Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the section of this Annual Report on Form 10-K captioned “Business” and our consolidated financial statements and the related notes to those statements included elsewhere in this Form 10-K. In addition to historical data, this discussion contains forward-looking statements about our business, results of operations, cash flows, financial condition and prospects based on current expectations that involve risks, uncertainties and assumptions. Our actual results could differ materially from such forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those identified below and those discussed in the sections titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” included elsewhere in this Annual Report on Form 10-K. Additionally, our historical results are not necessarily indicative of the results that may be expected for any period in the future.
Business Overview and 2024 Full Year Results
Our mission is to deliver smart systems solutions, combining hardware and software, which enhance safety, increase energy yield, and lower operating costs of residential, commercial, and utility-scale solar systems. We believe we are a worldwide leader in the development and delivery of products and solutions that are flexible and dependable, increase the energy generation of solar energy systems and address the need for change. We primarily offer products and services through distributors and solar installers. We have a worldwide footprint with product installations in over 100 countries and on all seven continents.
Further information regarding our business is provided in “Part 1, Item 1. Business” of this Annual Report on Form 10-K.
Key Factors that May Influence Future Results of Operations
Our financial results of operations may not be comparable from period to period due to several factors. Key factors affecting our results of operations are summarized below.
Demand for Products. The demand for our products in Europe and the United States experienced a notable slowdown beginning in the second quarter in 2023 and has continued into 2024. Although our net revenue has increased on a sequential basis in each quarter of 2024, our year-to-date results remain substantially lower than the comparable period in the prior year. In Europe, the slowdown was primarily due to elevated inventory levels with distributors and an overall channel inventory correction as they responded to a slower demand environment. Additionally, there has been uncertainty surrounding the net energy metering policies and solar export penalties in the European markets, such as Germany, Belgium, Italy and the United Kingdom, which also contributed to the overall slowdown in demand in Europe. In the United States, the slowdown was primarily attributable due to higher interest rates than recent prior periods and the transition from the second iteration of net metering (“NEM 2.0”) to the third iteration of net metering (“NEM 3.0”) in California.
As a result of these factors, we recognized inventory charges of $23.5 million to write down inventories to their estimated net realizable value for the year ended December 31, 2024. These charges were primarily related to excess and slow-moving inventory within the GO ESS line of energy storage solutions. See Note 9, “Supplementary Balance Sheet and Geographic Information,” of the notes to consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information.
In addition, in response to the factors noted above, we reduced staffing levels across all geographies in December 2023 by approximately 15%, and in April 2024 by approximately 10%.
Further write-downs of inventories and additional cost reduction measures in future quarters could occur if market conditions do not improve or further deteriorate which could continue to have an adverse effect on our results of operations in 2025.
Unfavorable Macroeconomic and Market Conditions. The global macroeconomic and market uncertainty, including higher interest rates and inflation, has caused disruptions in financial markets and may continue to have an adverse effect on the U.S. and world economies. Since the second quarter of 2023, we have experienced a significant number of customer requests to delay purchase order deliveries and a smaller number of purchase order cancellations and returns. Other customers may decide to delay purchasing our products and services or not purchase at all. A tighter
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credit market for consumer and business spending could, in turn, adversely affect the spending levels of installers and end users and lead to increased price competition for our products. Reductions in customer spending in response to unfavorable or uncertain macroeconomic and market conditions, globally or in a particular region where we operate, have adversely affected, and could continue to adversely affect our business, results of operations and financial condition.
Managing Supply Chain. We rely on contract manufacturers and suppliers to produce our components. Our ability to grow depends, in part, on the ability of our contract manufacturers and suppliers to provide high quality services and deliver components and finished products on time and at reasonable costs. While we have diversified our supply chain, some of our suppliers and contract manufacturers are sole-source suppliers. Our concentration of suppliers could lead to supply shortages, long lead times for components and supply changes. A significant portion of our supply chain originates in Thailand and China. In the event we are unable to mitigate the impact of delays and/or price increases in raw materials, electronic components and freight, it could delay the manufacturing and delivery of our products, which would adversely impact our cash flows and results of operations, including revenue and gross margin. In addition, in a slowing economic environment, our inventory levels may continue to increase due to existing purchase commitments and our ability to negotiate volume pricing discounts may be impaired.
Expansion of Sales with Existing Customers and Adding New Customers. Our future revenue growth is, in part, dependent on our ability to expand product offerings and services in the U.S. residential market. In our North American market, revenue is generally generated from our product offerings and services in the commercial and industrial markets. In order to continue growth of revenues, we plan to expand our presence in the residential market through offerings with residential solar providers. We also expect to continue to evaluate and invest in new market opportunities internationally. We believe that our entry into new markets will continue to facilitate revenue growth and customer diversification. We primarily acquire new customers through collaboration with our industry partners and distributors. While we expect that a substantial portion of our future revenues in the near-term will be generated from our existing customers, we expect to invest in our sales and marketing to broaden reach with new residential customers in the U.S. and customers in EMEA.
Key Operating and Financial Metrics
We regularly review a number of metrics, including the following key operating and financial metrics, to evaluate our business, measure our performance, identify trends in our business, prepare financial projections and make strategic decisions. We believe the operating and financial metrics presented are useful in evaluating our operating performance, as they are similar to measures used by our public competitors and are regularly used by securities analysts, institutional investors, and other interested parties in analyzing operating performance and prospects.
The following table sets forth these metrics for the periods presented:
Year Ended December 31, Change in
(in thousands, except percentages) 2024 2023 $ %
Gross margin (7.7 )% 35.3 %
Gross (Loss) Profit and Gross Margin
We define gross (loss) profit as total net revenue less cost of revenue, and define gross margin expressed as a percentage, as the ratio of gross profit to revenue. Gross (loss) profit and margin can be used to understand our financial performance and efficiency and allow investors to evaluate its pricing strategy and compare it against competitors. We use these metrics to make strategic decisions identifying areas for improvement, set targets for future performance and make informed decisions about how to allocate resources going forward.
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Key Components and Comparison of Results of Operations
Net Revenue
We generate revenue primarily through the sale of our hardware products, SaaS platform, Predict+, our web-based monitoring services and royalties. Our revenue model is structured around the delivery of fully functional hardware products at the time of shipment, requiring no further modification for customer use. These products are sold primarily to distributors who then resell to end users, with our revenue recognition practices ensuring that revenue is recognized when control of the products is transferred to the customer.
Our revenue is influenced by changes in the sales volume of our products and services, market supply and demand, promotional incentives and the offerings of our competitors. The growth of our revenue is dependent on the following factors:
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our ability to grow our sales with existing customers and the addition of new customers in current and new markets;
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our ability to expand upon our current product and service offerings;
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our ability to manage our supply chain effectively;
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our ability to sustain our market competitiveness through cost efficiency and continuous innovation in our technology;
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our ability to navigate macroeconomic trends and the global regulatory environment; and
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our capability to consistently promote our product and service portfolio, thereby enhancing our brand visibility and establishing a distinct market position.
Years endedDecember 31, 2024 and 2023
Year Ended December 31, Change in
(in thousands, except percentages) 2024 2023 $ %
Net revenue decreased by $91.2 million or 62.8% for the year ended December 31, 2024, as compared to the same period in 2023. The decrease is primarily due to the solar industry experiencing a broad-based slowdown starting in the second half of 2023 in both the U.S. and European markets, which resulted in elevated inventory levels with distributors and installers, and as a result the overall demand for our products and services decreased as distributors and installers responded to this slower demand environment. Please see the section below for a discussion of the factors influencing the fluctuations in net revenue for each of our geographic regions.
Year Ended December 31, Change in
(in thousands, except percentages) 2024 2023 $ %
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EMEA – Net revenue for the EMEA region decreased by $76.7 million or 70.2% for the year ended December 31, 2024, as compared to the same period in 2023. We saw increased revenues in the region beginning in 2022 and through the first half of 2023 primarily due to higher energy prices following the onset of the armed conflict in Ukraine. Beginning in the second half of 2023 and continuing into 2024, the industry experienced a broad-based slowdown as higher interest rates, policy changes, and elevated inventory levels at distributors and installers reduced demand for solar solutions in the region.
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Americas – Net revenue for the Americas region decreased by $12.0 million or 47.8% for the year ended December 31, 2024, as compared to the same period in 2023. The decrease is primarily due to lower demand for our solutions as a result of higher interest rates and the transition from NEM 2.0 to NEM 3.0 in California.
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APAC – Net revenue for the APAC region decreased by $2.5 million or 23.0% for the year ended December 31, 2024, as compared to the same period in 2023. The decrease was primarily driven by a $2.2 million decline in sales in China which is primarily attributable to higher interest rates impacting investment decisions and new entrants to the MLPE market, including low-cost Asian manufacturers.
Cost of Revenues and Gross Profit
Our cost of revenues consists primarily of product costs, warranty costs, and logistics costs, as well as inventory write-downs, shipping and handling costs, hosting service costs related to the monitoring service, and depreciation and amortization of manufacturing test equipment. We outsource our manufacturing to third-party contract manufacturers and negotiate product pricing on a quarterly basis. Our product costs are affected by the advancement of technology in both our hardware and services, economies of scale resulting in lower component costs, and improvements in our overall manufacturing and production processes.
Key components of our logistics supply channel consist of third-party distribution centers in the U.S., Europe, and China. Finished goods are either shipped to our customers directly from our contract manufacturers or shipped to third-party distribution centers and then distributed to our customers.
Gross profit may fluctuate from one reporting period to the next as the components of net revenue and cost of revenue are affected by market price fluctuations whose changes impact our average selling prices, product cost, product mix, customer mix, warranty costs and freight costs.
Year Ended December 31, Change in
(in thousands, except percentages) 2024 2023 $ %
Gross margin (7.7 )% 35.3 %
Years endedDecember 31, 2024 and 2023
Cost of revenue decreased by $35.8 million or 38.1% for the year ended December 31, 2024, as compared to the same period in 2023. The decrease is primarily due to a 62.8% decline in net revenues for the year ended December 31, 2024, compared to the same period in 2023. The decrease was primarily offset by inventory charges of $23.5 million during the year ended December 31, 2024, primarily due to excess and slow-moving inventory within the GO ESS line of energy storage solutions as a result of the macroeconomic factors noted above.
Gross profit decreased from $51.3 million for the year ended December 31, 2023, to a gross loss of $4.2 million for the year ended December 31, 2024, a decrease of $55.5 million or 108.1%. Gross margin decreased by 43.0 percentage points for the year ended December 31, 2024, as compared to the same period in 2023. The decreases are primarily due to inventory reserve charges of $23.5 million during the year ended December 31, 2024 primarily due to excess and slow-moving inventory within the GO ESS line of energy storage solutions and lower sales volume due to the unfavorable macroeconomic and market conditions noted above, in addition to sales promotions and discounts related to our GO ESS product line.
Operating Expenses
Operating expenses consist of research and development, sales and marketing and general and administrative expenses. Personnel-related costs are the most significant component of each of these expense categories and include salaries, benefits, payroll taxes, sales commissions, incentive compensation and stock-based compensation. Refer below for further details on the separate components of operating expenses.
Research and Development
Research and development expenses consist of personnel-related expenses and facility-related expenses. Research and development employees are primarily engaged in the design and development of our MLPE, GO ESS solutions and Predict+. We devote substantial resources to research and development programs that focus on enhancements to, and cost efficiencies in, our existing products or services and timely development of new products and services that utilize technological innovation to drive down product costs, improve functionality and enhance
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reliability. We intend to continue to invest appropriate resources in our research and development efforts because we believe they are critical to maintaining our competitive position.
Year Ended December 31, Change in
(in thousands, except percentages) 2024 2023 $ %
Percentage of net revenue 18.3 % 6.5 %
Years endedDecember 31, 2024 and 2023
Research and development expense increased by $0.4 million or 3.8% for the year ended December 31, 2024, as compared to the same period in 2023. The increase was primarily driven by an increase in consulting and personnel-related stock-based compensation expenses, and is partially offset by a decrease in payroll related expenses from a lower headcount during the year ended December 31, 2024, compared to the same period in 2023.
The amount of research and development expenses may fluctuate from period to period due to differing levels and stages of development activity.
Sales and Marketing
Sales and marketing expenses consist primarily of personnel-related expenses, as well as advertising, travel, trade shows, marketing, customer support and other indirect costs. We expect to continue to make the necessary investments to enable us to execute our strategy to increase our market penetration geographically and enter into new markets by expanding our customer base of distributors.
Year Ended December 31, Change in
(in thousands, except percentages) 2024 2023 $ %
Percentage of net revenue 31.3 % 14.7 %
Years endedDecember 31, 2024 and 2023
Sales and marketing expense decreased by $4.4 million or 20.5% for the year ended December 31, 2024, as compared to the same period in 2023. The decrease was primarily due to reduced payroll and travel expenses resulting from a lower headcount by $5.1 million, and was partially offset by an increase in personnel-related stock-based compensation expenses by $0.9 million.
General and Administrative
General and administrative expense consist primarily of personnel-related expenses for our executive, finance, human resources, information technology and legal organizations, facilities costs, and fees for professional services. Fees for professional services consist primarily of outside legal, accounting and information technology consulting costs.
Year Ended December 31, Change in
(in thousands, except percentages) 2024 2023 $ %
Percentage of net revenue 39.0 % 19.8 %
Years endedDecember 31, 2024 and 2023
General and administrative expense decreased by $7.7 million or 26.9% for the year ended December 31, 2024, as compared to the same period in 2023. The decrease is primarily due to a decline of bad debt expense associated with our accounts receivable by $5.6 million, a decrease in legal expense by $4.4 million which was higher in 2023 due to the Business Combination, as defined below, and is partially offset by an increase in personnel-related stock-based compensation expenses by $2.6 million.
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Other Expenses (Income), Net
Other expenses (income), net, primarily consist of interest income earned on our cash and short term investments, realized gains and losses on short-term and long-term marketable securities, interest expense and fees under our convertible note, non-cash interest expense related to the amortization of debt issuance costs, and non-cash charges recognized for the change in fair value of our convertible notes embedded derivative, and convertible preferred stock warrants and losses or gains on debt extinguishment. Refer below for further details on the separate components of other (income) expenses, net.
Year Ended December 31, Change in
(in thousands, except percentages) 2024 2023 $ %
Change in fair value of derivative liability — (12,247 ) 12,247 100.0 %
Years endedDecember 31, 2024 and 2023
Change in fair value of preferred stock warrant and contingent shares liability decreased by $1.0 million or 86.3% for the year ended December 31, 2024, as compared to the same period in 2023, primarily due to a decrease in mark-to-market expense associated with the contingent shares related to the fSight acquisition as a result of a reduction in the number of contingent shares issued in 2024 compared to the same period in 2023, which included the maximum number of contingent shares that we could have been required to issue. The final tranche of the contingent shares was released on July 25, 2024. See Note 4, “Acquisition of Foresight Energy, Ltd.,” of the notes to consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information.
The change in fair value of derivative liability for the year ended December 31, 2023, is related to the Convertible Promissory Note which contained conversion options that met the requirements for separate accounting and was accounted for as a convertible note derivative liability. The derivative instrument was recorded at fair value upon recognition on the Merger Date and was subject to remeasurement at the end of the reporting period. On September 24, 2023, we entered into the Convertible Note Amendment (as defined above) with L1 Energy (as defined above) to modify the conversion terms of the Convertible Promissory Note and, as a result of such amendment, the conversion options no longer meet the requirements to be bifurcated in accordance with ASC Topic 815, “Derivatives and Hedging”. See Note 9, “Long-Term Debt,” of the notes to consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information.
The loss on debt extinguishment for the year ended December 31, 2023, is primarily related to the repayment of our Series 2022-1 Notes.
Interest expense increased by $3.3 million or 40.7% for the year ended December 31, 2024, as compared to the same period in 2023. This increase is primarily due to the timing of the amortization of the debt discount of $23.5 million that was recorded upon the bifurcation of the conversion options at the time of the Business Combination. Please see Note 9, “Long-Term Debt,” of the notes to consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information.
Interest income decreased by $1.5 million or 62.7% for the year ended December 31, 2024, as compared to the same period in 2023, primarily due to a lower balance of marketable securities available to generate interest income in 2024 compared to the same period in 2023.
Other income, net of $37,000 decreased to other expenses, net of $0.2 million for the year ended December 31, 2024, as compared to the same period in 2023. This is primarily due to a reduction of finance fees charged to customers for the year ended December 31, 2024, compared to same period in 2023.
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Liquidity, Going Concern and Capital Resources
As of December 31, 2024, our principal sources of liquidity were cash and cash equivalents and marketable securities of $19.9 million and total working capital, which we define as current assets less current liabilities, of $36.3 million. Our principal uses of cash are for funding our operations, capital expenditures, other working capital requirements, other investments and the repayment of our Convertible Promissory Note (as defined below) due in January 2026.
In accordance with ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“Subtopic 205-40”), we evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the consolidated financial statements are issued. The Convertible Promissory Note, which has an aggregate principal amount outstanding of $50.0 million as of December 31, 2024, has a maturity date of January 9, 2026. See Note 9, “Long-Term Debt,” of the notes to consolidated financial statements for additional information regarding the Convertible Promissory Note. Management determined as a result of this evaluation, our current cash, working capital position, and upcoming maturity date of its Convertible Promissory Note, raises substantial doubt about our ability to continue as a going concern within one year after the date that the consolidated financial statements are issued.
Our plan is to continue exploring options for raising additional capital through a combination of equity financing to supplement our liquidity and/or refinancing of the Convertible Promissory Note. Our ability to raise capital may be constrained by the price of and demand for our common stock. Additional capital may not be available on favorable terms or at all, and could further dilute our current stockholders. Management cannot conclude as of the date of this filing that its plans are probable of being successfully implemented. There can be no assurance that we will be able to raise sufficient additional capital or obtain financing that will provide it with sufficient liquidity to satisfy its Convertible Promissory Note obligation in January 2026.
The consolidated financial statements have been prepared on a basis that assumes we will continue as a going concern which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business. Accordingly, the accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
At-the-market offering. In November 2024, we entered into the ATM Agreement with the Sales Agent, pursuant to which we may offer and sell shares of our common stock having an aggregate gross sales price of up to $14.2 million, from time to time, through the Sales Agent in transactions deemed to be “at-the-market” offerings under federal securities laws (the “2024 ATM Program”). The offering of Shares pursuant to the ATM Agreement will terminate upon (a) five business days’ advance notice from us to the Sales Agent or five business days’ advance notice from the Sales Agent to us or (b) otherwise by mutual agreement of the parties pursuant to the terms of the ATM Agreement. Sales under the 2024 ATM Program are subject to a maximum commission of up to 3.0% of the gross proceeds per share sold through the Sales Agent.
During the year ended December 31, 2024, a total of 16,336 shares of common stock were issued pursuant to the Sales Agreement for aggregate gross proceeds of approximately $17,000, before deducting commissions and offering expenses payable by us. At December 31, 2024, $14.2 million remained available under the ATM Agreement. Refer to Note 11, in Part II, Item 8 of this Annual Report on Form 10-K for more information on the at-the-market offering.
Convertible Note. As of December 31, 2024, our Convertible Note obligation was $50.0 million. Upon conversion of the Convertible Note due in January 2026, we would need to pay cash or issue shares of common stock equal to the aggregate principal amount of the Convertible Note to be converted. As noted above, there is substantial doubt about our ability to continue as a going concern within one year after the date that the consolidated financial statements are issued due to the upcoming maturity date of the Convertible Note. Management continues to explore options to address the substantial doubt, however there can be no assurance that we will be able to raise sufficient additional capital or obtain financing that will provide it with sufficient liquidity to satisfy the Convertible Promissory Note obligation. Refer to the section above for more information regarding our going concern analysis and management’s plan to address the substantial doubt. Refer to Note 9, in Part II, Item 8 of this Annual Report on Form 10-K for more information on our outstanding Convertible Note.
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Operating Leases. We have entered into various non-cancelable operating leases primarily for our facilities with original lease periods expiring through the year 2029, with our most significant leases relating to our facilities in Campbell, California and Ra’anana, Israel. As of December 31, 2024, we had total lease obligations of $1.6 million recorded on our consolidated balance sheet.
Cash Flows
The following table summarizes our cash flows for the periods presented:
Year Ended December 31,
Net cash used in operating activities $ (12,354 ) $ (37,222 )
Net cash provided by (used in) investing activities 19,756 (30,914 )
Net cash (used in) provided by financing activities (61 ) 34,824
Net increase (decrease) in cash and cash equivalents $ 7,341 $ (33,312 )
Management closely monitors expenditures and is focused on obtaining new customers and continuing to develop our products. Cash from operations and our liquidity could also be affected by various risks and uncertainties, including, but not limited to, economic concerns related to interest rates, inflation or the supply chain, including timing of cash collections from customers and other risks which are detailed in the section entitled “Risk Factors” in Part I, Item 1A to this Annual Report on Form 10-K.
Cash Flows Used in Operating Activities
Operating cash flows consists primarily of net loss adjusted for certain non-cash items and changes in operating assets and liabilities. Cash used in operating activities decreased by $24.8 million in the year ended December 31, 2024, as compared to the same period in 2023. The decrease in cash used in operating activities was primarily driven by a decrease in inventory purchases, in addition to inventory charges for excess and slow-moving inventory within our GO ESS line of energy storage solutions.
Cash Flows Provided by (Used in) Investing Activities
Net cash provided by investing activities was $19.8 million for the year ended December 31, 2024, which is primarily attributable to the sale and maturities of marketable securities and was partially offset by the purchase of additional marketable securities and property and equipment. Net cash used in investing activities was $30.9 million for the year ended December 31, 2023, which is primarily attributable to the purchase of marketable securities and property and equipment and was partially offset by the sale and maturities of marketable securities.
Cash Flows (Used in) Provided by Financing Activities
Net cash used in financing activities was $61,000 for the year ended December 31, 2024, which is primarily attributable to the payments of offering costs related to our at-the-market offering and payments of tax withholdings on stock options. This was partially offset by proceeds from the exercise of stock options. Net cash provided by financing activities was $34.8 million for the year ended December 31, 2023, which is primarily attributable to proceeds of $50.0 million from the Convertible Promissory Note, proceeds of $3.7 million from the redemptions of common stock warrants and proceeds of $2.2 million from the Business Combination, which was partially offset by the $20.8 million repayment of the Series 2022-1 Notes.
Off-Balance Sheet Arrangements
During the periods presented, we did not have any off-balance sheet arrangements.
Critical Accounting Estimates
The preparation of our audited consolidated financial statements and related notes requires us to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities.
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We have based our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates due to risks and uncertainties, including uncertainty in the current economic environment due to the global impact of inflation, interest rate fluctuations, new regulations, and geopolitical conflicts. As of the date of issuance of these financial statements, we are not aware of any specific event or circumstance that would require us to update our estimates, judgments or revise the carrying value of our assets or liabilities. For a description of our significant accounting policies, see Note 2. “Summary of Significant Accounting Policies,” in Part II, Item 8 of this Annual Report on Form 10-K. An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the consolidated financial statements. We believe the following critical accounting policies reflect the more significant estimates and assumptions used in the preparation of our consolidated financial statements.
Inventory, net
Our inventories are comprised of sellable finished goods, raw materials bought on behalf of our contract manufacturers, and defective units returned under our warranty policy.
Sellable finished goods and raw material inventories are valued at the lower of cost or net realizable value, based on the first-in, first-out (“FIFO”) method. Certain factors could affect the realizable value of our inventories, including market and economic conditions, technological changes, existing product changes (mainly due to cost reduction activities) and new product introductions. We consider historic usage, expected demand, anticipated sales price, the effect of new product introductions, product obsolescence, and other factors when evaluating the net realizable value of inventories. Inventory write-downs are equal to the difference between the cost of inventories and their estimated net realizable value. Inventory write downs are recorded as cost of revenues in the accompanying consolidated statements of operations and comprehensive loss.
If estimates regarding customer demand are inaccurate or changes in technology affect demand for certain products in an unforeseen manner, we may be exposed to potential losses. For example, we incurred inventory charges for the year ended December 31, 2024 of $23.5 million, primarily for excess and slow-moving inventory within our GO ESS line of energy storage solutions, reflecting the fact that this business line has not performed as well as was originally forecasted due to the macroeconomic factors noted above.
See Note 2 and Note 8 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information related to inventory valuation.
Product Warranties
We provide a standard limited product warranty for our solar products against defects in materials and workmanship under normal use and service conditions. Our standard warranty period is 25 years for our MLPE devices, 12.5 years for our inverters, and 11 years for our batteries. Other products are sold with standard limited warranties that typically range in duration from five to ten years. In addition, customers in the United States can purchase extended warranties for inverters that extend the warranty period up to 25 years.
Our products are designed to meet the warranty periods, and our reliability procedures cover component selection, design, accelerated life cycle tests, and end-of-manufacturing line testing. However, since our history in selling MLPE devices, batteries, inverters and other hardware is shorter than the warranty period, the calculation of warranty provisions is inherently uncertain.
We accrue estimated warranty costs at the time of sale based on anticipated warranty claims, which are estimated based on actual historical warranty claims experience. Warranty provisions, computed on a per-unit sold basis, are based on our best estimate of such costs and are included in our cost of revenues. The warranty obligation is determined based on actual and predicted failure rates of the products, cost of replacement and service and delivery costs incurred to correct a defective product. Our warranty obligation requires management to make assumptions regarding estimated failure rates and replacement costs. If actual warranty costs differ significantly from these estimates, adjustments may
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be required in the future, which could adversely affect our gross profit and results of operations. Warranty obligations are classified as short-term and long-term warranty obligations, based on the period in which the warranty is expected to be claimed. The product warranty liability (short and long-term) was $5.8 million and $5.6 million, for the years ended December 31, 2024, and 2023, respectively.
See Note 2 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information related to product warranty.
Impairment of Long-Lived Assets and Intangibles
We review our long-lived assets, which consist of property and equipment and operating lease right of use assets, for impairment when specific triggering events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets held and used is measured by comparison of the carrying amount of an asset to future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of their carrying cost amount or fair value less cost to sell. No impairment losses were identified for the years ended December 31, 2024, and 2023.
We evaluate the recoverability of finite-lived intangible assets for impairment whenever there are triggering events or circumstances that may indicate the carrying amount of such assets may not be recoverable. The evaluation is performed at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If such review indicates that the carrying amount of intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value. No impairment losses were identified for the years ended December 31, 2024, and 2023.
Acquired identifiable finite-lived intangible assets are amortized on a straight-line basis over the estimated useful lives of the assets. We believe the basis of amortization approximates the pattern in which the assets are utilized, over their estimated useful lives. We routinely review the remaining estimated useful lives of finite-lived intangible assets. In case we reduce the estimated useful life assumption for any asset, the remaining unamortized balance is amortized or depreciated over the revised estimated useful life.
The valuation of long-lived assets and finite-lived intangible assets inherently involves a degree of uncertainty, particularly as it relates to our future undiscounted cash flows and performance. Beginning in the second half of 2023 and continuing into 2024, we saw a decrease in cash flow generation primarily due to being affected by an industry-wide inventory oversupply, higher interest rates, and other macroeconomic trends. These considerations were factored into the 2024 annual impairment analysis, and we did not believe this has led to impairment of long-lived assets or finite-lived intangible assets, as of the assessment date. If these macroeconomic trends, noted above, persists into 2025, there is a possibility that we may record impairment charges against these assets. We closely monitor these conditions and are prepared to perform interim impairment tests, as applicable, should there be indications of triggering events leading to impairment.
See Note 2, 8 and 14 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information related to long-lived assets and intangibles.
Goodwill
Goodwill represents the excess of the purchase price over the identifiable tangible and intangible assets acquired in addition to liabilities assumed arising from the acquisition of fSight.
Goodwill is not amortized and is tested for impairment at least on an annual basis. The goodwill impairment test is performed according to the following principles:
1.
An initial qualitative assessment may be performed to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount;
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2.
If we conclude it is more likely than not that the fair value of the reporting unit is less than its carrying amount, a quantitative fair value test is performed. An impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value is recognized.
As we operate as a single reporting unit, with a centralized business model, we used the market approach to estimate the fair value of the reporting unit. The market approach allows the use of the market price of an individual equity security at the assessment date to calculate the fair value of the reporting unit. We used the closing stock price at the date of assessment to calculate our fair value. As we are considered one reporting unit, we used the consolidated balance sheet to derive the carrying amount of the reporting unit, with the inclusion of goodwill.
We complete the required annual testing of goodwill impairment for the reporting unit in the fourth quarter of each year to determine if goodwill should be impaired. During the year ended December 31, 2024, no impairment of goodwill has been identified. For the annual test impairment test that was conducted in the fourth quarter of 2024, fair value exceeded the carrying value by 531.5%.
The valuation of goodwill inherently involves a degree of uncertainty, particularly as it relates to our stock price and the calculation of our fair value. Throughout 2024, our stock price has decreased primarily due to our performance being affected by an industry-wide inventory oversupply, higher interest rates, and other macroeconomic trends. Additionally, should our share price continue to decline, reflecting broader industry or economic concerns, this could indicate a decline in the fair value of the reporting unit, potentially leading to an impairment of goodwill. We closely monitor these conditions and are prepared to perform interim impairment tests should there be indications that the fair value of the reporting unit may have declined below its carrying amount.
See Note 2 and 14 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information related to goodwill.
Income Taxes
Income taxes are accounted for under the asset-and-liability method as required by ASC Topic 740, “Income Taxes” (“ASC Topic 740”). Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period corresponding to the enactment date.
Valuation Allowance
We establish an income tax valuation allowance when available evidence indicates that it is more likely than not that all or a portion of a deferred tax asset will not be realized. In assessing the need for a valuation allowance, we consider the amounts and timing of expected future deductions or carryforwards and sources of taxable income that may enable utilization. We maintain an existing valuation allowance until enough positive evidence exists to support its reversal. Changes in the amount or timing of expected future deductions or taxable income may have a material impact on the level of income tax valuation allowances. Our assessment of the realizability of the deferred tax assets requires judgment about our future results. Inherent in this estimation is the requirement for us to estimate future book and taxable income and possible tax planning strategies. These estimates require us to exercise judgment about our future results, the prudence and feasibility of possible tax planning strategies, and the economic environment in which we do business. It is possible that the actual results will differ from the assumptions and require adjustments to the allowance. Adjustments to the allowance would affect future net income.
As of December 31, 2024, our net DTA balance on a consolidated basis was $0.2 million, after reduction of a valuation allowance of $36.9 million. Significant domestic DTAs were generated, primarily due to net operating losses, research and development tax credits, along with capitalized expenditures including research and development. We assessed the ability to realize the benefits of our DTAs in each reporting period by evaluating all available positive and negative evidence, objective and subjective in nature, including, but not limited to, (1) cumulative results of operations in recent years, (2) sources of recent pre-tax income, (3) estimates of future taxable income, (4) respective carryback and/or carryforward periods of tax attributes available to date, and (5) limitation on NOL utilization against
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taxable income. We measured our current DTA balances against estimates of future income based on objectively verifiable operating results from our recent history, and concluded that sufficient future taxable income will not be generated to realize the benefits of our federal, state and certain foreign DTAs. Therefore, we continue to maintain a valuation allowance against our domestic and certain foreign net deferred tax assets.
Uncertain Tax Positions
We follow ASC Topic 740 that prescribes a financial statement recognition threshold and measurement process for uncertain tax positions taken or expected to be taken on our income tax returns. We recognize income tax benefits from uncertain tax positions only if we believe that it is more likely than not that the tax position will be sustained upon examination by the taxing authorities based on the technical merits of the position. We include interest and penalties related to unrecognized tax benefits within income tax expense in the accompanying consolidated statements of operations.
The calculation of our current provision for income taxes involves the use of estimates, assumptions and judgments while taking into account current tax laws, interpretation of current tax laws and possible outcomes of future tax audits. We have established reserves to address potential exposures related to tax positions that could be challenged by tax authorities. Although we believe our estimates, assumptions and judgments to be reasonable, any changes in tax law or interpretation of tax law and the resolutions of potential tax audits could significantly impact the amounts provided for income taxes in our consolidated financial statements.
See Note 2 and 15 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information related to income taxes.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
As a “smaller reporting company” as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company is not required to provide the information required under this Item.
Item 8. Financial Statements and Supplementary Data.
TABLE OF CONTENTS TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34) 72
Consolidated Balance Sheets as of December 31, 2024 and 2023 73
Notes to Consolidated Financial Statements 79
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Report of Independent Registered Public Accounting Firm
To the stockholders and the Board of Directors of Tigo Energy, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Tigo Energy, Inc. and subsidiaries (collectively the “Company”) as of December 31, 2024, and 2023, the related consolidated statements of operations and comprehensive loss, convertible preferred stock and changes in stockholders’ equity (deficit), and cash flows for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company does not have sufficient cash, cash equivalents and marketable securities to repay its convertible promissory notes upon maturity, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. 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 U.S. Securities and Exchange Commission and the PCAOB.
We conducted our audit 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 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 audit, 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 audit included performing procedures to assess the risks of material misstatement of the 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 audit 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 audit provides a reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
San Jose, California
March 20, 2025
We have served as the Company’s auditor since 2023.
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TIGO ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
December 31,
ASSETS
Current assets
Marketable securities, short-term 8,156 26,806
Prepaid expenses and other current assets 3,533 5,236
Operating right of use assets 1,576 2,503
Marketable securities, long-term — 1,977
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accrued expenses and other current liabilities 7,361 8,681
Deferred revenue, current portion 525 335
Warranty liability, current portion 496 526
Operating lease liabilities, current portion 649 1,192
Warranty liability, net of current portion 5,302 5,106
Deferred revenue, net of current portion 644 466
Operating lease liabilities, net of current portion 961 1,392
Commitments and Contingencies (Note 10)
Stockholders’ equity
Accumulated other comprehensive income (loss) 2 (59 )
Total liabilities and stockholders’ equity $ 72,911 $ 127,777
See accompanying notes to consolidated financial statements.
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TIGO ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except per share data)
Year Ended December 31,
Operating expenses:
Other (income) expenses, net:
Change in fair value of derivative liability — (12,247 )
Loss on debt extinguishment — 171
Other expenses (income), net 245 (37 )
Total other expenses (income), net 10,646 (7,429 )
Loss before income tax expense (62,643 ) (846 )
Other comprehensive loss:
Total comprehensive loss $ (62,685 ) $ (1,043 )
Cumulative dividends on convertible preferred stock — (3,399 )
Net loss attributable to common stockholders $ (62,746 ) $ (4,383 )
Loss per common share
Weighted-average common shares outstanding
See accompanying notes to consolidated financial statements.
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TIGO ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
(In thousands, except share data)
Stockholders’ equity
Common stock
Issuance of common stock upon exercise of stock options 789,097 — 272 — — 272
Stock-based compensation expense — — 7,721 — — 7,721
See accompanying notes to consolidated financial statements.
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TIGO ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
(In thousands, except share data)
Stockholders’ (deficit) equity
Convertible preferred stock Common stock
Stock-based compensation expense — — — — 3,808 — — 3,808
Net loss — — — — — (984 ) — (984 )
(1)
The shares of the Company’s common and redeemable convertible preferred stock prior to the Business Combination (as defined in Note 1) have been retroactively restated to reflect the exchange ratio of approximately 0.233335 established in the Business Combination as described in Note 3.
See accompanying notes to consolidated financial statements.
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TIGO ENERGY, INC. AND SUBSIDIARIES
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 1,219 1,106
Reserve for excess and obsolete inventory 23,108 713
Change in fair value of derivative liability — (12,247 )
Change in allowance for credit losses (1,684 ) 3,870
Loss on debt extinguishment — 171
Accretion of interest on marketable securities (354 ) (508 )
Loss on disposal of property and equipment — 17
Changes in operating assets and liabilities:
Prepaid expenses and other assets 1,658 (1,293 )
Accrued expenses and other liabilities (793 ) 3,383
Operating lease liabilities (1,169 ) (1,003 )
Net cash used in operating activities $ (12,354 ) $ (37,222 )
Cash flows from investing activities:
Purchase of marketable securities (10,976 ) (53,483 )
Acquisition of fSight — (16 )
Purchase of intangible assets — (450 )
Purchase of property and equipment (1,286 ) (2,114 )
Sales and maturities of marketable securities 32,018 25,149
Net cash provided by (used in) investing activities $ 19,756 $ (30,914 )
Cash flows from financing activities:
Proceeds from Convertible Promissory Note — 50,000
Payment of financing costs — (358 )
Proceeds from Business Combination — 2,238
Proceeds from exercise of stock options 272 215
Payment of tax withholdings on stock options (122 ) (91 )
Payment of offering costs related to at-the-market offering (227 ) —
Proceeds from at-the-market offering 16 —
Net cash (used in) provided by financing activities $ (61 ) $ 34,824
Net increase (decrease) in cash 7,341 (33,312 )
Cash and cash equivalents at beginning of period 4,405 37,717
Cash and cash equivalents at end of period $ 11,746 $ 4,405
See accompanying notes to consolidated financial statements.
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Years Ended December 31,
Supplemental disclosure of cash flow information:
Cash paid for income taxes $ 575 $ 95
Supplemental schedule of non-cash investing and financing activities:
Net assets acquired from Roth CH Acquisition IV Co. $ — $ 573
Property and equipment in accounts payable $ — $ 693
Non-cash consideration paid for fSight acquisition $ 375 $ 10,974
Contingent shares liability from fSight acquisition $ — $ 2,167
Fair value of derivative note liability at issuance $ — $ 23,525
Convertible preferred stock dividends (Note 3) $ — $ 12,581
Issuance of preferred stock upon exercise of preferred warrants $ — $ 2,008
Reclassification of convertible note derivative liability to equity $ — $ 11,278
See accompanying notes to consolidated financial statements.
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TIGO ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
Nature of Operations
Tigo Energy, Inc. (f/k/a Roth CH Acquisition IV Co.) and subsidiaries (together, the “Company”) consists of Tigo Energy, Inc. (“Tigo”), its wholly-owned direct and indirect subsidiaries: Tigo Energy MergeCo, Inc. (f/k/a Tigo Energy, Inc.) (“Legacy Tigo”), Tigo Energy Brasil Ltda., Tigo Energy Philippines Inc., Tigo Energy Israel Ltd., Tigo Energy AI Ltd. (f/k/a Foresight Energy, Ltd. (“fSight”)), Tigo Energy Italy SRL, Tigo Energy Equipment Trading (Suzhou) Co., Ltd. and Tigo Energy Australia Pty Ltd. Prior to the consummation of the Business Combination (as defined below), the operations of the Company were conducted through Legacy Tigo. Legacy Tigo was incorporated in Delaware in 2007 and commenced operations in 2010.
The Company provides solar and energy storage solutions, including module level power electronics (“MLPE”) designed to maximize the energy output of individual solar modules, delivering more energy, active management, and enhanced safety for utility, commercial, and residential solar arrays. By combining its MLPE and solar optimizer technology with intelligent, cloud-based software capabilities, the Company enables advanced energy monitoring, system diagnostics, and real-time control. These smart hardware and software solutions enhance system performance, lower operating costs, and ensure compliance with safety regulations, including rapid shutdown requirements. In addition to MLPE, the Company develops and manufactures inverters and battery storage systems for the residential solar-plus storage market, further expanding its suite of solutions for efficient and reliable energy management. The Company is headquartered in Campbell, California, with offices in Europe, Asia, and the Middle East.
Entry into a Material Definitive Agreement
On December 5, 2022, Roth CH Acquisition IV Co., a Delaware corporation (“ROCG”), Roth IV Merger Sub Inc., a Delaware corporation and a wholly-owned subsidiary of ROCG (“Merger Sub”), and Legacy Tigo, entered into an Agreement and Plan of Merger, as amended on April 6, 2023 (the “Merger Agreement”), pursuant to which, among other transactions, on May 23, 2023 (the “Closing Date”), Merger Sub merged with and into Legacy Tigo (the “Merger”), with Legacy Tigo surviving the Merger as a wholly-owned subsidiary of ROCG (the Merger, together with the other transactions described in the Merger Agreement, the “Business Combination”). In connection with the closing of the Business Combination, ROCG changed its name to “Tigo Energy, Inc.”
Please refer to Note 3 “Merger with ROTH CH Acquisition IV Co.” for additional details regarding the Business Combination.
Basis of Presentation
The accompanying audited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) promulgated by the Financial Accounting Standards Board (“FASB”).
Pursuant to the Business Combination, the merger between ROCG and Legacy Tigo was accounted for as a reverse recapitalization in accordance with U.S. GAAP (the “Reverse Recapitalization”). Under this method of accounting, ROCG was treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Reverse Recapitalization was treated as the equivalent of Legacy Tigo issuing stock for the net assets of ROCG, accompanied by a recapitalization. The net assets of ROCG are stated at historical cost, with no goodwill or other intangible assets recorded. The consolidated assets, liabilities and results of operations prior to the Reverse Recapitalization are those of Legacy Tigo. The shares and corresponding capital amounts and earnings per share available for common stockholders, prior to the Business Combination, have been retroactively recasted as shares reflecting the exchange ratio established in the Business Combination.Please refer to Note 3 “Merger with ROTH CH Acquisition IV Co.” for additional details regarding the Business Combination.
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
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The Company has determined the functional currency of the subsidiaries to be the U.S. dollar. The Company remeasures monetary assets and liabilities of its foreign operations at exchange rates in effect at the balance sheet date and nonmonetary assets and liabilities at their historical exchange rates. Net revenue and expenses are remeasured at the weighted-average exchange rates during the relevant reporting period. These remeasurement gains and losses are recorded in other expenses (income), net in the consolidated statements of operations and comprehensive loss and were not material for the years ended December 31, 2024, and 2023.
2.
Summary of Significant Accounting Policies
Liquidity and Going Concern
In accordance with ASU No. 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” (“Subtopic 205-40”), the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the consolidated financial statements are issued.
As of December 31, 2024, the Company had cash and cash equivalents of $11.7 million and total net working capital, which we define as current assets less current liabilities, of $36.3 million. The Convertible Promissory Note (as defined in Note 9, “Long-Term Debt,” below), has an aggregate principal amount outstanding of $50.0 million as of December 31, 2024, and a maturity date of January 9, 2026. As of the date of this filing, the Company does not have sufficient cash, cash equivalents and marketable securities to repay this obligation. Management determined as a result of this evaluation, the Company’s current cash, net working capital position, and the upcoming maturity date of its Convertible Promissory Note, raises substantial doubt about the Company’s ability to continue as a going concern.
The Company’s plan is to continue exploring options for raising additional capital through a combination of equity financing to supplement the Company’s liquidity and/or refinancing of the Convertible Promissory Note. The Company's ability to raise capital may be constrained by the price of and demand for the Company’s common stock. Additional capital may not be available on favorable terms or at all, and could further dilute our current stockholders. Management cannot conclude as of the date of this filing that its plans are probable of being successfully implemented. There can be no assurance that the Company will be able to raise sufficient additional capital or obtain financing that will provide it with sufficient liquidity to satisfy its Convertible Promissory Note obligation in January 2026.
The consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business. Accordingly, the accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Emerging Growth Company Status
The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (JOBS Act). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act, until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
Use of Estimates
The preparation of the consolidated financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Key estimates in the consolidated financial statements include revenue recognition, fair value of investments, allowance for credit allowances, inventory valuation, impairment of long-lived assets, fair value of acquired intangible assets and goodwill, useful lives of acquired intangible assets and property and equipment, product warranty liabilities, incremental borrowing rate for right of use assets and lease liability, and
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the valuation of the derivative liability, valuation allowance on deferred tax assets, assessment of probability of vesting of performance-based equity awards, preferred stock warrant liabilities and stock-based compensation, including the underlying fair value of the common stock. These estimates are based on information available as of the date of the financial statements; therefore, actual results could differ materially from those estimates due to risks and uncertainties.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist of cash, marketable securities and accounts receivable. The Company maintains deposits in federally insured financial institutions, which, at times, may exceed federally insured limits. The Company believes it is not exposed to significant credit risk beyond the normalcredit risk associated with commercial banking relationships as the Company’s cash is deposited with major financial institutions in the U.S., Europe, the Middle East and Asia. The Company does not believe it is exposed to any significant credit risk due to the high credit quality of the financial instruments in which the money is held. At December 31, 2024, and 2023, the Company held insignificant cash in foreign bank accounts. To date, the Company has not experienced any losses on its deposits of cash.
During the years ended December 31, 2024, and 2023, there were no individual customers that exceeded 10% of the Company’s annual net revenue.
Segment Information
Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker (“CODM”), or decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker (“CODM”) is the Chief Executive Officer (the “CEO”). The Company has one business activity — the design, development and sale of solar energy optimization solutions. There are no segment managers who are held accountable for operations, operating results or plans for levels or components below the consolidated unit level. Accordingly, management has determined that the Company has a single operating and reportable segment. The CODM assesses performance for the Company, monitors budget versus actual results and determines how to allocate resources based on consolidated net loss as reported in the consolidated statements of operations and comprehensive loss. There are no other expense categories regularly provided to the CODM that are not already included in the primary financial statements herein.
Fair Value of Financial Instruments
The Company uses a three-level hierarchy, which prioritizes, within the measurement of fair value, the use of market-based information over entity-specific information for fair value measurement based on the nature of inputs used in the valuation of an asset or liability as of the measurement date. Fair value focuses on an exit price and is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The inputs or methodology used to estimate the fair value of financial instruments are not necessarily an indication of the risk associated with those financial instruments. The three-level hierarchy for fair value measurement is defined as follows:
•
Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
•
Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liabilities.
•
Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
Management believes that the carrying amounts of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accrued expenses and accounts payable approximate fair value due to the short-term nature of these instruments.
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Cash and Cash Equivalents
The Company’s cash and cash equivalents include short-term highly-liquid investments with an original maturity of 90 days or less when purchased and are carried at fair value in the accompanying consolidated balance sheets. The Company considers all highly-liquid investments with a remaining maturity of three months or less at the date of purchase to be cash. Cash consists primarily of amounts in checking and savings accounts.
Marketable Securities
The Company’s marketable securities consist of investments in U.S. agency securities and corporate bonds that are classified as available-for-sale. The securities are carried at fair value with the unrealized gains and losses included in other comprehensive loss, a component of stockholders’ equity. Realized gains, losses, and declines in value determined to be other than temporary are included in the Company’s consolidated statements of operations and comprehensive loss. If any adjustment to fair value reflects a decline in the value of the investment that the Company considers to be “other than temporary,” the Company reduces the investment to fair value through a charge to the consolidated statements of operations and comprehensive loss. No such adjustments were necessary during the periods presented.
Accounts Receivable and Allowance for Credit Losses
Accounts receivable are recorded at the invoiced amount, do not bear interest, and are typically due 30 days from the invoice date. The Company generally does not require collateral from its customers and maintains an allowance for anticipated credit losses inherent in its accounts receivable portfolio. In establishing the required allowance, management considers historical bad debts, current customer receivable balances, age of customer receivable balances and the customers’ financial condition, all of which are subject to change. Additionally, the Company monitors activities and considers future reasonable and supportable forecasts of economic conditions to adjust all general and customer specific reserve percentages, as necessary. Balances recorded for estimated credit losses are written-off when they are determined to be uncollectible. The following table sets forth activities in the allowance for credit losses for the periods indicated:
Year Ended December 31,
Allowance for credit losses, beginning balance $ 4,011 $ 76
Net charges to (recovery) or expense (1,629 ) 3,960
Write-offs, net of recoveries (143 ) (25 )
Allowance for credit losses, ending balance $ 2,239 $ 4,011
Inventory
In accordance with ASC Topic 330, “Inventory”, inventory is valued at the lower of cost or net realizable value (“NRV”) with cost determined under the first-in, first-out (“FIFO”) method. The determination of NRV involves numerous judgments, including estimated average selling prices based upon recent sales volumes, industry trends, existing customer orders, current contract price, future demand, pricing for the Company’s products and technological obsolescence of the Company’s products. Inventory that is obsolete, in excess of the Company’s forecasted demand or is anticipated to be sold at a loss is written down to its NRV based on expected demand and selling prices. The Company recorded inventory charges of $23.5 million in 2024 which is presented in costs of revenue within the consolidated statements of operations and comprehensive loss. Inventory charges were recorded to reflect anticipated net realizable value on disposition of existing inventory assets. This inventory charge is primarily related to excess and slow-moving inventory within the GO ESS line of energy storage solutions.
Property and equipment, net
Property and equipment is stated at cost, less accumulated depreciation. Cost includes amounts paid to acquire or construct the asset as well as any expenditure that substantially adds to the value of or significantly extends the useful life of an existing asset. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets, which ranges from 3 to 7 years. Leasehold improvements are amortized over the shorter of the lease term or expected useful life of the improvements.
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Leases
The Company determines if an arrangement is or contains a lease at inception. Operating lease 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 over the lease term.
Operating lease assets and liabilities are recognized based on the present value of the remaining lease payments discounted using the Company’s incremental borrowing rate. Operating lease assets also include initial direct costs incurred and prepaid lease payments, minus any lease incentives. The Company’s lease terms include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense is recognized on a straight-line basis over the lease term.
The Company combines the lease and non-lease components in determining the operating lease assets and liabilities. The Company elected to not record right of use (“ROU”) assets or corresponding lease liabilities on the Company’s consolidated balance sheet for short term leases with an initial lease term of 12 months or less and purchase options the Company is not reasonably certain will be exercised.
Long-Lived Assets
The Company reviews its long-lived assets, which consist of property and equipment, net and operating lease right of use assets, for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets held and used is measured by comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of their carrying cost amount or fair value less cost to sell. No impairment losses were identified for the years ended December 31, 2024, and 2023.
Goodwill and Intangible Assets
Goodwill represents the excess of the purchase price over the identifiable tangible and intangible assets acquired in addition to liabilities assumed arising from the acquisition of fSight in 2023. Initially the Company measures goodwill based upon the value of the consideration paid plus or minus net assets assumed. The goodwill arising from the Company’s acquisition is attributable to the value of the potential expanded market opportunity with new customers.
Intangible assets have either an identifiable or indefinite useful life. Intangible assets are recorded at cost or when acquired as part of a business combination at estimated fair value. Intangible assets with identifiable useful lives are amortized on a straight-line basis over their economic or legal life, whichever is shorter. The Company’s amortizable intangible assets consist primarily of patents, developed technology, and customer relationships. The useful life of these intangible assets ranges from 6 to 10 years. We evaluate the recoverability of finite-lived intangible assets for impairment whenever there are triggering events or circumstances that may indicate the carrying amount of such assets may not be recoverable.
Goodwill is not amortized but is subject to annual impairment testing in the fourth quarter unless circumstances dictate more frequent assessments. The Company will perform an annual impairment assessment for goodwill and more frequently whenever events or changes in circumstances indicate that the fair value of the asset may be less than the carrying amount.
Customer Deposits
Customer deposits consist of deposits received by the Company, as required on certain contracts and agreements, which are refundable at the termination of the contract. Customer deposits are recorded in deferred revenue, current portion within the consolidated balance sheet.
Product Warranties
The Company estimates the cost of its warranty obligations based on several key estimates: the warranty period (which can vary from 5 to 25 years depending on the product), its historical experience of known product failure rates,
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costs of materials to repair or replace defective products and parts, and service delivery costs incurred in correcting product failures.In addition, from time to time, specific warranty accruals may be made if unforeseen technical problems arise. Should the actual experience relative to these factors differ from the estimates, the Company may be required to record additional warranty reserves. Product warranty costs are recorded as expense to cost of revenue based on customer history, historical information and current trends.
The following table summarizes the changes in product warranty liability:
Year Ended December 31,
Balance at the beginning of the period $ 5,632 $ 4,351
Provision for warranty issued during period 1,284 2,153
Changes in estimate (758 ) (451 )
Balance at the end of the period $ 5,798 $ 5,632
Convertible Promissory Note
On January 9, 2023, the Company entered into a convertible promissory note purchase agreement (the “Note Purchase Agreement”) with L1 Energy Capital Management S.a.r.l (“L1 Energy”) pursuant to which the Company issued a convertible promissory note in an aggregate principal amount of $50.0 million (the “Convertible Promissory Note”).
The Company analyzes its convertible debt instruments for embedded attributes that may require bifurcation from the host and accounted for as derivatives. At the inception of each instrument, in the event of a modification of a debt agreement, and at each reporting date, the Company performs an analysis of the embedded features requiring bifurcation and may elect, if eligible, to account for the entire debt instrument at fair value. If the fair value option were to be elected, any changes in fair value would be recognized in the accompanying statements of operations until the instrument is settled. Under the terms of the Note Purchase Agreement, the Convertible Promissory Note may be converted at the option of the noteholder into shares of common stock or an equivalent equity instrument resulting from a public company event. As a result of the Business Combination, the conversion options were bifurcated and accounted for as derivatives. The derivative instrument was recorded at fair value upon recognition and was subject to remeasurement to fair value at each balance sheet date, with any changes in estimated fair value recognized in the accompanying consolidated statements of operations and comprehensive income (loss).
On September 24, 2023, the Company and L1 Energy entered into an Amendment to Note Purchase Agreement and Convertible Promissory Note (the “Convertible Note Amendment”) which amended the conversion terms and, as a result of such amendment, the conversion options no longer met the requirements to be bifurcated in accordance with ASC Topic 815, “Derivatives and Hedging”. The carrying value of the convertible note derivative liability was remeasured to fair value immediately prior to the execution of the Convertible Note Amendment and the change in fair value was recorded to the Company’s consolidated statements of operations and comprehensive loss. The carrying value of the convertible note derivative liability was reclassified to equity and was recorded into additional paid-in capital on the Company’s consolidated balance sheet.
Please refer to Note 6 “Fair Value of Financial Instruments” for further details regarding the fair value of the derivative instrument. In addition, please refer Note 9 “Long-Term Debt” for additional details regarding the Convertible Promissory Note and derivative instrument.
Business Combinations
Other than the Merger, which was accounted for as a reverse recapitalization (see Note 3 for additional information), the Company accounts for business combinations under ASC Topic 805, “Business Combinations” using the acquisition method of accounting, and accordingly, the assets and liabilities of the acquired business are recorded at their fair values at the date of acquisition. The fair values assigned, defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants, are based on estimates and assumptions determined by management. These valuations require the Company to make significant
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estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired customer relationships and developed technology, royalty rates, and discount rates. The Company records the excess consideration over the aggregate fair value of tangible and intangible assets, net of liabilities assumed, as goodwill. All acquisition costs are expensed as incurred. Upon acquisition, the accounts and results of operations are included as of and subsequent to the acquisition date.
If the initial accounting for a business combination is incomplete by the end of a reporting period that falls within the measurement period, the Company reports provisional amounts in the consolidated financial statements. During the measurement period, the provisional amounts recognized at the acquisition date will be adjusted to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date and the Company records those adjustments in the consolidated financial statements.
Revenue Recognition
The Company complies with ASC Topic 606, “Revenue from Contracts with Customers” (“ASC Topic 606”) for revenue recognition. In accounting for contracts with customers:
The Company determines revenue recognition through the following steps:
•
Identification of the contract, or contracts, with a customer
•
Identification of the performance obligations in the contract
•
Determination of the transaction price
•
Allocation of the transaction price to the performance obligations in the contract
•
Recognition of revenue when, or as, the Company satisfies a performance obligation
Revenues are recognized when control of the promised goods or services are transferred to the Company’s customers in an amount that reflects the consideration that is expected to be received in exchange for those goods or services. The Company generates all of its revenue from contracts with its customers. A description of the principal activities from which the Company generates revenue are as follows:
•
Products Delivered at a Point in Time. The Company’s primary source of revenue is the sale of its hardware products. The Company’s hardware products are fully functional at the time of shipment and do not require modification or customization for customers to use the products. The Company sells its products primarily to distributors that resell the Company’s products to end users. Distributors do not have general rights of return and generally order goods for immediate resale to end customers. The Company uses present right to payment and transfer of title as indicators to determine the transfer of control to the customer. The Company recognizes revenue at a point in time when its performance obligation has been satisfied and control of the product is transferred to the customer, which generally aligns with shipping terms. Contract shipping terms include ExWorks (“EXW”), FOB Shipping Point and FOB Destination incoterms. Under EXW (meaning the seller fulfills its obligation to deliver when it makes goods available at its premises, or another specified location, for the buyer to collect), the performance obligation is satisfied and control is transferred at the point when the customer is notified that their order is available for pickup. Under FOB Shipping Point, control is transferred to the customer at the time the good is transferred to the shipper and under FOB Destination, at the time the customer receives the goods. We deduct sales returns to arrive at net revenue. Sales tax and other similar taxes are excluded from revenues. The Company has made the election to account for shipping and handling as activities to fulfill the promise to transfer the product and as such records amounts charged to customers for shipping and handling as revenue and the related costs are included in cost of revenues.
•
Services Delivered Over Time. Sales of the Company’s hardware products can include the Company’s free or premium web-based monitoring service. These monitoring services represent a single performance obligation and is deferred at the sale date. The free monitoring service revenue is recognized ratably over an estimated service period of 5 years as the service is performed. The premium monitoring service is
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recognized ratably over the contracted service period, up to 20 years, as the service is performed. The full consideration of monitoring service revenue represented less than 1% of the total net revenue during the years ended December 31, 2024, and 2023. The allocation of revenue between the hardware and monitoring service deliverables is based on the Company’s best estimate of the standalone selling price determined by considering multiple factors, including internal costs, gross margin and historical selling practices. Additionally, the Company provides software as a service (“SaaS”) platform for our Predict+ technology. The Predict+ service revenue is recognized ratably over a contract service period up to 11 years, as the service is performed.
The Company typically incurs incremental costs to acquire customer contracts related to the Company’s hardware sales in the form of sales commissions; however, because the expected benefit from these contracts is one year or less, the Company follows the ASC Topic 606 practical expedient and expenses these amounts as incurred.
The Company records certain contra revenue promotions as variable consideration and recognizes these promotions at the time the related revenue is recorded.
Deferred revenue or contract liabilities consists of payments received from customers in advance of revenue recognition for the Company’s products and service. The current portion of deferred revenue represents the unearned revenue that will be earned within 12 months of the balance sheet date. Correspondingly, noncurrent deferred revenue represents the unearned revenue that will be earned after 12 months from the balance sheet date.
See Note 7 for additional information.
Cost of Revenue
The Company includes the following in cost of revenue: product costs, warranty costs, operation personnel and logistics costs, inventory reserve charges, shipping and handling costs, hosting service costs related to the monitoring service, depreciation and amortization of manufacturing test equipment, and employee-related expenses which primarily consists of employees’ salaries and health insurance expense.
Stock-Based Compensation
The Company measures the cost of employee and non-employee services received in exchange for stock-based awards based on the grant-date fair value of the award. The Company uses the Black-Scholes option pricing model to value its stock option awards. The fair value of restricted stock units (“RSU”) granted is determined based on the price of the Company’s common stock on the date of grant. The fair value of non-market‐based performance stock units (“PSUs”) granted is determined based on the market value of the Company’s common stock at the closing market price on the grant date, and the expense is recognized based on whether achievement of performance-based vesting conditions are probable. The Company recognizes compensation expense of its awards over the requisite service period, which is typically the vesting period, for the entire award using the straight-line attribution method. The Company accounts for forfeitures as they occur.
Estimating the fair value of options requires the input of subjective assumptions, including the estimated fair value of the Company’s common stock, the expected life of the options, stock price volatility, the risk-free interest rate and expected dividends. The assumptions used in the Company’s Black-Scholes option-pricing model represent management’s best estimates and involve a number of variables, uncertainties and assumptions and the application of management’s judgment, as they are inherently subjective.
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Research and Development
Research and development expenses are comprised of costs to design, develop, test or significantly improve our solar energy hardware and software solutions and primarily include personnel costs and facility-related expenses.
Advertising Costs
All advertising costs are expensed as incurred and included in sales and marketing expenses. Advertising expenses incurred by the Company were $0.6 million and $0.8 million for the years ended December 31, 2024, and 2023, respectively.
Income Taxes
Income taxes are accounted for under the asset-and-liability method as required by ASC Topic 740, “Income Taxes” (“ASC Topic 740”). Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period corresponding to the enactment date. Under ASC Topic 740, a valuation allowance is required when it is more likely than not that all or some portion of the deferred tax assets will not be realized through generating sufficient future taxable income.
ASC Topic 740 defines the criterion an individual tax position must meet for any part of the benefit of the tax position to be recognized in financial statements prepared in conformity with GAAP. The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not such tax position will be sustained on examination by the taxing authorities, based solely on the technical merits of the respective tax position. The tax benefits recognized in the consolidated financial statements from such a tax position should be measured based on the largest benefit having a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority. In accordance with the disclosure requirements of ASC Topic 740, the Company’s policy on income statement classification of interest and penalties related to income tax obligations is to include such items as part of income tax expense.
The Tax Cuts and Jobs Act (“TCJA”) subjects a U.S. shareholder to tax on global intangible low-taxed income (“GILTI”) earned by certain foreign subsidiaries. Under GAAP, the Company can make an accounting policy election to either treat taxes due on the GILTI inclusion as a current period expense or factor such amounts into the Company’s measurement of deferred taxes. The Company elected to treat the GILTI inclusion as a period expense.
Comprehensive Loss
Comprehensive loss consists of two components, net loss and other comprehensive loss. Other comprehensive loss refers to gains and losses that are recorded as an element of stockholders’ equity but are excluded from net loss. The Company’s other comprehensive loss consists of the change in net unrealized loss on marketable securities.
Recently Adopted Accounting Pronouncements
In November 2023, the FASB issued ASU No. 2023-07, “Improvements to Reportable Segment Disclosures” (“Topic 280”). This ASU updates segment reporting disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (CODM) and included within each reported measure of a segment’s profit or loss. This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company adopted ASU 2023-07 effective for its Annual Report on Form 10-K for the year ended December 31, 2024, and subsequent interim periods. The adoption of ASU 2023-07 did not have a significant impact on our consolidated financial statements.
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Recently issued accounting pronouncements not yet adopted
In December 2023, the FASB issued ASU No. 2023-09, “Improvements to Income Tax Disclosures” (“Topic 740”). This ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024, although retrospective application is permitted. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. The Company is currently evaluating the impact adoption that this ASU will have on the Company’s income tax-related disclosures.
In November 2024, the FASB issued ASU 2024-03, “Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (“Subtopic 220-40”): Disaggregation of Income (loss) Statement Expenses” (“ASU 2024-03”). ASU 2024-03 requires disaggregation of certain costs and expenses included in each relevant expense caption on the Company’s consolidated income (loss) statements in a separate note to the financial statements at each interim and annual reporting period, including amounts of purchases of inventory, employee compensation, depreciation, and intangible asset amortization. ASU 2024-04 is effective fiscal years beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2024-03.
3.
Merger with Roth CH Acquisition IV Co.
The Business Combination was accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, ROCG was treated as the “acquired” company and Legacy Tigo was considered the “acquirer” for financial reporting purposes. This determination was primarily based on Legacy Tigo stockholders comprising a majority of the voting power of the Company, Legacy Tigo’s senior management comprising substantially all of the senior management of the Company, Legacy Tigo’s relative size compared to ROCG, and Legacy Tigo’s operations prior to the acquisition comprising the only ongoing operations of the Company. Accordingly, for accounting purposes, the financial statements of the Company represent a continuation of the financial statements of Legacy Tigo with the Business Combination being treated as the equivalent of Legacy Tigo issuing stock for the net assets of ROCG, accompanied by a recapitalization. The net assets of ROCG are stated at historical costs, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination are presented as those of Legacy Tigo. All periods prior to the Business Combination have been retrospectively adjusted using the exchange ratio established in the Business Combination of 0.233335 (the “Exchange Ratio”) to affect the reverse recapitalization.
As part of the reverse recapitalization, Legacy Tigo acquired $2.2 million of cash, $0.6 million of prepaid expenses and insurance and assumed $3,400 of accrued expenses and $61,000 of income tax payable. The Company incurred $6.1 million in transaction costs relating to the Business Combination, which were charged directly to additional paid in capital to the extent of cash received. Transaction costs in excess of cash acquired of $3.9 million were charged to general and administrative expenses.
Immediately prior to the closing of the Business Combination:
•
all shares of Legacy Tigo’s outstanding Series E, Series D, Series C-1, Series C, Series B-4, Series B-3, Series B-2, Series B-1, Series A-4, Series A-3, Series A-2, and Series A-1 convertible preferred stock were converted into an equivalent number of shares of Legacy Tigo common stock on a one-to-one basis and additional shares of Legacy Tigo common stock were issued to settle the accumulated dividend to the Series E and Series D convertible preferred stockholders of $12.6 million;
•
all common warrants net of exercise were converted into an equivalent number of shares of Legacy Tigo common stock on a one-to-one basis; and
•
all preferred warrants net of exercise were converted into an equivalent number of shares of Legacy Tigo preferred stock on a one-to-one basis, and subsequently converted into an equivalent number of shares of Legacy Tigo common stock on a one-to-one basis.
At the effective time of the Business Combination, each share of Legacy Tigo common stock issued and outstanding immediately prior to the closing (including the shares of Legacy Tigo common stock issued in connection
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with the foregoing) were canceled and converted into the right to receive a pro rata portion of the merger consideration based on the Exchange Ratio.
Immediately following the Business Combination, there were 58,144,543 shares of common stock issued and outstanding, options to purchase an aggregate of 4,358,301 shares of common stock and 5,768,750 warrants outstanding to purchase shares of common stock.
4.
Acquisition of Foresight Energy, Ltd.
On January 25, 2023 (“Acquisition Closing Date”), Legacy Tigo acquired 100% of the equity interests of fSight. The results of fSight’s operations have been included in the consolidated financial statements since the Acquisition Closing Date. fSight primarily focuses on developing and marketing a software as a service platform, based on artificial intelligence for the smart management of electrical energy. The acquisition expands the Company’s ability to leverage energy consumption and production data for solar energy producers, adding a prediction platform that provides actionable system performance data, from the grid down to the module level. The Company changed the name of fSight to Tigo Energy AI Ltd. in September 2024.
Under the terms of the purchase agreement, total consideration amounted to $13.2 million which consisted of 5,598,751 shares of Legacy Tigo’s common stock (which represents 1,306,385 shares of common stock on an as-converted basis as a result of the Business Combination) issued at closing with a fair value of approximately $11.0 million, 737,233 shares of Legacy Tigo’s common stock (which represents 172,022 shares of common stock on an as-converted basis as a result of the Business Combination) with a fair value of approximately $1.4 million to be issued 12 months from closing and 368,617 shares of Legacy Tigo’s common stock (which represents 86,011 shares of common stock on an as-converted basis as a result of the Business Combination) with a fair value of approximately $0.7 million to be issued 18 months from closing (collectively with the shares to be issued at 12 months “Contingent Shares”). In addition to the consideration in the purchase agreement, there is an additional $0.5 million in consideration related to a loan that the Company issued to fSight prior to the Acquisition Closing Date, for a total consideration transferred of $13.7 million. The loan payable was deemed settled immediately following the Acquisition Closing Date.
Pursuant to the terms of the purchase agreement, the Contingent Shares are subject to adjustment based on certain indemnification obligations, liabilities or settlements that may arise during the contingency period, which ends 18 months following the Acquisition Closing Date. During the year ended December 31, 2023, there was an adjustment recorded against the Contingent Shares related to an unrecorded liability that was not present as of the opening balance sheet date of January 25, 2023, and the number of Contingent Shares was adjusted downward by 5,745 shares to reflect this change. As of December 31, 2023, there was a total of up to 252,288 Contingent Shares that may be issued pursuant to the terms of the purchase agreement.
The contingent shares were recorded as a liability at a fair value of approximately $2.1 million on the Acquisition Closing Date based on the fair value of Legacy Tigo’s common stock at the Acquisition Closing Date. The contingent shares liability is recorded in accrued expenses and other current liabilities financial statement line items within the consolidated balance sheet.
On January 25, 2024, consistent with the terms of the purchase agreement, the Company issued the 12-month tranche of Contingent Shares, 166,271 shares of its common stock, to certain former equity holders of fSight. At January 25, 2024, the liability was revalued to $0.4 million based upon the Company’s common stock fair value per share at that date. A mark-to-market gain of $0.2 million was recorded upon the remeasurement at January 25, 2024. Additionally, on July 25, 2024, consistent with the terms of the purchase agreement, the Company issued the 18-month tranche of Contingent Shares, 86,017 shares of its common stock, to certain former equity holders of fSight. At July 25, 2024, the liability was revalued to $0.1 million, and the Company recognized a mark-to-market expense of $3,000 related to the remeasurement upon issuance of the final tranche of Contingent Shares. As of December 31, 2024, all Contingent Shares have been issued.
The transaction was accounted for as a business combination pursuant to ASC Topic 805, “Business Combinations”, using the acquisition method of accounting and in conjunction with the acquisition, Legacy Tigo recognized $0.2 million of acquisition-related costs during the year ended December 31, 2023. The Company did not
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incur any expenses associated with acquisition-related costs during the year ended December 31, 2024. The acquisition-related costs, which were expensed as incurred, are recorded in general and administrative expenses on the condensed consolidated statement of operations and comprehensive loss.
The following table summarizes the provisional fair values of the identifiable assets acquired and liabilities assumed at the date of the acquisition:
(in thousands)
Consideration transferred(1):
Fair value of common stock issued $ 10,974
Fair value of contingent shares 2,167
Deemed settlement of loan payable 527
Total consideration $ 13,668
Assets Acquired
Cash and cash equivalents $ 55
Accounts receivable 117
Property and equipment 9
Developed technology 1,820
Customer relationships 170
Total assets acquired $ 14,380
Liabilities Assumed
Accounts payable $ 418
Accrued expenses 294
Net assets acquired $ 13,668
(1)
The reported provisional amounts presented above have been updated from the Company’s S-1 filed with the SEC on June 22, 2023. The Company recorded an out of period adjustment related to the adjustment of the provisional fair market value of the Legacy Tigo common stock that was used to develop the calculation of the purchase price consideration. The Company does not believe that the adjustment had a material impact on its consolidated statements of operations and comprehensive loss, consolidated balance sheets, or consolidated statements of cash flows in any periods previously reported.
During the fourth quarter of 2023, upon the recognition that the liabilities associated with other current liabilities and other long-term liabilities, initially assumed and incorporated within the opening balance sheet as of January 25, 2023, were not obligatory, the Company made an adjustment to the financial statement line items associated with these liabilities and correspondingly adjusted goodwill. Additionally, in the fourth quarter of 2023, the Company finalized its fair value determination on the acquired assets and assumed liabilities, and completed its assessment of the purchase price allocation. The purchase price was allocated to the tangible assets and identifiable intangible assets acquired and liabilities assumed based on their acquisition date estimated fair values. Accounts receivable and property and equipment acquired were not material in size or scope, and the carrying amounts of these assets represented their fair value. The identifiable intangible assets consist of developed technology and customer relationships which were assigned fair values of approximately $1.8 million and $0.2 million, respectively. The developed technology and customer relationships are all being amortized on a straight-line basis over 10 years.
Goodwill represents the excess of the purchase price over the identifiable tangible and intangible assets acquired in addition to liabilities assumed arising from the business combination. The Company believes the goodwill related to the acquisition was attributable to the expected synergies, value of the assembled workforce, and the collective experience of the management team with regards to its operations, customers, and industry. As a non-taxable stock acquisition, the value attributable to the acquired intangibles and goodwill are not tax deductible.
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Supplemental Pro Forma Information (Unaudited)
The following table presents supplemental pro-forma information for the year ended December 31, 2023, as if the merger with fSight had occurred on January 1, 2023. These amounts have been calculated after applying the Company’s accounting policies and are based upon currently available information.
(in thousands) December 31, 2023
Supplemental Information of Operating Results
For the year ended December 31, 2023, the Company’s consolidated statement of operations included net revenues of $0.6 million and a net loss of $1.4 million attributable to fSight.
5.
Net Loss Per Share
Basic net loss per share of common stock is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during each period, without consideration for potential dilutive shares of common stock. Diluted net loss per share of common stock is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common share equivalents outstanding for the period determined using the treasury-stock method and if-converted method, as applicable.
For the year ended December 31, 2024, the Company reported a net loss. The diluted net loss per share calculation is the same as basic net loss per share since dilutive shares are not assumed to have been issued if their effect is antidilutive. Therefore, the weighted-average shares used to calculate both basic and diluted net loss per share are the same.
For the year ended December 31, 2023, basic and diluted net loss per share attributable to common stockholders is presented in conformity with the two-class method required for participating securities, which include convertible preferred stock. Under the two-class method, net loss is adjusted by the difference between the fair value of consideration transferred and the carrying amount of convertible preferred stock during periods where the Company redeems its convertible preferred stock. The remaining earnings (undistributed earnings) are allocated to common stock and each series of convertible preferred stock to the extent that each preferred security may share in earnings as if all of the earnings for the period had been distributed. The total earnings allocated to common stock is then divided by the number of outstanding shares to which the earnings are allocated to determine the earnings per share. The two-class method is not applicable during periods with a net loss, as the holders of the convertible preferred stock have no obligation to fund losses.
For the year ended December 31, 2023, the Company reported a net loss. In accordance with ASC Topic 260, “Earning Per Share”, the difference between our basic and diluted loss per share calculations is due to the application of the if-converted method for the Company’s convertible debt. In the diluted loss per share calculation, the numerator is adjusted by adding back interest expense and changes in fair value of derivative liability, reflecting the assumed conversion of the convertible debt into common stock. The denominator includes the dilutive effect of the shares that the Company would issue under the convertible notes if-converted.
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The following table sets forth the computation of basic and diluted net loss per share to common stockholders:
Year Ended December 31,
(in thousands, except share and per share data) 2024 2023
Basic net loss per common share calculation:
Net loss attributable to common stockholders $ (62,746 ) $ (4,383 )
Undistributed loss to preferred stock stockholders — 1,418
Net loss attributable to common stockholders – basic $ (62,746 ) $ (2,965 )
Net loss per share of common stock – basic $ (1.04 ) $ (0.08 )
Diluted net loss per common share calculation:
Net loss attributable to common stockholders $ (62,746 ) $ (4,383 )
Net loss attributable to common stockholders (62,746 ) (8,705 )
Undistributed loss to preferred stock stockholders — 2,817
Net loss attributable to common stockholders – diluted $ (62,746 ) $ (5,888 )
Convertible promissory note — 5,174,618
Net loss per share of common stock – diluted $ (1.04 ) $ (0.14 )
The following potentially dilutive securities have been excluded from the computation of diluted weighted-average shares of common stock outstanding, as they would be anti-dilutive:
As of December 31,
Outstanding stock options and restricted stock units 4,673,638 3,470,172
Convertible preferred stock warrants — 580,729
Common stock warrants — 75,305
Convertible promissory note 5,305,861 —
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6.
Fair Value of Financial Instruments
Fair Value Measurements
The following fair value hierarchy table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis:
Fair value measurement atreporting date using
(in thousands) (Level 1) (Level 2) (Level 3)
Assets:
Cash equivalents:
Money market accounts $ 6,839 $ — $ —
U.S. agency securities $ — $ 499 $ —
Marketable securities:
Corporate bonds $ — $ 2,018 $ —
U.S. agency securities $ — $ 6,138 $ —
Assets:
Cash equivalents:
Money market accounts $ 1,646 $ — $ —
Marketable securities:
Corporate bonds $ — $ 19,489 $ —
U.S. agency securities $ — $ 9,294 $ —
Liabilities:
Contingent shares liability from fSight acquisition $ 527 $ — $ —
The following is a summary of the changes in fair value of the Company’s marketable securities as of December 31, 2024, and 2023, respectively:
(in thousands) Amortized cost Unrealized gain Unrealized loss Fair value
Available-for-sale marketable securities:
Current assets
Total available-for-sale marketable securities $ 8,154 $ 3 $ (1 ) $ 8,156
As of December 31, 2024, all available-for-sale marketable securities consisted of investments that mature within one year.
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(in thousands) Amortized cost Unrealized gain Unrealized loss Fair value
Available-for-sale marketable securities:
Current assets
Long-term assets
Total available-for-sale marketable securities $ 28,842 $ 7 $ (66 ) $ 28,783
The fair value of the preferred stock warrants was calculated using the Black-Scholes option pricing model and was revalued to fair value at the end of each reporting period until the earlier of the exercise or expiration of the preferred stock warrants. As a part of the Business Combination, Legacy Tigo preferred stock warrants were converted into the Legacy Tigo common stock at the conversion rate in effect immediately prior to the consummation of the Business Combination. Please see Note 3, “Merger with Roth CH Acquisition IV Co.” for additional information. The fair value of the warrant liabilities was estimated using the Black-Scholes option pricing model using the following assumptions:
Expected volatility 68% - 70%
Risk-free interest rate 4.10% - 4.28%
Expected term (in years) 2.0 - 2.6
Expected dividend yield —
Fair value of Series C convertible preferred stock $ 1.89
The table presented below is a summary of the changes in fair value of the Company’s preferred stock warrant liability which was exercised immediately prior to the Business Combination into Legacy Tigo preferred stock and subsequently converted into Legacy Tigo common stock. Upon the consummation of the Business Combination, such shares of Legacy Tigo common stock were converted to shares of common stock. Please see Note 3, “Merger with ROTH CH Acquisition IV Co.” for additional information.
(in thousands) Fair value of preferred stock warrant liability
Change in fair value 501
Exercise of warrants (2,008 )
Balance at December 31, 2023 $ —
The table presented below is a summary of the changes in fair value of the Company’s Level 3 financial instruments. The contingent shares from the fSight Acquisition (Note 4) were initially classified as a Level 3 measurement and upon the Merger were transferred out of Level 3 into Level 1, as they were valued on the observable stock price of the Company. In addition, the Company bifurcated the conversion options associated with the convertible promissory notes and separately account for them as a derivative liability. On September 24, 2023, the Company and L1 Energy entered into the Convertible Note Amendment. As a result of the Convertible Note Amendment, the conversion options no longer meet the requirements to be bifurcated into a convertible note derivative liability in accordance with ASC 815, “Derivatives and Hedging”. The carrying value of the convertible note derivative liability was remeasured to fair value immediately prior to the execution of the Convertible Note Amendment and was reclassified to equity. The reclassification was recorded in additional paid-in capital on the
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Company’s consolidated balance sheet. Please refer to Note 9 “Long-Term Debt” for additional details regarding the derivative instrument.
Balance at December 31, 2022 $ — $ —
Balance at December 31, 2023 $ — $ —
The fair value of the convertible note derivative liability was estimated using the Black-Scholes option pricing model using the following assumptions:
Expected volatility 58.6 %
Risk-free interest rate 4.9 %
Expected term (in years) 2.3
Expected dividend yield —
(1)
The fair value of the convertible note derivative liability was remeasured on September 24, 2023, immediately prior to the execution of the Convertible Note Amendment.
During the year ended December 31, 2024, there were no transfers between Level 1, Level 2 and Level 3.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, restricted cash, marketable securities, accounts receivable, accounts payable, and customer deposits approximate fair value due to their short-term nature. As of December 31, 2024, the fair value and carrying value of the Company’s Convertible Promissory Note (Note 9) was $44.0 million and $40.5 million, respectively. The estimated fair value for the Company’s Convertible Promissory Note was based on discounted expected future cash flows using prevailing interest rates which are Level 3 inputs under the fair value hierarchy.
7.
Net Revenue
Geographic Revenues
The Company sells its products in the Americas (North and South America), EMEA (Europe, Middle East, and Africa), and APAC (Asia-Pacific) regions.
95
The following table summarizes net revenue by major geographic region, based on customers’ location (in millions):