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Item 7. 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 as of December 31, 2022 and for the fiscal year ended December 31, 2022. The discussion and analysis should be read together with our audited consolidated financial statements and related notes that are included elsewhere in this Annual report on Form 10-K. 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 Annual 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 Annual 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 is a grid-scale energy storage company that is driving a faster transition to renewable power by solving the intermittence issues that are inherent to the most prevalent sources of renewable energy, solar and wind.

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Our energy storage and software solutions allow utilities, independent power producers, and large energy users to manage their power portfolios. We provide turnkey energy storage solutions that meet the demands of the market for shorter duration with our BESSs and longer duration with our GESSs. In addition, our hybrid systems that incorporate other energy storage mediums, such as green hydrogen, address demand for extended duration energy storage. Our technology agnostic EMS platform once fully functional will orchestrate the management of one or more of our diverse storage mediums and the underlying generation assets to enable the delivery of power to our customers for their varied and multiple use cases.

Our solutions are designed to address the intermittency inherent in the predominant sources of renewable energy production by storing energy produced when renewable energy production is active. Once stored in our storage solutions, energy can be discharged to the grid in a controlled and reliable manner at any time, regardless of the then current ability of the renewable sources to generate power. Our energy storage solutions are designed to accommodate a wide variety of renewable power sources and to achieve an attractive levelized cost of energy relative to fossil fuels. Collectively, these abilities greatly broaden the use cases and time duration scenarios that can be addressed by certain sources of renewable power.

The Company’s portfolio of market-ready turnkey energy storage solutions currently includes:

•Battery energy storage systems (“BESS”) are our integrated solutions to meet shorter-duration storage needs.

•Gravity energy storage systems (“GESS”) include our proprietary EVx solution to meet longer-duration storage needs.

•Green hydrogen energy storage systems (“gHESS”) are our integrated solutions to meet extended duration storage needs.

•Hybrid energy storage systems (“HESS”) are our uniquely integrated solutions which allow the pairing of various energy storage mediums to meet specific customer needs.

•Energy management software platform (“EMS”) is our proprietary solution designed by our Energy Vault Solutions (“EVS”) division that orchestrates the management of one or more of our diverse storage mediums, along with the underlying generation assets to enable the delivery of power to our customers for their varied and multiple use cases.

Recent Developments

In January 2022, Energy Vault signed a license and royalty agreement for renewable energy storage with Atlas Renewable LLC (“Atlas”), which is majority owned by 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 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 all $50.0 million as of December 31, 2022.

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 December 31, 2022, the Company has contributed all $25.0 million. The refundable contribution will be returned to the Company upon Atlas’ first GESS reaching substantial completion, subject to adjustment for potential liquidated damages if certain performance metrics are not met.

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

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August 1, 2022 were redeemed at a price of $0.10 per warrant. No Public Warrants remain outstanding as of December 31, 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) BESS 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. 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 68.8 MW (275.2 MWh) BESS 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.

In November and December 2022, the Company entered into license and royalty agreements with two customers in the Middle East and Europe, respectively, to deploy Energy Vault’s proprietary gravity energy storage technology and energy management software platform.

In December 2022, the Company entered into a contract with NV Energy, whereby Energy Vault will construct a 220 MW (440 MWh) grid-tied BESS at a site located near Las Vegas, Nevada. The two-hour energy storage system is designed to store and dispatch excess renewable energy, including wind and solar power. The BESS will be charged and discharged on a daily basis and designed to dispatch stored renewable energy at peak consumption hours to help meet the high demand during Nevada’s peak load hours. Construction is anticipated to begin during the second quarter of 2023 with commercial operation expected by the end of 2023.

In December 2022, the Company entered into a tolling arrangement with Pacific Gas and Electric Company (“PG&E”), a subsidiary of PG&E Corporation (NYSE: PCG), in which Energy Vault and PG&E are partnering to deploy and operate a utility-scale battery plus green hydrogen long-duration energy storage system (“BH-ESS”) with a minimum of 293 MWh of dispatchable carbon-free energy, with the potential to further expand the project’s capacity up to 700 MWh. The BH-ESS is designed to power downtown and the surrounding area of the Northern California city of Calistoga for a minimum of 48 hours during planned outages and potential public safety power shutoffs, which is when the power lines serving the surrounding area must be turned off for safety due to high wildfire risk. The energy storage system will be owned, operated, and maintained by Energy Vault while providing dispatchable power under a long-term tolling arrangement with PG&E. Construction is anticipated to begin during the fourth quarter of 2023 with commercial operation expected by the end of the second quarter of 2024.

Business Combination and Public Company Costs

On February 11, 2022, Legacy Energy Vault completed 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 $235.9 million, including the contribution of $40.9 million of cash, net of redemptions, held in Novus’ trust account from its initial public offering and an aggregate purchase price of $195.0 million from the sale and issuance of shares of common stock in a private placement (“Private Investment in Public Equity” or “PIPE”) at $10.00 per share. Energy Vault and Novus paid $44.8 million in transaction costs, resulting in total net cash proceeds to Energy Vault from the Merger and PIPE of $191.1 million. See Note 1 and Note 3, in Part II, Item 8. “Financial Statements and Supplementary Data” for additional information about the Merger.

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As a result of the Merger, Energy Vault became 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 incurred 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 I, Item 1A. “Risk Factors.”

Product Development and Deployment Plan

We leverage our sustainable and differentiated technology to provide our customers with an economical solution to meet their shorter, longer, and extended-duration renewable energy storage needs. We believe that the majority of our competitors are primarily focused on the development and marketing of vertically siloed solutions based on a singular energy storage technology. We anticipate that our market will be characterized by high growth and rapidly evolving use cases and requirements. As a result, we have strategically chosen to design an agile and agnostic software platform that can orchestrate the management of one or more of our diverse storage mediums and the underlying power generation assets to harmonize asset operation and maximize economic return for our customers. This full spectrum of energy storage solutions assures our customers that we not only have what they need today, but that we also have what they will need in the future, thereby protecting their investments in our products. For these reasons, we believe we are well positioned to compete successfully in the evolving market for energy storage solutions.

Our project delivery generally relies on third-party EPC firms to construct our storage systems, under our supervision with dedicated teams tasked with project management. Our current business model options include:

•Building, operating, and transferring energy storage projects to potential customers,

•Building, operating, and holding energy storage systems as equity (co-) sponsor that may provide recurring revenue in the future,

•Recurring software revenue through licensing software for asset management and use case applications,

•Recurring service revenue through long term service agreements, and

•Intellectual property licenses and royalties associated with our energy storage technologies that may provide recurring revenues in the future.

Our cost projections are heavily dependent upon raw materials (such as steel), equipment (such as motors, batteries, 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 improvements until it was decommissioned in September 2022. Building on its experience with the CDU, Energy Vault designed its EVx system. The EVx system is designed to be modular and flexible to address longer duration energy storage needs, such as when there are power outages or for powering industrial processes over long periods. There are no commercial installations of Energy Vault’s EVx system at this time.

Energy Storage Industry

The growth of the energy storage market that we address is primarily driven by the decreasing cost of renewable power generation sources, government mandates, financial incentives to reduce CO2 emissions, and increasing geopolitical pressures driving energy independence goals. These dynamics are in turn driving demand for additional renewable power generation and increased capacity and storage duration in energy storage solutions.

According to a BloombergNEF analysis published in October 2022, demand for clean energy is growing rapidly, with renewable energy expected to supply nearly two-thirds of the world's electricity demand by 2050. Global energy storage additions are on track to grow at a 21% compound annual growth rate through 2030, with annual additions reaching 233 GWhs and cumulative capacity reaching nearly 400 GWhs. Both government mandates and companies focused on

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reducing energy use, cost, and emissions will propel the shift to renewable sources of power. We believe we are well-positioned to capitalize on this opportunity through our competitive pricing and scalability, and the environmentally friendly attributes of our energy storage solutions that cover the spectrum from shorter durations to extended durations.

During 2022, the United States Congress passed the IRA. The IRA provides incentives for the domestic manufacturing of key components of energy storage solutions as well as the construction of standalone energy storage projects. The resulting improved economics are expected to reduce the cost to implement storage within the domestic market and may amplify and accelerate the adoption of energy storage systems for shorter, longer, and extended duration use cases, like those offered by Energy Vault.

Our business depends on the acceptance of our energy storage products 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.

Increasing Deployment of Renewable Energy

Deployment of renewable energy resources has accelerated over the last decade, and solar and wind have become a low cost energy source. Energy storage is critical to reducing the intermittency and volatility of renewable energy generation. However, there is no guarantee that the deployment of renewable energy will occur at the rate that is expected. Inflationary pressures, supply chain disruptions, geopolitical stresses, and other factors could result in fluctuations in demand for and deployment of renewable energy resources, adversely affecting our revenue and ability to generate profits in the future.

Competition

The market for our products is competitive, and we may face increased competition as new and existing competitors introduce energy storage solutions and components. Furthermore, as we expand our services and digital applications in the future, we may face other competitors including software providers and hardware manufacturers that offer software solutions. If our market share declines due to increased competition or if we are not able to compete as we expect, our revenue and ability to generate profits in the future may be adversely affected.

Inflation

In the markets in which we operate, there have been higher rates of inflation in recent months. If inflation continues to increase in our markets, it may increase our expenses that we may not be able to pass through to customers. It may also increase the costs of our products that could negatively impact their competitiveness.

Key Components of Results of Operations

The following discussion describes certain line items in our Consolidated Statements of Operations and Comprehensive Loss.

Revenue

Prior to 2022, the Company was primarily involved in research and development activities. The Company began generating revenue from its product offerings during 2022, primarily from the licensing of our GESS EVx solution and from the sale of our BESSs. We expect to generate revenue in the future from the sale and licensing of the Company’s energy storage solutions, EMS, additional software applications, and long-term services agreements, including pursuant to tolling arrangements in connection with energy storage systems that we intend to own and operate.

Our revenue is affected by changes in the price, volume, and mix of products and services purchased by our customers, which is driven by the demand of our products, geographic mix of our customers, strength of competitor’s product offerings, and the availability of government incentives to the end-users of our products.

Our revenue growth is dependent on continued growth in the amount of energy storage systems constructed each year and our ability to increase our share of demand in the geographic regions where we currently compete and plan to compete in the future. Additionally, our revenue growth is dependent on our ability to continue to develop and commercialize new and innovative products to meet our customer’s energy storage needs.

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Cost of Revenue

Cost of revenue primarily consists of product costs, including batteries and supplies, as well as subcontractor costs, direct labor, and consulting expenses associated with constructing energy storage systems and providing construction support services to Atlas.

Our cost of revenue is affected by underlying costs for batteries, inverters, enclosures, and cables, as well as the cost of subcontractors to provide construction services.

Gross Profit and Gross Profit Margin

Gross profit and gross profit margin may vary from period to period due to the timing of when control of significant uninstalled materials are transferred to customers under contracts to sell energy storage systems. When control of significant uninstalled materials are transferred to customers, the Company recognizes revenue in an amount equal to the cost of those materials. The profit margin inherit in these materials is deferred until the Company performs on its obligation to install the materials during construction of the energy storage systems. As a result, gross profit and gross profit margin will vary from period to period depending on the timing of revenue recognition related to uninstalled materials.

Additionally, gross profit and gross profit margin may vary from period to period due to our sales volume, product prices, product costs, product mix, geographical mix, and the timing of when we perform installation and construction services.

Sales and Marketing Expenses

Sales and marketing expenses consist primarily of internal personnel-related costs for marketing, sales, and related support teams and external costs such as professional service costs, trade shows, marketing and sales related promotional materials, public relations expenses, website operating and maintenance costs. Personnel-related expenses consist of salaries, benefits, and stock-based compensation expense. 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 product development, testing and evaluation costs, construction costs including labor and transportation of material, overhead related costs and other direct expenses consisting of personnel-related expenses and consulting expenses relating to study of product safety, reliability and development. Personnel-related expenses consist of salaries, benefits, and stock-based compensation expense. 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 costs, and 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, 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 dismantled the CDU in September 2022. The Company has recognized various impairments related to the CDU when components have been damaged or become obsolete.

Interest Expense

Interest expense consists primarily of interest related to finance leases.

Change in Fair Value of Warrant 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 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

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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 from our 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 and the aggregate contracted value for energy storage systems, tolling arrangements, and license and service agreements signed during the period. The aggregate contracted value excludes any potential future variable payments or royalties.

The following table presents bookings for the periods indicated ($ in thousands):

Year Ended December 31,

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 agreements. As of December 31, 2022, backlog totaled $331.0 million.

The Company expects to realize the majority of the backlog as of December 31, 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, 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 Year Ended December 31, 2022 to Year Ended December 31, 2021

The following table sets forth our results of operations for the periods indicated (amounts in thousands):

Year Ended December 31,

Operating Expenses:

Other Income (Expense):

Interest expense (2) (7) 5

Change in fair value of warrant liability 2,330 — 2,330

Revenue

The Company recognized revenue for the product and service categories as follows for the years ended December 31, 2022 and 2021 (amounts in thousands):

Year Ended December 31,

Build and transfer energy storage products $ 85,636 $ —

Licensing of intellectual property 58,483 —

Revenue for the year ended December 31, 2022 was $145.9 million compared to no revenue for the year ended December 31, 2021. Revenue for the year ended December 31, 2022 consisted of $85.6 million from the building and transferring of energy storage products and $58.5 million from the licensing of the Company’s EVx intellectual property. Additionally, the Company recognized other revenue of $1.8 million related the Company providing construction support services to Atlas during the year ended December 31, 2022. Revenue from two customers represented 57% and 35%, respectively, of the Company’s total revenue for the year ended December 31, 2022.

Cost of Revenue

Cost of revenue was $86.6 million for the year ended December 31, 2022 compared to no cost of revenue for the year ended December 31, 2021. Cost of revenue for the year ended December 31, 2022 was primarily attributable to the cost of batteries related to the build and transfer of its battery storage projects. Cost of revenue also included subcontractor costs on its battery storage projects, and direct labor and consulting expenses related to providing construction support services to Atlas.

Gross Profit and Gross Profit Margin

Gross profit was $59.3 million and gross profit margin was 40.6% for the year ended December 31, 2022. Gross profit in 2022 was primarily attributable to the Company’s intellectual property licensing revenue, which did not have any associated cost of revenue.

Sales and Marketing Expenses

Sales and marketing expenses increased by $11.8 million to $12.6 million for the year ended December 31, 2022, compared to $0.8 million for the year ended December 31, 2021. The increase was primarily attributable to an increase in

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personnel-related expenses of $8.9 million, an increase in marketing and public relations costs of $1.5 million, an increase in consulting costs of $0.6 million, and an increase in travel related expenses of $0.6 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 $5.1 million for the year ended December 31, 2022, compared to $0.1 million for the year ended December 31, 2021.

Research and Development Expenses

Research and development expenses increased by $42.2 million to $50.1 million for the year ended December 31, 2022, compared to $7.9 million for the year ended December 31, 2021. The increase was primarily attributable to a $22.3 million increase in personnel-related expenses, a $7.5 million increase in depreciation expense, a $7.0 million increase in engineering and development costs, a $3.1 million increase in software expenses, a $1.2 million increase in consulting costs, and a $1.0 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 $14.8 million for the year ended December 31, 2022, compared to $0.4 million for the year ended December 31, 2021. The increase in depreciation expense primarily relates to depreciation on the CDU and related components.

General and Administrative Expenses

General and administrative expenses increased by $38.8 million to $56.9 million for the year ended December 31, 2022, compared to $18.1 million for the year ended December 31, 2021. The increase was primarily attributable to a $25.7 million increase in personnel-related expenses, a $6.3 million increase in legal and professional fees, a $2.5 million increase in consulting costs, a $1.8 million in travel related expenses, a $1.7 million increase in insurance costs, a $1.1 million increase in software expenses, and a $0.8 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 $21.2 million for the year ended December 31, 2022, compared to $0.1 million for the year ended December 31, 2021. The increase in legal and professional fees was attributable to external costs such as accounting, finance, tax, compliance, auditing, legal, and other professional fees associated with becoming a public company. These increases in general administrative expenses were partially offset by a $1.2 million decrease in depreciation expense.

Asset Impairment

Asset impairment was $2.8 million for the year ended December 31, 2022, compared $2.7 million for the year ended December 31, 2021. Asset impairment for the year ended December 31, 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 during 2022.

Asset impairment of $2.7 million for the year ended December 31, 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.

Change in Fair Value of Warrant Liability

The Company recognized a gain of $2.3 million related to the change in the fair value of the Company’s warrant liability for the year ended December 31, 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 year ended December 31, 2021.

Transaction Costs

The Company recognized transaction costsof $20.6 million related to the consummation of the Merger during theyear ended December 31, 2022. The Company did not recognize any transaction costs during 2021.

Other Income (Expense), Net

Other income (expense), net improved by $5.3 million to other income, net of $3.5 million for the year ended December 31, 2022 compared to other expense, net of $1.8 million for the year ended December 31, 2021. The improvement was primarily attributable to an increase in interest income and positive fluctuations in foreign currency transaction gain and losses.

Liquidity and Capital Resources

Sources of Liquidity

Since inception, we have financed our operations primarily through the issuance and sale of equity and the proceeds from the Merger and the PIPE. Energy Vault completed the Merger and PIPE on February 11, 2022, pursuant to which we

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received net proceeds of $191.1 million. As of December 31, 2022, we had cash, cash equivalents, and restricted cash of $286.2 million. Our cash equivalents are highly liquid investments purchased with an original or remaining maturities of three months or less. Substantially all of our restricted cash balance is held by banks as collateral for the Company’s letters of credit.

December 31,

Cash, cash equivalents, and restricted cash:

Total cash, cash equivalents, and restricted cash $ 286,182 $ 105,125

Short-Term Liquidity

Management believes that its cash, cash equivalents, and restricted cash on hand as of December 31, 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 private warrants. The exercise price for 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 in the future due to our-going research and development activities. We 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.

Licensing Agreements with Extended Payment Terms

The Company has licensed its EVx intellectual property and certain of these agreements contain extended payment terms. Expected cash inflows from all licensing agreements with extended payment terms as of December 31, 2022 are as follows:

Year ended December 31, Amount

Contractual Obligations

Our principal commitments as of December 31, 2022 consisted primarily of obligations under operating leases, finance leases, deferred pensions, and issued purchase orders. Our non-cancellable purchase obligations as of December 31, 2022 totaled approximately $50.2 million.

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Cash Flows

The following table summarizes cash flows from operating, investing, and financing activities for the periods indicated (amounts in thousands):

Year Ended December 31,

Net cash used in operating activities $ (23,346) $ (22,066)

Net cash used in investing activities (13,319) (1,170)

Effects of exchange rate changes on cash (49) 1,931

Net increase in cash, cash equivalents, and restricted cash $ 181,057 $ 95,074

Operating Activities

During the years ended December 31, 2022 and 2021, cash used in operating activities totaled $23.3 million and $22.1 million, respectively. During the year ended December 31, 2022, cash used in operating activities was negatively impacted by a net loss of $78.3 million, an increase in accounts receivable of $37.5 million, an increase in contract assets of $29.0 million, an increase in prepaid and other current assets of $29.6 million, an increase in customer financings receivable of $9.7 million, and an increase in inventory of $4.4 million. Operating cash flows were positively impacted by non-cash charges of $49.6 million, an increase in accounts payable and accrued expenses of $67.9 million, and an increase in contract liabilities of $49.4 million. The non-cash charges primarily consisted of $41.1 million in stock-based compensation expense, $7.7 million in depreciation and amortization expense, and $2.8 million in asset impairments, partially offset by a $2.3 million gain from the change in fair value of the Company’s warrant liability.

During the year ended December 31, 2021, cash used in operating activities of $22.1 million was negatively impacted by a net loss of $31.3 million. Operating cash flows were positively impacted by non-cash charges of $6.3 million and an increase in accounts payable and accrued expenses of $3.0 million. Non-cash charges primarily consisted of $3.2 million related to the write-down of inventory, $2.3 million in depreciation and amortization expense, $0.5 million in stock-based compensation expense, and $0.1 million in non-cash lease expenses.

Investing Activities

During the years ended December 31, 2022 and 2021, cash used in investing activities totaled $13.3 million and $1.2 million, respectively. Cash used in investing activities for the year ended December 31, 2022 consisted of $9.0 million for the purchase of equity securities, $2.3 million for the purchase of property and equipment, and $2.0 million for the purchase of a convertible note. The Company purchased $9.0 million of equity securities as part of a strategic investment in a company that is active in the energy transition industry.

Cash used in investing activities for the year endedDecember 31, 2021 consisted of $1.0 million for the purchase of a convertible note and $0.2 million for the purchase of property and equipment.

Financing Activities

During the years ended December 31, 2022 and 2021, cash provided by financing activities totaled $217.8 million and $116.4 million, respectively. For the year ended December 31, 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 $5.5 million in tax payments related to the net settlement of equity awards.

During the year ended December 31, 2021, cash provided by financing activities was primarily attributable to $105.4 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 $3.6 million in payments related to Merger transaction costs and $0.8 million in debt repayments.

Non-GAAP Financial Measure

We use adjusted EBITDA to complement our 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 GAAP 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):

Year Ended December 31,

Non-GAAP Adjustments:

Interest income, net (3,693) (57)

Income tax expense 427 1

Depreciation and amortization 7,743 2,320

Stock-based compensation expense 41,058 500

Change in fair value of warrant liability (2,330) —

Transaction costs 20,586 —

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 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 December 31, 2022.

Critical Accounting Policies and Use of Estimates

Our consolidated financial statements are prepared in conformity with 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. For more information on our significant accounting policies, refer to Note 2 - Summary of Significant Accounting Policies of our audited consolidated financial statements included in this Annual Report on Form 10-K.

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 the consideration is considered to be variable, an estimate of the unconstrained amount is recognized in the transaction price. 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 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. 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.

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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.

The Company’s agreement with Atlas includes variable consideration of $25.0 million, which represents a refundable contribution the Company made to Atlas during the construction period for their first GESS. The refundable contribution will be returned to Energy Vault upon Atlas’ first GESS reaching substantial completion, subject to adjustment for potential liquidated damages if certain performance metrics are not met. The Company has determined that it is probable that the entire $25.0 million will be collected from Atlas, and therefore has included that amount in the contract’s transaction price.

Certain licensing agreements contain a significant financing component due to the customer having extended payment terms. The licensing agreements that contain a significant financing component require the Company to recognize revenue as the present value of the future customer payments. The Company determines the present value of the future customer payments using a discounted cash flow analysis and a discount rate that approximates the interest rate the Company would use in a separate financing transaction with the customer. The discount rate used in the discounted cash flow analysis is highly subjective as it is dependent on the Company’s assessment of the customer’s credit risk.

Stock-Based Compensation

We have granted stock-based awards consisting primarily of incentive and non-qualified stock options and restricted stock units (“RSUs”) to employees, members of our Board, and non-employees.

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 options

Stock options 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.

RSUs

RSUs issued prior to the Merger were subject to both a service-based and a performance-based vesting condition. The performance-based vesting condition was satisfied upon the closing of the Merger. The qualifying liquidity event was not deemed probable until consummated, and therefore, stock-based compensation related to these RSUs remained unrecognized prior to the consummation of the Merger. The grant date fair value of our RSUs prior to the Merger was

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determined using valuation methodologies which utilized 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.

Subsequent to the Merger date, issued RSUs generally vest based only on a service condition. The grant date fair value of RSUs issued subsequent to the Merger that vest solely based upon service conditions are based on the fair value of our underlying common stock as of the date of the grant.

The Company grants RSUs to its CEO that vest based upon a market condition. The market conditions will be satisfied upon the Company’s stock price meeting certain price targets for 20 days out of any 30 day trading period. The fair value of these RSUs is measured using a Monte Carlo simulation model on the date of the grant. The Monte Carlo simulation model requires the input of highly subjective assumptions, including the expected term of the award, the expected volatility of the Company’s common stock, risk-free interest rates, and the expected dividend yield of the Company.

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 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.

The Private Warrants are classified as a Level 3 measurement and the Company uses a Black Scholes model to determine their fair value. The Black Scholes model requires the input of expected volatility, which is subjective. A significant increase in the expected volatility in isolation would result in a significantly higher fair value measurement.

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 2023 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 consolidated financial statements included elsewhere in this Annual Report.

Item 7A. 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

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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.

Credit Risk

Credit risk refers to the risk that a counterparty may default on its contractual obligations resulting in a loss to us. Our customers include the counterparties for the sale of our energy storage systems or the licensees of our intellectual property. A loss of one or more of our significant customers, their inability to perform under their contracts, or their default in payment could harm our business and negatively impact revenue, results of operations, and cash flows.

Commodity Price Risk

We are subject to risk from fluctuating market prices of certain commodity raw materials, including cement, steel, aluminum, and lithium, that are used in the components from suppliers that are inputs into our products. Prices of these raw materials may be affected by supply restrictions or other logistic costs market factors from time to time. As we are not the direct buyer of these raw materials, we do not enter into hedging arrangements to mitigate commodity risk. Significant price changes for these raw materials could reduce our operating margins if suppliers increase component prices and we are unable to recover such increases from our customers and could harm our business, financial condition, and results of operations.

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Item 8. Financial Statements and Supplementary Data

Index of Consolidated Financial Statements for the fiscal years ended December 31, 2022 and 2021.

Contents Page

Consolidated Balance Sheets as of December 31, 2022 and 2021 61

Notes to Consolidated Financial Statements 65

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Report of Independent Registered Public Accounting Firm

Shareholders and Board of Directors

Energy Vault Holdings, Inc.

Westlake Village, California 91361

Opinion on the consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Energy Vault Holdings, Inc (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, convertible preferred stock and stockholders’ equity (deficit), and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ BDO USA, LLP

We have served as the Company's auditor since 2020.

Melville, New York

April 12, 2023

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ENERGY VAULT HOLDINGS, INC.

Consolidated Balance Sheets

(In thousands, except par value)

December 31,

Assets

Current Assets

Accounts receivable 37,460 —

Customer financing receivable, current portion 1,500 —

Prepaid expenses and other current assets 31,569 5,538

Operating lease right-of-use assets 1,442 1,238

Customer financing receivable, long-term portion 8,260 —

Liabilities, Convertible Preferred Stock, and Stockholders’ Equity (Deficit)

Current Liabilities

Contract liabilities, current portion 49,434 —

Finance leases, current portion 38 48

Operating leases, current portion 787 612

Deferred pension obligation 890 734

Asset retirement obligation 560 978

Contract liabilities, long-term portion 1,500 1,500

Long-term finance leases 16 34

Long-term operating leases 709 662

Warrant liability 2 —

Commitments and contingencies (Note 18)

Stockholders’ Equity (Deficit)

Accumulated other comprehensive loss (888) (413)

The accompanying notes are an integral part of these consolidated financial statements.

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ENERGY VAULT HOLDINGS, INC.

Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except per share data)

Year Ended December 31,

Operating expenses:

Other income (expense)

Interest expense (2) (7)

Change in fair value of warrant liability 2,330 —

Transaction costs (20,586) —

Other income (expense), net 3,469 (1,793)

Provision for income taxes 427 1

Net loss per share — basic and diluted $ (0.64) $ (2.45)

Weighted average shares outstanding — basic and diluted 123,241 12,780

Other comprehensive income (loss) — net of tax

Actuarial gain (loss) on pension $ (188) $ 166

Foreign currency translation gain (loss) (287) 1,519

Total other comprehensive income (loss) (475) 1,685

The accompanying notes are an integral part of these consolidated financial statements.

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ENERGY VAULT HOLDINGS, INC.

Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(In thousands)

Shares (1) Amount Shares (1) Amount

Issuance of 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 — (1,628) — — — — —

Exercise of stock options — — 373 — 10 — 10

Actuarial gain on pension — — — — — — 166 166

Foreign currency translation gain — — — — — — 1,519 1,519

Actuarial loss on pension — — — — — — (188) (188)

Foreign currency translation loss — — — — — — (287) (287)

(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 consolidated financial statements.

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ENERGY VAULT HOLDINGS, INC.

Consolidated Statements of Cash Flows

(In thousands)

Year Ended December 31,

Cash Flows From Operating Activities

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization 7,743 2,320

Non-cash operating lease expense 744 117

Non-cash interest income (365) —

Gain on change in fair value of warrant liability (2,330) —

Change in pension obligation (12) 92

Change in asset retirement obligation (392) (52)

Foreign exchange gains and losses 316 64

Changes in operating assets and liabilities:

Accounts receivable (37,460) —

Contract assets (28,978) —

Prepaid expenses and other current assets (29,613) 217

Customer financing receivable (9,725) —

Other assets (1,052) —

Accounts payable and accrued expenses 67,861 3,002

Contract liabilities 49,434 —

Operating lease liabilities (726) —

Net cash used in operating activities (23,346) (22,066)

Cash Flows From Investing Activities

Purchase of property and equipment (2,319) (170)

Purchase of convertible notes (2,000) (1,000)

Purchase of equity securities (9,000) —

Net cash used in investing activities (13,319) (1,170)

Cash Flows From Financing Activities

Proceeds from exercise of stock options 171 5

Proceeds from reverse recapitalization and PIPE financing, net 235,940 —

Proceeds from exercise of warrants 7,855 —

Payment of taxes related to net settlement of equity awards (5,482) —

Repayment of debt — (765)

Payment of finance lease obligations (62) (53)

Proceeds from Series B-1 preferred stock, net of issuance costs — 15,295

Proceeds from Series C preferred stock, net of issuance costs — 105,373

Proceeds from issue of shares, net of issuance costs — 116

Net increase in cash, cash equivalents, and restricted cash 181,057 95,074

Cash, cash equivalents, and restricted cash – end of the period 286,182 105,125

Less: Restricted cash at end of period 83,145 —

Cash and cash equivalents - end of period $ 203,037 $ 105,125

ENERGY VAULT HOLDINGS, INC.

Consolidated Statements of Cash Flows (Continued)

(In thousands)

Year Ended December 31,

Supplemental Disclosures of Cash Flow Information:

Income taxes paid 3 1

Cash paid for interest 2 70

Supplemental Disclosures of Non-Cash Investing and Financing Information:

Warrants assumed as part of reverse recapitalization 19,838 —

Actuarial gain (loss) on pension (188) 166

Property, plant and equipment financed through accounts payable — 39

Assets acquired on finance lease 37 44

Reclassification of inventory costs to property and equipment, net — 11,156

Merger related costs in accounts payable — 529

The accompanying notes are an integral part of these consolidated financial statements.

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ENERGY VAULT HOLDINGS, INC.

Notes to Consolidated Financial Statements

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”, is a grid-scale energy storage company that is driving a faster transition to renewable power by solving the intermittence issues that are inherent to the most prevalent sources of renewable energy, solar and wind. The Company’s mission is to provide energy storage solutions to accelerate the global transition to renewable energy.

The Company’s project delivery generally relies on third-party EPC firms to construct our storage systems, under our supervision with dedicated teams tasked with project management. Our current business model options include:

•Building, operating, and transferring energy storage projects to potential customers,

•Building, operating, and holding energy storage systems as equity (co-) sponsor that may provide recurring revenue in the future,

•Recurring software revenue through licensing software for asset management and use case applications,

•Recurring service revenue through long term service agreements, and

•Intellectual property licenses and royalties associated with our energy storage technologies that may provide recurring revenues in the future.

The Company’s subsidiary, Energy Vault SA, was formed in December 2017 in Lugano Switzerland to 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 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 the Merger Agreement with Legacy Energy Vault that would result in 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 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.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements have been prepared on an accrual basis of accounting in accordance with GAAP and applicable rules and regulations of the SEC regarding financial reporting.

Principles of Consolidation

These 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

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ENERGY VAULT HOLDINGS, INC.

Notes to Consolidated Financial Statements

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 consolidated financial statements, in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the 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, revenue recognition, stock-based compensation, and valuation of warrant liability. Due to the inherent uncertainty involved in making assumptions and estimates, changes in circumstances 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.

Concentration of Credit Risk

Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, accounts receivable, and customer financings receivable.

Risks associated with cash and cash equivalents and restricted cash are mitigated by banking with creditworthy institutions. Such balances with any one institution may, at times, be in excess of federally insured amounts.

As of December 31, 2022, two customers had trade receivable balances exceeding 10% of total accounts receivable. These customers accounted for 78% and 16% of total accounts receivable, respectively.

As of December 31, 2022, one customer accounted for 100% of the customer financing receivable.

For the year ended December 31, 2022, revenue from two different customers accounted for 57% and 35% of total revenue, respectively.

Foreign Currency

Assets and liabilities denominated in a foreign currency are translated into U.S dollars using the exchange rates in effect at the balance sheet date. Revenue and expense accounts are translated at the average exchange rates during the periods. The impact of exchange rate fluctuations from translation of assets and liabilities is included in accumulated other comprehensive loss, a component of stockholders’ equity (deficit). As of December 31, 2022, accumulated other comprehensive loss included a $0.2 million loss related to currency translation adjustments. As of December 31, 2021, accumulated other comprehensive loss included a $44 thousand gain related to currency translation adjustments.

Gains and losses resulting from foreign currency transactions are included in other income (expense), net in the accompanying consolidated statements of operations.

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ENERGY VAULT HOLDINGS, INC.

Notes to Consolidated Financial Statements

Fair Value Measurements

ASC 820, Fair Value Measurement (“ASC 820”), establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:

Level I — Inputs which include quoted prices in active markets for identical assets and liabilities.

Level II — Inputs other than Level I 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 III — Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

Revenue Recognition

The Company recognizes revenue from contracts with customers in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, revenue is recognized when, or as, control of promised goods and services is transferred to customers, and the amount of revenue recognized reflects the consideration to which the Company expects to be entitled in exchange for the goods and services transferred. The Company determines revenue recognition through the following steps:

(1)Identification of the contract, or contracts, with a customer.

(2)Identification of the performance obligations in the contract.

(3)Determination of the transaction price.

(4)Allocation of the transaction price to the performance obligations in the contract.

(5)Recognition of revenue when, or as, a performance obligation is satisfied.

Once a contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations. Arrangements that include rights to additional goods or services that are exercisable at a customer’s discretion are generally considered options. The Company assesses if these options provide a material right to the customer and if so, they are considered performance obligations. The 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

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ENERGY VAULT HOLDINGS, INC.

Notes to Consolidated Financial Statements

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. When a contract provides the customer with a significant benefit of financing, the Company recognizes a customer financing receivable and recognizes interest income separate from the revenue recognized on the contracts with customers. 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.

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.

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.

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ENERGY VAULT HOLDINGS, INC.

Notes to Consolidated Financial Statements

The Company offers limited warranties on the Company’s energy storage systems which provide the customer assurance that the energy storage systems will function as the parties intended because it complies with agreed-upon specifications and are free from defects. These assurance-type warranties are not treated as a separate revenue performance obligation and are accounted for as guarantees under GAAP.

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 and Long Term Service Arrangements:To date, the Company has not recognized any revenue related to providing energy management software as a service or related to long term service arrangements. 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. Certain licensing agreements contain a significant financing component due to the customer having extended payment terms. The amounts due from customers under extended payment terms are included in the line item, customer financing receivable, on the consolidated balance sheets.

One of the Company’s intellectual property licensing customers is Atlas, which was an investor in the Company’s PIPE. As part of the Company’s licensing agreement with Atlas, the Company agreed to 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 during the first quarter of 2022. This deferred amount was recognized as revenue during the fourth quarter of 2022 upon the Company transferring the technology update to Atlas.

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 be repaid when Atlas’ first project reaches substantial completion, subject to adjustment for potential liquidated damages if certain performance metrics are not met. The Company has determined that it is probable that Atlas will reach substantial completion and meet the performance metrics to repay Energy Vault, therefore the entire amount of variable consideration has been included in the transaction price. As of December 31, 2022, the Company has contributed all $25.0 million to Atlas. The $25.0 million refundable contribution is included in the line item, contract assets, on the 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 were considered to be an option that provided a material right 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.

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ENERGY VAULT HOLDINGS, INC.

Notes to Consolidated Financial Statements

Cash, Cash Equivalents, and Restricted Cash

The Company considers all highly liquid investments purchased with an original or remaining maturity of three months or less to be cash equivalents. At December 31, 2022 and 2021, the Company maintained money market accounts totaling $5.4 million and $5.3 million respectively; and a cash sweep account invested primarily in US Treasury and other short term securities totaling $66.5 million and $84.2 million, respectively.

Restricted cash as of December 31, 2022 primarily consisted of cash held by banks as collateral for the Company’s letters of credit.

Accounts Receivable

Accounts receivable represents amounts that have an unconditional right to consideration, 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 December 31, 2022 and December 31, 2021, no allowance for doubtful accounts has been recorded.

Customer Financing Receivable

Customer financing receivable includes amounts due from a customer related to a licensing agreement under extended payment terms which contains a significant financing component. An interest rate is not stated in this agreement and is imputed using the effective interest method when recognizing interest income. The imputed interest rate on the note is 8.9%. Interest income on the customer financing receivable was $35 thousand for the year ended December 31, 2022 and was recognized within the line item, other income (expense), net in the consolidated statements of operations. As of December 31, 2022, no allowance for doubtful accounts has been recorded for customer financing receivable.

Inventory

Inventory consists of inverters and spare parts, which are used in ongoing battery storage projects for sale. Inventory is stated at the lower of cost or net realizable value with cost being determined by the specific identification method. Costs include the cost of purchase and other costs incurred in bringing the inventories to their present location and condition. The Company periodically reviews its inventory for potential obsolescence and write down of its inventory, as appropriate, to net realizable value based on its assessment of market conditions.

Property and Equipment, Net

Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets. Maintenance and repairs are charged to expense as incurred. When assets are retired or sold, the cost and related accumulated depreciation are removed from the consolidated balance sheet and any resulting gain or loss is reflected in operating expenses in the period realized.

Impairment of Long-Lived Assets

The Company reviews long-lived assets, primarily comprised of property and equipment and operating right-of-use assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparison of the carrying amount to the future undiscounted net cash flows which the assets are expected to generate. If the carrying value of the assets exceeds the sum of the estimated future cash flows, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceed their fair value.

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ENERGY VAULT HOLDINGS, INC.

Notes to Consolidated Financial Statements

Investment in Equity Securities

During 2022, the Company made a strategic investment and purchased equity securities of a private company active in the energy transition industry. These equity securities do not have a readily determinable fair value and are recorded at cost, less any impairment, plus or minus adjustments related to observable transactions for the same or similar securities, with unrealized gains and losses included in earnings. As of December 31, 2022, both the cost basis and carrying value of these equity securities was $9.0 million. The Company did not recognize any impairments or value changes resulting from observable price changes during the year ended December 31, 2022. The carrying value of the Company’s investment in equity securities is included in the line item, other assets, in the consolidated balance sheets.

Leases

The Company determines if a contract contains a lease at its inception based on whether or not the Company has the right to control the asset during the contract period and other facts and circumstances. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

ROU assets are classified as either operating or finance leases. Upon commencement of the lease, a ROU asset and corresponding lease liability are recognized for all operating and finance leases. The Company has elected the short-term lease exemption, which does not require a ROU asset or lease liability to be recognized when the lease term is 12 months or less and does not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise. The Company has decided not to elect the policy to not separate lease and non-lease component in arrangements whereby the Company is the lessee.

Upon commencement of the lease, ROU assets are recognized based on the initial measurement of the lease liability and adjusted for any lease payments made before commencement date of the lease, less any lease incentives and including any initial direct costs incurred. Lease liabilities are initially measured at the present value of future minimum lease payments over the lease term.

The discount rate used to determine the present value is the rate implicit in the lease unless that rate cannot be determined, in which case Company’s incremental borrowing rate is used, which is based on the estimated interest rate for collateralized borrowing over a similar term of the lease at commencement date.

Rights to extend or terminate a lease are included in the lease term when there is reasonable certainty the right will be exercised. Factors used to assess reasonable certainty of rights to extend or terminate a lease include current and forecasted lease improvement plans, anticipated changes in development strategies, historical practice in extending similar contracts and current market conditions.

Operating lease ROU assets and liabilities are subsequently measured at the present value of the lease payments not yet paid and discounted at the initial discount rate at commencement of the lease, less any impairments to the ROU asset. Operating lease expense is recognized on a straight-line basis over the lease term. Finance lease ROU assets are amortized on a straight-line basis over the estimated useful life of the asset if the lessee is reasonably certain to exercise a purchase option or ownership of the leased asset transfers at the end of the lease term, otherwise the leased assets are amortized over the lease term. Amortization of finance lease ROU assets is included in depreciation and amortization.

Operating lease ROU assets are recognized on the consolidated balance sheets in the line item, operating lease right-of-use assets, and finance lease ROU assets are recognized on the consolidated balance sheets within the line item, property and equipment, net.

Asset Retirement Obligation

Asset retirement obligations (AROs) are legal obligations associated with the retirement of tangible long-lived assets resulting from acquisition, construction, development, and/or normal use of the underlying assets. The ARO is recognized at its estimated fair value in the period in which it is incurred. These obligations generally include the estimated net future costs of dismantling the assets and restoring the land the assets are located on to its original condition in accordance with legal regulations and land lease agreement requirements. Upon initial recognition of a liability, the associated asset retirement costs are capitalized as part of the related long-lived asset and depreciated over the estimated useful life of the related asset. The liability is accreted over time through charges to earnings. If an ARO is settled for an amount other than

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ENERGY VAULT HOLDINGS, INC.

Notes to Consolidated Financial Statements

the carrying amount of the liability, the Company recognizes a gain or loss on the settlement. The Company reviews its AROs on an ongoing basis.

Defined Benefit Pension Obligation

The Company’s wholly owned subsidiary in Switzerland has a defined benefit pension obligation covering retirement and other long-term benefits of the local employees. Accrued pension costs are developed using actuarial principles and assumptions which consider a number of factors, including estimates for the discount rate, expected long-term rate of return on assets and mortality. Changes in these estimates would impact the amounts that the Company records in the consolidated financial statements.

Warrants

The Company assumed Public Warrants and 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 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 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 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 on the third anniversary of such date. 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.

Research and Development Expenses

Research and development costs are expensed as incurred. Research and development costs consist of salaries and other personnel related expenses, engineering expenses, product development costs and facility costs.

Advertising Costs

Advertising costs are expensed as incurred and are reflected in the line item, sales and marketing, in the consolidated statements of operations. Advertising expenses were $0.3 million for the year ended December 31, 2022. The Company did not incur any advertising expenses during the year ended December 31, 2021.

Stock-Based Compensation

The Company issues stock-based compensation awards to employees, directors, and non-employees in the form of stock options and restricted stock units (“RSUs”). The Company measures and recognizes compensation expense for stock-based awards based on the award’s fair value on the date of the grant. The Company accounts for forfeitures of stock-based awards when they occur. The fair value of RSUs that vest based on service conditions is measured using the fair value of the Company’s common stock on the date of the grant. The fair value of RSUs that vest based on market conditions is measured using a Monte Carlo simulation model on the date of the grant. The fair value of stock options that vest based on service conditions is measured using the Black-Scholes option pricing model on the date of the grant. The Monte Carlo simulation model and the Black-Scholes option pricing model require the input of highly subjective assumptions, including

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ENERGY VAULT HOLDINGS, INC.

Notes to Consolidated Financial Statements

the fair value of the Company’s common stock, the expected term of the award, the expected volatility of the Company’s common stock, risk-free interest rates, and the expected dividend yield of the Company’s common stock. This assumption used to determine the fair value of the awards represent management’s best estimates. These estimates involve inherit uncertainties and the application of management’s judgment.

The fair value of awards are recognized on a straight-line basis over the requisite service period. The fair value of the market-based RSUs is recognized over the requisite service period regardless of whether or not the RSUs ultimately vest and convert to common stock.

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 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 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 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.

Income Taxes

The Company accounts for income taxes in accordance with ASC 740, Income Taxes (“ASC 740”). ASC 740 prescribes the use of the liability method, whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates that will be in effect when the differences are expected to reverse.

Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax bases and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered. Deferred tax assets are evaluated for future realization and reduced by a valuation allowance to the extent the Company believes they will not be realized.

Net Loss Per Share

Basic net loss per share of common stock is calculated by dividing net loss by the weighted average number of common shares outstanding for the applicable period. Diluted net loss is computed based on the weighted average number of common shares outstanding increased by the number of additional shares that would have been outstanding had the potentially dilutive common shares been issued, including any dilutive effect from convertible preferred stock, outstanding stock options, or unvested RSUs, and reduced by the number of shares the Company could have repurchased with the proceeds from the issuance of the potentially dilutive shares. Potentially dilutive instruments are excluded from the per share calculation because the Company is in a net loss position and they would therefore be anti-dilutive.

Prior to 2022, the Company followed the two-class method when computing net loss per share for periods when issued shares that meet the definition of participating securities are outstanding. The two-class method calls for the calculation of net loss per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income available to common stockholders to be allocated between common and participating securities based upon their respective rights to received dividends as if all income for the period had been distributed. Net losses are not allocated to the Company’s preferred stockholders as they do not have an obligation to share in the Company’s net losses. The two-class method is no longer applicable after the closing of the Merger.

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 and will be adopted using the

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ENERGY VAULT HOLDINGS, INC.

Notes to Consolidated Financial Statements

modified retrospective method, which requires a cumulative effect adjustment to retained earnings. The Company is currently evaluating the impact this ASU will have on its consolidated financial statements and expects the adoption of the ASU will reduce opening retained earnings by approximately $2.4 million (pre-tax), driven by the Company’s accounts receivables, contract assets, and long-term financing receivable.

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 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 consolidated financial statements.

NOTE 3. REVERSE RECAPITALIZATION

On February 11, 2022, in connection with the Merger, the Company raised gross proceeds of $235.9 million, including the contribution of $40.9 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 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 106.2 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 $191.1 million.

The following transactions were completed as part of the Merger:

•All of the issued and outstanding shares of Legacy Energy Vault convertible preferred stock were canceled and converted into a total of 85.7 million shares of Energy Vault common stock;

•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. The reverse recapitalization accounting treatment was primarily determined based on the shareholders of Legacy Energy Vault having a relative majority of the voting power of Energy Vault and having the ability to nominate the majority of the members of the Energy Vault Board, senior management of Legacy Energy Vault comprise the senior management of Energy Vault, and the operations of Legacy Energy Vault prior to the Merger comprise the ongoing operations of Energy Vault. Accordingly, for accounting

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ENERGY VAULT HOLDINGS, INC.

Notes to Consolidated Financial Statements

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 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 following the consummation of the Merger was as follows (amounts in thousands):

Legacy Energy Vault stock converted as part of Merger (1) 106,172

Novus public shares (2) 4,079

Novus sponsor shares (3) 3,975

Total shares of Energy Vault common stock issued as part of the Merger 133,726

__________________

(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 years ended December 31, 2022 and 2021 (amounts in thousands):

Year Ended December 31,

Build and transfer energy storage products (1) $ 85,636 $ —

Licensing of intellectual property (2) 58,483 —

__________________

(1) Represents revenue recognized over time

NRGV US Equity

NRGV · 10-K · period ended 2022-12-31

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

NRGV US Equity☆

NRGV · 10-K · period ended 2022-12-31

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

NRGV US Equity