Filed pursuant to Rule 424(b)(3)
Registration No. 333-262720
PROSPECTUS SUPPLEMENT NO. 9
(to Prospectus dated May 6, 2022)
Energy Vault Holdings, Inc.
Up to 101,567,843 Shares of Common Stock
5,166,666 Warrants to Purchase
Common Stock
This prospectus supplement supplements the prospectus dated May 6, 2022, as previously supplemented (the “Prospectus”), which forms a part of our registration statement on Form S-1 (No. 333-262720). This prospectus supplement is being filed to update and supplement the information in the Prospectus with the information contained in our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on November 14, 2022 (the “Quarterly Report”). Accordingly, we have attached the Quarterly Report to this prospectus supplement.
The Prospectus and this prospectus supplement relate to the issuance by us of up to an aggregate of 5,166,666 shares of our common stock, $0.0001 par value per share (“Common Stock”) issuable upon exercise of private placement warrants issued to our Founders (as defined in the Prospectus) (the “Private Warrants”). The Prospectus and this prospectus supplement also relate to the resale from time to time, upon the expiration of lock-up agreements, by (i) the selling stockholders named in the Prospectus or their permitted transferees of up to 96,401,254 shares of our Common Stock and (ii) the selling holders of Private Warrants.
Our Common Stock is listed on the New York Stock Exchange under the symbol “NRGV.” On November 11, 2022, the closing price of our Common Stock was $3.18 per share.
We are an “emerging growth company” under applicable federal securities laws and will be subject to reduced public company reporting requirements.
INVESTING IN OUR SECURITIES INVOLVES RISKS THAT ARE DESCRIBED IN THE “RISK FACTORS” SECTION BEGINNING ON PAGE 9 OF THE PROSPECTUS.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued under this prospectus supplement or the Prospectus or determined if this prospectus supplement or the Prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus supplement is November 14, 2022.
















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 September 30, 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
91361
(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
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 138,268,342, shares of common stock, par value $0.0001 per share, outstanding as of November 10, 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:
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 business, 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 our 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 our 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.
4


Part I-Financial Information
Item 1. Financial Statements
ENERGY VAULT HOLDINGS, INC.

Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands except par value)

September 30,
2022
December 31,
2021
Assets
Current Assets
Cash and cash equivalents$249,649 $105,125 
Restricted cash25,086 — 
Accounts receivable22,824 — 
Contract assets24,714 — 
Prepaid expenses and other current assets9,421 5,538 
Total current assets331,694 110,663 
Property and equipment, net1,577 11,868 
Right-of-Use assets, net1,378 1,238 
Other assets3,900 1,525 
Total Assets$338,549 $125,294 
Liabilities, Convertible Preferred Stock, and Stockholders’ Equity (Deficit)
Current Liabilities
Accounts payable$2,801 $1,979 
Accrued expenses3,669 4,704 
Contract liabilities, current portion27,517 — 
Long-term finance leases, current portion37 48 
Long-term operating leases, current portion676 612 
Total current liabilities34,700 7,343 
Deferred pension obligation166 734 
Asset retirement obligation819 978 
Contract liabilities, long-term portion1,500 1,500 
Long-term finance leases23 34 
Long-term operating leases760 662 
Warrant liability271  
Total liabilities38,239 11,251 
Commitments and contingencies
   Convertible preferred stock, $0.0001 par value; 85,741 shares authorized, 85,741 shares issued and outstanding at December 31, 2021; liquidation preference of $171,348
— 182,709 
Stockholders’ Equity (Deficit)
   Preferred stock, $0.0001 par value; 5,000 shares authorized, none issued
— — 
   Common stock, $0.0001 par value; 500,000 shares authorized, 137,839 shares issued, and 137,839 outstanding at September 30, 2022; 120,568 shares authorized, 20,432 shares issued, and 20,432 outstanding at December 31, 2021
14 — 
Additional paid-in capital424,499 713 
Accumulated deficit(123,988)(68,966)
Accumulated other comprehensive loss(215)(413)
Total stockholders’ equity (deficit)300,310 (68,666)
Total Liabilities, Convertible Preferred Stock, and Stockholders’ Equity (Deficit)$338,549 $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 September 30,
Nine Months Ended September 30,
2022202120222021
Revenue$1,694 $— $45,555 $— 
Operating expenses:
Cost of revenue1,623 — 2,194 — 
Sales and marketing3,758 169 8,287 443 
Research and development16,731 1,697 36,155 4,920 
General and administrative12,960 3,759 33,434 8,620 
Asset impairment2,828 (11)2,828 2,733 
Loss from operations(36,206)(5,614)(37,343)(16,716)
Other income (expense)
Interest expense— — (1)(7)
Change in fair value of warrant liability6,706 — 2,061 — 
Transaction costs— — (20,586)— 
Other income (expense), net920 (549)1,205 (1,866)
Loss before income taxes(28,580)(6,163)(54,664)(18,589)
Provision for income taxes185 — 358 — 
Net loss$(28,765)$(6,163)$(55,022)$(18,589)
Net loss per share — basic and diluted$(0.21)$(0.45)$(0.46)$(1.54)
Weighted average shares outstanding — basic and diluted140,302 13,598 118,560 12,094 
Other comprehensive income (loss) — net of tax
Actuarial gain (loss) on pension$$63 $561 $295 
Foreign currency translation gain (loss)(8)(596)(363)303 
Total other comprehensive income (loss)(7)(533)198 598 
Total comprehensive loss$(28,772)$(6,696)$(54,824)$(17,991)
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 Convertible Preferred Stock and Stockholders’ Equity (Deficit)
(Unaudited)
(In thousands)
Three Months Ended September 30, 2022
Convertible Preferred StockCommon Stock
Additional Paid-In Capital
Accumulated Deficit
Accumulated Other Comprehensive Income (Loss)
Total Stockholders’ Equity
Shares (1)
Amount
Shares (1)
Amount
Balance at June 30, 2022
 $ 134,441 $13 $402,004 $(95,223)$(208)$306,586 
Exercise of stock option— — 114 — 95 — — 95 
Exercise of warrants— — 2,190 14,523 — — 14,524 
Stock based compensation
— — — — 10,894 — — 10,894 
Vesting of RSUs, net of shares withheld for payroll taxes— — 1,094 — (3,017)— — (3,017)
Net loss— — — — — (28,765)— (28,765)
Actuarial gain on pension— — — — — — 
Foreign currency translation loss
— — — — — — (8)(8)
Balance at September 30, 2022
 $ 137,839 $14 $424,499 $(123,988)$(215)$300,310 
Three Months Ended September 30, 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 June 30, 2021
70,958 $77,341 14,924 $ $354 $(50,054)$(967)$(50,667)
Series B-1 Preferred Stock issuance costs
— (4)— — — — — — 
Issuance of Series C preferred stock for cash
14,783 107,000 — — — — — — 
Series C Preferred Stock issuance costs
— (1,479)— — — — — — 
Stock based compensation
— — 5,655 — 307 — — 307 
Net income— — — — — (6,163)— (6,163)
Actuarial loss on pension— — — — — — 63 63 
Foreign currency translation gain
— — — — — — (596)(596)
Balance at September 30, 2021
85,741 $182,858 20,579 $ $661 $(56,217)$ $(1,500)$(57,056)


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ENERGY VAULT HOLDINGS, INC.

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) (Continued)
(Unaudited)
(In thousands)
Nine Months Ended September 30, 2022
Convertible Preferred StockCommon Stock
Additional Paid-In Capital
Accumulated Deficit
Accumulated Other Comprehensive Income (Loss)
Total Stockholders’ Equity ( Deficit)
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(85,741)(182,709)85,741 182,700 — — 182,709 
Issuance of common stock upon the reverse recapitalization, net of transaction costs— — 27,553 191,856 — — 191,859 
Exercise of stock option— — 146 130 — — 131 
Exercise of warrants— — 2,873 25,360 — — 25,361 
Stock based compensation
— — — — 26,757 — — 26,757 
Vesting of RSUs, net of shares withheld for payroll taxes— — 1,094 — (3,017)— — (3,017)
Net loss— — — — — (55,022)— (55,022)
Actuarial gain on pension— — — — — — 561 561 
Foreign currency translation loss
— — — — — — (363)(363)
Balance at September 30, 2022
 $ 137,839 $14 $424,499 $(123,988)$(215)$300,310 
Nine Months Ended September 30, 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
7,153 15,320 — — — — — — 
Series B-1 Preferred Stock issuance costs
(25)— — — — — — 
Issuance of Series C preferred stock for cash
14,783 107,000 — — — — — — 
Series C Preferred Stock issuance costs
— (1,479)— — — — — — 
Exercise of stock option— — 373 — — — 
Stock based compensation
— — 5,655 — 557 — — 557 
Net loss— — — — — (18,589)— (18,589)
Actuarial gain on pension— — — — — — 295 295 
Foreign currency translation gain
— — — — — — 303 303 
Balance at September 30, 2021
85,741 $182,858 20,579 $ $661 $(56,217)$ $(1,500)$(57,056)
(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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ENERGY VAULT HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)

Nine Months Ended September 30,
20222021
Cash Flows From Operating Activities
Net loss$(55,022)$(18,589)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization7,562 976 
Non-cash lease expense548 319 
Non-cash interest income(217)— 
Stock based compensation26,757 452 
Asset Impairment2,828 3,236 
Change in fair value of warrant liability(2,061)— 
Change in pension obligation21 53 
Change in asset retirement obligation(93)— 
Foreign exchange gains and losses163 100 
Change in operating assets(55,247)664 
Change in operating liabilities26,966 (1,286)
Net cash used in operating activities(47,795)(14,075)
Cash Flows From Investing Activities
Purchase of property and equipment(679)(76)
Purchase of convertible notes(2,000)— 
Net cash used in investing activities(2,679)(76)
Cash Flows From Financing Activities
Proceeds from exercise of stock options131 — 
Proceeds from reverse recapitalization and PIPE financing, net235,940 — 
Proceeds from exercise of warrants7,855 — 
Payment of transaction costs related to reverse recapitalization(20,651)(469)
Payment of taxes related to net settlement of equity awards(3,017)— 
Repayment of debt— (765)
Proceeds from promissory note— 125 
Payment of finance lease obligations(51)(43)
Proceeds from Series B-1 preferred stock, net of issuance costs— 15,295 
Proceeds from Series C preferred stock, net of issuance costs— 105,520 
Proceeds from issue of shares, net of issuance costs— 
Net cash provided by financing activities220,207 119,668 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash(123)723 
Net increase in cash, cash equivalents, and restricted cash169,610 106,240 
Cash, cash equivalents, and restricted cash  –  beginning of the period
105,125 10,051 
Cash, cash equivalents, and restricted cash –  end of the period
274,735 116,291 
Less: Restricted cash at end of period25,086 — 
Cash and cash equivalents - end of period$249,649 $116,291 
ENERGY VAULT HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows (Continued)
(Unaudited)
(In thousands)
Nine Months Ended September 30,
20222021
Supplemental Disclosures of Cash Flow Information:
Income taxes paid
Cash paid for interest50 
Reclassification of inventory costs— 10,812 
Supplemental Disclosures of Non-Cash Investing and Financing Information:
Conversion of redeemable preferred stock into common stock in connection with the reverse recapitalization182,709 — 
Warrants assumed as part of reverse recapitalization19,838 — 
Actuarial gain on pension561 295 
Assets acquired on finance lease35 43 
Purchases of intangible assets recorded in accrued liabilities— 119 
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., which together with its subsidiaries is referred to herein as “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 identify, develop, and bring to market the most economical, flexible, and sustainable energy storage solutions. To achieve this, the Company delivers turn-key energy storage solutions and energy management software systems to utilities, independent power producers, and large energy users to 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’s subsidiary, Energy Vault SA, was formed in December 2017 in Lugano Switzerland to build a full-scale demonstration unit (the “CDU”), and 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
Prior to 2022, the Company was primarily involved in research and development activities. Currently, the Company continues to devote substantial efforts to product research and development, as well as initial market development. 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 economic uncertainties described below.
The spread of the COVID-19 virus during 2020 and thereafter, along with inflation concerns, have caused economic uncertainty on a global scale, as well as significant volatility in the U.S. and global financial markets. The COVID-19 pandemic 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 the Company’s other core operations such as research and development and fund raising. The extent to which these economic uncertainties impact 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 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”).
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ENERGY VAULT HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements
(Unaudited)
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 September 30, 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 and nine months ended September 30, 2022 and 2021. The results for the three and nine months ended September 30, 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.
If the Company has a variable interest in an entity, an assessment is performed to determine if that entity is a variable interest entity (“VIE”), and if so, if the Company is the primary beneficiary of the VIE. The assessment of whether an entity is a VIE requires an evaluation of qualitative factors and, where applicable, quantitative factors. These factors include: (i) determining whether the entity has sufficient equity at risk, (ii) evaluating whether the equity holders, as a group, lack the ability to make decisions that significantly affect the economic performance of the entity, and (iii) determining whether the entity is structured with disproportionate voting rights in relation to their equity interests. The Company has determined that it is not the primary beneficiary of any VIEs in which it has a variable interest.
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
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ENERGY VAULT HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements
(Unaudited)
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.
Segment Reporting
The Company reports its operating results and financial information in one operating and reportable segment. Our chief operating decision maker, which is our chief executive officer, reviews our operating results on a consolidated basis and uses that consolidated financial information to make operating decisions, assess financial performance, and allocate resources.
Transaction Costs
Transaction costs consist of direct legal, accounting, and other fees related 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 public 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 sheets. 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 statements 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 condensed consolidated statements 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.
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Notes to Condensed Consolidated Financial Statements
(Unaudited)
(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 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.
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 September 30, 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.
Build and Transfer Energy Storage Projects: The Company enters into contracts with utility companies and independent power producers to build and transfer energy storage projects. The Company has entered into contracts to build and transfer battery-based energy storage projects and intends to enter into contracts to build and transfer gravity-based energy storage projects in the future. Each storage project is customized depending on the customer’s energy needs. Customer payments are due upon meeting certain milestones that are consistent with contract-specific phases of a project. The Company determines the transaction price based on the consideration expected to be received, which includes estimates of liquidated damages or other variable consideration. Generally, each contract to design and construct an energy storage project contains one performance obligation. Multiple contracts entered into with the same customer and near the same time to construct energy storage projects are combined in accordance with ASC 606. In these situations, the contract prices are aggregated and then allocated to each energy storage project based upon their relative stand-alone selling price.
The Company recognizes revenue over time as a result of the continuous transfer of control of its products to the customer. The continuous transfer of control to the customer is supported by clauses in the contracts that provide enforceable rights to
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Notes to Condensed Consolidated Financial Statements
(Unaudited)
payment of the transaction price associated with work performed to date for products that do not have an alternative use to the Company and/or the project is built on the customer’s land that is under the customer’s control.
Revenue for these performance obligations is recognized using the percentage of completion method based on cost incurred as a percentage of total estimated contract costs. Contract costs include all direct materials and labor costs related to contract performance. Pre-contract costs with no future benefit are expensed in the period in which they are incurred. Since the revenue recognition of these contracts depends on estimates, which are assessed continually during the term of the contract, recognized revenues and profit are subject to revisions as the contract progresses to completion. The cumulative effects of revisions of estimated total contract costs and revenues, together with any contract reserves which may be deemed appropriate, are recorded in the period in which the facts and changes in circumstances become known. Due to uncertainties inherent in the estimation process, it is reasonably possible that these estimates will be revised in a different period. When a loss is forecasted for a contract, the full amount of the anticipated loss is recognized in the period in which it is determined that a loss will incur.
The Company’s contracts generally provide customers the right to liquidated damages (“LDs”) against Energy Vault in the event specified milestones are not met on time, or certain performance metrics are not met upon or after the substantial completion date. LDs are accounted for as variable consideration, and the contract price is reduced by the expected penalty or LD amount when recognizing revenue. Variable consideration is included in the transaction price only to the extent that it is improbable that a significant reversal in the amount of cumulative revenue recognized will occur when the uncertainty is resolved. Estimating variable consideration requires certain estimates and assumptions, including whether and by how much a project will be delayed. The existence and measurement of liquidated damages may also be impacted by the Company’s judgment about the probability of favorable outcomes of customer disputes involving whether certain events qualify as force majeure or the reason for the events that caused project delays. Variable consideration for LDs is estimated using the expected value of the consideration to be received. If Energy Vault has a claim against the customer for an amount not specified in the contract, such claim is recognized as an increase to the contract price when it is legally enforceable, which is usually upon signing a respective change order or equivalent document confirming the claim acceptance by the customer.
Operate 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’s intellectual property licensing revenue to date is only 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 previously provided to Atlas. The Company identified the obligation to provide this update to Atlas as a performance obligation and deferred $5.9 million of the transaction price related to this performance obligation. 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 $25.0 million due to the Company’s commitment to provide a $25.0 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
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ENERGY VAULT HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements
(Unaudited)
the variable consideration has been included in the transaction price. As of September 30, 2022, the Company has contributed $22.5 million of the $25.0 million. The $22.5 million refundable contribution is included in the line item, contract assets, on the condensed consolidated balance sheets.
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 to Atlas during the periods in which they construct energy storage projects. Energy Vault is reimbursed by Atlas at the Company’s cost to provide these services. Because the construction support services are considered to be an option for the customer to obtain services from the Company, this obligation was considered to be a performance obligation and required an allocation of the transaction price. The transaction price allocated to construction support services and deferred at the inception of the contract was $1.2 million. This amount is recognized as revenue 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.
Accounts Receivable
Accounts receivable represents amounts that have been billed to customers and do not bear interest. Receivables are carried at amortized cost. The Company periodically assesses collectability of its receivables from each customer and records an allowance for doubtful accounts for the estimated uncollectible amount when deemed appropriate. If circumstances related to specific customers change, the Company’s estimates of the recoverability of receivables could be adjusted. Accounts are written off after all means of collection, including legal action, have been exhausted. As of both September 30, 2022 and December 31, 2021, no allowance for doubtful accounts has been recorded.
Restricted Cash
Restricted cash as of September 30, 2022 was $25.1 million on the Company’s consolidated balance sheet. Substantially all of the restricted cash balance was held by banks as collateral for the Company’s letters of credit.
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 in May 2022);
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 consummation 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 consummation of the Merger was as follows (amounts in thousands):
Shares
Legacy Energy Vault stock (1)
106,079
Novus public 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. REVENUE RECOGNITION
The Company recognized revenue for the product and service categories as follows for the three and nine months ended September 30, 2022 and 2021.
Three Months Ended September 30,
20222021
Licensing of intellectual property$— $— 
Build and transfer energy storage products1,153 — 
Other541 — 
Total revenue$1,694 $— 
Nine Months Ended September 30,
20222021
Licensing of intellectual property$42,884 $— 
Build and transfer energy storage products1,153 — 
Other1,518 — 
Total revenue$45,555 $— 
Other revenue includes revenue of $0.2 million and $0.7 million related to the amortization of deferred revenue related to providing construction support services to Atlas during the three and nine months ended September 30, 2022, respectively. Additionally, other revenue includes revenue of $0.3 million and $0.9 million related to cost reimbursements from Atlas for providing construction support services during the three and nine months ended September 30, 2022, respectively.
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Notes to Condensed Consolidated Financial Statements
(Unaudited)
For the three months ended September 30, 2022, the Company had two customers that accounted for 68% and 32% of total revenue, respectively. For the nine months ended September 30, 2022, the company had one customer that accounted for 97% of total revenue.
Remaining Performance Obligations
Remaining performance obligations represent the amount of unearned transaction prices under contracts for which work is wholly or partially unperformed. As of September 30, 2022, the amount of the Company’s remaining performance obligations was $211.5 million. The Company generally expects to recognize the majority of the remaining performance obligations as revenue within the next twelve months.
Contract Balances
The following table provides information about contract assets and contract liabilities from contracts with customers.
September 30, 2022December 31, 2021
Refundable contribution$22,500 $— 
Unbilled receivables298 — 
Retainage1,916 — 
Contract assets$24,714 $— 
Contract liabilities, current portion$27,517 $— 
Contract liabilities, long-term portion1,500 1,500 
Total contract liabilities$29,017 $1,500 
Contract assets consist of a refundable contribution, unbilled receivables, and retainage. Refundable contribution represents the contribution the Company made to Atlas to be used during the construction of its first gravity energy storage system (“GESS”), which will be refunded to the Company upon Atlas’ first GESS obtaining substantial completion. Unbilled receivables represent the estimated value of unbilled work for projects with performance obligations recognized over time. Retainage represents a portion of the contract amount that has been billed, but for which the contract allows the customer to retain a portion of the billed amount until final contract settlement. Retainage is not considered to be a significant financing component because the intent is to protect the customer.
Contract liabilities consist of deferred revenue. Under certain contracts, the Company may be entitled to invoice the customer and receive payments in advance of performing the related contract work. In those instances, the Company recognizes a liability for advance billings in excess of revenue recognized, which is referred to as deferred revenue. Deferred revenue is not considered to be a significant financing component because it is generally used to meet working capital demands that can be higher in the early stages of a contract.
NOTE 5. 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.
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Notes to Condensed Consolidated Financial Statements
(Unaudited)
The Company’s financial assets and liabilities that were measured at fair value on a recurring basis as of September 30, 2022 and December 31, 2021 were as follows (amounts in thousands):
September 30, 2022
Level 1Level 2Level 3Total
Assets (Liabilities):
Money market funds (1)
$5,357 $— $— $5,357 
Derivative asset —  conversion option (2)
— — 1,025 1,025 
Warrant liability (3)
— — (271)(271)
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 7 - Convertible Note Receivable for further information.
(3) Refer to Note 10 - Warrants for further information.
NOTE 6. RELATED PARTY TRANSACTIONS
In May 2019, the Company received a $1.5 million deposit for an “EV1” tower from a customer that is owned by one of its primary shareholders; the order remains outstanding as of September 30, 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 and nine months ended September 30, 2022, the Company paid consulting fees of $0.1 million and $0.3 million, respectively, to the father of one of the Company’s executive officers. The Company paid consulting fees of $0.1 million and $0.2 million during the three and nine months ended September 30, 2021.
The Company paid EVx/EV1 prototype construction labor costs of $0.1 million and $0.4 million, respectively, to a company owned by the brother of an employee during the three and nine months ended September 30, 2022. The Company paid EVx/EV1 prototype construction labor costs of $0.1 million and $0.4 million during the three and nine months ended September 30, 2021.
The Company paid marketing costs of $0.3 million and $0.8 million, respectively, to a company who has a director that is also one of the Energy Vault’s executive officers during the three and nine months ended September 30, 2022.
NOTE 7. CONVERTIBLE NOTE RECEIVABLE
In October 2021, the Company entered into a convertible promissory note purchase agreement with DG Fuels, LLC (“DG Fuels”) and purchased a promissory note with a principal balance of $1.0 million (“DG Fuels Tranche 1 Note”). In April 2022, the Company purchased an additional promissory note from DG Fuels with a principal balance of $2.0 million. (“DG Fuels Tranche 2 Note”) (collectively, the “DG Fuels Note”). The convertible promissory note is recorded in other assets in the condensed consolidated balance sheets.
The maturity date of the DG Fuels Note 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
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 its 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, which requires bifurcation and separate accounting at its estimated fair value under ASC 815 – Derivative and Hedging. The embedded derivative upon the purchase of the DG Fuels Tranche 1 Note was an asset of $0.4 million and the embedded derivative upon the purchase of the DG Fuels Tranche 2 note was an asset of $0.7 million. The estimated fair value of the derivative instruments were recognized as a derivative asset on the condensed consolidated balance sheets, 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 $0.1 million and $0.2 million for the three and nine months ended September 30, 2022 from the DG Fuels Note. Interest income included income from the amortization of the debt discount of $33 thousand and $0.1 million for the three and nine months ended September 30, 2022.
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 and nine months ended September 30, 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):
Three Months Ended September 30, 2022Nine Months Ended September 30, 2022
Beginning of period$1,025 $350 
Additions— 675 
Change in fair value— — 
End of period
$1,025 $1,025 
The Company has determined that DG Fuels is a variable interest entity and that the Company has a variable interest in it through the DG Fuels note. The Company is not the primary beneficiary of DG Fuels, and thus is not required to consolidate DG Fuels. The Company’s maximum exposure to loss related to DG Fuels is limited to the Company’s investment of $3.0 million.
NOTE 8. PROPERTY AND EQUIPMENT, NET
As of September 30, 2022 and December 31, 2021, property and equipment, net consisted of the following (amounts in thousands):
September 30,
2022
December 31,
2021
Brick machines$1,108 $2,515 
Right-of-Use assets – vehicles169 175 
Furniture and equipment525 176 
Leasehold improvements408 179 
Demonstration & test equipment8,881 11,218 
Total property and equipment11,091 14,263 
Less: accumulated depreciation(9,514)(2,395)
Property and equipment, net$1,577 $11,868 
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Notes to Condensed Consolidated Financial Statements
(Unaudited)

For the three and nine months ended September 30, 2022, depreciation and amortization related to property and equipment was $5.2 million and $7.6 million, respectively. For the three and nine months ended September 30, 2021, depreciation and amortization related to property and equipment was $0.5 million and $1.0 million, respectively.
The Company recognized impairment charges of $2.8 million for the three and nine months ended September 30, 2022, respectively, related to demonstration and test equipment and brick machines. Due to a change in the facts and circumstances during the three months ended September 30, 2022, the Company completed the dismantling of the CDU by September 30, 2022. This change in the facts and circumstances resulted in the accelerated depreciation and impairment charges recognized during the three months ended September 30, 2022. The Company did not recognize any impairment charges on property and equipment, net during the three and nine months ended September 30, 2021.
NOTE 9. 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 were converted to 93,258 shares of common stock in May 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):
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 stock14,361 14,361 25 
85,741 85,741 $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
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ENERGY VAULT HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

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 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.
NOTE 10. 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 at that time were scheduled to expire on February 11, 2027, which represents 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
Through June 30, 2022, 0.7 million Public Warrants had been exercised, resulting in 8.9 million outstanding Public Warrants as of June 30, 2022. On July 1, 2022 the Company announced it would redeem all of its Public Warrants that
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ENERGY VAULT HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

remained outstanding at 5:00 p.m. New York City time on August 1, 2022 (the “Redemption Date”) for $0.10 per warrant (the “Redemption Price”). The Public Warrant Holders were permitted to exercise their warrants and receive common stock (i) in exchange for a payment in cash of the $11.50 per warrant exercise price, or (ii) on a cashless basis in which the exercising holder received 0.2526 of common stock for each warrant surrendered for exercise. Any Public Warrants that remained unexercised at 5:00 p.m. New York City time on the Redemption Date would be void and no longer exercisable, and the holders of those Public Warrants would be entitled to receive only the redemption price of $0.10 per warrant.
2.2 million shares of common stock were issued upon the cashless exercise of 8.7 million Public Warrants. 0.2 million in unexercised and outstanding Public Warrants as of 5:00 p.m., August 1, 2022 were redeemed at a price of $0.10 per Public Warrant. No Public Warrants remained outstanding as of September 30, 2022.
Private Warrants
The Private Warrants are exercisable on a cash or cashless basis, at the warrant holders’ option, and are not 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 Private Warrants are exercisable until February 11, 2027.
The following table summarizes the Public and Private Warrants activities for the three and nine months ended September 30, 2022 (amounts in thousands):
Three Months Ended September 30, 2022
Public WarrantsPrivate WarrantsTotal Warrants
Beginning of period8,900 5,167 14,067 
Warrants exercised(8,665)— (8,665)
Warrants redeemed(235)— (235)
End of period— 5,167 5,167 
Nine Months Ended September 30, 2022
Public WarrantsPrivate WarrantsTotal Warrants
Warrants assumed upon the Closing of the Merger9,583 5,167 14,750 
Warrants exercised(9,348)— (9,348)
Warrants redeemed(235)— (235)
End of period— 5,167 5,167 
The Public Warrants were classified as Level 1 measurements as the Public Warrants had an adequate trading volume to provide reliable indication of value from the Closing of the Merger to the Redemption Date. The Private Warrants were classified as Level 2 from the Closing of the Merger until the Redemption Date because the Private Warrants had similar terms to the Public Warrants. Upon the ceasing of trading of the Public Warrants on the Redemption Date, the fair value measurement of the Private Warrants transferred from Level 2 to Level 3 and the Company used a Black Scholes model to determine the fair value of the Private Warrants. The primary significant unobservable input used to evaluate the fair value measurement of the Company’s Private Warrants is the expected volatility. A significant increase in the expected volatility in isolation would result in a significantly higher fair value measurement. The Private Warrants were valued at $0.05 per warrant as of September 30, 2022.
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ENERGY VAULT HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

The following table provides the assumptions used to estimate the fair value of the Private Warrants as of September 30, 2022:
September 30, 2022
Common stock price$5.28 
Exercise price$11.50 
Expected term (in years)4.37
Expected volatility17.4 %
Risk-free interest rate4.2 %
Expected dividend yield— %
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 for the three and nine months ended September 30, 2022 (amounts in thousands):
Three Months Ended September 30, 2022
Public WarrantsPrivate Warrants Total Warrants
Beginning of period$13,439 $8,060 $21,499 
Warrants exercised(14,499)— (14,499)
Warrants redeemed(23)— (23)
Change in fair value1,083 (7,789)(6,706)
End of period$— $271 $271 
Nine Months Ended September 30, 2022
Public WarrantsPrivate WarrantsTotal Warrants
Warrant liability assumed upon the Closing of the Merger$12,938 $6,900 $19,838 
Warrants exercised(17,483)— (17,483)
Warrants redeemed(23)— (23)
Change in fair value4,568 (6,629)(2,061)
End of period$— $271 $271 
NOTE 11. 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
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ENERGY VAULT HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

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.
Stock Option Activity
Stock option activity for the nine months ended September 30, 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 $0.79 9.11$7,024 
Stock options granted— — — — 
Stock options exercised(162)0.80 — — 
Stock options forfeited, canceled, or expired(40)0.80 — — 
Balance as of September 30, 2022
1,143 0.79 8.10$5,136 
Options exercisable as of September 30, 2022
803 0.69 7.77$3,689 
Options vested and expected to vest as of September 30, 2022
1,143 $0.79 8.10$5,136 
__________________
(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 September 30, 2022, total unamortized stock-based compensation expense related to unvested awards that are expected to vest was $0.7 million. The weighted-average period over which such stock-based compensation expense will be recognized is approximately 2.94 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 September 30, 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.
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ENERGY VAULT HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

RSU activity for the nine months ended September 30, 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 $2.11 
RSUs granted13,281 9.08 
RSUs forfeited(516)5.58 
RSUs vested(4,450)1.06 
Nonvested balance as of September 30, 2022
14,485 $8.02 
_________________
(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 September 30, 2022, unrecognized stock-based compensation expense related to these RSUs was $100.5 million which is expected to be recognized over the remaining weighted-average vesting period of approximately 3.34 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 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 nine months ended September 30, 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 $0.73 
New grants or issues— — 
Common stock vested(5,520)0.73 
Balances outstanding at September 30, 2022
— $— 
_________________
(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.
Stock-Based Compensation Expense
Total stock-based compensation expense for the three and nine months ended September 30, 2022 and 2021 is as follows (in thousands):
Three Months Ended September 30,
20222021
Sales and marketing$2,146 $
Research and development4,219 184 
General and administrative4,529 
Total stock-based compensation expense$10,894 $202 
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ENERGY VAULT HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

Nine Months Ended September 30,
20222021
Sales and marketing$3,038 $59 
Research and development11,011 339 
General and administrative12,708 54 
Total stock-based compensation expense$26,757 $452 
Total stock-based compensation expense for the nine months ended September 30, 2022 includes $7.1 million in expense that was recognized upon the Closing of the Merger, which includes $3.9 million related to RSUs and $3.2 million related to RSAs.
NOTE 12. INCOME TAXES
The Company recorded a tax provision of $0.2 million and $0.4 million for the three and nine months ended September 30, 2022 respectively. The Company did not record any tax provision for the three and nine months ended September 30, 2021. The Company has recorded a valuation allowance against substantially all of the Company’s net deferred tax assets. The Company provides for a valuation allowance when it is more likely than not that some portion of, or all of the Company’s deferred tax assets will not be realized. Due to the Company’s history of losses, the Company determined that it is not more likely than not to realize its deferred tax assets.
NOTE 13. NET LOSS PER SHARE OF COMMON STOCK
The weighted-average number of shares of common stock outstanding prior to the Merger have been retroactively adjusted by the Exchange Ratio to give effect to the reverse recapitalization treatment of the Merger. Shares of common stock issued as a result of the conversion of Legacy Energy Vault convertible preferred stock in connection with the closing of the Merger have been included in the basic net loss per share calculation on a prospective basis.
Basic and diluted net loss per share attributable to common stockholders are calculated as follows (amounts in thousands, except per share amounts):
Three Months Ended September 30,
20222021
Net loss$(28,765)$(6,163)
Weighted-average shares outstanding – basic and diluted (1)
140,302 13,598 
Net loss per share – basic and diluted$(0.21)$(0.45)

Nine Months Ended September 30,
20222021
Net loss$(55,022)$(18,589)
Weighted-average shares outstanding – basic and diluted (1)
118,560 12,094 
Net loss per share – basic and diluted$(0.46)$(1.54)
_________________
(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 are no common stock and convertible preferred stock that were dilutive for the three and nine months ended September 30, 2022 and 2021. Due to net losses during those periods, basic and diluted net loss per common share were the same, as the effect of potentially dilutive securities would have been anti-dilutive.
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ENERGY VAULT HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

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 September 30,
20222021
Private Warrants5,167 — 
Stock options1,143 1,199 
Convertible preferred stock— 85,741 
RSUs14,485 — 
Unvested Common Stock— 675 
Total20,795 87,615 
Nine Months Ended September 30,
20222021
Private Warrants5,167 — 
Stock options1,143 1,199 
Convertible preferred stock— 85,741 
RSUs14,485 — 
Unvested Common Stock— 675 
Total20,795 87,615 
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 September 30, 2022, as the underlying shares remain contingently issuable as the Earn-Out Triggering Events have not been satisfied.
NOTE 14. COMMITMENTS AND CONTINGENCIES
In connection with the Company’s licensing agreement with Atlas, the Company agreed to make a refundable contribution to Atlas in the amount up to $25.0 million during the period in which Atlas constructs its first GESS. As of September 30, 2022, the Company has contributed $22.5 million of the $25.0 million. The refundable contribution will be returned to the Company upon Atlas’ first GESS reaching substantial completion and meeting certain performance metrics.
Other Commitments and Contingencies
Letters of Credit: In the ordinary course of business and under certain contracts, the Company is required to post letters of credit for its customers, insurance carriers, and surety bond providers for project performance, and for its vendors for payment guarantees. Such letters of credit are generally issued by a bank or a similar financial institution. The letter of credit commits the issuer to pay specified amounts to the holder of the letter of credit under certain conditions. As of September 30, 2022, there was $24.9 million of letters of credit issued under the Company’s credit facilities. The Company is not aware of any material claims relating to its outstanding letters of credit.
Performance and Payment Bonds: In the ordinary course of business, Energy Vault is required by certain customers to provide performance and payment bonds for contractual commitments related to its projects. These bonds provide a guarantee that the Company will perform under the terms of a contract and that the Company will pay its subcontractors and vendors. If the Company fails to perform under a contract or to pay its subcontractors and vendors, the customer may demand that the surety make payments or provide services under the bond. The Company must reimburse the surety for expenses or outlays it incurs. As of September 30, 2022, there were no outstanding performance and payment bonds.
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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 identify, develop, and bring to market the most economical, flexible, and sustainable energy storage solutions. To achieve this, Energy Vault delivers turn-key energy storage solutions and energy management software systems to utilities, independent power producers, and large energy users to 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 — energy 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 core competencies include:
EVx: Our proprietary gravity-based energy storage system, which is a technologically and economically viable system that is currently being deployed.
Energy Vault Solutions (“EVS”): EVS develops our energy management software for maximizing the applications and economic return of diverse energy storage assets, including battery and gravity-based systems.
The Company’s portfolio of market-ready turnkey energy storage solutions currently includes:
Gravity energy storage systems (“GESS”),
Battery energy storage systems (“BESS”), and
Energy management software (“EMS”)
Gravity Energy Storage Systems
Energy Vault’s gravity-based solutions provide long-duration energy storage of four to twelve hours, while providing competitive economics and a lifetime round-trip efficiency (“RTE”) of over 80%. The Company’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
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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 topographical/geological constraints of pumped hydroelectric energy storage plants.
Applying the fundamental principles of gravity and potential energy, Energy Vault’s EVx solution combines advanced materials science and proprietary machine-vision software to autonomously orchestrate the charge, storage, and discharge of electricity in grid-scale applications. 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 storage duration of four to twelve hours.
Our storage, when combined with low-cost wind and photovoltaic solar, is designed to achieve an attractive levelized cost of energy delivered. The EVx system can be deployed as stand-alone storage connected to the grid or alongside any generation source, such as wind or solar farms. Energy Vault 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.
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 RTE of over 80%, 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.
Battery Energy Storage Systems
Energy Vault’s BESSs have expected lives that range from 10 to 20 years and provide short-duration energy storage of one to four hours. Our BESSs utilize a purpose-built AC block system leveraging an innovative architecture to lower cost, improve performance, and ensure the highest level of project safety. The Company’s BESS integrates hardware components from a diverse network of battery and power electronics manufacturers, and incorporates modular inverters to improve uptime and insulate against the potential consolidated damages of lost capacity. Our battery systems utilize flexible system architecture for long-term asset resiliency as grid conditions and market parameters change, as well as improved augmentation by avoiding reliance on a single manufacturer.
Energy Management Software
The Company launched EVS to provide customers with (i) a technology neutral platform for the integration and delivery of multiple energy storage technologies 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. EVS is expected to offer EMS as a software as a service, bundled with the sale 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 its 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. Atlas agreed to pay $50.0 million in IP licensing fees, for use and deployment of Energy Vault’s gravity energy storage technology. The Company has collected $45.0 million of the $50.0 million of cash and expects to collect the remaining $5.0 million of cash before the end of 2022. The Company recognized revenue
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related to this agreement of $0.5 million and $44.4 million during the three and nine months ended September 30, 2022, respectively.
In connection with the Company’s licensing agreement with Atlas, the Company agreed to make a refundable contribution to Atlas in the amount up to $25.0 million during the period in which Atlas constructs its first gravity energy storage system (“GESS”). As of September 30, 2022, the Company has contributed $22.5 million of the $25.0 million. The refundable contribution will be returned to the Company upon Atlas’ first GESS reaching substantial completion and meeting certain performance metrics.
In April 2022, the Company purchased a $2.0 million convertible promissory note from DG Fuels, LLC (“DG Fuels”). The maturity date of the note 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 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.
On July 1, 2022, Energy Vault delivered a notice of redemption for all of its outstanding public warrants to purchase shares of Energy Vault common stock. After delivering the notice of redemption, 2.2 million shares of common stock were issued upon the cashless exercise of 8.7 million public warrants. 0.2 million in unexercised and outstanding Public Warrants as of August 1, 2022 were redeemed at a price of $0.10 per warrant. No Public Warrants remain outstanding as of September 30, 2022.
In August 2022, the Company entered into two contracts with Jupiter Power (“Jupiter”), a leading battery energy storage developer and owner/operator of utility-scale battery energy storage projects in the United States, whereby Energy Vault will supply equipment, engineering, procurement, construction, balance of plant services, and the energy management software for two of Jupiter’s battery energy storage projects. The projects include a 100 MW (200 MWh) battery energy storage system near Fort Stockton, Texas, which will provide energy and ancillary services to ERCOT, and a 10 MW (20 MWh) system in Carpinteria, California, to provide grid services through participation in the CAISO Resource Adequacy program as well as energy resiliency in southern California. The projects will provide critically needed dispatchable capacity to these electricity markets and are expected to be completed in 2023.
In September 2022, the Company entered into a contract with Wellhead Electric Company, Inc. (“Wellhead”) and W Power, LLC, (“W Power”), a woman-owned business enterprise that has developed and owned power generation facilities in California, whereby Energy Vault will construct a 275.2 MWh battery storage project at W Power’s Energy Reliability Center in Stanton, California. The project is on an accelerated timeline to meet critical power needs for southern California and is expected to be completed by mid-2023.
Business Combination and Public Company Costs
On February 11, 2022, Energy Vault, Inc. (“Legacy Energy Vault”) completed the 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, 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 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
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“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 has required 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 have begun to incur and expect to continue 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 system as a viable solution for short, medium, and long-term renewable energy storage.
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.
To date, the only operating energy storage system that utilized Energy Vault’s technologies was the CDU. Energy Vault used the CDU for testing and software improvement until it was dismantled in September 2022. 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 40 MWh 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. There are no commercial installations of Energy Vault’s EVx system 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 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, Energy Vault had not recognized any revenue. During the three and nine months ended September 30, 2022, Energy Vault recognized revenue of $1.7 million and $45.6 million, respectively, from the building of energy storage systems and from the licensing of the Company’s intellectual property.
We expect to earn revenue from the sale of energy storage solutions, under four complementary sales programs based on customer preferences.
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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. The Company recognized revenue of $1.2 million during both the three and nine months ended September 30, 2022 related to this sales program.
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 30% 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. The Company has not yet recognized any revenue from this sales program.
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. The Company has not yet recognized any revenue from this sales program.
Under the fourth program, the Company would enter into intellectual property license and royalty agreements associated with our energy storage technology. The Company recognized revenue of zero and $42.9 million during the three and nine months ended September 30, 2022 related to this sales program.
Operating expenses
Cost of revenue
Cost of revenue consists primarily of subcontractor costs, direct labor, and consulting expenses associated with constructing energy storage systems and providing construction support services to Atlas.
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 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.
Asset Impairment
Energy Vault began building a prototype of the EV1 in March 2020, resulting in the CDU, an EV1 Tower, which was connected to the Swiss national grid in July 2020. Thereafter, through design improvements and refinements of its technology, Energy Vault announced the new EVx platform in 2021 and the Company completed the dismantling of the
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CDU by September 2022. The Company has recognized various impairments related to the CDU and production equipment for the EV1 Tower when components have been damaged or become obsolete.
Other income (expense)
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. With the completion of the redemption of Energy Vault’s public warrants on August 1, 2022, Energy Vault currently expects to incur incremental income (expense) in its consolidated statements of operations for the fair value change for outstanding warrant liabilities at the end of each reporting period in respect of outstanding private 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.
Key Operating Metrics
Bookings
Bookings represents the total MWhs to be delivered per signed customer contracts, or the total dollar value of signed customer contracts entered into during the specified periods. The following table presents bookings for the periods indicated (amounts in thousands, except MWh amounts):
Three months ended September 30,Nine Months Ended September 30,
20222021$ Change20222021$ Change
Bookings [MWh]495 — 495 495 — 495 
Bookings [$]$206,794 $— $206,794 $256,794 $— $256,794 
Backlog
Backlog represents the amount of revenue we expect to realize in the future on uncompleted construction contracts, including new contracts under which work has not yet begun, as well as the remaining revenue to be recognized under the Company’s intellectual property licensing agreement with Atlas. As of September 30, 2022, backlog totaled $211.5 million.
The Company expects to realize the majority of the backlog as of September 30, 2022 over the next twelve months. Timing of revenue for construction and installation projects included in our backlog can be subject to change as a result of customer, regulatory, or other delays or cancellations including from economic or other conditions caused by supply chain disruptions, inflation, COVID-19, weather, and/or other project-related factors. These effects, among others, could cause estimated revenue to be realized in periods later than originally expected, or not at all. Customers may postpone or cancel construction projects due to changes in our customer’s spending plans, market volatility, changes in government permitting, regulatory delays, and/or other factors. There can be no assurance as to our customer’s requirements or if actual results will be consistent with our estimates. As a result, our backlog as of any particular date is an uncertain indicator of future revenue and earnings.
Backlog is a common measurement used in our industry. Our methodology for determining backlog may not, however, be comparable to the methodologies used by others. The Company’s backlog agrees with the amount of our remaining performance obligations, which are described in Note 4 - Revenue Recognition.
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Results of operations
Consolidated Comparison of Three and Nine Months Ended September 30, 2022 to September 30, 2021
The following table sets forth our results of operations for the periods indicated (amounts in thousands):
Three months ended September 30,
Nine Months Ended September 30,
2022
2021
$ Change
2022
2021
$ Change
Revenue$1,694 $— $1,694 $45,555 $— $45,555 
Operating Expenses:
Cost of revenue1,623 — 1,623 2,194 — 2,194 
Sales and marketing3,758 169 3,589 8,287 443 7,844 
Research and development16,731 1,697 15,034 36,155 4,920 31,235 
General and administrative12,960 3,759 9,201 33,434 8,620 24,814 
Asset impairment2,828 (11)2,839 2,828 2,733 95 
Loss from operations(36,206)(5,614)(30,592)(37,343)(16,716)(20,627)
Other Income (Expense):
Interest expense— — — (1)(7)
Change in fair value of warrant liability6,706 — 6,706 2,061 — 2,061 
Transaction costs— — — (20,586)— (20,586)
Other income (expenses), net920 (549)1,469 1,205 (1,866)3,071 
Loss before income taxes$(28,580)$(6,163)$(22,417)$(54,664)$(18,589)$(36,075)
Revenue
The Company recognized revenue for the product and service categories as follows for the three months ended September 30, 2022 and 2021.
Three Months Ended September 30,
20222021
Licensing of intellectual property$— $— 
Build and transfer energy storage products1,153 — 
Other541 — 
Total revenue$1,694 $— 
Revenue for the three months ended September 30, 2022 was $1.7 million compared to no revenue for the three months ended September 30, 2021. Revenue for the three months ended September 30, 2022 primarily consisted of $1.2 million related to the building and transferring of energy storage products. This $1.2 million in revenue was earned from Jupiter as the Company began construction on their battery energy storage systems during the three months ended September 30, 2022. Revenue from Jupiter represents 68% of the Company’s total revenue for the three months ended September 30, 2022. Additionally, the Company earned other revenue of $0.5 million from Atlas related to providing construction support services during the three months ended September 30, 2022. Revenue from Atlas represents 32% of the Company’s total revenue for the three months ended September 30, 2022.
The Company recognized revenue for the product and service categories as follows for the nine months ended September 30, 2022 and 2021.
Nine Months Ended September 30,
20222021
Licensing of intellectual property$42,884 $— 
Build and transfer energy storage products1,153 — 
Other1,518 — 
Total revenue$45,555 $— 
Revenue for the nine months ended September 30, 2022 was $45.6 million compared to no revenue for the nine months ended September 30, 2021. Revenue for the nine months ended September 30, 2022 primarily consisted of $42.9 million related to the transfer of intellectual property to Atlas. Additionally, the Company recognized revenue of $1.2 million
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related to the building and transferring energy storage products to Jupiter and $1.5 million in other revenue related the Company providing construction support services to Atlas during the nine months ended September 30, 2022. Revenue from Atlas represents 97% of the Company’s total revenue for the nine months ended September 30, 2022.
At this point in time, Energy Vault does not expect to enter into many other intellectual property licensing agreements.
Operating expenses
Cost of revenue
Cost of revenue was $1.6 million for the three months ended September 30, 2022 compared to no cost of revenue for the three months ended September 30, 2021. Cost of revenue for the three months ended September 30, 2022 consisted of subcontractor and direct labor costs on the battery storage projects with Jupiter, and direct labor and consulting expenses related to providing construction support services to Atlas.
Cost of revenue was $2.2 million for the nine months ended September 30, 2022 compared to no cost of revenue for the nine months ended September 30, 2021. Cost of revenue for the nine months ended September 30, 2022 consisted of subcontractor and direct labor costs on the battery storage projects with Jupiter, and direct labor and consulting expenses related to providing construction support services to Atlas.
Sales and Marketing
Sales and marketing expenses increased by $3.6 million to $3.8 million for the three months ended September 30, 2022, compared to $0.2 million for the three months ended September 30, 2021. The increase resulted primarily from an increase in personnel-related expenses of $2.9 million and an increase in marketing and public relation costs of $0.3 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 $2.1 million for the three months ended September 30, 2022, compared to $9 thousand for the three months ended September 30, 2021.
Sales and marketing expenses increased by $7.9 million to $8.3 million for the nine months ended September 30, 2022, compared to $0.4 million for the nine months ended September 30, 2021. The increase resulted primarily from an increase in personnel-related expenses of $4.8 million, an increase in marketing and public relations costs of $2.0 million, and an increase in travel related expenses of $0.4 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 $3.0 million for the nine months ended September 30, 2022, compared to $0.1 million for the nine months ended September 30, 2021.
Research and Development
Research and development expenses increased by $15.0 million to $16.7 million for the three months ended September 30, 2022, compared to $1.7 million for the three months ended September 30, 2021. The increase resulted primarily from a $6.0 million increase in personnel-related expenses, a $5.1 million increase in depreciation expense, a $2.3 millionincrease in engineering and development costs, a $0.8 million increase in consultant expenses, and a $0.8 million increase in software costs. 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 $4.2 million for the three months ended September 30, 2022, compared to $0.2 million for the three months ended September 30, 2021. The increase in depreciation expense primarily relates to depreciation on the CDU and related components.
Research and development expenses increased by $31.3 million to $36.2 million for the nine months ended September 30, 2022, compared to $4.9 million for the nine months ended September 30, 2021. The increase resulted primarily from a $14.9 million increase in personnel-related expenses, a $7.4 million increase in depreciation expense, a $4.6 millionincrease in engineering and development costs, a $2.3 million increase in software expenses, a $1.0 million increase in consultant expenses, and a $0.7 million increase in travel related 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 $11.0 million for the nine months ended September 30, 2022, compared to $0.3 million for the nine months ended September 30, 2021. The increase in depreciation expense primarily relates to depreciation on the CDU and related components.
General and Administrative
General and administrative expenses increased by $9.2 million to $13.0 million for the three months ended September 30, 2022 compared to $3.8 million for the three months ended September 30, 2021. The increase resulted primarily from a $5.7 million increase in personnel-related expenses, a $1.7 million increase in legal and professional fees, a $0.7 million increase in consultant expenses, a $0.4 million increase in insurance costs, and a $0.3 million increase in travel expenses. The increase in personnel costs was due to expanded headcount and an increase in stock-based compensation expense.
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Stock-based compensation expense was $4.5 million for the three months ended September 30, 2022, compared to $9 thousand for the three months ended September 30, 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.
General and administrative expenses increased by $24.8 million to $33.4 million for the nine months ended September 30, 2022, compared to $8.6 million for the nine months ended September 30, 2021. The increase resulted primarily from a $15.4 million increase in personnel-related expenses, a $4.0 million increase in legal and professional fees, a $1.6 million increase in consultant expenses, a $1.2 million increase in insurance costs, a $1.1 million in travel related expenses, a $0.7 million increase in software expenses, and a $0.5 million increase in employee recruiting costs. The increase in personnel costs was due to expanded headcount and an increase in stock-based compensation expense. Stock-based compensation expense was $12.7 million for the nine months ended September 30, 2022, compared to $54 thousand for the nine months ended September 30, 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.
Asset Impairment
Asset impairment was $2.8 million for both the three and nine months ended September 30, 2022, compared to a credit to asset impairment of $11 thousand for the three months ended September 30, 2021 and asset impairment of $2.7 million for the nine months ended September 30, 2021. Asset impairment for the three and nine months ended September 30, 2022 related to the CDU and the brick machines used to manufacture bricks for the EV1 tower design. The Company completed the dismantling of the CDU by September 2022 and is no longer being used as a demonstration unit.
Asset impairment of $2.7 million for the nine months ended September 30, 2021 related to components of the CDU that were damaged. This impairment and other related costs were partially offset by an insurance claim received by the Company. Additionally, other components, which were not previously installed, were reclassified into prepaid expenses and other current asset at their estimated net realizable value during 2021.
Other Income (Expense)
Change in fair value of warrant liability
The Company recognized a gain of $6.7 million related to the change in the fair value of the Company’s warrant liability for the three months ended September 30, 2022 due to a decrease in the fair value of our outstanding warrants as of September 30, 2022 compared to the fair value as of June 30, 2022 or as of the date the warrants were exercised. The Company recognized a gain of $2.1 million related to the change in the fair value of the Company’s warrant liability for the nine months ended September 30, 2022 due to a decrease 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 and nine month periods ending September 30, 2021.
Transaction costs
The Company did not recognize any transaction costs during the three months ended September 30, 2022. The Company recognized transaction costs of $20.6 million related to the consummation of the Merger during the nine months ended September 30, 2022. The Company did not recognize any transaction costs during 2021.
Other income (expense), net
Other income (expense), net improved by $1.4 million to other income, net of $0.9 million for the three months ended September 30, 2022 compared to other expense, net of $0.5 million for the three months ended September 30, 2021. The improvement resulted primarily from an increase in interest income and positive fluctuations in foreign currency transaction gain and losses.
Other income (expense), net improved by $3.1 million to other income, net of $1.2 million for the nine months ended September 30, 2022 compared to other expense, net of $1.9 million for the nine months ended September 30, 2021. The improvement resulted primarily from an increase in interest income and positive 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.
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Merger and PIPE
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 September 30, 2022, we had $274.7 million of cash, cash equivalents, and restricted cash, representing an increase of $169.6 million from cash, cash equivalents, and restricted cash of $105.1 million at December 31, 2021. As of September 30, 2022, the Company had $25.1 million in restricted cash. Substantially all of the restricted cash balance was held by banks as collateral for the Company’s letters of credit. The Company did not have any restricted cash of December 31, 2021.
Management believes that its cash, cash equivalents, and restricted cash on hand as of September 30, 2022 will be sufficient to fund our operating activities for at least the next twelve months without regard to any cash proceeds we received or may in the future receive upon the exercise for cash of our warrants. The exercise price for any of our private warrants is $11.50 per warrant, 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 private 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 private 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 September 30, 2022 consisted primarily of obligations under operating leases, finance leases, deferred pensions, a refundable contribution to Atlas, and issued purchase orders.
The Company committed to make a $25.0 million refundable contribution to Atlas during the period in which it constructs its first GESS, and will be refunded to the Company upon Atlas’ first GESS reaching substantial completion and meeting certain performance metrics. As of September 30, 2022, the Company has remitted to Atlas $22.5 million of the $25.0 million. Our non-cancellable purchase obligations as of September 30, 2022 totaled approximately $23.9 million.
Cash Flows
The following table summarizes cash flows from operating, investing, and financing activities for the periods indicated (amounts in thousands):
Nine Months Ended September 30,
20222021
Net cash used in operating activities$(47,795)$(14,075)
Net cash used in investing activities(2,679)(76)
Net cash provided by financing activities220,207 119,668 
Effects of exchange rate changes on cash(123)723 
Net increase in cash$169,610 $106,240 
Operating Activities
During the nine months ended September 30, 2022 and 2021, cash used in operating activities totaled $47.8 million and $14.1 million, respectively. During the nine months ended September 30, 2022, cash used in operating activities was negatively impacted by a net loss of $55.0 million and an increase in operating assets of $55.2 million. The change in operating assets was primarily due to a $24.7 million increase in contract assets, a $22.8 million increase in accounts receivable, and a $7.7 million increase in prepaid expenses and other current assets. Operating cash flows were positively
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impacted by non-cash charges of $35.5 million and a $27.0 million increase in operating liabilities. The non-cash charges primarily consisted of $26.8 million in stock-based compensation expense, $7.6 million in depreciation and amortization expense, and $2.8 million in asset impairments. The increase in operating liabilities primarily consisted of a $27.5 million increase in contract liabilities.
During the nine months ended September 30, 2021, cash used in operating activities of $14.1 million was negatively impacted by a net loss of $18.6 million and a $1.3 million decrease in operating liabilities. The decrease in operating liabilities resulted from a decrease in accounts payable and accrued expenses. Operating cash flows were positively impacted by non-cash charges of $5.1 million and a $0.7 million increase in operating assets. Non-cash charges primarily consisted of $3.2 million related to the write-down of inventory, $1.0 million in depreciation and amortization expense, $0.3 million in non-cash lease expenses, and $0.5 million in stock-based compensation expense.
Investing Activities
During the nine months ended September 30, 2022 and 2021, cash used in investing activities totaled $2.7 million and $76 thousand, respectively. Cash used in investing activities for the nine months ended September 30, 2022 consisted of $2.0 million for the purchase of a convertible note and $0.7 million for the purchase of property and equipment.
Cash used in investing activities for the nine months ended September 30, 2021 consisted of purchases of property and equipment.
Financing Activities
During the nine months ended September 30, 2022 and 2021, cash provided by financing activities totaled $220.2 million and $119.7 million, respectively. For the nine months ended September 30, 2022, cash provided by financing activities was primarily attributable to $235.9 million in proceeds from the reverse recapitalization and PIPE financing, net, and $7.9 million in proceeds from the exercise of warrants. Partially offsetting these cash inflows was $20.7 million in transaction cost payments related to the reverse recapitalization and $3.0 million in tax payments related to the net settlement of equity awards.
During the nine months ended September 30, 2021, cash provided by financing activities was primarily attributable to $105.5 million in net proceeds from the issuance of Series C preferred stock and $15.3 million in net proceeds from the issuance of Series B-1 preferred stock. Partially offsetting these cash inflows was $0.8 million in debt repayments and $0.5 million in payments related to Merger transaction costs.
Non-GAAP Financial Measure
We use adjusted EBITDA to complement our condensed consolidated statements of operations. Management believes that this non-GAAP financial measure complements our GAAP net loss and such measure is useful to investors. The presentation of this non-GAAP measure is not meant to be considered in isolation or as an alternative to net loss as an indicator of our performance.
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The following table provides a reconciliation from non-GAAP adjusted EBITDA to GAAP net loss, the most directly comparable GAAP measure (amounts in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Net loss (GAAP)$(28,765)$(6,163)$(55,022)$(18,589)
Non-GAAP Adjustments:
Interest income, net(1,024)(21)(1,355)(36)
Income tax expense185 — 358 — 
Depreciation and amortization5,158 529 7,562 976 
Stock-based compensation expense10,894 202 26,757 452 
Change in fair value of warrant liability(6,706)— (2,061)— 
Transaction costs— — 20,586 — 
Asset impairment2,828 (11)2,828 2,733 
Foreign exchange (gains) and losses219 550 163 1,889 
Adjusted EBITDA (non-GAAP)$(17,211)$(4,914)$(184)$(12,575)
We present adjusted EBITDA, which is net loss excluding adjustments that are outlined in the quantitative reconciliation provided above, as a supplemental measure of our performance and because we believe this measure is frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry. The items excluded from adjusted EBITDA are excluded in order to better reflect our continuing operations.
In evaluating adjusted EBITDA, one should be aware that in the future we may incur expenses similar to the adjustments noted above. Our presentation of adjusted EBITDA should not be construed as an inference that our future results will be unaffected by these types of adjustments. Adjusted EBITDA is not a measurement of our financial performance under GAAP and should not be considered as an alternative to net loss, operating loss, or any other performance measures derived in accordance with GAAP or as an alternative to cash flow from operating activities as a measure of our liquidity.
Our adjusted EBITDA measure has limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:
it does not reflect our cash expenditures, future requirements for capital expenditures, or contractual commitments;
it does not reflect changes in, or cash requirements for, our working capital needs;
it does not reflect stock-based compensation, which is an ongoing expense;
although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and our adjusted EBITDA measure does not reflect any cash requirements for such replacements;
it is not adjusted for all non-cash income or expense items that are reflected in our condensed consolidated statements of cash flows;
it does not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations;
it does not reflect limitations on or costs related to transferring earnings from our subsidiaries to us; and
other companies in our industry may calculate this measure differently than we do, limiting its usefulness as a comparative measure.
Because of these limitations, adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business or as a measure of cash that will be available to use to meet our obligations. You should compensate for these limitations by relying primarily on our GAAP results and using adjusted EBITDA only supplementally.
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Off-Balance Sheet Commitments and Arrangements
The Company has not entered into off-balance sheet arrangements, as defined in the rules and regulations of the SEC as of September 30, 2022.
Critical Accounting Policies and Use of Estimates
Our consolidated financial statements are prepared in conformity with Generally Accepted Accounting Principles in the United States (“GAAP”). In preparing our financial statements, we make assumptions, judgments, and estimates based on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions and conditions.
We believe that the following accounting policies involve a high degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations. Other than the policies described in Note 2 - Summary of Significant Accounting Policies in the Company’s unaudited interim condensed consolidated financial statements included elsewhere in this Quarterly Report, there have been no material changes to our critical accounting policies and estimates as compared to those disclosed in the notes to our audited consolidated financial statements as of and for the years ended December 31, 2021 and 2020 included in Amendment No. 1.
Revenue
Effective January 1, 2022, Energy Vault’s revenue recognition policy is a critical policy due to the adoption of the guidance from ASC 606, Revenue from Contracts with Customers. We determine the amount of revenue to be recognized through the application of 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.
The Company identifies performance obligations in our contracts with customers. The transaction price is determined based on the amount which the Company expects to be entitled to in exchange for providing the promised goods and services to the customer. The transaction price in the contract is allocated to each distinct performance obligation on a relative standalone selling price basis. Revenue is recognized when performance obligations are satisfied. When a part or all of a transaction price is considered to be variable, an estimate of the constrained transaction price is recognized. Changes in variable consideration may result in an increase or a decrease to revenue.
Building Energy Storage Projects: The Company enters into contracts with utility companies and independent power producers to build energy storage projects. The Company has entered into battery-based energy storage projects and intends to enter into gravity-based energy storage projects in the future. Each storage project is customized depending on the customer’s energy needs. Customer payments are due upon meeting certain milestones that are consistent with contract-specific phases of a project. The Company determines the transaction price based on the consideration expected to be received, which includes estimates of liquidated damages or other variable consideration. Generally, each contract to design and construct an energy storage project contains one performance obligation. Multiple contracts entered into with the same customer and near the same time to construct energy storage projects are combined in accordance with ASC 606. In these situations, the contract prices are aggregated and then allocated to each energy storage project based upon their relative stand-alone selling price.
The Company recognizes revenue over time as a result of the continuous transfer of control of its products to the customer. The continuous transfer of control to the customer is supported by clauses in the contracts that provide enforceable rights to payment of the transaction price associated with work performed to date for products that do not have an alternative use to the Company and/or the project is built on the customer’s land that is under the customer’s control.
Revenue for these performance obligations is recognized using the percentage of completion method based on cost incurred as a percentage of total estimated contract costs. Contract costs include all direct materials and labor costs related to contract performance. Pre-contract costs with no future benefit are expensed in the period in which they are incurred. Since the revenue recognition of these contracts depends on estimates, which are assessed continually during the term of the contract, recognized revenues and profit are subject to revisions as the contract progresses to completion. The cumulative effects of revisions of estimated total contract costs and revenues, together with any contract reserves which may be
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deemed appropriate, are recorded in the period in which the facts and changes in circumstances become known. Due to uncertainties inherent in the estimation process, it is reasonably possible that these estimates will be revised in a different period. When a loss is forecasted for a contract, the full amount of the anticipated loss is recognized in the period in which it is determined that a loss will incur.
The Company’s contracts generally provide customers the right to liquidated damages (“LDs”) against Energy Vault in the event specified milestones are not met on time, or certain performance metrics are not met upon or after the substantial completion date. LDs are accounted for as variable consideration, and the contract price is reduced by the expected penalty or LD amount when recognizing revenue. Variable consideration is included in the transaction price only to the extent that it is improbable that a significant reversal in the amount of cumulative revenue recognized will occur when the uncertainty is resolved. Estimating variable consideration requires certain estimates and assumptions, including whether and by how much a project will be delayed. The existence and measurement of liquidated damages may also be impacted by the Company’s judgment about the probability of favorable outcomes of customer disputes involving whether certain events qualify as force majeure or the reason for the events that caused project delays. Variable consideration for LDs is estimated using the expected value of the consideration to be received. If Energy Vault has a claim against the customer for an amount not specified in the contract, such claim is recognized as an increase to the contract price when it is legally enforceable, which is usually upon signing a respective change order or equivalent document confirming the claim acceptance by the customer.
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.
Stock-Based Compensation
Accounting for stock-based compensation requires us to make a number of judgments, estimates, and assumptions. If any of the estimates prove to be inaccurate, Energy Vault’s net loss and operating results could be affected adversely.
The Company’s stock-based compensation arrangements are accounted for in accordance with ASC Topic 718, “Share Based Payments.” Compensation expense is recognized over the requisite service period (usually the vesting period) on a straight-line basis and adjusted for actual forfeitures of unvested awards as they occur.
Stock awards that vest solely based on a service condition are measured based on the estimated fair values of the awards as of the grant date using the Black-Scholes option-pricing model, which was impacted by the following assumptions:
Expected Term — The expected term represents the period that Energy Vault’s awards granted are expected to be outstanding and is determined based upon the simplified method, as we do not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior.
Expected Volatility — Since we were privately held and did not have any trading history for our common stock prior to the Merger, the expected volatility was estimated based on the average volatility for comparable publicly traded companies over a period equal to the expected term of the stock award grants.
Risk-Free Interest Rate — We use the U.S. Treasury yield for our risk-free interest rate that corresponds with the expected term.
Expected Dividend — Energy Vault has never paid dividends on its common stock and has no plans to pay dividends in the foreseeable future. Therefore, an expected dividend yield of zero was used.
The grant date fair value of our common stock is determined using valuation methodologies which utilize certain assumptions, including probability weighting of events, volatility, time to liquidation, a risk-free interest rate, and an assumption for a discount for lack of marketability (Level 3 inputs). The fair value of the Company’s common stock was estimated because the common stock of Legacy Energy Vault had not yet been publicly traded prior to the Merger.
Defined Benefit Pension Obligation
Energy Vault’s wholly owned subsidiary in Switzerland has a defined benefit pension obligation covering retirement and other long-term benefits for the local employees. The plan is a statutory requirement in accordance with local regulations which is accounted for and disclosed in accordance with the provisions of GAAP relating to the accounting for pension plans. These GAAP provisions require the use of assumptions, such as the discount rate for liabilities and long-term rate of return on assets, in determining the projected benefit obligation, fair value of plan assets and an underfunded net benefit obligation.
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Warrant Liability
Energy Vault’s financial statements reflect the impact of the publicly-traded warrants (“Public Warrants”) and private warrants (“Private Warrants”) that were assumed upon the closing of the Merger. 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 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 statement of operations. With the completion of the redemption of Energy Vault’s public warrants on August 1, 2022, Energy Vault currently expects to incur incremental income (expense) in its condensed consolidated statements of operations for the fair value change for outstanding warrant liabilities at the end of each reporting period only in respect of its private warrants.
Emerging Growth Company Accounting Election
We are an “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933, as amended, and have irrevocably elected to take advantage of the benefits of this extended transition period for new or revised standard. We are expected to remain an emerging growth company through the end of 2022 and expect to continue to take advantage of the benefits of the extended transition period. This may make it difficult or impossible to compare our financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions for emerging growth companies because of the potential differences in accounting standards used.
Recently Adopted and Issued Accounting Pronouncements
Recently issued and adopted/unadopted accounting pronouncements are described in Note 2 of the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk represents the risk of loss that may impact our financial position because of adverse changes in financial market prices and rates.
Foreign Currency Risk
Nearly all of our letters of intent are denominated in U.S. dollars, and certain of our definitive agreements could be denominated in currencies other than the U.S. dollar, including the Euro, the Australian dollar, the Brazilian real, and the Saudi riyal. A strengthening of the U.S. dollar could increase the cost of our solutions to our international customers, which could adversely affect our business and results of operations. In addition, an increasing portion of our operating expenses is incurred outside the United States, is denominated in foreign currencies, such as the euro and the Swiss franc, and is subject to fluctuations due to changes in foreign currency exchange rates. If we become more exposed to currency fluctuations and are not able to successfully hedge against the risks associated with currency fluctuations, our results of operations could be adversely affected.
Inflation Risk
Our operations could be adversely impacted by inflation, primarily from higher material, labor, and construction costs. While it is difficult to measure the impact of inflation for such estimates accurately, we believe, if our costs are affected due to significant inflationary pressures, we may not be able to fully offset higher costs through price increases or other corrective measures, which may adversely affect our business, financial condition, and results of operations.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Our management, with the participation of our chief executive officer and our chief financial officer, has concluded, based upon its evaluation as of the end of the period covered by this report, that the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act), are effective to ensure that
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information required to be disclosed in the reports that we file or submit under the Securities Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.
Previously Reported Material Weakness
As disclosed in the section titled “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q, Novus previously identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis.
The material weaknesses identified in our internal control over financial reporting related to (1) the accounting treatment of our warrants and (2) the classification of Novus’s Class A common stock subject to possible redemption. Each of these material weaknesses was identified prior to the closing of the Merger on February 11, 2022.
Remediation Plans
Since the closing of the Merger on February 11, 2022, we have commenced measures to remediate the identified material weaknesses, including the employment of Legacy Energy Vault’s finance and accounting personnel and the hiring of additional finance and accounting personnel, further developing and implementing formal policies, processes and documentation procedures relating to financial reporting and the adoption of new technological solutions. While we believe the steps taken to date and those planned for future implementation will improve the effectiveness of our internal control over financial reporting, we have not completed all remediation efforts. The material weaknesses cannot be considered remediated until applicable controls have operated for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
Changes in Internal Control Over Financial Reporting
We are taking actions to remediate the material weakness relating to our internal control over financial reporting, as described above. Except as otherwise described herein, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls
The effectiveness of any system of disclosure controls and procedures and internal control over financial reporting, including ours, is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, in designing and evaluating the disclosure controls and procedures, management recognizes that any system of internal control over financial reporting, including ours, no matter how well designed and operated, can only provide reasonable assurance, not absolute assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business but cannot assure you that such improvements will be sufficient to provide us with effective internal control over financial reporting.


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Part II-Other Information
Item 1. Legal Proceedings
Energy Vault has been and continues to be involved in legal proceedings that arise in the ordinary course of business, the outcome of which, if determined adversely to Energy Vault, would not individually or in the aggregate have a material adverse effect on Energy Vault’s business, financial condition, and results of operations. From time to time, Energy Vault may become involved in additional legal proceedings arising in the ordinary course of its business.
Item 1A. Risk Factors
Certain factors may have a material adverse effect on our business, financial condition, results of operations, and prospects. You should carefully consider the risks and uncertainties described below, as well as the other information in this Quarterly Report, including our condensed consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The occurrence of any of the events or developments described below, or of additional risks and uncertainties not presently known to us or that we currently deem immaterial, could materially and adversely affect our business, results of operations, financial condition, and prospects. In such an event, the market price of our securities could decline, and you could lose all or part of your investment.
Risk Factor Summary
Below is a summary of the principal factors that make an investment in our common stock speculative or subject to risk. This summary does not address all of the risks facing our business. You should consider the risks in this summary together with the detailed discussion of risks that immediately follows this summary in this section titled “Risk Factors,” as well as the other information in this Quarterly Report on Form 10-Q.
We are an early stage company with a history of losses, and expect to incur significant expenses and continuing losses for the foreseeable future, and we may not be able to achieve profitability in the future.
Our limited operating history and our rapidly evolving industry make it difficult to evaluate our business, the risks and challenges we may face, and future prospects.
The engineering of our systems is in continuous refinement to improve system cost and efficiency. There is no guarantee that we will be successful in implementing all improvements under the expected schedule.
There is no assurance that non-binding letters of intent and other indication of interest will result in binding orders or sales. Customers may cancel or delay the non-binding letters of intent and other indications of interest in our sales pipeline.
Our systems are based on established principles that are deployed in a novel way to create new technologies to store energy and potential customers may be hesitant to make a significant investment in our technology or abandon the technology they are currently using.
Our systems include complex software and technology systems and do not have a meaningful history of operation, and there can be no assurance such systems and technology will perform as expected or that software, engineering or other technical defects will not be discovered until after a system is installed and operated by a customer. If our EVx systems contain manufacturing or construction defects, our business and financial results could be harmed. In addition, the development and updating of these systems will require us to incur potentially significant costs and expenses.
If any of our products are or are alleged to be defective in design or manufacturing or experience other failures, we may be compelled to undertake corrective actions, which could adversely affect our business, prospects, operating results, reputation and financial condition.
Our systems’ performance may not meet our customers’ expectations or needs.
Our energy storage systems involve a lengthy sales and installation cycle, and if we fail to close sales on a regular and timely basis it could harm our business. Moreover, the long sales cycles for our energy storage systems may cause us to incur significant expenses without offsetting revenues.
Approvals, electrical interconnection, and other contingencies that may arise in the course of completing installations.
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The failure or inability of our suppliers to deliver necessary components or raw materials for construction of our energy storage systems in a timely manner could cause installation delays, cancellations, penalty payments and damage to our reputation.
If the selling security holders sell their securities pursuant to the registration statement the Company initially filed with the SEC on February 14, 2022 and declared effective by the SEC on May 6, 2022, it may negatively impact the market price of the shares of our common stock and such holders still may receive significant proceeds.
Risks Related to Energy Vault’s Business and Industry
We are an early stage company with a history of losses, and expect to incur significant expenses and continuing losses for the foreseeable future, and we may not be able to achieve profitability in the future.
Since our inception in October 2017, we have incurred significant net losses and have used significant cash in our business. As of September 30, 2022, we had an accumulated deficit of $124.0 million, and net losses of $31.4 million for the year ended December 31, 2021 and $55.0 million for the nine months ended September 30, 2022. We expect to continue to expand our operations, including by investing in manufacturing, sales and marketing, research and development and infrastructure to support our growth. We anticipate that we will incur net losses for the foreseeable future and, even if we begin to record revenue, there is no guarantee that we will become profitable. Our ability to achieve profitability in the future will depend on a number of factors, including:
successfully implementing our products on a commercial scale;
achieving meaningful sales volume;
the successful and timely development of a digital platform by our Energy Vault Solutions division;
attracting customers;
expanding into geographical markets;
our future customers’ ability to attract and retain financing partners who are willing to provide financing for sales on a timely basis and with attractive terms;
continuing to improve the expected useful life of our gravity-based energy storage technology and reducing our warranty servicing costs;
the cost of producing our EVx systems, including our mobile masses;
ability to execute on our strategy to reduce costs, in the amount and on the timing projected;
adding waste material, such as coal ash and wind turbine blades, in the production of mobile masses;
improving the efficiency and predictability of our construction processes;
entering into agreements with suppliers and service providers for the maintenance of our systems and other strategic relationships;
improving the effectiveness of our sales and marketing activities and any independent sales representatives that we may engage;
attracting and retaining key talent in a competitive marketplace;
the amount of stock-based compensation that Energy Vault recognizes in a given period;
identifying new opportunities for other business to integrate our product into their operations;
fluctuations in the costs of steel and raw materials;
legal and commercial acceptance of the incorporation of waste material (including, but not limited to, coal ash) into our mobile masses; and
delays associated with obtaining construction permits and potential regulatory review.

Even if we do achieve profitability, we may be unable to sustain or increase our profitability in the future.
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Our limited operating history and our rapidly evolving industry make it difficult to evaluate our business, the risks and challenges we may face and future prospects.
From our inception in October 2017 to the present, we have focused principally on developing and proving our fundamental gravity energy storage technology, formulating and implementing the EV1 design, and only recently designed the new EVx and EVRC platforms, which are the systems we are seeking to commercialize. As a result, we have a limited history operating our business, and therefore a limited history upon which you can base an investment decision. We have built only one EV1 system, which serves as a commercial demonstration unit, and we have not deployed any other systems as of the date of this Quarterly Report. Further, we have not yet finalized the design of our EVx system or our EVRC platform.
Our EVx systems and our EVRC platform are new types of products in the rapidly evolving energy storage industry. In light of the fact that the entire energy sector is undergoing a major transition, from thermal generation to renewable energy generation, predicting our future revenue depends on the evolution of the market itself and market acceptance of our technology and systems. Moreover, budgeting for our expenses presents some uncertainty because of the unpredictability of the prices of raw materials and other trends that may emerge and affect our business. If actual results differ from our estimates or we adjust our estimates in future periods, our operating results and financial position could be materially and adversely affected. You should consider our prospects in light of the risks and uncertainties emerging companies encounter when introducing new products into a nascent industry.
The engineering of our systems is in continuous refinement to improve system cost and efficiency. There is no guarantee that we will be successful in implementing all improvements under the expected schedule.
Our business depends on our ability to succeed in implementing our EVx systems and EVRC platform and introduce innovative and competitive energy storage technologies. As of the date of this Quarterly Report, we have not deployed a fully operational EVx system or EVRC platform. As our EVx systems are highly complex, this process is costly and time-consuming. Further, we have not yet finalized the design of our EVx system or our EVRC platform. The date of the first EVx deployment may be delayed, and we may incur more costs than we expect. In addition, the processes by which we engineer and manufacture mobile masses are still developing rapidly as we explore new processes and different techniques. Our business, reputation, results of operations and financial condition may be materially adversely affected if we do not successfully implement our systems or to the extent that such implementation occurs later or costs more than we expect. Examples of costs that we cannot control include the costs of electronics due to global allocation shortages or costs associated with construction delays.
Our ability to use net operating loss (“NOL”) carryforwards and other tax attributes may be limited in connection with ownership changes.
As stated above, we have incurred significant net losses during our history and our ability to become profitable in the near future is uncertain. To the extent that we continue to generate taxable losses, unused losses will carry forward to offset future taxable income, if any, until such unused losses expire (if at all). As of December 31, 2021, we had approximately $19.1 million, $11.8 million and $34.2 million of federal, state and foreign net operating loss carryforwards (“NOLs”). The foreign net operating loss carryforwards will begin to expire, if unutilized, beginning in 2025. Additionally, as of December 31, 2021, the Company had federal and state research tax credit carryforwards of and $0.1 million and $0.1 million, respectively.
Federal NOLs incurred in tax years beginning after December 31, 2017 and before January 1, 2021 may be carried back to each of the five tax years preceding such loss, and NOLs arising in tax years beginning after December 31, 2020 may not be carried back. Moreover, federal NOLs generated in taxable years ending after December 31, 2017, may be carried forward indefinitely, but the deductibility of such federal NOLs may be limited to 80% of our taxable income annually for tax years beginning after December 31, 2020. Our NOL carryforwards are subject to review and possible adjustment by the Internal Revenue Service (the “IRS”), and state tax authorities. In addition, in general, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change NOLs or tax credits to offset future taxable income or taxes. For these purposes, an ownership change generally occurs where the aggregate stock ownership of one or more stockholders or groups of stockholders who own at least 5% of a corporation’s stock increases their ownership by more than 50 percentage points over their lowest ownership percentage within a specified testing period. Our existing NOLs or credits may be subject to limitations arising from previous ownership changes, and if we underwent an ownership change in connection with, or undergo an ownership change following, the Merger, our ability to utilize NOLs or credits could be further limited by Sections 382 and 383 of the Code. In addition, future changes in our stock ownership, many of which are outside of our control, could result in an ownership change under Sections 382 and 383 of the Code. Our NOLs or credits may also be impaired under state law. Accordingly, we may not be able to utilize a material portion of our NOLs or credits. If we determine that an ownership change has occurred and our ability to use our historical NOLs or credits is materially limited,
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it would harm our future operating results by effectively increasing our future tax obligations. Section 382 and 383 of the Code would apply to all net operating loss and tax credit carryforwards, whether the carryforward period is indefinite or not. If we earn taxable income, such limitations could result in increased future tax liability to us and our future cash flows could be adversely affected.
Our systems are based on established principles that are deployed in a novel way to create new technologies to store energy and potential customers may be hesitant to make a significant investment in our technology or abandon the technology they are currently using.
The design of our EVx systems and EVRC platform are based on established principles that are deployed in a novel way and will compete with alternative energy storage products based on other technologies, like lithium-ion battery technology. We believe that the continued growth and acceptance of energy storage generally will depend significantly on continued investment by the public and private sectors in the renewable energy industry, the regulatory environment towards carbon intensive power generation and the speed of transition towards electric mobility.
The adoption of renewable energy may not proceed as quickly as (or at the levels that) we expect and may be influenced by changes in regulatory environments, including incentives, fuel prices, public policy concerns and other factors beyond our control. Additionally, potential customers who previously invested in alternatives to our gravity based energy storage solution may not deem a transition to our existing or future gravity based energy storage solutions to be cost-effective. Moreover, given the limited history of our gravity based energy storage technology, potential customers may be hesitant to make a significant investment in our products. Our business, results of operations, financial condition and prospects could be adversely affected to the extent that customers, for any reason, do not adopt our systems or migrate to our systems from another energy storage technology.
Our systems include complex software and technology systems and do not have a meaningful history of operation, and there can be no assurance such systems and technology will perform as expected or that software, engineering or other technical defects will not be discovered until after a system is installed and operated by a customer. If our EVx systems contain manufacturing or construction defects, our business and financial results could be harmed. In addition, the development and updating of these systems will require us to incur potentially significant costs and expenses.
To date, we have only built the CDU but have not yet deployed any EVx system or an EVRC, and these systems do not have any history of commercial operation. Once commercial production commences or our systems are installed and put into use by customers, our EVx systems, or any of our other products, may contain defects in design, manufacture or construction that may cause them not to perform as expected or may require repair. Because there is as of yet no prototype for our EVx systems or EVRCs and such systems are still under development, we currently have no frame of reference by which to evaluate the performance of our EVx systems and EVRCs upon which our business prospects depend. For example, our EVx systems and any EVRC will use a substantial amount of software to operate which may require modification and updates over the life of such systems. Software products are inherently complex and often contain defects and errors when first introduced. Additionally, it is difficult for us to evaluate the manufacture and construction of our EVx systems or an EVRC until there are working examples that have been manufactured, constructed and used by us and/or our customers.
There can be no assurance that we will be able to detect and fix any defects in the hardware or software of our EVx systems or EVRCs, and such defects may not become apparent until a system is installed and operated by a customer. Our EVx systems and EVRCs may not perform consistent with customers’ expectations or consistent with other energy storage systems which may become available. Any product defects or any other failure of our EVx systems to perform as expected could harm our reputation and result in negative publicity, lost revenue, delivery delays, product liability claims and significant warranty and other expenses, and could have a material adverse impact on our business, financial condition, operating results and prospects.
In addition, further development and updating of our EVx systems and EVRC platform will require us to incur potentially significant costs and expenses.
The performance and availability of our products, services and systems may be affected by factors outside of our control, which could result in harm to our business and financial results.
The performance and availability of our products, services and systems may be affected by factors outside of our control, such as inclement weather and natural disasters, failures in the power grid, acts of vandalism, shortages in skilled and qualified technical and construction personnel, shortages in raw materials or spare parts, fluctuations in commodities prices, bad performance or poor quality of equipment and/or infrastructure purchased from our suppliers and unforeseeable incidents or mistakes in the construction, commissioning or testing of prototype sites under the control of Energy Vault. The severity of such factors and frequency at which they occur are also outside our control. If such factors occur and affect the performance of our systems, our business and financial results could be harmed.
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If any of our products are or are alleged to be defective in design or manufacturing or experience other failures, we may be compelled to undertake corrective actions, which could adversely affect our business, prospects, operating results, reputation and financial condition.
Once an EVRC or EVx system is delivered to a customer, some of the delivered product components may contain defects in design or manufacture that may cause them not to perform as expected or that may require repair and design changes. The EVRC and our EVx systems are complex and incorporate technology and components that may contain defects and errors, particularly when first introduced. We have a limited frame of reference from which to evaluate the long-term performance of our EVx systems and EVRCs in light of the fact that there is still no prototype for them. There can be no assurance that we will be able to detect and fix any defects in an EVRC or our EVx systems prior to the sale to potential consumers. If a mobile mass falls from an EVx system or an EVRC or our systems otherwise fail to perform as expected, customers may delay or cancel deliveries, generate negative publicity about us, terminate further orders or pursue warranty or other claims against us, each of which could adversely affect our sales and reputation and could adversely affect our business, prospects, and results of operations.
Our systems’ performance may not meet our customers’ expectations or needs.
The systems will be subject to various operating risks that may cause them to generate less value for our customers than expected. These risks include a failure or wearing out of our equipment or the equipment that our equipment connects into, an inability to find suitable replacement equipment or parts, or disruption in our distribution systems. Any extended interruption or failure of our customer’s projects, including systems we operate under the Storage Service Customer program, for any reason to generate the expected amount of output could adversely affect our business, financial condition and results of operations. In addition, our customers’ willingness to acquire additional systems or services from us may be impacted in the future if any of our systems incur operational issues that indicate expected future cash flows from the system are less than the carrying value. Any such outcome could adversely affect our operating results or ability to attract new customers.
If our estimates of the useful life for our energy storage systems are inaccurate or we do not meet service and warranties and performance guarantees, our business and financial results could be adversely affected.
We expect to provide warranties and performance guarantees of our systems. To date, we have only deployed our CDU, and we have not deployed any EVx system or an EVRC, and our estimates about product performance and life may prove to be incorrect. Failure to meet these warranties and performance guarantee levels may require the purchase price to be adjusted downward based on agreed-upon performance targets, or require us to make cash payments to the customer based on actual performance, as compared to expected performance.
Further, the occurrence of any defects, errors, disruptions in service, or other performance problems, interruptions, or delays with our systems, whether in connection with day-to-day operations or otherwise, could result in:
loss of customers;
loss or delayed market acceptance and sales of our hardware and software-enabled services;
delays in payment to us by customers;
injury to our reputation and brand;
legal claims, including warranty and service level agreement claims, against us; or
diversion of our resources, including through increased service and warranty expenses or financial concessions, and increased insurance costs.
The costs incurred in correcting any material defects or errors in our hardware and software or other performance problems may be substantial and could adversely affect our business, fi