ESS Tech Inc
For the period ended Mar 31, 2025. Filed May 15, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 15, 2025
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What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-14.
0001628280-24-047692
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-15.
0001628280-25-026025
Item 2. 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 91 previous paragraphs and 87 current paragraphs.
37 unchanged; 34 reworded; 14 added; 18 removed; 2 previous and 2 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 (14)
Current report
Other income, net
Current report
Loss on revaluation of common stock warrant liabilities
Current report
Other income (expense), net
Current report
N/M = Not meaningful
Current report
Cost of revenue decreased by $2.4 million or 21% from $11.1 million for the three months ended March 31, 2024 to $8.7 million for the three months ended March 31, 2025. Cost of revenue during the three months ended March 31, 2024 included a significant benefit related to the utilization of inventory previously expensed during the research and development phase, which we transitioned out of in the third quarter of 2023. When removing this benefit, the decrease aligns proportionately with the revenue recognized in each period. Additionally, we recognized reduced warranty expense in the three months ended March 31, 2025.
Current report
Research and development expenses decreased by $1.1 million or 30% from $3.5 million for the three months ended March 31, 2024 to $2.5 million for the three months ended March 31, 2025. The decrease resulted from reduced personnel-related expenses including stock-based compensation and decreased purchases of testing equipment and supplies.
Current report
Sales and marketing expenses generally remained consistent year over year, decreasing by $84 thousand or 4%. The decrease is driven by minor fluctuations in personnel-related expenses including stock-based compensation, outside services and professional expenses.
Current report
Other income, net
Current report
Loss on revaluation of common stock warrant liabilities
Current report
Other income (expense), net
Current report
Other income (expense), net increased by $74 thousand or 135% from $55 thousand of expense for the three months ended March 31, 2024 to $19 thousand of income for the three months ended March 31, 2025. The increase to income during the three months ended March 31, 2025 is a result of decreased unrealized losses on trading securities and miscellaneous income from the disposal of excess materials in 2025.
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. As of March 31,
Current report
2025 we had no outstanding borrowings under the Credit Agreement. See Note 8, Commitments and Contingencies, to our financial statements included elsewhere in this Quarterly Report on Form 10-Q 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. On March 31, 2025, we entered into an at-the-market sales agreement with Robert W. Baird & Co. Incorporated (“Baird”), pursuant to which we may sell, from time to time, shares of Common Stock having an aggregate offering price of up to $13,504,438, in such share amounts as we may specify by notice to Baird (the “ATM Offering”).
Removed paragraphs (18)
Previous report
Recent Developments
Previous report
Transition to Commercial Inventory Accounting
Previous report
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. As a result of the transition, all inventoriable costs incurred are capitalized, net of any 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 report
Gain on revaluation of common stock warrant liabilities
Previous report
In this section, we discuss the results of our operations for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023.
Previous report
Cost of revenue for the three and nine months ended September 30, 2024 was $12.7 million and $35.6 million compared to $10.2 million for the three and nine months ended September 30, 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.
Previous report
Research and development expenses increased by $1.1 million or 67% from $1.6 million for the three months ended September 30, 2023 to $2.7 million for the three months ended September 30, 2024. The increase resulted from the utilization of $1.0 million of inventory which was previously expensed prior to the Transition Date during the third quarter of 2023 following the transition which did not recur in the current year. Research and development expenses have remained otherwise consistent year-over-year.
Previous report
Research and development expenses decreased by $29.7 million or 77% from $38.8 million for the nine months ended September 30, 2023 to $9.1 million for the nine months ended September 30, 2024. 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. Research and development expenses have remained otherwise consistent year-over-year.
Previous report
Sales and marketing expenses increased by $0.5 million or 23% from $2.1 million for the three months ended September 30, 2023 to $2.5 million for the three months ended September 30, 2024. The increase is driven by increased personnel-related expenses due to expanded headcount as well as increased outside services, advertising and sales consultant expenses.
Previous report
Sales and marketing expenses increased by $1.6 million or 29% from $5.6 million for the nine months ended September 30, 2023 to $7.3 million for the nine months ended September 30, 2024. The increase is driven by increased
Previous report
23 - personnel-related expenses due to expanded headcount as well as increased outside services, advertising and sales consultant expenses.
Previous report
General and administrative expenses increased by $0.3 million or 4% from $5.8 million for the three months ended September 30, 2023 to $6.1 million for the three months ended September 30, 2024. The increase is due to increased IT expenses and stock-based compensation, partially offset by decreased audit and legal expenses and insurance costs.
Previous report
Interest income, net decreased by $0.6 million or 17% from $3.7 million for the nine months ended September 30, 2023 to $3.1 million for the nine months ended September 30, 2024. The decrease resulted from a decrease in interest income earned on our short-term investment portfolio offset by a decrease in expense resulting from the repayment of our notes payable during 2023.
Previous report
Gain on revaluation of common stock warrant liabilities
Previous report
Other income, net increased by $22 thousand or 129% from $17 thousand for the three months ended September 30, 2023 to $39 thousand for the three months ended September 30, 2024. The increase in income is a result of recognition of quarter-to-date unrealized gains on trading securities in 2024 rather than unrealized losses in 2023.
Previous report
Other income, net decreased by $0.7 million or 100% from $0.7 million for the nine months ended September 30, 2023 to $2 thousand of income for the nine months ended September 30, 2024. The decrease 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 report
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 report
Net cash provided by financing activities was $25.6 million for the nine months ended September 30, 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 our ESPP of $0.3 million and stock options exercised of $0.2 million, partially offset by principal payments on notes payable of $1.7 million.
Reworded paragraphs (34)
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 our batteries are designed to operate using an electrolyte of primarily salt, iron and water, they are 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 long-duration iron flow batteries are the product of nearly 50 years of scientific advancement. Our founders, Craig Evans and Dr. Julia Song, began advancing this technology in 2011 and formed Legacy ESS. Our team has significantly enhanced the technology, improved the round-trip efficiency and developed an innovative solution to the hydroxide build-up problem that plagued previous researchers developing iron flow batteries. Our proprietary solution to eliminate the hydroxide formation is known as the Proton Pump, which works by utilizing hydrogen generated by side reactions on the negative electrode. The Proton Pump converts the hydrogen back into protons in the positive electrolyte. This process eliminates the hydroxide and stabilizes the electrolytes’ pH levels.
Current wording
Our long-duration iron flow batteries are the product of nearly 50 years of scientific advancement. Our founders began advancing this technology in 2011 and formed Legacy ESS. Our team has significantly enhanced the technology, improved round-trip efficiency and developed an innovative solution to the hydroxide build-up problem that plagued previous researchers developing iron flow batteries. Our proprietary solution to eliminate the hydroxide formation is known as the Proton Pump, which works by utilizing hydrogen generated by side reactions on the negative electrode. The Proton Pump converts the hydrogen back into protons in the positive electrolyte. This process eliminates the hydroxide and stabilizes the electrolytes’ pH levels.
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 of up to twelve hours. Our second, larger scale energy storage product, the Energy Center, is 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 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.
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) 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 believe that our performance and future success depends on several factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in the section “Part II—Item 1A. Risk Factors” of this Quarterly Report on Form 10-Q.
Current wording
We believe that our performance and future success depends on several factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in the section “Part II—Item 1A. Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q.
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
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 when 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
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 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 the first three quarters of 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 during the remainder of 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, governmental fiscal, monetary and tax policies, or tariffs and trade restrictions, 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 2024 and the first quarter of 2025 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 during the remainder of 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, which extends the availability of investment tax credits (“ITCs”) 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 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 Inflation Reduction Act, which extended the availability of investment tax credits (“ITCs”) and production tax credits and made 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 was extended until at least 2033 and expanded to include stand-alone battery storage projects. This expansion provided more certainty on the tax incentives available to stand-alone battery storage projects in the future. Subject to pending legislation, 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 further legislative changes are enacted, including the passage of comparable legislation in other jurisdictions, to our results of operations going forward.
Previous wording
As discussed in Note 13, Government Grants, to our condensed 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 a positive impact on our gross margins in the future.
Current wording
As discussed in Note 13, Government Grants, to our condensed financial statements, Section 45X of the Code, as enacted by the IRA, currently 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, subject to pending legislation. The Section 45X PTC may be refundable by the IRS or saleable to unrelated third parties. Subject to the enactment of any adverse pending legislation, 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 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.
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
As discussed above, commencing with the third quarter of 2023 we reached commercial viability and transitioned out of the research and development phase and into commercial inventory accounting. Following the Transition Date, cost of revenue is primarily driven by direct material, labor, freight and overhead expenses. Cost of revenue also includes LCNRV charges, warranty costs, losses on unfulfilled noncancellable purchase commitments, obsolescence charges, and fulfillment costs. Cost of revenue does not include inventory previously expensed during the research and development phase prior to the Transition Date. We expect revenue and cost of revenue to increase as we scale the business and deliver our energy storage products to customers.
Current wording
Cost of revenue is primarily driven by direct material, labor, freight and overhead expenses. Cost of revenue also includes LCNRV charges, warranty costs, losses on unfulfilled noncancellable purchase commitments, obsolescence charges, and fulfillment costs. Cost of revenue does not include inventory previously expensed during the research and development phase of accounting which we transitioned out of in the third quarter of 2023. We expect revenue and cost of revenue to increase when we scale the business and deliver our energy storage products to customers.
Previous 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.
Current wording
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. We continue to perform research and development activities to further expand our product roadmap.
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 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.
Previous wording
Gain on revaluation of common stock warrant liabilities consists of periodic fair value adjustments related to our common stock warrants.
Current wording
Loss on revaluation of common stock warrant liabilities consists of periodic fair value adjustments related to our common stock warrants.
Previous wording
Other income, net consists primarily of various gains and losses associated with our short-term investments and other income and expense items.
Current wording
Other income (expense), net consists primarily of various gains and losses associated with our short-term investments and other income and expense items.
Previous wording
Comparison of Three and Nine Months Ended September 30, 2024 to Three and Nine Months September 30, 2023
Current wording
Comparison of Three Months Ended March 31, 2025 to Three Months Ended March 31, 2024
Previous wording
Revenue for the three and nine months ended September 30, 2024 was $0.4 million and $3.4 million compared to $1.5 million and $4.7 million for the three and nine months ended September 30, 2023 as we delivered and recognized revenue for the sale of Energy Warehouses, other related equipment, and extended warranty services.
Current wording
Revenue for the three months ended March 31, 2025 was $0.6 million compared to $2.7 million for the three months ended March 31, 2024. During the three months ended March 31, 2025 we delivered and recognized revenue for Energy Centers, other related equipment, and extended warranty services. During the three months ended March 31, 2024 we delivered and recognized revenue for a higher volume of Energy Warehouses and other related equipment compared to the three months ended March 31, 2025.
Previous wording
General and administrative expenses increased by $0.8 million or 5% from $17.0 million for the nine months ended September 30, 2023 to $17.8 million for the nine months ended September 30, 2024. The increase is due primarily to personnel-related expenses including stock-based compensation and increased professional and outside services costs.
Current wording
General and administrative expenses increased by $45 thousand or 1% from $5.5 million for the three months ended March 31, 2024 to $5.6 million for the three months ended March 31, 2025. The increase is due to increased professional and outside services costs offset by decreased personnel-related expenses including stock-based compensation expense, as a result of reduced executive compensation, and decreased IT expenses.
Previous wording
Interest income, net decreased by $0.3 million or 30% from $1.2 million for the three months ended September 30, 2023 to $0.8 million for the three months ended September 30, 2024. The decrease resulted from a decrease in interest income earned on our short-term investment portfolio offset by a decrease in expense resulting from the repayment of our notes payable during 2023.
Current wording
Interest income, net decreased by $1.0 million or 83% from $1.2 million for the three months ended March 31, 2024 to $0.2 million for the three months ended March 31, 2025. The decrease resulted from a decrease in interest income earned on our short-term investment portfolio.
Previous wording
The change in fair value of common stock warrant liabilities resulted in a gain of $0.3 million for the three months ended September 30, 2024 and a loss of $0.3 million for the three months ended September 30, 2023. The changes in fair value of warrant liabilities were driven by changes in the market price of our common stock over the respective periods.
Current wording
The change in fair value of common stock warrant liabilities resulted in a loss of $0.1 million for the three months ended March 31, 2025 and there was no change in valuation for the three months ended March 31, 2024. The changes in fair value of warrant liabilities were driven by changes in the market price of our common stock over the respective periods.
Previous wording
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 nine months ended September 30, 2024, we incurred net losses of $62.7 million and used $51.7 million of cash in operating activities. As of September 30, 2024, we 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. 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 condensed financial statements included in this Quarterly Report on Form 10-Q. 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 wording
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 condensed financial statements included in this Quarterly Report on Form 10-Q. 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.
Previous wording
We have 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. There were no draws against the letter of credit during the three and nine months ended September 30, 2024 and 2023.
Current wording
We had 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 totaling $75 thousand. As of December 31, 2024 the certificate of deposit was recorded as restricted cash, non-current. The letter of credit expired during February 2025 and as of March 31, 2025 was no longer recorded as restricted cash. There were no draws against the letter of credit during the three months ended March 31, 2025 and 2024.
Previous wording
We have 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 were no draws against the letter of credit during the three and nine months ended September 30, 2024 and 2023.
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 March 31, 2025, $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 three months ended March 31, 2025 and 2024.
Previous wording
We have a standby letter of credit with Bank of America for $200 thousand in support of our 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 were no draws against the letter of credit during the three and nine months ended September 30, 2024 and 2023.
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 March 31, 2025, $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 three months ended March 31, 2025 and 2024.
Previous 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.
Current wording
Cash flows used in operating activities to date have primarily consisted of inventory purchases and cost of revenue, costs related to research and development, building awareness of our products’ capabilities and other general and administrative activities.
Previous wording
Net cash used in operating activities was $38.8 million for the nine months ended September 30, 2023, which is comprised of net loss of $61.4 million, noncash interest income of $2.4 million, and noncash changes in the fair value of common stock warrant liabilities of $0.9 million, partially offset by inventory write-downs and losses on noncancellable purchase commitments of $11.4 million, stock-based compensation of $7.7 million and depreciation expense of $3.2 million. Net changes in operating assets and liabilities provided $2.9 million of cash driven by cash collections on accounts receivable, a decrease in prepaid expenses and other current assets and an increase in accrued product warranties, partially offset by decreases in accrued and other current liabilities, deferred revenue, accounts payable and operating lease liabilities.
Current wording
Net cash used in operating activities was $18.2 million for the three months ended March 31, 2025, which is comprised of net loss of $18.0 million, inventory write-downs and losses on noncancellable purchase commitments of $0.8 million, and noncash interest income of $0.1 million, partially offset by stock-based compensation of $1.2 million and depreciation and amortization expense of $1.5 million. Net changes in operating assets and liabilities used $2.6 million of cash driven by decreases in accrued and other current liabilities, accrued product warranties, inventory, operating lease liabilities, deferred revenue, and cash collections on accounts receivable, partially offset by an increase in accounts payable and prepaid and other current assets.
Previous wording
Net cash used in operating activities was $51.7 million for the nine months ended September 30, 2024, which is comprised of net loss of $62.7 million and noncash interest income of $2.1 million, partially offset by stock-based compensation of $8.5 million, inventory write-downs and losses on noncancellable purchase commitments of $5.2 million, and depreciation and amortization expense of $3.3 million. Net changes in operating assets and liabilities used $4.8 million of cash driven by decreases accrued and other current liabilities, deferred revenue, operating lease liabilities, and an increase in inventory, prepaid and other current assets, partially offset by cash collections on accounts receivable, an increase in accounts payable, and an increase in accrued product warranties.
Current wording
Net cash used in operating activities was $18.9 million for the three months ended March 31, 2024, which is comprised of net loss of $18.3 million, noncash interest income of $1.0 million, inventory write-downs and losses on noncancellable purchase commitments of $2.0 million, partially offset by stock-based compensation of $2.9 million and depreciation and amortization expense of $1.2 million. Net changes in operating assets and liabilities used $2.1 million of cash driven by cash collections on accounts receivable and an increase in accrued product warranties, partially offset by decreases in accrued and other current liabilities, deferred revenue, accounts payable, operating lease liabilities, and an increase in prepaid and other current assets.
Previous wording
Net cash provided by investing activities was $43.9 million for the nine months ended September 30, 2024, which relates to maturities of short-term investments partially offset by purchases of property and equipment.
Current wording
Net cash provided by investing activities was $13.3 million for the three months ended March 31, 2025, which relates to maturities of short-term investments partially offset by purchases of property and equipment.
Previous wording
Net cash provided by investing activities was $16.0 million for the nine months ended September 30, 2023, which relates to maturities of short-term investments partially offset by purchases of property and equipment.
Current wording
Net cash provided by investing activities was $34.7 million for the three months ended March 31, 2024, which relates to maturities of short-term investments partially offset by purchases of property and equipment.
Previous wording
Net cash provided by financing activities was $49 thousand for the nine months ended September 30, 2024, which consisted of proceeds from our ESPP and stock options exercised offset by repurchases for shares from employees for income tax withholding purposes.
Current wording
Net cash used in financing activities was $13 thousand for the three months ended March 31, 2025, which consisted of proceeds from stock options exercised offset by repurchases for shares from employees for income tax withholding purposes.
Previous wording
Our contractual obligations and other commitments as of September 30, 2024 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 three and nine months ended September 30, 2024 and 2023. Additionally, we are committed to non-cancellable purchase commitments of $0.8 million as of September 30, 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).
Current wording
Our contractual obligations and other commitments as of March 31, 2025 consist of lease commitments and two standby letters of credit and the Credit Agreement. The letters of credit serve as security for our performance and payment obligations under a customer agreement and in support of our customs and duties due on imported materials and 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 three months ended March 31, 2025 and 2024. Additionally, we are committed to non-cancellable purchase commitments of $0.3 million as of March 31, 2025 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
There have been no material changes to our critical accounting policies from those described in the Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
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. There have been no material changes to our critical accounting policies from those described in the Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
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 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 current paragraphs (2)
Current report — wording carried from elsewhere
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 three months ended March 31, 2025, we incurred net losses of $18.0 million and used $18.2 million of cash in operating activities. As of March 31, 2025, we had unrestricted cash and cash equivalents of $8.4 million and short-term investments of $4.4 million, or total liquid assets of $12.8 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 — wording carried from elsewhere
Net cash used in financing activities was $81 thousand for the three months ended March 31, 2024, which consisted of repurchases for shares from employees for income tax withholding purposes.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
20 - engineering and research and development functions. Achievement of margin targets and cash flow generation is dependent on finalizing development and manufacturing of Energy Centers and core component offerings.
Previous report — wording carried elsewhere
The change in fair value of common stock warrant liabilities resulted in a gain of $0.5 million for the nine months ended September 30, 2024 and a gain of $0.9 million for the nine months ended September 30, 2023. The changes in fair value of warrant liabilities were driven by changes in the market price of our common stock over the respective periods.