STEM INC

Current report

We may not be able to successfully implement our recently announced new strategy. Our failure to do so could adversely affect our business, financial condition, and results of operations.

Current report

On October 1, 2024, we announced the outcome of a strategic review of our business. That review identified, among other things, the need to transition from a business model reliant on hardware resales to a software- and services-focused approach. While we believe this shift is critical to our long-term growth and profitability, the successful implementation of this strategy is subject to numerous risks and uncertainties.

Current report

Our total hardware revenue in the first three quarters of fiscal year 2024 and fiscal year 2023 were$36.7 million and$246.5 million, which comprised 41% of our total revenue in the first three quarters of fiscal year 2024 and 84% of our total revenue in fiscal year 2023, respectively. Our transition away from hardware resales is expected to lead to decreased revenue in the short term, as we work to adjust our revenue streams and reconfigure our customer base. This decline in revenue could strain our cash flow and temporarily worsen our cash position, which in turn may limit our ability to invest in the necessary technologies, talent, and infrastructure required to fully implement the new strategy. If we are unable to generate sufficient cash flow or secure additional funding, we may experience delays in executing our new strategy, which could have a material adverse affect on our business, financial condition, and results of operations.

Current report

This transition will entail significant operational changes, including reduction of what has historically been the source of most of our revenue (battery resales), adjustments to the way we develop and market our products and services, and realignment of our business processes. These changes could lead to reduced revenue, increased costs and disruptions in our operations, which may negatively impact our ability to effectively scale the software and services segments of our business and achieve our financial and operational targets. Failure to successfully and timely implement these changes may have a material adverse effect on our business, financial condition, and results of operations.

Current report

Customer acceptance of our software and service offerings is also critical to the success of our new strategy. Existing customers may not adopt our new offerings at the rate we expect, and new customers may not be attracted to our software-based solutions. If market demand for the types of AI-driven clean energy software and services we are developing and will seek to develop in the future does not grow as anticipated, or if competitors offer more attractive products, our revenue growth and market position could be adversely affected. As with all software offerings, there is also a risk that our solutions could be vulnerable to cybersecurity threats or contain errors, bugs, or other issues affecting their functionality, which could negatively affect customer satisfaction and adoption.

Current report

In addition, executing on the new strategy requires investment in new capabilities and resources, particularly in software development, data management, and AI. We may face challenges in recruiting, retaining, and training employees who have the necessary skill sets to support our new business model. A failure to build or acquire these capabilities in a timely manner could delay the successful execution of the strategy and weaken our competitive position.

Current report

We may fail to qualify for continued listing on the NYSE, which could make it more difficult for our stockholders to sell their shares.

Current report

Our common stock is listed on the NYSE under the symbol “STEM.” We are required to satisfy the continued listing requirements of the NYSE to maintain such listing, including, among other things, the maintenance of a certain average closing price of our common stock.

Current report

On August 28, 2024, we received formal notice from the NYSE that we were not in compliance with Section 802.01C of the NYSE Listed Company Manual because the average closing price of our shares of common stock had fallen below $1.00 per share over a period of 30 consecutive trading days. We subsequently notified the NYSE of our intent to regain compliance with the requirements of Section 802.01C. We are able to regain compliance at any time within the six-month period following receipt of the notice if, on the last trading day of any calendar month during this cure period (or the last trading day of this cure period), we have a closing share price of at least $1.00 and an average closing share price of at least $1.00 over the prior 30 trading-day period. If we do not regain compliance with Section 802.01C within such cure period, the NYSE may commence delisting proceedings.

Current report

There can be no assurance that we will be able to regain compliance with the NYSE’s continued listing requirements. If our stock price does not increase, we may not be able to meet the standards for continued listing on the NYSE within the compliance period. In the event that we do not regain compliance with the NYSE continued listing standards, we could face material adverse consequences, including:

Current report

• an adverse effect on the market price of our common stock;

Current report

• loss of confidence from stakeholders, employees and potential business partners;

Current report

• a determination that our shares are a “penny stock,” which will require brokers trading in our shares to adhere to more stringent rules, and which may limit demand for our common stock among certain investors;