ESS Tech (GWH) risk factors, FY2025 10-K

Risks Related to Our Technology, Products and Manufacturing

1. 01We 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
2. 02We have experienced in the past, and may experience in the future, delays, disruptions, or quality control problems in our manufacturing operations
3. 03We 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
4. 04Our cost reduction strategy may not succeed or may be significantly delayed, which may result in our inability to achieve profitability
5. 05We 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
6. 06We 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
7. 07If 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 operations32% rewritten

Risks Related to Our Business and Industry

1. 08Our 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. 09We have a history of losses and have to deliver significant business growth to achieve sustained, long-term profitability and long-term commercial success31% rewritten
3. 10There is substantial doubt about our ability to continue as a “going concern”New
4. 11There is no assurance nonbinding pre-orders or framework agreements will be converted into binding orders or that orders will be completed
5. 12Failure 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
6. 13Our plans are dependent on the development of market acceptance of our products and long duration energy storage technology
7. 14Our future growth and success depend on our ability to sell effectively to large customers
8. 15Our 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 flows33% rewritten
9. 16Our contracted sales are subject to the risk of termination by the contracting party
10. 17If 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
11. 18We 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
12. 19Our 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
13. 20We 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
14. 21The 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 growth31% rewritten
15. 22Significant changes to our leadership team and the resulting management transitions might harm our future operating resultsNew
16. 23Our 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
17. 24We currently are and in the foreseeable future will be significantly dependent on a limited number of products24% rewritten
18. 25Our planned expansion into new geographic markets or new product lines or services could subject us to additional business, financial, and competitive risks20% rewritten
19. 26If we fail to maintain effective control over financial reporting, our ability to accurately and timely report our financial results could be adversely affectedNew
20. 27Defects 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
21. 28Third parties might attempt to gain unauthorized access to our network or seek to compromise our products and services70% rewritten
22. 29The failure or breach of our IT systems could affect our sales and operations50% rewritten
23. 30We 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
24. 31Our facilities or operations could be damaged or adversely affected as a result of natural disasters and other catastrophic events30% rewritten
25. 32We may not have sufficient insurance coverage to cover business continuity
26. 33Changes 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 flows59% rewritten
27. 34We could be subject to foreign exchange risk
28. 35We 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
29. 36Our 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
30. 37The requirements of being a public company may strain our resources and divert management’s attention
31. 38We may engage in transactions with related parties and such transactions present possible conflicts of interest that could have an adverse effect on us
32. 39The 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 prospects36% rewritten
33. 40Our review of commercial and strategic transactions may be disruptive to our business and may not be successful79% rewritten

Risks Related to Regulatory, Environmental and Legal Issues

1. 41We 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. 42Our 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. 43We are subject to requirements relating to environmental and safety regulations and environmental remediation matters which could adversely affect our business, results of operation and reputation29% rewritten
4. 44Our 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. 45We may be exposed to delays, limitations and risks related to the environmental permits and other operating permits required to operate our products
6. 46We 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. 47We 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. 48We 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. 49We 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. 50We 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 future30% rewritten
11. 51government may gain rights to the intellectual property developed in our related research. The government’s rights in our intellectual property may lessen its commercial value, which could adversely affect our performanceNew
12. 52The 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 business51% rewritten
13. 53Changes in tax laws or in their implementation or interpretation may adversely affect our business and financial condition55% rewritten
14. 54Also, the IRA introduced a new non-deductible excise tax of 1% on certain net share repurchases by corporations. This 1% excise tax will generally apply to any repurchase of stock we undertake, net of shares issued by us in the same taxable year, which may increase the costs to us of any share repurchasesNew
15. 55Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited51% rewritten

Risks Related to Our Intellectual Property

1. 56If 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. 57Third 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. 58Our 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. 59Our 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. 60As 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. 61We will need to raise additional capital in the near future, and it may not be available on acceptable terms, if at all45% rewritten
3. 62Our debt service obligations may adversely affect our financial condition and cash flows from operations24% rewritten

Risks Related to Our Common Stock and Warrants

1. 63The price of our common stock may be volatile24% rewritten
2. 64These market and industry factors may materially reduce the market price of our common stock regardless of our operating performance and such impact may be exacerbated during periods of greater economic and market volatility45% rewritten
3. 65A sale of a significant portion of our total outstanding shares into the market may cause the market price of our common stock to drop significantly, even if our business is doing wellNew
4. 66We have warrants outstanding that are exercisable for our common stock, which, if exercised, would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholdersNew
5. 67The terms of our warrants may be amended from time to time
6. 68We may redeem your unexpired warrants prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless
7. 69We do not expect to declare any dividends in the foreseeable future
8. 70There can be no assurance that we will be able to continue to satisfy the continued listing standards of the NYSE78% rewritten
9. 71of any such fees and prior to the completion of our Plan Period, we will be subject to NYSE’s prompt initiation of suspension and delisting proceduresNew
10. 72Reports 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
11. 73We may be subject to short selling strategies that may drive down the market price of our common stock
12. 74Provisions 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
13. 75This 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
14. 76Our 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