ENERGY VAULT HOLDINGS, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

The following discussion and analysis provide information which Energy Vault's
management believes is relevant to an assessment and understanding of Energy
Vault's consolidated results of operations and financial condition. The
discussion should be read together with our unaudited interim condensed
consolidated financial statements, the respective notes thereto, and other
financial information included elsewhere in this Quarterly Report. The
discussion and analysis should also be read together with the audited
consolidated financial statements for the year ended December 31, 2021, and the
related notes included in Amendment No. 1 to the Current Report on Form 8-K
filed by us with the SEC on March 31, 2022 ("Amendment No. 1"). This discussion
may contain forward-looking statements based upon Energy Vault's current
expectations that involve risks, uncertainties, and assumptions. Energy Vault's
actual results may differ materially from those anticipated in these
forward-looking statements. You should review the section titled "Cautionary
Note Regarding Forward-Looking Statements" for a discussion of forward-looking
statements and the section titled "Risk Factors," for a discussion of factors
that could cause actual results to differ materially from the results described
in or implied by the forward-looking statements contained in the following
discussion and analysis and elsewhere in this Quarterly Report. Energy Vault's
historical results are not necessarily indicative of the results that may be
expected for any period in the future. Unless the context otherwise requires,
all references in this Quarterly Report to "we," "our," "us," "the Company," or
Energy Vault refer to Energy Vault Holdings, Inc., a Delaware corporation, and
its subsidiaries both prior to the consummation of and following the Merger (as
defined below).

Our Business

Energy Vault develops sustainable, grid-scale energy storage solutions designed
to advance the transition to a carbon free, resilient power grid. Energy Vault's
mission is to accelerate the decarbonization of the economy through the
development of sustainable and economical energy storage technologies. To
achieve this, Energy Vault is developing a proprietary gravity-based energy
storage technology. Energy Vault is also designing proprietary energy management
software based on artificial intelligence (AI), advanced optimization algorithms
designed to control and optimize entire energy storage systems, and a flexible
energy storage integration platform suitable for storage technologies of many
durations. Energy Vault's product platform aims to help utilities, independent
power producers, and large energy users significantly reduce their levelized
cost of energy while maintaining power reliability.

Energy Vault was founded to address one of the greatest impediments to efficient
renewable energy adoption - electricity storage. Renewable energy solutions
struggle to replace fossil fuel power due to intermittency of the generation
source and the lack of economic and sustainable energy storage solutions.
Variable renewable energy sources such as wind and solar only produce energy
when the sun is shining, or when the wind is blowing. Cost-effective energy
storage is required to increase the amount of electricity that can be delivered
to the grid from renewable energy sources in a balanced way that supports grid
integration resiliency during low generation and eliminates over-generation and
the risk of changes in energy delivery, or ramp rate. Ramp rate is measured as
the percentage of change in energy delivered per second. Power plants are
designed to operate within a range where the amount of energy delivered to the
grid must always equal the amount of energy that is being consumed. Blackouts
and other issues can result when the balance is disrupted, when the energy
levels fall out of the set range due to low generation periods, or high energy
demand periods. The system also may become overloaded because of abrupt changes
in renewable energy generation. Energy storage helps to maintain the balance of
energy delivery with energy consumed and to mitigate ramp rate to stay within
range and avoid blackouts or other grid resiliency problems.

Energy Vault's gravity-based solutions are based on the well-understood physics
and mechanical engineering fundamentals of pumped hydroelectric energy storage,
but replace water with custom-made composite blocks, or "mobile masses", that
can be made from low-cost and locally sourced materials, including local soil,
mine tailings, coal combustion residuals (coal ash), and end-of-life
decommissioned wind turbine blades.

Energy Vault's gravity-based solutions build upon the core, proven energy
storage technology of pumped hydroelectric energy storage and incorporates a
simplified building design that is modular, flexible, and not limited by the
same geological constraints of pumped hydroelectric energy storage plants.
Applying the fundamental principles of gravity and potential energy, Energy
Vault's EVx and Energy Vault Resiliency Center ("EVRC") solutions combine
advanced materials science and proprietary machine-vision software to
autonomously orchestrate the charge, storage, and discharge of electricity in
grid-scale applications. To achieve this, Energy Vault synthesized technologies
from four established industries: crane/elevators, shipping, motor/generator,
and materials science. Combining potential and kinetic energy cycles, Energy
Vault's systems are automated with advanced computer control and machine vision
software to create a gravity energy storage innovation designed to meet the
market demand for 2-12 hours of storage duration. Energy Vault's EVx and EVRC
systems are designed to serve economically both higher power/shorter duration
applications with ancillary services from 2-4 hours, while scaling to serve
medium (4-10 hours) and long duration (ten or more hours) requirements.

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Our storage, when combined with low-cost wind and photovoltaic solar, is
designed to achieve an attractive levelized cost of energy delivered. The EVx
and EVRC systems can be deployed as stand-alone storage connected to the grid or
alongside any generation source, such as wind or solar farms. The Company is
focused on enabling cost-effective renewable power on a global scale at a lower
cost than existing, fully-depreciated fossil fuel plants, and with high
sustainability standards. The potential energy of the system can be stored with
the composite blocks in the raised position for unlimited periods of time and
with nearly zero expected loss of the storage capacity over time. Additionally,
Energy Vault is uniquely positioned to work with traditional fossil fuel
companies to help utilities and coal plant operators make a more cost-effective
transition to green power by utilizing energy waste materials such as coal ash
in the production of the mobile masses that charge our gravity energy storage
solutions.

The circular economy is a model of production and consumption, which involves
sharing, leasing, reusing, repairing, refurbishing, and recycling existing
materials and products as long as possible. In this way, the life cycle of
products is extended to help minimize waste. Energy Vault has a unique approach
to the circular economy which involves beneficial reuse of recyclable and energy
waste materials into its sustainable production design.

In July 2020, Energy Vault completed mechanical construction of a five MW
commercial demonstration unit ("CDU") located in Arbedo-Castione, Switzerland
based on the EV1 Tower design. In July 2020, the CDU was connected to the Swiss
national electricity grid. Following the successful commercial scale deployment
of the CDU, Energy Vault announced the new EVx platform in 2021 concurrent with
its announcement of an investment in Energy Vault from Saudi Aramco Energy
Ventures investment. EVx is expected to offer performance enhancements designed
to have 80%-85% round trip efficiency, a 35-year life, and a flexible, modular
design that is 45% lower in height than the EV1 Tower design. Round trip
efficiency is the ratio between the amount of energy that is delivered from the
charged system and the amount of energy that was used to charge the system,
expressed as a percentage. For example, a round trip efficiency of 80% means
that a system is able to deliver 80% of the energy that was used to charge the
system to the end user. It is important to note that no energy storage system is
100% efficient and that there is always a loss of energy in the storage/delivery
process.

In November 2021, the Company launched Energy Vault Solutions ("EVS") to provide
customers with (i) a technology neutral platform for the integration and
delivery of multiple energy storage technologies, in addition to our proprietary
gravity storage technology, and (ii) an advanced software energy management
system, using artificial intelligence, predictive analytics and software
optimization algorithms, to orchestrate the ideal economic dispatching of energy
generation and storage assets as well as electrolizers and fuel cells. In this
way, EVS is expected to be offered as software as a service, bundled with the
sales of energy storage assets, or an energy storage technology license.

RECENT DEVELOPMENTS

In February 2022, Energy Vault announced a License and Royalty agreement for
renewable energy storage with Atlas Renewable LLC ("Atlas") and their majority
investor China Tianying Inc., an international environmental management and
waste remediation corporation engaged in smart urban environmental services,
resource recycling and recovery, and zero-carbon clean energy technologies. The
agreement supports the deployment of Energy Vault's proprietary gravity energy
storage technology and energy management software platform within mainland China
and the Special Administrative Regions ("SAR") of Hong Kong and Macau. In
addition, Atlas has agreed to pay $50.0 million in IP licensing fees, to be paid
in 2022, for use and deployment of Energy Vault's gravity energy storage
technology. The Company recognized revenue from this agreement of $42.9 million
during the three months ended March 31, 2022.

In connection with the Company's licensing agreement with Atlas, the Company has
committed to make a refundable contribution to Atlas in the amount of
$25.0 million. The refundable contribution will be issued to Atlas during the
period in which it begins construction on its first gravity energy storage
system ("GESS"), and will be refunded to the Company upon Atlas' first GESS
reaching substantial completion and meeting certain performance metrics.

Business combinations and public company costs

On February 11, 2022, Energy Vault, Inc. ("Legacy Energy Vault") completed the
previously announced merger with NCCII Merger Corp., with Legacy Energy Vault
surviving as a wholly-owned subsidiary of Novus Capital Corporation II ("Novus")
(the "Merger"). Immediately following the completion of the Merger, Novus
changed its name to Energy Vault Holdings, Inc. On February 14, 2022, the Energy
Vault's common stock and warrants began trading on the New York Stock Exchange
under the symbols "NRGV" and "NRGV WS," respectively.

The Merger was accounted for as a reverse recapitalization in accordance with
United States Generally Accepted Accounting Principles ("GAAP"). Under this
method of accounting, Novus was treated as the "acquired" company for financial
reporting purposes. Accordingly, for accounting purposes, the financial
statements of the combined entity upon consumption of the Merger represented a
continuation of the financial statements of Legacy Energy Vault with the Merger

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being treated as the equivalent of Legacy Energy Vault issuing stock for the net
assets of Novus, accompanied by a recapitalization. The net assets of Novus are
stated at historical cost, with no goodwill or other intangible assets recorded.
Operations prior to the Merger are presented as those of Legacy Energy Vault in
future reports of the combined entity. All periods prior to the Merger have been
retroactively adjusted using the exchange ratio of 6.7735 (the "Exchange Ratio")
for the equivalent number of shares outstanding immediately after the Merger to
effect the reverse recapitalization.

Energy Vault raised gross proceeds of $235.8 million, including the contribution
of $40.8 million of cash, net of redemptions, held in Novus' trust account from
its initial public offering and an aggregate purchase price of $195.0 million
from the sale and issuance of shares of common stock in a private placement
("Private Investment in Public Equity" or "PIPE") at $10.00 per share. Energy
Vault and Novus paid $44.8 million in transaction costs, resulting in total net
cash proceeds to Energy Vault from the Merger and PIPE of $191.0 million. See
Note 1 and Note 3, in Part I, Item 1. "Financial Statements" for additional
information about the Merger.

As a result of the Merger, Energy Vault has become the successor to a publicly
reporting company, which requires the hiring of additional personnel and the
implementation of procedures and processes to comply with public company
regulatory requirements, including the Exchange Act, and customary practices. We
expect to incur additional annual expenses as a public company for, among other
things, directors' and officers' liability insurance, director fees, and
additional internal and external accounting, legal, and administrative
resources, including increased audit and legal fees.

Main factors and trends affecting our business

We believe that our performance and future success depends on several factors that present significant opportunities for us, but also pose risks and challenges, including those discussed below and in Part II, Item 1A. “Risk factors.”

Product development and deployment plan

energy vault intends to leverage its technology, competitive strengths and remediation opportunities to establish its EVx and EVRC systems as viable solutions for short, medium and long term renewable energy storage solutions.

Our cost projections are heavily dependent upon raw materials (such as steel),
equipment (such as motors, inverters, and power electronic devices) and
technical and construction service providers (such as engineering, procurement,
construction firms). The global supply chain, on which Energy Vault relies, has
been significantly impacted by (i) the COVID-19 pandemic, (ii) economic
uncertainties, including the war in Ukraine, and (iii) high inflation pressure
on project budgeting resulting in potential significant delays and cost
fluctuations, particularly with respect to microchips and many other raw
materials that are within the motor and power electronic supply chains. These
future timing and financial developments may impact Energy Vault's performance
from both a deployment and cost perspective.

Currently, the only operating energy storage system utilizing Energy Vault's
technologies is the CDU which the Company continues to use for testing and
software improvement. Building on its experience with the CDU, Energy Vault
designed its EVx system. The EVx platform is designed to be a scalable, modular
product line starting from 40MWh to multi-GWh to address grid resiliency needs
in shorter durations while supporting longer duration and power needs in the
event of power outages or powering industrial processes over long periods. Using
the EVx design as a building block, the EVRC can be custom designed and built
out in 10MWh increments that can scale to multi-GW-hour storage capacity to meet
the energy storage needs for grid-scale deployment. There are no commercial
installations of Energy Vault's EVx system or EVRC platform at this time.

Energy storage industry

Our future revenue growth will be directly tied to the continued adoption of
renewable energy storage systems. As the sector is relatively nascent, we expect
the markets for renewable energy storage to increase. Furthermore, our systems
rely on an alternative technology to the dominant and accepted storage
technologies such as lithium-ion, flow batteries, and thermal storage. Our
business depends on the acceptance of our products, including the EVx systems,
in the marketplace. Even if renewable energy and energy storage become more
widely adopted than they have been to date, potential customers may choose
energy storage products from our competitors that are based on technologies
other than our gravity-based energy storage technology.

COVID-19[feminine]

The spread of the COVID-19 has caused an economic downturn on a global scale, as
well as significant volatility in the financial markets. Government reactions to
the public health crisis with mitigation measures have created significant
uncertainties in the U.S. and global economies. The COVID-19 pandemic had caused
delays in the construction of the CDU in Switzerland due to government-mandated
temporary stay-at-home and quarantine orders; however, it did not significantly
impact Energy Vault's other core functions such as research and development and
capital raising. Due to the pandemic related uncertainties in global markets and
specific restrictions announced by The Canton Government of Ticino

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in March and April 2020, Energy Vault implemented actions to reduce its
operating expense run rate through temporary salary reductions and other
discretionary expense reductions. CDU component deliveries into the testing site
in Arbedo Castione were also delayed due to the Swiss border being closed and
due to the worksite being shut in compliance with the March 2020 lockdown.
Furthermore, the Canton Health and Safety Department of Ticino, Switzerland
ordered the hiring of a Health and Safety Manager in order to resume onsite
operations of the CDU. The extent to which the COVID-19 pandemic impacts Energy
Vault's business, operations and financial results will depend on numerous
evolving factors that management may not be able to accurately predict. The
ultimate outcome of these matters is uncertain and, accordingly, the impact on
our financial condition or results of operations is also uncertain.

Components of operating results

Revenue

Prior to January 1, 2022, the Energy Vault had not recognized any revenue.
During the three months ended March 31, 2022, the Company recognized revenue of
$42.9 million from the licensing of its intellectual property to one customer.
In the future, we expect to earn revenue from the sale of energy storage
solutions, under four complementary sales programs based on customer
preferences. Under the first program, Storage Asset Owners, the customer owns
both the energy storage system and the service, that the system provides (i.e.,
the energy storage and dispatch of electricity). Energy Vault anticipates that
this program will constitute the substantial majority of future sales and that
utility companies, independent power producers, and industrial customers that
consume large amounts of power or are making a transition to 24/7 renewable
power may be interested in being Storage Asset Owners.

Under the second program, Storage Service Customers, customers such as community
choice aggregators, independent power producers, and utility companies would
sign long-term power purchase agreements and/or tolling agreements to purchase
power on a fixed dollar per kilowatt on a monthly or hourly basis, while Energy
Vault and potentially other equity co-investors would retain an ownership
interest in the system. An investment tax credit of up to 26% could be applied
against the costs incurred by the Company for U.S. based project installations
if Energy Vault decides to combine other renewable energy components into a
combined storage project. See the section titled "Risks Related to Government
Regulations" in Item 1A. Risk Factors for further details.

Under the third program, the customer would enter into a software as a service (“SaaS”) contract with energy vaultand would have access to Energy Vaults Energy management system that helps in the economical dispatching of its energy storage and production assets.

Under the fourth program, the Company would enter into intellectual property licensing and royalty agreements associated with our energy storage technology.

We intend to finalize our revenue recognition policies for these programs once we have finalized definitive agreements with our future customers.

Operating Expenses

Sales and marketing expenses

Sales and marketing expenses consist primarily of expenses relating to
professional service costs, trade shows, marketing and sales related promotional
materials, public relations expenses, website operating and maintenance costs,
and stock-based compensation expenses for marketing, sales personnel, and
related support teams. We expect that our sales and marketing expenses will
increase over time as we continue to hire additional personnel to support the
overall growth in our business.

Research and development costs

Research and development expenses consist primarily of internal and external
expenses incurred in connection with our research activities and development
programs that include materials costs directly related to the product
development, testing and evaluation costs, construction costs including labor
and transportation of material, overhead related costs and other direct expenses
consisting of stock-based compensation and consulting expenses relating to study
of product safety, reliability and development. We expect our research and
development costs to increase for the foreseeable future as we continue to
invest in these activities to achieve our product design, engineering, and
development roadmap.

General and administrative expenses

General and administrative expenses consist of information technology expenses,
legal and professional fees, travel cost, personnel-related expenses for our
corporate, executive, finance, and other administrative functions including
expenses for professional and contract services. Personnel related expenses
consist of salaries, benefits, and stock-based compensation expense. To a lesser
extent, general and administrative expense includes depreciation, investor
relations costs, insurance

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costs, rent, office expenses, and maintenance costs. We expect our general and
administrative expenses to increase in the foreseeable future as we hire
personnel to meet the growth of our business, and as a result of operating as a
public company, including compliance with the rules and regulations of the SEC,
legal, audit, additional insurance requirements, investor relations fees, SOX
404 implementation fees, and other administrative and professional services.

Other income (expenses)

Change in fair value of derivative

The gain (loss) on revaluation of embedded derivatives consists of periodic fair value adjustments associated with the Series B Convertible Preferred Share Right Derivative Liability.

Interest expense

Interest expense primarily includes interest related to finance leases.

Change in fair value of warrant liability

The Company's warrants are subject to fair value remeasurement at each balance
sheet date. The Company expects to incur incremental income (expense) in the
condensed consolidated statements of operations for the fair value change for
the outstanding warrant liabilities at the end of each reporting period or
through the exercise of such warrants.

Transaction costs

Transaction costs include legal, accounting, banking and other costs directly related to the completion of the Merger and the PIPE.

Other income (expenses), net

Other income (expenses), net, mainly includes interest income related to our investments in money market funds as well as gains and losses related to foreign exchange transactions.

Operating results

Consolidated comparison of the three months ended March 31, 2022 for March 31, 2021

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

                                                           Three months ended March 31,
                                                 2022           2021         $ Change      % Change
Revenue                                      $   42,884      $       -      $ 42,884             -  %
Operating Expenses:
Sales and marketing                               2,580             85      $  2,495       2,935.3  %
Research and development                          9,661          1,021         8,640         846.2  %
General and administrative                        9,806          1,855         7,951         428.6  %

Income (loss from operations)                    20,837         (2,961)       23,798        (803.7) %
Other Income (Expense):
Change in fair value of derivative                    -        (24,102)       24,102        (100.0) %
Interest expense                                     (1)            (4)            3         (75.0) %
Change in fair value of warrant liability       (20,237)             -       (20,237)            -  %
Transaction costs                               (20,586)             -       (20,586)            -  %
Other income (expenses), net                         36         (1,928)        1,964        (101.9) %
Net loss before income taxes                 $  (19,951)     $ (28,995)     $  9,044         (31.2) %


Revenue

Revenue for the three months ended March 31, 2022 was $42.9 million. compared to
no revenue for the three months ended March 31, 2021. The revenue for the three
months ended March 31, 2022 resulted from a licensing agreement with

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Atlas Renewable. Revenue was recognized upon the transfer of the intellectual
property to the customer. Currently, the Company does not expect to enter into
any other licensing agreements.

Operating Expenses

Sales and Marketing

Sales and marketing expenses increased by $2.5 million to $2.6 million for the
three months ended March 31, 2022, from $0.1 million for the three months ended
March 31, 2021. The increase resulted primarily from an increase in marketing
and public relations costs of $1.2 million and an increase in personnel-related
expenses of $0.9 million. The increase in personnel costs was due to expanded
headcount, particularly at the senior levels, and increased stock-based
compensation expense. Stock-based compensation expense was $0.5 million for the
three months ended March 31, 2022, compared to $6 thousand for the three months
ended March 31, 2021.

Research and Development

Research and development expenses increased by $8.6 million to $9.7 million for
the three months ended March 31, 2022, from $1.0 million for the three months
ended March 31, 2021. The increase resulted primarily from a $5.1 million
increase in personnel-related expenses, a $1.2 million increase in depreciation
expense, a $1.0 million increase in engineering and development costs, and a
$0.8 million increase in software expenses. The increase in personnel costs was
due to expanded headcount, particularly at the senior levels, and increased
stock-based compensation expense. Stock-based compensation expense was
$3.8 million for the three months ended March 31, 2022, compared to no expense
for the three months ended March 31, 2021.

General and administrative

General and administrative expenses increased by $8.0 million to $9.8 million
for the three months ended March 31, 2022 from $1.9 million for the three months
ended March 31, 2021. The increase resulted primarily from a $5.3 million
increase in personnel-related expenses, a $1.3 million increase in legal and
professional fees, a $0.4 million increase in insurance expenses, and a
$0.3 million increase in consultant expenses. The increase in personnel costs
was due to expanded headcount and an increase in stock-based compensation
expense. Stock-based compensation expense was $4.9 million for the three months
ended March 31, 2022, compared to $1 thousand for the three months ended
March 31, 2021. The increase in legal and professional fees was attributable to
external costs such as accounting, finance, tax, compliance, auditing, legal,
and other professional fees associated with becoming a public company.

Other income (expenses)

Change in fair value of derivative

Loss on revaluation of fair value adjustments decreased by $24.1 million to $0
for the three months ended March 31, 2022 compared to a $24.1 million loss for
the three months ended March 31, 2021. The derivative liability associated with
the Series B Convertible Preferred Stock expired without exercise in June 2021,
therefore the derivative was not outstanding during the three months ended
March 31, 2022.

Change in fair value of warrant liability

The Company recognized a change in the fair value of its warrant liability of
$20.2 million for the three months ended March 31, 2022 due to the increase in
the fair value of our outstanding warrants since the closing of the Merger. The
Company did not have any outstanding warrants during the three month period
ending March 31, 2021.

Transaction costs

The Company recognized transaction costs of $20.6 million related to the completion of the Merger during the quarter ended March 31, 2021.

Other income (expenses), net

Other income (expense), net improved by $2.0 million to other income, net of $36
thousand for the three months ended March 31, 2022 compared to other expense,
net of $1.9 million for the three months ended March 31, 2021. The change
resulted primarily from fluctuations in foreign currency transaction gain and
losses.

Cash and capital resources

Since our inception, we have financed our operations primarily through the issuance and sale of shares and the proceeds of the merger and the PIPE.

Fusion and PIPE

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energy vault finalized the Merger and the PIPE on February 11, 2022pursuant to which we received the net proceeds of $191.0 million.

Short term liquidity

As of March 31, 2022, we had $303.5 million of cash and cash equivalents,
representing an increase of $198.4 million from cash and cash equivalents of
$105.1 million at December 31, 2021. Management believes that its cash and cash
equivalents on hand as of March 31, 2022 will be sufficient to fund our
operating activities for at least the next twelve months without regard to any
cash proceeds we may receive upon the exercise for cash of our warrants. The
exercise price for any of our warrants is $11.50 per share, subject to certain
specified adjustments. To the extent that the price of our common stock exceeds
$11.50 per share, it is more likely that our warrant holders will exercise their
warrants. To the extent that the price of our common stock declines, including a
decline below $11.50 per share, it is less likely that our warrant holders will
exercise their warrants. In addition, should Energy Vault enter into definitive
collaboration and/or joint venture agreements or engage in business combinations
in the future, we may be required to seek additional financing.

Energy Vault has incurred negative operating cash flows and operating losses in
the past. We may continue to incur operating losses for the next several years
due to its on-going research and development activities. The Company may seek
additional capital through equity and/or debt financings depending on market
conditions. If we are required to raise additional funds by issuing equity
securities, dilution to stockholders would result. Any equity securities issued
may also provide for rights, preferences or privileges senior to those of
holders of our common stock. If we raise funds by issuing debt securities, these
debt securities would have rights, preferences and privileges senior to those of
holders of common stock. The terms of debt securities or borrowings could impose
significant restrictions on our operations. The credit market and financial
services industry have in the past, and may in the future, experience periods of
uncertainty that could impact the availability and cost of equity and debt
financing.

Contractual obligations

Our principal commitments as of March 31, 2022 consisted primarily of
obligations under operating leases, finance leases, deferred pensions, and a
refundable contribution to Atlas. The Company has committed to make a
$25.0 million refundable contribution that will be issued to Atlas during the
period in which it begins construction on its first GESS, and will be refunded
to the Company upon Atlas' first GESS reaching substantial completion and
meeting certain performance metrics.

Except for the commitment to provide the $25.0 million refundable contribution
to Atlas, our commitments have not materially changed from those disclosed in
our financial statements and accompanying notes for the year ended December 31,
2021, which are included in Amendment No. 1.

Cash flow

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

                                                                      Three 

Months ended March, 31st,

                                                                        2022                   2021
Net cash used operating activities                               $        (16,811)         $   (6,004)
Net cash provided by (used in) investing activities                           (83)                 (3)
Net cash provided by financing activities                                 215,304              14,674
Effects of exchange rate changes on cash                                      (17)              2,061
Net increase (decrease) in cash                                  $        198,393          $   10,728


Operating Activities

During the three months ended March 31, 2022 and 2021, cash used in operating
activities totaled $16.8 million and $6.0 million, respectively. During the
three months ended March 31, 2022, cash used in operating activities was
negatively impacted by a net loss of $20.1 million and an increase in operating
assets of $32.6 million. The change in operating assets was primarily due to a
$30 million increase in accounts receivable. Operating cash flows were
positively impacted by non-cash charges of $30.9 million and a $5.0 million
increase in operating liabilities. The non-cash charges primarily consisted of a
$20.2 million change in fair value of the warrant liability, $9.2 million in
stock-based compensation expense, and $1.2 million in depreciation and
amortization expense. The increase in operating liabilities primarily consisted
of a $7.1 million increase in deferred revenue and other liabilities, partially
offset by a $2.0 million decrease in accounts payable and accrued expenses.


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During the three months ended March 31, 2021, cash used in operating activities
of $6.0 million was negatively impacted by a net loss of $29.0 million, a $0.8
million decrease in operating liabilities, and a $0.6 million increase in
operating assets. Operating cash flows were positively impacted by non-cash
charges of $24.4 million. Non-cash charges primarily consisted of a $24.1
million change in the fair value of the derivative liability and $0.2 million in
non-cash lease expenses.

Investing Activities

During the three months ended March 31, 2022 and 2021, cash used in investing
activities totaled $0.1 million and $3 thousand, respectively. Cash used in
investing activities for both periods consisted of purchases of property and
equipment.

Financing Activities

During the three months ended March 31, 2022 and 2021, cash provided by
financing activities totaled $215.3 million and $14.7 million, respectively. For
the three months ended March 31, 2022, cash provided by financing activities was
primarily attributable to $235.9 million in proceeds from the reverse
recapitalization and PIPE financing, net, partially offset by $20.7 million in
transaction cost payments related to the reverse recapitalization.

In the three months ended March 31, 2021cash flows generated by financing activities are mainly attributable to $14.7 million the proceeds from the issue of Series B-1 Preferred Shares, net of issue costs,

Non-GAAP Financial Measure

We use adjusted EBITDA to complement our condensed consolidated statements of
operations. Management believes that this non-GAAP financial measure complements
our GAAP net loss and such measure is useful to investors. The presentation of
this non-GAAP measure is not meant to be considered in isolation or as an
alternative to net loss as an indicator of our performance.

The following table provides a reconciliation from non-GAAP adjusted EBITDA to
GAAP net loss, the most directly comparable GAAP measure (amounts in thousands):

                                                      Three Months Ended March 31,
                                                          2022                   2021
Net loss (GAAP)                                $       (20,079)               $ (28,995)
Non-GAAP Adjustments:
Interest income, net                                       (47)                      (8)
Income tax expense                                         128                        -
Depreciation and amortization                            1,218                       17
Stock-based compensation expense                         9,202              

7

Change in fair value of warrant liability               20,237              

Transaction costs                                       20,586              

Foreign exchange (gains) and losses                        (11)             

1,940

Change in fair value of derivative liability                 -                   24,102
Adjusted EBITDA (non-GAAP)                     $        31,234                $  (2,937)


We present adjusted EBITDA, which is net income (loss) excluding adjustments
that are outlined in the quantitative reconciliation provided above, as a
supplemental measure of our performance and because we believe this measure is
frequently used by securities analysts, investors, and other interested parties
in the evaluation of companies in our industry. The items excluded from adjusted
EBITDA are excluded in order to better reflect our continuing operations.

In evaluating adjusted EBITDA, one should be aware that in the future we may
incur expenses similar to the adjustments noted above. Our presentation of
adjusted EBITDA should not be construed as an inference that our future results
will be unaffected by these types of adjustments. Adjusted EBITDA is not a
measurement of our financial performance under GAAP and should not be considered
as an alternative to net loss, operating income (loss), or any other performance

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measures derived in accordance with GAAP or as an alternative to cash flow from operating activities as a measure of our liquidity.

Our adjusted EBITDA measure has limitations as an analytical tool, and should
not be considered in isolation or as a substitute for analysis of our results as
reported under GAAP. Some of these limitations are:

•it does not reflect our cash expenditures, our future capital expenditure needs or our contractual commitments;

•it does not reflect changes or cash requirements for our working capital requirements;

•although depreciation and amortization are non-cash charges, the assets being
depreciated and amortized will often have to be replaced in the future, and our
adjusted EBITDA measure does not reflect any cash requirements for such
replacements;

•it is not adjusted for all non-cash income or expense items that are reflected in our condensed consolidated statements of cash flows;

•it does not reflect the impact of income or expense resulting from matters that we believe are not indicative of our ongoing operations;

•it does not reflect the limitations or costs associated with the transfer of profits from our subsidiaries to us; and

•Other companies in our industry may calculate this measure differently than we do, which limits its usefulness as a comparative measure.

Because of these limitations, adjusted EBITDA should not be considered as a
measure of discretionary cash available to us to invest in the growth of our
business or as a measure of cash that will be available to use to meet our
obligations. You should compensate for these limitations by relying primarily on
our GAAP results and using adjusted EBITDA only supplementally.

Off-balance sheet commitments and arrangements

The Company has not entered into any off-balance sheet arrangements, as defined in the rules and regulations of the SECOND from March 31, 2022.

Significant Accounting Policies and Use of Estimates

Our consolidated financial statements are prepared in conformity with Generally
Accepted Accounting Principles in the United States ("GAAP"). In preparing our
financial statements, we make assumptions, judgments, and estimates based on
historical experience and various other factors that we believe to be reasonable
under the circumstances. Actual results could differ materially from these
estimates under different assumptions and conditions.

We believe that the following accounting policies involve a high degree of
judgment and complexity. Accordingly, these are the policies we believe are the
most critical to aid in fully understanding and evaluating our consolidated
financial condition and results of operations. Other than the policies described
in Note 2 - Summary of Significant Accounting Policies in the Company's
unaudited interim condensed consolidated financial statements included elsewhere
in this Quarterly Report, there have been no material changes to our critical
accounting policies and estimates as compared to those disclosed in the notes to
our audited consolidated financial statements as of and for the years ended
December 31, 2021 and 2020 included in Amendment No. 1.

Revenue

Effective January 1, 2022, Energy Vault's revenue recognition policy is a
critical policy due to the adoption of the guidance from ASC 606, Revenue from
Contracts with Customers. We determine the amount of revenue to be recognized
through the application of the following steps:

(1) Identification of the contract(s) with a customer.

(2) Identification of performance obligations in the contract.

(3)Determination of the transaction price.

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

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

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The Company identifies performance obligations in our contracts with customers,
which to date have included licenses and support services. The transaction price
is determined based on the amount which the Company expects to be entitled to in
exchange for providing the promised goods and services to the customer. The
transaction price in the contract is allocated to each distinct performance
obligation on a relative standalone selling price basis. Revenue is recognized
when performance obligations are satisfied. When a part or all of a transaction
price is considered to be variable, an estimate of the constrained transaction
price is recognized. Changes in variable consideration may result in an increase
or a decrease to revenue.

Stock-Based Compensation

Accounting for stock-based compensation requires us to make a number of judgments, estimates and assumptions. If any of the estimates turn out to be inaccurate, Energy Vaults net loss and results of operations could be adversely affected.

The Company's stock-based compensation arrangements are accounted for in
accordance with ASC Topic 718, "Share Based Payments." Compensation expense is
recognized over the requisite service period (usually the vesting period) on a
straight-line basis and adjusted for actual forfeitures of unvested awards as
they occur.

Equity awards that vest solely based on a condition of service are valued based on the estimated fair values ​​of the awards at the grant date using the Black-Scholes option pricing model, which has been influenced by the following assumptions:

•Expected Term - The expected term represents the period that Energy Vault's
awards granted are expected to be outstanding and is determined based upon the
simplified method, as we do not have sufficient historical information to
develop reasonable expectations about future exercise patterns and post-vesting
employment termination behavior.

•Expected Volatility - Since we were privately held and did not have any trading
history for our common stock prior to the Merger, the expected volatility was
estimated based on the average volatility for comparable publicly traded
companies over a period equal to the expected term of the stock award grants.

• Risk-free interest rate – We use the WE Treasury return for our risk-free interest rate which corresponds to the expected duration.

• Expected dividend – energy vault has never paid dividends on its common stock and does not plan to do so in the foreseeable future. Therefore, an expected dividend yield of zero was used.

The grant date fair value of our common stock is determined using valuation
methodologies which utilize certain assumptions, including probability weighting
of events, volatility, time to liquidation, a risk-free interest rate, and an
assumption for a discount for lack of marketability (Level 3 inputs). The fair
value of the Company's common stock was estimated because the common stock of
Legacy Energy Vault had not yet been publicly traded prior to the Merger.

Defined benefit pension obligation

Energy Vault's wholly owned subsidiary in Switzerland has a defined benefit
pension obligation covering retirement and other long-term benefits for the
local employees. The plan is a statutory requirement in accordance with local
regulations which is accounted for and disclosed in accordance with the
provisions of GAAP relating to the accounting for pension plans. These GAAP
provisions require the use of assumptions, such as the discount rate for
liabilities and long-term rate of return on assets, in determining the projected
benefit obligation, fair value of plan assets and an underfunded net benefit
obligation.

Warrant Liability

Energy Vault's financial statements reflect the impact of the publicly-traded
warrants ("Public Warrants") and private warrants ("Private Warrants") that were
assumed upon the closing of the Merger. The Company accounts for warrants for
shares of the Company's common stock that are not indexed to its own stock as
liabilities at fair value on the balance sheet. The warrants are subject to
remeasurement at each balance sheet date and any change in fair value is
recognized in the Company's statement of operations.

Accounting Election for Emerging Growth Companies

We are an "emerging growth company" as defined in Section 2(a) of the Securities
Act of 1933, as amended, and have irrevocably elected to take advantage of the
benefits of this extended transition period for new or revised standard. We are
expected to remain an emerging growth company through the end of 2022 and
expects to continue to take advantage of the benefits of the extended transition
period. This may make it difficult or impossible to compare our financial
results with the financial results of another public company that is either not
an emerging growth company or is an emerging growth company that has chosen not
to take advantage of the extended transition period exemptions for emerging
growth companies because of the potential differences in accounting standards
used.

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Recently Adopted and Issued Accounting Pronouncements

Recently issued and adopted/unadopted accounting pronouncements are described in
Note 2 of the unaudited condensed consolidated financial statements included
elsewhere in this Quarterly Report.

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