ESS Tech (GWH) risk factors, FY2024 10-K

Risks Related to Our Technology, Products and Manufacturing

1. 01our supply or delivery chain and shipments could harm our ability to manufacture, supply and commercialize our energy storage products
2. 02We do not know whether we will be able to maintain long-term supply relationships with our critical suppliers, or, if required, secure new long-term supply relationships on terms that will allow us to achieve our objectives
3. 03We have experienced in the past, and may experience in the future, delays, disruptions, or quality control problems in our manufacturing operations
4. 04We may be unable to adequately control the costs associated with our operations and the components necessary to build our energy storage products, and if we are unable to reduce our cost structure and effectively scale our operations in the future, our ability to become profitable may be impaired
5. 05Our cost reduction strategy may not succeed or may be significantly delayed, which may result in our inability to achieve profitability
6. 06We rely on complex machinery for our operations and the production of our iron flow batteries involves a significant degree of risk and uncertainty in terms of operational performance and costs
7. 07We have in the past and may be compelled in the future to undertake product recalls or take other actions, which could adversely affect our business, prospects, operating results, reputation and financial condition
8. 08If required maintenance is performed incorrectly or if maintenance requirements exceed our current expectations, this could adversely affect our reputation, prospects, business, financial condition and results of operations

Risks Related to Our Business and Industry

1. 09Our expectations for future operating and financial results and market growth rely in large part upon assumptions and analyses developed by us. If these assumptions or analyses prove to be incorrect, our actual operating results may be materially different from our anticipated results
2. 10We have a history of losses and have to deliver significant business growth to achieve sustained, long-term profitability and long-term commercial success
3. 11The report of our independent registered public accounting firm includes a “going concern” explanatory paragraph
4. 12There is no assurance nonbinding pre-orders or framework agreements will be converted into binding orders or that orders will be completed
5. 13Our warranty insurance provided by Munich Re is important to many potential customers. Should we be unable to maintain our relationship with Munich Re and be unable to find a similar replacement, demand for our products may suffer
6. 14Failure to deliver the benefits offered by our technology, or the emergence of improvements to competing technologies, could reduce demand for our energy storage products and harm our business
7. 15Our plans are dependent on the development of market acceptance of our products and long duration energy storage technology
8. 16Our future growth and success depend on our ability to sell effectively to large customers
9. 17Our project awards and sales pipeline may not convert to contracts or may be delayed, which may have a material adverse effect on our revenue and cash flows
10. 18equipment installation, which has caused, and in the future may continue to cause, delays with respect to delivery and installation and potentially our ability to recognize revenue. This could have an adverse impact on our revenue and cash flow and our ability to complete construction of a project
11. 19Our contracted sales are subject to the risk of termination by the contracting party
12. 20If we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of customer service, or adequately address competitive challenges
13. 21We have signed product sales contracts and have entered into service agreements with customers. If we do not meet the obligations under these agreements or if our estimates of the projected useful life of our energy storage products are inaccurate, our business and financial results could be adversely affected
14. 22Our ability to proceed with projects under development and complete construction of projects on schedule and within budget are subject to contractual, technology, operating and commodity risks as well as market conditions that may affect our operating results
15. 23We invest significantly in research and development, and to the extent our research and development investments are not directed efficiently or do not result in material enhancements to our products and technologies, our business and results of operations would be harmed
16. 24The loss of one or more members of our senior management team and other key personnel or our failure to attract and retain qualified personnel may adversely affect our business and our ability to achieve our anticipated level of growth
17. 25Our results of operations may fluctuate from quarter to quarter, which could make our future performance difficult to predict and could cause our results of operations for a particular period to fall below expectations, resulting in a decline in the price of our common stock
18. 26We currently are and in the foreseeable future will be significantly dependent on a limited number of products
19. 27Our planned expansion into new geographic markets or new product lines or services could subject us to additional business, financial, and competitive risks
20. 28fluctuations in the value of foreign currencies and difficulties and increased expenses in complying with United States and foreign laws, regulations and trade standards, including the Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”)
21. 29Our business and operations may be adversely affected by outbreaks of contagious diseases and other adverse public health developments
22. 30diversion of our personnel from our operational efforts, and increases in customer service and support costs, all of which could have a material adverse effect on our business, financial condition, and results of operations
23. 31Defects or performance problems in our products could result in loss of customers, reputational damage, and decreased revenue, and we may face warranty, indemnity, and product liability claims that may arise from defective products
24. 32Third parties might attempt to gain unauthorized access to our network or seek to compromise our products and services
25. 33in response to Western sanctions could include cyber attacks that could disrupt the economy more generally or that could also impact our operations directly or indirectly
26. 34The failure or breach of our IT systems could affect our sales and operations
27. 35lengthy interruptions in our service and may adversely affect our business, prospects, financial condition and operating results
28. 36We may not be able to identify or complete transactions with attractive acquisition candidates. Future acquisitions may result in significant transaction expenses and we may incur significant costs
29. 37Our facilities or operations could be damaged or adversely affected as a result of natural disasters and other catastrophic events
30. 38We may not have sufficient insurance coverage to cover business continuity
31. 39Changes in the global trade environment, including the imposition or escalation of import tariffs, could adversely affect the amount or timing of our revenues, results of operations or cash flows
32. 40We could be subject to foreign exchange risk
33. 41We may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and stock price, which could cause you to lose some or all of your investment
34. 42Our results of operations could vary as a result of changes to our accounting policies or the methods, estimates and judgments we use in applying our accounting policies
35. 43The requirements of being a public company may strain our resources and divert management’s attention
36. 44We may engage in transactions with related parties and such transactions present possible conflicts of interest that could have an adverse effect on us
37. 45The execution of our strategy to expand into new markets through strategic partnerships, joint ventures and licensing arrangements is in a very early stage and is also subject to various risks which could adversely affect our business and future prospects
38. 46Our review of commercial and strategic transactions may be disruptive to our business and may not be successful
39. 47and execution of a commercial or financial transaction may lead to similar disruptions, and parties advocating for alternatives not selected may solicit support for such other alternatives, causing further disruption

Risks Related to Regulatory, Environmental and Legal Issues

1. 48We may face regulatory challenges to or limitations on our ability to sell our products directly in certain markets. Expanding operations internationally could expose us to additional risks
2. 49Our customers may be required to obtain environmental, health and safety or other certifications in order to install our products. If our customers are unable to obtain the necessary certifications, we will not be able to install our products, which would negatively impact our revenues
3. 50We are subject to requirements relating to environmental and safety regulations and environmental remediation matters which could adversely affect our business, results of operation and reputation
4. 51Our manufacturing process involves hazards such as but not limited to hazardous materials, machines with moving parts, and high voltage and/or high current electrical systems typical of large manufacturing equipment and related safety incidents
5. 52We may be exposed to delays, limitations and risks related to the environmental permits and other operating permits required to operate our products
6. 53We may collect and process certain information about our customers and about individuals and will be subject to various laws and regulations relating to privacy, data protection and cybersecurity
7. 54We could be subject to penalties and other adverse consequences for any violations of the FCPA, and other foreign anti-bribery and anti-corruption laws
8. 55We are subject to governmental export and import controls and economic sanctions programs that could impair our ability to compete in international markets or subject us to liability if we violate these controls
9. 56We may be exposed to various risks related to legal proceedings or claims that could adversely affect our operating results. The nature of our business exposes us to various liability claims, which may exceed the level of our insurance coverage resulting in our not being fully protected
10. 57We are subject to certain restrictions and obligations on our business as a result of grants and/or loans received under certain governmental programs and we may be subject to similar or other restrictions to the extent we utilize governmental grants in the future
11. 58The reduction, elimination or expiration of government tax credits, subsidies and economic incentives related to renewable energy solutions could reduce demand for our technology and harm our business
12. 59Changes in tax laws or in their implementation or interpretation may adversely affect our business and financial condition
13. 60Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited
14. 61“smaller reporting companies,” this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies

Risks Related to Our Intellectual Property

1. 62If we fail to protect, or incur significant costs in defending, our intellectual property and other proprietary rights, then our business and results of operations could be materially harmed
2. 63Third parties may assert that we are infringing upon their intellectual property rights, which could divert management’s attention, cause us to incur significant costs, and prevent us from selling or using the technology to which such rights relate
3. 64Our patent applications may not result in issued patents or our patent rights may be contested, circumvented, invalidated or limited in scope, any of which could have a material adverse effect on our ability to prevent others from interfering with the commercialization of our products
4. 65Our products contain third-party open-source software components, and failure to comply with the terms of the underlying open source software licenses could restrict our ability to sell our products or our use of those components give rise to disclosure obligations of proprietary software

Risks Related to Raising Capital

1. 66As we endeavor to expand our business, we will incur significant costs and expenses, which could outpace our cash reserves. Unfavorable conditions or disruptions in the capital and credit markets may adversely impact business conditions and the availability of credit
2. 67We will need to raise additional capital in the near future, and it may not be available on acceptable terms, if at all
3. 68Our debt service obligations may adversely affect our financial condition and cash flows from operations

Risks Related to Our Common Stock and Warrants

1. 69The price of our common stock may be volatile
2. 70These market and industry factors may materially reduce the market price of our common stock regardless of our operating performance
3. 71Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock
4. 72As of December 31, 2024, we had outstanding 11,461,227 Public Warrants to purchase an aggregate of 764,081 shares of our common stock. Each fifteen Public Warrants are exercisable for one share of common stock at an exercise price of $172.50 per share
5. 73weighted average price of the Company’s common stock for the last fifteen (15) trading days of the relevant calendar year for which such additional Performance Warrant is being issued
6. 74The terms of our warrants may be amended from time to time
7. 75We may redeem your unexpired warrants prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless
8. 76We do not expect to declare any dividends in the foreseeable future
9. 77There can be no assurance that we will be able to continue to satisfy the continued listing standards of the NYSE
10. 78The ultimate effect of the 1-for-15 reverse stock split on the market price of our common stock cannot be predicted with any certainty and shares of our common stock have likely experienced decreased liquidity as a result of such reverse stock split
11. 79Reports published by analysts, including projections in those reports that differ from our actual results, could adversely affect the price and trading volume of our common stock
12. 80We may be subject to short selling strategies that may drive down the market price of our common stock
13. 81Provisions in our amended and restated certificate of incorporation, as amended, and amended and restated bylaws and Delaware law might discourage, delay or prevent a change in control of the Company or changes in management and, therefore, depress the market price of our common stock
14. 82This provision would not apply to suits brought to enforce a duty or liability created by the Securities Act, the Exchange Act or any other claim for which the U.S. federal courts have exclusive jurisdiction
15. 83Our Charter and amended and restated bylaws provide that we will indemnify our directors and officers, in each case to the fullest extent permitted by Delaware law