(Mark One)
| ☒ | QUARTERLY QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
2021
| ☐ | QUARTERLY TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For
STAR PEAK ENERGY TRANSITION
CORP.
________
Delaware | 333-251397 | 85-1972187 | ||||||||||||
(State or Other Jurisdiction of | (Commission File Number) | (
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1603 Orrington Avenue, 13th Floor
Evanston, Illinois 60201
(847) 905-4500
(
code
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
☐
☐
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||||||||||
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |||||||||||
| Emerging growth company | ☒ | |||||||||||||
| If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ☐ | |||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
As of November 16, 2020, 38,358,504 Class A common stock, par value $0.0001, and 9,589,626 Class B common stock, par value $0.0001, were issued and outstanding.
STAR PEAK ENERGY TRANSITION CORP.
Quarterly Report on Form 10-Q
Table of Contents
| Class | Outstanding as of November 8, 2021 | ||||
| 144,489,164 | |||||
PART I - FINANCIAL INFORMATION
STAR PEAK ENERGY TRANSITION CORP.
| September 30, 2020 | December 31, 2019 | |||||||
| (Unaudited) | ||||||||
| Assets: | ||||||||
| Current assets: | ||||||||
| Cash | $ | 1,840,514 | $ | - | ||||
| Prepaid expenses | 735,475 | 1,594 | ||||||
| Total current assets | 2,575,989 | 1,594 | ||||||
| Deferred offering costs associated with initial public offering | - | 251,424 | ||||||
| Investments held in Trust Account | 383,603,554 | - | ||||||
| Total Assets | $ | 386,179,543 | $ | 253,018 | ||||
| Liabilities and Stockholders' Equity: | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 445,093 | $ | 35,093 | ||||
| Accrued expenses | 121,296 | 154,174 | ||||||
| Note payable | - | 57,301 | ||||||
| Franchise tax payable | 149,639 | - | ||||||
| Total current liabilities | 716,028 | 246,568 | ||||||
| Deferred legal fees | 203,910 | - | ||||||
| Deferred underwriting commissions in connection with the initial public offering | 13,425,476 | - | ||||||
| Total liabilities | 14,345,414 | 246,568 | ||||||
| Commitments | ||||||||
| Class A common stock, $0.0001 par value; 36,683,412 and -0- shares subject to possible redemption at $10.00 per share as of September 30, 2020 and December 31, 2019, respectively | 366,834,120 | - | ||||||
| Stockholders' Equity: | ||||||||
| Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding | - | - | ||||||
| Class A common stock, $0.0001 par value; 400,000,000 shares authorized; 1,675,092 and -0- shares issued and outstanding (excluding 36,683,412 and -0- shares subject to possible redemption) as of September 30, 2020 and December 31, 2019, respectively | 168 | - | ||||||
| Class B common stock, $0.0001 par value; 40,000,000 shares authorized; 9,589,626 and 10,062,500 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively (1) | 959 | 1,006 | ||||||
| Additional paid-in capital | 5,394,034 | 23,994 | ||||||
| Accumulated deficit | (395,152 | ) | (18,550 | ) | ||||
| Total stockholders' equity | 5,000,009 | 6,450 | ||||||
| Total Liabilities and Stockholders' Equity | $ | 386,179,543 | $ | 253,018 | ||||
(1) The amount of shares as of December 31, 2019 included up to 1,312,500 shares of Class B common stock subject to forfeiture if the over-allotment option was not exercised in full or in part by the underwriters. On August 26, 2020, the underwriters partially exercised their over-allotment option; thus, 472,874 shares of Class B common stock were forfeited.
thousands, except share and per share amounts) thousands, except share and per share amounts) COMPREHENSIVE INCOME (LOSS) the largest mitigate these effects. 2021 or for any other future interim period or year. such differences could be material to the financial position and results of operations. time, subsequently amended. The purpose of this revolving loan agreement was to finance the Company’s purchase of hardware for its various energy storage system projects. As of the beginning of 2020, the agreement had a total revolving loan capacity of $45.0 million that bore fixed interest at 10% with a maturity date of June 2020. July 19, 2021. Act of 1934, as amended, (the “Exchange Act”). Our Disclosure In designing and evaluating our Disclosure Controls, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable, and not absolute, assurance of achieving the desired control objectives, and management necessarily applied its judgment in evaluating and implementing possible controls and procedures. RISK FACTORS DEFAULTS UPON SENIOR SECURITIES MINE SAFETY DISCLOSURESunaudited condensed consolidated financial statements.1STAR PEAK ENERGY TRANSITION CORP.STATEMENTS OF OPERATIONS For The Three Months Ended September 30, For The Nine Months Ended September 30, 2020 2019 2020 2019 General and administrative expenses $ 110,673 $ 1,080 $ 110,673 $ 9,566 General and administrative expenses - related party 133,210 - 133,210 - Franchise tax expense 149,033 - 151,233 390 Loss from operations 392,916 1,080 395,116 9,956 Other income: Gain on investment (net), dividends and interest held in Trust Account 18,514 - 18,514 - Loss before income tax benefit 18,514 - 18,514 - Income tax benefit - - - - Net loss $ (374,402 ) $ (1,080 ) $ (376,602 ) $ (9,956 ) Weighted average Class A ordinary shares outstanding, basic and diluted 37,878,718 - 37,878,718 - Basic and diluted net loss per ordinary share, Class A $ (0.00 ) $ - $ (0.00 ) $ - Weighted average Class B ordinary shares outstanding, basic and diluted (1) 9,589,626 9,589,626 9,589,626 9,589,626 Basic and diluted net loss per ordinary share, Class B $ (0.04 ) $ (0.00 ) $ (0.04 ) $ (0.00 ) (1) Included up to 1,312,500 shares of Class B common stock subject to forfeiture if the over-allotment option was not exercised CONSOLIDATED BALANCE SHEETSfull or in part by the underwriters. On August 26, 2020, the underwriters partially exercised their over-allotment option; thus, 472,874 shares of Class B common stock were forfeited.September 30, 2021 December 31, 2020 ASSETS Current assets: Cash and cash equivalents $ 405,189 $ 6,942 Short-term investments 170,795 — Accounts receivable, net 34,997 13,572 Inventory, net 24,200 20,843 Other current assets (includes $379 and $123 due from related parties as of September 30, 2021 and December 31, 2020, respectively) 16,496 7,920 Total current assets 651,677 49,277 Energy storage systems, net 114,149 123,703 Contract origination costs, net 11,665 10,404 Goodwill 1,741 1,739 Intangible assets, net 13,125 12,087 Operating leases right-of-use assets 13,894 358 Other noncurrent assets 18,716 8,282 Total assets $ 824,967 $ 205,850 LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) Current liabilities: Accounts payable $ 14,962 $ 13,749 Accrued liabilities 14,024 16,072 Accrued payroll 5,524 5,976 Notes payable, current portion — 33,683 Convertible promissory notes (includes $— and $45,271 due to related parties as of September 30, 2021 and December 31, 2020, respectively) — 67,590 Financing obligation, current 14,315 14,914 Deferred revenue, current 27,129 36,942 Other current liabilities (includes $692 and $399 due to related parties as of September 30, 2021 and December 31, 2020, respectively) 2,465 1,589 Total current liabilities 78,419 190,515 Deferred revenue, noncurrent 21,743 15,468 Asset retirement obligation 4,149 4,137 Notes payable, noncurrent 1,675 4,612 Financing obligation, noncurrent 75,384 73,128 Warrant liabilities — 95,342 Lease liability, noncurrent 12,678 57 Total liabilities 194,048 383,259 Commitments and contingencies (Note 14) 0 0 Stockholders’ equity (deficit): Preferred stock, $0.0001 par value; 1,000,000 shares authorized as of September 30, 2021 and December 31, 2020, respectively; 0 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively — — Common stock, $0.0001 par value; 500,000,000 shares authorized as of September 30, 2021 and December 31, 2020; 144,285,959 and 40,202,785 issued and outstanding as of September 30, 2021 and December 31, 2020, respectively 14 4 Additional paid-in capital 1,106,220 230,620 Accumulated other comprehensive loss (317) (192) Accumulated deficit (474,998) (407,841) Total stockholders’ equity (deficit) 630,919 (177,409) Total liabilities and stockholders’ equity (deficit) $ 824,967 $ 205,850 CHANGES IN STOCKHOLDERS’ EQUITY For The Three and Nine Months Ended September 30, 2020 Common Stock Total Class A Class B Additional Paid-In Accumulated Stockholders' Shares Amount Shares Amount Capital Deficit Equity Balance - December 31, 2019 - $ - 10,062,500 $ 1,006 $ 23,994 $ (18,550 ) $ 6,450 Net loss - - - - - - - Balance - March 31, 2020 (unaudited) - - 10,062,500 1,006 23,994 (18,550 ) 6,450 Net loss - - - - - (2,200 ) (2,200 ) Balance - June 30, 2020 (unaudited) - $ - 10,062,500 1,006 23,994 (20,750 ) 4,250 Sale of units in initial public offering, gross 38,358,504 3,836 - - 383,581,204 - 383,585,040 Offering costs - - - - (22,152,459 ) - (22,152,459 ) Sale of private placement warrants to Sponsor in private placement - - - - 10,771,700 - 10,771,700 Class B common stock forfeited - - (472,874 ) (47 ) 47 - - Class A common stock subject to possible redemption (36,683,412 ) (3,668 ) - - (366,830,452 ) - (366,834,120 ) Net loss - - - - - (374,402 ) (374,402 ) Balance - September 30, 2020 1,675,092 $ 168 9,589,626 $ 959 $ 5,394,034 $ (395,152 ) $ 5,000,009 (1) The amount of shares as of December 31, 2019 included up to 1,312,500 shares of Class B common stock subject to forfeiture if the over-allotment option was not exercised OPERATIONSfull or in part by the underwriters. On August 26, 2020, the underwriters partially exercised their over-allotment option; thus, 472,874 shares of Class B common stock were forfeited. For The Three and Nine Months Ended September 30, 2019 Common Stock Total Class A Class B Additional Paid-In Accumulated Stockholder's Shares Amount Shares Amount Capital Deficit Equity Balance - December 31, 2018 - $ - 10,062,500 $ 1,006 $ 23,994 $ (8,144 ) $ 16,856 Net loss - - - - - (8,798 ) (8,798 ) Balance - March 31, 2019 (unaudited) - - 10,062,500 1,006 23,994 (16,942 ) 8,058 Net loss - - - - - (78 ) (78 ) Balance - June 30, 2019 (unaudited) - - 10,062,500 1,006 23,994 (17,020 ) 7,980 Net loss - - - - - (1,080 ) (1,080 ) Balance -September 30, 2019 (unaudited) - $ - 10,062,500 $ 1,006 $ 23,994 $ (18,100 ) $ 6,900 Three Months Ended
September 30,Nine Months Ended
September 30,2021 2020 2021 2020 Revenue Services revenue $ 4,947 $ 3,649 $ 14,982 $ 10,711 Hardware revenue 34,886 5,523 59,609 6,950 Total revenue 39,833 9,172 74,591 17,661 Cost of revenue Cost of service revenue 6,639 5,828 19,354 16,083 Cost of hardware revenue 30,057 5,074 52,343 6,439 Total cost of revenue 36,696 10,902 71,697 22,522 Gross margin 3,137 (1,730) 2,894 (4,861) Operating expenses: Sales and marketing 4,975 3,053 11,555 11,699 Research and development 6,268 5,052 15,502 12,084 General and administrative 11,024 2,635 28,730 8,018 Total operating expenses 22,267 10,740 55,787 31,801 Loss from operations (19,130) (12,470) (52,893) (36,662) Other income (expense), net: Interest expense (2,674) (4,265) (12,835) (13,826) Loss on extinguishment of debt — — (5,064) — Change in fair value of warrants and embedded derivative 137,001 (2,096) 3,424 (3,005) Other income (expenses), net 415 188 211 (1,602) Total other income (expense) 134,742 (6,173) (14,264) (18,433) Income (loss) before income taxes 115,612 (18,643) (67,157) (55,095) Income tax expense — (142) — (142) Net income (loss) $ 115,612 $ (18,785) $ (67,157) $ (55,237) Net income (loss) per share attributable to common shareholders, basic $ 0.85 $ (0.47) $ (0.73) $ (1.61) Net loss per share attributable to common shareholders, diluted $ (0.15) $ (0.47) $ (0.73) $ (1.61) Weighted-average shares used in computing net income (loss) per share, basic 135,231,146 39,844,652 92,436,649 40,087,247 Weighted-average shares used in computing net loss per share, diluted 140,285,165 39,844,652 92,436,649 40,087,247 CASH FLOWS For The Nine Months Ended September 30, 2020 2019 Cash Flows from Operating Activities: Net loss $ (376,602 ) $ (9,956 ) Adjustments to reconcile net loss to net cash used in operating activities: Gain on investment (net), dividends and interest held in Trust Account (18,514 ) - Changes in operating assets and liabilities: Prepaid expenses (733,881 ) - Franchise tax payable 149,639 390 Accounts payable 20,000 (778 ) Accrued expenses 24,622 - Net cash used in operating activities (934,736 ) (10,344 ) Cash Flows from Investing Activities Cash deposited in Trust Account (383,585,040 ) - Net cash used in investing activities (383,585,040 ) - Cash Flows from Financing Activities: Proceeds from note payable to related party 200,000 - Repayment of note payable to related party (292,301 ) (124,828 ) Proceeds received from initial public offering, gross 383,585,040 - Proceeds received from private placement 10,771,700 - Offering costs paid (7,904,149 ) (24,500 ) Net cash provided by (used in) financing activities 386,360,290 (149,328 ) Net change in cash 1,840,514 (159,672 ) Cash - beginning of the period - 159,672 Cash - end of the period $ 1,840,514 $ - Supplemental disclosure of noncash activities: Offering costs included in accounts payable $ 292,500 $ 35,000 Offering costs included in accrued expenses $ 75,000 $ 19,046 Adjust offering costs against accrued expenses $ - $ (149,200 ) Deferred legal fees $ 203,910 $ - Deferred underwriting commissions in connection with the initial public offering $ 13,425,476 $ - Reclassification of accrued offering costs to accounts payable $ (132,500 ) $ - Accounts payable paid by Sponsor $ (35,000 ) $ - Initial value of Class A common stock subject to possible redemption $ 334,952,900 $ - Change in value of Class A common stock subject to possible redemption $ 31,881,220 $ - Forfeiture of Class B common stock $ 47 $ - Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Net income (loss) $ 115,612 $ (18,785) $ (67,157) $ (55,237) Other comprehensive income (loss): Unrealized loss on available-for-sale securities (19) — (19) — Foreign currency translation adjustment 245 (283) (106) (41) Total comprehensive income (loss) $ 115,838 $ (19,068) $ (67,282) $ (55,278) Convertible Preferred Stock Series 1 Convertible Preferred Stock Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders’ Equity (Deficit) Shares Amount Shares Amount Shares Amount Balance as of December 31, 2020 175,437,783 $ 220,563 2,961 $ — 11,228,371 $ — $ 10,061 $ (192) $ (407,841) $ (397,972) Retroactive application of recapitalization (Note 1) (175,437,783) (220,563) (2,961) — 28,974,414 4 220,559 — — 220,563 Adjusted balance, beginning of period — — — — 40,202,785 4 230,620 (192) (407,841) (177,409) Issuance of beneficial conversion feature related to convertible notes (Note 8) — — — — — — 1,126 — — 1,126 Stock option and stock warrant exercises — — — — 1,412,025 — 3,147 — — 3,147 Stock-based compensation — — — — — — 784 — — 784 Foreign currency translation adjustments — — — — — — — 251 — 251 Net loss — — — — — — — — (82,553) (82,553) Balance as of March 31, 2021 — — — — 41,614,810 4 235,677 59 (490,394) (254,654) Merger and PIPE financing (Note 1) — — — — 70,428,326 7 247,011 — — 247,018 Conversion of warrants into common stock upon Merger (Note 9) — — — — 2,759,970 — 60,568 — — 60,568 Conversion of convertible notes into common stock upon Merger (Note 8) — — — — 10,921,548 1 77,747 — — 77,748 Exchange of warrants into common stock (Note 9) — — — — 4,683,349 1 168,646 — — 168,647 Issuance of common stock warrants for services (Note 9) — — — — — — 9,183 — — 9,183 Stock option and stock warrant exercises — — — — 360,052 — 39 — — 39 Stock-based compensation — — — — — — 1,047 — — 1,047 Foreign currency translation adjustments — — — — — — — (602) — (602) Net loss — — — — — — — — (100,216) (100,216) Balance as of June 30, 2021 — — — — 130,768,055 13 799,918 (543) (590,610) 208,778 Public Warrant exercises (Note 9) — — — — 12,638,723 1 312,115 — — 312,116 Stock option exercises — — — — 879,181 — (12,552) — — (12,552) Stock-based compensation — — — — — — 6,739 — — 6,739 Unrealized loss on available-for-sale securities — — — — — — — (19) — (19) Foreign currency translation adjustments — — — — — — — 245 — 245 Net income — — — — — — — — 115,612 115,612 Balance as of September 30, 2021 — $ — — $ — 144,285,959 $ 14 $ 1,106,220 $ (317) $ (474,998) $ 630,919 Convertible Preferred Stock Series 1 Convertible Preferred Stock Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders’ Deficit Shares Amount Shares Amount Shares Amount Balance as of December 31, 2019 191,139,933 $ 231,129 2,961 $ — 9,392,682 $ — $ 3,339 $ 54 $ (259,054) $ (255,661) Retroactive application of recapitalization (Note 1) (191,139,933) (231,129) (2,961) — 33,796,513 3 231,126 — — 231,129 Adjusted balance, beginning of period — — — — 43,189,195 3 234,465 54 (259,054) (24,532) Effect of exchange transaction — — — — (3,448,648) — (10,605) — 7,337 (3,268) Issuance of common stock upon exercise of stock options and warrants — — — — 15,457 — 21 — — 21 Stock-based compensation — — — — — — 456 — — 456 Foreign currency translation adjustments — — — — — — — 451 — 451 Net loss — — — — — — — — (17,471) (17,471) Balance as of March 31, 2020 — — — — 39,756,004 3 224,337 505 (269,188) (44,343) Issuance of common and preferred stock upon exercise of stock options and warrants — — — — — — 168 — — 168 Issuance of common stock upon exercise of stock options and warrants — — — — 87,942 — 4 — — 4 Stock-based compensation — — — — — — 476 — — 476 Foreign currency translation adjustments — — — — — — — (209) — (209) Net loss — — — — — — — — (18,981) (18,981) Balance as of June 30, 2020 — — — — 39,843,946 3 224,985 296 (288,169) (62,885) Stock option and stock warrant exercises — — — — 4,621 1 4 — — 5 Stock-based compensation — — — — — — 495 — — 495 Foreign currency translation adjustments — — — — — — — (283) — (283) Net loss — — — — — — — — (18,785) (18,785) Balance as of September 30, 2020 — $ — — $ — 39,848,567 $ 4 $ 225,484 $ 13 $ (306,954) $ (81,453) Nine Months Ended September 30, 2021 2020 OPERATING ACTIVITIES Net loss $ (67,157) $ (55,237) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization expense 15,620 13,769 Non-cash interest expense, including interest expenses associated with debt issuance costs 8,098 7,080 Stock-based compensation 7,983 1,427 Change in fair value of warrant liability and embedded derivative (3,424) 3,005 Noncash lease expense 280 435 Accretion expense 174 188 Impairment of energy storage systems 2,200 — Issuance of warrants for services 9,183 — Net (accretion of discount) amortization of premium on investments 295 — Other — 9 Changes in operating assets and liabilities: Accounts receivable (21,383) (6,039) Inventory (3,357) (17,595) Deferred costs with suppliers — 2,751 Other assets (18,060) (105) Contract origination costs (1,853) (2,135) Accounts payable and accrued expenses 6,151 2,836 Deferred revenue (3,538) 32,251 Lease liabilities (331) (475) Other liabilities 99 (86) Net cash used in operating activities (69,020) (17,921) INVESTING ACTIVITIES Purchase of available-for-sale investments (171,109) — Purchase of energy storage systems (6,173) (4,121) Capital expenditures on internally-developed software (4,250) (3,585) Purchase of property and equipment (525) (13) Net cash used in investing activities (182,057) (7,719) FINANCING ACTIVITIES Proceeds from exercise of stock options and warrants 148,322 30 Payments for taxes related to net share settlement of stock options (12,622) — Net contributions from Merger and PIPE financing, net of transaction costs of $58,061 550,322 — Proceeds from financing obligations 4,929 12,901 Repayment of financing obligations (5,721) (7,776) Proceeds from issuance of convertible notes, net of issuance costs of $8 and $1,740 for the nine months ended September 30, 2021 and 2020, respectively 1,118 12,548 Proceeds from issuance of notes payable, net of issuance costs of $101 and $1,502 for the nine months ended September 30, 2021 and 2020, respectively 3,917 25,000 Repayment of notes payable (41,446) (21,660) Net cash provided by financing activities 648,819 21,043 Effect of exchange rate changes on cash and cash equivalents 505 (349) Net increase (decrease) in cash and cash equivalents 398,247 (4,946) Cash and cash equivalents, beginning of period 6,942 12,889 Cash and cash equivalents, end of period $ 405,189 $ 7,943 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid for interest $ 8,992 $ 6,446 NON-CASH INVESTING AND FINANCING ACTIVITIES Change in asset retirement costs and asset retirement obligation $ 162 $ 527 Exchange of warrants for common stock $ 168,647 $ — Conversion of warrants upon merger $ 60,568 $ — Conversion of convertible notes upon merger $ 77,748 $ — Conversion of accrued interest into outstanding note payable $ 337 $ 385 Right-of-use asset obtained in exchange for lease liability $ 13,816 $ — Settlement of warrant liability into common stock due to exercise $ 167,050 $ — Settlement of warrant liability into common stock due to redemption $ 2,121 $ — Issuance of warrants upon debt modification $ — $ 168 Stock-based compensation capitalized to internal-use software $ 587 $ — UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNote 1—Organization,the Business OperationsBasisits subsidiaries (together, “Stem” or the “Company”) is one of PresentationEnergy Transition Corp., formerly known as Star Peak Energy Acquisition Corp. (the “Company”), is a blank check company incorporated in Delaware on October 29, 2018 (inception) for the purpose of effecting a merger, capital stock exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). While the Company may pursue an acquisition opportunity in any business, industry, sector or geographical location, it intends to focus its efforts primarily on identifying businesses seeking to be a market leader in, and/or benefit from the increasing global initiatives to improve the efficiency of our energy ecosystems and reduce emissions (the “Energy Transition”). The Company is an emerging growth company and, as such, the Company is subject to all of the risks associated with emerging growth companies.As of September 30,Mergerhad not commenced any operations. All activity for the period from October 29, 2018 (inception) through September 30, 2020 relatesentered into an Agreement and Plan of Merger (the “Merger Agreement”) with Star Peak Transition Corp. (“STPK,” prior to the Company’s formation and the initial public offering (the “Initial Public Offering”) and since the closing of the Initial Public Offering, the search for a prospective initial Business Combination. The Company temporary halted the Initial Public Offering in September 2019Merger and recapitalized and continued in July 2020. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the Initial Public Offering.The Company’s sponsor is Star Peak Sponsor LLC, a Delaware limited liability company (the “Sponsor”). The registration statement for the Company’s Initial Public Offering was declared effective on August 17, 2020. On August 20, 2020, the Company consummated its Initial Public Offering of 35,000,000 units (the “Units” and, with respect to the Class A common stock included in the Units being offered, the “Public Shares”) at $10.00 per Unit, generating gross proceeds of $350.0 million, and incurring offering costs of approximately $20.0 million, inclusive of approximately $12.3 million in deferred underwriting commissions (Note 5). On August 26, 2020, the Company consummated the sale of 3,358,504 Units at the Initial Public Offering price at $10.00 per Unit pursuant to the notice of partial exercise from the underwriters, generating additional gross proceeds of approximately $33.6 million, and incurring additional offering costs of approximately $1.8 million, inclusive of approximately $1.2 million in deferred underwriting commissions.Simultaneously with“New Stem,” following the closing of the Initial Public Offering,Merger), an entity listed on the New York Stock Exchange under the trade symbol “STPK”, and STPK Merger Sub Corp., a Delaware corporation and wholly owned subsidiary of STPK (“Merger Sub”), providing for, among other things, and subject to the conditions therein, the combination of the Company consummated the private placement (“Private Placement”) of 6,733,333 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”) at a price of $1.50 per Private Placement Warrant to the Sponsor, generating gross proceeds of $10.1 million (Note 4). In connection with the consummation of the sale of additional UnitsSTPK pursuant to the underwriters’ over-allotment option, on August 26, 2020,merger of Merger Sub with and into the Company sold 447,801 Private Placement Warrantswith the Company continuing as the surviving entity (the “Merger”).Recapitalization Cash — STPK trust and working capital cash $ 383,383 Cash — PIPE 225,000 Less: transaction costs and advisory fees paid (58,061) Merger and PIPE financing $ 550,322 the Sponsor, generating additional gross proceeds of approximately $0.7 million.Upon the closing of the Initial Public OfferingMerger, (i) all issued and the Private Placement on August 20, 2020, $350.0 million ($10.00outstanding shares of Legacy Stem preferred stock, par value $0.00001 per Unit)share (the “Legacy Stem Preferred Stock”), were converted into shares of the net proceeds of the sale of the Units in the Initial Public Offering and the Private Placement were placed in a trust account (“Trust Account”), located in the United States at J.P. Morgan Chase Bank, N.A. with Continental Stock Transfer & Trust Company acting as trustee, and invested only in U.S. “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the assets held in the Trust Account as described below. Upon closing of the sale of Units and Private Placement Warrants upon exercise of the over-allotment, on August 26, 2020, $34.3 million of the net proceeds of the sale of the Units and Private Placement Warrants were placed in the Trust Account.The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. If the Company’s securities are listed on a national securities exchange, the Company must complete one or more initial Business Combinations having an aggregate fair market value of at least 80% of the assets held in the Trust Account (as defined below) (excluding the deferred underwriting commissions and taxes payable on income earned on the Trust Account) at the time of the agreement to enter into the initial Business Combination. However, the Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act 1940, as amended (the “Investment Company Act”).5STAR PEAK ENERGY TRANSITION CORP.NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTSThe Company will provide the holders of its outstanding Class ALegacy Stem common stock, par value $0.0001$0.000001 per share (the “Class A common stock”“Legacy Stem Common Stock”), sold in the Initial Public Offering (the “Public Stockholders”) with the opportunity to redeem all or a portion of their Public Shares (as defined in Note 3) upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.00 per Public Share). The per-share amount to be distributed to Public Stockholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters (as discussed in Note 5). These Public Shares will be recorded at a redemption value and classified as temporary equity upon the completion of the Initial Public Offering in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” In such case, the Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business Combination and a majority of the shares of the Company’s outstanding common stock voted are voted in favor of the Business Combination. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to itsLegacy Stem’s amended and restated certificate of incorporation, conduct(ii) all outstanding convertible promissory notes of Legacy Stem (the “Legacy Stem Convertible Notes”) were converted into Legacy Stem Preferred Stock in accordance with the redemptions pursuant to the tender offer rulesterms of the U.S. SecuritiesLegacy Stem Convertible Notes and Exchange Commission(iii) certain warrants issued by Legacy Stem to purchase Legacy Stem Common Stock and Legacy Stem Preferred Stock (the “SEC”“Legacy Stem Warrants”) and file tender offer documentswere exercised by holders into Legacy Stem Common Stock in accordance with the SEC prior to completing a Business Combination. If, however, stockholder approvalterms thereof. Upon the consummation of the transactions is required by law, or the Company decides to obtain stockholder approval for business or legal reasons, the Company will offer to redeem Public Shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. Additionally,Merger, each Public Stockholder may elect to redeem their Public Shares irrespectiveshare of whether they vote for or against the proposed transaction. If the Company seeks stockholder approval in connection with a Business Combination, the initial stockholders (as defined below) have agreed to vote their Founder Shares (as defined below in Note 4) and any Public Shares purchased during or after the Initial Public Offering in favor of a Business Combination. In addition, the initial stockholders have agreed to waive their redemption rights with respect to their Founder Shares and Public Shares, if any, in connection with the completion of a Business Combination.Notwithstanding the foregoing, the Company’s amended and restated certificate of incorporation provides that a Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% or more of the Class ALegacy Stem common stock sold inthen issued and outstanding was canceled and converted into the Initial Public Offering, without the prior consent of the Company.The Company’s Sponsor, officers and directors (the “initial stockholders”) have agreed notright to propose an amendment to the Company’s amended and restated certificate of incorporation that would affect the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if the Company does not complete a Business Combination within 24 months from the closing of the Initial Public Offering, or August 20, 2022 (the “Combination Period”), unless the Company provides the Public Stockholders with the opportunity to redeem theirreceive shares of Class A common stock of Stem using an exchange ratio of 4.6432conjunctiona private placement pursuant to the subscription agreements (the “PIPE”). The PIPE investment closed simultaneously with any such amendment.If the Companyconsummation of the Merger. The Merger is unableaccounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, STPK was treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Merger was treated as the equivalent of Stem issuing stock for the net assets of STPK, accompanied by a recapitalization. The net liabilities of STPK of $304.0 million, comprised primarily of the warrant liabilities associated with the Public and Private Placement Warrants discussed in Note 9, are stated at historical cost, with no goodwill or other intangible assets recorded.complete a Business Combination withinForm 10-Q and Article 10 of the Combination Period,Regulation S-X, assuming the Company will (i) cease all operations exceptcontinue as a going concern. As of September 30, 2021, the Company had cash and cash equivalents of $405.2 million, short-term investments of $170.8 million, an accumulated deficit of $475.0 million and net working capital of $573.3 million, with $14.3 million of financing obligation coming due within the next 12 months. During the nine months ended September 30, 2021, the Company incurred a net loss of $67.2 million and had negative cash flows from operating activities of $69.0 million. However, the Merger and the proceeds of $145.3 million from the exercise of Public Warrants (as described in Note 8 - Warrants), provided the Company with a significant amount of cash proceeds and, as such, the Company believes that its cash position is sufficient to meet capital and liquidity requirements for at least the purposenext 12 months after the date that the financial statements are available to be issued.winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equalcommercial operations. Prior to the aggregate amount then on deposit inMerger, the Trust AccountCompany had been funded primarily by equity financings, convertible promissory notes and borrowings from affiliates. The attainment of profitable operations is dependent upon future events, including interest earned onobtaining adequate financing to complete the funds held in the Trust AccountCompany’s development activities, securing adequate supplier relationships, building its customer base, successfully executing its business and not previously releasedmarketing strategy, and hiring and retaining appropriate personnel. Failure to generate sufficient revenues, achieve planned gross margins and operating profitability, control operating costs, or secure additional funding may require the Company to paymodify, delay or abandon some of its franchiseplanned future expansion or development, or to otherwise enact operating cost reductions available to management, which could have a material adverse effect on the Company’s business, operating results and income taxes (less upfinancial condition.$100,000result in widespread adverse impacts on the global and U.S. economies. Ongoing government and business responses to COVID-19, along with the COVID-19 Delta variant and resurgence of interest to pay dissolution expenses), divided byrelated disruptions, could have a continued material adverse effect on economic and market conditions and trigger a period of continued global and U.S. economic slowdown.numbersupply of then outstanding Public Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law,energy storage systems, batteries, modules and (iii) as promptly as reasonably possible following such redemption, subjectcomponent parts for inverters and battery energy storage systems available for purchase. These shortages and delays can be attributed in part to the approvalCOVID-19 pandemic and resulting government action. While a majority of the Company’s remaining stockholderssuppliers have secured sufficient quantities to permit them to continue delivery and boardinstalling through the end of directors, dissolve2021, if these shortages and liquidate, subject in each case to our obligations under Delaware law to provide for claimsdelays persist into 2022, they could adversely affect the timing of creditorswhen energy storage systems can be delivered and the requirements of other applicable law.6STAR PEAK ENERGY TRANSITION CORP.NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTSThe initial stockholders have agreed to waive their liquidation rights with respect to the Founder Shares ifinstalled and when the Company failscan begin to complete a Business Combination withingenerate revenue from those systems. The Company cannot predict the Combination Period. However, iffull effect the initial stockholders acquire Public Shares in or after the Initial Public Offering, theyCOVID-19 pandemic will be entitledhave on its business, cash flows, liquidity, financial condition and results of operations at this time due to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 5) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the funds held in the Trust Account that will be available to fund the redemption of the Company’s Public Shares. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be only $10.00 per share initially held in the Trust Account (or less than that in certain circumstances). In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by third parties, including any vendor for services rendered or products sold to the Company, or any prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account. This liability will not apply with respect to any claims by a third party who executed a waiver of any right, title, interest or claim of any kind in or to any monies held in the Trust Account or to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims.numerous uncertainties. The Company will seekcontinue to reduce the possibility that the Sponsormonitor developments affecting its workforce, its customers and its business operations generally, and will havetake actions it determines are necessary in order to indemnify the Trust Account due to claims of creditors by endeavoring to have all third parties, including vendors, service providers (except the Company’s independent registered public accounting firm and the underwriters with respect to the underwriting agreement), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.United States generally accepted accounting principles (“U.S. GAAP”)GAAP for interim financial informationreporting and with the instructions to Form 10-Q and Article 810 of Regulation S-X.they do not include all of the condensed balance sheet at December 31, 2020 has been derived from the audited financial statements at that date, but certain notes or other information and footnotesthat are normally required by U.S. GAAP.GAAP have been omitted if they substantially duplicate the disclosures contained in the Company’s annual audited consolidated financial statements. In the opinion of Stem management, all normal and recurring adjustments (consisting of normal accruals) considered necessary for a fair presentationstatement of the results for the interim period presented have been included.included in the accompanying unaudited financial statements. The unaudited condensed consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries, and consolidated variable interest entities (“VIEs”). All intercompany balances and transactions have been eliminated in consolidation. These unaudited condensed financial statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2020. Operating results for the periods presentedthree and nine month period ended September 30, 2021 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2020.accompanyingpreparation of unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Form 8-K and the final prospectus filed by the Company with the SEC on August 26, 2020 and August 19, 2020, respectively.Emerging Growth CompanyThe Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.7STAR PEAK ENERGY TRANSITION CORP.NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTSThis may make comparison of the Company’s financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.Liquidity and Capital ResourcesAs of September 30, 2020, the Company had approximately $1.8 million in its operating bank account and working capital of approximately $1.8 million.The Company’s liquidity needs to date have been satisfied through a capital contribution of $25,000 from the Sponsor to purchase the Founder Shares (as defined below), the loan of up to $300,000 under the Note (see Note 4), and the net proceeds from the consummation of the Private Placement not held in the Trust Account. The Company fully repaid the Note on August 20, 2020. In addition, in order to finance transaction costs in connection with a Business Combination, the Company’s officers, directors and initial stockholders may, but are not obligated to, provide the Company Working Capital Loans (see Note 4). To-date, there have been no borrowings under any Working Capital Loans.Based on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity from the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, the Company will be using these funds for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that the specific impact is not readily determinable as of the date of the balance sheet. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.Note 2—Summary of Significant Accounting PoliciesUse of EstimatesThe preparation ofconsolidated financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosuresthe disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. MakingThe Company bases its estimates requires managementon historical experience and on various other assumptions believed to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actualbe reasonable. Actual results could differ significantly from those estimates.Cashestimates and Cash Equivalentsconsidersoperates as 1 operating segment that is focused exclusively on innovative technology services that transform the way energy is distributed and consumed. Net assets outside of the U.S. were less than 10% of total net assets as of September 30, 2021 and December 31, 2020.Accounts Receivable Revenue Revenue September 30, December 31, Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 2021 2020 Customers: Customer A * 30 % * * 11 % * Customer B * 20 % * * * * Customer C 18 % 17 % 22 % * 12 % * Customer D * * * * 13 % * Customer H 12 % * 15 % 32 % 11 % 17 % Customer I 12 % * * * * * withas available-for-sale securities and changes in fair market value are reported in other comprehensive income (loss).originalalternative form of cash and, if the cash needs arise, could liquidate the investments at any point in time regardless of the contractual maturity of three months or less when purchased to be cash equivalents.Investments Held in Trust AccountThe Company’s portfolio of investments is comprised solely of U.S. government securities, within the meaning set forth in Section 2(a)(16)investments. All of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities, or a combination thereof. The Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presentedtradable on the condensed balance sheetan active market and could be sold at fair value at the end of each reporting period. Gains and losses resulting from the changeany point in fair value of these securities is included in gain on investment (net), dividends and interest held in Trust Account in the accompanying unaudited condensed statement of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.
time.8STAR PEAK ENERGY TRANSITION CORP.NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTSConcentration of Credit RiskFinancial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $250,000, and investments held in Trust Account. At September 30, 2020, the Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.Fairis defined asin the priceunaudited condensed consolidated financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would behave received forin connection with the sale of an assetthe assets or paid forin connection with the transfer of a liability,the liabilities in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a three-tierIn connection with measuring the fair value hierarchy,of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities).prioritizesare directly related to the amount of subjectivity associated with the inputs used in measuring fair value.The hierarchy givesto the highest priority to unadjustedvaluation of these assets or liabilities are as follows:(Levelthat the Company has the ability to access as of the measurement date.measurements)that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data.lowest priority touse of unobservable inputs (Level 3 measurements). These tiers include:●Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;●Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and●Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.In some circumstances, the inputs used to measurewhen determining fair value. Assets and liabilities measured at fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorizedare classified in itstheir entirety in the fair value hierarchy based on the lowest level of input that is significant to their fair value measurement. The Company’s assessment of the significance of a specific input to the fair value measurement.As of September 30, 2020, the carrying values of cash, accounts payable, accrued expenses,measurement in its entirety requires management to make judgments and franchise tax payable approximate their fair values dueconsider factors specific to the short-term nature of the instruments. The Company’s portfolio of investments held in the Trust Account is comprised of investments in U.S. Treasury securities with an original maturity of 185 daysasset or less or investments in money market funds that invest in U.S. government securities, or a combination thereof. The fair value for trading securities is determined using quoted market prices in active markets.Offering Costs Associated with the Initial Public OfferingOffering costs consisted of underwriting, legal, accounting, and other costs incurred that were directly related to the Initial Public Offering and that were charged to stockholders’ equity upon the completion of the Initial Public Offering.Class A Common Stock Subject to Possible RedemptionThe Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Class A common stock subject to mandatory redemption (if any) is classified as a liability instrument and measured at fair value. Conditionally redeemable Class A common stock (including Class A common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, Class A common stock is classified as stockholders’ equity. The Company’s Class A common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, at September 30, 2020, 36,683,412 shares of Class A common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of the Company’s unaudited condensed balance sheet.
liability.9STAR PEAK ENERGY TRANSITION CORP.NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTSIncome TaxesThe Company follows the asset and liability method of accounting for income taxes. Deferred taxFinancial assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. 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 that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. As of September 30, 2020, the Company had deferred tax assets of approximately $55,000, which had a full valuation allowance recorded against them. The deferred tax assets are comprised of approximately $26,000 of organization and start-up costs and of approximately $29,000 of projected net operating loss for the current tax year.For tax benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of September 30, 2020. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties as of September 30, 2020. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.Net Income (Loss) Per Common ShareNet income (loss) per share is computed by dividing net income (loss) by the weighted-average number of common stock outstanding during the periods. The Company has not considered the effect of the warrants sold in the Initial Public Offering and the Private Placement to purchase up to an aggregate of 19,967,302 shares of the Company’s Class A common stock in the calculation of the diluted income per share, since their inclusion would be anti-dilutive under the treasury stock method.The Company’s unaudited condensed statements of operations include a presentation of income (loss) per share for common stock subject to redemption in a manner similar to the two-class method of income (loss) per share. Net income per common share, basic and diluted for Class A common stock is calculated by dividing the gain on investment (net), dividends and interest held in Trust Account of approximately $19,000 for the three and nine months ended September 30, 2020, net of applicable taxes available to be withdrawn from the Trust Account of approximately $19,000 for the three and nine months ended September 30, 2020, resulting in net income of $0 for the three months and nine ended September 30, 2020, by the weighted average number of Class A common stock outstanding for each period. Net loss per share, basic and diluted for Class B common stock is calculated by dividing the net loss of approximately $374,000 and $377,000 for the three and nine months ended September 30, 2020, respectively, less income attributable to Class A common stock of $0 for each period, by the weighted average number of Class B common stock outstanding for the period.Recent Accounting PronouncementsManagement does not believe that any recently issued, but not yet effective, accounting pronouncement if currently adopted would have a material effect on the Company’s financial statements.Note 3—Initial Public OfferingOn August 20, 2020, the Company consummated its Initial Public Offering of 35,000,000 Units at $10.00 per Unit, generating gross proceeds of $350.0 million, and incurring offering costs of approximately $20.0 million, inclusive of approximately $12.3 million in deferred underwriting commissions. On August 26, 2020, the Company consummated the sale of 3,358,504 Units at the Initial Public Offering price at $10.00 per Unit pursuant to the notice of partial exercise from the underwriters, generating additional gross proceeds of approximately $33.6 million, and incurring additional offering costs of approximately $1.8 million, inclusive of approximately $1.2 million in deferred underwriting commissions.10STAR PEAK ENERGY TRANSITION CORP.NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTSEach Unit consists of one share of Class A common stock (such shares of Class A common stock included in the Units being offered, the “Public Shares”), and one-third of one redeemable warrant (each, a “Public Warrant”). Each whole Public Warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 6).Note 4—Related Party TransactionsFounder SharesOn November 8, 2018, the Sponsor purchased 2,875,000 shares (the “Founder Shares”) of the Company’s Class B common stock, par value $0.0001 per share, for an aggregate price of $25,000. On July 13, 2020, the Company effected a stock split resulting in the Sponsor holding 10,062,500 Founder Shares. All shares and the associated amounts have been retroactively restated to reflect the aforementioned stock split. On July 29, 2020, the Sponsor transferred 40,000 Founder Shares to each of Desirée Rogers and C. Park Shaper, the Company’s independent director nominees. The initial stockholders agreed to forfeit up to 1,312,500 Founder Shares to the extent that the over-allotment option is not exercised in full by the underwriters, so that the Founder Shares would represent 20% of the outstanding shares after the Initial Public Offering. The underwriters partially exercised their over-allotment option on August 26, 2020, with the remaining portion of the over-allotment option expiring at the conclusion of the 45-day option period. As a result, an aggregate of 472,874 Founder Shares were forfeited upon the expiration of the over-allotment option.The Founder Shares will automatically convert into Class A common stock on a one-for-one basis at the time of the Company’s initial Business Combination and are subject to certain transfer restrictions, as described below. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts sold in the Initial Public Offering and related to the closing of the initial Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock outstanding upon the completion of the Initial Public Offering plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with the Business Combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in the Business Combination).The initial stockholders agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) one year after the completion of the initial Business Combination or (B) subsequent to the initial Business Combination, (x) if the last sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for share splits, share dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of the Company’s stockholders having the right to exchange their common stock for cash, securities or other property.Private Placement WarrantsSimultaneously with the closing of the Initial Public Offering, the Company consummated the Private Placement of 6,733,333 Private Placement Warrants at a price of $1.50 per Private Placement Warrant to the Sponsor, generating gross proceeds of $10.1 million. In connection with the consummation of the sale of additional Units pursuant to the underwriters’ over-allotment option, on August 26, 2020, the Company sold an additional 447,801 Private Placement Warrants to the Sponsor, generating additional gross proceeds of approximately $0.7 million.Each Private Placement Warrant is exercisable for one share of Class A common stock at a price of $11.50 per share. A portion of the proceeds from the sale of the Private Placement Warrants will be added to the proceeds from the Initial Public Offering to be held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the Private Placement Warrants will expire worthless. The Private Placement Warrants will be non-redeemable and exercisable on a cashless basis so long as they are held by the Sponsor or its permitted transferees.11STAR PEAK ENERGY TRANSITION CORP.NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTSThe Sponsor and the Company’s officers and directors have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants until 30 days after the completion of the initial Business Combination.Related Party Reimbursements and LoansThe Company’s Sponsor has agreed to loan the Company up to $300,000 to cover expenses related to the Initial Public Offering pursuant to a promissory note, dated November 8, 2018 and later amended on July 10, 2020 (the “Note”). This loan is non-interest bearing and payable upon the completion of the Initial Public Offering. In 2018 and 2019, the Company borrowed approximately $182,000 under the Note and repaid approximately $125,000 when it temporary halted the Initial Public Offering in September 2019. The Company recapitalized and continued in July 2020, and borrowed an additional of $235,000 under the Note. The Company fully repaid the remaining balance the Note of approximately $292,000 on August 20, 2020.In September 2020, the Company reimbursed affiliates of the Sponsor for costs incurred of approximately $113,000.In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination is not completed, the Company may use a portion of the proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lenders’ discretion, up to $1.5 million of such Working Capital Loans may be convertible into warrants of the post Business Combination entity at a price of $1.50 per warrant. The warrants would be identical to the Private Placement Warrants. As of September 30, no Working Capital Loan was outstanding.Administrative Service AgreementCommencing on the date that the Company’s securities were first listed on the NYSE, the Company agreed to pay an affiliate of the Sponsor of total $10,000 per month for office space, utilities, secretarial support and administrative services. Upon completion of the initial Business Combination or the liquidation, the Company will cease paying these monthly fees. The Company incurred approximately $20,000 in administrative expenses under the agreement, which is recognized in the accompanying unaudited condensed statements of operations for both the three and nine months ended September 30, 2020 within general and administrative expenses – related party.Note 5—Commitments and ContingenciesRegistration RightsThe holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans, if any, are entitled to registration rights (in the case of the Founder Shares, only after conversion of such shares into Class A common stock) pursuant to the registration and shareholder rights agreement. These holders will be entitled to certain demand and “piggyback” registration rights. However, the registration and shareholder rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until the termination of the applicable lock-up period for the securities to be registered. The Company will bear the expenses incurred in connection with the filing of any such registration statements.12STAR PEAK ENERGY TRANSITION CORP.NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTSUnderwriting AgreementThe Company granted the underwriters a 45-day option from the closing date of the Initial Public Offering to purchase up to 5,250,000 additional Units to cover over-allotments, if any, at $10.00 per Unit, less underwriting discounts and commissions. On August 26, 2020, the Company consummated the sale of an additional 3,358,504 Units at the Initial Public Offering price at $10.00 per Unit pursuant to the notice of partial exercise from the underwriters.The underwriters were entitled to an underwriting discount of $0.20 per Unit, or $7.0 million in the aggregate, paid upon the closing of the Initial Public Offering. In addition, $0.35 per Unit, or approximately $12.3 million in the aggregate will be payable to the underwriters for deferred underwriting commissions. The deferred underwriting commissions will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.In connection with the consummation of the sale of Units pursuant to the over-allotment option on August 26, 2020, the underwriters were entitled to an aggregate of approximately $0.7 million in fees payable upon closing and an additional deferred underwriting commissions of approximately $1.2 million.Note 6—Stockholders’ EquityCommon StockClass A common stock — The Company is authorized to issue 400,000,000 Class A common stock with a par value of $0.0001 per share. As of September 30, 2020, there were 38,358,504 Class A common shares outstanding, including 36,683,412 shares of Class A common stock subject to possible redemption that were classified as temporary equity in the accompanying condensed balance sheet.Class B common stock — The Company is authorized to issue 40,000,000 shares of Class B common stock with a par value of $0.0001 per share. On July 13, 2020, the Company effected a stock split resulting in the Sponsor holding 10,062,500 shares of Class B common stock. All shares and the associated amounts have been retroactively restated to reflect the aforementioned stock split. Of the 10,062,500 shares of Class B common stock outstanding, up to 1,312,500 shares were subject to forfeiture to the Company by the Sponsor for no consideration to the extent that the underwriters’ over-allotment option is not exercised in full or in part, so that the initial stockholders would collectively own 20.0% of the Company’s issued and outstanding common stock after the Initial Public Offering. The underwriters partially exercised their over-allotment option on August 26, 2020, with the remaining portion of the over-allotment option expiring at the conclusion of the 45-day option period. As a result, an aggregate of 472,874 Founder Shares were forfeited upon the expiration of the over-allotment option.Common stockholders of record are entitled to one vote for each share held on all matters to be voted on by stockholders. Holders of the Class A common stock and holders of the Class B common stock will vote together as a single class on all matters submitted to a vote of our stockholders except as required by law.Preferred Stock — The Company is authorized to issue 1,000,000 shares of preferred stock, with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. As of September 30, 2020, there were no shares of preferred stock issued or outstanding.Warrants — Public Warrants may only be exercised for a whole number of shares. No fractional Public Warrants will be issued upon separation of the Units and only whole Public Warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the Initial Public Offering; provided in each case that the Company has an effective registration statement under the Securities Act covering the Class A common stock issuable upon exercise of the Public Warrants and a current prospectus relating to them is available (or the Company permits holders to exercise their Public Warrants on a cashless basis and such cashless exercise is exempt from registration under the Securities Act). The Company has agreed that as soon as practicable, but in no event later than 20 business days, after the closing of a Business Combination, the Company will use its commercially reasonable efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the Class A common stock issuable upon exercise of the Public Warrants. The Company will use its commercially reasonable efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the Public Warrants in accordance with the provisions of the warrant agreement. If a registration statement covering the Class A common stock issuable upon exercise of the warrants is not effective by the sixtieth (60th) day after the closing of the initial Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.13STAR PEAK ENERGY TRANSITION CORP.NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTSRedemption of Warrants when the price per Class A ordinary share equals or exceeds $18.00. Once the warrants become exercisable, the Company may redeem the Public Warrants (except as described herein with respect to the Private Placement Warrants):·in whole and not in part;·at a price of $0.01 per warrant;·upon a minimum of 30 days’ prior written notice of redemption; and·if, and only if, the reported closing price of the Company’s Class A ordinary shares equals or exceeds $18.00 per share (as adjusted) for any 20 trading days within a 30-trading day period ending three trading days prior to the date on which the Company sends the notice of redemption to the warrant holdersThe Company will not redeem the warrants as described above unless a registration statement under the Securities Act covering the issuance of the Class A ordinary shares issuable upon exercise of the warrants is then effective and a current prospectus relating to those Class A ordinary shares is available throughout the 30-day redemption period. If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.Redemption of Warrants when the price per Class A Ordinary Share equals or exceeds $10.00. Once the warrants become exercisable, the Company may redeem the outstanding Public Warrants:·in whole and not in part;·at $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption; provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares based on the redemption date and the “fair market value” of the Company’s Class A ordinary shares;·if, and only if, the last reported sale price (the “closing price”) of the Company’s Class A ordinary shares equals or exceeds $10.00 per Public Share (as adjusted) for any 20 trading days within the 30-trading day period ending three trading days before the Company sends the notice of redemption to the warrant holders; and·if the closing price of the Class A ordinary shares for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which we send the notice of redemption to the warrant holders is less than $18.00 per share (as adjusted), the Private Placement Warrants must also be concurrently called for redemption on the same terms as the outstanding Public Warrants, as described above.If and when the Public Warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.The exercise price and number of ordinary shares issuable upon exercise of the Public Warrants may be adjusted in certain circumstances, including in the event of a share dividend, or recapitalization, reorganization, merger or consolidation. However, except as described below, the Public Warrants will not be adjusted for issuance of ordinary shares at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants. If the Company has not completed a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their Public Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.14STAR PEAK ENERGY TRANSITION CORP.NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTSIn addition, if (x) the Company issues additional Class A ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of a Business Combination at an issue price or effective issue price of less than $9.20 per ordinary share (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of a Business Combination on the date of the consummation of a Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Class A ordinary shares during the 20 trading day period starting on the trading day prior to the day on which the Company consummates a Business Combination (such price, the “Market Value”) is below $9.20 per share, then the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, the $18.00 per share redemption trigger price and the “Redemption of Warrants when the price per Class A ordinary share equals or exceeds $10.00” described above will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price, and the $10.00 per share redemption trigger price described above under “Redemption of Warrants when the price per Class A ordinary share equals or exceeds $10.00” will be adjusted (to the nearest cent) to be equal to the higher of the Market Value and the Newly Issued Price.The Private Placement Warrants will be identical to the Public Warrants underlying the Units being sold in the Initial Public Offering, except that the Private Placement Warrants and the Class A ordinary shares issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be exercisable on a cashless basis and be non-redeemable (except as described above under “Redemption of Warrants when the price per Class A ordinary share equals or exceeds $10.00”) so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable under all redemption scenarios by the Company and exercisable by such holders on the same basis as the Public Warrants.Note 7—Fair Value MeasurementsThe following table presents information about the Company’s assets that are measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020 include cash and indicatescash equivalents, short-term investments and warrant liabilities.Three Months Ended
September 30,Nine Months Ended
September 30,2021 2020 2021 2020 Partnership hardware revenue $ 34,886 $ 5,523 $ 59,609 $ 6,950 Partnership service revenue 33 — 112 — Host customer service revenue 4,914 3,649 14,870 10,711 Total revenue $ 39,833 $ 9,172 $ 74,591 $ 17,661 Total remaining
performance
obligationsPercent Expected to be Recognized as Revenue Less than
one yearTwo to
five yearsGreater than
five yearsService revenue $ 157,494 12 % 48 % 40 % Hardware revenue 49,738 100 % — % — % Total revenue $ 207,232 Beginning balance as of January 1, 2021 $ 52,410 Upfront payments received from customers 36,652 Upfront or annual incentive payments received 4,575 Revenue recognized related to amounts that were included in beginning balance of deferred revenue (32,139) Revenue recognized related to deferred revenue generated during the period (12,626) Ending balance as of September 30, 2021 $ 48,872 Amortized cost Unrealized gain Unrealized Loss Estimated Fair Value Assets Cash equivalents: Money market fund $ 3,787 $ — $ — $ 3,787 Total cash equivalents $ 3,787 $ — $ — $ 3,787 Debt securities: Corporate debt securities $ 34,378 $ 2 $ (17) $ 34,363 Commercial paper $ 20,738 $ 2 $ — $ 20,740 U.S. government bonds $ 80,845 $ 3 $ (8) $ 80,840 Certificate of deposits $ 24,520 $ 3 $ — $ 24,523 Other $ 10,333 $ — $ (4) $ 10,329 Total debt securities $ 170,814 $ 10 $ (29) $ 170,795 Classified as: Cash equivalents $ 3,787 Short-term debt securities $ 170,795 Long-term debt securities $ — $ 174,582 September 30, 2021 Level 1 Level 2 Level 3 Total Assets Cash equivalents: Money market fund $ 3,787 $ — $ — $ 3,787 Debt securities Corporate debt securities — 34,363 — 34,363 Commercial paper — 20,740 — 20,740 U.S. government bonds — 80,840 — 80,840 Certificate of deposits — 24,523 — 24,523 Other — 10,329 — 10,329 Total financial assets $ 3,787 $ 170,795 $ — $ 174,582 December 31, 2020 Level 1 Level 2 Level 3 Total Assets Cash equivalents: Money market fund $ 67 $ — $ — $ 67 Liabilities Convertible preferred stock warrant liability $ — $ — $ 95,342 $ 95,342 techniques thatreports prepared by an independent third party for the Company. Inputs include exercise price, volatility, fair value of common or preferred stock, expected dividend rate and risk-free interest rate.Nine Months Ended
September 30,2020 Volatility 65.0 % Risk-free interest rate 0.1 % Expected term (in years) 1.8 Dividend yield — % Discount for lack of marketability 36.5 % Warrant Liability Balance as of December 31, 2020 $ 95,342 Changes in estimated fair value (1,303) Assumption of warrant liability upon Merger 303,221 Conversion of warrants upon Merger (59,442) Exchange of warrants (168,647) Exercised warrants (169,171) Balance as of September 30, 2021 $ — September 30, 2021 Energy storage systems placed into service $ 143,423 Less: accumulated depreciation (42,465) Energy storage systems not yet placed into service 13,191 Total energy storage systems, net $ 114,149 utilizedentered into a revolving loan agreement with an affiliate of a member of certain of the Company’s special purpose entities (“SPE”). This agreement was, from time to determine such fair value. Quoted Prices in
Active Markets Significant Other
Observable Inputs Significant Other
Unobservable Inputs Description (Level 1) (Level 2) (Level 3) Investments held in Trust Account: U.S. Treasury Securities $ 383,603,554 $ - $ - $ 383,603,554 $ - $ - uses inputsfinanced this acquisition by entering into a term loan agreement with the noncontrolling member bearing fixed interest of 4.5% per quarter (18.0% per annum) on the outstanding principal balance. The loan required fixed quarterly payments throughout the term of the loan, which was scheduled to be paid in full by April 1, 2026.9/30/2021 Outstanding principal $ 1,902 Unamortized discount (227) Carrying value of debt $ 1,675 actual trade data, benchmark yields, quoted market prices from dealers or brokers,the “Convertible Promissory Notes”. As of December 31, 2020, these Convertible Promissory Notes had a balance of $67.6 million. During the nine months ended September 30, 2021, the Company issued additional Convertible Promissory Notes. All Convertible Promissory Notes were converted and other similar sourcescancelled upon effectiveness of the Merger (see “—Conversion and Cancellation of Convertible Promissory Notes Upon Merger” below).As of September 30, 2021, there were no Convertible Promissory Notes outstanding.determinevarious investors with aggregate gross proceeds of $1.1 million. The Company evaluated the conversion option within the Q1 2021 Convertible Notes and determined the effective conversion price was beneficial to the note holders. As such, the Company recorded a beneficial conversion feature (“BCF”) related to the issuance of the Q1 2021 Convertible Notes based on the difference between the effective conversion rate and the fair value of its investments.Transfers to/from Levels 1, 2, and 3 are recognized at the endstock into which it was convertible, limited by the amount of the reportingaggregate gross proceeds. The BCF resulted in a $1.1 million discount to the Q1 2021 Convertible Notes with an increase to additional paid in capital. The Company accreted the discount in connection with the BCF as interest expense over the term of the Q1 2021 Convertible Notes using the effective interest rate method.ThereThe Company has also issued warrants to purchase shares of Legacy Stem’s common stock. Upon effectiveness of the Merger, the Company had 50,207,439 warrants outstanding, of which substantially all were converted into 2,759,970 shares of Class A common stock of Stem. Upon conversion of the warrants, the existing warrant liabilities were remeasured to fair value resulting in a gain on remeasurement of $100.9 million and a total warrant liability of $60.6 million, which was then reclassified to additional paid-in-capital. As of September 30, 2021, there were 23,634 Legacy Stem Warrants outstanding. These instruments are exercisable into the Company’s Class A common stock and are equity classified.transfers between levelsPrivate Warrants outstanding as of September 30, 2021.2020.Note 8—Subsequent EventsManagement has evaluated subsequent events2021. The public warrants have been delisted from the NYSE, and there are no public warrants left outstanding.determinebe a related party to jointly explore on a non-exclusive basis possible business opportunities to advance projects in the United States, the United Kingdom, Europe and Asia. As consideration for the strategic relationship, upon closing of the Merger, the Company issued warrants to purchase 350,000 shares of the Company’s common stock at an exercise price of $0.01 per share. These warrants were deemed to have been fully earned as of the grant date. The warrants were valued at fair market value as of the grant date totaling $9.2 million and recorded to general and administrative expense in the Company’s statement of operations. In May 2021, all of these warrants were exercised for shares of the Company’s common stock.September 30,
2021Shares reserved for warrants 23,673 Options issued and outstanding 9,165,901 Shares available for future issuance under equity incentive plan 20,923,177 Total 30,112,751 eventsany, or transactions occurring through November 13, 2020,both. When the holder net settles the tax obligation, the Company pays the amount of the withholding tax to the U.S. government in cash, which is accounted for as an adjustment to additional paid-in-capital. The Company does not intend to grant new awards under the 2009 Plan. At September 30, 2021, 8,166,991 stock options were outstanding under the 2009 Plan. In May 2021, the Company issued awards under the 2021 Plan, with 23,722,254 shares reserved thereunder.financial statementsgrant. The Plans allow for exercise of unvested options with repurchase rights over the restricted common stock issued at the original exercise price. The repurchase rights lapse at the same rate as the options vest.Number of
Options
OutstandingWeighted-
Average
Exercise Price
Per ShareWeighted-
Average
Remaining
Contractual
Life (years)Aggregate
Intrinsic
Value
(in thousands)Balances as of December 31, 2020 51,379,939 $ 0.56 7.2 $ 46,516 Retroactive application of recapitalization (40,314,281) 2.05 — — Adjusted Balance as of December 31, 2020 11,065,658 2.61 7.2 46,516 Options granted 1,043,948 28.80 Options exercised (2,842,564) 1.72 Options forfeited (101,141) 14.03 Balances as of September 30, 2021 9,165,901 $ 2.32 7.1 $ 171,226 Options vested and exercisable — September 30, 2021 6,133,879 $ 2.32 6.2 $ 132,327 available2,440,000 stock options granted during the nine months ended September 30, 2020. The intrinsic value of options exercised was $63.0 million and less than $0.1 million during the nine months ended September 30, 2021 and 2020, respectively. During the three months ended September 30, 2021, 1,440,026 stock options were exercised at a weighted average exercise price of $1.48 per share. During the nine months ended September 30, 2021, the Company issued 839,745 shares of common stock from the net settlement of 1,426,130 stock options and shares granted. The Company paid $12.6 million in withholding taxes in connection with the net share settlement of these awards.issuance, require potential adjustment to or disclosurethe period ended September 30, 2021:Number of
RSUs
OutstandingWeighted-
Average
Grant Date Fair Value
Per ShareBalances as of December 31, 2020 — $ — RSUs granted 1,759,077 36.21 RSUs vested — — RSUs forfeited — — Balances as of September 30, 2021 1,759,077 $ 36.21 financialCompany’s consolidated statements of operations and has concluded that all such events thatcomprehensive loss (in thousands):Three Months Ended
September 30,Nine Months Ended
September 30,2021 2020 2021 2020 Sales and marketing $ 723 $ (24) $ 975 $ 196 Research and development 965 33 1,384 519 General and administrative 4,511 486 5,624 712 Total stock-based compensation expense $ 6,199 $ 495 $ 7,983 $ 1,427 Three Months Ended
September 30,Nine Months Ended
September 30,2021 2020 2021 2020 Numerator - Basic: Net income (loss) $ 115,612 $ (18,785) $ (67,157) $ (55,237) Less: Deemed Dividend — — — (9,484) Net income (loss) attributable to common stockholders, basic $ 115,612 $ (18,785) $ (67,157) $ (64,721) Numerator - Diluted: Net income (loss) attributable to common stockholders, basic 115,612 (18,785) (67,157) (64,721) Less: Gain from decrease in fair value and redemption of warrants (137,001) — — — Net loss attributable to common stockholders, diluted (21,389) (18,785) (67,157) (64,721) Denominator: Weighted-average number of shares outstanding used to compute net income (loss) per share attributable to common stockholders, basic 135,231,146 39,844,652 92,436,649 40,087,247 Dilutive potential common shares 5,054,019 — — — Weighted-average number of shares outstanding used to compute net loss per share attributable to common stockholders, diluted 140,285,165 39,844,652 92,436,649 40,087,247 Net income (loss) per share attributable to common stockholders, basic $ 0.85 $ (0.47) $ (0.73) $ (1.61) Net loss per share attributable to common stockholders, diluted $ (0.15) $ (0.47) $ (0.73) $ (1.61) require recognition or disclosure have been anti-dilutive:September 30, 2021 September 30, 2020 Convertible preferred stock — 175,593,919 Outstanding convertible promissory notes — 35,358,748 Outstanding stock options 9,165,901 43,971,965 Outstanding warrants 23,673 6,001,639 Outstanding RSUs 1,759,077 — Outstanding convertible preferred stock warrants — 39,697,463 Total 10,948,651 300,623,734 or disclosed.
a $12.6 million operating lease liability, and a $12.7 million operating lease right-of-use (“ROU”) asset, which are included in the condensed consolidated balance sheet as of September 30, 2021.15ItemManagement’s Discussion and Analysis of Financial Condition and Results of Operations.References to the “Company,” “our,” “us” or “we” refer to Star Peak Energy Transition Corp. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.Cautionary MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSQuarterly Report onthird-quarter 2021 Form 10-Q, includes forward-lookingas well as other statements we make, contains “forward-looking statements” within the meaning of Section 27Athe federal securities laws, which include any statements that are not historical facts. Such statements often contain words such as “expect,” “may,” “can,” “believe,” “predict,” “plan,” “potential,” “projected,” “projections,” “forecast,” “estimate,” “intend,” “anticipate,” “ambition,” “goal,” “target,” “think,” “should,” “could,” “would,” “will,” “hope” “see,” “likely,” and other similar words.Securities Actintegration and optimization of 1933,energy resources; the business strategies of Stem and those of its customers; the global commitment to decarbonization; our ability to retain or upgrade current customers, further penetrate existing markets or expand into new markets; our ability to manage our supply chains and distribution channels and the impact of natural disasters and other events beyond our control, such as amended (the “Securities Act”),the COVID-19 pandemic and Section 21Ethe Delta variant, and government and business responses thereto; and future results of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. Theseoperations. Such forward-looking statements are subject to known and unknown risks, uncertainties, and assumptions about usother factors that maycould cause our actual results levels of activity, performance or achievements to bediffer materially different from any future results, levels of activity, performance or achievementsthose expressed or implied by such forward-looking statements. In some cases, you can identifyThese forward-looking statements are based upon assumptions and estimates that, while considered reasonable by terminology suchStem and its management, depend upon inherently uncertain factors and risks that may cause actual results to differ materially from current expectations, including our inability to help reduce GHG emissions; our inability to seamlessly integrate and optimize energy resources; our inability to achieve our financial and performance targets and other forecasts and expectations; our inability to recognize the anticipated benefits of our recent business combination with Star Peak Energy Transition Corp. (“Star Peak”); our ability to grow and manage growth profitably; risks relating to the development and performance of our energy storage systems and software-enabled services; the risk that the global commitment to decarbonization may not materialize as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,”we predict, or the negativeeven if it does, that we might not be able to benefit therefrom; our inability to retain or upgrade current customers, further penetrate existing markets or expand into new markets; our inability to secure sufficient inventory from our suppliers to meet customer demand, and provide us with contracted quantities of such termsequipment; supply chain interruptions and manufacturing or delivery delays;disruptions in sales, production, service or other similar expressions. Such statements include, but are not limitedbusiness activities; our inability to possibleattract and retain qualified personnel; the risk that our business, combinationsfinancial condition and the financing thereof,results of operations may be adversely affected by other political, economic, business and related matters, as well as allcompetitive factors; and other statements other than statements of historical fact includedrisks and uncertainties set forth in this Form 10-Q. Factors that might cause or contribute10-Q, the section entitled “Risk Factors” in the definitive proxy statement relating to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission (“SEC”) filings.OverviewWe are a blank check company incorporated in Delaware on October 29, 2018 for the purpose of effecting a merger, capital stock exchange, asset acquisition, share purchase, reorganization or similar business combination filed by Star Peak on March 30, 2021, the Form 10-K/A filed by Star Peak with the SEC on April 26, 2021, and our Forms 8-K filed with or furnished to the SEC. businesses (the “Business Combination”). While we may pursue an acquisition opportunity in any business, industry, sectorof these or geographical location, we intend to focus its efforts primarily on identifying businesses seeking to be a market leader in, and/other risks or benefit fromuncertainties materialize (or the increasing global initiatives to improve the efficiencyconsequences of our energy ecosystems and reduce emissions (the “Energy Transition”). Our sponsor is Star Peak Sponsor LLC, a Delaware limited liability company (our “Sponsor”).Our registration statement for our Initial Public Offering (the “Initial Public Offering”) became effective on August 17, 2020. On August 20, 2020, we consummated the Initial Public Offering of 35,000,000 units (the “Units” and, with respect to the Class A common stock included in the Units being offered, the “Public Shares”) at $10.00 per Unit, generating gross proceeds of $350.0 million, and incurring offering costs of approximately $20.0 million, inclusive of approximately $12.3 million in deferred underwriting commissions. On August 26, 2020, we consummated the sale of an additional 3,358,504 Units at the Initial Public Offering price at $10.00 per Unit pursuant to the notice of partial exercise from the underwriters, generating additional gross proceeds of approximately $33.6 million, and incurring additional offering costs of approximately $1.8 million, inclusive of an additional approximately $1.2 million in deferred underwriting commissions.Simultaneously with the closing of the Initial Public Offering, we consummated the private placement (“Private Placement”) of 6,733,333 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”) at a price of $1.50 per Private Placement Warrant to our Sponsor, generating gross proceeds of $10.1 million. In connection with the consummation of the sale of additional Units pursuant to the underwriters’ over-allotment option, on August 26, 2020, we sold 447,801 Private Placement Warrants to our Sponsor, generating additional gross proceeds of approximately $0.7 million.16Upon the closing of the Initial Public Offering and the Private Placement on August 20, 2020, $350.0 million ($10.00 per Unit) of the net proceeds of the sale of the Units in the Initial Public Offering and the Private Placement were placed in a trust account (“Trust Account”), located in the United States at J.P. Morgan Chase Bank, N.A. with Continental Stock Transfer & Trust Company acting as trustee, and invested only in U.S. “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the assets held in the Trust Account as described below. Upon closing of the sale of Units and Private Placement Warrants upon exercise of the over-allotment, on August 26, 2020, $34.3 million of the net proceeds of the sale of the Units and Private Placement Warrants were placed in the Trust Account.If we are unable to complete a Business Combination within 24 months from the closing of the Initial Public Offering, or August 20, 2022, unless we provide the Public Stockholders with the opportunity to redeem their shares of Class A common stock in conjunction with any such amendment, we will (i) cease all operations except for the purposedevelopment changes), or should our underlying assumptions prove incorrect, actual outcomes may vary materially from those reflected in our forward-looking statements. Statements in this third-quarter 2021 Form 10-Q are made as of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equalNovember 9, 2021, and Stem disclaims any intention or obligation to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to us to pay our franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible followingupdate publicly or revise such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.Results of OperationsOur entire activity since inception through September 30, 2020 related to our formation, the preparation for the Initial Public Offering, and since the closing of the Initial Public Offering, the search for a prospective initial Business Combination. We have neither engaged in any operations nor generated any revenues to date. We will not generate any operating revenues until after completion of our initial Business Combination. We will generate non-operating income in the form of gain on investment (net), dividends and interest held in Trust Account. We expect to incur increased expensesstatements, whether as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.Fornew information, future events or otherwisethree months ended September 30, 2020, we had net loss of approximately $374,000, which consisted of approximately $111,000 in general and administrative expenses, approximately $133,000 in general and administrative expenses for costs incurred with our Sponsor and approximately $149,000 of franchise tax expense, which was partially offset by approximately $19,000 gain on investment (net), dividends and interest held in Trust Account.For the nine months ended September 30, 2020, we had net loss of approximately $377,000, which consisted of approximately $111,000 in general and administrative expenses, approximately $133,000 in general and administrative expenses for costs incurred with our Sponsor and approximately $151,000 of franchise tax expense, which was partially offset by approximately $19,000 gain on investment (net), dividends and interest held in Trust Account.For the three months ended September 30, 2020, we had net loss of approximately $1,100, which consisted of approximately $1,100 in general and administrative expenses.For the nine months ended September 30, 2020, we had net loss of approximately $10,000, which consisted of approximately $10,000 in general and administrative expenses and approximately $400 of franchise tax expense.Liquidity and Capital ResourcesAs of September 30, 2020, we had approximately $1.8 million in our operating bank account and working capital of approximately $1.8 million. Our liquidity needs to date have been satisfied through a capital contribution of $25,000 from our Sponsor to purchase the Founder Shares, the loan of up to $300,000 under a note agreement with our Sponsor (the “Note”), and the net proceeds from the consummation of the Private Placement not held in the Trust Account. We fully repaid the Note on August 20, 2020. In addition, in order to finance transaction costs in connection with a Business Combination, our officers, directors and initial stockholders may, but are not obligated to, provide us working capital loans. To-date, there have been no borrowings under any working capital loans.17Based on the foregoing, management believes that we will have sufficient working capital and borrowing capacity from our Sponsor or an affiliate of our Sponsor, or our officers and directors to meet our needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, we will be using these funds for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.We continue to evaluate the impact of the COVID-19 pandemic and have concluded that the specific impact is not readily determinable as of the date of the balance sheet. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.Contractual ObligationsWe do not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or long-term liabilities, other than an agreement to pay Administrative Services Agreement fees to our Sponsor that total $10,000 per month for office space, secretarial and administrative services provided to members of our management team.Critical Accounting PoliciesThisfollowing management’s discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and related notes included under Part I, Item 1 of this Quarterly Report on Form 10-Q. This discussion and analysis should also be read together with our audited consolidated financial statements as of December 31, 2020 and 2019 and for the years ended December 31, 2020 and 2019 (“Annual Financial Statements”) and the section entitled “Stem’s Managemebasedlisted on the New York Stock Exchange under the trade symbol “STEM”. Upon the consummation of the Merger, Stem received approximately $550.3 million, net of fees and expenses. See Note 1 - Business, of the Notes to the unaudited condensed consolidated financial statements in this report, for additional details regarding this transaction. For financial reporting purposes, Legacy Stem is treated as the accounting acquirer.statements,condition and results of operations at this time due to numerous uncertainties. We will continue to monitor developments affecting our workforce, our suppliers, our customers and our business operations generally, and will take actions we determine are necessary in order to mitigate these impacts as much as possible.have beenare non-GAAP financial measures, for financial and operational decision making and as a means to evaluate our operating performance and future prospects, develop internal budgets and financial goals, and to facilitate period-to-period comparisons. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses and expenditures that may not be indicative of our operating performance, such as stock-based compensation and other non-cash charges, as well as discrete cash charges that are infrequent in nature. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to our historical performance and liquidity as well as comparisons to our competitors’ operating results. We believe these non-GAAP financial measures are useful to investors both because they (1)allow for greater transparency with respect to key metrics used by management in its financial and operational decision making and (2)are used by our institutional investors and the analyst community to help them analyze the health of our business. Adjusted EBITDA and non-GAAP gross margin should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Revenue $ 39.8 $ 9.2 $ 74.6 $ 17.7 Cost of revenue (36.7) (10.9) (71.7) (22.5) Gross Margin (GAAP) 3.1 (1.7) 2.9 (4.9) Gross Margin % (GAAP) 8 % (19) % 4 % (28) % Adjustments to Gross Margin: Amortization of Capitalized Software 1.4 1.0 3.8 2.9 Impairments 0.7 1.4 2.0 2.8 0.6 — 2.1 0.3 Non-GAAP Gross Margin $ 5.8 $ 0.7 $ 10.8 $ 1.0 Non-GAAP Gross Margin % 15 % 8 % 14 % 6 % (1) Consists of certain operating expenses including communication and cloud service expenditures reclassified to cost of revenue. Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 (in thousands) (in thousands) Net income (loss) $ 115,612 $ (18,785) $ (67,157) $ (55,237) Adjusted to exclude the following: Depreciation and amortization 5,305 3,924 15,620 13,769 Interest expense 2,674 4,265 12,835 13,826 Loss on extinguishment of debt — — 5,064 — Stock-based compensation 6,199 495 7,983 1,427 Issuance of warrants for services — — 9,183 — Change in fair value of warrants and embedded derivative (137,001) 2,096 (3,424) 3,005 Provision for income taxes — 142 — 142 Adjusted EBITDA $ (7,211) $ (7,863) $ (19,896) $ (23,068) Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 (in millions) (in millions) Key Financial Metrics Revenue $ 39.8 $ 9.2 $ 74.6 $ 17.7 Gross Margin (GAAP) $ 3.1 $ (1.7) $ 2.9 $ (4.9) Gross Margin % (GAAP) 8 % (19) % 4 % (28) % Non-GAAP Gross Margin $ 5.8 $ 0.7 $ 10.8 $ 1.0 Non-GAAP Gross Margin % 15 % 8 % 14 % 6 % Net Income (loss) $ 115.6 $ (18.8) $ (67.2) $ (55.2) Adjusted EBITDA $ (7.2) $ (7.9) $ (19.9) $ (23.1) Key Operating Metrics 12-Month Pipeline (in billions) (1) $ 2.4 ** * ** Bookings (in millions) (2) 103.7 36.6 148.8 94.3 Contracted Backlog (in millions) (3) 312 ** * ** Contracted AUM (in GWh) (4) 1.4 1.0 * ** * at period end ** not available principlespolicy and timing of revenue recognition for host customer contracts and partnership arrangements that qualify as contracts with customers under ASC 606, are described within Note 3- Revenue, of the Notes to the audited consolidated financial statements as of December 31, 2020.acceptedconsist of recurring fixed monthly payments throughout the term of the contract and in some arrangements, an installation and/or upfront fee component. We may also receive incentives from utility companies in relation to the sale of our services.Three Months Ended
September 30,$ Change % Change 2021 2020 (In thousands, except percentages) Revenue Service revenue $ 4,947 $ 3,649 $ 1,298 36% Hardware revenue 34,886 5,523 29,363 * Total revenue 39,833 9,172 30,661 334% Cost of revenue Cost of service revenue 6,639 5,828 811 14% Cost of hardware revenue 30,057 5,074 24,983 * Total cost of revenue 36,696 10,902 25,794 237% Gross margin 3,137 (1,730) 4,867 281% Operating expenses: Sales and marketing 4,975 3,053 1,922 63% Research and development 6,268 5,052 1,216 24% General and administrative 11,024 2,635 8,389 318% Total operating expenses 22,267 10,740 11,527 107% Loss from operations (19,130) (12,470) (6,660) 53% Other income (expense), net: Interest expense (2,674) (4,265) 1,591 (37)% Loss on extinguishment of debt — — — * Change in fair value of warrants and embedded derivative 137,001 (2,096) 139,097 * Other expenses, net 415 188 227 121% Total other income (expense) 134,742 (6,173) 140,915 (2,283)% Income (loss) before income taxes 115,612 (18,643) 134,255 (720)% Income tax expense — (142) 142 * Net income (loss) $ 115,612 $ (18,785) $ 134,397 (715)% Nine Months Ended
September 30,$ Change % Change 2021 2020 (In thousands, except percentages) Revenue Service revenue $ 14,982 $ 10,711 $ 4,271 40% Hardware revenue 59,609 6,950 52,659 * Total revenue 74,591 17,661 56,930 322% Cost of revenue Cost of service revenue 19,354 16,083 3,271 20% Cost of hardware revenue 52,343 6,439 45,904 * Total cost of revenue 71,697 22,522 49,175 218% Gross margin 2,894 (4,861) 7,755 160% Operating expenses: Sales and marketing 11,555 11,699 (144) (1)% Research and development 15,502 12,084 3,418 28% General and administrative 28,730 8,018 20,712 258% Total operating expenses 55,787 31,801 23,986 75% Loss from operations (52,893) (36,662) (16,231) 44% Other income (expense), net: Interest expense (12,835) (13,826) 991 (7)% Loss on extinguishment of debt (5,064) — (5,064) * Change in fair value of warrants and embedded derivative 3,424 (3,005) 6,429 * Other expenses, net 211 (1,602) 1,813 (113)% Total other income (expense) (14,264) (18,433) 4,169 (23)% Income (loss) before income taxes (67,157) (55,095) (12,062) 22% Income tax expense — (142) 142 * Net income (loss) $ (67,157) $ (55,237) $ (11,920) 22% America. The preparationglobal financial markets, reducing our ability to access capital in the future. In addition, a recession or long-term market correction resulting from the spread of COVID-19 or government and business responses could materially affect our business and the value of our common stock.make estimatesworking capital. The 2020 Credit Agreement has a maturity date of the earlier of (1) May 14, 2021, (2) the maturity date of the revolving loan agreement, or (3) the maturity date of the convertible promissory notes discussed below. The loan bears interest of 12% per annum, of which 8% is paid in cash and judgments4% is added back to principal of the loan balance every quarter. We used a portion of the proceeds towards payments associated with existing debt as previously discussed. In April 2021, we repaid the remaining outstanding balance in full.affectwe own and operate. The credit agreement has a stated interest of 5.45% and a maturity datereported amountscredit agreement of $1.8 million in January 2021. The repayment of advances received under this credit agreement is determined by the lender based on the proceeds generated by us through the operation of the underlying energy storage systems. We have $1.9 million of outstanding borrowings under this credit agreement as of September 30, 2021.Nine Months Ended September 30, 2021 2020 Net cash used in operating activities $ (69,020) $ (17,921) Net cash used in investing activities (182,057) (7,719) Net cash provided by financing activities 648,819 21,043 Effect of exchange rate changed on cash 505 (349) Net increase (decrease) in cash and cash equivalents $ 398,247 $ (4,946) liabilities, revenues and liabilities. Non-cash charges primarily consisted of depreciation and amortization of $15.6 million, non-cash interest expense of $8.1 million, which includes interest expenses associated with debt issuance costs, stock-based compensation expense of $8.0 million, change in the fair value of warrant liability and the disclosureembedded derivative of contingent$3.4 million, impairment of energy storage systems of $2.2 million, issuance of warrants for services of $9.2 million, noncash lease expense of $0.3 million, accretion expense of $0.2 million, and net amortization of premium on investments of $0.3 million . The net cash outflow from changes in operating assets and liabilities was primarily driven by an increase in our financial statements. Onaccounts receivable of $21.4 million, an ongoing basis, we evaluate our estimatesincrease in other assets of $18.1 million, a decrease in deferred revenue of $3.5 million, an increase in inventory of $3.4 million, and judgments, including those related to fair valuean increase in contract origination costs of financial instruments$1.9 million, partially offset by an increase in accounts payable and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable underexpenses of $6.2 million. 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 under different assumptions or conditions. The Company has identified the following as its critical accounting policies:Class A Common Stock Subject to Possible RedemptionClass A common stock subject to mandatory redemption (if any) is classified as a liability instrument and measured at fair value. Conditionally redeemable Class A common stock (including Class A common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, Class A common stock is classified as stockholders’ equity. Our outstanding Class A common stock features certain redemption rights that are considered to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, at September 30, 2020, 36,683,412 shares of Class A common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of the unaudited condensed balance sheet.Net Income (Loss) Per Common ShareNet income (loss) per share is computed by dividing net income (loss) by the weighted-average number of common stock outstanding during the periods. We have not considered the effect of the warrants sold in the Initial Public Offering and the Private Placement to purchase up to an aggregate of 19,967,302 shares of our Class A common stock in the calculation of the diluted income per share, since their inclusion would be anti-dilutive under the treasury stock method.18The unaudited condensed statements of operations include a presentation of income (loss) per share for common stock subject to redemption in a manner similar to the two-class method of income (loss) per share. Net income per common share, basic and diluted for Class A common stock is calculated by dividing the gain on investment (net), dividends and interest held in Trust Account of approximately $19,000 for the three and nine months ended September 30, 2020, net cash used in operating activities was $17.9 million, primarily resulting from our operating loss of applicable taxes available to be withdrawn$55.2 million, adjusted by non-cash charges of $25.9 million and net cash inflow of $11.4 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of depreciation and amortization of $13.8 million, non-cash interest expense of $7.1 million, which includes interest expenses associated with debt issuance costs, stock-based compensation expense of $1.4 million, and change in the Trust Accountfair value of approximately $19,000warrant liability and embedded derivative of $3.0 million. The net cash inflow from changes in operating assets and liabilities was primarily driven by an increase in deferred revenue of $32.3 million, an increase in accounts payable and accrued expenses of $2.8 million, and an decrease in deferred costs with suppliers of $2.8 million, partially offset by an increase in inventory of $17.6 million, an increase in accounts receivable of $6.0 million, an increase in contract origination costs of $2.1 million, and an decrease in lease liabilities of $0.5 million. three and nine months ended September 30, 2020, resultingnet cash used for investing activities was $7.7 million, consisting of $4.1 million in net incomepurchase of $0 forenergy systems and $3.6 million in capital expenditures on internally-developed software.threenine months and nine ended September 30, 2020,2021, net cash provided by financing activities was $648.8 million, primarily consisting of net proceeds from the weighted average numberMerger and PIPE financing of Class A common$550.3 million, proceeds from exercise of stock outstanding for each period. Net loss per share, basicoptions and diluted for Class B common stock is calculatedwarrants of $148.3 million, proceeds from financing obligations of $4.9 million, proceeds from issuance of notes payable ofdividingrepayment of notes payable of $41.4 million, and repayment of financing obligations of $5.7 million. net loss of approximately $374,000 and $377,000 for the three and nine months ended September 30, 2020, respectively, less income attributablenet cash provided by financing activities was $21.0 million, primarily resulting from net proceeds from issuance of notes payable of $25.0 million, proceeds from financing obligations of $12.9 million, and net proceeds from issuance of convertible notes of $12.5 million, partially offset by repayment of notes payable of $21.7 million and repayment of financing obligations of $7.8 million.Class A common stock of $0 for each period, byour contractual obligations described in our registration statement on Form S-1 as filed with the weighted average number of Class B common stock outstanding for the period.Recent Accounting PronouncementsOur management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effectSEC on the accompanying financial statements.As of September 30, 2020, we didhavea party to any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K.InflationWe do not believeincluding guarantee contracts, retained or contingent interests, or unconsolidated variable interest entities that inflation hadeither have, or are reasonably likely to have, a current or future material impacteffect on our business, revenues or operating results duringunaudited condensed consolidated financial statements.period presented.JOBS ActThe Jumpstart Our Business Startups ActSEC on July 19, 2021. Information with respect to changes in our critical accounting policies can be found in Note 2 - 2012 (the “JOBS Act”) contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and underSignificant Accounting Policies, of the JOBS Act are allowedNotes to complythe unaudited condensed consolidated financial statements in this report, which information is incorporated herein by reference.new or revisedrespect to recent accounting pronouncements based onmay be found in Note 2 - Summary of Significant Accounting Policies, of the effective date for private (not publicly traded) companies. We are electingNotes to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, theunaudited condensed consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements providedthis report, which information is incorporated herein by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until we are no longer an “emerging growth company,” whichever is earlier.ItemQuantitative and Qualitative Disclosures About Market RiskWe are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
Not applicable.ItemControls and ProceduresEvaluation of CONTROLS AND PROCEDURESUnder the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of ouras(Disclosure Controls) within the meaning of the end of the fiscal quarter ended September 30, 2020, as such term is defined in Rules 13a-15(e) and 15d-15(e) underof the Securities Exchange Act. Based on this evaluation, our chief executive officer and chief financial officer have concluded that during the period covered by this report, our disclosure controls and procedures were effective.controls and proceduresControls are designed to ensure that information required to be disclosed by us in ourthe reports we file or submit under the Exchange Act, reportssuch as this Quarterly Report on Form 10-Q, is recorded, processed, summarized and reported within the time periods specified in the SEC’sSecurities and Exchange Commission’s rules and forms, andforms. Our Disclosure Controls are also designed to ensure that such information is accumulated and communicated to our management, including our principal executive officerChief Executive Officer and principal financial officer or persons performing similar functions,Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.waswere no changechanges in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended September 30, 2020, covered byquarter to which this Quarterly Report on Form 10-Qreport relates, and that hashave materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.– OTHER INFORMATION- Other Information1.Legal ProceedingsNone.ItemRisk Factors.fromto the risk factors previously disclosed in the Company’s final prospectus for the Initial Public Offering asPart 1, Item 1A, of our registration statement on Form S-1 filed with the SEC on AugustJuly 19, 2020.Item 2.Unregistered Sales of Equity Securities2021, except as set forth below. The risk factor set forth below updates, and Use of Proceeds from Registered SecuritiesUnregistered SalesOn November 8, 2018, our Sponsor purchased 2,875,000 shares (the “Founder Shares”) of our Class B common stock, par value $0.0001 per share, for an aggregate price of $25,000. On July 13, 2020, we effected a stock split resultingshould be read together with, the risk factors set forth in our Sponsor holding 10,062,500 Founder Shares. On July 29, 2020, our Sponsor transferred 40,000 Founder Shares to each of Desirée Rogers and C. Park Shaper, our independent director nominees. 19, 2021 Form S-1.initial stockholders agreed to forfeit up to 1,312,500 Founder Shares to the extent that the over-allotment option was not exercised in full by the underwriters, so that the Founder Shares would represent 20%interruption of the outstanding shares after the Initial Public Offering. The underwriters partially exercised their over-allotment option on August 26, 2020, with the remaining portionflow of the over-allotment option expiring at the conclusion of the 45-day option period. As a result, an aggregate of 472,874 Founder Shares were forfeited upon the expiration of the over-allotment option. Such securities were issued in connection with the Company’s organization pursuantcomponents and materials from domestic and international suppliers has disrupted and could continue to the exemption from registration contained in Section 4(a)(2) of the Securities Act.Simultaneously with the closing of the Initial Public Offering, we consummated the Private Placement of 6,733,333 Private Placement Warrants at a price of $1.50 per Private Placement Warrant todisrupt our Sponsor, generating gross proceeds of $10.1 million. In connection with the consummation of the sale of additional Units pursuant to the underwriters’ over-allotment option, on August 26, 2020, we sold 447,801 Private Placement Warrants to our Sponsor, generating additional gross proceeds of approximately $0.7 million. These issuances were made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.No underwriting discounts or commissions were paid with respect to such sales.20Use of ProceedsOn August 20, 2020, we consummated an Initial Public Offering of 35,000,000 Units at $10.00 per Unit, generating gross proceeds of $350.0 million. On August 26, 2020, we consummated the sale of 3,358,504 Units at the Initial Public Offering price at $10.00 per Unit pursuant to the notice of partial exercise from the underwriters, generating additional gross proceeds of approximately $33.6 million. The securities in the offering were registered under the Securities Act on registration statements on Form S-1 (File No. 333-240267) that became effective on August 17, 2020. Credit Suisse Securities (USA) LLC acted as the underwriter for the Initial Public Offering.In connection with the Initial Public Offering and the sale of Unitssupply chain, including as a result of partial exercisethe imposition of additional duties, tariffs, and other charges on imports and exports.over-allotment option, we incurred offeringUnited States, and have experienced delays in obtaining these components and materials as a result of the recent COVID-19 pandemic and the Delta variant. Political, social, or economic instability in certain regions where our suppliers are located or where our products are made, could cause future disruptions in trade. Actions in various countries have created uncertainty with respect to tariff impacts on the costs of approximately $21.8 million, inclusivesome of approximately $13.5 millionour components and materials. The degree of our exposure is dependent on (among other things) the type of materials, rates imposed, and timing of the tariffs. Other events that could also cause disruptions to our domestic and international supply chains include:deferred underwriting commissions. Other incurred offering costs consisted principally of preparation fees related towhich our components and materials are sourced, or may be sourced in the Initial Public Offering. After deducting the underwriting discounts and commissions (excluding the deferred portion, which amountfuture, will be payable upon consummationsubject to new or additional trade restrictions imposed by the United States or other foreign governments,Initial Business Combination, if consummated)cost or reduce or delay the supply of components and the Initial Public Offering expenses, approximately $384.3 millionmaterials available to us and adversely affect our business, financial condition and results of the net proceeds from our Initial Public Offering, the sale of Units resulting from partial exercise of the over-allotment and certain of the proceeds from the Private Placement of the Private Placement Warrants (or $10.00 per share sold in the Initial Public Offering) was placed in the Trust Account. The net proceeds of the Initial Public Offering, the sale of Units resulting from partial exercise of the over-allotment and certain proceeds from the sale of the Private Placement Warrants are held in the Trust Account and invested as described elsewhere in this Quarterly Report on Form 10-Q.There has been no material change in the planned use of the proceeds from the Initial Public Offering and Private Placement as is described in the Company’s final prospectus related to the Initial Public Offering.ItemDefaults Upon Senior SecuritiesItemMine Safety DisclosuresItemExhibits. EXHIBIT INDEXExhibitNumberDescription31.1EXHIBIT INDEX Exhibit No. Description 3.1 3.2 16.1 31.1 31.2 31.232.1 32.132.2 32.2101.INS 101.INSInline XBRL Instance Document 101.SCH 101.SCHInline XBRL Taxonomy Extension Schema Document 101.CAL 101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF 101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB 101.LABInline XBRL Taxonomy Extension Label Linkbase Document 101.PRE 101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document 104 21Cover Page Interactive Data File (embedded within the Inline XBRL document) this 16th day of November 2020.9, 2021.STAR PEAK ENERGY TRANSITION CORP.STEM, INC. By:/s/ Eric ScheyerName:By:Eric Scheyer/s/ William BushTitle:William Bush Chief ExecutiveFinancial Officer and Director(Principal Financial Officer)