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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________
FORM 10-Q
___________________________________
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number 001-39982
___________________________________
ENERGY VAULT HOLDINGS, INC.
___________________________________
(Exact name of registrant as specified in its charter)
Delaware
85-3230987
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
4360 Park Terrace Drive, Suite 100
 Westlake Village, California
93161
(Address of Principal Executive Offices)
(Zip Code)
(805) 852-0000
Registrant’s telephone number, including area code
___________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.0001 per shareNRGVNew York Stock Exchange
Redeemable warrants, each whole warrant exercisable for one share of common stock at an exercise price of $11.50 per shareNRGV.WSNew York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
¨
Accelerated filer
o
Non-accelerated filer
x
Smaller reporting company
x
Emerging growth company
x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).Yes o No x
The registrant had 133,758,293, shares of common stock, par value $0.0001 per share, outstanding as of May 9, 2022.


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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties, and other important factors that are in some cases beyond our control and may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will” or “would” or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning the following:
the expected benefits of the Merger (as defined herein);
changes in our strategy, expansion plans, customer opportunities, future operations, future financial position, estimated revenues and losses, projected costs, prospects and plans;
the implementation, market acceptance and success of our business model and growth strategy;
our ability to develop and maintain our brand and reputation;
developments and projections relating to our competitors and industry;
the impact of health epidemics, including the COVID-19 pandemic, on our business and the actions we may take in response thereto;
our expectations regarding its ability to obtain and maintain intellectual property protection and not infringe on the rights of others;
expectations regarding the time during which we will be an emerging growth company under the JOBS Act;
our future capital requirements and sources and uses of cash;
our ability to obtain funding for its operations and future growth; and
our business, expansion plans and opportunities.
You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.
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Part I-Financial Information
Item 1. Financial Statements
ENERGY VAULT HOLDINGS, INC.

Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands except par value)
March 31,
2022
December 31,
2021
Assets
Current Assets
Cash and cash equivalents$303,518 $105,125 
Accounts receivable30,002  
Prepaid expenses and other current assets4,541 5,538 
Total current assets338,061 110,663 
Property and equipment, net10,752 11,868 
Right-of-Use assets, net1,242 1,238 
Other assets1,479 1,525 
Total Assets$351,534 $125,294 
Liabilities, Convertible Preferred Stock, and Stockholders’ Equity (Deficit)
Current Liabilities
Accounts payable$3,516 $1,979 
Accrued expenses1,305 4,704 
Long-term finance leases, current portion46 48 
Long-term operating leases, current portion619 612 
Total current liabilities5,486 7,343 
Deferred pension obligation454 734 
Asset retirement obligation984 978 
Deferred revenue8,616 1,500 
Long-term finance leases25 34 
Long-term operating leases659 662 
Warrant liability40,075  
Total liabilities56,299 11,251 
Commitments and contingencies
   Convertible preferred stock, $0.0001 par value; 85,739 shares authorized, 85,739 shares issued and outstanding at December 31, 2021; liquidation preference of $171,348
— 182,709 
Stockholders’ Equity (Deficit)
   Convertible preferred stock, $0.0001 par value; 5,000 shares authorized, 93 shares issued and outstanding at March 31, 2022; liquidation preference of $675
675 — 
   Common stock, $0.0001 par value; 500,000 shares authorized, 133,633 shares issued, and 133,633 and outstanding at March 31, 2022; 120,568 shares authorized, 20,432 shares issued, and 20,432 outstanding at December 31, 2021
13  
Additional paid-in capital383,821 713 
Accumulated deficit(89,045)(68,966)
Accumulated other comprehensive loss(229)(413)
Total stockholders’ equity (deficit)295,235 (68,666)
Total Liabilities, Convertible Preferred Stock, and Stockholders’ Equity (Deficit)$351,534 $125,294 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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ENERGY VAULT HOLDINGS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
(In thousands except per share data)
Three Months Ended March 31,
20222021
Revenue$42,884 $ 
Operating expenses:
Sales and marketing2,580 85 
Research and development9,661 1,021 
General and administrative9,806 1,855 
Income (loss) from operations20,837 (2,961)
Other income (expense)
Change in fair value of derivative (24,102)
Interest expense(1)(4)
Change in fair value of warrant liability(20,237) 
Transaction costs(20,586) 
Other income (expense), net36 (1,928)
Loss before income taxes(19,951)(28,995)
Provision for income taxes128  
Net loss$(20,079)$(28,995)
Net loss per share of common stock — basic and diluted$(0.25)$(2.67)
Weighted average shares of common stock — basic and diluted80,806 10,861 
Other comprehensive income (loss) — net of tax
Actuarial gain (loss) on pension$278 185 
Foreign currency translation gain (loss)(94)1,231 
Total other comprehensive income (loss)184 1,416 
Total comprehensive loss$(19,895)$(27,579)
The accompanying notes are an integral part of these condensed consolidated financial statements.
5

Table of Contents
ENERGY VAULT HOLDINGS, INC.

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Deficit
(Unaudited)
(In thousands)
Three Months Ended March 31, 2022
Convertible Preferred StockCommon StockConvertible Preferred Stock
Additional Paid-In Capital
Accumulated Deficit
Accumulated Other Comprehensive Income (Loss)
Total Stockholders’ Equity ( Deficit)
Shares (1)
Amount
Shares (1)
Amount
Shares (1)
Amount
Balance at December 31, 2021
85,741 $182,709 20,432 $  $ $713 $(68,966)$(413)$(68,666)
Conversion of convertible preferred stock into common stock in connection with reverse recapitalization(85,648)(182,034)85,648 9 — — 182,025 — — 182,034 
Reclassification of convertible preferred stock to stockholders’ deficit(93)(675)— — 93 675 — — — 675 
Issuance of common stock upon the reverse recapitalization, net of transaction costs— — 27,553 4 — — 191,856 — — 191,860 
Exercise of stock option— — — — — — 25 — — 25 
Stock based compensation
— — — — — — 9,202 — — 9,202 
Net loss— — — — — — — (20,079)— (20,079)
Actuarial gain (loss) on pension— — — — — — — — 278 278 
Foreign currency translation gain (loss)
— — — — — — — — (94)(94)
Balance at March 31, 2022
 $ 133,633 $13 93 $675 $383,821 $(89,045)$(229)$295,235 
Three Months Ended March 31, 2021
Convertible Preferred StockCommon Stock
Additional Paid-In Capital
Accumulated Deficit
Accumulated Other Comprehensive Income (Loss)
Total Stockholders’ Deficit
Shares (1)
Amount
Shares (1)
Amount
Balance at December 31, 2020
63,805 $62,042 14,551 $ $99 $(37,628)$(2,098)$(39,627)
Issuance of Series B-1 preferred stock for cash
6,864 14,700 — — — — — — 
Series B-1 Preferred Stock issuance costs
— (8)— — — — — — 
Exercise of stock option— — 373 — 5 — — 5 
Stock based compensation
— — — — 7 — — 7 
Net loss— — — — — (28,995)— (28,995)
Actuarial gain (loss) on pension— — — — — — 185 185 
Foreign currency translation gain (loss)
— — — — — — 1,231 1,231 
Balance at March 31, 2021
70,669 $76,734 14,924 $ $111 $(66,623)$ $(682)$(67,194)
(1) The number of shares of convertible preferred stock and common stock prior to the Merger (defined in Note 1) have been retroactively restated to reflect the exchange ratio of 6.7735 established in the Merger as described in Note 1 and Note 3.

The accompanying notes are an integral part of these condensed consolidated financial statements.
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Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Three Months Ended March 31,
20222021
Cash Flows From Operating Activities
Net loss$(20,079)$(28,995)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization1,218 17 
Non-cash lease expense165 151 
Non-cash interest income(16) 
Stock based compensation9,202 7 
Change in fair value of derivative 24,102 
Change in fair value of warrant liability20,237  
Change in pension obligation7 18 
Asset retirement obligation accretion expense19  
Foreign exchange gains and losses19 96 
Change in operating assets(32,550)(561)
Change in operating liabilities4,967 (839)
Net cash used in operating activities(16,811)(6,004)
Cash Flows From Investing Activities
Purchase of property and equipment(83)(3)
Net cash used in investing activities(83)(3)
Cash Flows From Financing Activities
Proceeds from exercise of stock options25 6 
Proceeds from reverse recapitalization and PIPE financing, net235,940  
Payment of transaction costs related to reverse recapitalization(20,651) 
Payment of lease obligations(10)(24)
Proceeds from Series B-1 Preferred Stock, net of issuance costs 14,692 
Net cash provided by financing activities215,304 14,674 
Effect of exchange rate changes on cash and cash equivalents(17)2,061 
Net increase in cash198,393 10,728 
Cash and cash equivalents –  beginning of the period
105,125 10,051 
Cash and cash equivalents –  end of the period
$303,518 $20,779 
Supplemental Disclosures of Cash Flow Information:
Income taxes paid1  
Cash paid for interest23 17 
Supplemental Disclosures of Non-Cash Investing and Financing Information:
Conversion of redeemable preferred stock into common stock in connection with the reverse recapitalization182,034  
Warrants assumed as part of reverse recapitalization19,838  
Actuarial gain (loss) on pension278 148 
Property, plant and equipment financed through accounts payable137  
Assets acquired on finance lease 43 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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ENERGY VAULT HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements
(Unaudited)
NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Energy Vault Holdings, Inc. (“Energy Vault” or the “Company”) develops sustainable, grid-scale energy storage solutions designed to advance the transition to a carbon free, resilient power grid. The Company’s mission is to accelerate the decarbonization of the economy through the development of sustainable and economical energy storage technologies. To achieve this, the Company is developing a proprietary gravity-based energy storage technology. The Company’s product platform aims to help utilities, independent power producers, and large energy users significantly reduce their levelized cost of energy while maintaining power reliability.
The Company’s project delivery strategy relies upon engineering, procurement, and construction (“EPC”) firms to construct its storage projects, while under the supervision of the Company’s dedicated teams tasked with project management. The current business model is comprised of the following product and service categories:
(1)Building, operating, and transferring energy storage projects to potential customers,
(2)Building, operating, and holding energy storage systems as equity (co-) sponsor,
(3)Selling energy management software as a service, and
(4)Entering into intellectual property license and royalty agreements associated with the Company’s energy storage technologies.
The Company has a wholly owned subsidiary, Energy Vault SA, which was formed in December 2017 in Lugano Switzerland to build a full-scale demonstration unit (the “Prototype”), serves as the Company’s research and development hub, and operates as the Company’s international headquarters.
Energy Vault was originally incorporated under the name Novus Capital Corporation II (“Novus”) as a special purpose acquisition company in the state of Delaware in September 2020 with the purpose of effecting a merger with one or more operating businesses. On September 8, 2021, Novus announced that it had entered into a definitive agreement for a business combination (the “Merger Agreement”) with Energy Vault, Inc. (“Legacy Energy Vault”) that would result in Legacy Energy Vault becoming a wholly owned subsidiary of Novus (the “Merger”). Upon the closing of the Merger on February 11, 2022 (the “Closing”), Novus was immediately renamed to “Energy Vault Holdings, Inc.” The Merger between Novus and Legacy Energy Vault was accounted for as a reverse recapitalization. See Note 3 - Reverse Capitalization for more information. Energy Vault Holdings, Inc. is headquartered in Los Angeles, California.
Throughout the notes to the consolidated condensed financial statements, unless otherwise noted, the “Company,” “we,” “us,” or “our” and similar terms refer to Legacy Energy Vault and its subsidiaries prior to the consummation of the Merger, and Energy Vault and its subsidiaries after the consummation of the Merger.
Certain Significant Risks and Uncertainties
Since inception, the Company has been primarily involved in research and development activities. The Company devotes substantially all its efforts to product research and development, initial market development, and raising capital. The Company is subject to a number of risks similar to those of other early-stage clean energy companies, including dependence on key individuals, the need for development of commercially viable products, competitors developing new technological innovations, the need to successfully commercialize and gain market acceptance of the Company’s products, protection of proprietary technology, and the need to obtain adequate additional financing to fund the development of its products and technology. These risks could be further complicated by the ongoing COVID-19 pandemic described below.
The spread of the COVID-19 virus during 2020 caused an economic downturn on a global scale, as well as significant volatility in the financial markets. In March 2020, the World Health Organization declared spread of the COVID-19 virus a pandemic. Government reactions to the public health crisis with mitigation measures created significant uncertainties in the U.S. and global economies. The COVID-19 pandemic caused delays in the construction of the Prototype in Switzerland due to Government mandated temporary stay-at-home and quarantine orders; however, it did not significantly impact the Company’s other core operations such as research and development and fund raising. The extent to which the COVID-19 pandemic impacts the Company’s business, operations and financial results will depend on numerous evolving factors that management may not be able to accurately predict, and which may cause the actual results to differ from the estimates and
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Notes to Condensed Consolidated Financial Statements
(Unaudited)
assumptions that are required to be made in the preparation of condensed financial statements according to Generally Accepted Accounting Principles in the United States (“GAAP”).
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements have been prepared on an accrual basis of accounting in accordance with GAAP and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes for the year ended December 31, 2021. The condensed balance sheet as of December 31, 2021, included herein, was derived from the consolidated financial statements of the Company as of that date.
These unaudited interim condensed consolidated financial statements, in the opinion of management, reflect all adjustments necessary to present fairly the Company’s financial position as of March 31, 2022 and the Company’s results of operations and comprehensive loss, convertible preferred stock and stockholders’ deficit activities, and the cash flows for the three months ended March 31, 2022 and 2021. The results for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any interim period or for any other future year.
Principles of Consolidation
These unaudited interim condensed consolidated financial statements include Energy Vault Holdings, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Emerging Growth Company
Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised, and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
This may make comparison of the Company’s consolidated financial statement with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of the condensed consolidated financial statements, in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited interim condensed consolidated financial statements and accompanying notes. The Company evaluates its assumptions on an ongoing basis. The Company’s management believes that the estimates, judgment, and assumptions used are reasonable based upon information available at the time they are made. Significant estimates made by management include, among others, valuation of inventory, pension obligations, fair value of financial instruments including embedded derivatives, stock-based compensation, valuation of deferred income tax assets, revenue recognition, and the estimated useful life of long-lived assets. Due to the inherent uncertainty involved in making assumptions and estimates, changes in circumstances, including those arising from the impacts of the COVID-19 pandemic, could result in actual results differing from those estimates, and such differences could be material to the Company’s consolidated financial condition and results of operations.
Transaction Costs
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Notes to Condensed Consolidated Financial Statements
(Unaudited)
Transaction costs consist of direct legal, accounting, and other fees relating to the consummation of the Merger. These costs were initially capitalized as incurred in prepaid assets and other current assets in the condensed consolidated balance sheet. Upon the Closing, transaction costs related to the issuance of shares were recognized in stockholders’ deficit while costs associated with the pubic and private warrants liabilities were expensed in the condensed consolidated statements of operations and comprehensive loss. As of December 31, 2021, $4.1 million of deferred Merger transaction costs were included within prepaid and other current assets in the condensed consolidated balance sheet. The Company and Novus incurred in aggregate $44.8 million in transaction costs, consisting of underwriting, legal, and other professional fees, of which $24.2 million was recorded to additional paid-in-capital as a reduction of proceeds and the remaining $20.6 million was expensed immediately upon the Closing.
Warrants
The Company assumed publicly-traded warrants (“Public Warrants”) and private warrants (“Private Warrants”) upon the Closing. The Company accounts for warrants for shares of the Company’s common stock that are not indexed to its own stock as liabilities at fair value on the condensed consolidated balance sheet. The warrants are subject to remeasurement at each balance sheet date and any change in fair value is recognized in the Company’s condensed consolidated statement of operations. For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in-capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as a liability at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss in the statement of operations.
Earn-Out Shares
In connection with the reverse recapitalization and pursuant to the Merger Agreement, eligible Legacy Energy Vault stockholders immediately prior to the Closing, have the contingent right to receive an aggregate of 9.0 million shares of the Company’s common stock (“Earn-Out Shares”) upon the Company achieving each Earn-Out Triggering Event (defined below) during the period beginning on the 90th day following the Closing and ending in the third anniversary of such date (the “Earn-Out Period”). An “Earn-Out Triggering Event” means the date on which the closing price of the Company’s common stock quoted on the NYSE is greater than or equal to certain specified prices for any 20 trading days within a 30 consecutive day trading period.
The Earn-Out Shares were recognized at fair value upon the Closing of the Merger and classified in shareholders’ equity. Because the Merger was accounted for as a reverse recapitalization, the issuance of the Earn-Out Shares was treated as a deemed dividend and since the Company does not have retained earnings, the issuance was recorded within additional-paid-in capital (“APIC”) and has a net nil impact on APIC.
Revenue from Contracts with Customers
The Company recognizes revenue from contracts with customers in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, revenue is recognized when, or as, control of promised goods and services is transferred to customers, and the amount of revenue recognized reflects the consideration to which the Company expects to be entitled in exchange for the goods and services transferred. The Company determines revenue recognition through the following steps:
(1)Identification of the contract, or contracts, with a customer.
(2)Identification of the performance obligations in the contract.
(3)Determination of the transaction price.
(4)Allocation of the transaction price to the performance obligations in the contract.
(5)Recognition of revenue when, or as, a performance obligation is satisfied.
Once a contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations. Arrangements that include rights to additional goods or services that are exercisable at a customer’s discretion are generally considered options. The Company assesses if these options provide a material right to the customer and if so, they are considered performance obligations. The
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Notes to Condensed Consolidated Financial Statements
(Unaudited)
identification of material rights requires judgments related to the determination of the value of the underlying good or service relative to the option exercise price.
The Company assesses whether each promised good or service is distinct for the purposes of identifying performance obligations in the contract. This assessment involves subjective determination and requires management to make judgments about the individual promised goods or services and whether such are separable from the other aspects of the contractual relationship. Promised goods and services are considered to be distinct provided that: (i) the customer can benefit from the good or service either on its own or together with the other resources that are readily available to the customer (that is, the good or service is capable of being distinct) and (ii) the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (that is, the promise to transfer the good or service is distinct within the context of the contract). The Company also considers the intended benefit of the contract in assessing whether a promised good or service is separately identifiable from other promises in the contract. If a promised good or service is not distinct, an entity is required to combine that good or service with other promised goods or services until it identifies a bundle of goods or services that is distinct.
The transaction price is determined and allocated to the identified performance obligations in proportion to their stand-alone selling prices (“SSP”) on a relative SSP basis. SSP is determined at contract inception and is not updated to reflect changes between contract inception and when the performance obligations are satisfied. Determining the SSP for performance obligations requires significant judgment. In developing the SSP for a performance obligation, the Company considers applicable market conditions and relevant entity-specific factors, including factors that were contemplated in negotiating the agreement with the customer and estimated costs.
For arrangements that include sales-based royalties, the Company recognizes royalty revenue when the related sales occur.
In determining the transaction price, the Company adjusts consideration for the effects of the time value of money if the timing of payments provides the Company with a significant benefit of financing. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment and the transfer of the promised goods or services will be one year or less. As of March 31, 2022, the Company does not have any contracts that contain a significant financing component.
The Company recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) each performance obligation is satisfied, either at a point in time or over time. Over time revenue recognition is based on the use of an output or input method.
Building Energy Storage Projects
To date, the Company has not recognized any revenue from the building of energy storage projects. The method of revenue recognition will be determined once the Company finalizes agreements with its future customers.
Operating Energy Storage Projects
To date, the Company has not recognized any revenue related to providing operation services for its energy storage projects. The method of revenue recognition will be determined once the Company finalizes agreements with its future customers.
Energy Management Software as a Service
To date, the Company has not recognized any revenue related to providing energy management software as a service. The method of revenue recognition will be determined once the Company finalizes agreements with its future customers.
Intellectual Property Licensing
The Company enters into licensing agreements of its intellectual property that are within the scope of ASC 606. The terms of such licensing agreements include the license of functional intellectual property, given the functionality of the intellectual property is not expected to change substantially as a result of the licensor’s ongoing activities. The transaction price allocated to the licensing of intellectual property is recognized as revenue at a point in time when the licensed intellectual property is made available for the customer’s use and benefit. The Company recognized intellectual property licensing revenue of $42.9 million during the three months ended March 31, 2022. The revenue recognized during the three
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Notes to Condensed Consolidated Financial Statements
(Unaudited)
months ended March 31, 2022 was from one customer, Atlas Renewable LLC (“Atlas”), which was an investor in the Company’s PIPE.
As part of the Company’s licensing agreement with Atlas, the Company will provide Atlas with a final update to its functional intellectual property upon the completion of the Company’s research and development activities related to the intellectual property that was provided to Atlas. The Company has identified the obligation to provide this update to Atlas as a performance obligation and has deferred $5.9 million of the transaction price. The $5.9 million will be recognized as revenue when the Company completes the transfer of the final technology update to Atlas.
Additionally, the contract with Atlas includes variable consideration of $25 million due to the Company’s commitment to provide a $25 million refundable contribution to Atlas during the construction period of Atlas’ first project. The Company has considered this to be variable consideration as the Company will only be repaid the amount if Atlas’ first project reaches substantial completion and certain performance metrics are met. The Company has determined that it is probable that Atlas will reach substantial completion and meet the performance metrics to repay Energy Vault, therefore the variable consideration has been included in the transaction price.
Royalty Revenue
In connection with entering into intellectual property licensing agreements, the Company also enters into royalty agreements whereby the customer agrees to pay the Company a percentage of the customer’s future sales revenue that is generated by using the Company’s intellectual property. The Company has not recognized any royalty revenue to date, but will recognize royalty revenue at the point in time when the customer’s sales occur.
Other Revenue
In connection with entering into the intellectual property licensing agreement with Atlas, the Company agreed to provide construction support services during the periods in which the customer constructs its energy storage projects. The transaction price allocated to construction support services is recognized over time using the cost-to-cost measure of progress as that method offers the best depiction of the continuous transfer of services to the customer. The Company did not provide any construction support services during the three months ended March 31, 2022, therefore the Company did not recognize any revenue from this performance obligation.
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 amends the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in the more timely recognition of losses. The new accounting standard will be effective for the fiscal year beginning on January 1, 2023, including interim periods within that year. The Company does not expect that adoption of this standard will have a material impact on its consolidated financial statements.
In August 2020, FASB issued ASU No. 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). ASU 2020-06 simplifies the accounting for convertible instruments. In addition to eliminating certain accounting models, this ASU includes improvements to the disclosures for convertible instruments and earnings-per-share (EPS) guidance and amends the guidance for the derivatives scope exception for contracts in an entity’s own equity. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021. The Company adopted ASU 2020-06 on January 1, 2022 and it did not have an impact on the Company’s condensed consolidated financial statements.
In December 2020, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes. ASU 2019-12 is effective for nonpublic entities for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The Company adopted ASU 2019-12 on January 1, 2022 and it did not have an impact on the Company’s condensed consolidated financial statements.
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Notes to Condensed Consolidated Financial Statements
(Unaudited)
NOTE 3. REVERSE RECAPITALIZATION
On February 11, 2022, in connection with the Merger, the Company raised gross proceeds of $235.8 million, including the contribution of $40.8 million of cash, net of redemptions, held in Novus’ trust account from its initial public offering and an aggregate purchase price of $195.0 million from the sale and issuance of common shares in a private placement (“Private Investment in Public Equity” or “PIPE”) at $10.00 per share. The Company and Novus incurred in aggregate approximately $44.8 million in transaction costs, consisting of underwriting, legal, and other professional fees, of which $24.2 million was recorded to additional paid-in-capital as a reduction of proceeds and the remaining $20.6 million was expensed immediately upon the Closing. The aggregate consideration paid to Legacy Energy Vault stockholders in connection with the Merger (excluding any potential Earn-Out Shares), was 106.1 million shares of the Company’s common stock, par value $0.0001 after giving effect to the exchange ratio of 6.7735 (the “Exchange Ratio”). The total net cash proceeds to the Company were $191.0 million.
The following transactions were completed concurrently upon the Closing:
All but 93,258 of issued and outstanding shares of Legacy Energy Vault convertible preferred stock were canceled and converted into a total of 85.6 million shares of Energy Vault common stock (the preferred stock that did not convert as of March 31, 2022 converted into 93,258 shares of common stock subsequent to the end of the quarter);
Each issued and outstanding share of Legacy Energy Vault common stock was canceled and converted into a total of 20.4 million shares of Energy Vault common stock;
Each outstanding vested and unvested Legacy Energy Vault common stock option was converted into options exercisable for shares of Energy Vault common stock with the same terms except for the number of shares exercisable and the exercise price, each of which was adjusted by the Exchange Ratio;
Each outstanding and unvested Legacy Energy Vault restricted stock unit (“RSU”) was converted into RSUs for shares of Energy Vault common stock with the same terms except for the number of shares, each of which was adjusted by the Exchange Ratio; and
Each outstanding vested and unvested Legacy Energy Vault restricted stock award (“RSA”) was converted into RSAs for shares of Energy Vault common stock with the same terms except for the number of shares, each of which was adjusted by the Exchange Ratio.
The Merger was accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, Novus was treated as the acquired company for financial reporting purposes. This determination was primarily due to the fact that shareholders of Legacy Energy Vault continue to control Energy Vault after the completion of the Merger. Accordingly, for accounting purposes, the financial statements of the combined entity upon consumption of the Merger represent a continuation of the financial statements of Legacy Energy Vault with the Merger being treated as the equivalent of Legacy Energy Vault issuing shares for the net assets of Novus, accompanied by a recapitalization. The net assets of Novus were recognized at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the
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Notes to Condensed Consolidated Financial Statements
(Unaudited)
Merger are presented as those of Legacy Energy Vault and the accumulated deficit of Legacy Energy Vault has been carried forward after Closing.
All periods prior to the Merger have been retroactively adjusted using the Exchange Ratio for the equivalent number of shares outstanding immediately after the Closing to effect the reverse recapitalization.
The number of common stock issued immediately following the consumption of the Merger was as follows (amounts in thousands):
Shares
Legacy Energy Vault stock (1)
106,079
Novus pubic shares (2)
4,079
Novus sponsor shares (3)
3,975
PIPE shares19,500
Total shares of Energy Vault common stock immediately after the Merger133,633
__________________
(1) Excludes 9.0 million common shares issuable in earn-out arrangements as they are not issuable until 90 days after the Closing and are contingently issuable based upon the Company’s share price meeting certain thresholds.
(2) Excludes 14.7 million warrants issued and outstanding as of the Closing of the Merger which includes 9.6 million public warrants and 5.2 million private warrants held by the Novus Sponsor.
(3) Includes 1.6 million common shares that have transfer restrictions based on the Company’s share price meeting certain thresholds. These 1.6 million common shares are held in escrow and are subject to potential forfeiture.
NOTE 4. FAIR VALUE MEASUREMENTS
Carrying amounts of certain financial instruments, including cash, accounts payable, and accrued liabilities approximate their fair value due to their relatively short maturities and market interest rates, if applicable.
The Company categorizes assets and liabilities recorded or disclosed at fair value on the consolidated balance sheet based upon the level of judgment associated with inputs used to measure their fair value. The categories are as follows:
Level 1—Inputs which included quoted prices in active markets for identical assets and liabilities.
Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3—Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
The Company’s financial assets and liabilities that were measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021 were as follows (amounts in thousands):
March 31, 2022
Level 1Level 2Level 3Total
Assets (Liabilities):
Money market funds (1)
$5,315 $ $ $5,315 
Derivative asset —  conversion option (2)
  350 350 
Warrant liability (3)
(25,875)(14,200) (40,075)
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Notes to Condensed Consolidated Financial Statements
(Unaudited)
December 31, 2021
Level 1Level 2Level 3Total
Assets (Liabilities):
Money market funds (1)
$5,304 $ $ $5,304 
Derivative asset —  conversion option (2)
  350 350 
__________________
(1) Included in the line item cash and cash equivalents on the condensed consolidated balance sheets.
(2) Refer to Note 6 - Convertible Note Receivable for further information.
(3) Refer to Note 9 - Warrants for further information.

The Company’s Series B preferred stock purchase agreement included terms that obligated the investors to purchase, and the Company to sell, two subsequent rounds of Series B preferred stock in tranche closings (the “Tranche Rights”). The Company concluded that the Tranche Rights met the definition of a freestanding financial instrument, and classified them as an asset or a liability under ASC Topic 480, Distinguishing Liabilities from Equity and were initially recorded at fair value and remeasured to the then current fair value at each reporting period.
The following table provides a reconciliation of the Tranche Right liability balance for the three months ended March 31, 2021 (amounts in thousands):
Preferred Stock Tranche Liability
Balance at January 1, 2021$ 
Change in fair value(24,102)
Balance at March 31, 2021$(24,102)
NOTE 5. RELATED PARTY TRANSACTIONS
In May 2019, the Company received a $1.5 million deposit for an “EV1” tower from a customer that was owned by one of its primary shareholders; the order remains outstanding as of March 31, 2022. The deposit and order were received before the owner of the customer became one of the Company’s primary shareholders and before it was represented on the Company’s board of directors.
For the three months ended March 31, 2022 and 2021, the Company paid consulting fees of $0.1 million and $0.1 million, respectively, to the father of one of the Company’s executive officers. For the three months ended March 31, 2022 and 2021, the Company paid Prototype construction labor costs of $0.1 million and $0.1 million, respectively, to a company owned by the brother of an employee.
NOTE 6. CONVERTIBLE NOTE RECEIVABLE
In October 2021, the Company entered into a convertible promissory note purchase agreement with DG Fuels, LLC (the “DG Fuels Note”). The principal balance of the promissory note is $1.0 million. The maturity date is the earlier of (i) 30 days after a demand for payment is made by the Company at any time after the two year anniversary of the date of issuance of the note; (ii) the four year anniversary of the date of issuance of the note; (iii) five days following a Financial Close (“Financial Close” means a project finance style closing by DG Fuels or its subsidiary of debt and equity capital to finance the construction of that certain biofuel facility currently under development by DG Fuels), or (iv) upon an event of default determined at the discretion of the Company. The DG Fuels Note has an annual interest rate of 10.0%.
The Company intends to hold and convert the DG Fuels Note into the equity securities issued by DG Fuels in their next equity financing round that is greater than $20.0 million at a 20% discount to the issuance price. The principal balance and unpaid accrued interest on the DG Fuels Note will, at the option of the Company, convert into equity securities upon the closing of such next equity financing round.
The discounted conversion rate in the DG Fuels Note is considered a redemption feature that is an embedded derivative requiring bifurcation and separate accounting at its estimated fair value under ASC 815 – Derivative and Hedging. The estimated fair value of the embedded derivative upon issuance in October 2021 was an asset of $0.4 million. The estimated
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
fair value of this derivative instrument was recognized as a derivative asset on the condensed consolidated balance sheet, with an offsetting discount to the DG Fuels Note. The Company amortizes the discount on the Note into interest income using the effective interest method. The Company recognized interest income of $16 thousand during the three months ended March 31, 2022 from the DG Fuels Note, inclusive of contractual interest of $8 thousand and amortization of the debt discount of $8 thousand.
At each reporting period, the Company remeasures this derivative financial instrument to its estimated fair value. The change in the estimated fair value is recorded in other income (expense), net in the consolidated statement of operations and comprehensive loss. For the three months ended March 31, 2022, there was no change in fair value of the embedded derivative.
A reconciliation of the beginning and ending asset balance for the embedded derivative in the DG Fuels Note is as follows (amounts in thousands):
Derivative Conversion Option
Balance at January 1, 2022$350 
Change in fair value 
Balance at March 31, 2022
$350 
NOTE 7. PROPERTY AND EQUIPMENT, NET
As of March 31, 2022, and December 31, 2021, property and equipment, net consisted of the following (amounts in thousands):
March 31,
2022
December 31,
2021
Brick machines$2,484 $2,515 
Right-of-Use assets – vehicles173 175 
Furniture and equipment228 176 
Leasehold improvements347 179 
Demonstration & test equipment11,078 11,218 
Total property and equipment14,310 14,263 
Less: accumulated depreciation(3,558)(2,395)
Property and equipment, net$10,752 $11,868 
For the three months ended March 31, 2022 and 2021, depreciation and amortization related to property and equipment was $1.2 million and $17 thousand respectively. No impairments of long-lived assets were recorded for the three months ended March 31, 2022 and 2021.
NOTE 8. STOCKHOLDERS’ EQUITY
Redeemable Convertible Preferred Stock
Upon the closing of the Merger on February 11, 2022, 85.6 million shares of issued and outstanding redeemable convertible preferred stock were cancelled and converted into 85.6 million shares of Energy Vault common stock based upon an exchange ratio of 6.7735 . A total of $182.0 million redeemable convertible preferred stock was reclassified into common stock and additional paid-in-capital on the condensed balance sheet. One shareholder that owned 13,768 shares of Series C preferred stock prior to the Merger, had a delay in the conversion of its shares to common stock and the shares remained as outstanding preferred stock at March 31, 2022. The preferred shares were converted to 93,258 shares of common stock subsequent to March 31, 2022.
As of December 31, 2021, the Company’s convertible preferred stock consisted of the following (amounts in thousands and adjusted for Merger exchange ratio):
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Notes to Condensed Consolidated Financial Statements
(Unaudited)

Shares
Designated
Shares Issued and
Outstanding
Liquidation
Preference
Series C preferred stock14,787 14,787 $107,000
Series B-1 preferred stock14,475 14,475 31,003 
Series B preferred stock14,651 14,651 25,003 
Series A-2 preferred stock5,087 5,087 3,555 
Series A-1 preferred stock6,950 6,950 3,076 
Series Seed 2 preferred stock4,240 4,240 934 
Series Seed 1 preferred stock11,190 11,190 753 
Series FR preferred stock14,360 14,360 25 
85,740 85,740 $171,349 
The significant rights and preferences of the outstanding convertible preferred stock through the closing of the Merger were as follows:
Dividends
Through the closing date, the holders of each class of convertible preferred stock had been entitled to receive non-cumulative dividends at 8% per annum, if and when declared by the Board of Directors of the Company. Through the closing date of the Merger, no dividends had been declared.
Conversion
Until the closing of the Merger, each class of preferred stock was convertible to common stock at the option of the holder at the conversion price (as defined in the articles of incorporation) which was initially equal to the original issuance price of each of the preferred stock issuances. The preferred stock would be automatically converted to common stock upon the earlier of; (a) a firm commitment underwritten initial public offering to an effective registration statement and sale of common stock to the public of not less than $49.0258 per share (minimum price per share does not apply to Series FR, Seed 1 and Seed 2 preferred stock) with gross proceeds not less than $50.0 million, or (b) by written consent of the holders of a majority of the then outstanding shares of preferred stock voting as single class on an as-converted to common stock basis, with the holders of the Series A, Seed 2, Seed 1, and Series FR preferred stock voting as a separate class on an as-converted basis, the holders of the Series B voting as a separate class on an as-converted basis, the holders of the Series B-1 voting as a separate class on an as-converted basis, and the holders of the Series C voting as a separate class on an as-converted basis.
The conversion price was subject to adjustment for stock splits and stock dividends, reorganization, reclassifications, or similar events and was to be adjusted proportionately. The conversion price would have also been adjusted for certain dilutive issuances of common stock or securities exercisable or convertible into common stock at a price below the conversion price in effect at the time (price protection or ratchet feature). The adjustment to the conversion price would have been determined by multiplying the conversion price by a fraction calculated as the diluted shares pre-issuance at the conversion price divided by the common stock pre-issuance plus the additional stock issued (partial ratchet).
Liquidation
Until the closing of the Merger, in the event of any liquidation, dissolution, or winding up of the Company, the holders of Series B, Series B-1 and Series C preferred stock would have been entitled to, in preference to the holders of each of the other classes of preferred stock, and to the common stockholder, an amount equal to the original issuance price plus declared but unpaid dividends. After payment in full to the holders of Series B, Series B-1 and Series C preferred stock, and prior to any distribution to the common stockholders, each of the other classes of preferred stock would have been entitled to receive an amount equal to the original issue price plus declared and unpaid dividends on such shares, payable on a pari-passu basis among the Series.
A liquidation, dissolution, or winding up of the Company would have been deemed to have occurred upon completion of any transaction or event that resulted in a change of control as defined in the articles of incorporation (a “Deemed Liquidation Event”). Upon a Deemed Liquidation Event, the preferred stock would have become redeemable at the option
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ENERGY VAULT HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

of the holder and the Company would have been required to provide written notice to the holders of the preferred stock within 90 days of such an event informing them of their right to redeem the preferred stock. For purposes of determining the amount each holder of preferred stock would have been entitled to receive upon a Deemed Liquidation Event, each class of preferred stock would have been deemed to have automatically converted their shares into common stock at the as converted value (even if not elected by the holder) immediately prior to such a Deemed Liquidation Event, if the value was greater than the amount that would have been distributed to the holder of the preferred stock if it were not converted.
Voting
Until the closing of the Merger, each share of preferred stock was entitled to the number of votes equal to the number of shares of common stock into which the shares of preferred stock so held could be converted at the record date.
Common Stock
On February 11, 2022, in connection with the reverse recapitalization treatment of the Merger, the Company effectively issued 27.6 million new shares of common stock. Additionally upon the close of the Merger, the Company converted all 3.0 million issued and outstanding common stock and all 12.7 million issued and outstanding convertible preferred stock of Legacy Energy Vault into 106.1 million new shares of common stock using an exchange ratio of 6.7735.
As of March 31, 2022, the Company had approximately 93 thousand shares of common stock reserved for future issuance due to a delay in the conversion of Series C preferred shares upon the Closing of the Merger.
NOTE 9. WARRANTS
Upon the Closing of the Merger, the Company assumed 9.6 million Public Warrants and 5.2 million Private Warrants. Each whole warrant entitles the holder to purchase one share of the Company’s common stock at an exercise price of $11.50 per share, subject to adjustments. The warrants became exercisable on March 13, 2022 and will expire on February 11, 2027, which is five years after the Closing.
The Company filed a Registration Statement on Form S-1 on March 8, 2022 related to the issuance of an aggregate of up to approximately 14.7 million shares of common stock issuable upon the exercise of the Public and Private Warrants, which was declared effective by the SEC on May 6, 2022.
Public Warrants
Once the Public Warrants become exercisable, the Company may redeem the outstanding warrants for cash, in whole and not in part, upon not less than 30 days’ prior written notice of redemption (“Redemption Period”) at a price of $0.01 per warrant, if, and only if, the reported last sale price of the common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations, and the like) for any 20 trading days withing a 30 day trading period ending on the third trading day prior to the notice of redemption to the Public Warrant holders. If the Company calls the Public Warrants for redemption, the Company will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The Public Warrant holders have the right to exercise their outstanding warrants prior to the scheduled redemption date during the Redemption Period at $11.50 per share.
Commencing 90 days after the Public Warrants become exercisable, the Company may redeem the outstanding Public Warrants, in whole and not in part, for a price of $0.10 per warrant provided that the Public Warrant Holders will be able to exercise their warrants prior to redemption and receive that number of shares of common stock determined based on a predefined rate based on the redemption date and the “fair market value” of the Company’s common stock upon a minimum of 30 days’ prior written notice of redemption and if, and only if, the last reported sale price of the Company’s common stock equals or exceeds $10.00 per share (as adjusted for stock splits, stock dividends, reorganizations,
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ENERGY VAULT HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

recapitalizations, and the like) on the trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.
“Fair market value” of the Company’s common stock shall mean the average last reported sales price of its common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of the warrants.
This redemption feature differs from the typical warrant redemption features used in many other blank check offerings, which typically only provide for a redemption of Public Warrants when the trading price of the Company’s common stock exceeds $18.00 per share for a specified period of time. This redemption feature is structured to allow for all of the outstanding Public Warrants to be redeemed when the Company’s common stock is trading at or above $10.00 per share, which may be at a time when the trading price of the Company’s stock is below the exercise price of the warrants. This redemption feature was established to provide the Company with the flexibility to redeem the warrants without the warrants having to reach the $18.00 per share threshold described above. Holders choosing to exercise their Public Warrants in connection with this redemption feature will, in effect, receive a number of shares for their warrants based on an option pricing model with a fixed volatility input as of February 8, 2021. This redemption right provides the Company an additional mechanism by which to redeem all of the outstanding Public Warrants, and therefore have certainty as to the Company’s capital structure as the Public Warrants would no longer be outstanding and would have been exercised or redeemed, The Company will effectively be required to pay the redemption price to warrant holders if the Company chooses the redemption right and it will allow Energy Vault to quickly proceed with a redemption of the warrants if it is determined it is in the Company’s best interest.
The exercise price and number of shares of common stock issuable on exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary dividend or recapitalization, reorganization, merger, or consolidation.
Private Warrants
The Private Warrants have terms and provisions that are identical to those of the Public Warrants, except that the Private Warrants are exercisable on a cash or cashless basis, at the warrant holders’ option, and will not be redeemable by the Company, in each case so long as the warrants are still held by Novus or their permitted transferees. If the Private Warrants are no longer held by Novus or their permitted transferees, the redemption right included in the Public Warrants will attach to the Private Warrants.
The following table summarizes the Public and Private Warrants activities for the three months ended March 31, 2022 (amounts in thousands):
Public WarrantsPrivate WarrantsTotal Warrants
Warrants assumed upon the Closing of the Merger9,583 5,167 14,750 
Warrants exercised   
Outstanding as of March 31, 2022
9,583 5,167 14,750 
The Public Warrants were classified as Level 1 measurements as the Public Warrants had an adequate trading volume to provide reliable indication since the Closing of the Merger. The Private Warrants have been classified as Level 2 since the Closing of the Merger. Both the Public Warrants and Private Warrants were valued at $2.75 as of March 31, 2022. The fair value of the Private Warrants was deemed to be equal to the fair value of the Public Warrants because the Private Warrants have similar terms as the Public Warrants.
The Public and Private Warrants are measured at fair value on a recurring basis. The following table presents the changes in the fair value of the Company’s Public and Private Warrants liabilities (amounts in thousands):
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ENERGY VAULT HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

Public Warrants (Level 1)Private Warrants (Level 2)Total Warrants
Fair value assumed upon the Closing of the Merger$12,938 $6,900 $19,838 
Change in fair value12,937 7,300 20,237 
Fair value as of March 31, 2022
$25,875 $14,200 $40,075 

NOTE 10. STOCK-BASED COMPENSATION
2017 Stock Incentive Plan
In 2017, the Company adopted its 2017 Stock Incentive Plan (the “2017 Plan”) which provides for the granting of stock options, restricted stock, and RSUs to employees, directors, and consultants of the Company. Options granted under the 2017 Plan were either Incentive Stock Options (“ISOs”) or Nonqualified Stock Options (“NSOs”). Awards under the 2017 Plan may be granted for periods of up to ten years. Under the terms of the 2017 Plan, awards may be granted at an exercise price not less than the estimated fair value of the shares on the date of grant, as determined by the Company’s Board of Directors. For employees holding more than 10% of the voting rights of all classes of stock, the exercise price of ISOs and NSOs may not be less than 110% of the estimated fair value of the shares on the date of grant, as determined by the board of directors. Awards generally vest over one to four years.
2020 Stock Incentive Plan
In 2020, the Company adopted its 2020 Stock Incentive Plan (the “2020 Plan”) which superseded the previous 2017 Plan. The 2020 Plan provides for the granting of stock options, restricted stock, and RSUs to employees, directors, and consultants of the Company. Options granted under the 2020 Plan may be either Incentive Stock Options (“ISOs”) or Nonqualified Stock Options (“NSOs”). Awards under the 2020 Plan may be granted for periods of up to ten years. Under the terms of the 2020 Plan, awards may be granted at an exercise price not less than the estimated fair value of the shares on the date of grant, as determined by the Company’s Board of Directors. For employees holding more than 10% of the voting rights of all classes of stock, the exercise price of ISOs and NSOs may not be less than 110% of the estimated fair value of the shares on the date of grant, as determined by the board of directors. Awards generally vest over one to four years.
2022 Equity Incentive Plan
In 2022, the Company adopted its 2022 Equity Incentive Plan (the “2022 Plan”), which superseded the previous 2020 Plan, provides for the granting of stock options, stock appreciation rights (“SARs”), restricted stock, and RSUs to employees, non-employee directors, and consultants of the Company. Shares of common stock underlying awards that expire or are forfeited or canceled will again be available for issuance under the 2022 Plan.
The number of shares of the Company’s common stock reserved for issuance under the 2022 Plan is approximately 15.5 million, plus up to approximately 8.3 million shares subject to awards granted under the 2017 and 2020 Plans. Additionally, beginning on March 1, 2022 and ending on (and including) March 31, 2031, the number of shares of the Company’s common stock that may be issued under the 2022 Plan will increase by a number of shares equal to the lesser of (i) 4.0% of the outstanding shares on the last day of the immediately preceding fiscal year or (ii) such lesser number of shares (including zero) that the Company’s Board of Directors determines for the purposes of the annual increase for that fiscal year.
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ENERGY VAULT HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

Stock Option Activity
Stock option activity for the three months ended March 31, 2022 is as follows (in thousands, except per share data):
Options Outstanding
Number of
Options
Weighted Average
Exercise Price
Per Share
Weighted Average
Remaining
Contractual
Term (in years)
Aggregate
Intrinsic
Value
Balance as of December 31, 2021 (1)
1,345 $5.35 9.11$7,024 
Stock options granted  
Stock options exercised(32)5.43 
Stock options forfeited, canceled, or expired(24)5.43 
Balance as of March 31, 2022
1,289 5.34 8.90$19,481 
Options exercisable as of March 31, 2022
685 4.49 8.58$10,439 
Options vested and expected to vest as of March 31, 2022
1,289 $5.34 8.90$19,481 
__________________
(1) The number of options prior to the Merger have been retroactively restated to reflect the exchange ratio of 6.7735 established in the Merger.
As of March 31, 2022, total unamortized stock-based compensation expense related to unvested awards that are expected to vest was $1.0 million. The weighted-average period over which such stock-based compensation expense will be recognized is approximately 2.85 years.
The aggregate intrinsic values of options outstanding, exercisable, vested and expected to vest were calculated as the difference between the exercise price of the options and the closing stock price of the Company’s common stock on the NYSE as of March 31, 2022.
Restricted Stock Units
The Company has granted two-tier RSUs under the 2020 Plan. These RSUs have both a service-based vesting condition and liquidity event-based vesting condition. The service-based vesting period for these awards is generally four years with a cliff vesting period of one year and continue to vest monthly thereafter. The liquidity event-based vesting condition was satisfied upon the closing of the Merger.
RSU activity for the three months ended March 31, 2022 was as follows (in thousands, except per share data):
Share
Weighted Average
Grant Date Fair
Value per Share
Nonvested balance as of December 31, 2021 (1)
6,170 $14.33 
RSUs granted1,115 43.47 
RSUs forfeited(133)41.33 
RSUs vested(2,637)5.15 
Nonvested balance as of March 31, 2022
4,515 $25.47 
_________________
(1) The number of RSUs prior to the Merger have been retroactively restated to reflect the exchange ratio of 6.7735 established in the Merger.
As of March 31, 2022, unrecognized stock-based compensation expense related to these RSUs was $13.7 million which is expected to be recognized over the remaining weighted-average vesting period of approximately 3.47 years.
Unvested Common Stock/Restricted Stock Awards
The Company has certain common stocks that are subject to repurchase at the election of the Company. These repurchase rights expire over time and therefore are accounted for as unvested common stock. The Company has RSAs that vest upon
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ENERGY VAULT HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

the satisfaction of both a service-based condition and a liquidity event-based condition. The liquidity event-based vesting condition was satisfied upon the closing of the Merger.
The following table summarizes information about outstanding unvested stock activities for the three months ended March 31, 2022 (in thousands, except per share data):
Unvested
Common
Stock
Weighted Average
Grant Date Fair
Value per Share
Balances outstanding at December 31, 2021 (1)
5,520 $4.95 
New grants or issues  
Common stock vested(3,578)4.95 
Balances outstanding at March 31, 2022
1,942 $4.95 
_________________
(1) The number of RSAs prior to the Merger have been retroactively restated to reflect the exchange ratio of 6.7735 established in the Merger.
As of March 31, 2022, unrecognized stock-based compensation expense related to these RSAs was $0.7 million which is expected to be recognized over the remaining weighted-average vesting period of approximately 1.46 years.
Stock-Based Compensation Expense
Total stock-based compensation expense for the three months ended March 31, 2022 and 2021 is as follows (in thousands):
Three Months Ended March 31,
20222021
Sales and marketing$490 $6 
Research and development3,781  
General and administrative4,931 1 
Total stock-based compensation expense$9,202 $7 
Total stock-based compensation expense for the three months ended March 31, 2022 includes $7.1 million in expense that was recognized upon the Closing of the Merger, which included $3.9 million related to RSUs and $3.2 million related to RSAs.
NOTE 11. INCOME TAXES
The Company recorded a tax provision of $0.1 million and $0 for the three months ended March 31, 2022 and 2021, respectively. The Company has recorded a valuation allowance against substantially all of the Company’s net deferred tax assets. The Company provides for a valuation allowance when it is more likely than not that some portion of, or all of the Company’s deferred tax assets will not be realized. Due to the Company’s history of losses, the Company determined that it is not more likely than not to realize its deferred tax assets.
NOTE 12. NET LOSS PER SHARE OF COMMON STOCK
The weighted-average number of shares of common stock outstanding prior to the Merger have been retroactively adjusted by the Exchange Ratio to give effect to the reverse recapitalization treatment of the Merger. Shares of common stock issued
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ENERGY VAULT HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

as a result of the conversion of Legacy Energy Vault convertible preferred stock in connection with the closing of the Merger have been included in the basic net loss per share calculation on a prospective basis.
Basic and diluted net loss per share attributable to common stockholders are calculated as follows (amounts in thousands, except per share amounts):
Three Months Ended March 31,
20222021
Net loss$(20,079)$(28,995)
Weighted-average shares outstanding – basic and diluted (1)
80,806 10,861 
Net loss per share – basic and diluted$(0.25)$(2.67)
_________________
(1) The weighted-average number of shares prior to the Merger have been retroactively restated to reflect the exchange ratio of 6.7735 established in the Merger.
There is no common stock and convertible preferred stock that were dilutive for the three months ended March 31, 2022 and 2021. Due to net losses for the three months ended March 31, 2022 and 2021, basic and diluted net loss per common share were the same, as the effect of potentially dilutive securities would have been anti-dilutive.
The following outstanding balances of common share equivalent securities have been excluded from the calculation of diluted weighted-average common shares outstanding because the effect is anti-dilutive for the periods presented:
Three Months Ended March 31,
20222021
Public and Private Warrants14,750  
Stock options1,289 203 
Convertible preferred stock 70,669 
RSUs4,515  
Unvested Common Stock1,942 2,262 
Total22,496 73,134 
The 9.0 million shares of common stock equivalents subject to the Earn-Out Shares are excluded from the anti-dilutive table above as of March 31, 2022, as the underlying shares remain contingently issuable as the Earn-Out Triggering Events have not been satisfied.
NOTE 13. COMMITMENTS AND CONTINGENCIES
In connection with the Company’s licensing agreement with Atlas, the Company has committed to make a refundable contribution to Atlas in the amount of $25.0 million. The refundable contribution will be issued to Atlas during the period in which it begins construction on its first gravity energy storage system (“GESS”), and will be refunded to the Company upon Atlas’ first GESS reaching substantial completion and meeting certain performance metrics.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis provide information which Energy Vault’s management believes is relevant to an assessment and understanding of Energy Vault’s consolidated results of operations and financial condition. The discussion should be read together with our unaudited interim condensed consolidated financial statements, the respective notes thereto, and other financial information included elsewhere in this Quarterly Report. The discussion and analysis should also be read together with the audited consolidated financial statements for the year ended December 31, 2021, and the related notes included in Amendment No. 1 to the Current Report on Form 8-K filed by us with the SEC on March 31, 2022 (“Amendment No. 1”). This discussion may contain forward-looking statements based upon Energy Vault’s current expectations that involve risks, uncertainties, and assumptions. Energy Vault’s actual results may differ materially from those anticipated in these forward-looking statements. You should review the section titled “Cautionary Note Regarding Forward-Looking Statements” for a discussion of forward-looking statements and the section titled “Risk Factors,” for a discussion of factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis and elsewhere in this Quarterly Report. Energy Vault’s historical results are not necessarily indicative of the results that may be expected for any period in the future. Unless the context otherwise requires, all references in this Quarterly Report to “we,” “our,” “us,” “the Company,” or Energy Vault refer to Energy Vault Holdings, Inc., a Delaware corporation, and its subsidiaries both prior to the consummation of and following the Merger (as defined below).
Our Business
Energy Vault develops sustainable, grid-scale energy storage solutions designed to advance the transition to a carbon free, resilient power grid. Energy Vault’s mission is to accelerate the decarbonization of the economy through the development of sustainable and economical energy storage technologies. To achieve this, Energy Vault is developing a proprietary gravity-based energy storage technology. Energy Vault is also designing proprietary energy management software based on artificial intelligence (AI), advanced optimization algorithms designed to control and optimize entire energy storage systems, and a flexible energy storage integration platform suitable for storage technologies of many durations. Energy Vault’s product platform aims to help utilities, independent power producers, and large energy users significantly reduce their levelized cost of energy while maintaining power reliability.
Energy Vault was founded to address one of the greatest impediments to efficient renewable energy adoption — electricity storage. Renewable energy solutions struggle to replace fossil fuel power due to intermittency of the generation source and the lack of economic and sustainable energy storage solutions. Variable renewable energy sources such as wind and solar only produce energy when the sun is shining, or when the wind is blowing. Cost-effective energy storage is required to increase the amount of electricity that can be delivered to the grid from renewable energy sources in a balanced way that supports grid integration resiliency during low generation and eliminates over-generation and the risk of changes in energy delivery, or ramp rate. Ramp rate is measured as the percentage of change in energy delivered per second. Power plants are designed to operate within a range where the amount of energy delivered to the grid must always equal the amount of energy that is being consumed. Blackouts and other issues can result when the balance is disrupted, when the energy levels fall out of the set range due to low generation periods, or high energy demand periods. The system also may become overloaded because of abrupt changes in renewable energy generation. Energy storage helps to maintain the balance of energy delivery with energy consumed and to mitigate ramp rate to stay within range and avoid blackouts or other grid resiliency problems.
Energy Vault’s gravity-based solutions are based on the well-understood physics and mechanical engineering fundamentals of pumped hydroelectric energy storage, but replace water with custom-made composite blocks, or “mobile masses”, that can be made from low-cost and locally sourced materials, including local soil, mine tailings, coal combustion residuals (coal ash), and end-of-life decommissioned wind turbine blades.
Energy Vault’s gravity-based solutions build upon the core, proven energy storage technology of pumped hydroelectric energy storage and incorporates a simplified building design that is modular, flexible, and not limited by the same geological constraints of pumped hydroelectric energy storage plants. Applying the fundamental principles of gravity and potential energy, Energy Vault’s EVx and Energy Vault Resiliency Center (“EVRC”) solutions combine advanced materials science and proprietary machine-vision software to autonomously orchestrate the charge, storage, and discharge of electricity in grid-scale applications. To achieve this, Energy Vault synthesized technologies from four established industries: crane/elevators, shipping, motor/generator, and materials science. Combining potential and kinetic energy cycles, Energy Vault's systems are automated with advanced computer control and machine vision software to create a gravity energy storage innovation designed to meet the market demand for 2-12 hours of storage duration. Energy Vault’s EVx and EVRC systems are designed to serve economically both higher power/shorter duration applications with ancillary services from 2-4 hours, while scaling to serve medium (4-10 hours) and long duration (ten or more hours) requirements.
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Our storage, when combined with low-cost wind and photovoltaic solar, is designed to achieve an attractive levelized cost of energy delivered. The EVx and EVRC systems can be deployed as stand-alone storage connected to the grid or alongside any generation source, such as wind or solar farms. The Company is focused on enabling cost-effective renewable power on a global scale at a lower cost than existing, fully-depreciated fossil fuel plants, and with high sustainability standards. The potential energy of the system can be stored with the composite blocks in the raised position for unlimited periods of time and with nearly zero expected loss of the storage capacity over time. Additionally, Energy Vault is uniquely positioned to work with traditional fossil fuel companies to help utilities and coal plant operators make a more cost-effective transition to green power by utilizing energy waste materials such as coal ash in the production of the mobile masses that charge our gravity energy storage solutions.
The circular economy is a model of production and consumption, which involves sharing, leasing, reusing, repairing, refurbishing, and recycling existing materials and products as long as possible. In this way, the life cycle of products is extended to help minimize waste. Energy Vault has a unique approach to the circular economy which involves beneficial reuse of recyclable and energy waste materials into its sustainable production design.
In July 2020, Energy Vault completed mechanical construction of a five MW commercial demonstration unit (“CDU”) located in Arbedo-Castione, Switzerland based on the EV1 Tower design. In July 2020, the CDU was connected to the Swiss national electricity grid. Following the successful commercial scale deployment of the CDU, Energy Vault announced the new EVx platform in 2021 concurrent with its announcement of an investment in Energy Vault from Saudi Aramco Energy Ventures investment. EVx is expected to offer performance enhancements designed to have 80%-85% round trip efficiency, a 35-year life, and a flexible, modular design that is 45% lower in height than the EV1 Tower design. Round trip efficiency is the ratio between the amount of energy that is delivered from the charged system and the amount of energy that was used to charge the system, expressed as a percentage. For example, a round trip efficiency of 80% means that a system is able to deliver 80% of the energy that was used to charge the system to the end user. It is important to note that no energy storage system is 100% efficient and that there is always a loss of energy in the storage/delivery process.
In November 2021, the Company launched Energy Vault Solutions (“EVS”) to provide customers with (i) a technology neutral platform for the integration and delivery of multiple energy storage technologies, in addition to our proprietary gravity storage technology, and (ii) an advanced software energy management system, using artificial intelligence, predictive analytics and software optimization algorithms, to orchestrate the ideal economic dispatching of energy generation and storage assets as well as electrolizers and fuel cells. In this way, EVS is expected to be offered as software as a service, bundled with the sales of energy storage assets, or an energy storage technology license.
Recent Developments
In February 2022, Energy Vault announced a License and Royalty agreement for renewable energy storage with Atlas Renewable LLC (“Atlas”) and their majority investor China Tianying Inc., an international environmental management and waste remediation corporation engaged in smart urban environmental services, resource recycling and recovery, and zero-carbon clean energy technologies. The agreement supports the deployment of Energy Vault’s proprietary gravity energy storage technology and energy management software platform within mainland China and the Special Administrative Regions (“SAR”) of Hong Kong and Macau. In addition, Atlas has agreed to pay $50.0 million in IP licensing fees, to be paid in 2022, for use and deployment of Energy Vault’s gravity energy storage technology. The Company recognized revenue from this agreement of $42.9 million during the three months ended March 31, 2022.
In connection with the Company’s licensing agreement with Atlas, the Company has committed to make a refundable contribution to Atlas in the amount of $25.0 million. The refundable contribution will be issued to Atlas during the period in which it begins construction on its first gravity energy storage system (“GESS”), and will be refunded to the Company upon Atlas’ first GESS reaching substantial completion and meeting certain performance metrics.
Business Combination and Public Company Costs
On February 11, 2022, Energy Vault, Inc. (“Legacy Energy Vault”) completed the previously announced merger with NCCII Merger Corp., with Legacy Energy Vault surviving as a wholly-owned subsidiary of Novus Capital Corporation II (“Novus”) (the “Merger”). Immediately following the completion of the Merger, Novus changed its name to Energy Vault Holdings, Inc. On February 14, 2022, the Energy Vault’s common stock and warrants began trading on the New York Stock Exchange under the symbols “NRGV” and “NRGV WS,” respectively.
The Merger was accounted for as a reverse recapitalization in accordance with United States Generally Accepted Accounting Principles (“GAAP”). Under this method of accounting, Novus was treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the financial statements of the combined entity upon consumption of the Merger represented a continuation of the financial statements of Legacy Energy Vault with the Merger
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being treated as the equivalent of Legacy Energy Vault issuing stock for the net assets of Novus, accompanied by a recapitalization. The net assets of Novus are stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Merger are presented as those of Legacy Energy Vault in future reports of the combined entity. All periods prior to the Merger have been retroactively adjusted using the exchange ratio of 6.7735 (the “Exchange Ratio”) for the equivalent number of shares outstanding immediately after the Merger to effect the reverse recapitalization.
Energy Vault raised gross proceeds of $235.8 million, including the contribution of $40.8 million of cash, net of redemptions, held in Novus’ trust account from its initial public offering and an aggregate purchase price of $195.0 million from the sale and issuance of shares of common stock in a private placement (“Private Investment in Public Equity” or “PIPE”) at $10.00 per share. Energy Vault and Novus paid $44.8 million in transaction costs, resulting in total net cash proceeds to Energy Vault from the Merger and PIPE of $191.0 million. See Note 1 and Note 3, in Part I, Item 1. “Financial Statements” for additional information about the Merger.
As a result of the Merger, Energy Vault has become the successor to a publicly reporting company, which requires the hiring of additional personnel and the implementation of procedures and processes to comply with public company regulatory requirements, including the Exchange Act, and customary practices. We expect to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees, and additional internal and external accounting, legal, and administrative resources, including increased audit and legal fees.
Key Factors and Trends Affecting our Business
We believe that our performance and future success depend upon several factors that present significant opportunities for us, but also pose risks and challenges including those discussed below and in Part II, Item 1A. “Risk Factors.”
Product Development and Deployment Plan
Energy Vault intends to leverage its technology, competitive strengths, and remediation opportunity to establish its EVx and EVRC systems as viable solutions for short, medium and long-term renewable energy storage solutions.
Our cost projections are heavily dependent upon raw materials (such as steel), equipment (such as motors, inverters, and power electronic devices) and technical and construction service providers (such as engineering, procurement, construction firms). The global supply chain, on which Energy Vault relies, has been significantly impacted by (i) the COVID-19 pandemic, (ii) economic uncertainties, including the war in Ukraine, and (iii) high inflation pressure on project budgeting resulting in potential significant delays and cost fluctuations, particularly with respect to microchips and many other raw materials that are within the motor and power electronic supply chains. These future timing and financial developments may impact Energy Vault’s performance from both a deployment and cost perspective.
Currently, the only operating energy storage system utilizing Energy Vault’s technologies is the CDU which the Company continues to use for testing and software improvement. Building on its experience with the CDU, Energy Vault designed its EVx system. The EVx platform is designed to be a scalable, modular product line starting from 40MWh to multi-GWh to address grid resiliency needs in shorter durations while supporting longer duration and power needs in the event of power outages or powering industrial processes over long periods. Using the EVx design as a building block, the EVRC can be custom designed and built out in 10MWh increments that can scale to multi-GW-hour storage capacity to meet the energy storage needs for grid-scale deployment. There are no commercial installations of Energy Vault’s EVx system or EVRC platform at this time.
Energy Storage Industry
Our future revenue growth will be directly tied to the continued adoption of renewable energy storage systems. As the sector is relatively nascent, we expect the markets for renewable energy storage to increase. Furthermore, our systems rely on an alternative technology to the dominant and accepted storage technologies such as lithium-ion, flow batteries, and thermal storage. Our business depends on the acceptance of our products, including the EVx systems, in the marketplace. Even if renewable energy and energy storage become more widely adopted than they have been to date, potential customers may choose energy storage products from our competitors that are based on technologies other than our gravity-based energy storage technology.
COVID-19
The spread of the COVID-19 has caused an economic downturn on a global scale, as well as significant volatility in the financial markets. Government reactions to the public health crisis with mitigation measures have created significant uncertainties in the U.S. and global economies. The COVID-19 pandemic had caused delays in the construction of the CDU in Switzerland due to government-mandated temporary stay-at-home and quarantine orders; however, it did not significantly impact Energy Vault’s other core functions such as research and development and capital raising. Due to the pandemic related uncertainties in global markets and specific restrictions announced by The Canton Government of Ticino
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in March and April 2020, Energy Vault implemented actions to reduce its operating expense run rate through temporary salary reductions and other discretionary expense reductions. CDU component deliveries into the testing site in Arbedo Castione were also delayed due to the Swiss border being closed and due to the worksite being shut in compliance with the March 2020 lockdown. Furthermore, the Canton Health and Safety Department of Ticino, Switzerland ordered the hiring of a Health and Safety Manager in order to resume onsite operations of the CDU. The extent to which the COVID-19 pandemic impacts Energy Vault’s business, operations and financial results will depend on numerous evolving factors that management may not be able to accurately predict. The ultimate outcome of these matters is uncertain and, accordingly, the impact on our financial condition or results of operations is also uncertain.
Components of Results of Operations
Revenue
Prior to January 1, 2022, the Energy Vault had not recognized any revenue. During the three months ended March 31, 2022, the Company recognized revenue of $42.9 million from the licensing of its intellectual property to one customer. In the future, we expect to earn revenue from the sale of energy storage solutions, under four complementary sales programs based on customer preferences. Under the first program, Storage Asset Owners, the customer owns both the energy storage system and the service, that the system provides (i.e., the energy storage and dispatch of electricity). Energy Vault anticipates that this program will constitute the substantial majority of future sales and that utility companies, independent power producers, and industrial customers that consume large amounts of power or are making a transition to 24/7 renewable power may be interested in being Storage Asset Owners.
Under the second program, Storage Service Customers, customers such as community choice aggregators, independent power producers, and utility companies would sign long-term power purchase agreements and/or tolling agreements to purchase power on a fixed dollar per kilowatt on a monthly or hourly basis, while Energy Vault and potentially other equity co-investors would retain an ownership interest in the system. An investment tax credit of up to 26% could be applied against the costs incurred by the Company for U.S. based project installations if Energy Vault decides to combine other renewable energy components into a combined storage project. See the section titled “Risks Related to Government Regulations” in Item 1A. Risk Factors for further details.
Under the third program, the customer would enter into a Software as a Service (“SaaS”) agreement with Energy Vault, and would be granted access to Energy Vault’s Energy Management System that helps the economic dispatching of its energy storage and generation assets.
Under the fourth program, the Company would enter into intellectual property license and royalty agreements associated with our energy storage technology.
We intend to finalize our revenue recognition policies relating to these programs once we finalize definitive agreements with our future customers.
Operating expenses
Sales and marketing expenses
Sales and marketing expenses consist primarily of expenses relating to professional service costs, trade shows, marketing and sales related promotional materials, public relations expenses, website operating and maintenance costs, and stock-based compensation expenses for marketing, sales personnel, and related support teams. We expect that our sales and marketing expenses will increase over time as we continue to hire additional personnel to support the overall growth in our business.
Research and development expenses
Research and development expenses consist primarily of internal and external expenses incurred in connection with our research activities and development programs that include materials costs directly related to the product development, testing and evaluation costs, construction costs including labor and transportation of material, overhead related costs and other direct expenses consisting of stock-based compensation and consulting expenses relating to study of product safety, reliability and development. We expect our research and development costs to increase for the foreseeable future as we continue to invest in these activities to achieve our product design, engineering, and development roadmap.
General and administrative expenses
General and administrative expenses consist of information technology expenses, legal and professional fees, travel cost, personnel-related expenses for our corporate, executive, finance, and other administrative functions including expenses for professional and contract services. Personnel related expenses consist of salaries, benefits, and stock-based compensation expense. To a lesser extent, general and administrative expense includes depreciation, investor relations costs, insurance
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costs, rent, office expenses, and maintenance costs. We expect our general and administrative expenses to increase in the foreseeable future as we hire personnel to meet the growth of our business, and as a result of operating as a public company, including compliance with the rules and regulations of the SEC, legal, audit, additional insurance requirements, investor relations fees, SOX 404 implementation fees, and other administrative and professional services.
Other income (expense)
Change in fair value of derivative
The gain (loss) on revaluation of embedded derivatives consists or periodic fair value adjustments associated with the Series B Convertible Preferred Stock issuance right derivative liability.
Interest expense
Interest expense consists primarily of interest related to finance leases.
Change in fair value of warrants liability
The Company’s warrants are subject to fair value remeasurement at each balance sheet date. The Company expects to incur incremental income (expense) in the condensed consolidated statements of operations for the fair value change for the outstanding warrant liabilities at the end of each reporting period or through the exercise of such warrants.
Transaction costs
Transaction costs consist of legal, accounting, banking fees, and other costs directly related to the consummation of the Merger and the PIPE.
Other income (expense), net
Other income (expense), net consists primarily of interest income relating to our investment in money market funds as well as gains and losses related to foreign exchange transactions.
Results of operations
Consolidated Comparison of Three Months Ended March 31, 2022 to March 31, 2021
The following table sets forth our results of operations for the periods indicated (amounts in thousands, except percentages):
Three months ended March 31,
2022
2021
$ Change% Change
Revenue$42,884 $— $42,884 — %
Operating Expenses:
Sales and marketing2,580 85 $2,495 2,935.3 %
Research and development9,661 1,021 8,640 846.2 %
General and administrative9,806 1,855 7,951 428.6 %
Income (loss from operations)20,837 (2,961)23,798 (803.7)%
Other Income (Expense):
Change in fair value of derivative— (24,102)24,102 (100.0)%
Interest expense(1)(4)(75.0)%
Change in fair value of warrant liability(20,237)— (20,237)— %
Transaction costs(20,586)— (20,586)— %
Other income (expenses), net36 (1,928)1,964 (101.9)%
Net loss before income taxes$(19,951)$(28,995)$9,044 (31.2)%
Revenue
Revenue for the three months ended March 31, 2022 was $42.9 million. compared to no revenue for the three months ended March 31, 2021. The revenue for the three months ended March 31, 2022 resulted from a licensing agreement with
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Atlas Renewable. Revenue was recognized upon the transfer of the intellectual property to the customer. Currently, the Company does not expect to enter into any other licensing agreements.
Operating expenses
Sales and Marketing
Sales and marketing expenses increased by $2.5 million to $2.6 million for the three months ended March 31, 2022, from $0.1 million for the three months ended March 31, 2021. The increase resulted primarily from an increase in marketing and public relations costs of $1.2 million and an increase in personnel-related expenses of $0.9 million. The increase in personnel costs was due to expanded headcount, particularly at the senior levels, and increased stock-based compensation expense. Stock-based compensation expense was $0.5 million for the three months ended March 31, 2022, compared to $6 thousand for the three months ended March 31, 2021.
Research and Development
Research and development expenses increased by $8.6 million to $9.7 million for the three months ended March 31, 2022, from $1.0 million for the three months ended March 31, 2021. The increase resulted primarily from a $5.1 million increase in personnel-related expenses, a $1.2 million increase in depreciation expense, a $1.0 million increase in engineering and development costs, and a $0.8 million increase in software expenses. The increase in personnel costs was due to expanded headcount, particularly at the senior levels, and increased stock-based compensation expense. Stock-based compensation expense was $3.8 million for the three months ended March 31, 2022, compared to no expense for the three months ended March 31, 2021.
General and Administrative
General and administrative expenses increased by $8.0 million to $9.8 million for the three months ended March 31, 2022 from $1.9 million for the three months ended March 31, 2021. The increase resulted primarily from a $5.3 million increase in personnel-related expenses, a $1.3 million increase in legal and professional fees, a $0.4 million increase in insurance expenses, and a $0.3 million increase in consultant expenses. The increase in personnel costs was due to expanded headcount and an increase in stock-based compensation expense. Stock-based compensation expense was $4.9 million for the three months ended March 31, 2022, compared to $1 thousand for the three months ended March 31, 2021. The increase in legal and professional fees was attributable to external costs such as accounting, finance, tax, compliance, auditing, legal, and other professional fees associated with becoming a public company.
Other Income (Expense)
Change in fair value of derivative
Loss on revaluation of fair value adjustments decreased by $24.1 million to $0 for the three months ended March 31, 2022 compared to a $24.1 million loss for the three months ended March 31, 2021. The derivative liability associated with the Series B Convertible Preferred Stock expired without exercise in June 2021, therefore the derivative was not outstanding during the three months ended March 31, 2022.
Change in fair value of warrant liability
The Company recognized a change in the fair value of its warrant liability of $20.2 million for the three months ended March 31, 2022 due to the increase in the fair value of our outstanding warrants since the closing of the Merger. The Company did not have any outstanding warrants during the three month period ending March 31, 2021.
Transaction costs
The Company recognized transaction costs of $20.6 million related to the consummation of the Merger during the three months ended March 31, 2021.
Other income (expense), net
Other income (expense), net improved by $2.0 million to other income, net of $36 thousand for the three months ended March 31, 2022 compared to other expense, net of $1.9 million for the three months ended March 31, 2021. The change resulted primarily from fluctuations in foreign currency transaction gain and losses.
Liquidity and Capital Resources
Since inception, we have financed our operations primarily through the issuance and sale of equity and the proceeds from the Merger and the PIPE.
Merger and PIPE
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Energy Vault completed the Merger and PIPE on February 11, 2022, pursuant to which we received net proceeds of $191.0 million.
Short-Term Liquidity
As of March 31, 2022, we had $303.5 million of cash and cash equivalents, representing an increase of $198.4 million from cash and cash equivalents of $105.1 million at December 31, 2021. Management believes that its cash and cash equivalents on hand as of March 31, 2022 will be sufficient to fund our operating activities for at least the next twelve months without regard to any cash proceeds we may receive upon the exercise for cash of our warrants. The exercise price for any of our warrants is $11.50 per share, subject to certain specified adjustments. To the extent that the price of our common stock exceeds $11.50 per share, it is more likely that our warrant holders will exercise their warrants. To the extent that the price of our common stock declines, including a decline below $11.50 per share, it is less likely that our warrant holders will exercise their warrants. In addition, should Energy Vault enter into definitive collaboration and/or joint venture agreements or engage in business combinations in the future, we may be required to seek additional financing.
Energy Vault has incurred negative operating cash flows and operating losses in the past. We may continue to incur operating losses for the next several years due to its on-going research and development activities. The Company may seek additional capital through equity and/or debt financings depending on market conditions. If we are required to raise additional funds by issuing equity securities, dilution to stockholders would result. Any equity securities issued may also provide for rights, preferences or privileges senior to those of holders of our common stock. If we raise funds by issuing debt securities, these debt securities would have rights, preferences and privileges senior to those of holders of common stock. The terms of debt securities or borrowings could impose significant restrictions on our operations. The credit market and financial services industry have in the past, and may in the future, experience periods of uncertainty that could impact the availability and cost of equity and debt financing.
Contractual Obligations
Our principal commitments as of March 31, 2022 consisted primarily of obligations under operating leases, finance leases, deferred pensions, and a refundable contribution to Atlas. The Company has committed to make a $25.0 million refundable contribution that will be issued to Atlas during the period in which it begins construction on its first GESS, and will be refunded to the Company upon Atlas’ first GESS reaching substantial completion and meeting certain performance metrics.
Except for the commitment to provide the $25.0 million refundable contribution to Atlas, our commitments have not materially changed from those disclosed in our financial statements and accompanying notes for the year ended December 31, 2021, which are included in Amendment No. 1.
Cash Flows
The following table summarizes cash flows from operating, investing, and financing activities for the periods indicated (amounts in thousands):
Three Months Ended March 31,
20222021
Net cash used operating activities$(16,811)$(6,004)
Net cash provided by (used in) investing activities(83)(3)
Net cash provided by financing activities215,304 14,674 
Effects of exchange rate changes on cash(17)2,061 
Net increase (decrease) in cash$198,393 $10,728