STEM, INC.

Previous wording

Forward-looking statements address matters that are, to varying degrees, uncertain, such as statements about our financial and operating performance guidance, targets and other forecasts or expectations regarding, or dependent on, our business outlook and strategy; and expectations around our software and services-centric business; our ability to secure sufficient and timely inventory from suppliers; our ability to meet contracted customer demand; our ability to manage manufacturing or delivery delays; our ability to manage our supply chain and distribution channels; our acquisitions, joint ventures, partnerships and other alliances; forecasts or expectations regarding energy transition and global climate change; the integration and optimization of energy resources; our business strategies and those of our customers; our ability to retain or upgrade current customers, further penetrate existing markets or expand into new markets; the effects of natural disasters and other events beyond our control; the impacts of the One Big Beautiful Bill Act (“OBBB”) on our business and that of our customers; the direct or indirect effects on our business of macroeconomic factors and geopolitical instability, such as the wars in Ukraine and the Middle East; and our outlook and future results of operations, including revenue, adjusted EBITDA, and other metrics.

Current wording

Forward-looking statements address matters that are, to varying degrees, uncertain, such as statements about our financial and operating performance, guidance, targets and other forecasts or expectations regarding, or dependent on, our business outlook and strategy; and expectations around our software-centric business; our ability to secure sufficient and timely inventory from suppliers; our ability to meet contracted customer demand; our ability to manage manufacturing or delivery delays; our ability to manage our supply chain and distribution channels; our acquisitions, joint ventures, partnerships and other alliances; forecasts or expectations regarding the energy transition and global climate change; the integration and optimization of energy resources; our business strategies and those of our customers; our ability to retain or upgrade current customers, further penetrate existing markets or expand into new markets; the effects of natural disasters and other events beyond our control; the impacts of the One Big Beautiful Bill Act (“OBBB”) on our business and that of our customers; the direct or indirect effects on our business of macroeconomic factors and geopolitical instability, such as the armed conflicts between Russian and Ukraine and in the Middle East; and our outlook and future results of operations, including revenue, adjusted EBITDA, and other metrics.

Previous wording

Such forward-looking statements are subject to risks, uncertainties, and other factors that could cause actual results or outcomes to differ materially from those expressed or implied by such forward-looking statements, including but not limited to our inability to execute on, and achieve the expected benefits from, our operational and strategic initiatives, including from our cost reduction, workforce reduction and restructuring efforts; our inability to successfully execute on our new software and services-centric strategy; the effects of the OBBB on our business and that of our customers; our inability to secure sufficient and timely inventory from our suppliers, as well as contracted quantities of equipment; our inability to meet contracted customer demand; supply chain interruptions and manufacturing or delivery delays; disruptions in sales, production, service or other business activities; general macroeconomic and business conditions in key regions of the world, including inflationary pressures, general economic slowdown or a recession, high interest rates, changes in monetary policy, changes in trade policies, including tariffs or other trade restrictions or the threat of such actions, government shutdowns and instability in financial institutions; the direct and indirect effects of widespread health emergencies on our workforce, operations, financial results and cash flows; geopolitical instability, such as the wars in Ukraine and the Middle East; the results of operations and financial condition of our customers and suppliers; pricing pressures; severe weather and seasonal factors; our inability to continue to grow and manage our growth effectively; our inability to attract and retain qualified employees and key personnel; our inability to comply with, and the effect on our business of, evolving legal standards and regulations, including those concerning data protection, consumer privacy, sustainability, and evolving labor standards; risks relating to the development and performance of our software-enabled services; our inability to retain or upgrade current customers, further penetrate existing markets or expand into new markets; the risk that our business, financial condition and results of operations may be adversely affected by other political, economic, business and competitive factors; and other risks and uncertainties discussed in Part II. Item 1A. “Risk Factors” in this Report, in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, and in our other filings with the SEC. If one or more of these or other risks or uncertainties materialize (or the consequences of any such development changes), or should our underlying assumptions prove incorrect, our actual results or outcomes, or the timing of these results or outcomes, may vary materially from those reflected in our forward-looking statements. Forward-looking statements and other statements in this Report regarding our en…

Excerpt shortened here; the source contains the full paragraph.

Current wording

Such forward-looking statements are subject to risks, uncertainties, and other factors that could cause actual results or outcomes to differ materially from those expressed or implied by such forward-looking statements, including but not limited to our inability to execute on, and achieve the expected benefits from, our operational and strategic initiatives, including from our cost reduction, and restructuring efforts; our inability to successfully execute on our new software-centric strategy; the effects of the OBBB on our business and that of our customers; our inability to secure sufficient and timely inventory from our suppliers, as well as contracted quantities of equipment; our inability to meet contracted customer demand; supply chain interruptions and manufacturing or delivery delays; disruptions in sales, production, service or other business activities; general macroeconomic and business conditions in key regions of the world, including inflationary pressures, general economic slowdown or a recession, high interest rates, changes in monetary policy, changes in trade policies, including tariffs or other trade restrictions or the threat of such actions, government shutdowns and instability in financial institutions; the direct and indirect effects of widespread health emergencies on our workforce, operations, financial results and cash flows; geopolitical instability, such as the armed conflicts between Russian and Ukraine and in the Middle East; the results of operations and financial condition of our customers and suppliers; pricing pressures; severe weather and seasonal factors; our inability to continue to grow and manage our growth effectively; our inability to attract and retain qualified employees and key personnel; our inability to comply with, and the effect on our business of, evolving legal standards and regulations, including those concerning data protection, consumer privacy, sustainability, and evolving labor standards; risks relating to the development and performance of our software-enabled services; our inability to retain or upgrade current customers, further penetrate existing markets or expand into new markets; the risk that our business, financial condition and results of operations may be adversely affected by other political, economic, business and competitive factors; and other risks and uncertainties discussed in Part II. Item 1A. “Risk Factors” in this Report, in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, and in our other filings with the SEC. If one or more of these or other risks or uncertainties materialize (or the consequences of any such development changes), or should our underlying assumptions prove incorrect, our actual results or outcomes, or the timing of these results or outcomes, may vary materially from those reflected in our forward-looking statements. Forward-looking statements and other statements in this Report regarding our envi…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

You should read the following management’s discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q. This discussion and analysis should also be read together with our audited consolidated financial statements and related notes, as well as the section entitled “Management’s Discussion and Analysis of Financial Condition and Results or Operations” contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. You should carefully read the sections entitled “Special Note Regarding Forward-Looking Statements” and “Risk Factors” herein to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements.

Current wording

You should read the following management’s discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and related notes included in Part I, Item 1 of this Report. This discussion and analysis should also be read together with our audited consolidated financial statements and related notes, as well as the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. You should carefully read the sections entitled “Special Note Regarding Forward-Looking Statements” and “Risk Factors” herein to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements.

Previous wording

Our total revenue decreased from $32.5 million for the three months ended March 31, 2025 to $29.0 million for the three months ended March 31, 2026. For the three months ended March 31, 2026 and 2025, we incurred a net loss of $18.9 million and $25.0 million, respectively. As of March 31, 2026, we had an accumulated deficit of $1,507.7 million.

Current wording

Our total revenue decreased from $38.4 million for the three months ended June 30, 2025 to $33.7 million for the three months ended June 30, 2026. We incurred net losses of $14.4 million for the three months ended June 30, 2026 and recognized net income of $202.5 million for the three months ended June 30, 2025. Our total revenue decreased from $70.9 million for the six months ended June 30, 2025 to $62.7 million for the six months ended June 30, 2026. For the six months ended June 30, 2026 and 2025, we incurred a net loss of $33.3 million and recognized net income of $177.5 million, respectively. As of June 30, 2026, we had an accumulated deficit of $1,522.1 million.

Previous wording

In 2024, we announced a new business strategy that reflects a renewed focus on developing and marketing our AI-enabled software, edge and services offerings. This transition has entailed significant operational changes during calendar years 2024 and 2025, including reduction of what had 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 have resulted in reduced revenue, increased restructuring-related costs, reduced operating expenses, and short-term disruptions in our operations, which may negatively affect our ability to effectively scale our software and services offerings and achieve our financial and operational targets. Failure to achieve the anticipated benefits of our strategy may have a material adverse effect on our business, financial condition, and results of operations. See“Our strategy may not achieve anticipated benefits.” in Part I. Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 for additional information about some risks related to our strategy.

Current wording

In 2024, we announced a new business strategy that reflects a renewed focus on developing and marketing our AI-enabled software, edge and services offerings. This transition resulted in significant operational changes during calendar years 2024 and 2025, including reduction of what had 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 have resulted in reduced revenue, increased restructuring-related costs, reduced operating expenses, and short-term disruptions in our operations, which may negatively affect our ability to effectively scale our software and services offerings and achieve our financial and operational targets. Failure to achieve the anticipated benefits of our strategy may have a material adverse effect on our business, financial condition, and results of operations. See“Our strategy may not achieve anticipated benefits.” in Part I. Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 for additional information about some risks related to our strategy.

Previous wording

The execution of our business strategy has required, and is expected to continue to require, investment in our software, our employees and infrastructure. As of March 31, 2026, we had cash and cash equivalents of$36.6 million, while our operating expenses for the three months ended March 31, 2026 were$25.1 million. If our cash flow from operations does not improve as expected, or if we are unable to secure additional sources of capital if or when the need arises, we may be constrained in our ability to make the investments required to continue execution of our new strategy.

Current wording

The execution of our business strategy has required, and is expected to continue to require, investment in our software, our employees and infrastructure. As of June 30, 2026, we had cash and cash equivalents of$38.4 million, while our operating expenses for the three months ended June 30, 2026 were$21.6 million. If our cash flow from operations does not improve as expected, or if we are unable to secure additional sources of capital if or when the need arises, we may be constrained in our ability to make the investments required to continue execution of our new strategy.

Previous wording

In July 2025, the OBBB was enacted, which introduced material changes to clean energy tax credit programs that are significant to our business and may affect our financial condition, results of operations and future prospects. Included in this legislation are provisions that allow for the immediate expensing of domestic United States research and development expenses, immediate expensing of certain capital expenditures, and other changes to the U.S. taxation of profits derived from foreign operations. The OBBB did not result in any material changes to tax expense or cash tax for 2025, primarily as a result of the valuation allowance we have on our deferred tax assets.

Current wording

In July 2025, the OBBB was enacted, which introduced material changes to clean energy tax credit programs that are significant to our business and may affect our financial condition, results of operations and future prospects. The OBBB did not result in any material changes to tax expense or cash tax forthree and six months ended June 30, 2026, primarily as a result of the valuation allowance we have on our deferred tax assets.

Previous wording

The OBBB scales back the Investment Tax Credit (the “ITC”) available under Section 25D of the Internal Revenue Code (the “Code”) for residential solar and storage systems purchased through cash or loans. Under the OBBB, the Section 25D credit expired on December 31, 2025. In addition, the OBBB imposes new timing requirements for eligibility under Section 48E of the Code, which governs ITCs for leased solar and storage systems. Previously under the IRA, Section 48E credits were available through 2032 or such later period when the U.S. power sector emitted 75% less carbon emissions than 2022 levels. Under the OBBB, these credits will no longer be available for solar-only projects placed in service after December 31, 2027, unless construction begins on or before July 4, 2026, pursuant to a grandfathering rule. Projects that qualify under this rule must still meet continuity requirements to remain eligible. Energy storage projects are not subject to this placed-in-service deadline; however, the ITC for storage systems will begin to phase down in 2034 - decreasing to 75% in 2034, 50% in 2035 and phasing out entirely by 2036.

Current wording

The OBBB scales back the Investment Tax Credit (the “ITC”) available under Section 25D of the Internal Revenue Code (the “Code”) for residential solar and storage systems purchased through cash or loans. Under the OBBB, the Section 25D credit expired on December 31, 2025. In addition, the OBBB imposes new timing requirements for eligibility under Section 48E of the Code, which governs ITCs for leased solar and storage systems. Previously under the IRA, Section 48E credits were available through 2032 or such later period when the U.S. power sector emitted 75% less carbon emissions than 2022 levels. Under the OBBB, these credits will no longer be available for solar-only projects placed in service after December 31, 2027, unless construction begins on or before July 4, 2026, pursuant to a grandfathering rule. Projects that qualify under this rule must still meet continuity requirements to remain eligible. Energy storage projects are not subject to this placed-in-service deadline; however, the ITC for storage systems will begin to phase down, decreasing to 75% in 2034, 50% in 2035 and 0% in 2036.

Previous wording

The OBBB also amends the domestic content bonus credit rules for Section 48E projects. Projects commencing construction after June 16, 2025 and before January 1, 2026 must meet a 45% domestic cost threshold. If construction begins in 2026, the project’s domestic cost threshold is 50%, and if construction begins after 2026, the project’s domestic cost threshold is 55%.

Current wording

The OBBB also amends the domestic content bonus credit rules for Section 48E projects. Projects commencing construction after June 16, 2025 and before January 1, 2026 must meet a 45% domestic cost threshold, increasing to 50% for construction beginning in 2026 and 55% thereafter.

Previous wording

Additionally, the OBBB introduces new compliance requirements under the Foreign Entity of Concern (“FEOC”) provisions for both Section 48E and the Advanced Manufacturing Production Tax Credit (“AMPTC”) under Section 45X. These provisions limit “material assistance” from FEOCs in projects otherwise eligible for tax credits under Section 48E and Section 45X and establish an escalating threshold of non-FEOC content that must be met by solar and storage projects beginning construction in 2026 and by manufactured components produced beginning in 2026.

Current wording

Additionally, the OBBB introduces new compliance requirements under the Foreign Entity of Concern (“FEOC”) provisions for both Section 48E and the Advanced Manufacturing Production Tax Credit (“AMPTC”) under Section 45X. These provisions limit “material assistance” from FEOCs in projects otherwise eligible for tax credits under Section 48E and Section 45X and establish an escalating threshold of non-FEOC content that must be met by solar and storage projects beginning construction after 2025 and by manufactured components produced beginning after 2025.

Previous wording

On July 7, 2025, the President issued an Executive Order directing the Secretary of the Treasury to issue updated guidance on the “beginning of construction” requirements applicable to Section 48E projects under the OBBB and also to implement the FEOC restrictions set forth in the OBBB. On August 15, 2025, the Treasury Department released Notice 2025-42, which modifies the rules for determining when construction begins for purposes of qualifying for the Section 48E credits. The guidance eliminates the longstanding 5 percent safe harbor for solar projects larger than 1.5 megawatts (AC), effective for projects that begin construction on or after September 2, 2025. Projects that began construction prior to that date continue to be governed by prior IRS guidance. The 5 percent safe harbor remains available for solar facilities of 1.5 MW or smaller. Under the new rules, the physical work test is now the sole method for establishing that construction has begun for affected solar projects larger than 1.5 MW and for all wind projects. The test requires that “physical work of a significant nature” be performed, without regard to cost, and may include certain on-site and off-site activities but excludes preliminary activities such as planning, permitting, and financing. We are currently evaluating the full impact of this legislation on our consolidated financial statements.

Current wording

On July 7, 2025, the President issued an Executive Order directing the Secretary of the Treasury to issue updated guidance on the “beginning of construction” requirements applicable to Section 48E projects and also to implement the FEOC restrictions under the OBBB. On August 15, 2025, the Treasury Department released Notice 2025-42, which eliminates the 5% safe harbor and makes the physical work test the sole method for establishing the beginning of construction for solar projects larger than 1.5 megawatts (AC), effective for projects that begin construction on or after September 2, 2025. On February 12, 2026, the Treasury Department released Notice 2026-15, providing interim guidance on the FEOC “material assistance” restrictions under Sections 45Y, 48E and 45X.

Previous wording

The OBBB makes permanent key elements of the Tax Cuts and Jobs Act, including 100% bonus depreciation, domestic research cost expensing, and the business interest expense limitation. ASC 740, “Income Taxes”, requires the effects of changes in tax rates and laws to be recognized in the period in which the legislation is enacted, which is the date the legislation is signed into law. The OBBB did not have a material impact on our financial statements for 2025, but we continue to evaluate the potential future impact of the OBBB on our financial statements.

Current wording

The OBBB makes permanent key elements of the Tax Cuts and Jobs Act, including 100% bonus depreciation, domestic research cost expensing, and the business interest expense limitation. The OBBB has not had a material impact on our financial statements. We continue to evaluate the potential future impact of the OBBB on our financial statements.

Previous wording

We calculate adjusted EBITDA as net loss attributable to us before depreciation and amortization, including amortization of internally developed software, interest expense, further adjusted to exclude stock-based compensation and other income and expense items, including change in fair value of warrant liability, impairment of assets held for sale and income tax provision or benefit.

Current wording

We calculate adjusted EBITDA as net (loss) income attributable to us before depreciation and amortization, including amortization of internally developed software, interest expense, further adjusted to exclude stock-based compensation and other income and expense items, including change in fair value of warrant liability, impairment of assets held for sale and income tax provision or benefit.

Previous wording

The following table provides a reconciliation of adjusted EBITDA to net loss (in thousands):

Current wording

The following table provides a reconciliation of adjusted EBITDA to net (loss) income (in thousands):

Previous wording

Due to the long-term nature of our contracts, bookings are a key metric that allows us to understand and evaluate the growth of our Company and our estimated future revenue related to customer contracts for our energy optimization services, sales of energy storage systems, asset monitoring software, edge devices, and project and professional service engagements. Bookings represent the total value of executed customer purchase orders. Customer purchase orders are typically executed three to six months ahead of hardware installation. The booking amount includes (1) hardware revenue, which is typically recognized at delivery of the energy storage system and/or edge device to the customer, and (2) services revenue, which represents the total nominal software and services contract value which will be recognized ratably over the contract period.

Current wording

Due to the long-term nature of our contracts, bookings are a key metric that allows us to understand and evaluate the growth of our Company and our estimated future revenue related to customer contracts for our energy optimization services, sales of energy storage systems, asset monitoring software, edge devices, and project and professional service engagements. Bookings represent the total value of executed customer purchase orders. Customer purchase orders are typically executed three to six months ahead of hardware installation. The booking amount includes (1) hardware revenue, which is typically recognized at delivery of the energy storage system and/or edge device to the customer, and (2) services revenue, which represents the total software and services contract value which will be recognized ratably over the contract period.

Previous wording

We generate services and other revenue and hardware revenue. Services and other revenue is generated through (i) energy optimization software (ii) asset management software, and (iii) advisory services and (iv) the sale of project assets. Software fees charged to customers generally consist of recurring fixed monthly payments throughout the term of the contract and in some arrangements, an installation and/or upfront fee component. We may also receive incentives from utility companies in relation to the sale of our services.

Current wording

We generate services and other revenue and hardware revenue. Services and other revenue is generated through (i) asset management software (ii) energy optimization software, (iii) advisory services, and (iv) the sale of project assets. Software fees charged to customers generally consist of recurring fixed annual payments throughout the term of the contract and in some arrangements, an installation and/or upfront fee component. We may also receive incentives from utility companies in relation to the sale of our services.

Previous wording

We generate hardware revenue through (i) edge hardware devices and (ii) sales of OEM energy storage systems. Performance obligations are satisfied when the energy storage system and edge hardware device along with all ancillary hardware components are delivered. The milestone payments received before the delivery of hardware are treated as deferred revenue. In certain customer contracts, we agreed to provide a guarantee that the value of purchased hardware will not decline for a certain period of time, as more fully described below under Note 3 —Revenue, of the Notes to the unaudited condensed consolidated financial statements in this Report.

Current wording

We generate hardware revenue through (i) edge hardware devices and (ii) resales of OEM energy storage systems. Performance obligations are satisfied when the energy storage system and edge hardware device along with all ancillary hardware components are delivered. The milestone payments received before the delivery of hardware are treated as deferred revenue.

Previous wording

Cost of hardware revenue generally includes the cost to produce edge hardware and the battery hardware purchased from a manufacturer, shipping, delivery, and other costs required to fulfill our obligation to deliver the edge hardware and energy storage systems to the customer location. Cost of hardware revenue may also include any impairment of energy storage systems held in our inventory for sale to our customer. Cost of hardware revenue related to the sale of energy storage systems is recognized when the delivery of the product is completed.

Current wording

Cost of hardware revenue generally includes the cost to produce edge hardware and the battery hardware purchased from a manufacturer, shipping, delivery, and other costs required to fulfill our obligation to deliver the edge hardware and energy storage systems to the customer location. Cost of hardware revenue may also include any impairment of energy storage systems held in our inventory for sale to a customer. Cost of hardware revenue related to the sale of energy storage systems and edge hardware is recognized when the delivery of the product is completed.

Previous wording

Impairment of assets held for sale represents impairment charges as a result of the carrying amount being greater than the fair value of the assets held for sale.

Current wording

(Remeasurement of) impairment of assets held for sale represents impairment charges as a result of the carrying amount being greater than the fair value of the assets held for sale and the remeasurement and reclassification of assets held for sale to held and used.

Previous wording

Revenue decreased by $3.5 million, or 11%, for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The decrease was primarily driven by a $4.5 million decrease in hardware revenue that is primarily the result of a decrease in battery hardware resales being offset by increased edge hardware and service offerings as the Company continues to strategically de-emphasize battery hardware resales and pursue more selective opportunities. Service and other revenue also increased $1.0 million, primarily due to an increase in solar services subscriptions from existing and new customers.

Current wording

Revenue decreased by $4.7 million, or 12%, for the three months ended June 30, 2026, as compared to the three months ended June 30, 2025. The decrease was primarily driven by a $2.5 million decrease in hardware revenue that is primarily the result of a decrease in battery hardware resales being offset by increased edge hardware and service offerings as the Company continues to strategically de-emphasize battery hardware resales and pursue higher margin opportunities. Service and other revenue also decreased $2.2 million primarily due to a decrease in managed services revenue related to the operations and optimization of energy storage assets, primarily offset by increased PowerTrack subscriptions.

Previous wording

Interest expense, net increased by$3.1 million, or 72%, for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The increase was primarily driven by an increase of$3.4 million in interest on notes, partially offset by a decrease of$0.3 million in interest on financing obligations.

Current wording

Interest expense increased by $3.4 million, or 84%, for the three months ended June 30, 2026, as compared to the three months ended June 30, 2025. The increase was driven by an increase of $3.4 million in interest on notes due to the debt exchange executed in the second quarter of 2025, an increase of $0.2 million on the unpaid sales and use tax liability, partially offset by a decrease of $0.2 million in interest on financing obligations.

Previous wording

During thethree months ended March 31, 2026, we recorded a provision for income taxes of $0.1 million primarily as a result of foreign and state income tax expense. During the three months ended March 31, 2025, we recorded a$0.1 million provision for income taxes primarily as a result of foreign income tax expense.

Current wording

During thethree months ended June 30, 2026, we recorded a provision for income taxes of $13 thousand as a result of foreign and state income tax expense. During the three months ended June 30, 2025, we recorded aprovision for income taxes of$0.5 million primarily as a result of foreign and state income tax expense.

Previous wording

Cost of revenue decreased by$3.8 million, or 17%, for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The decrease was primarily driven by a decrease in cost of hardware revenue of $4.4 million primarily due to a reduction in low margin battery hardware resales as the company continues to strategically de-emphasize this business line and pursue more selective opportunities. This decrease was partially offset by anincrease in cost of services and other revenue of $0.5 million primarily due to higher cloud infrastructure costs to support our growing PowerTrack software platform.

Current wording

Cost of revenue decreased by$9.6 million, or 20%, for the six months ended June 30, 2026, as compared to the six months ended June 30, 2025. The decrease was primarily driven by a decrease in cost of hardware revenue of $7.5 million primarily due to a reduction in low margin battery hardware resales as the company continues to strategically de-emphasize this business line and pursue higher margin opportunities. Cost of services and other revenue decreased $2.2 million primarilydue to decrease revenue from lower margin managed services.

Previous wording

Sales and marketing expense decreased by$0.3 million, or 4%, for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The decrease was driven by a decrease of$0.3 million in personnel related expenses due to a decrease in headcount.

Current wording

Sales and marketing expense decreased by$0.1 million, or 1%, for the six months ended June 30, 2026, as compared to the six months ended June 30, 2025. The decrease was driven by a decrease of$1.0 million in personnel related expenses due to a decrease in headcount, partially offset by an increase of$0.9 million in the amortization of contract origination costs and professional services.

Previous wording

Research and development expense decreased by$4.8 million, or 42%, for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The decrease was primarily due to a decrease of$3.7 million in personnel related expenses as a result of lower headcount, and a decrease of$1.1 million in professional services and other expenses.

Current wording

Research and development expense decreased by$8.3 million, or 39%, for the six months ended June 30, 2026, as compared to the six months ended June 30, 2025. The decrease was primarily due to a decrease of$7.8 million in personnel related expenses as a result of lower headcount, and a decrease of$0.5 million in professional services and other expenses.

Previous wording

General and administrative expense decreased by$4.9 million, or 36%, for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The decrease was primarily driven by a decrease of $2.3 million in personnel related expenses driven by a decrease in headcount, a decrease of $1.5 million in office-related and other expenses, and a decrease of $1.1 million in professional services, resulting from decreases in advisory services.

Current wording

General and administrative expense decreased by$5.6 million, or 25%, for the six months ended June 30, 2026, as compared to the six months ended June 30, 2025. The decrease was primarily driven by a decrease of $4.2 million in personnel related expenses driven by a decrease in headcount, and a decrease of $2.1 million in professional services, resulting from decreases in advisory services, partially offset by an increase of $0.8 million in office-related and other expenses.

Previous wording

During thethree months ended March 31, 2026, we recorded impairment of $3.3 million on assets held for saleas the carrying amount of the assets held for sale exceeded its fair value.

Current wording

During thesix months ended June 30, 2026, we recorded net impairment of $2.8 million on assets held for saleas the carrying amount of the assets held for sale exceeded its fair value and the reclassification of an energy storage system previously impaired and held for sale to held for use.

Previous wording

During thethree months ended March 31, 2026, werecorded a gain on remeasurement of $2.4 million relating to our private placement warrants issued in June 2025.

Current wording

During thesix months ended June 30, 2026, werecorded a decrease in fair value of $2.9 million relating to our private placement warrants.

Previous wording

Other income, net decreased by$0.1 million, or 30%, for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025 primarily due to a $0.3 million decrease in interest income from short-term investments, partially offset by a $0.1 million increase in income from equity investments and a$0.1 million increase in other income.

Current wording

Other income, net decreased by$0.2 million, or 24%, for the six months ended June 30, 2026, as compared to the six months ended June 30, 2025 primarily due to a $0.4 million decrease in interest income from short-term investments, partially offset by a $0.1 million increase in income from equity investments and a$0.1 million increase in other income.

Previous wording

As of March 31, 2026, our principal sources of liquidity were cash and cash equivalents of $36.6 million, which were held for working capital purposes and for investment growth opportunities. As of March 31, 2026, our working capital (deficit), which we define as current assets less current liabilities, was a deficit of $16.0 million. We believe that our cash position is sufficient to meet our capital and liquidity requirements for at least the next 12 months.

Current wording

As of June 30, 2026, our principal sources of liquidity were cash and cash equivalents of $38.4 million, which were held for working capital purposes and for investment growth opportunities. As of June 30, 2026, our working capital (deficit), which we define as current assets less current liabilities, was a deficit of $18.2 million. We believe that our cash position is sufficient to meet our capital and liquidity requirements for at least the next 12 months.

Previous wording

Our attainment of profitable operations is dependent upon future events, including continued implementation of our new business strategy, hiring and retaining our key executives and personnel with the requisite experience to develop our software and AI-based solutions, controlling our operating costs and building our customer base. Failure to successfully implement our new business strategy, generate sufficient revenues from our software and services offerings, achieve planned gross margins and operating profitability, control operating costs, or secure additional funding may require us to modify, delay, or abandon some of our planned future expansion or development, or to otherwise enact operating cost reductions available to management, which could have a material adverse effect on our business, operating results, and financial condition. The execution of our new strategy has required 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 have resulted in reduced revenue, increased costs and short-term disruptions in our operations, which have negatively impacted our financial condition in the near term. Furthermore, our cash reserves may constrain our ability to make the investments required to execute our new strategy or may otherwise not be sufficient to fund operations. If our cash flow from operations does not improve as quickly as expected, or if we are unable to secure additional sources of capital if or when the need arises, it may have a material adverse effect on our business, financial condition, and results of operations.

Current wording

Our attainment of profitable operations is dependent upon continued implementation of our business strategy, hiring and retaining our key executives and personnel with the requisite experience to develop our software and AI-based solutions, controlling our operating costs, building our customer base, and other factors. Failure to implement our new business strategy, generate sufficient revenues from our software and services offerings, achieve planned gross margins and operating profitability, control operating costs, or secure additional funding may require us to modify, delay, or abandon some of our planned future expansion or development, or to otherwise enact operating cost reductions available to management, which could have a material adverse effect on our business, operating results, and financial condition. The execution of our strategy has required 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 have resulted in reduced revenue, increased costs and short-term disruptions in our operations, which have negatively impacted our financial condition in the near term. Furthermore, our cash reserves may constrain our ability to make the investments required to execute our new strategy or may otherwise not be sufficient to fund operations. If our cash flow from operations does not improve as quickly as expected, or if we are unable to secure additional sources of capital if or when the need arises, it may have a material adverse effect on our business, financial condition, and results of operations.

Previous wording

We have entered into arrangements wherein we finance the cost of energy storage systems via special purpose entities (“SPEs”) we establish with outside investors. These SPEs are not consolidated into our financial statements, but are accounted for as equity method investments. The investors provide us upfront payments through the SPEs. Under these arrangements, the payment by the SPEs to us is accounted for as a borrowing by recording the proceeds received as a financing obligation. The financing obligation is repaid with the future customer payments and incentives received. A portion of the amounts paid to the SPE is allocated to interest expense using the effective interest rate method. Furthermore, we continue to account for the revenues from customer arrangements and incentives and all associated costs despite such systems being legally sold to the SPEs due to our significant continuing involvement in the operations of the energy storage systems. The total financing obligation as of March 31, 2026 was $39.9 million, of which $13.2 million was classified as a current liability.

Current wording

We have entered into arrangements wherein we finance the cost of energy storage systems via special purpose entities (“SPEs”) we establish with outside investors. These SPEs are not consolidated into our financial statements, but are accounted for as equity method investments. The investors provide us upfront payments through the SPEs. Under these arrangements, the payment by the SPEs to us is accounted for as a borrowing by recording the proceeds received as a financing obligation. The financing obligation is repaid with the future customer payments and incentives received. A portion of the amounts paid to the SPE is allocated to interest expense using the effective interest rate method. Furthermore, we continue to account for the revenues from customer arrangements and incentives and all associated costs despite such systems being legally sold to the SPEs due to our significant continuing involvement in the operations of the energy storage systems. The total financing obligation as of June 30, 2026 was $37.2 million, of which $13.2 million was classified as a current liability.

Previous wording

$343.9 million, reduced by the collective fair value of the 2030 Senior Secured Notes of $132.0 million and the fair value of the 2030 Private Placement Warrants of $2.7 million, offset by cash received. The fair value of the 2030 Senior Secured Notes was estimated using a Black Derman-Toy lattice model with a yield of approximately 14.6%, synthetic credit rating for the Company, volatility of 32%, and the risk free rate of 3.79% for the expected term associated with the 2030 secured notes. The fair value of the 2030 Private Placement Warrants was estimated using the Black-Scholes-Merton model based on the Company’s closing strike price on the date of extinguishment of $6.23, volatility of 121.60%, and the risk free rate of 3.79% for the expected term associated with the 2030 secured notes. The Company accrued $5.2 million in debt issuance costs primarily consisting of financial advisory, legal, and accounting fees. See 2028 Convertible Notes and 2030 Convertible Notes above for further details on the impacts of the debt extinguishment.

Current wording

The transaction included an exchange of approximately (i) $228.8 million principal amount of the 2028 Convertible Notes and (ii) $121.3 million principal amount of the 2030 Convertible Notes, less amounts in lieu of fractional notes, for the 2030 Senior Secured Notes, warrants to purchase 439,919 shares of common stock (the “2030 Private Placement Warrants”), (iii) $10.0 million of cash proceeds, and accrued and unpaid interest on the exchanged 2028 Convertible Notes and 2030 Convertible Notes. The exchange resulted in a $220.0 million gain on debt extinguishment recorded within other income (expenses), net in the unaudited condensed consolidated statements of operations. The gain on debt extinguishment represented the proportional carrying value of the exchanged 2028 Convertible Notes and 2030 Convertible Notes, which in aggregate was $343.9 million, reduced by the collective fair value of the 2030 Senior Secured Notes of $132.0 million and the fair value of the 2030 Private Placement Warrants of $2.2 million, offset by cash received. The fair value of the 2030 Senior Secured Notes was estimated using a Black Derman-Toy lattice model with a yield of approximately 14.6%, synthetic credit rating for the Company, volatility of 32%, and the risk free rate of 3.79% for the expected term associated with the 2030 secured notes. The fair value of the 2030 Private Placement Warrants was estimated using the Black-Scholes-Merton model based on the Company’s closing strike price on the date of extinguishment of $6.23, volatility of 118.60%, and the risk free rate of 3.79% for the expected term associated with the 2030 secured notes. The Company accrued $5.2 million in debt issuance costs primarily consisting of financial advisory, legal, and accounting fees. See 2028 Convertible Notes and 2030 Convertible Notes above for further details on the impacts of the debt extinguishment.

Previous wording

On March 6, 2026, the Company entered into an open market sales agreement with Jeffries LLC (the “Agent”), as sales agent and/or principal, providing for an “at-the-market” equity offering program (the “ATM Program”) pursuant to which the Company may issue and sell from time to time shares of its common stock, par value $0.0001 per share, having an aggregate offering price of up to$30.0 million (the “Shares”) to or through the Agent in ordinary brokers’ transactions on the NYSE or otherwise, at market prices prevailing at the time of sale, in block transactions, in negotiated transactions, in any matter permitted by applicable law or as otherwise agreed with the Agent. We intend to use any net proceeds received from the sale of the shares for general corporate purposes, including working capital. As of March 31, 2026, no shares have been issued under the ATM Program.

Current wording

On March 6, 2026, the Company entered into an open market sales agreement with Jefferies LLC (the “Agent”), as sales agent and/or principal, providing for an “at-the-market” equity offering program (the “ATM Program”) pursuant to which the Company may issue and sell from time to time shares of its common stock, par value $0.0001 per share, having an aggregate offering price of up to$30.0 million (the “Shares”) to or through the Agent in ordinary brokers’ transactions on the NYSE or otherwise, at market prices prevailing at the time of sale, in block transactions, in negotiated transactions, and in any manner permitted by applicable law or as otherwise agreed with the Agent. We intend to use any net proceeds received from the sale of the shares for general corporate purposes, including working capital. As of June 30, 2026,595,303 shares have been issued under the ATM Program. Total net proceeds were$5.6 million.

Previous wording

During the three months ended March 31, 2026, net cash used in operating activities was $8.3 million, primarily due to our net loss of $18.9 million, adjusted for non-cash items of $14.5 million and net cash outflow of $3.9 million from changes in operating assets and liabilities. Non-cash items primarily consisted of depreciation and amortization of $10.5 million, non-cash interest expense of $0.4 million related to debt issuance costs, stock-based compensation expense of $2.0 million, non-cash lease expense of $0.6 million, impairment of assets held for sale of $3.3 million, and other non-cash items of $0.1 million, partially offset by a change in fair value of warrant liability of $2.4 million. The net cash outflow from changes in operating assets and liabilities was primarily driven by an increase in inventory of $1.1 million, an increase in contract origination costs of $0.2 million, a decrease in accounts payable of $3.3 million, a decrease in accrued expenses and other liabilities of $0.6 million, a decrease in deferred revenue of $3.1 million, and a decrease in lease liabilities of $0.8 million, partially offset by a decrease in accounts receivable of $5.0 million, and a decrease in other assets of $0.2 million.

Current wording

During the six months ended June 30, 2026, net cash used in operating activities was $8.0 million, primarily due to our net loss of $33.3 million, adjusted for non-cash items of $27.5 million and net cash outflow of $2.1 million from changes in operating assets and liabilities. Non-cash items primarily consisted of depreciation and amortization of $21.9 million, non-cash interest expense of $0.7 million related to debt issuance costs, stock-based compensation expense of $3.5 million, non-cash lease expense of $1.3 million, impairment of assets held for sale of $2.8 million, and other non-cash items of $0.1 million, partially offset by a change in fair value of warrant liability of $2.9 million. The net cash outflow from changes in operating assets and liabilities was primarily driven by an increase in inventory of $1.5 million, an increase in other assets of $1.4 million an increase in contract origination costs of $0.5 million, a decrease in accrued expenses and other liabilities of $3.3 million, a decrease in deferred revenue of $2.9 million, and a decrease in lease liabilities of $1.6 million, partially offset by a decrease in accounts receivable of $5.1 million, and an increase in accounts payable of $4.1 million.

Previous wording

During the three months ended March 31, 2025, net cash provided by operating activities was $8.5 million, primarily due to our net loss of $25.0 million, adjusted for non-cash items of $17.2 million and net cash inflow of $16.4 million from changes in operating assets and liabilities. Non-cash items primarily consisted of depreciation and amortization of $11.0 million, non-cash interest expense of $0.3 million related to debt issuance costs, stock-based compensation expense of $4.3 million, non- cash lease expense of $0.7 million, provision for accounts receivable allowance of $0.1 million, and other non-cash items of $0.8 million. The net cash inflow from changes in operating assets and liabilities was primarily driven by a decrease in accounts receivable of $24.4 million, a decrease in inventory of $2.1 million, a decrease in other assets of $2.0 million, an increase in accrued expenses and other liabilities of $3.9 million, partially offset by an increase in contract origination costs of $0.3 million, an increase in project assets of $1.5 million, a decrease in accounts payable of $10.5 million, a decrease in deferred revenue of $3.0 million, and a decrease in lease liabilities of $0.5 million.

Current wording

During the six months ended June 30, 2025, net cash used in operating activities was $12.7 million, primarily due to our net income of $177.5 million, adjusted for non-cash items of $186.4 million and net cash outflow of $3.9 million from changes in operating assets and liabilities. Non-cash items primarily consisted of a net gain on extinguishment of debt of $220.0 million, and , partially offset by depreciation and amortization of $22.2 million, non-cash interest expense of $0.2 million related to debt issuance costs, stock-based compensation expense of $5.7 million, non-cash lease expense of $1.4 million, impairment of energy storage systems of $1.4 million, provision for accounts receivable allowance of $1.5 million , and other non-cash items of $1.1 million. The net cash outflow from changes in operating assets and liabilities was primarily driven by a decrease in accounts receivable of $14.8 million, a decrease in inventory of $6.3 million, a decrease in other assets of $1.7 million, partially offset by an increase in contract origination costs of $0.6 million, an increase in project assets of $2.2 million, a decrease in accounts payable of $18.7 million, a decrease in accrued expenses and other liabilities of $1.2 million, a decrease in deferred revenue of $2.8 million, and a decrease in lease liabilities of $1.2 million.

Previous wording

During the three months ended March 31, 2026, net cash used in investing activities was $1.3 million, and consisted of $1.3 million in capital expenditures related to internally-developed software.

Current wording

During the six months ended June 30, 2026, net cash used in investing activities was $2.6 million, and consisted of $2.6 million in capital expenditures related to internally-developed software.

Previous wording

During the three months ended March 31, 2025, net cash used in investing activities was $3.6 million, and consisted of $3.6 million in capital expenditures related to internally-developed software.

Current wording

During the six months ended June 30, 2025, net cash used in investing activities was $4.7 million, and consisted of $4.6 million in capital expenditures related to internally-developed software.

Previous wording

During the three months ended March 31, 2026, net cash used in financing activities was $2.8 million, and consisted of the repayment of financing obligations of $2.8 million.

Current wording

During the six months ended June 30, 2025, net cash provided by financing activities was $1.7 million, and primarily consisted of net proceeds from the issuance of senior secured notes of $10.0 million, partially offset by repayment of financing obligations of $8.4 million.

Previous wording

A summary of our critical accounting policies and estimates is presented in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, and there have been no material changes to our critical accounting estimates during thethree months ended March 31, 2026.

Current wording

A summary of our critical accounting policies and estimates is presented in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, and there have been no material changes to our critical accounting estimates during thethree and six months ended June 30, 2026.