ESS Tech, Inc.
For the period ended Dec 31, 2024. Filed Mar 31, 2025.
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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 31, 2025
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What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-14.
0001628280-24-011004
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-31.
0001628280-25-015649
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 107 previous paragraphs and 101 current paragraphs.
50 unchanged; 38 reworded; 12 added; 16 removed; 3 previous and 1 current paragraphs rearranged.
Tables are not compared: 2 previous and 2 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 (12)
Current report
Research and development
Current report
Sales and marketing
Current report
General and administrative
Current report
Other income, net
Current report
Revenue for the year ended December 31, 2024 was $6.3 million compared to $7.5 million for the year ended December 31, 2023 as we recognized revenue for the sale of Energy Centers, Energy Warehouses, other related equipment, engineering services related to a product site deployment, and extended warranty services. The decrease of $1.2 million consists of a $0.3 million decrease in product revenue due to customer funding and project delays and a $0.9 million decrease in other revenue. Other revenue was higher in 2023 as a result of revenue earned for one-time engineering services we performed in support of a customer project and services performed to date under two contracts that were ultimately terminated due to customer project complications.
Current report
General and administrative expenses increased by $0.9 million, or 4%, from $22.6 million for the year ended December 31, 2023 to $23.5 million for the year ended December 31, 2024. The increase is due to increased professional and outside services costs, and increased personnel-related expenses, partially offset by decreased insurance and reduced facilities costs allocated to general and administrative expenses.
Current report
Other income, net
Current report
Since our inception, we have financed our operations primarily through the issuance and sale of equity and debt securities and loan agreements. We have incurred losses since inception and have negative cash flows from operations. We anticipate that losses will continue in the near term. During the year ended December 31, 2024, we incurred net losses of $86.2 million and used $72.2 million of cash in operating activities. As of December 31, 2024, we had unrestricted cash and cash equivalents of $13.3 million and short-term investments of $18.3 million, or total liquid assets of $31.6 million. We have expanded certain cost reduction and cash conservation measures, including ongoing evaluation of workforce staffing requirements, further reduction of material purchases by continuing to minimize spending until firm orders are received, refining our focus on R&D and engineering project efforts towards highest priority, greatest return projects and additional reduction in outside vendor spending, and we may implement further measures.
Current report
We will need additional debt or equity financing in order to meet our near-term operating cash flow requirements, and accordingly there is substantial doubt as to our ability to continue as a going concern for 12 months from the issuance of the financial statements included in this Annual Report on Form 10-K. Management is evaluating various strategies to obtain additional funding, which may include additional offerings of equity, issuance of debt, or other capital sources. If such financing is not available or if the financing terms are less desirable than we expect, we may be forced to decrease our level of investment in product development or scale back our operations, which could have an adverse impact on our business and financial prospects.
Current report
On November 1, 2024, we entered into a Credit Agreement with Export-Import Bank of the United States, as lender, and related agreements related to the financing of two production lines (the “Credit Agreement”). The Credit Agreement provides for a secured loan facility in an aggregate principal amount of up to $22.7 million, of which $20.0 million is available to be borrowed for equipment financing and the balance will be used to finance an exposure fee and transaction expenses. The loan facility has a maturity date of June 30, 2031. Half of the proceeds of the loan facility may be used on a retroactive basis for the financing of the Company’s existing automated battery assembly line and the remainder may be used for the financing or refinancing of an additional line upon the closing of an equity raise milestone. At December 31, 2024, we had no outstanding borrowings under the Credit Agreement. See Note 10, Commitments and Contingencies, to our financial statements for the year ended December 31, 2024 included elsewhere in this Annual Report on Form 10-K for further discussion.
Current report
We also maintain a shelf registration statement on Form S-3 pursuant to which we may, from time to time, sell up to an aggregate of $300 million of our common stock, preferred stock, debt securities, depositary shares, warrants, subscription rights, purchase contracts, or units.
Current report
52 - operating lease liabilities, and deferred revenue, offset by increases in accounts payable and accrued product warranties and cash collections on accounts receivable.
Removed paragraphs (16)
Previous report
Recent Developments
Previous report
Honeywell Agreements
Previous report
On September 21, 2023, we entered into a Common Stock and Warrant Purchase Agreement (the “Purchase Agreement”) with Honeywell ACS Ventures LLC (“Honeywell Ventures”), an affiliate of Honeywell, which became a related party as a result. Pursuant to the Purchase Agreement, Honeywell invested $27.5 million in the Company and we issued 16,491,754 shares of common stock and a warrant to issue up to 10,631,633 shares of common stock (the “Investment Warrant”) to Honeywell Ventures. Pursuant to the Purchase Agreement and also as further consideration for the licensing by UOP, an affiliate of Honeywell, of certain intellectual property to us, we issued a warrant to issue up to 6,269,955 shares of common stock (the “IP Warrant”) to UOP.
Previous report
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 775,760 shares of common stock, issued on September 21, 2023 in exchange for a prepayment of equipment by UOP in the amount of $15 million, and (ii) additional performance warrants (not to exceed an aggregate value of $15 million based on target purchase amounts of up to $300 million by 2030) to be issued on an annual basis for the five-year period beginning in 2026, based on UOP’s purchase of additional equipment after execution of the Supply Agreement (the “Performance Warrants”).
Previous report
Other income (expenses), net
Previous report
N/M = Not meaningful
Previous report
Revenue for the year ended December 31, 2023 was $7.5 million compared to $0.9 million for the year ended December 31, 2022. We commenced shipping of our second-generation Energy Warehouses in the third quarter of 2021 and we received final customer acceptance for the initial units shipped and began recognizing revenue in 2022. Revenue increased as we ramped up production and commercialization of our products following acceptance of the initial units in 2022. During 2023 other revenue also included engineering services the Company performed in support of a customer project site and revenue earned for services performed to date under project contracts that were ultimately terminated.
Previous report
Research and development expenses
Previous report
Sales and marketing expenses
Previous report
General and administrative expenses
Previous report
General and administrative expenses decreased by $4.9 million, or 18%, from $27.5 million for the year ended December 31, 2022 to $22.6 million for the year ended December 31, 2023. The decrease is due primarily to reduced board
Previous report
48 - member and executive stock-based compensation expense, decreased insurance costs, and decreased professional and outside services costs, partially offset by increased payroll related expenses.
Previous report
Other (expense) income, net
Previous report
Since our inception, we have financed our operations primarily through the issuance and sale of equity and debt securities and loan agreements. We have incurred significant losses and have negative cash flows from operations. As of December 31, 2023, we had an accumulated deficit of $696.2 million. Management expects to continue to incur additional substantial losses in the foreseeable future as we scale our operations to achieve positive unit economics. As of December 31, 2023, we had unrestricted cash and cash equivalents of $20.2 million, which is available to fund future operations, and short-term investments of $87.9 million. We believe that our unrestricted cash and cash equivalents and short-term investments as of December 31, 2023 will enable us to maintain our operations and satisfy our financial obligations for a period of at least 12 months following the filing date of this Annual Report on Form 10-K. Beyond 12 months, we may need additional cash resources to the extent our current resources are insufficient to satisfy our cash requirements. Therefore, we may seek additional equity or debt financing. If such financing is not available, or if the financing terms are less desirable than we expect, we may be forced to decrease our level of investment in product development or scale back our operations, which could have an adverse impact on our business and financial prospects.
Previous report
In March 2020, we borrowed $4.0 million through a note payable with Silicon Valley Bank (“SVB”) that was secured by significantly all of our property, except for intellectual property. The note bore interest at 0.50% below the bank’s prime rate. On July 7, 2023, we elected to repay the note payable in full with a payment of $1.0 million covering the outstanding principal balance, interest and a final payment due of $200 thousand. As of December 31, 2023 there was no outstanding principal balance related to this note. See Note 10, Borrowings to our consolidated financial statements for the year ended December 31, 2023 included elsewhere in this Annual Report on Form 10-K.
Previous report
As discussed in Note 1, Description of Business and Basis of Presentation, to our consolidated financial statements for the year ended December 31, 2023 included elsewhere in this Annual Report on Form 10-K, we reached commercial viability and transitioned out of the research and development phase and into commercial inventory accounting commencing with the third quarter of 2023. Refer to Note 2, Significant Accounting Policies, to our consolidated financial statements for the year ended December 31, 2023 included elsewhere in this Annual Report on Form 10-K, for full details on the accounting impacts of the transition.
Reworded paragraphs (38)
Previous wording
ESS is a long-duration energy storage company specializing in iron flow battery technology. We design and produce long-duration batteries predominantly using earth-abundant materials that we believe can be cycled over 20,000 times without capacity fade. Because we designed our batteries to operate using an electrolyte of primarily salt, iron and water, they are environmentally sustainable and substantially recyclable.
Current wording
ESS is a long-duration energy storage company specializing in iron flow battery technology. We design and produce long-duration batteries predominantly using earth-abundant materials that we believe can be cycled over 20,000 times without capacity fade. Because our batteries are designed to operate using an electrolyte of primarily salt, iron and water, they are environmentally sustainable and substantially recyclable or reusable.
Previous wording
Our batteries provide flexibility to grid operators and energy assurance for commercial and industrial customers. Our technology addresses energy delivery, duration and cycle-life in a single battery platform that compares favorably to lithium-ion batteries, the most widely deployed alternative technology. Using our iron flow battery technology, we are developing several products, each of which is able to provide reliable, safe, long-duration energy storage. Our first energy storage product, the Energy Warehouse, is our “behind-the-meter” solution (referring to solutions that are located on the customer’s premises, behind the service demarcation with the utility) that offers energy storage ranging from six to twelve-hour duration. Our second, larger scale energy storage product, the Energy Center, is currently being designed for “front-of-the-meter” (referring to solutions that are located outside the customer’s premises, typically operated by the utility or by third-party providers who sell energy into the grid, often known as independent power producers) deployments specifically
Current wording
Our batteries provide flexibility to grid operators and energy assurance for commercial and industrial customers. Our technology addresses energy delivery, duration and cycle-life in a single battery platform that compares favorably to lithium-ion batteries, the most widely deployed alternative technology. Using our iron flow battery technology, we are developing several products, each of which is designed to provide reliable, safe, long-duration energy storage. Our first energy storage product, the Energy Warehouse, is our ‘behind-the-meter’ solution (referring to solutions that are located on the customer’s premises, behind the service demarcation with the utility) that is used for initial testing and technology validation. Our larger scale energy storage products, the Energy Center and Energy Base, are designed for either ‘behind-the meter’ or ‘front-of-the-meter’ (referring to solutions that are located outside the customer’s premises, typically operated by the utility or by third-party providers who sell energy into the grid, often known as independent power producers)
Previous wording
44 - for utility and large commercial and industrial consumers. Our core technology components in the Energy Warehouse and the Energy Center also are under development for integration into third-party systems.
Current wording
47 - deployments specifically for utility and large commercial and industrial consumers. We are developing additional products at larger scale, in addition to productized versions of our core technology components, for integration into third-party systems.
Previous wording
We have historically been in the research and development phase for accounting purposes. On a quarterly basis we had evaluated a combination of evidence including production quality metrics, field functionality to date, revenue trends, and existing contracts with customers. Based on the evaluation performed during the third quarter of 2023, we transitioned out of the research and development phase and into commercial inventory accounting as of July 1, 2023 (the “Transition Date”). As a result of the transition, all inventoriable costs incurred are capitalized, net 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.
Current wording
We historically had been in the research and development phase for accounting purposes. On a quarterly basis we had evaluated a combination of evidence including production quality metrics, field functionality to date, revenue trends, and existing contracts with customers. Based on the evaluation performed during the third quarter of 2023, we transitioned out of the research and development phase and into commercial inventory accounting as of July 1, 2023 (the “Transition Date”). As a result of the transition, all inventoriable costs incurred are capitalized, net 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 as of the Transition Date.
Previous wording
We believe we have the opportunity to establish attractive margin unit economics if we are able to continue to reduce production costs and scale our operations. Our future financial performance will depend on our ability to deliver on these economies of scale with lower product costs. We believe our business model is positioned for scalability due to the ability to leverage the same product platform across our customer base. Significant improvements in manufacturing scale are expected to decrease the cost of materials and direct labor. Compared to 2023, we expect our indirect cost of goods and operating expenses to increase as we ramp up our manufacturing and sales activities. We further expect an increase in expenses related to the implementation of cost reduction projects and initiatives in our supply chain, manufacturing engineering and research and development functions. We also anticipate some higher general and administrative expenses related to operating as a public company. Achievement of margin targets and cash flow generation is dependent on finalizing development and manufacturing of Energy Centers.
Current wording
We believe we have the opportunity to establish attractive margin unit economics if we are able to continue to reduce production costs and scale our operations. Our future financial performance will depend on our ability to deliver on these economies of scale with lower product costs. We believe our business model is positioned for scalability due to the ability to leverage the same core technology and components across our products and customer base. We anticipate significant reduction in our cost of goods through our cost reduction initiatives, including design optimization from value engineering, strategic supply chain projects, and further automation of our manufacturing processes. Additionally, significant improvements in manufacturing scale are expected to decrease the cost of materials and direct labor. Compared to 2024, we expect our indirect cost of revenue and operating expenses to increase as we ramp up our manufacturing and sales activities. We further expect an increase in expenses related to the implementation of cost reduction projects and initiatives in our supply chain, manufacturing engineering and research and development functions. Achievement of margin targets and cash flow generation is dependent on the execution of these cost out initiatives.
Previous wording
Our near-term and medium-term revenue is expected to be generated from our Energy Centers, second-generation Energy Warehouses, and core technology component productization. We believe our unique technology provides a compelling value proposition and an opportunity for favorable margins and unit economics in the energy storage industry in the future.
Current wording
Our near-term and medium-term revenue is expected to be generated from our Energy Centers, second-generation Energy Warehouses, Energy Base, and core technology component productization. We believe our unique technology provides a compelling value proposition and an opportunity for favorable margins and unit economics in the energy storage industry in the future.
Previous wording
45 - volatility, inflation, recession or governmental fiscal, monetary and tax policies, among others, could adversely impact our and our customers’ business, financial condition and operating results. In addition, general and ongoing tightening in the credit market, lower levels of liquidity, increases in rates of default and bankruptcy, and significant volatility in equity and fixed-income markets could all negatively impact our customers, contractors, suppliers and partners. Potentially as a result of these macroeconomic forces, during the 2023 we have experienced supply constraints, increased shipping delays for certain customer contracts, and delays in timing of payments from some of our customers. We believe some or all of these negative trends may continue in 2024.
Current wording
We are closely monitoring macroeconomic developments, including global supply chain challenges, foreign currency fluctuations, fluctuations in inflation and interest rates and monetary policy changes, as well as global events, such as the Russia-Ukraine conflict, tensions in the Middle East, and other areas of geopolitical tension around the world, and how they may adversely impact our and our customers’, contractors’, suppliers’ and partners’ respective businesses. In particular, weak economic conditions or significant uncertainty regarding the stability of financial markets related to stock market volatility, inflation, recession or governmental fiscal, monetary and tax policies, among others, could adversely impact our and our customers’ business, financial condition and operating results. In addition, general and ongoing tightening in the credit market, lower levels of liquidity, increases in rates of default and bankruptcy, and significant volatility in equity and fixed-income markets could all negatively impact our customers, contractors, suppliers and partners. As a result of these macroeconomic forces, during 2023 and 2024 we experienced supply constraints, increased shipping delays for certain customer contracts, and delays in timing of payments from some of our customers. We believe some or all of these negative trends may continue in 2025.
Previous wording
To the extent that challenging macroeconomic conditions persist, we may experience an extension and worsening of these effects as well as additional adverse effects on our business, financial condition, or results of operations in future periods. These effects could include, among others, slower purchasing decisions by existing and potential new customers, additional delays in timing of payments under our existing customer contracts, further reduction or delays in purchasing decisions by our customers, potential losses of customers as a result of economic distress or bankruptcy, and increased costs for raw materials and freight resulting from continued inflationary cost pressures.
Current wording
To the extent that challenging macroeconomic conditions persist, we may experience an extension and worsening of these effects as well as additional adverse effects on our business, financial condition, or results of operations in future periods. These effects could include, among others, slower purchasing decisions by existing and potential new customers, additional delays in timing of payments under our existing customer contracts, further reduction or delays in purchasing decisions by our customers, potential losses of customers as a result of economic distress or bankruptcy, and increased costs for raw materials and freight resulting from inflationary cost pressures.
Previous wording
On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022, which extends the availability of investment tax credits and production tax credits and makes significant changes to the tax credit regime that applies to solar and energy storage products. As a result of changes made by the IRA, the ITC for solar generation projects is extended until at least 2033 and has been expanded to include stand-alone battery storage projects. This expansion provides significant certainty on the tax incentives that will be available to stand-alone battery storage projects in the future. We believe the IRA will increase demand for our services due to the extensions and expansions of various tax credits that are critical for our customers’ economic returns, while also providing more certainty in and visibility into the supply chain for materials and components for energy storage systems. We are continuing to evaluate the overall impact and applicability of the IRA as implementing regulations are issued, and the passage of comparable legislation in other jurisdictions, to our results of operations going forward.
Current wording
On August 16, 2022, President Biden signed into law the IRA, which extends the availability of ITCs and PTCs and makes significant changes to the tax credit regime that applies to solar and energy storage products. As a result of changes made by the IRA, the ITC for solar generation projects is extended until at least 2033 and has been expanded to include stand-alone battery storage projects. This expansion provides more certainty on the tax incentives that will be available to stand-alone battery storage projects in the future. We believe the IRA will increase demand for our services due to the extensions and expansions of various tax credits that are critical for our customers’ economic returns, while also providing more certainty in and visibility into the supply chain for materials and components for energy storage systems. We are continuing to evaluate the overall impact and applicability of the IRA as guidance is issued, and the passage of comparable legislation in other jurisdictions, to our results of operations going forward.
Previous wording
As discussed in Note 14, Government Grants, to our consolidated financial statements, starting in 2023, there are PTCs that can be claimed on battery components manufactured in the U.S. and sold to U.S. or foreign customers. 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. We expect these credits will have positive impact on our gross margins in the future.
Current wording
As discussed in Note 15, Government Grants, to our financial statements, Section 45X of the Code, as enacted by the IRA, provides a PTC that can be claimed on certain battery components manufactured in the U.S. and sold to unrelated U.S. or foreign customers after 2022, through the end of 2032. The tax credits available to manufacturers include a credit for ten percent of the cost incurred to make electrode active materials in addition to credits of $35 per kWh of capacity for battery cells and $10 per kWh of capacity for battery modules. The credits are cumulative, meaning that companies will be able to claim each of the available tax credits based on the battery components produced and sold through 2029, after which the PTC will begin to gradually phase down through the end of 2032. The Section 45X PTC may be refundable by the IRS or saleable to unrelated third parties. We expect these credits will have a positive impact on our gross margins in the future. Further, on October 28, 2024, Treasury and the IRS issued final regulations providing guidance on requirements that taxpayers must satisfy to qualify for the Section 45X PTC, including the definition of a Section 45X manufacturing facility.
Previous wording
We earn revenue from the sale of our energy storage products and from service contracts. Revenue from service contracts includes extended warranty and maintenance services for our energy storage products. We invoice our customers based upon contractual terms, and accordingly, we have deferred revenues and contract assets depending upon whether we can invoice in advance of satisfying the performance obligations under the respective customer contract or in arrears, respectively.
Current wording
We earn revenue from the sale of our energy storage products and from service contracts. Revenue from service contracts includes engineering design and extended warranty and maintenance services for our energy storage products. We invoice our customers based upon contractual terms, and accordingly, we have deferred revenues and contract assets depending upon whether we can invoice in advance of satisfying the performance obligations under the respective customer contract or in arrears, respectively. As we are a project-based business, there is inherent variability in our revenue due to variations in pricing, project complexity and timing of delivery across customer projects. Additionally, increased regulatory uncertainty may create a more challenging customer environment and have significant impacts on the consistency and predictability of our revenue year-over-year.
Previous wording
46 - also included direct product development material costs, including freight charges, and warranty-related costs. Our research and development costs have decreased following the transition to commercial inventory accounting in the third quarter of 2023; however, we continue to perform research and development activities to further expand our product roadmap.
Current wording
Following the Transition Date, research and development expenses consist of materials, supplies, personnel-related expenses, consulting services and other direct expenses. Personnel-related expenses consist of salaries, bonuses, benefits and stock-based compensation. Prior to the Transition Date, research and development expenses also included direct product development material costs, including freight charges, and warranty-related costs. Our research and development costs have decreased following the transition to commercial inventory accounting in the third quarter of 2023; however, we continue to perform research and development activities to further expand our product roadmap.
Previous wording
General and administrative expenses consist of personnel-related expenses for our corporate, executive, finance, legal, and other administrative functions, as well as expenses for outside professional services and insurance costs. Personnel-related expenses consist of salaries, bonuses, benefits and stock-based compensation. To a lesser extent, general and administrative expenses include depreciation and other allocated costs, such as facility-related expenses, and supplies. We expect some of our general and administrative expenses to increase as we expand our operations and manufacturing capacity to support the growth of our business, and as a result of operating as a public company, including compliance with the rules and regulations of the SEC, legal, audit, additional insurance expenses, investor relations activities, and other administrative and professional services.
Current wording
General and administrative expenses consist of personnel-related expenses for our corporate, executive, finance, legal, and other administrative functions, as well as expenses for outside professional services and insurance costs. Personnel-related expenses consist of salaries, bonuses, benefits and stock-based compensation. To a lesser extent, general and administrative expenses include depreciation and other allocated costs, and supplies. We expect some of our general and administrative expenses to increase as we expand our operations and manufacturing capacity to support the growth of our business, and as a result of operating as a public company, including compliance with the rules and regulations of the SEC, legal, audit, additional insurance expenses, investor relations activities, and other administrative and professional services.
Previous wording
Interest income, net consists primarily of earned income on our cash equivalents, restricted cash, and short-term investments. These amounts will vary based on our cash, cash equivalents, restricted cash and short-term investment balances, and on market rates. Interest income is partially offset by interest expense on our notes payable.
Current wording
Interest income, net consists primarily of earned income on our cash equivalents, restricted cash, and short-term investments. These amounts will vary based on our cash, cash equivalents, restricted cash and short-term investment balances, and on market rates. Interest income is partially offset by interest expense on notes payable.
Previous wording
Cost of revenue for the year ended December 31, 2023 was $20.5 million. During the third quarter of 2023 we reached commercial viability and transitioned out of the research and development phase and into commercial inventory accounting. As such, we began recording cost of revenue as of the Transition Date. Cost of revenue for units associated with the revenue recognized prior to the Transition Date is zero as these costs were recognized as research and development expenses in the respective periods incurred. As the production costs for our units significantly exceed their selling price, after the transition to commercial inventory accounting, we began recognizing LCNRV charges. Additionally, losses on purchase commitments and inventory write-downs are recorded as cost of revenue. Refer to Note 2, Significant Accounting Policies, to our consolidated financial statements for further details on the accounting impact of this transition.
Current wording
Cost of revenue for the year ended December 31, 2024 was $51.7 million compared to $20.5 million for the year ended December 31, 2023. During the third quarter of 2023 we reached commercial viability and transitioned out of the research and development phase and into commercial inventory accounting. As such, we began recording cost of revenue as of the Transition Date. Cost of revenue for units associated with the revenue recognized prior to the Transition Date is zero as these costs were recognized as research and development expenses in the respective periods incurred. As such, cost of revenue for the years presented is not comparable.
Previous wording
Research and development expenses decreased by $29.3 million, or 41%, from $72.0 million for the year ended December 31, 2022 to $42.6 million for the year ended December 31, 2023. The decrease resulted from the transition out of research and development accounting in the third quarter of 2023 into commercial inventory accounting as of the Transition Date.
Current wording
Research and development expenses decreased by $30.9 million, or 72%, from $42.6 million for the year ended December 31, 2023 to $11.8 million for the year ended December 31, 2024. $30.4 million of the $30.9 million decrease resulted from the transition out of research and development accounting in the third quarter of 2023 into commercial inventory accounting as of the Transition Date. The remaining decrease is driven by a decrease in personnel-related expenses and hardware and IT costs.
Previous wording
Sales and marketing expenses increased by $0.8 million, or 12%, from $6.9 million for the year ended December 31, 2022 to $7.7 million for the year ended December 31, 2023. The increase is driven by an increase in personnel-related expenses due to expanded sales headcount and an increase in external marketing costs.
Current wording
Sales and marketing expenses increased by $1.4 million, or 18%, from $7.7 million for the year ended December 31, 2023 to $9.2 million for the year ended December 31, 2024. The increase is driven by an increase in personnel-related expenses due to expanded sales headcount and an increase in outside services and external marketing costs.
Previous wording
Interest income, net increased by $3.1 million from $2.2 million of interest income, net for the year ended December 31, 2022 to $5.3 million of interest income, net for the year ended December 31, 2023. The change resulted from a decrease in interest expense resulting primarily from a decrease in outstanding notes payable for 2023 compared to 2022 and an increase in interest income driven by interest earned on our short-term investment portfolio during 2023.
Current wording
Interest income, net decreased by $1.7 million, or 32%, from $5.3 million for the year ended December 31, 2023 to $3.6 million for the year ended December 31, 2024. The decrease resulted from a decrease in interest income earned on our short-term investment portfolio partially offset by a decrease in expense resulting from the repayment of our notes payable during 2023.
Previous wording
The change in fair value of common stock warrant liabilities resulted in a gain of $2.3 million for the year ended December 31, 2023 and a gain of $25.8 million for the year ended December 31, 2022. The changes in fair value of common stock warrant liabilities was driven by changes in the market price of our common stock over the respective period.
Current wording
The change in fair value of common stock warrant liabilities resulted in a gain of $0.1 million and $2.3 million for the years ended December 31, 2024 and 2023, respectively. The changes in fair value of common stock warrant liabilities was driven by changes in the market price of our common stock over the respective period.
Previous wording
Other income (expense), net for the year ended December 31, 2023 was $773 thousand of income and $452 thousand of expense for the year ended December 31, 2022. The change is a result of an increase in funding received from federal agencies for our research and development activities in 2023 as well the increase in unrealized gains rather than unrealized losses reported on trading securities.
Current wording
Other income (expense), net resulted in $0.8 million of income for the year ended December 31, 2023 and $0.1 million of expense for the year ended December 31, 2024. The change is a result of funding received from federal agencies for our research and development activities in 2023 that did not recur in 2024, offset by the recognition of year-to-date unrealized losses on trading securities in 2023 rather than unrealized gains in 2024.
Previous wording
As of December 31, 2022, we had a standby letter of credit with First Republic Bank totaling $725 thousand as security for an operating lease of office and manufacturing space in Wilsonville, Oregon. As of December 31, 2023, the letter of credit was reduced to $75 thousand. As of December 31, 2023, the letter of credit was secured by a restricted certificate of deposit account totaling $75 thousand. There were no draws against the letter of credit during the years ended December 31, 2023 and 2022.
Current wording
We have a standby letter of credit with JP Morgan Chase for $75 thousand as security for an operating lease of office and manufacturing space in Wilsonville, Oregon secured by a restricted certificate of deposit account totaling $75 thousand. There were no draws against the letter of credit during the years ended December 31, 2024 and 2023.
Previous wording
On September 1, 2022, we executed a standby letter of credit with CitiBank, N.A. for $600 thousand as security for the performance and payment of the Company’s obligations under a customer agreement. The letter of credit is in effect until the date on which the warranty period under the agreement expires, which is anticipated to be more than a year from the balance sheet date. As of December 31, 2023, $600 thousand was pledged as collateral for the letter of credit and recorded as restricted cash, non-current. There were no draws against the letter of credit during the years ended December 31, 2023 and 2022.
Current wording
We have a standby letter of credit with Bank of America for $0.6 million as security for the performance and payment of the Company’s obligations under a customer agreement. The letter of credit is in effect until the date on which the warranty period under the agreement expires, which is anticipated to be more than a year from the balance sheet date. As of December 31, 2024, $0.6 million was pledged as collateral for the letter of credit and recorded as restricted cash, non-current. There were no draws against the letter of credit during the years ended December 31, 2024 and 2023.
Previous wording
On March 9, 2023, we executed a standby letter of credit with SVB for $200 thousand in support of our customs and duties due on imported materials. In June 2023, the letter of credit was transferred to Bank of America. The letter of credit is in effect until March 9, 2024. As of December 31, 2023, $200 thousand was pledged as collateral for the letter of credit and
Current wording
We have a standby letter of credit with Bank of America for $0.2 million in support of our customs and duties due on imported materials. The letter of credit is in effect until May 19, 2025. As of December 31, 2024, $0.2 million was pledged as collateral for the letter of credit and recorded as restricted cash, current. There were no draws against the letter of credit during the year ended December 31, 2024.
Previous wording
On September 21, 2023 we entered into a Common Stock and Warrant Purchase Agreement with Honeywell Ventures pursuant to which Honeywell Ventures invested $27.5 million in the Company and the Company issued 16,491,754 shares of common stock and the Investment Warrant exercisable for up to 10,631,633 shares of Common Stock.
Current wording
On September 21, 2023, we entered into a Common Stock and Warrant Purchase Agreement with Honeywell Ventures pursuant to which, Honeywell Ventures invested $27.5 million in the Company and the Company issued 1,099,450 shares of common stock and the Investment Warrant exercisable for up to 708,775 shares of Common Stock.
Previous wording
Cash flows used in operating activities to date have primarily consisted of costs related to research and development of our energy storage systems, building awareness of our products’ capabilities and other general and administrative activities. Beginning in the third quarter of 2023, following the transition to commercial inventory accounting, cash flows used in operating activities also consisted of inventory and cost of revenue.
Current wording
Cash flows used in operating activities to date have primarily consisted inventory purchases and cost of revenue, costs related to research and development of our energy storage systems, building awareness of our products’ capabilities and other general and administrative activities.
Previous wording
Net cash used in operating activities was $81.6 million for the year ended December 31, 2022, which is comprised of net loss of $78.0 million and noncash changes in the fair value of warrant liabilities of $25.8 million, partially offset by stock-based compensation of $11.9 million. Net changes in operating assets and liabilities provided $8.5 million of cash driven by increases in accounts payable, accrued and other current liabilities, accrued product warranties, and deferred revenue, partially offset by increases in accounts receivable, prepaid expenses and other assets, and a decrease in operating lease liabilities.
Current wording
Net cash used in operating activities was $72.2 million for the year ended December 31, 2024, which is comprised of net loss of $86.2 million, adjusted for noncash interest income of $2.4 million, partially offset by stock-based compensation of $11.6 million, inventory write-downs and losses on noncancellable purchase commitments of $4.9 million, and depreciation expense of $4.7 million. Net changes in operating assets and liabilities used $6.5 million of cash driven by inventory purchases, an increase in prepaid and other current assets, and decreases in accrued and other current liabilities,
Previous wording
Net cash used in operating activities was $54.9 million for the year ended December 31, 2023, which is comprised of net loss of $77.6 million, adjusted for noncash interest income of $3.6 million and changes in the fair value of warrant liabilities of $2.3 million, partially offset by inventory write-downs and losses on noncancellable purchase commitments of $11.9 million, stock-based compensation of $10.6 million, and depreciation expense of $6.5 million. Net changes in operating assets and liabilities used $1.6 million of cash driven by cash collections on accounts receivable, an increase in prepaid expenses and other current assets, accrued product warranties and deferred revenue, partially offset by inventory purchases and decreases in accrued and other current liabilities, accounts payable and operating lease liabilities.
Current wording
Net cash used in operating activities was $54.9 million for the year ended December 31, 2023, which is comprised of net loss of $77.6 million, adjusted for noncash interest income of $3.6 million and noncash changes in the fair value of warrant liabilities of $2.3 million, partially offset by inventory write-downs and losses on noncancellable purchase commitments of $11.9 million, stock-based compensation of $10.6 million, and depreciation expense of $6.5 million. Net changes in operating assets and liabilities used $1.6 million of cash driven by cash collections on accounts receivable, an increase in prepaid expenses and other current assets, accrued product warranties and deferred revenue, partially offset by inventory purchases and decreases in accrued and other current liabilities, accounts payable and operating lease liabilities.
Previous wording
Net cash used in investing activities was $117.9 million thousand for the year ended December 31, 2022, which related to purchases of short-term investments and purchases of property and equipment, primarily for our investment in automating production.
Current wording
Net cash provided by investing activities was $64.8 million for the year ended December 31, 2024, which related to maturities of short-term investments partially offset by purchases of property and equipment.
Previous wording
Cash flows from financing activities to date have consisted of the Business Combination, the Honeywell agreements, and the issuance of debt and equity securities and loan agreements.
Current wording
Cash flows from financing activities to date have consisted of the Business Combination, our partnership with Honeywell, and the issuance of debt and equity securities and loan agreements.
Previous wording
Net cash used in financing activities was $4.1 million for the year ended December 31, 2022 and consisted of repurchases of shares from employees for income tax withholding purposes of $2.8 million and payments on notes payable of $1.9 million, partially offset by proceeds from contributions to our ESPP of $492 thousand.
Current wording
Net cash provided by financing activities was $0.2 million for the year ended December 31, 2024 and consisted of proceeds from contributions to our ESPP of $0.4 million and stock options exercised of $86 thousand, partially offset by repurchases of shares from employees for income tax withholding purposes of $0.3 million.
Previous wording
Net cash provided by financing activities was $25.7 million for the year ended December 31, 2023 and consisted of $27.1 million of proceeds from the issuance of common stock and common stock warrants, net of issuance costs, proceeds from contributions to our ESPP of $541 thousand and stock options exercised of $237 thousand, partially offset by principal payments on notes payable of $1.7 million and repurchases of shares from employees for income tax withholding purposes of $310 thousand.
Current wording
Net cash provided by financing activities was $25.7 million for the year ended December 31, 2023 and consisted of $27.1 million of proceeds from the issuance of common stock and common stock warrants, net of issuance costs, proceeds from contributions to our ESPP of $0.5 million and stock options exercised of $0.2 million, partially offset by principal payments on notes payable of $1.7 million and repurchases of shares from employees for income tax withholding purposes of $0.3 million.
Previous wording
Our contractual obligations and other commitments as of December 31, 2023 consist of lease commitments and three standby letters of credit. The letters of credit serve as security for certain operating leases for office and manufacturing space, for our performance and payment obligations under a customer agreement, and in support of our customs and duties due on imported materials. The letter of credit related to operating leases is fully secured by restricted certificate of deposit accounts. The letters of credit related to a customer contract and to support customs and duties due on imported materials are secured by a total of $800 thousand pledged as collateral. There were no draws against the letters of credit during the years ended December 31, 2023 and 2022. Additionally, we are committed to non-cancellable purchase commitments of $0.6 million as of December 31, 2023 and to reimburse UOP a minimum of $8.0 million for research and development expenses incurred through December 31, 2028 under the JDA (as defined herein).
Current wording
Our contractual obligations and other commitments as of December 31, 2024 consist of lease commitments and three standby letters of credit and the Credit Agreement. The letters of credit serve as security for certain operating leases for office and manufacturing space, for our performance and payment obligations under a customer agreement, and in support of our customs and duties due on imported materials. The letter of credit related to operating leases is fully secured by restricted certificate of deposit accounts. The letters of credit related to a customer contract and to support customs and duties due on imported materials are secured by a total of $0.8 million pledged as collateral. Our obligations under the Credit Agreement are secured pursuant to a security agreement granting EXIM a first priority security interest in the financed equipment and a securities account containing collateral consisting of cash and cash equivalents in an amount equal to a certain portion of the disbursements under the Credit Agreement that decreases upon the equity raise milestone and will be reported as restricted cash. There were no draws against the letters of credit or under the Credit Agreement during the years ended December 31, 2024 and 2023. Additionally, we are committed to non-cancellable purchase commitments of $0.2 million as of December 31, 2024 and to reimburse UOP a minimum of $8.0 million for research and development expenses incurred through December 31, 2028 under the JDA (as defined herein).
Previous wording
The preparation of consolidated financial statements in conformity with U.S. GAAP requires that management apply accounting policies and make estimates and assumptions that affect amounts reported in the statements. The following accounting policies represent those that management believes are particularly important to the consolidated financial statements and that require the use of estimates, assumptions, and judgments to determine matters that are inherently uncertain.
Current wording
The preparation of financial statements in conformity with U.S. GAAP requires that management apply accounting policies and make estimates and assumptions that affect amounts reported in the statements. The following accounting policies represent those that management believes are particularly important to the financial statements and that require the use of estimates, assumptions, and judgments to determine matters that are inherently uncertain.
Previous wording
As of the Transition Date, inventory is stated on a first-in, first-out basis at the lower of cost or net realizable value. Net realizable value is the estimated selling price of inventory in the ordinary course of business, less estimated costs of completion, disposal, and transportation. We periodically make judgments and estimates regarding the future utility and carrying value of inventory. When inventory is adjusted to its net realizable value, a new cost basis is established and such cost is not adjusted for any potential recovery or increase in cost. Obsolete inventories are written off to cost of revenue. Should our estimates of future selling prices or production costs change, additional and potentially material write-downs may be required. A small change in our estimates may result in a material charge to our reported financial results.
Current wording
Inventory is stated on a first-in, first-out basis at the lower of cost or net realizable value. Net realizable value is the estimated selling price of inventory in the ordinary course of business, less estimated costs of completion, disposal, and transportation. We periodically make judgments and estimates regarding the future utility and carrying value of inventory. When inventory is adjusted to its net realizable value, a new cost basis is established and such cost is not adjusted for any potential recovery or increase in cost. Obsolete inventories are written off to cost of revenue. Should our estimates of future selling prices or production costs change, additional and potentially material write-downs may be required. A small change in our estimates may result in a material charge to our reported financial results.
Previous wording
Revenue is earned from the sales of energy storage systems and related services and is derived from customer contracts. Revenue is recognized in an amount that reflects the consideration to which we expect to be entitled in exchange for transferring the promised goods and/or services to the customer, when or as our performance obligations are satisfied which includes estimates for variable consideration (e.g., liquidated damages). For sales of energy storage systems, our performance obligations are satisfied at the point in time when the customer obtains control of the system. Payment terms generally include advance payments to reserve capacity and/or upon issuance of the customer’s purchase order with the remainder due upon the achievement of various milestones including shipment readiness, delivery, commissioning of the system, and completion of final site testing.
Current wording
Revenue is earned from the sales of energy storage systems and related services and is derived from customer contracts. Revenue is recognized in an amount that reflects the consideration to which we expect to be entitled in exchange for transferring the promised goods and/or services to the customer, when or as our performance obligations are satisfied which includes estimates for variable consideration (e.g., liquidated damages). For sales of energy storage systems, our performance obligations are satisfied at the point in time when the customer obtains control of the system. Payment terms generally include advance payments to reserve capacity and/or material procurement or commence upon issuance of the customer’s purchase order with the remainder due upon the achievement of various milestones including shipment readiness, delivery, system start up, and/or completion of final site testing.
Previous wording
Initial warranty data is limited at the early stage in the commercialization of our products. Thus, it is likely that as we sell additional energy storage systems, we will acquire additional information on the components requiring repair or replacement as well as the projected costs to repair or replace items under warranty which may result in a material difference between our estimated costs and our actual costs. We review our warranty accrual at least quarterly and adjust our estimates as needed to ensure our accruals are adequate to meet expected future warranty obligations. Adjustments to warranty accruals were recorded to research and development expenses when the Company was in the research and development phase and are now recorded to cost of revenue following the transition to commercial inventory as of the Transition Date.
Current wording
Initial warranty data is limited at the early stage in the commercialization of our products. Thus, it is likely that as we sell additional energy storage systems, we will acquire additional information on the components requiring repair or replacement as well as the projected costs to repair or replace items under warranty which may result in a material difference between our estimated costs and our actual costs. We review our warranty accrual at least quarterly and adjust our estimates as needed to ensure our accruals are adequate to meet expected future warranty obligations. Adjustments to warranty accruals are recorded to cost of revenue.
Previous wording
See Note 2, Significant Accounting Policiesto our consolidated financial statements for the year ended December 31, 2023 included elsewhere in this Annual Report on Form 10-K.
Current wording
See Note 2, Significant Accounting Policiesto our financial statements for the year ended December 31, 2024 included elsewhere in this Annual Report on Form 10-K.
Previous wording
We are an “emerging growth company” as defined in Section 2(a) of the Securities Act and have elected to take advantage of the benefits of the extended transition period for new or revised financial accounting standards. We expect to continue to take advantage of the benefits of the extended transition period for as long as we remain an emerging growth company, although we may decide to early adopt new or revised accounting standards to the extent permitted by such standards. This may make it difficult or impossible to compare our financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions because of the potential differences in accounting standards used.
Current wording
We are an “emerging growth company” as defined in Section 2(a) of the Securities Act and have elected to take advantage of the benefits of the extended transition period for new or revised financial accounting standards. We expect to continue to take advantage of the benefits of the extended transition period until the end of fiscal year 2025, although we may decide to early adopt new or revised accounting standards to the extent permitted by such standards. This may make it difficult or impossible to compare our financial results with the financial results of another public company that is either not an
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
54 - emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions because of the potential differences in accounting standards used.
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
We are closely monitoring macroeconomic developments, including global supply chain challenges, foreign currency fluctuations, elevated inflation and interest rates and monetary policy changes, as well as global events, such as the Russia-Ukraine conflict, the conflict in the Middle East, and other areas of geopolitical tension around the world, and how they may adversely impact our and our customers’, contractors’, suppliers’ and partners’ respective businesses. In particular, weak economic conditions or significant uncertainty regarding the stability of financial markets related to stock market
Previous report — wording carried elsewhere
Following the Transition Date, research and development expenses consist of materials, supplies, personnel-related expenses, allocated facilities costs, consulting services and other direct expenses. Personnel-related expenses consist of salaries, bonuses, benefits and stock-based compensation. Prior to the Transition Date, research and development expenses
Previous report — wording carried elsewhere
49 - recorded as restricted cash, current. There were no draws against the letter of credit during the year ended December 31, 2023.