relate to unbilled amounts resulting from contract arrangements in which the related revenue recognition performance obligations have been satisfied, however invoicing to the customer has not yet occurred. Deferred revenue (or contract liabilities) relates to consideration received from customers in advance of the Company satisfying the revenue recognition performance obligations under the related contractual arrangements. Contract balances are reported in a net contract asset or deferred revenue liability position on a contract-by-contract basis at the end of each reporting period. Contract assets are included in prepaid expenses and other current assets and deferred revenue is presented separately on the condensed balance sheets.

The following table provides information about contract assets and deferred revenue from contracts with customers (in thousands):

Contract assets decreased by $128 thousand during the nine months ended September 30, 2024 due to invoicing on contracts for which revenue has previously been recognized. Deferred revenue decreased by $0.3 million during the nine months ended September 30, 2024 reflecting $0.7 million in customer advance billings offset by the recognition of $1.1 million of revenue that was included in the deferred revenue balance at the beginning of the period.

Deferred revenue of $6.0 million is expected to be recognized within the next 12 months and non-current deferred revenue of $14.4 million is expected to be recognized thereafter.

15. RELATED PARTY TRANSACTIONS

During the three and nine months ended September 30, 2024, the Company recognized revenue of $4 thousand and $0.5 million, respectively, for reimbursable expenses, sale of energy storage systems, and extended warranty services provided to related parties. During the three and nine months ended September 30, 2023, the Company recognized revenue of $1 thousand and $3 thousand, respectively, for extended warranty services provided to related parties.

As of September 30, 2024, the Company had $40 thousand of deferred revenue for extended warranty services and equipment to related parties and $18 thousand of outstanding accounts receivable from related parties. As of

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December 31, 2023, the Company had recorded deferred revenue of $1 thousand for extended warranty services provided to related parties and $29 thousand of outstanding accounts receivable from related parties.

As of September 30, 2024 and December 31, 2023, the Company recorded a non-refundable deposit for future equipment purchases by Honeywell of $14.4 million within non-current deferred revenue. As of December 31, 2023, the Company recorded $0.6 million in current deferred revenue which was subsequently recognized as revenue during the nine months ended September 30, 2024. As of September 30, 2024 and December 31, 2023, the value of the initial Performance Warrant issued to Honeywell was $0.7 million included within other non-current assets in the condensed balance sheets. During the nine months ended September 30, 2024, $27 thousand of the value of the initial Performance Warrant was amortized as an offset to the revenue recognized in the period.

16. NET LOSS PER SHARE

The following table presents the calculation of basic and diluted net loss per share attributable to common stockholders (in thousands, except share and per share data):

Due to the net losses for the three and nine months ended September 30, 2024 and 2023, basic and diluted net loss per common share were the same, as the effect of potentially dilutive securities would have been anti-dilutive.

The following outstanding balances of common share equivalents have been excluded from the calculation of diluted weighted-average common shares outstanding because the effect is anti-dilutive for the periods presented:

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