Each issued and outstanding share of ESS Preferred Stock was converted into shares of ESS Common Stock at the then-effective conversion rate as calculated pursuant to the ESS Certificate of Incorporation;

Each issued and outstanding ESS Warrant was exercised in full in exchange for the issuance of shares of ESS Common Stock;

Each issued and outstanding share of ESS Common Stock (including shares of ESS Common Stock resulting from the conversion of ESS Preferred Stock and the exercise and settlement of all outstanding ESS Warrants) was cancelled and converted into the right to receive a number of shares of New ESS Common Stock equal to the Per Share Consideration;

Each issued and outstanding vested and unvested ESS Option was converted into New ESS Options exercisable for shares of New ESS Common Stock with the same terms except for the number of shares exercisable and the exercise price, each of which was adjusted using the Per Share Consideration; and

Each issued and outstanding vested and unvested ESS RSU was converted into New ESS RSUs for shares of New ESS Common Stock with the same terms except for the number of shares, which was adjusted using the Per Share Consideration.

The issuance and sale of 25,000,000 shares of New ESS Common Stock at a purchase price of $10.00 per share for an aggregate purchase price of $250.0 million pursuant to the PIPE Financing;

The issuance to ESS employees of 824,998 (net of settlement adjustment) New ESS restricted stock units (“RSUs”), which vested on November 9, 2021 upon the occurrence of the Earnout Milestone Events;

During the Earnout Period (as defined in the Merger Agreement), eligible ESS securityholders are also entitled to Earnout Stock comprising up to 16,500,000 shares of additional New ESS Common Stock, consisting of two separate tranches of 8,250,000 shares per tranche, upon the occurrence of the respective Earnout Milestone Event. As the Earnout Milestone Events were met on November 9, 2021, a total of 15,675,002 shares of New ESS Common Stock will be issued, and accordingly, are reclassified from liability classified equity instruments to equity classified equity instruments in the unaudited pro forma financial information; and

The repayment of the outstanding STWO working capital loan to the Sponsor and ESS bridge loan as a result of the Business Combination.

ESS Stockholders (1)(2)(3)(4)

STWO Public Shareholders

STWO Initial Shareholders (5)

PIPE Investors

Total

Includes 15,675,002 shares of New ESS Common Stock to be issued to eligible ESS securityholders representing Earnout Stock. The Earnout Milestone Events were met on November 9, 2021.

Includes 67,090,925 shares of New ESS Common Stock issued to holders of an aggregate of 45,622,439 shares of ESS Common Stock and ESS Preferred Stock adjusted using the Per Share Consideration, including net settlement adjustment as applicable.

Includes 3,354,867 shares of New ESS Common Stock issued to holders of 2,280,661 ESS warrants adjusted using the Per Share Consideration and 824,998 shares (net of settlement adjustment) of New ESS Common Stock upon the settlement of New ESS RSUs, which were issued at the Closing and vested on November 9, 2021 upon the occurrence of the Earnout Milestone Events. All outstanding vested and unvested ESS Options were converted into New ESS Options exercisable for shares of New ESS Common Stock with the same terms except for the number of shares exercisable and the exercise price, each of which was adjusted using the Per Share Consideration.

Includes the issuance of 29,117,001 shares of New ESS Common Stock resulting from the conversion of 5,427,464 shares of ESS Series C-2 Preferred Stock and related 14,365,207 ESS Series C-2 Preferred Stock warrants, adjusted using the Per Share Consideration.

Includes 6,250,000 shares subscribed for by the Sponsor in return for STWO Class B Ordinary Shares and excludes 583,334 shares related to the Private Placement Warrants earnout.

ASSETS

Current assets:

Cash and cash equivalents

Restricted cash

Prepaid expenses and other current assets

Total current assets

Non-current assets:

Property and equipment, net

Cash equivalents held in Trust Account

Restricted cash

Other assets

Total non-current assets

TOTAL ASSETS

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current liabilities:

Accounts payable

Accrued and other current liabilities

Accrued liabilities — related party

Working capital loan

Notes payable, current

Total current liabilities

Non-current liabilities:

Earnout liability

Derivative liabilities

Derivative warrant liabilities

Deferred underwriting commissions

Other non-current liabilities

Notes payable, non-current

Total non-current liabilities

Total liabilities

Commitments and contingencies

Redeemable convertible preferred stock

Class A common stock subject to possible redemption

Stockholders’ equity (deficit)

Class A common stock

Class B common stock

ESS common stock

New ESS common stock

Additional paid-in capital

Accumulated deficit

Total stockholders’ equity (deficit)

TOTAL LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

Operating expenses

Research and development

Sales and marketing

General and administrative

Total operating expenses

Loss from operations

Other income (expense), net

Gain on marketable securities, net, and dividends held in Trust Account

Change in fair value of derivative warrant liabilities

Change in fair value of derivative liability

Interest expense, net

Other income, net

Total other income (expense), net

Net loss

Basic and diluted net loss per share—New ESS

Weighted average shares outstanding of New ESS common stock—basic and diluted

Basic and diluted net loss per share—ESS

Weighted average shares outstanding of ESS common stock—basic and diluted

Basic and diluted net loss per share—Class A common stock subject to redemption

Weighted average shares outstanding of Class A common stock subject to redemption—basic and diluted

Basic and diluted net loss per share—Class B common stock, non redeemable ordinary shares

Weighted average shares outstanding of Class B common stock, non redeemable ordinary shares

Operating expenses

Research and development

Sales and marketing

General and administrative

Total operating expenses

Loss from operations

Other income (expense), net

Gain on marketable securities, net, and dividends
held in Trust Account

Change in fair value of derivative warrant liabilities

Change in fair value of derivative liability

Financing costs — derivative warrant liabilities

Other income (expense), net

Total other income (expense), net

Net loss

Basic and diluted net loss per share — New ESS

Weighted average shares outstanding of New ESS common stock —basic and diluted

Basic and diluted net loss per share — ESS

Weighted average shares outstanding of ESS common stock — basic and diluted

Basic and diluted net loss per share — Class A common stock subject to possible redemption

Weighted average shares outstanding of Class A common stock subject to possible redemption —basic and diluted

Basic and diluted net loss per share — Class B common stock, non redeemable ordinary shares

Weighted average shares outstanding of Class B common stock, non redeemable ordinary shares

STWO’s financial statements for the period from July 21, 2020 (inception) through December 31, 2020 and for the period from July 21, 2020 (inception) through September 30, 2020 (the “Affected Periods”), are restated in its Annual Report on Form 10-K to correct the misapplication of accounting guidance related to STWO’s warrants in STWO’s previously issued audited and unaudited condensed financial statements for such periods.

Basis of Presentation

Accounting Policies

Adjustments to Unaudited Pro Forma Condensed Combined Financial Information

Reflects 5,427,464 shares of ESS Series C-2 Preferred Stock issued prior to Closing at a price of $2.95 per share, and related proceeds of $16.0 million. Upon the Closing, ESS Series C-2 Preferred Stock were converted into New ESS Common Stock adjusted using the Per Share Consideration.

Reflects the issuance of 14,365,207 preferred warrants to purchase ESS Series C-2 Preferred Stock prior to Closing at a price of $0.0001 per warrant, and related proceeds of $1,437. Upon the Closing, the ESS Series C-2 Preferred warrants were converted into common stock adjusted using the Per Share Consideration.

Reflects the liquidation and reclassification of $250.0 million of investments held in the Trust Account to cash and cash equivalents that became available for general use by New ESS.

Reflects the proceeds of $250.0 million from the issuance and sale of 25.0 million shares of New ESS Common Stock at $10.00 per share pursuant to the Subscription Agreements in connection with the PIPE Financing.

Reflects the reclassification of 25,000,000 STWO Class A Ordinary Shares subject to redemption into permanent equity and immediate conversion of all 25,000,000 shares of STWO Class A Ordinary Shares into shares of New ESS Common Stock on a one-to-one basis upon the Domestication.

Reflects the conversion of STWO’s 6,250,000 STWO Class B Ordinary Shares into shares of New ESS Common Stock on a one-to-one basis upon the Domestication.

Reflects the conversion of ESS Series A, B, C-1 and C-2 redeemable convertible preferred stock into shares of New ESS Common Stock adjusted using the Per Share Consideration.

Represents the issuance of new shares of New ESS Common Stock to holders of ESS Common Stock at the Closing pursuant to the Merger Agreement to affect the reverse recapitalization at the Closing, adjusted using the Per Share Consideration.

Reflects the elimination of STWO’s historical accumulated deficit with a corresponding adjustment to additional paid-in capital for New ESS in connection with the reverse recapitalization at the Closing.

Represents the reclassification of $3.5 million capitalized as deferred offering costs in prepaid expenses and other current assets on the balance sheet as of September 30, 2021, and additional cash disbursements for the preliminary estimated direct and incremental transaction costs of $14.6 million to be incurred by ESS prior to, or concurrent with, the Closing. The total estimated direct and incremental transaction costs consist of $12.0 million (of which $1.7 million has already been paid and included in the historical financial statements and $1.7 million included in accrued and other current liabilities) which represents advisory, legal, accounting and other fees that qualify as equity issuance costs to be offset against additional paid-in capital and $4.3 million which represents transaction costs that are not eligible to be capitalized which are recorded to accumulated deficit.

Represents the cash disbursement for the preliminary estimated direct and incremental transaction costs of $25.3 million to be incurred by STWO prior to, or concurrent with, the Closing, excluding the $8.8 million of deferred underwriting fees related to STWO’s IPO. Transaction costs that are not eligible to be capitalized were expensed and have already been included in the historical financial statements.

Reflects the cash disbursement of $8.8 million to settle the deferred underwriters’ fees due upon the Closing which were originally incurred by STWO during its IPO.

Reflects the reclassification of ESS’s derivative liabilities related to ESS Series C-2 Preferred Stock, to APIC as a result of Preferred Stock being net settled into shares of ESS Common Stock immediately prior to the Closing.

Per the Merger Agreement, out of the outstanding 4,666,667 Private Placement Warrants, upon Closing, 3,500,000 warrants vested, 583,333 warrants were forfeited and the remaining 583,334 warrants will vest as Private Placement Warrants-contingent earnouts, based on meeting certain future Earnout Milestone Events. This adjustment reflects the reclassification of 583,334 Private Placement Warrants which will vest contingent on meeting certain Earnout Milestone Events and forfeiture of 583,333 Private Placement Warrants. Refer to Adjustment “P” for recording the fair value of the 583,334 Private Placement Warrants Earnout Shares. Refer to Adjustment “T” for recording the impact of change in fair value of the earnout liability and the reclassification of the earnout liability from liability to equity classification as the Earnout Stock vested on November 9, 2021 upon meeting the Earnout Milestone Events.

Reflects the preliminary fair value of the Earnout Stock contingently issuable to the eligible ESS Securityholders as of the Closing. The preliminary fair value was determined using the most reliable information available at the Closing. Refer to Adjustment “T” for recording the impact of change in fair value of the earnout liability and the reclassification of the earnout liability from liability to equity classification as the Earnout Stock vested on November 9, 2021 upon meeting the Earnout Milestone Events.

Reflects the preliminary fair values of the Public Warrants and Private Placement Warrants and the preliminary fair value of the Private Placement Warrants Earnout Shares as of the Closing. The preliminary fair value was determined using the most reliable information available at the Closing.

Represents the cash disbursed to redeem 20,754,719 shares of STWO Class A Ordinary Shares for $207.5 million allocated to New ESS Common Stock and additional paid-in capital, using a par value of $0.0001 per share at a redemption price of $10.00 per share.

Reflects the repayment of the outstanding STWO working capital loan of $0.4 million to the Sponsor and ESS bridge loan of $20.0 million in principal and $1.4 million in accrued interest as a result of the Business Combination.

Reflects the fair values of ESS’s derivative liabilities related to ESS Series C-2 Preferred Stock as of the Closing. The fair values were determined using the most reliable information available at the Closing.

Reflects the impact of change in fair value of the earnout liability and the reclassification of the earnout liability from liability to equity classification as the Earnout Stock vested on November 9, 2021 upon meeting the Earnout Milestone Events.

Represents the preliminary estimated incremental stock-based compensation expense for New ESS RSUs granted to employees immediately prior to Closing and require future service throughout certain contingent triggering vesting dates. New ESS RSUs vested on November 9, 2021 upon meeting the Earnout Milestone Events.

Reflects the elimination of interest income of the trust account.

Reflects the elimination of the impact of change in fair value of 583,334 Private Placement Warrant liabilities replaced with the Private Placement Warrants Earnout Shares, which vested upon the occurrence of the Earnout Milestone Events, and forfeiture of 583,333 Private Placement Warrants. Therefore, the 583,333 Private Placement Warrants forfeited will not be marked to market at each reporting period. Refer to Adjustment “P” for recording the fair value of 583,334 Private Placement Warrants Earnout Shares.

Reflects the elimination of the impact of change in fair value of the warrant and derivative liabilities as these securities became equity classified as a result of the Business Combination, and therefore will not be marked to market at each reporting period.

Represents the elimination of the financing costs associated with the derivative warrant liabilities.

Reflects the portion of estimated transaction costs not eligible for capitalization of $6.1 million. Of this amount, $1.8 million is already incurred and expensed in the historical statement of operations for the nine months ended September 30, 2021. This is a non-recurring item.

Reflects the impact of change in fair values of the Public Warrants and Private Placement Warrants and the reclassification of the preliminary estimated fair value of the Private Placement Warrants Earnout Shares to additional paid-in capital which was initially recorded as a charge to the statement of operations.

Reflects the impact of change in fair values of ESS’s derivative liabilities related to ESS Series C-2 Preferred Stock as of the Closing.

Reflects the elimination of interest expense, bank and legal fees on ESS bridge loan as a result of the Business Combination.

Represents the preliminary estimated incremental stock-based compensation expense for New ESS RSUs granted to employees immediately prior to Closing and require future service throughout certain contingent triggering vesting dates. New ESS RSUs vested on November 9, 2021 upon meeting the Earnout Milestone Events.

Loss per Share

Numerator:

Net loss

Net loss attributable to common stockholders—basic and diluted

Denominator:

ESS Stockholders

STWO Public Shareholders

STWO Initial Shareholders

PIPE investors

Weighted average shares outstanding—basic

STWO’s warrants

New ESS RSUs

Weighted average shares outstanding—diluted

Net loss attributable to common stockholders—basic and diluted

STWO warrants (1)

Includes STWO 8,333,333 Public Warrants and 3,500,000 Private Placement Warrants vesting at the Closing, which are all antidilutive, as their exercise price is $11.50.