Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis provides information which Volta’s management believes is relevant to an assessment and understanding of its consolidated results of operations and financial condition. You should read the following discussion and analysis of Volta’s financial condition and results of operations in conjunction with the consolidated financial statements and notes thereto contained in this Annual Report on Form 10-K.
Certain of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to plans and strategy for Volta’s business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, Volta’s actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Factors that could cause or contribute to such differences include, but are not limited to, capital expenditures, economic and competitive conditions, regulatory changes and other uncertainties, as well as those factors discussed below and elsewhere in this Annual Report on Form 10-K. We assume no obligation to update any of these forward-looking statements. Please also see the section entitled "Forward-Looking Statements."
Percentage amounts included in this Annual Report on Form 10-K have not in all cases been calculated on the basis of rounded figures, but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this Annual Report on Form 10-K may vary from those obtained by performing the same calculations using the figures in the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Certain other amounts that appear in this Annual Report on Form 10-K may not sum due to rounding.
Basis of Presentation
Substantially all of Volta’s long-lived assets are maintained in, and its losses are attributable to, the United States. The consolidated financial statements include the accounts of Volta and its wholly owned subsidiaries. See, “Note 2 - Summary of Significant Accounting Policies” of the accompanying consolidated financial statements for more information.
Components of Results of Operations
Revenue
Media
Media revenue is principally generated through the delivery of paid content across the charging network.
Network Development
Network Development revenue is generated from installation, operating and maintenance services of the charging stations to select site partners. Network Development also includes revenue from select site partners related to the sale of Volta’s charging products and the performance of development work necessary to prepare a site for EV infrastructure as well as revenue from contracts with utility companies for installing electrical infrastructure.
Charging Network Operations
Charging Network Operations revenue is generated by utilization of Volta’s charging stations and through the sale of LCFS credits.
Network Intelligence
Network Intelligence revenue consists of license or service fee revenue from proprietary software tools derived from the charging network. Volta offers access to the PredictEVTM tool to utility companies, channel partners and other third parties through a SaaS business model.
Cost of Services
Cost of services consist primarily of contracted labor for sales of installation and maintenance services and costs related to station rent, electricity, insurance, communication, and business property taxes related to Volta’s site leases. Volta expects cost of services to increase in future periods primarily due to increased costs associated with operating a national charging network due to increasing rent and electricity costs as site hosts seek to monetize customer parking spaces.
Cost of Products
Cost of products consist primarily of hardware related costs of AC and DCFC stations which includes the station chassis, high-resolution, outdoor screen displays on media-enabled stations, the EV chargers, routers, and computers. While the cost of products has increased for the current generation of Volta’s award-winning charging stations, which include intuitive lighting features and a new chassis design, Volta seeks to drive cost down of the next generation of stations through scaling purchasing with its manufacturing partners.
Selling, General and Administrative Expenses
Selling, general and administrative expenses primarily consist of personnel-related expenses, share based compensation, professional fees for legal, accounting, other consulting services, software and licenses, and information technology development services costs. During 2022, Volta incurred additional general and administrative expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and NYSE listing standards, additional insurance expenses (including directors’ and officers’ insurance), investor relations activities and other administrative and professional services.
Depreciation and Amortization
Depreciation and amortization primarily relate to the depreciation of Volta-owned charging stations and its tenant improvements, technology equipment and other tools. Volta anticipates these expenses will continue to increase over time as it continues to build its network.
Other Operating Expenses
Other operating expenses primarily relate to write offs of expenses related to projects discontinued prior to construction disposal of assets, and obsolete inventory.
Interest Expense
Interest expense primarily consists of interest related to its loan interest, amortization of debt issuance costs and costs related to early termination of debt.
Other (Income) Expense, net
Other (income) expense, net primarily consists of changes in the fair value of the Company's warrant liabilities, gain or loss on foreign exchange transactions and sublease income related to subleased office space.
Income Tax Expense
Volta’s income tax provision consists of an estimate of federal and state taxes, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities and changes in tax law and valuation allowance.
Results of Operations
Comparison of the years ended December 31, 2022 and 2021
The results of operations presented below should be reviewed in conjunction with Volta’s consolidated financial statements for the years ended December 31, 2022 and 2021 and the related notes included elsewhere in this document. The following tables set forth Volta’s consolidated results of operations data for the years ended December 31, 2022 and 2021:
| | | | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, | | Variance |
| in thousands | 2022 | | 2021 | | $ | | % |
| REVENUES | | | | | | | |
| Service revenue | $ | 52,767 | | | $ | 29,881 | | | $ | 22,886 | | | 77 | % |
| Product revenue | 398 | | | 1,199 | | | (801) | | | (67) | % |
| Other revenue | 1,435 | | | 1,231 | | | 204 | | | 17 | % |
| Total revenues | $ | 54,600 | | | $ | 32,311 | | | 22,289 | | | 69 | % |
| | | | | | | |
| COSTS AND EXPENSES | | | | | | | |
| Costs of services (exclusive of depreciation and amortization shown below) | 38,749 | | | 23,029 | | | 15,720 | | | 68 | % |
| Costs of products (exclusive of depreciation and amortization shown below) | 440 | | | 1,678 | | | (1,238) | | | (74) | % |
| | | | | | | |
| Selling, general and administrative | 165,328 | | | 262,628 | | | (97,300) | | | (37) | % |
| Depreciation and amortization | 19,280 | | | 11,153 | | | 8,127 | | | 73 | % |
| Other operating expense | 2,877 | | | 2,026 | | | 851 | | | 42 | % |
| Total costs and expenses | $ | 226,674 | | | $ | 300,514 | | | (73,840) | | | (25) | % |
| Loss from operations | $ | (172,074) | | | $ | (268,203) | | | 96,129 | | | (36) | % |
| | | | | | | |
| OTHER EXPENSES (INCOME) | | | | | | | |
| Interest expense, net | 5,535 | | | 6,402 | | | (867) | | | (14) | % |
| Other expense, net | — | | | 712 | | | (712) | | | (100) | % |
| Change in fair value of warrant liability | (22,978) | | | 1,239 | | | (24,217) | | | (1955) | % |
| Total other expenses (income) | $ | (17,443) | | | $ | 8,353 | | | (25,796) | | | (309) | % |
| LOSS BEFORE INCOME TAXES | $ | (154,631) | | | $ | (276,556) | | | 121,925 | | | (44) | % |
| Income tax expense | 2 | | | 39 | | | (37) | | | (95) | % |
| NET LOSS | $ | (154,633) | | | $ | (276,595) | | | $ | 121,962 | | | (44) | % |
Revenues
The following table summarizes the changes in revenue from the years ended December 31, 2022 and 2021:
| | | | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, | | Variance |
| in thousands | 2022 | | 2021 | | $ | | % |
| Revenues | | | | | | | |
| Media | $ | 44,008 | | | $ | 25,961 | | | $ | 18,047 | | | 70 | % |
| Network Development | 9,246 | | | 5,224 | | | 4,022 | | | 77 | % |
| Charging Network Operations | 748 | | | 676 | | | 72 | | | 11 | % |
| Network Intelligence | 598 | | | 450 | | | 148 | | | 33 | % |
| Total revenues | $ | 54,600 | | | $ | 32,311 | | | $ | 22,289 | | | 69 | % |
Media revenue increased by $18.0 million, or 70%, from December 31, 2021 to December 31, 2022 primarily due to the expansion of our media-enabled station network and new media campaigns with national brands, including new and existing advertisers. Media revenue is recorded in service revenue.
Network Development revenue increased by $4.0 million, or 77%, from December 31, 2021 to December 31, 2022, primarily due to the construction performed on active projects in connection with our new infrastructure development service contracts. Network development revenue is recorded in part in service revenue and in part in product revenue. (see Note 2 - Summary of Significant Accounting Policies).
Cost of Revenues
The following table summarizes cost of revenues by products and services:
| | | | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, | | Variance |
| in thousands | 2022 | | 2021 | | $ | | % |
| Costs of services | $ | 38,749 | | | $ | 23,029 | | | $ | 15,720 | | | 68 | % |
| Costs of products | $ | 440 | | | $ | 1,678 | | | $ | (1,238) | | | (74) | % |
Costs of services increased by $15.7 million, or 68%, to $39 million for the year ended December 31, 2022 as compared to the year ended December 31, 2021. This was primarily due to an increase of $6.3 million in station rent as a result of an increase in the cumulative number of leases that commenced over the prior four quarters, an increase of $5.9 million in installation and services costs largely driven by an increase in construction and engineering fees, an increase of $1.3 million in advertising and media costs attributable to commission fees and other costs owed to agents, an increase of $1.1 million in freight costs due to the continued growth in active construction projects, and an increase of $0.7 million in network costs due to an increase in purchases from vendors.
Costs of products decreased by $1.2 million, or 74%, from the years ended December 31, 2021 to December 31, 2022, primarily due to fewer customer-owned stations going live in 2022 compared to 2021.
Operating Expenses
Selling, General and Administrative
Selling, general and administrative expenses decreased by $97.3 million, or 37%, for the year ended December 31, 2022 as compared to the year ended December 31, 2021. This decrease primarily relates to a $144.0 million decrease in stock-based compensation expense due to the Company issuing fewer equity awards, an increase in equity award forfeitures and a decrease in the fair value of new equity grants caused by a decrease in the Company’s stock price compared to the year ended December 31, 2021. Refer to Note 11 - Stockholders' (Deficit) Equity and Stock-Based Compensation of the accompanying financial statements for further discussion. Additionally, there was a decrease of $1.7 million in bonus and commissions due to the change in calculation of the bonus accrual from 20% of annualized salary to 10%. This amount was partially offset by a $21.5 million increase in payroll-related costs largely driven by an increase in our average employee headcount to 355 from 254. Additionally, there was an increase of $13.9 million in outside services, an increase of $7.3 million in other selling, general and administrative expense primarily due to insurance costs, an increase of $2.2 million in software, hardware, and hosting costs due to prepaid software amortization and prototyping expenses, an increase of $1.3 million in travel, meals and related expenses due to the easing of COVID-19 travel restrictions, and an increase of $1.2 million in rent and facilities expense.
Depreciation and Amortization
Depreciation and amortization expenses increased by $8.1 million, or 73%, to $19 million for the year ended December 31, 2022 from $11 million for the year ended December 31, 2021. This was primarily due to an increase of 803 Volta-owned installations in service during the year ended December 31, 2022 as compared to the year ended December 31, 2021.
Other Operating Expense
Other operating expense increased by $0.9 million for the year ended December 31, 2022 as compared to the year ended December 31, 2021, primarily due to costs associated with disqualified projects prior to construction during the year ended December 31, 2022 compared to the year ended December 31, 2021.
Loss from Operations
Loss from operations decreased by $96.1 million, or 36%, from December 31, 2021 to December 31, 2022. This was primarily due to a decrease in selling, general and administrative expenses of $97.3 million of which, $144.0 million was attributable to a decrease in stock-based compensation, an increase in other operating expense of $0.9 million, an increase in costs of services of $15.7 million, a decrease in costs of products of $1.2 million and an increase in depreciation and amortization expenses of $8.1 million, partially offset by an increase in revenue of $22.3 million.
Interest Expense, net
Interest expense decreased by $0.9 million, or 14% from the year ended December 31, 2021 to the year ended December 31, 2022. The decrease is primarily due to lower average outstanding balance under our term loan during the year ended December 31, 2022 compared to the prior year period.
Other Expense, net
Other expense, net decreased by $25.8 million or 309% from the year ended December 31, 2021 to the year ended December 31, 2022. The decrease was primarily attributed to the change in the fair value of the warrant liability. The change in the fair value of the warrant liability was primarily attributable to the decrease in the Company's stock price used as an input in determining the fair value of the Public and Private Warrants. Warrants issued to TortoiseEcofin Borrower, LLC in a private placement simultaneously with the closing of the Company’s initial public offering are referred to as the “Private Warrants”.
Income Tax Expense
Income tax expense was $39 thousand and $2 thousand for the year ended December 31, 2021 and 2022, which was primarily attributable to state taxes.
Net Loss
Net loss decreased $122.0 million, or 44%, from December 31, 2021 to December 31, 2022, primarily due to a decrease of $73.8 million in total costs and expenses, partially offset by an increase in revenue of $22.3 million.
Liquidity and Capital Resources
Sources of Liquidity
Volta has incurred net losses and negative cash flows from operations since its inception. To date, Volta has funded its operations primarily with proceeds from the issuance of Volta preferred stock, common stock issued in “at-the-market” offerings, borrowings under its loan facilities, including its term loan, a Paycheck Protection Program loan under the Small Business Administration (SBA), and other term loans. Until Volta is cash-flow positive, Volta may need to consider raising funds through the issuance of debt or equity securities or additional borrowings in the future.
Volta’s operations are dependent on its ability to generate meaningful long-term revenue and will highly depend on driver behavior trends, media industry trends, as well as increased and sustained driver demand for EVs and related
charging services. If the market for EVs does not develop as Volta expects or develops more slowly than it expects, or if there is a decrease in driver demand for EV charging services or demand for Volta’s Media offerings, Volta’s business, prospects, financial condition and results of operations will be harmed. The market for EV charging is relatively new, rapidly evolving, characterized by rapidly changing technologies, volatile electricity pricing, additional competitors, evolving government regulation (including carbon credits) and industry standards, frequent new vehicle announcements and changing driver demands and behaviors. Any number of changes in the industry could negatively affect revenue generation from Media and EV charging.
For the year ended December 31, 2022, the Company incurred a net loss of $154.6 million and had negative cash flows from operating activities of $117.2 million. Volta has a cash balance of $2.6 million as of December 31, 2022.
The Company entered into the Business Combination Agreement with Tortoise Acquisition Corp. II. on February 7, 2021 and following the Closing on August 26, 2021, Volta Inc. began trading on the NYSE. On September 12, 2022, the Company filed a registration statement on Form S-3 (File No. 333-267374) with the SEC (declared effective by the SEC on September 20, 2022) which permits the Company to offer up to 500 million shares of Class A common stock, preferred stock, depositary shares, debt securities, warrants and rights in one or more offerings and in any combination, including in units from time to time (the “Shelf Registration Statement”). Please refer to “Note 1 - Description of Business” of the accompanying consolidated financial statements for the year ended December 31, 2022 for additional information. Additional cash obligations in the next twelve months are expected to include investments in the operations and purchases to expand the business. Management has considered conditions and events which provide substantial doubt about the Company's ability to continue as a going concern for the 12 months following the issuance of the consolidated financial statements. While Volta has engaged in significant cost-cutting efforts, the Company concluded that there is substantial doubt that the Company cannot continue as a going concern in the next twelve months based on reasonable information available to us as of the date of this analysis. No assurances can be provided that additional funding will be available at terms acceptable to the Company, if at all. If the Company is unable to raise additional capital, the Company may significantly curtail its operations, modify strategic plans and/or dispose of certain operations or assets.
Liquidity Policy
As an early-stage company, Volta maintains a focus on liquidity and defines its liquidity risk tolerance based on sources and uses to maintain a sufficient liquidity position to meet its obligations under both normal and stressed conditions. Volta manages its liquidity to provide access to sufficient funding to meet its business needs and financial obligations, as well as capital allocation and growth objectives.
Debt Profile
The following table summarizes Volta’s debt balances and key related loan information:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Net Carrying Value |
| in thousands | | Principal Amount | | Issuance Date | | Maturity Date | | Interest Rate | | December 31, 2022 | | December 31, 2021 |
Term loans payable | | $ | 49,000 | | | 6/19/2019 | | 6/19/2024 | | 12%1 | | $ | 12,923 | | | $ | 40,833 | |
| | | | | | | | | | | | |
| Total outstanding loans payable | | 12,923 | | | 40,833 | |
| Less current maturities, net of debt issuance costs | | 12,483 | | | 15,998 | |
| Less unamortized deferred issuance fees | | 440 | | | 838 | |
| Total loans payable, net of unamortized debt issuance costs | | $ | — | | $ | 23,997 |
(1)The interest rate on the term loan as of June 19, 2019 was a fixed rate of 12% per annum. Please see Note 9 - Debt Facilities to the accompanying consolidated financial statements for additional information.
On June 19, 2019, Volta entered into a senior secured term loan agreement, and has drawn a total of $49 million over the life of the term loan. Volta drew an initial amount of $24 million under the term loan during the year ended December 31, 2019 and drew an additional $25 million under the term loan during the year ended December 31, 2020 to help fund network expansion and operating activities. The term loan agreement is fully funded based on
capital expenditures and is secured by stations and other assets. Interest on the outstanding balance of the term loan is equal to 12% per annum, and principal payments are due in equal monthly installments which began on July 1, 2021.
The following table summarizes Volta’s financing obligations:
| | | | | | | | |
| December 31, | December 31 |
| in thousands | 2022 | 2021 |
| | |
| | |
| Financing obligation, long-term portion | $ | 2,361 | $ | 3,050 |
| Plus: current portion of financing obligation | 916 | 896 |
| Total financing obligation | $ | 3,277 | $ | 3,946 |
Volta entered into multiple sale-leaseback arrangements of digital media screens that do not qualify as asset sales and are accounted for as financing obligations. These financing obligations have been amortized over the 5-year term at Volta's incremental borrowing rate at the time of the transaction which has ranged between 6.0% - 17.9%.
Please refer to “Note 9 - Debt Facilities”, of the accompanying consolidated financial statements for additional information.
Material Cash Requirements
In the normal course of business, Volta enters into obligations and commitments that require future contractual payments. The commitments result primarily from operating leases and long-term debt. The following table summarizes Volta’s contractual obligations and commercial commitments as of December 31, 2022:
The Company's material cash requirements include the following commitments and contractual obligations:
| | | | | | | | | | | |
| in thousands | Total | Less than 1
year | More than 1 year |
| Lease Liability | $ | 132,309 | | $ | 18,795 | | $ | 113,514 | |
| Long-Term Debt | 12,923 | | 12,923 | | — | |
| Financing Obligations | 4,160 | | 1,198 | | 2,962 | |
| Total | $ | 149,392 | | $ | 32,916 | | $ | 116,476 | |
Cash Flow Summary
The following table summarizes Volta’s cash flows for the years ended December 31, 2022 and 2021:
| | | | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, | | Variance |
| in thousands | 2022 | | 2021 | | $ | | % |
| Net cash used in operating activities | $ | (117,156) | | | $ | (94,934) | | | $ | (22,222) | | | 23 | % |
| Net cash used in investing activities | (102,938) | | | (55,638) | | | (47,300) | | | 85 | % |
| Net cash (used in) provided by financing activities | $ | (39,836) | | | $ | 353,813 | | | $ | (393,649) | | | (111) | % |
Operating Activities
Net cash used in operating activities increased by $22.2 million for the year ended December 31, 2022 as compared to the year ended December 31, 2021. The increase is primarily due to the increase of $29.5 million in net loss adjusted for non-cash items, partially offset by a decrease of $10.0 million in net working capital and a $6.1 million decrease in operating lease liability.
With the use of cash for operating activities to expand the business, Volta has considered conditions and events which provide substantial doubt about the Company's ability to meet cash requirements to support its operations over the 12 months following the issuance of the consolidated financial statements. See Note 3 - Liquidity, of Volta’s of the accompanying consolidated financial statements for additional information.
Investing Activities
Net cash used in investing activities increased by $47 million, or 85%, to $102.9 million for the year ended December 31, 2022, as compared to $55.6 million for the year ended December 31, 2021, primarily due to $42.5 million increase in purchases of property and equipment, a $4.1 million increase in expenditures on internal-use software development, and a cash payment of $0.9 million related to the acquisition of technology patents during the period.
Financing Activities
Net cash used in financing activities increased by $394 million, or 111%, to $39.8 million for the year ended December 31, 2022, as compared to net cash provided by financing activities for the year ended December 31, 2021. The increase was primarily due to a lower amount of proceeds raised from financing during the year ended December 31, 2022, fully offset by principal repayments on the Term Loan Facility of $12.2 million and $16.6 million in taxes paid related to the settlement of equity. During the year ended December 31, 2021, $350.1 million in proceeds were received from the completion of the Reverse Recapitalization and $28.7 million was raised from the issuance of Volta Industries, Inc. (“Legacy Volta”) Series D preferred stock, partially offset by a $8.3 million payment of taxes on promissory notes for employees, $9.0 million in payments for transaction costs related to the Reverse Recapitalization, and $4.1 million in principal repayments on the Term Loan Facility.
Subsequent Events
Please refer to “Note 17 - Subsequent Events,” of the accompanying consolidated financial statements for additional information.
Critical Accounting Policies and Estimates
Volta prepares its consolidated financial statements in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires it to make estimates, assumptions and judgments that can significantly impact the amounts it reports as in its financial statements and the related disclosures. Volta bases its estimates on historical experience and other assumptions that it believes are reasonable under the circumstances. Volta’s actual results could differ significantly from these estimates under different assumptions and conditions. Volta believes that the accounting policies discussed below are critical to understanding its historical and future performance as these policies involve a greater degree of judgment and complexity.
Please refer to “Note 2 - Summary of Significant Accounting Policies,” of the accompanying consolidated financial statements for a description of Volta’s accounting policies in detail. Volta believes the following accounting policies require the most significant judgments and estimates used in the preparation of its consolidated financial statements.
Emerging Growth Company Status
Pursuant to Section 107(b) of the JOBS Act, an emerging growth company is provided the option to adopt new or revised accounting standards that may be issued by FASB or the SEC either (a) within the same periods as those otherwise applicable to non-emerging growth companies or (b) within the same time periods as private companies. Volta intends to take advantage of the exemption for complying with certain new or revised accounting standards within the same time periods as private companies, such as current expected credit losses and income tax.
Volta also intends to take advantage of some of the reduced regulatory and reporting requirements of emerging growth companies pursuant to the JOBS Act, including, but not limited to not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation and exemptions from the requirements of holding non-binding advisory votes on executive compensation and golden parachute payments.
Volta will cease to be an emerging growth company on the date that is the earliest of (a) the last day of the fiscal year in which it has total annual gross revenues of $1.07 billion or more; (b) the last day of its fiscal year following the fifth anniversary of the date of its initial public offering; (c) the date on which it has issued more than $1.0 billion in nonconvertible debt during the previous three years; or (d) the last day of the fiscal year in which it is deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of its common stock held by non-affiliates equals or exceeds $700 million as of the last business day of the second fiscal quarter of such fiscal year.
Network Development Revenue
Volta generates Network Development revenue from the sales of products, including charging stations to select site partners and infrastructure to utility companies as well as related installation services and operations and maintenance services on charging stations owned by third parties. Some of Volta’s agreements include non-standard terms and conditions and include promises to transfer multiple goods and services. As a result, significant interpretation and judgment is required to determine the appropriate accounting for these transactions, including: (1) whether performance obligations are considered distinct that should be accounted for separately versus together, how the price should be allocated among the performance obligations, and when to recognize revenue for each performance obligation; (2) developing an estimate of the stand-alone selling price (“SSP”) of each distinct performance obligation; (3) combining contracts that may impact the allocation of the transaction price between product and services; and (4) estimating the consideration payable to a customer as a reduction of the transaction price.
When an agreement contains multiple performance obligations, Volta identifies each component to the contract and allocates the transaction price based on a relative SSP. If the arrangement contains a lease it is accounted for in accordance with ASC 842, Leases. In some arrangements, Volta has executed a sale and leaseback of the digital media screens (sale leaseback) and has also acquired the right to control the use of the location to advertise over a set term (location lease). During the construction phase, Volta does not control the underlying asset on the customer’s property. When the sale leaseback qualifies as a financing lease, Volta will not record a sale for accounting purposes of the digital media screen and depreciates that asset over its useful life. For contractual lease payments that do not exceed the fair value of the location lease obligation, Volta records a lease liability and an associated right-of-use ("ROU") asset based on the discounted lease payments. In some instances, Volta may receive a lease incentive from the lessor which is recorded as a reduction to the lease payments. In arrangements where Volta pays consideration to a customer for a distinct good or service, the consideration payable to a customer is limited to the fair value of the distinct good or service received by the customer. If the contractual payments for the location lease of this arrangement are in excess of fair value, then Volta will estimate the excess contractual payments over fair value and record that amount as a reduction to the transaction price in the arrangement. The reduction to transaction price for consideration payable to a customer is recognized at the later of when Volta pays or promises to pay the consideration or when Volta recognizes the related revenue for the transferred products and services.
The determination of SSP for performance obligations to customers is judgmental and is based on the price that Volta would charge for the same good or service if sold separately on a standalone basis to similar clients in similar circumstances. Volta estimates SSP based on reasonably available data that maximizes the use of observable inputs that may vary over time. Typically, the SSP of Volta’s performance obligations are based on expected cost plus a
margin. The margin reflects what the market would be willing to pay adjusted for differences in products, geographies, customers, and other factors.
Sales of charging stations and installed infrastructure is recognized at a point in time when control has been transferred to the customer and is classified as product revenue on our statement of operations. Installation services are recognized over time using an input method based on costs incurred to measure progress toward complete satisfaction of the performance obligation. Revenue from operation and maintenance services is recognized ratably over the term of the arrangement as the services are performed. Payments are typically due within one month after billed.
Changes in judgments with respect to these assumptions and estimates could impact the timing or amount of revenue recognition. Please refer to “Note 2 - Summary of Significant Accounting Policies,” of the accompanying consolidated financial statements for the year ended December 31, 2022 for additional information on revenue recognition.
Equity Based Compensation
Volta’s stock-based compensation consists of options and RSUs that are granted to employees and non-employees as part of their compensation package. As the Company does not have a trading history for its common stock prior to the Reverse Recapitalization, Volta’s management must make assumptions to estimate the fair value.
The grant-date fair value of employee and non-employee stock options are determined using the Black-Scholes option-pricing model using various inputs, including estimates of expected volatility, term, risk-free rate, and future dividends. Forfeitures are recognized as they occur. Compensation cost is recognized over the vesting period of the applicable award using the straight-line method.
Changes in the following assumptions can materially affect the estimate of fair value and ultimately how much stock-based compensation expense is recognized. These inputs are subjective and generally require significant analysis and judgment to develop.
Given Volta's limited public trading history, the Board considers numerous objective and subjective factors to determine the fair value of Volta common stock. These factors include, but are not limited to (i) contemporaneous valuations of Volta common stock performed by an independent valuation specialist; (ii) developments in the business and stage of development; (iii) operational and financial performance and condition; (iv) issuances of Volta Preferred Stock and the rights and preferences of Volta preferred stock relative to Volta common stock; (v) the current condition of capital markets and the likelihood of achieving a liquidity event, such as an initial public offering or sale of Volta; (vi) the lack of marketability of the Volta common stock; and (vii) experience of management and hiring of key personnel.
The grant date fair value of Volta common stock was determined using valuation methodologies which utilize certain assumptions, including probability weighting events, volatility, time to liquidation, a risk-free interest rate, and an assumption for a discount for lack of marketability.
Volta used the market approach to determine the fair value of the Volta common stock. This approach measures the value of an asset or business through an analysis of recent sales or offerings of comparable investments or assets and gives consideration to the financial condition and operating performance of an entity relative to those of public entities operating in the same or similar lines of business. Volta applies the market approach by utilizing the Backsolve method, which uses a Black-Scholes option pricing model to calculate the implied value based on the recent transaction price. For purposes of allocating the fair value of common stock, Volta used the Option Pricing Method (“OPM”). Under the OPM, shares are valued by creating a series of call options with exercise prices based on the liquidation preferences and conversion terms of each equity class. The estimated fair values of the Preferred and common stock are inferred by analyzing these options. This method is appropriate to use when the range of possible future outcomes is so difficult to predict that estimates would be highly speculative, and dissolution or liquidation is not imminent.
For financial reporting purposes, Volta considers the amount of time between the valuation date and the grant date to determine whether to use the latest common stock valuation or a straight-line interpolation between the two valuation dates. The determination includes an evaluation of whether the subsequent valuation indicates that any significant change in valuation had occurred between the previous valuation and the grant date.
The following table summarizes the key share-based payment valuation assumptions for the year ended December 31, 2021:
| | | | | | | | |
| | Year ended December 31, |
| | 2021 |
| Expected dividend yield | | — | % |
| Risk-free interest rate | | 0.7 | % |
| Expected volatility | | 60.4 | % |
| Expected term (in years) | | 5.8 |
During the year ended December 31, 2022, the Company did not issue any additional options.
Expected Dividend Yield
Volta does not expect, and is not contractually obligated, to pay dividends in the foreseeable future.
Risk-free Interest Rate
The risk-free interest rate is based on the implied yields currently available from the U.S. Treasury zero-coupon yield curve over the expected term.
Expected Volatility
Expected volatility is a measure of the amount of fluctuation in the value of Volta’s share price over a specific time period. Volatility is generally calculated as the standard deviation of the continuously compounding rates of return on the share over a specified period and is typically expressed as annualized returns. Judgment is required to select a method to estimate expected volatility for nonpublic companies. As Volta does not have a trading history prior to the Reverse Recapitalization, sufficient historical information related to the fair value of Volta’s options is not available. Nonpublic entities may use average volatility for comparable public companies to form a reasonable basis for the assumption of expected volatility. To identify similar entities, Volta considered characteristics of each, such as industry, stage of life cycle, size and financial leverage. The average volatility actually used in the fair value determination for stock options was 58%-68% for grants issued in the year ended December 31, 2021.
Expected Term (in years)
Volta uses the practical expedient in ASC 718, Compensation- Stock Compensation, which allows nonpublic entities to follow a simplified approach for calculating expected term. For service vesting conditions, the expected term is the midpoint between the requisite service period and the contractual term of the option. For performance vesting conditions, the expected term is determined based on the probability of occurrence. When the occurrence is probable, the expected term is the midpoint between the requisite service period and the contractual term of the option. If the occurrence is other than probable, the expected term is the contractual term when the service period is not stated, or the midpoint between the requisite service period and the contractual term if the requisite service period or vesting period is stated.
Fair Value of Warrant Liabilities
Volta classifies the Private Warrants as liabilities at their estimated fair value. The liability is subject to remeasurement at each consolidated balance sheet date, with changes in fair value recorded in change in fair value of warrant liability in the consolidated statement of operations and comprehensive loss. Volta will continue to revalue all warrants until exercise, expiration, conversion or until they are no longer redeemable. As of December 31, 2022, 8,621,440 Public Warrants and 5,933,333 Private Warrants remain outstanding.
Volta estimates the fair value of the Public and Private Warrants using the Binomial Lattice Valuation Model (“BLM”). Volta is required to make assumptions and estimates in determining an appropriate risk-free interest rate, volatility, term, dividend yield, discount due to exercise restrictions and the fair value of Volta common stock. Any significant adjustments to the unobservable inputs would have a direct impact on the fair value of the warrant liability. Please refer to “Note 6 - Fair Value Measurements,” of the accompanying consolidated financial statements for additional information.
Long Lived Assets
Property and equipment, net, which primarily consists of charging stations and construction in progress station hardware, is reported at historical cost less accumulated depreciation. Volta estimates the useful lives of the stations to be between five and ten years, based on its historical experience and its plans regarding how it intends to use those assets.
Volta’s experience indicates that the estimated useful lives applied to its portfolio of assets have been reasonable, and it does not expect significant changes to the estimated useful lives of its long-lived assets in the future. When Volta determines that stations or other equipment will be disposed of prior to the end of their initially estimated useful lives, it estimates the revised useful lives and depreciates the assets over the revised period.
Volta also reviews property and equipment for impairment when events and circumstances indicate that depreciable property and equipment might be impaired, and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. When specific assets are determined to be unrecoverable, the cost basis of the asset is reduced to reflect the current fair market value.
Volta uses various assumptions in determining the remaining useful lives of assets to be disposed of prior to the end of their useful lives and in determining the current fair market value of long-lived assets that are determined to be unrecoverable. Estimated useful lives and fair values are sensitive to factors including contractual commitments, regulatory requirements and future expected cash flows. Volta’s impairment loss calculations require management to apply judgment in estimating future cash flows, including forecasting useful lives of the assets and selecting the discount rate that reflects the risk inherent in future cash flows.
Leases
The charging stations have two units of account: the charging station and digital media screen. Volta recognizes a financing transaction on the digital media screen, which remains on Volta’s consolidated balance sheet based on the cost of the digital media screen and is depreciated over its useful life. Volta also leases the location of the charging stations and this is recognized as an operating lease arrangement, with a lease liability and ROU asset under ASC 842. Volta voluntarily early adopted accounting standards for the treatment of leases under ASC 842 prior to the required adoption after December 15, 2021 given its business and operations in relation to leased properties on a go-forward basis.
Volta uses significant estimates in accounting for lease liabilities and ROU assets, which are recognized at the lease commencement date based on the present value of the future minimum lease payments over the lease term. The lease interest rate used to determine the present value of future lease payments is based on Volta’s incremental borrowing rate. Volta’s leases are all long-term, extending beyond a twelve-month period, and include periods under options to extend or terminate the lease when it is reasonably certain Volta will exercise such options. Volta identifies separate
lease and non-lease components, and the non-lease components are typically composed of electricity reimbursements to the landlord.
Volta has elected the practical expedient to account for lease and non-lease components as a combined single lease component, increasing the amount of Volta’s lease liabilities and ROU assets.
Please refer to “Note 2 - Summary of Significant Accounting Policies,” and “Note 13 - Leases,” of the accompanying consolidated financial statements for additional information about leases.
Income Taxes
Volta utilizes the liability method in accounting for income taxes. Deferred tax assets and liabilities reflect the estimated future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities. 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. Deferred tax expense or benefit is the result of changes in the deferred tax asset and liability. Valuation allowances are established when necessary to reduce deferred tax assets where it is more likely than not that the deferred tax assets will not be realized. Volta makes estimates, assumptions and judgments to determine its provision for its income taxes, deferred tax assets and liabilities and any valuation allowance recorded against deferred tax assets. Volta assesses the likelihood that its deferred tax assets will be recovered from future taxable income, and to the extent it believes that recovery is not likely, it establishes a valuation allowance.
Volta recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement.
Off-Balance Sheet Arrangements
As of the consolidated balance sheet dates of December 31, 2022 and 2021, Volta has not engaged in any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
Recent Accounting Pronouncements
Refer to “Note 2 - Summary of Significant Accounting Policies,” of the accompanying consolidated financial statements for a discussion of the impact of recent accounting pronouncements.
Related Party Transactions
Refer to “Note 16 - Related Party Transactions,” of the accompanying consolidated financial statements for additional information for related party transactions.
Item 8. Financial Statements
Consolidated Financial Statements
Reports of Independent Registered Public Accounting Firm (PCAOB ID Number 248)
Consolidated Balance Sheets as of December 31, 2022 and 2021 3 Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2022 and 2021 5 Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders' (Deficit) Equity for the years ended December 31,2022 and 2021 6 Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021 9 Notes to Consolidated Financial Statements 11
Report of Independent Registered Public Accounting Firm
Board of Directors and Shareholders
Volta Inc.
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Volta Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, changes in redeemable convertible preferred stock and stockholders’ (deficit) equity, and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
Going concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company has an accumulated deficit of $583.4 million as of December 31, 2022 and incurred a net loss of $154.6 million during the year ended December 31, 2022. These conditions, along with other matters set forth in Note 3, raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Grant Thornton LLP
We have served as the Company’s auditor since 2019.
San Francisco, California
March 30, 2023
Volta Inc.
| | |
| Consolidated Balance Sheets |
| | | | | | | | | | | | |
| December 31, | |
| 2022 | | 2021 | |
| (in thousands, except share amounts and par value) | |
| ASSETS | | | | |
| Current assets | | | | |
| Cash and cash equivalents | $ | 2,642 | | | $ | 262,260 | | |
Accounts receivable, less allowance for doubtful accounts; $42 and $0 | 16,749 | | | 12,587 | | |
| Inventory | 2,132 | | | 2,726 | | |
| Prepaid partnership costs | 8,360 | | | 8,982 | | |
| Prepaid expenses and other current assets | 8,383 | | | 12,091 | | |
| Total current assets | 38,266 | | | 298,646 | | |
| Operating lease right-of-use assets, net | 93,630 | | | 76,364 | | |
| Property and equipment, net | 207,346 | | | 97,728 | | |
| Other non-current assets | 674 | | | 321 | | |
| | | | |
| | | | |
| Intangible assets, net | 1,175 | | | 643 | | |
| Goodwill | 221 | | | 221 | | |
| Total assets | $ | 341,312 | | | $ | 473,923 | | |
| | | | |
| LIABILITIES | | | | |
| Current liabilities | | | | |
| Accounts payable | 46,998 | | | 18,461 | | |
| Accrued expenses and other current liabilities | 19,445 | | | 20,168 | | |
| Operating lease liability - current portion | 9,533 | | | 5,952 | | |
| Deferred revenue | 13,584 | | | 8,450 | | |
| Term loans payable - current | 12,483 | | | 15,998 | | |
| Warrant liability | 386 | | | 27,071 | | |
| Total current liabilities | 102,429 | | | 96,100 | | |
| Term loans payable, net of unamortized debt issuance costs and current term loan payable | — | | | 23,997 | | |
| Operating lease liability - non-current portion | 79,075 | | | 64,422 | | |
| Other non-current liabilities | 8,484 | | | 7,268 | | |
| Total liabilities | $ | 189,988 | | | $ | 191,787 | | |
| | | | |
| STOCKHOLDERS' EQUITY | | | | |
Class A and Class B common stock, par value $0.0001 and $0.0001, respectively: 400,000,000 (Class A 350,000,000, Class B 50,000,000) shares authorized as of each of December 31, 2022 and 2021; 174,198,246 (Class A 174,198,246, Class B 0) and 162,105,399 (Class A 152,218,214, Class B 9,887,185) shares issued and outstanding as of December 31, 2022 and 2021, respectively | 18 | | | 16 | | |
| | | | |
| | | | |
| Additional paid-in capital | 734,146 | | | 710,638 | | |
| Accumulated other comprehensive income | 524 | | | 213 | | |
| Accumulated deficit | (583,364) | | | (428,731) | | |
| Total stockholders' equity | 151,324 | | | 282,136 | | |
| Total liabilities and stockholders’ equity | $ | 341,312 | | | $ | 473,923 | | |
| | | | |
Volta Inc.
| | |
| Consolidated Statements of Operations and Comprehensive Loss |
| | | | | | | | | | | |
| Year ended December 31, |
| 2022 | | 2021 |
| (in thousands, except share amounts and per share data) |
| REVENUES | |
| Service revenue | $ | 52,767 | | | $ | 29,881 | |
| Product revenue | 398 | | | 1,199 | |
| Other revenue | 1,435 | | | 1,231 | |
| Total revenues | 54,600 | | | 32,311 | |
| | | |
| COSTS AND EXPENSES | | | |
| Costs of services (exclusive of depreciation and amortization shown below) | 38,749 | | | 23,029 | |
| Costs of products (exclusive of depreciation and amortization shown below) | 440 | | | 1,678 | |
| Selling, general and administrative | 165,328 | | | 262,628 | |
| Depreciation and amortization | 19,280 | | | 11,153 | |
| Other operating expense | 2,877 | | | 2,026 | |
| Total costs and expenses | 226,674 | | | 300,514 | |
| Loss from operations | (172,074) | | | (268,203) | |
| | | |
| OTHER EXPENSE (INCOME) | | | |
| Interest expense, net | 5,535 | | | 6,402 | |
| Other expense, net | — | | | 712 | |
| Change in fair value of warrant liability | (22,978) | | | 1,239 | |
| Total other expense (income) | (17,443) | | | 8,353 | |
| LOSS BEFORE INCOME TAXES | (154,631) | | | (276,556) | |
| | | |
| Income tax expense | 2 | | | 39 | |
| NET LOSS | $ | (154,633) | | | $ | (276,595) | |
| | | |
| OTHER COMPREHENSIVE INCOME | | | |
| Foreign currency translation adjustment | 311 | | | 213 | |
| TOTAL COMPREHENSIVE LOSS | $ | (154,322) | | | $ | (276,382) | |
| | | |
| | | |
Weighted-average Class A common stock outstanding, basic and diluted (Note 12 - Net Loss Per Share) | 165,762,888 | | | 59,034,393 | |
Net loss per Class A common stock, basic and diluted (Note 12 - Net Loss Per Share) | $ | (0.91) | | | $ | (4.10) | |
Weighted-average Class B common stock outstanding, basic and diluted (Note 12 - Net Loss Per Share) | 4,545,964 | | | 8,393,797 | |
Net loss per Class B common stock, basic and diluted (Note 12 - Net Loss Per Share) | $ | (0.91) | | | $ | (4.10) | |
Volta Inc.
| | |
| Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders' (Deficit) Equity |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Redeemable Convertible Preferred Stock | | | | | Additional Paid-in Capital | | Accumulated Other | Accumulated Deficit | | Total Stockholders’
(Deficit) Equity |
| (in thousands) | Shares | | Amount | | | Shares | | Amount | | | Comprehensive Income | |
Balance at December 31, 2020 | 76,494 | | | $ | 182,599 | | | | 24,696 | | | $ | 1 | | | $ | 13,233 | | | — | | $ | (152,136) | | | $ | (138,902) | |
| Issuance of Series D preferred stock | 4,722 | | | 13,721 | | | | — | | | — | | | — | | | — | | — | | | — | |
| Issuance of Series D preferred stock - related party | — | | | 15,000 | | | | — | | | — | | | — | | | — | | — | | | — | |
| Issuance Costs - Series D | — | | | (1,290) | | | | — | | | — | | | — | | | — | | — | | | — | |
| Issuance of restricted stock awards - related party | — | | | — | | | | 6,917 | | | 1 | | | 40,236 | | | — | | — | | | 40,237 | |
| Reverse recapitalization | (81,216) | | | (210,030) | | | | 81,216 | | | 8 | | | 210,030 | | | — | | — | | | 210,038 | |
| TAC shares recapitalized, net of redemptions and equity issuance costs | — | | | — | | | | 48,907 | | | 5 | | | 327,124 | | | — | | — | | | 327,129 | |
| Transaction costs related to reverse recapitalization | — | | | — | | | | — | | | — | | | (9,048) | | | — | | — | | | (9,048) | |
| Recognition of exercise of options, net of forfeiture of shares, upon settlement of promissory notes | — | | | — | | | | (1,983) | | | — | | | (9,368) | | | — | | — | | | (9,368) | |
| Issuance of common stock upon exercise of options | — | | | — | | | | 1,545 | | | 1 | | | 1,508 | | | — | | — | | | 1,509 | |
| Issuance of common stock upon net exercise of warrant | — | | | — | | | | 254 | | | — | | | 1,948 | | | — | | — | | | 1,948 | |
| Stock-based compensation expense - options | — | | | — | | | | — | | | — | | | 133,753 | | | — | | — | | | 133,753 | |
| Issuance of common stock upon exercise of warrants - related party | — | | | — | | | | 371 | | | — | | | 2 | | | — | | — | | | 2 | |
| Issuance of common stock for acquisition of 2Predict | — | | | — | | | | 182 | | | — | | | 1,220 | | | — | | — | | | 1,220 | |
| Other comprehensive income | — | | | — | | | | — | | | — | | | — | | | 213 | | — | | | 213 | |
| Net loss | — | | | — | | | | — | | | — | | | — | | | — | | (276,595) | | | (276,595) | |
Balance at December 31, 2021 | — | | | $ | — | | | | 162,105 | | | $ | 16 | | | $ | 710,638 | | | $ | 213 | | $ | (428,731) | | | $ | 282,136 | |
Volta Inc.
| | |
| Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders' (Deficit) Equity |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Redeemable Convertible Preferred Stock | | | | | Additional Paid-in Capital | | Accumulated Other | Accumulated Deficit | | Total Stockholders’
(Deficit) Equity |
| (in thousands) | Shares | | Amount | | | Shares | | Amount | | | Comprehensive Income | |
Balance at December 31, 2021 | — | | | $ | — | | | | 162,105 | | | $ | 16 | | | $ | 710,638 | | | $ | 213 | | $ | (428,731) | | | $ | 282,136 | |
| Issuance of common stock upon exercise of options | — | | | — | | | | 1,535 | | | — | | | 894 | | | — | | — | | | 894 | |
| Issuance of common stock upon equity offering | — | | | — | | | | 4,251 | | | 1 | | | 4,507 | | | — | | — | | | 4,508 | |
| Issuance of common stock upon release of vested restricted stock units | — | | | — | | | | 885 | | | — | | | — | | | — | | — | | | — | |
| Stock-based compensation expense | — | | | — | | | | — | | | — | | | 30,586 | | | — | | — | | | 30,586 | |
| Issuance of common stock upon the settlement of vested restricted stock units, net of shares withheld for taxes | — | | | — | | | | 5,343 | | | 1 | | | (16,555) | | | — | | — | | | (16,554) | |
| Issuance of common stock for patent acquisition | — | | | — | | | | 150 | | | — | | | 369 | | | — | | — | | | 369 | |
| Change in warrant classification from liability to equity | — | | | — | | | | — | | | — | | | 3,707 | | | — | | — | | | 3,707 | |
| Forfeiture of shares to settle promissory notes | — | | | — | | | | (71) | | | — | | | — | | | — | | — | | | — | |
| Other comprehensive income | — | | | — | | | | — | | | — | | | — | | | 311 | | — | | | 311 | |
| Net loss | — | | | — | | | | — | | | — | | | — | | | — | | (154,633) | | | (154,633) | |
Balance at December 31, 2022 | — | | | $ | — | | | | 174,198 | | | $ | 18 | | | $ | 734,146 | | | $ | 524 | | $ | (583,364) | | | $ | 151,324 | |
Volta Inc.
| | |
| Consolidated Statements of Cash Flows |
| | | | | | | | | | | |
| Year ended December 31, |
| 2022 | | 2021 |
| (in thousands) |
| Cash flows from operating activities | | | |
| Net loss | $ | (154,633) | | | $ | (276,595) | |
| Adjustments to reconcile net loss to net cash used in operating activities: | | | |
| Reduction in the carrying amount of ROU assets | 11,511 | | | 4,718 | |
| Depreciation and amortization | 19,280 | | | 11,153 | |
| | | |
| | | |
| Stock-based compensation | 30,015 | | | 173,989 | |
| | | |
| Amortization of debt issuance costs | 398 | | | 337 | |
| | | |
| Accretion expense | 198 | | | 195 | |
| Revaluation of warrant liability to estimated fair value | (22,978) | | | 1,239 | |
| | | |
| Loss on disposal of property and equipment and inventory | 3,679 | | | 1,896 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Changes in operating assets and liabilities: | | | |
| Accounts receivable | (4,086) | | | (6,436) | |
| Inventory | 594 | | | 2,844 | |
| Prepaid expenses and other current assets | 3,408 | | | (11,154) | |
| Prepaid partnership costs | (700) | | | (2,245) | |
| Operating lease right-of-use asset | (448) | | | (1,076) | |
| | | |
| Other non-current assets | (353) | | | 6 | |
| Accounts payable | 21,725 | | | 8,985 | |
| Due to related party | — | | | (91) | |
| Accrued expenses and other current liabilities | (24,268) | | | (1,538) | |
| | | |
| Deferred revenue | 4,444 | | | 825 | |
| Lease incentive liability | 5 | | | (44) | |
| Operating lease liability | (9,409) | | | (3,292) | |
| Other noncurrent liabilities | 4,462 | | | 1,350 | |
| Net cash used in operating activities | $ | (117,156) | | | $ | (94,934) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Cash flows from investing activities | | | |
| Purchase of property and equipment | (97,352) | | | (54,812) | |
| Capitalization of internal-use software | (4,711) | | | (626) | |
| | | |
| | | |
| | | |
| Cash paid for acquisition of 2Predict | — | | | (200) | |
| Acquisition of OpConnect patent | (875) | | | — | |
| | | |
| Net cash used in investing activities | $ | (102,938) | | | $ | (55,638) | |
| | | |
| Cash flows from financing activities | | | |
| Due from employees for taxes paid on partial recourse notes | — | | | (8,341) | |
| | | |
| | | |
| Proceeds from issuance of Series D Preferred Stock | — | | | 28,721 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Payment of short-term debt | (4,083) | | | — | |
Payment of long-term debt | (12,250) | | | (8,167) | |
| EIP Loan reimbursement | (11,577) | | | — | |
| | | |
| Payment of PPP Loan | — | | | (3,195) | |
| Proceeds from exercise of stock options | 894 | | | 1,497 | |
Volta Inc.
| | |
| Consolidated Statements of Cash Flows |
| | | | | | | | | | | |
| Payment of issuance costs related to Series D and D-1 Preferred Stock | — | | | (1,290) | |
| Proceeds from issuance of common stock upon equity offering, net of fees | 4,508 | | | — | |
| | | |
| | | |
| Payment of financing activity principal | (774) | | | (620) | |
Proceeds from Reverse Recapitalization and PIPE Financing | — | | | 350,146 | |
| Proceeds from exercise of common stock warrants - related party | — | | | 2 | |
| | | |
| Taxes paid related to net share settlement of equity awards | (16,554) | | | — | |
| Proceeds from refunds of transaction costs related to Reverse Recapitalization | — | | | 4,108 | |
| Payment of transaction costs related to Reverse Recapitalization | — | | | (9,048) | |
| Net cash (used in) provided by financing activities | $ | (39,836) | | | $ | 353,813 | |
| | | |
| Effect of exchange rate changes on cash, cash equivalents, and restricted cash | 312 | | | 213 | |
| Net increase in cash and cash equivalents | (259,618) | | | 203,454 | |
| Cash and cash equivalents, beginning of period | 262,260 | | | 58,806 | |
| Cash and cash equivalents, end of period | $ | 2,642 | | | $ | 262,260 | |
| | | |
| | | |
| | | |
| Supplemental disclosures of cash flow information | | | |
| Cash paid for interest | 5,155 | | | 6,534 | |
| | | |
| | | |
| Non-cash investing and financing activities | | | |
| Purchases of property and equipment not yet settled | 39,545 | | | 10,136 | |
| Conversion of redeemable convertible Preferred Stock into common stock in connection with the Reverse Recapitalization | — | | | 210,030 | |
| | | |
| | | |
| | | |
| | | |
| Initial recognition of operating lease right-of-use asset | — | | | 30,612 | |
| Change in warrant classification from liability to equity | 3,707 | | | — | |
| ROU assets obtained in exchange for operating lease liabilities | 27,644 | | | 29,036 | |
| | | |
| | | |
| Class B common stock warrants issued in satisfaction of services rendered | — | | | — | |
| | | |
| Forfeiture of shares to settle promissory notes collateralized to common stock | — | | | 9,359 | |
| Cashless exercise of Legacy Volta Preferred Stock Warrants | — | | | 1,944 | |
Common stock issued for acquisition of 2Predict | — | | | 1,220 | |
| | | |
| Issuance of common stock for patent acquisition | 369 | | | — | |
| Stock-based compensation capitalized to internal-use software | 571 | | | — | |
Volta Inc.
| | |
| Notes to Consolidated Financial Statements |
Note 1 - Description of Business
Volta Inc. is a holding company for its wholly-owned subsidiaries, Volta Charging Industries, LLC, Volta Charging, LLC, Volta Charging Services, LLC, Volta Canada Inc., Volta Charging Germany GmbH, Volta France SARL, and Volta Media, LLC (inactive) (collectively, the “Company” or “Volta”). The new wholly owned subsidiaries, Rakko Holding B.V. and Volta Rakko B.V. were incorporated on August 22, 2022 and September 3, 2022, respectively. The Company is headquartered in San Francisco, California. The Company operates a network of smart media-enabled charging stations for electric vehicles across the U.S. In addition, the Company utilizes the network to decarbonize the transportation sector and accelerate electric vehicle adoption by providing sponsored charging to drivers. Revenue is derived primarily by selling paid content on the media-enabled charging station network, installing and maintaining charging stations.
On August 26, 2021, Tortoise Corp II consummated the Reverse Recapitalization contemplated by the Business Combination Agreement, by and among Tortoise Corp II, SNPR Merger Sub I, Inc., SNPR Merger Sub II, LLC, and Legacy Volta. On the Closing Date, and in connection with the Closing (the "Business Combination"), Tortoise Corp II was renamed Volta Inc. and began trading on the NYSE under the ticker symbol “VLTA”. The Company's Public Warrants also trade on the NYSE under the ticker symbol “VLTA WS”.
On September 12, 2022, the Company filed a registration statement on Form S-3 (File No. 333-267374) with the SEC (declared effective by the SEC on September 20, 2022) which permits the Company to offer up to 500 million shares of Class A common stock, preferred stock, depository shares, debt securities, warrants and rights in one or more offerings and in any combination, including in units from time to time. As part of the Shelf Registration Statement, the Company filed a prospectus supplement registering for sale from time to time up to 150 million shares of our Class A common stock, par value $0.0001 per share, in “at-the-market” offerings pursuant to a Controlled Equity Offering Sales AgreementSM (the “Sales Agreement”) entered into on September 26, 2022, with a designated sales agent. As of December 31, 2022, the Company received $4.9 million of net proceeds from the sale and issuance of 4,251,284 shares of Class A common stock under the Sales Agreement, resulting in $0.4 million of equity issuance costs.
A substantial portion of the Company's operations, assets and revenue are located in the U.S. or derived from customers in the U.S.
Note 2 - Summary of Significant Accounting Policies
Basis of presentation and consolidation
The accompanying consolidated financial statements have been prepared in conformity with GAAP and include the accounts and operations of Volta Inc. and its wholly-owned subsidiaries. Volta Charging, LLC is the primary U.S. operating subsidiary of the Company. All intercompany accounts and transactions have been eliminated upon consolidation.
Use of estimates
The preparation of consolidated financial statements in conformity with Generally Accepted Accounting Principles ("GAAP") requires the Company to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Significant items subject to management’s estimates and assumptions include, but are not limited to, assumptions underlying the determination of the stand-alone selling (“SSP”) prices for performance obligations within revenue arrangements, the fair value of consideration payable to a customer in revenue arrangements, allowance for doubtful accounts, inventory valuation, stock-based compensation, tax valuation allowance, warrant valuation, incremental borrowing rate for right-of-use (“ROU”) assets and lease liabilities, lease term, the valuation and useful lives of property and equipment, goodwill and intangibles, term loan payable, and the valuation of assets acquired and liabilities assumed for the Reverse Recapitalization.
Volta Inc.
| | |
| Notes to Consolidated Financial Statements |
The Company believes that the estimates and judgments upon which it relies are reasonable based upon information available to the Company at the time that these estimates and judgments are made. The Company periodically evaluates such estimates and adjusts prospectively based upon such periodic evaluation. Actual results could differ materially from those estimates using different assumptions or under different conditions.
Segment reporting
For the years ended December 31, 2022 and 2021, the Company was managed as one operating segment as we only report financial information on an aggregate and consolidated basis to the interim CEO, our Chief Operating Decision Maker (“CODM”), who regularly reviews financial operating results on a consolidated basis for purposes of allocating resources and evaluating financial performance. Although the Company has different revenue streams, the CODM managed the Company as a whole and made decisions at the consolidated level. There are no segment managers who are held accountable for operations, operating results, and plans for components or types of products or services below the consolidated unit level. As of December 31, 2022, a substantial portion of our long-lived assets were located in the United States and a majority of our revenue was earned in the United States.
Reclassifications
Certain prior period amounts have been reclassified to conform to current period presentation. These reclassifications have no material effect on previously reported results of operations or loss per share.
Cash, cash equivalents, and restricted cash
Cash and cash equivalents include on-demand deposits with banks and a mutual fund, respectively, for which cost approximates the fair value and restricted cash. As of December 31, 2022 and December 31, 2021, there was $0 and $0.1 million restricted cash, respectively, held in escrow related to payments to contractors.
Accounts receivable and allowance for doubtful accounts
Accounts receivable primarily include amounts related to receivables from our sales of media and installation of stations. We provide an allowance against accounts receivable for the amount we expect to be uncollectible. We write-off accounts receivable against the allowance when they are deemed uncollectible.
Unbilled receivables result from amounts recognized as revenues but not yet invoiced as of the consolidated balance sheet date. The Company had $0.8 million in unbilled receivables as of December 31, 2022 and 2021 related to network development revenue, which are included in the accounts receivable balance on the accompanying consolidated balance sheets.
The Company recorded $42 thousand allowance for doubtful accounts in the year ended December 31, 2022. The Company had no allowance for doubtful accounts in the year ended December 31, 2021.
Concentration of risk
Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash and accounts receivable. The Company’s cash is held on deposit with high-credit quality financial institutions. Such deposits may at times exceed federally insured limits. The Company has not experienced losses in accounts.
As of December 31, 2022, four customers accounted for 22.0%, 13.0%, 13.0%, and 11.0% of the Company's accounts receivable balance, respectively. As of December 31, 2021, three customers accounted for 30.5%, 22.0% and 18.7% of the Company's accounts receivable balance, respectively. For the year ended December 31, 2022, two customers accounted for 21.3% and 16.2% of the Company's revenue, respectively. For the year ended December 31, 2021, two customers accounted for 27.4% and 12.1% of the Company's revenue, respectively.
Volta Inc.
| | |
| Notes to Consolidated Financial Statements |
Revenue generated by these customers arises from a portfolio of contracts with multiple, separate, legal entities. The Company mainly mitigates concentration risk as all contracts are executed with these separate, legal entities.
As of both December 31, 2022 and December 31, 2021, no vendor accounted for more than 10% of the Company's accounts payable orders. The Company mitigates concentration risk by maintaining contracts and agreements with alternative suppliers and is actively expanding its supplier network.
Fair value of financial instruments
The Company evaluates the fair value measurements of all financial assets and liabilities. Fair value is an exit price representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.
A three-tiered hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value. This hierarchy requires that the Company use observable market data, when available, and minimize the use of unobservable inputs when determining fair value:
•Level 1, observable inputs such as quoted prices in active markets;
•Level 2, inputs other than the quoted prices in active markets that are observable either directly or indirectly;
•Level 3, unobservable inputs in which there is little or no market data, which requires that the Company develop its own assumptions.
Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value measurements requires judgment and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy.
Foreign currency
The functional currency of our foreign subsidiaries is the local currency or U.S. dollar depending on the nature of the subsidiaries' activities. Monetary assets and liabilities, and transactions denominated in currencies other than the functional currency are remeasured to the functional currency at the exchange rate in effect at the end of the period and are recorded in the current period consolidated statement of operations and comprehensive loss. Gains and losses resulting from remeasurement are recorded in foreign exchange gains (losses), net within other expense, net in the accompanying consolidated statement of operations and comprehensive loss. Subsidiary assets and liabilities with non-U.S. dollar functional currencies are translated at the month-end rate, retained earnings and other equity items are translated at historical rates, and revenues and expenses are translated at average exchange rates during the year. Cumulative translation adjustments are recorded within accumulated other comprehensive income, a separate component of total shareholders' (deficit) equity.
Inventory
Inventory consists of finished goods in the form of assembled charging stations. Inventory is measured using the first-in, first-out (“FIFO”) method and stated at the lower of cost or net realizable value as of December 31, 2022 and 2021. The value of inventories is reduced by estimates for excess and obsolete inventories. The estimate for excess and obsolete inventories is based upon management’s review of utilization of inventories in light of projected sales, current market conditions, and market trends. The Company monitors inventory to identify events that would require impairment due to obsolete inventory and adjusts the value of inventory when required. Inventory losses of $0.6 million were incurred during both the years ended December 31, 2022 and 2021.
Prepaid partnership costs
Volta Inc.
| | |
| Notes to Consolidated Financial Statements |
Prepaid partnership costs consist of licensing fees paid to site partners in Network Development arrangements for the exclusive right to display media on media-enabled charging stations in advance of the lease commencement date. Upon lease commencement, the costs are included in the right-of-use asset (“ROU”) asset balance.
Property and equipment
Property and equipment are stated at cost, less accumulated depreciation and amortization. The cost of maintenance and repairs is expensed as incurred, and expenditures that extend the useful lives of assets are capitalized. Charging stations, digital media screens, capitalized research and development equipment, computers and equipment, and furniture are depreciated and amortized using the straight-line method over the estimated useful lives of the respective assets. Leasehold improvements are depreciated using the straight-line method over the shorter of the estimated useful lives of the assets or the lease term, ranging from two to five years. Depreciation and amortization expense (excluding intangibles amortization) for the years ended December 31, 2022 and 2021 is $18.6 million and $10.6 million, respectively.
| | | | | |
| Asset | Useful Lives (In Years) |
| Charging stations and digital media screens | 5-10 |
| Capitalized research and development equipment | 2-5 |
| Computers and equipment | 3-5 |
| Furniture | 5 |
| Leasehold improvements | 2-5 |
| Capitalized software | 3 |
| |
Construction in progress includes all costs capitalized related to projects, primarily related to installation of assets that have yet to be placed in service and in-process engineering activities. When assets are retired or otherwise disposed of, the cost and accumulated depreciation or amortization are removed from the consolidated balance sheets, and any resulting gain or loss is reflected in the consolidated statements of operations and comprehensive loss in the period realized.
For the years ended December 31, 2022 and 2021, losses of $3.6 million and $1.9 million, respectively, related to construction in progress that was damaged or abandoned were recognized in other operating expenses in the accompanying consolidated statements of operations and comprehensive loss.
Capitalization of software costs and software implementation costs in a cloud computing arrangement
The Company accounts for the costs of software developed for internal use by capitalizing costs incurred during the application development stage to property and equipment, net on the accompanying consolidated balance sheets. Costs related to preliminary project activities and post-implementation activities are expensed as incurred. The Company amortizes the capitalized costs of internal-use software on a straight-line basis over the estimated useful lives of the assets. The Company recognizes the amortization in depreciation and amortization in the accompanying consolidated statements of operations and comprehensive loss.
The Company capitalizes qualified implementation costs incurred in a cloud computing or hosting arrangement that is a service contract for which it is the customer. These capitalized implementation costs are recorded within property and equipment, net, on the consolidated balance sheets and are amortized over the fixed, non-cancellable term of the associated hosting arrangement or the estimated useful life of the asset on a straight-line basis. Costs incurred during the preliminary project stage, and post-implementation activities, are expensed as incurred.
Intangible assets
Volta Inc.
| | |
| Notes to Consolidated Financial Statements |
Definite-lived intangible assets primarily consist of intellectual property, for which the weighted-average useful life is 1.5 to 9 years. Total amortization expense for capitalized software and capitalized software implementation costs within depreciation and amortization for the years ended December 31, 2022 and 2021 is $0.7 million and $0.6 million, respectively.
Impairment of long-lived assets and intangibles
Intangible assets with finite lives are amortized over their useful lives and reported net of accumulated amortization. The Company evaluates its long-lived assets and intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The recoverability of assets to be held and used is assessed by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets. Although the Company has accumulated losses, the Company believes that the future cash flows will be sufficient to exceed the carrying value of the Company’s long-lived and intangible assets. As of December 31, 2022 and 2021, the Company determined that no events or changes in circumstances existed that would otherwise indicate any impairment of its long-lived or intangible assets.
Goodwill
Goodwill represents the excess of the cost of an acquired entity over the fair value of the acquired net assets. The Company accounts for goodwill in accordance with Accounting Standards Update (“ASU”) 350, Intangibles - Goodwill and Other Intangible assets, which among other things, addresses financial accounting and reporting requirements for acquired goodwill and other intangible assets having indefinite useful lives. ASC 350 requires goodwill to be carried at cost, prohibits the amortization of goodwill and requires the Company to test goodwill for impairment at least annually. Volta evaluates its goodwill for impairment annually, in the fourth quarter, or more frequently if impairment indicators are present. A qualitative assessment is performed to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If, based on the evaluation, it is determined to be more likely than not that the fair value is less than the carrying value, then the goodwill is tested further for impairment. If the implied fair value of goodwill is lower than its carrying amount, an impairment loss is recognized in an amount equal to the difference. There was no impairment of goodwill for the year ended December 31, 2022.
Leases
The Company accounts for leases in accordance with ASC 842, Leases. The lease liabilities and corresponding ROU assets are recognized on the consolidated balance sheets. The Company determines if an arrangement contains a lease at inception. The Company recognizes an ROU asset and a lease liability at the lease commencement date for operating leases with terms greater than 12 months. ROU assets represent the Company's right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. The initial measurement of ROU assets is comprised of the initial amount of the lease liability, adjusted for lease payments made at or before the lease commencement date, plus any initial direct costs incurred, less any lease incentives received. ROU assets are subsequently measured throughout the lease term at the carrying amount of the lease liability, plus any initial direct costs, plus (less) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received. The lease expense is recognized on a straight-line basis over the lease term. The Company does not have material financing leases as of December 31, 2022.
The interest rate used to determine the present value of the future lease payments is the Company's incremental borrowing rate as the Company generally cannot determine the implicit rate because it does not have access to the lessor's residual value or the amount of the lessor's deferred initial costs. The incremental borrowing rate is the interest rate the Company would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms.
Volta Inc.
| | |
| Notes to Consolidated Financial Statements |
Lease terms include the noncancellable period of the lease plus any additional periods covered by either an option to extend (or not to terminate) the lease that the Company is reasonably certain to exercise, or an option to extend (or not to terminate) the lease controlled by the lessor.
Variable lease payments associated with the Company's leases are recognized when the event, activity, or circumstance in the lease agreement on which those payments are assessed occurs. Variable lease payments are recognized in other operating (income) expenses in the consolidated statements of operations and comprehensive loss.
The Company identifies separate lease and non-lease components within the contract. Non-lease components primarily include payments for electricity reimbursements made to the landlord. The Company has elected the practical expedient to combine lease and non-lease payments and account for them together as a single lease component, which increases the amount of the Company's ROU assets and lease liabilities.
During the fourth quarter of 2021, Volta changed the calculation of the short-term lease liability from a method that determines the short-term liability, net of interest, on a monthly basis to a method that determines the balance on a yearly basis, resulting in a decreased short-term liability balance and increased long-term liability balance. Diversity in practice exists in the absence of specific guidance on the method of calculating the short-term liability under ASC 842, and both the former and current approaches are considered acceptable. The impact from this change arises due to some monthly payments, net of interest, falling below zero and out of short-term liability classification, while those amounts would be included in short-term liability in an annual calculation of payments, net of interest. While the short-term and long-term lease liability balances are impacted by the change, the impact extends to classification and presentation only, and the total lease liability remains the same.
This change is due to the implementation of a new lease accounting system in Q4 2021 and is considered a change in accounting methodology that does not have a material impact on our consolidated financial statements. We applied this change prospectively in accordance with GAAP.
Debt issuance costs
The Company accounts for the costs incurred in connection with borrowings under financing facilities as deferred and amortized over the life of the related financing on a straight-line basis which approximates the effective interest method. During the years ended December 31, 2022 and 2021, the Company deferred and capitalized costs related to the issuance of the term loans approximating $0.6 million and $0, respectively, and amortized $0.4 million and $0.3 million for the years ended December 31, 2022 and 2021, respectively, of deferred debt issuance costs as interest expense, net, in the accompanying consolidated statements of operations and comprehensive loss (see Note 9 - Debt Facilities).
Equity issuance costs
Transaction costs related to issuing an equity instrument are accounted for as equity issuance costs and presented as a deduction from the carrying value of the equity instrument. Equity issuance costs are a reduction to the proceeds allocated to the equity component. For the year ended December 31, 2021, the Company raised $28.7 million through sales of Legacy Volta Series D Preferred Stock, resulting in $1.3 million of equity issuance costs, which was paid in cash. As a part of the Closing, all Legacy Volta Series D, Legacy Volta D-1 Preferred Stock, and Legacy Volta Class B common stock were converted to Volta Inc. Class A common stock (Note 11 - Stockholders' (Deficit) Equity and Stock-Based Compensation).
On September 12, 2022, the Company filed a registration statement on Form S-3 (File No. 333-267374) with the SEC (declared effective by the SEC on September 20, 2022) which permits the Company to offer up to 500 million shares of Class A common stock, preferred stock,depository shares, debt securities, warrants and rights in one or more offerings and in any combination, including in units from time to time (the “Shelf Registration Statement”). As part of the Shelf Registration Statement, the Company filed a prospectus supplement registering for sale from time
Volta Inc.
| | |
| Notes to Consolidated Financial Statements |
to time up to 150 million shares of our Class A common stock, par value $0.0001 per share, in “at-the-market” offerings pursuant to a Controlled Equity Offering Sales AgreementSM (the “Sales Agreement”) entered into on September 26, 2022, with a designated sales agent. As of December 31, 2022, the Company received $4.9 million of net proceeds from the sale and issuance of 4,251,284 shares of Class A common stock under the Sales Agreement, resulting in $0.4 million of equity issuance costs.
Stock warrants
The Company’s common stock warrants are freestanding warrants that were issued by Legacy Volta in connection with certain debt and equity financing transactions (“Legacy Volta Warrants”). At the Closing, the Legacy Volta Warrants were converted into warrants to purchase Volta Class A common stock (“Converted Warrants”). The Converted Warrants were classified as equity instruments at the grant date fair value calculated using the OPM Backsolve approach and were not subject to revaluation at the consolidated balance sheet date. Additionally, Tortoise Corp II sold Public Warrants and issued Private Warrants. The warrants are convertible to Volta Class A common stock. As of December 31, 2022, the Public Warrants are classified as equity instruments and are not subject to revaluation at the consolidated balance sheet date. As the Private Warrants do not meet the criteria for equity treatment, they are recorded as liabilities on the consolidated balance sheets. Accordingly, the Company classifies the Private Warrants as liabilities and records them at fair value, with the change recorded in the change in fair value of warrant liability in the accompanying consolidated statements of operations and comprehensive loss.
Revenue recognition
Revenue is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services by following a five-step process, (i) identify the contract with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price, and (v) recognize revenue when or as the Company satisfies a performance obligation.
The Company generally considers a sales contract and/or agreement with an approved purchase order as a customer contract provided that collection is considered probable, which is assessed based on the creditworthiness of the customer. The Company combines contracts with a customer if contracts are entered into at or near the same time with the same customer and are negotiated with a single commercial substance or contain price dependencies. As it enters contracts with customers, the Company evaluates distinct goods and services promised in the contract to identify the appropriate performance obligations. The performance obligations include advertising services, charging stations, which include AC and DCFC stations, installation services, operation and maintenance services, installed infrastructure, regulatory credits and SaaS. The Company generally contracts with customers at fixed amounts and has not experienced significant returns or price concessions and discounts to contacted terms. To the extent the Company is entitled to variable consideration on the sale of goods or services, it will estimate the amount it expects to collect as part of the transaction price provided it is probable that a significant reversal of revenue will not occur when the uncertainty related to variable consideration is resolved.
When a contract contains multiple performance obligations, the Company allocates the transaction price to each performance obligation using the relative SSP method. The determination of SSP is judgmental and is based on the price the Company would charge for the same good or service if it were sold separately in a standalone sale to similar customers in similar circumstances. As the charging stations, installation and operation and maintenance services are never sold separately, the Company utilizes an expected cost plus a margin approach to determine the SSP for each of the separate performance obligations. Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for promised goods or services.
For revenue generated from contracts with customers involving another party, the Company considers if we maintain control of the specified goods or services before they are transferred to the customer, as well as other indicators such as the party primarily responsible for fulfillment, collection risk, and discretion in establishing
Volta Inc.
| | |
| Notes to Consolidated Financial Statements |
prices. When the Company controls the performance of contractual obligations to the customer, it records revenue at the gross amount paid by the customer with amounts paid as commissions to Agents as cost of services.
Disaggregation of revenue
The Company's operations represent a single operating segment based on how the Company and its CODM manage its business. The Company disaggregates revenue by major category in the table below based on what it believes are the primary economic factors that impact the nature, amount, timing, and uncertainty of revenue and cash flows from these customer contracts.
| | | | | | | | | | | |
| Year ended December 31, |
| 2022 | | 2021 |
| Revenues | (in thousands) |
| Media | $ | 44,008 | | | $ | 25,961 | |
| Network Development | 9,246 | | | 5,224 | |
| Charging Network Operations | 748 | | | 676 | |
| Network Intelligence | 598 | | | 450 | |
| Total revenues | $ | 54,600 | | | $ | 32,311 | |
| | | |
| | | |
Media
Media revenue is generated based on the number of advertising impressions delivered over the contract term, which is typically less than one year. Media revenue is recorded in service revenue in the accompanying consolidated statements of operations and comprehensive loss.
Network Development
Network Development revenue consists of revenue generated through installation services, operation and maintenance services offered over the contract term, installed infrastructure for utility companies and charging station products. Revenue from installation services is recognized over time using an input method based on costs incurred to measure progress toward complete satisfaction of the performance obligation. Revenue from operation and maintenance services is recognized over the term of the arrangement as the services are performed. Revenue from the sale of installed infrastructure is recognized at a point in time when control of the installed infrastructure is transferred to the customer. Revenue from charging stations is recognized at the point in time when control of the charging station is transferred to the customer, which is typically when the charging station is delivered at the designated customer site.
If the arrangement contains a lease, it is accounted for in accordance with ASC 842, Leases. In some arrangements, the Company has executed a sale and leaseback of the digital media screens (sale leaseback) and has also acquired the right to control the use of the location to advertise over a set term (location lease) (see Note 9 - Debt Facilities). During the construction phase, the Company does not control the underlying asset on the customer’s property. As the leaseback qualifies as a financing arrangement, the Company will not record a sale for accounting purposes of the digital media screen and will depreciate that asset over its useful life. For contractual payments that do not exceed the fair value of the location lease obligation, the Company records a lease liability and an associated ROU asset based on the discounted lease payments. In some instances, the Company may receive a lease incentive from the lessor which is recorded as a reduction to the ROU asset.
The determination of the transaction price for Network Development revenue may require judgment and can affect the amount and timing of revenue. The transaction price is based on the consideration that the Company expects to be entitled to for providing the Network Development products and services on a standalone basis. Almost all the transaction price is based on fixed cash consideration received from customers. The transaction price is allocated
Volta Inc.
| | |
| Notes to Consolidated Financial Statements |
between lease and non-lease components based on a relative-selling price basis. However, in arrangements where the Company pays consideration to a customer for a distinct good or service, the consideration payable to a customer is limited to the fair value of the distinct good or service received by the customer. If the contractual payments for the location lease of this arrangement are in excess of fair value, then the Company will estimate the excess contractual payments over fair value and record that amount as a reduction to the transaction price in the arrangement. The reduction to transaction price for consideration payable to a customer is recognized at the later of when the Company pays or promises to pay the consideration or when the Company recognizes the related revenue for the transferred products and services. The Company reduced the transaction price and recognized consideration payable to a customer of $0.4 million and $0.6 million for the years ended December 31, 2022 and 2021, respectively.
The Company typically bills the customer upon contract inception for charging stations and installation services and bills the customer on a quarterly basis for operation and maintenance services. Payments are typically due within one month after billing. Revenue generated through infrastructure development services, installation services, operation and maintenance services and installed infrastructure is recorded in service revenue in the accompanying consolidated statements of operations and comprehensive loss. Revenue generated through charging station products is recorded in product revenue in the accompanying consolidated statements of operations and comprehensive loss.
Charging Network Operations
Charging Network Operations revenue correlates to usage of stations, and are currently, primarily generated by selling regulatory credits or LCFS credits to other regulated entities. The Company recognizes revenue from regulatory credits at the point in time when the regulatory credits are sold to the customer. Costs associated with Charging Network Operations are composed of a minor amount of personnel-related costs which is presented in selling, general and administrative in the accompanying consolidated statements of operations and comprehensive loss. Charging Network Operations revenue is recorded in other revenue in the accompanying consolidated statements of operations and comprehensive loss.
Network Intelligence
Network Intelligence revenue is generated through the delivery of SaaS to the customer as well as set up and one time fees. The Company recognizes Network Intelligence revenue ratably over the contract term on a time-elapsed basis as the SaaS is performed over the license period. Network Intelligence revenue is recorded in other revenue in the consolidated statements of operations and comprehensive loss. Most costs associated with Network Intelligence revenue qualify as internal use software and are capitalized and recorded within property and equipment, net on the accompanying consolidated balance sheets.
Practical expedient and policy elected
The Company utilized the practical expedient to not adjust the promised amount of consideration for the effects of a significant financing component if the Company generally expects, at contract inception, that the period between when the Company transfers control of the promised good or service and when the Company receives payment from the customer is within one year or less. At contract inception, the Company expects to complete installation and transfer control of media-enabled charging stations to customers and receive payment within one year of contract execution. The Company generally expects to fulfill media campaigns and receive payment for advertising sales within one year.
The Company has elected to present revenue net of sales taxes remitted to government authorities.
Remaining performance obligations
Transaction price allocated to the remaining performance obligation represents contracted revenue that has not yet been recognized, which includes deferred revenue and unbilled receivable amounts that are expected to be recognized as revenue in future periods and excludes the performance obligations that are subject to cancellation
Volta Inc.
| | |
| Notes to Consolidated Financial Statements |
terms. The remaining performance obligations related to advertising services, the sale of media-enabled charging stations, installation services and SaaS are expected to be recognized as revenue within the next twelve months and are recorded within deferred revenue on the accompanying consolidated balance sheets. The unbilled receivable amount was $0.8 million for both the years ended December 31, 2022 and 2021. The total remaining performance obligations, excluding advertising services contracts that have a duration of one year or less, was $30.6 million as of December 31, 2022. As of December 31, 2022, the Company expects to recognize approximately 51.0% of its remaining performance obligations as revenues in the next twelve months, and the remainder thereafter.
Deferred revenue
Deferred revenue primarily consists of billings or payments received from customers in advance of revenue recognized for the sale of media-enabled charging stations, and of installation and operation and maintenance services, and is recognized as revenue upon transfer control or as services are performed. The Company generally invoices customers in advance or in milestone-based installments. Revenue recognized for the years ended December 31, 2022 and 2021 that was included in the deferred revenue balance as of December 31, 2021 and 2020 was $8.1 million and $2.9 million, respectively. As of December 31, 2022, deferred revenue related to such customer payments amounted to $14.4 million, of which $13.6 million is expected to be recognized during the succeeding twelve-month period and is therefore presented as current.
Costs to obtain a contract with a customer
The Company elected to apply the practical expedient available under ASC 340-40, Other Assets and Deferred Costs - Contracts with Customers, to not capitalize incremental costs of obtaining a contract, such as sales commissions, if the amortization period is less than one year. Commissions paid for certain sales of advertising are expensed as incurred because the amortization period would have been one year or less as most media campaigns are scheduled to run less than one year.
Sales commissions are also paid for obtaining a network development contract with a site host that purchases media-enabled charging stations and related services. As the typical contract term for these agreements exceeds one year, the Company does not apply this practical expedient. Sales commissions that are considered incremental and recoverable costs of obtaining a contract with a customer are capitalized and included in prepaid expenses and other current assets and other non-current assets on the consolidated balance sheets. The deferred costs are then amortized over the period of benefit consistent with the transfer of the goods and services to the customer to which the asset relates and is included in selling general, and administrative in the consolidated statements of operations and comprehensive loss.
The ending balances of assets recognized from costs of obtaining a contract with a customer were $0.04 million included in prepaid expenses and other current assets for both years as of December 31, 2022 and 2021, respectively, and $0.2 million and $0.3 million included in other non-current assets for the years ended as of December 31, 2022 and 2021, respectively. Amortization expense related to assets recognized from costs to obtain a contract with a customer was $0.01 million and $0.1 million for the years ended December 31, 2022 and 2021, respectively. The Company did not recognize any contract cost impairment losses for the years ended December 31, 2022 and 2021.
Cost of revenues (excluding depreciation and amortization)
Costs of services
Costs of services consist of costs attributable to the Network Development revenue and Media revenue. Costs associated with Network Development consist of costs associated with providing installation, operations and maintenance services, including personnel-related costs associated with delivering services, such as salaries and benefits, and costs to install infrastructure for utility companies. Costs associated with Media revenue consist of costs associated with providing advertising services, including related rental payments on location leases for the
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advertising displays, charging sites, station electricity, and labor costs directly related to service revenue-generating activities.
Costs of products
Costs of products consists primarily of hardware cost and shipping cost. Hardware cost primarily relates to AC and DCFC stations which includes the cost of station chassis, the electric vehicle chargers, media screens, sensors, routers, and computers.
Selling, general and administrative
Selling, general and administrative consists primarily of employee-related costs, including salaries, employee benefits, and stock-based compensation, repair and maintenance expenses on corporate facilities and equipment and marketing. Selling, general and administrative also consist of rebates and incentives received from utility companies for the installation of electric vehicle charging stations and related infrastructure. Additionally, for the years ended December 31, 2022 and 2021 research and development expenses included in selling, general and administrative were $0.9 million and $1.2 million, respectively.
Advertising expenses
The Company expenses advertising expenses as they are incurred. For both the years ended December 31, 2022 and 2021, advertising expenses were $1.3 million, and are included in selling, general and administrative in the accompanying consolidated statements of operations and comprehensive loss. The Company does not capitalize any advertising expenses.
Other expenses, net
Other expenses, net, consist primarily of the miscellaneous expenses or income that are not related to core business operations. For the years ended December 31, 2022 and 2021, other expenses, net primarily relate to property taxes.
Income taxes
The Company uses the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax reporting bases of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts more likely than not expected to be realized.
Management regularly assesses the ability to realize deferred tax assets recorded based upon the available evidence, including such factors as recent earnings history and expected future taxable income on a jurisdiction-by-jurisdiction basis. In the event that the Company changes its determination as to the amount of realizable deferred tax assets, the Company will adjust its valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.
The Company accounts for uncertain tax positions in accordance with accounting standards which clarifies the accounting for uncertainty in income taxes in an enterprise’s financial statements by defining the criterion that an individual tax position must meet for any part of the benefit of that position to be recognized in an enterprise’s financial statements. The accounting standard prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken on a tax return as well as guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As of December 31, 2021, the Company recorded $2.0 million as an uncertain tax position related to deferred revenue. This uncertain tax position was released during the year ended December 31, 2022. The
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Company’s policy is to include penalties and interest related to income tax matters within the Company’s benefit from (provision for) income taxes.
Stock-based compensation
The Company accounts for all share-based payment awards granted to employees and non-employees based on the fair value of the awards on the date of the grant. For service-based awards, stock-based compensation is recognized in the consolidated statements of operations and comprehensive loss over the period during which the employee is required to perform service in exchange for the award (generally the vesting period of the award). The Company estimates the fair value of stock options on the date of grant using the Black-Scholes OPM. The grant-date fair value of option awards is based upon the fair value of the Company’s common stock as of the date of grant, as well as estimates of the expected term of the awards, expected common stock price volatility over the expected term of the option awards, risk-free interest rates and expected dividend yield. Forfeitures are recognized as they occur. Compensation cost is recognized over the vesting period of the applicable award using the straight-line method. For service and performance-based restricted stock units and awards, the fair value is based on the closing price for the Company's common stock on the date of the grant. Compensation cost for service-based awards is recognized on a straight-line basis over the requisite service period. Compensation cost for performance-based awards is recognized on a straight-line basis over the requisite service period if it is probable that the performance condition will be satisfied given the awards vest upon achievement of the performance condition. For market-based awards, the fair value is measured on the grant date using a Binomial Lattice Valuation Model (“BLM”). The requisite service period is also determined through the use of a BLM. Compensation cost associated with awards granted with market-based vesting conditions is recognized over the requisite service period for each tranche using the accelerated attribution method even if the market condition is never satisfied.
Comprehensive loss and accumulated other comprehensive income
The components of comprehensive loss consist of net loss and changes in foreign currency exchange rate translation. The changes in foreign currency exchange rate translation are excluded from earnings and reported as a component of stockholders’ (deficit) equity. The foreign currency translation adjustment results from those subsidiaries not using the United States dollar as their functional currency since the majority of their economic activities are primarily denominated in their applicable local currency. Accordingly, all assets and liabilities related to these operations are translated at the current exchange rates at the end of each period, whereas revenues and expenses are translated at average exchange rates in effect during the period. The resulting cumulative translation adjustments are recorded directly to the accumulated other comprehensive income account in stockholders’ (deficit) equity. For the years ended December 31, 2022 and 2021, the Company had total comprehensive loss of $154.3 million and $276.4 million, respectively, and accumulated other comprehensive income of $0.5 million and $0.2 million, respectively.
COVID-19 impact
On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of COVID-19. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The COVID-19 pandemic may continue to have a negative impact on the operations and customers of the Company. The impact on the business and the results of operations included decreased customer demand for advertising space due to the decrease in foot traffic at the site hosts as consumers were subject to stay at home and shelter-in-place orders around the United States, as well as the temporary halting of construction activities of the charging stations. In addition, the ability of the employees and the suppliers' and customers' employees to work may be impacted by individuals contracting or being exposed to COVID-19, which may significantly hamper the operations. Despite the adverse impacts, there are no indications that the COVID-19 pandemic has resulted in a material decline in the carrying value of any assets, or a material change in the estimate of any contingent amounts recorded in the consolidated balance sheet as of December 31, 2022. However, there is uncertainty as to the duration and overall impact of the COVID-19 pandemic. The consolidated financial statements reflect estimates and assumptions made by management as of December 31, 2022 and management continues to monitor the potential impact. Events and changes in circumstances arising after December 31, 2022, including those resulting from the
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impacts of the COVID-19 pandemic, will be reflected in management’s estimates for future periods. The Company applied for and received a $3.2 million loan under SBA as a part of the PPP Loan. While the Company received full forgiveness for the loan, the full amount of the loan was repaid in the year ended December 31, 2021 (see Note 9 - Debt Facilities).
Recent accounting pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The ASU was subsequently amended by ASU 2018-19, ASU 2019-05 and ASU 2019-10. The guidance amended reporting requirements for credit losses for assets held at amortized cost basis and available-for-sale debt securities. For available-for-sale debt securities, credit losses will be presented as an allowance rather than as a write-down. In addition, the length of time a security has been in an unrealized loss position will no longer impact the determination of whether a credit loss exists. ASU 2016-13, as subsequently amended for various technical issues, is effective for public, smaller reporting companies after December 15, 2022, and for interim periods within those fiscal years. The Company will adopt this ASU effective January 1, 2023 and does not expect it will have a material impact on its unaudited condensed consolidated financial statements.
Note 3 - Liquidity
The Company's consolidated financial statements are prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The accompanying Consolidated Financial Statements do not reflect any adjustments relating to the recoverability and reclassifications of assets and liabilities that would be necessary if the Company is unable to continue as a going concern. Additional cash obligations in the next twelve months are expected to include investments in the operations and purchases to expand the business. Management has considered conditions and events which provide substantial doubt about the Company's ability to continue as a going concern over the 12 months following the issuance of the consolidated financial statements. The Company concluded that there is substantial doubt that the Company can continue as a going concern in the next twelve months based on reasonable information available to us as of the date of this analysis. No assurances can be provided that additional funding will be available at terms acceptable to the Company, if at all. If the Company is unable to raise additional capital, the Company may significantly curtail its operations, modify strategic plans and/or dispose of certain operations or assets. For the year ended December 31, 2022, the Company incurred a net loss of $154.6 million and had negative cash flows from operating activities of $117.2 million. As of December 31, 2022, the Company had an accumulated deficit of 583.4 million and cash of $2.6 million.
ATM Proceeds
During the year ended December 31, 2022, the Company received $4.9 million of proceeds, net of commissions, from the sale and issuance of 4,251,284 shares of Class A common stock issued in “at-the-market” offerings pursuant to a Controlled Equity Offering Sales AgreementSM dated September 26, 2022. The offer and sale of these shares has been registered under the Securities Act, pursuant to the Company’s Registration Statement on Form S-3 (File No. 333-267374), which was originally filed with the SEC on September 12, 2022 and declared effective by the SEC on September 20, 2022, the base prospectus contained within the Registration Statement, and a prospectus supplement that was filed with the SEC on September 26, 2022. For more information, see Item 2. Management’s Discussion and Analysis of Financial Conditions and Results of Operations - Financial Condition, Liquidity, and Capital Resources - Shelf Registration Statement and At-the-Market Equity Offerings.
Agreement and Plan of Merger
On January 17, 2023, Volta entered into the Merger Agreement with Shell and Merger Sub. The Merger Agreement provides that, upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will merge with and into Volta, with Volta continuing as the surviving corporation and as a wholly-owned subsidiary of Shell. See Note 17 - Subsequent Events for further more details. In the event the Merger Agreement is not adopted
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by Volta stockholders, or if the merger is not completed for any other reason (other than pursuant to Volta’s acceptance of a superior proposal), it is likely that Volta would be required to promptly raise additional debt or equity capital, which may not be available, or commence voluntary bankruptcy proceedings.
As of December 31, 2022, the Company had $12.9 million outstanding on a term loan. The term loan agreement requires the Company to be in compliance with certain financial covenants, including maintaining a minimum cash balance and total and average revenue covenants. If the Company does not raise additional capital it is unlikely the financial requirements will be met in future periods and the lenders will have the right to exercise remedies, including an increase in the interest rate by 3.0% per annum, and an option to require repayment of the loan in the event of default. For more information on the term loan agreement, see Note 9 - Debt Facilities.
Note 4 - Acquisitions
On April 21, 2021, the Company completed its acquisition of certain assets of 2Predict, from Praveen Mandal, the Company’s former Chief Technology Officer. 2Predict uses artificial intelligence techniques to run next-level analytics on large data sets. 2Predict's data scientists provide advanced machine learning solutions and some of them will continue to assist in developing Volta’s technology. The purchase price was $1.4 million, comprising $0.2 million cash and 182,188 issued shares of Volta Class A common stock valued at $1.2 million, paid on the acquisition date.
The acquisition of 2Predict was accounted for as a Business Combination according to ASC 805-10, Business Combinations. This method requires, among other things, that assets acquired and liabilities assumed in a Business Combination be recognized at their fair values as of the acquisition date. During 2021, the Company incurred immaterial third-party acquisition costs. These expenses were included in general and administrative expense of the consolidated statements of operations and comprehensive loss for the year ended December 31, 2021.
The Company recorded net assets acquired of $1.4 million, including definite-lived intangible assets of $1.2 million and goodwill of $0.2 million. Definite-lived intangible assets primarily consist of intellectual property of 2Predict, for which the weighted-average useful life is 1.5 years. Goodwill is primarily attributed to the future economic benefits arising from assets acquired that could not be individually identified and separately recognized, such as assembled workforce.
The results of operations of 2Predict are included in the accompanying consolidated statements of operations and comprehensive loss from the date of acquisition. Pro forma results of operations for this acquisition have not been presented because the results of operations are not material to the consolidated statements of operations and comprehensive loss.
Note 5 - Reverse Recapitalization
As discussed in Note 1 - Description of Business, on the Closing Date, Volta Inc. (formerly Tortoise Corp II) consummated the Reverse Recapitalization and Legacy Volta received proceeds of $350.1 million. The proceeds included $300.0 million from certain accredited investors that agreed to purchase 30,000,000 shares of Volta Class A common stock in a private placement in connection with the Reverse Recapitalization (the “PIPE Financing”), and is net of $242.2 million in redemptions from issuance of common stock upon the Closing and includes $9.0 million of transaction costs of which the entire amount was paid by Legacy Volta as of December 31, 2021. Subsequent to the Closing, the Company received refunds for the over-payment of transaction costs of $4.1 million as of December 31, 2021. These transaction costs consist of legal, accounting, and other professional services directly related to the Reverse Recapitalization. These one-time direct and incremental transaction costs incurred by the Company were recorded based on the activities to which the costs relate and the structure of the transaction; cost relating to the issuance of equity is recorded as a reduction of the amount of equity raised, presented in additional paid in capital, while all costs related to the warrants were estimated and charged to expense. The cash outflows related to these costs were presented as financing activities on the Company’s consolidated statement of cash flows.
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On the Closing Date, each holder of Legacy Volta’s Class A common stock received approximately 1.2135 shares of Volta’s Class B common stock, par value $0.0001 per share, and each holder of Legacy Volta’s Class B common stock received approximately 1.2135 shares of the Company’s Class A common stock, par value $0.0001 per share. See Note 10 - Warrants and Note 11 - Stockholders' (Deficit) Equity and Stock-Based Compensation for additional details of the Company’s stockholders’ equity prior to and subsequent to the Reverse Recapitalization.
All equity awards of Legacy Volta were assumed by the Company and converted into comparable equity awards that are settled or exercisable for shares of the Company’s Class A or Class B common stock based on an exchange ratio of approximately 1.2135.
Each Public Warrant and Private Warrant was unexercised at the time of the Reverse Recapitalization and was assumed by the Company and represents the right to purchase shares of the Company’s Class A common stock. Please refer to Note 10 - Warrants for additional detail.
The Reverse Recapitalization was accounted for with Legacy Volta as the accounting acquirer and Tortoise Corp II as the acquired company for accounting purposes. Legacy Volta was determined to be the accounting acquirer since Legacy Volta’s stockholders prior to the Reverse Recapitalization had the greatest voting interest in the combined entity, Legacy Volta comprises all of the ongoing operations and Legacy Volta’s senior management directs operations of the combined entity. Accordingly, all historical financial information presented in the consolidated financial statements represents the accounts of Legacy Volta and its wholly owned subsidiaries. Net assets were stated at historical cost consistent with the treatment of the transaction as a reverse recapitalization of Volta Inc.
Note 6 - Fair Value Measurements
The Company uses a three-tier fair value hierarchy to prioritize the inputs used in the fair value measurements. All of the Company's cash and cash equivalents are classified within Level 1 as they are valued using quoted market prices or alternative pricing sources. The Public Warrants were classified as Level 1 due to the use of an observable market quote in an active market. The senior secured term loan is classified within Level 2 as it is valued using market-based risk measurements that are indirectly observable, such as credit risk. Private Warrants are classified within Level 3. In determining the fair value of the private placement warrant liability, the Company used the BLM that assumes optimal exercise of the Company’s redemption option at the earliest possible date.
The following tables present information about the Company’s liabilities that are measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.
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| Carrying Amount | | | Total | | Level 1 | | Level 2 | | Level 3 |
| December 31, 2021 | | | | (in thousands) |
| Liabilities | | | | | | | | | | |
| | | | | | | | | | |
| Senior secured term loan | $ | 39,995 | | | | $ | 41,242 | | | $ | — | | | $ | 41,242 | | | $ | — | |
| | | | | | | | | | |
| Private warrants | 11,036 | | | | 11,036 | | | — | | | — | | | 11,036 | |
| Public warrants | 16,036 | | | | 16,036 | | | 16,036 | | | — | | | — | |
| Total | $ | 67,067 | | | | $ | 68,314 | | | $ | 16,036 | | | $ | 41,242 | | | $ | 11,036 | |
| | | | | | | | | | |
| December 31, 2022 | | | | | | | | | | |
| Liabilities | | | | | | | | | | |
| | | | | | | | | | |
| Senior secured term loan | $ | 12,483 | | | | $ | 12,923 | | | $ | — | | | $ | 12,923 | | | $ | — | |
| | | | | | | | | | |
| Private warrants | 386 | | | | 386 | | | — | | | — | | | 386 | |
| Total | $ | 12,869 | | | | $ | 13,309 | | | $ | — | | | $ | 12,923 | | | $ | 386 | |
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Level 2 valuation - senior secured term loan
The Company measures the fair value of the senior secured term loan using discounted cash flows and market-based expectations for credit risk and market risk.
Level 3 valuation - Private Warrants
As of December 31, 2022 and 2021, the Company has Private Warrants defined and discussed in Note 10 - Warrants. The warrants are measured at fair value on a recurring basis at the end of each reporting period using a BLM. The BLM's primary unobservable input utilized in determining the fair value of the Private Warrants is the expected volatility of the common stock. The expected volatility as of the Closing was derived from observable Public Warrants pricing. The expected volatility as of subsequent valuation dates was implied from the Company’s own Public Warrants pricing. Accordingly, the Private Warrants are classified as Level 3 financial instruments. The Private Warrants were valued as of December 31, 2022 using the estimated fair value price of $0.07 per Private Warrant, and valued as of December 31, 2021 using the estimated fair value price of $1.86 per Private Warrant. The following table provides quantitative information regarding Level 3 Private Warrants fair value measurement inputs at their measurement dates:
| | | | | | | | | | | |
| December 31, 2022 | | December 31, 2021 |
| Expected dividend yield | — | % | | — | % |
| Risk-free interest rate | 4.10 | % | | 1.18 | % |
| Expected volatility | 214.40 | % | | 132.50 | % |
| Expected term (in years) | 3.65 | | 4.5 |
The changes in the fair value of the Private Warrants were as follows:
| | | | | |
| (in thousands) |
| December 31, 2020 | $ | 698 | |
| Increase in fair value of Preferred Stock warrants | 1,246 | |
| Release of liability upon exercise of Preferred Stock warrants | (1,944) | |
| Addition of Private Warrants | 11,036 | |
| Decrease in fair value of Private warrants | — | |
| December 31, 2021 | $ | 11,036 | |
| Decrease in fair value of Private warrants | (10,650) | |
| December 31, 2022 | $ | 386 | |
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There were no transfers of financial instruments between levels of the hierarchy for the years ended December 31, 2022 and 2021.
Note 7 - Property and Equipment, Net
Property and equipment, net, as of December 31, 2022 and 2021, consists of the following:
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| December 31, 2022 | | December 31, 2021 |
| (in thousands) |
| Charging stations and digital media screens | $ | 131,107 | | | $ | 79,104 | |
| Construction in progress: station hardware | 100,895 | | | 33,434 | |
| Capitalized research and development equipment | 2,451 | | | 2,689 | |
| Leasehold improvements | 1,990 | | | 856 | |
| Computer and office equipment | 1,727 | | | 1,459 | |
| Capitalized software | 1,622 | | | 888 | |
| Development in progress: software | 4,573 | | | 86 | |
| Furniture | 229 | | | 229 | |
| Other fixed assets | 4,573 | | | 3,736 | |
| Total property and equipment | 249,167 | | | 122,481 | |
| Less accumulated depreciation and amortization | (41,821) | | | (24,753) | |
| Property and equipment, net | $ | 207,346 | | | $ | 97,728 | |
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Construction in progress is primarily composed of the charging stations that are pending installation completion. Depreciation and amortization expenses, excluding intangible amortization, were $18.6 million and $10.6 million for the years ended December 31, 2022 and 2021, respectively.
Note 8 - Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities as of December 31, 2022 and 2021 consists of the following:
| | | | | | | | | | | |
| December 31, 2022 | | December 31, 2021 |
| (in thousands) |
| | | |
| Charging station expenses | $ | 10,499 | | | $ | 5,393 | |
| Lease incentive liability | 1,746 | | | 2,354 | |
| Employee related expenses | 6,374 | | | 9,239 | |
| | | |
| Deposit liability | — | | | 850 | |
| Accrued interest | — | | | 1,294 | |
| Severance | 325 | | | — | |
| Other | 501 | | | 1,038 | |
| Total accrued expenses and other liabilities | $ | 19,445 | | | $ | 20,168 | |
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Charging station expenses consist primarily of accrued installation costs and rent expenses. Accrued employee expenses consist of accrued bonuses and commissions. Lease incentive liability consists of payments received in excess of the SSP for performance obligations related to Network Development arrangements. These liabilities are recorded in ROU assets upon lease commencement.
Note 9 - Debt Facilities
The Company’s outstanding debt instruments as of December 31, 2022 and 2021 are as follows:
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| December 31, 2022 | | December 31, 2021 |
| (in thousands) |
| | | |
| Term loans payable | $ | 12,923 | | | $ | 40,833 | |
| Less current maturities, net of debt issuance | 12,483 | | | 15,998 | |
| Less unamortized debt issuance costs, non-current portion | 440 | | | 838 | |
| Total loans payable, net of unamortized debt issuance costs and current term loan payable | $ | — | | | $ | 23,997 | |
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Term loans payable
On June 19, 2019, the Company entered into a term loan agreement that provides for senior secured term loan facilities of up to $44.0 million, and on November 25, 2020, the maximum borrowings were increased to $49.0 million. The term loan bears interest on the total outstanding balance at 12% per annum and is secured by certain qualifying assets of the Company. Principal payments are due in equal monthly installments which began on July 1, 2021, and the term loan matures on June 19, 2024. Total payments on the principal balance for the years ended December 31, 2022 and December 31, 2021 were $27.9 million and $8.2 million, respectively. The term loan agreement contains certain covenants pertaining to reporting and financial requirements, as well as negative and affirmative covenants. If the Company does not meet its reporting requirements, the lenders have the right to request remedies, including an increase in the interest rate by 3.0% per annum, and an option to call the loan in the event of default. The lenders agreed to waive their right to call the debt as a result of violations of certain covenants. These provisions expire on the earlier of loan termination, when the facility is fully drawn on, or two years after the Closing Date. The Company is in compliance with all covenants in relation to the year ended December 31, 2022. In March 2022 certain additional covenants pertaining to investments by the Company in its foreign subsidiaries Volta Canada Inc., Volta Charging Germany GmbH and Volta France SARL were implemented through an amendment to the term loan agreement. The amendment requires that investments in such foreign subsidiaries shall not exceed 125% of funds held in escrow. As of September 30, 2022, the Company had funded $12.9 million into an escrow account to cover projected investments in such foreign subsidiaries, which was presented as restricted cash on the consolidated balance sheets as of September 30, 2022. The term loan agreement was further amended in September 2022 to permit the Company to sell shares of its common stock in at-the-market offerings. In October 2022, pursuant to a limited waiver to the term loan agreement, the Company released all of the funds in the escrow account of $12.9 million to the agent as a voluntary prepayment of the obligations owed under the term loan. The limited waiver maintains the funding requirement for the escrow account and extends it to include Volta Rakko B.V. and Rakko Holding B.V. in the Netherlands. As of December 31, 2022 and 2021, $12.9 million and $40.8 million of the principal was outstanding, and there was a debt discount of $0.4 million and $0.8 million, related to debt issuance costs, respectively. As of December 31, 2022, there was no accrued interest. As of December 31, 2021, accrued interest was $1.3 million.
Term loan payments by period as of December 31, 2022 are as follows:
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| Fiscal Year | (in thousands) |
| 2023 | 12,923 | |
| |
| |
| $ | 12,923 | |
PPP loan
In April 2020 the Company applied for and received a small business loan of $3.2 million through the PPP Loan. Although the Company received full forgiveness for the loan as the entire amount was used for eligible expenses under the program, the Company paid the entire balance of the PPP loan on October 12, 2021.
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Financing obligations
For one customer, the Company has entered into multiple contracts to sell media-enabled charging stations and leaseback the digital media screens for a period of up to 10 years. The leaseback of the digital media screen is in excess of its useful life of 5 years. Therefore, the consideration received equal to relative standalone selling price for the digital media screens has been recorded as a financing transaction. This financing arrangement has been amortized over its 5-year term at the Company’s incremental borrowing rate at the time of the transaction. As of both December 31, 2022 and 2021, the current portions of the financing obligation were $0.9 million, which were included within accrued expenses and other current liabilities in the accompanying consolidated balance sheets. Non-current portions as of December 31, 2022 and 2021 were $2.4 million and $3.1 million, respectively, which were included within other non-current liabilities on the accompanying consolidated balance sheets. The Company’s incremental borrowing rate for each of these transactions has ranged between 6.0%-17.9%.
As of December 31, 2022 future payments under financing obligations were as follows:
| | | | | |
| Fiscal Year | (in thousands) |
| 2023 | $ | 1,198 | |
| 2024 | 1,215 | |
| 2025 | 810 | |
| 2026 | 408 | |
| Thereafter | 529 | |
| Total future payments | 4,160 | |
| Less amount representing interest | 883 | |
| Total financing obligations | $ | 3,277 | |
Note 10 - Warrants
Legacy Volta Preferred Stock warrants
In connection with the Company’s prior debt financing agreements, Legacy Volta issued preferred stock warrants to purchase shares of Legacy Volta Series B preferred stock. During 2015, the Company issued warrants to purchase up to 209,029 shares of Series B preferred stock at an exercise price of $1.0475 per warrant expiring in July 2025.
On August 25, 2021, 208,993 shares of Legacy Volta preferred stock warrants were converted through a cashless exercise in accordance with the terms of the original warrant agreement to 253,613 shares of Class A common stock due to the application of the exchange ratio of approximately 1.2135.
As of December 31, 2022 and 2021, none of the Legacy Volta Preferred Stock warrants remain outstanding.
Legacy Volta common stock warrants
In connection with the Legacy Volta Series D issuance, the Company issued equity classified warrants to purchase 381,679 shares of Legacy Volta Class B common stock at an exercise price of $1.31, to the existing investors, during the year ended December 31, 2020. The Company valued the warrants at $0.76 per share upon issuance for a total amount of $0.3 million. As the warrants were issued in connection with the issuance of Legacy Volta preferred stock, the Legacy Volta preferred stock had equal and offsetting equity issuance costs of $0.3 million recorded in the consolidated balance sheet as of December 31, 2020. At Closing, each warrant to purchase Legacy Volta common stock was automatically converted to a warrant to purchase a number of shares of Volta Class A common stock equal to the product of (a) the number of shares of Legacy Volta common stock subject to such Legacy Volta warrant and (b) 1.2135, rounding down to the nearest whole number of shares, at an exercise price per share equal to
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(i) the exercise price per share for the shares of Legacy Volta common stock subject to such Legacy Volta warrant divided by (ii) 1.2135, rounding up to the nearest whole cent.
During the year ended December 31, 2021, 182,025 shares of Volta Class A common stock warrants were exercised at an exercise price of $0.01 per share for an immaterial amount.
During the year ended December 31, 2021, 188,638 shares of Volta Class A common stock warrants were exercised through a cashless exercise. As of December 31, 2022 and 2021, 9,773,835 Volta Class A common stock warrants remained outstanding.
Public and Private warrants
As the accounting acquirer, Legacy Volta, is deemed to have assumed 8,621,715 Public Warrants and 5,933,333 Private Warrants that were held by TortoiseCorp II at an exercise price of $11.50. In accordance A&R Warrant Agreement, dated August 26, 2021, between Volta, Computershare Inc. and Computershare Trust Company, N.A., collectively as warrant agent, the Public Warrants and Private Warrants for Class A common shares became exercisable on September 15, 2021. The warrants will expire five years after the completion of the Reverse Recapitalization, or earlier upon redemption or liquidation.
The Private Warrants do not meet the criteria for equity treatment and must be recorded as liabilities on the consolidated balance sheets. Accordingly, the Company classifies the Private Warrants as liabilities and records them at fair value. The Public Warrants did not meet the criteria for equity treatment from the issuance date through June 2022. During June 2022, changes in the Company's capital stock structure caused the Public Warrants to be eligible for equity classification. Accordingly the Company reclassified the fair value of the Public Warrants as of the date of the change in classification to additional paid-in-capital and was no longer required to make any additional fair value assessments in future periods. There was no warrant exercise activity during the year ended December 31, 2022. For the year ended December 31, 2021, 275 Public and no Private Warrants were exercised.
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| Private Warrants | | Public Warrants | | Total Public and Private Common Stock Warrants |
| Outstanding at December 31, 2020 | — | | | — | | | — | |
| Common stock warrants added upon the Reverse Recapitalization | 5,933,333 | | | 8,621,715 | | | 14,555,048 | |
| Warrants exercised | — | | | (275) | | | (275) | |
| Outstanding at December 31, 2021 | 5,933,333 | | | 8,621,440 | | | 14,554,773 | |
| Warrants exercised | — | | | — | | | — | |
| Outstanding at December 31, 2022 | 5,933,333 | | | 8,621,440 | | | 14,554,773 | |
The Private Warrants and the Public Warrants have substantially similar terms, except that the Private Warrants and Class A shares upon exercise of the Public Warrants were not transferable, assignable or salable until 30 days after the completion of the Reverse Recapitalization, subject to certain limited exceptions. Additionally, the Private Warrants will be non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Warrants will be redeemable and exercisable by such holders and the same basis as the Public Warrants.
Once the warrants become exercisable, the outstanding warrant can be redeemed in whole not in part and upon a minimum of 30 days’ prior written notice of redemption in the following two options:
•If the last sale price of Class A shares equals or exceeds $18.00 per share (as adjusted for share sub-divisions, share dividends, reorganizations, recapitalizations and the like) for any 20 trading days within
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a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders. In that case, the Company can redeem the outstanding warrants at a price of $0.01 per warrant.
•Commencing 90 days after the warrants become exercisable, if the last sale price of Class A shares equal or exceeds $10.00 per share (as adjusted for share sub-divisions, share dividends, reorganizations, recapitalization and the like) on the trading day prior to the date on which the Company sends a notice of redemption to the warrant holders. The Company can redeem the outstanding warrants for Volta Class A common shares a price equal to a number of Class A shares to be determined by reference to an agreed table based on the redemption date and the “fair market value” of Class A shares.
No fractional shares will be issued upon exercise of the warrants. If, upon exercise of the warrants, a holder would be entitled to receive a fractional interest in a share, the Company will, upon exercise, round down to the nearest whole number the number of shares of Class A common stock to be issued to the warrant holder.
Note 11 - Stockholders' (Deficit) Equity and Stock-Based Compensation
Prior to the Reverse Recapitalization, Legacy Volta had two classes of authorized common stock: Legacy Volta Class A common stock and Legacy Volta Class B common stock. Unvested shares issued upon early exercise of stock options for cash were not considered outstanding for accounting purposes because the employees holding these awards were not entitled to the rewards of stock ownership. There have been no early exercises other than those issued in exchange for partial recourse notes as of December 31, 2021. The holders of Legacy Volta Class A common stock were entitled to one vote per share on any matter submitted to a vote of the stockholders of the Company; holders of Legacy Volta Class B common stock were entitled to receive dividends whenever funds were legally available and when declared by the Board.
Reverse Recapitalization
On the Closing Date and in accordance with the terms and subject to the conditions of the Reverse Recapitalization, each share of the Legacy Volta Class A common stock and Legacy Volta Class B common stock, par value $0.0001 per share, was canceled and converted into the right to receive the applicable portion of the Reverse Recapitalization composed of the Company’s Class B common stock and Company's Class A common stock, par value $0.0001 per share, respectively, as determined pursuant to the share conversion ratio. The share conversion ratio is approximately 1.2135.
PIPE Financing
Concurrently with the execution of the Business Combination Agreement, certain accredited investors entered into subscription agreements, each dated February 7, 2021, pursuant to which the investors agreed to purchase 30,000,000 shares of the Company’s Class A common stock in a private placement for aggregate gross proceeds of $300.0 million.
Convertible Preferred Stock
Prior to the Closing, Legacy Volta had shares of Series A, Series B, Series C, Series C-1, Series C-2, Series D, and Series D-1 convertible preferred stock outstanding. Upon the Closing, the outstanding shares of Legacy Volta preferred stock were converted into shares of Legacy Volta Class B common stock then converted into Class A common stock of the Company at approximately 1.2135 per share, the exchange ratio established in connection thereof the Reverse Recapitalization. The following summarized the Company’s Preferred Stock conversion immediately after the Reverse Recapitalization:
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| | Preferred Shares | Conversion Ratio | Common stock |
| Series A redeemable convertible Preferred Stock | 7,363,856 | | 1.2135 | | 8,936,039 | |
| Series B redeemable convertible Preferred Stock | 11,090,568 | | 1.2135 | | 13,458,404 | |
| Series C redeemable convertible Preferred Stock | 18,581,768 | | 1.2135 | | 22,548,976 | |
| Series C-1 redeemable convertible Preferred Stock | 665,428 | | 1.2135 | | 807,497 | |
| Series C-2 redeemable convertible Preferred Stock | 7,675,798 | | 1.2135 | | 9,314,581 | |
| Series D redeemable convertible Preferred Stock | 13,266,042 | | 1.2135 | | 16,098,342 | |
| Series D-1 redeemable convertible Preferred Stock | 8,283,574 | | 1.2135 | | 10,052,117 | |
| Total | 66,927,034 | | | 81,215,956 | |
Company’s common stock outstanding
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| Authorized Shares | Issued and Outstanding Shares |
| December 31, 2022 | | |
| Volta Class A common stock | 350,000,000 | | 174,198,246 | |
| Volta Class B common stock | 50,000,000 | | — | |
| Total Common Stock | 400,000,000 | | 174,198,246 | |
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| December 31, 2021 | | |
| Volta Class A common stock | 350,000,000 | | 152,218,214 | |
| Volta Class B common stock | 50,000,000 | | 9,887,185 | |
| Total Common Stock | 400,000,000 | | 162,105,399 | |
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Volta Class A and Volta Class B common stock
Each holder of Volta Class A common stock has the right to one vote per share of Volta Class A common stock, and each holder of Volta Class B common stock has the right to ten votes per share of Volta Class B common stock held of record by such holder. Any dividends or distributions will be treated on a per share basis for each class. In the event a dividend is paid in the form of shares of Volta Class A common stock or Volta Class B common stock then holders of Volta Class A common stock will receive shares of Volta Class A common stock and holders of Volta Class B common stock will receive shares of Volta Class B common stock, with holders of shares of Volta Class A common stock and Volta Class B common stock receiving, on a per share basis, an identical number of shares of Volta Class A common stock or Volta Class B common stock, as applicable.
Subject to any preferential or other rights of any holders of Volta Preferred Stock then outstanding, upon the liquidation, dissolution or winding up of Volta, whether voluntary or involuntary, holders of Volta Class A common stock and Volta Class B common stock are entitled to receive ratably all assets of Volta available for distribution to its stockholders. The holders of Volta Class A and Class B common stock do not have preemptive, subscription, redemption or conversion rights. The Volta Class B common stock is convertible into shares of Volta Class A common stock on a one-to-one basis at the option of the holders or automatically upon predetermined events of the Volta Class B common stock at any time upon written notice to Volta.
Volta Preferred Stock
The Certificate of Incorporation of Volta filed with the Secretary of State of the State of Delaware on August 26, 2021, as the same may be amended, supplemented or modified from time to time provides that shares of Volta
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preferred stock may be issued from time to time in one or more series up to 10,000,000 shares. No such shares have been issued as of December 31, 2022.
Shares reserved for issuance
The Company has the following shares of common stock reserved for future issuance, on an as-if converted basis:
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| December 31, 2022 | | December 31, 2021 |
| 2022 ATM Plan Reserve | 70,748,716 | | | — | |
| Shares available for grant – 2021 Equity incentive plan | 25,500,119 | | | 14,357,382 | |
| Unvested restricted stock units | 18,391,859 | | | 29,688,046 | |
| Legacy Volta Class A common stock warrants | 9,773,835 | | | 9,773,835 | |
| Options outstanding | 6,336,542 | | | 11,464,745 | |
| Outstanding Public Warrants | 8,621,440 | | | 8,621,440 | |
| Outstanding Private Warrants | 5,933,333 | | | 5,933,333 | |
| Shares available for purchase - 2021 ESPP plan | 3,715,944 | | | 3,715,944 | |
| Vested restricted stock units, not yet released | 173,303 | | | — | |
| Total shares of common stock reserved | 149,195,091 | | | 83,554,725 | |
Employee Stock Purchase Plan
In connection with the Reverse Recapitalization, effective on August 26, 2021, the Board and Tortoise Corp II’s shareholders adopted the 2021 Employee Stock Purchase Plan (the “2021 ESPP”) to allow employees of Volta, under Section 423 of the Internal Revenue Code of 1986 (the “Code”), and its service providers (outside Section 423 of the Code) to purchase shares of Class A common stock at a discount through payroll deductions and to benefit from stock price appreciation, thus enhancing the alignment of employee and stockholder interests.
The 2021 ESPP allows eligible employees and service providers to purchase shares of the Company’s common stock with a percentage or maximum dollar amount discounted through payroll deductions of up to 15% of eligible employee compensation, subject to any plan limitations. The purchase price of shares of common stock acquired by eligible employees or service providers will not be less than the lesser of: (i) an amount equal to 85% of the fair market value of the shares of common stock on the offering date; or (ii) an amount equal to 85% of the fair market value of the shares of common stock on the applicable purchase date. No offerings or purchases of common stock shares have taken place as of December 31, 2022. Subject to capitalization adjustments, the 2021 ESPP provides for the issuance of up to 3,715,944 shares of common stock as of December 31, 2022.
Equity Incentive Plans
Upon the Closing Date, Volta's Board adopted a new plan (which amended and restated the prior plan), the 2021 Equity Incentive Plan (“2021 EIP”) effective as of August 26, 2021. The 2021 EIP authorizes stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”) and performance-based awards, as well as certain other awards. As of December 31, 2022, 25,500,119 shares of common stock were available and reserved for issuance under the 2021 EIP. The number of shares available and reserved for issuance under the 2021 EIP include the shares reserved for issuance under the Legacy Volta 2014 Equity Incentive Plan (“2014 EIP”). On the first day of each fiscal year beginning with the 2022 fiscal year and ending on (and including) the first day of the 2031 fiscal year, the number of shares available for issuance under the 2021 EIP will automatically increase in an amount equal to the lesser of (i) five percent (5%) of the outstanding shares on the last day of the immediately preceding fiscal year and (ii) such number of shares determined by the Board, with such shares to be Class A common stock. Under the 2021 EIP, the Company can grant stock options, stock appreciation rights, restricted stock, RSUs and certain other awards which are settled in the form of common shares under the 2021 EIP. No further awards will be granted under the Legacy Volta 2014 EIP. Additionally, upon the Closing Date, the Board adopted the Founder Incentive
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Plan (“FIP”) effective August 26, 2021. The FIP authorizes the grant of up to 10,500,000 aggregate RSUs to Scott Mercer and Christopher Wendel (the "Founders").
Stock option activity
Stock option activity and activity regarding shares available for grant under the Plan is as follows: | | | | | | | | | | | | | | | | | | | | | | | |
| Number of options outstanding | | Weighted-average exercise price per share | | Weighted-average remaining contractual life | | Aggregate intrinsic value |
| | | | | (in years) | | (in thousands) |
| January 1, 2021 | 17,558,731 | | | $ | 0.93 | | | 8.2 | | $ | 30,881 | |
| Options granted | 7,248,934 | | | 3.93 | | | | | |
| Options exercised | (12,796,353) | | | 0.79 | | | | | |
| Options forfeited | (544,526) | | | 2.53 | | | | | |
| Options expired | (2,022) | | | 0.73 | | | | | |
| December 31, 2021 | 11,464,764 | | | $ | 2.66 | | | 8.3 | | $ | 53,695 | |
| Options granted | — | | | — | | | — | | | $ | — | |
| Options exercised | (1,743,072) | | | 0.70 | | | | | |
| Options forfeited | (2,770,238) | | | 3.76 | | | | | |
| Options expired | (598,689) | | | 2.74 | | | | | |
| December 31, 2022 | 6,352,765 | | | $ | 2.70 | | | 7.0 | | $ | 16 | |
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Options vested and exercisable as of December 31, 2021 | 4,830,158 | | | $ | 1.30 | | | 7.4 | | $ | 29,176 | |
Options vested and exercisable as of December 31, 2022 | 4,828,793 | | | $ | 2.37 | | | 6.8 | | $ | 16 | |
The aggregate intrinsic value of employee options exercised during the years ended December 31, 2022 and 2021 was $2.3 million and $103.4 million, respectively. The intrinsic value is the difference between the fair value of the Company’s common stock at the date of the exercise and the exercise price for in-the-money options.
The total fair value of options vested during the years ended December 31, 2022 and 2021 was $8.5 million and $7.1 million, respectively.
RSUs
In accordance with the FIP, the Company granted 10,500,000 RSUs to the founder and co-founder in August 2021. The fair value of the RSUs is measured on the grant date based on the value of the shares on the Closing Date. These grants vest on the earlier of January 1, 2022 or a qualified termination as defined in the FIP. The FIP was adopted upon Closing to replace that certain Volta Management Carve-Out Plan (the "Carve-Out-Plan"), pursuant to which in the event of a "liquidity transaction" (as defined in the Carve-Out Plan), Mr. Mercer and Mr. Wendel would each be eligible to receive 2% of the "aggregate proceeds" (as defined in the Carve-Out Plan), subject to their execution of a release of claims in favor of Legacy Volta. The terms and conditions of the FIP and the grant of RSUs to Mr. Mercer and Mr. Wendel were proposed to be adopted in exchange for the termination of the Carve-Out Plan, and such proposal was approved by the shareholders of Tortoise Corp II.
In accordance with the 2021 EIP, the Company granted RSUs to certain officers, executives, new hires, and key employees in November 2021 and December 2021. The fair value of the RSUs is measured on the grant date based
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on the closing price for the Company’s Class A common stock. Typically, these grants vest over a three-year period from the date of issuance.
In addition to RSUs granted with service-based vesting conditions, the Company also granted RSUs with performance-based and market-based vesting conditions. Performance-based RSUs vest on the date that the Company achieves the targets specified within the grant agreements. The fair value of the awards is measured on the grant date based on the closing price of the Company’s common stock. The Company also granted RSUs with market-based vesting conditions to certain executives and designated employees in November and December 2021. Market-based RSUs vest on the date that the Company's stock price reaches certain thresholds specified within the grant agreements. The fair value of RSUs with market-based vesting conditions is measured on the grant date using a BLM. The requisite service period is also determined through the use of a BLM. Compensation cost associated with awards granted with market-based vesting conditions is recognized using an accelerated attribution method over the requisite service period even if the market condition is never satisfied.
A summary of the RSU activity for the year ended December 31, 2022 was as follows:
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| Number of shares | | Weighted-average grant date fair value |
| January 1, 2021 | — | | | $ | — | |
| RSUs granted | 29,763,009 | | | 10.70 | |
| RSUs vested | — | | | — | |
| RSUs forfeited | (75,000) | | | 12.10 | |
| December 31, 2021 | 29,688,009 | | | $ | 10.70 | |
| RSUs granted | 15,127,877 | | | 2.89 | |
| RSUs vested | (11,558,324) | | | 8.90 | |
| RSUs forfeited | (14,865,703) | | | 8.44 | |
| December 31, 2022 | 18,391,859 | | | $ | 7.83 | |
The weighted-average grant-date fair value of RSUs granted during the twelve months ended December 31, 2022 was $2.89 per share.
In addition to the awards outlined above, the Company approved the grant of 111,168 market-based RSUs and 1,340,974 service-based RSUs that were not yet communicated to employees as of December 31, 2021. As a result, these awards were not considered granted for accounting purposes during the year ended December 31, 2021. No additional market-based RSUs were awarded during 2022.
Restricted Stock Awards
In accordance with the 2014 EIP, the Company granted restricted stock awards (“RSAs”) to certain officers in February 2021. The fair value of the RSAs is measured on the grant date based on the closing price for the Company’s common stock. These awards vested immediately on the date of issuance.
A summary of the restricted stock award activity for the year ended December 31, 2022 was as follows:
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| Number of shares | | Weighted-average grant date fair value |
| January 1, 2021 | | | |
| RSAs granted | 6,916,950 | | | $ | 5.82 | |
| RSAs vested | (6,916,950) | | | $ | 5.82 | |
| RSAs forfeited | — | | | $ | — | |
| December 31, 2021 | — | | | $ | — | |
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There were no RSAs granted during the year ended December 31, 2022.
Stock-based compensation
Stock-based compensation for options is estimated using the Black-Scholes option pricing model on the date of grant. The fair value of all options is amortized on a ratable basis over the required service periods of the awards, which are generally the vesting periods.
The weighted-average assumptions that were used in calculating such values during the year ended December 31, 2021 were as follows:
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| Year ended December 31, 2021 |
| Expected dividend yield | — | % |
| Risk-free interest rate | 0.7 | % |
| Expected volatility | 60.4 | % |
| Expected term (in years) | 5.8 |
The Company has limited historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior for its stock option grants. Therefore, the expected term of options granted is based on the “simplified method” of expected life. There were no options granted during the year ended December 31, 2022 and therefore no fair value calculations were required.
The risk-free interest rate is based on the U.S. Treasury yield for a term consistent with the expected life of the awards in effect at the time of grant.
As the Company does not have a trading history for its common stock prior to the Reverse Recapitalization, the expected stock price volatility for the Company’s common stock was estimated by taking the historic stock price volatility for industry peers based on their price observations over a period equivalent to the expected term of the stock option grants. The Company has no history or expectation of paying cash dividends on its common stock.
In accordance with the 2021 EIP and the FIP, the Company has granted RSUs that are subject to service-based vesting conditions, performance-based vesting conditions and market-based vesting conditions established by the Company’s Compensation Committee at the grant date. Compensation cost for the performance-based RSUs is recognized over the requisite service period if it is probable that the performance condition will be satisfied. The Company interprets the term “probable” to represent a greater than 70% likelihood that an event will occur. As of December 31, 2022, the Company determined that it is not probable that the performance conditions would be satisfied and has not recorded compensation cost associated with the performance-based awards.
Compensation cost associated with market-based RSUs is recognized over the requisite service period using the accelerated attribution method even if the market condition is never satisfied. For the year ended December 31, 2022 and 2021, the Company recognized $9.5 million and $21.6 million in compensation costs associated with market-based RSUs.
The unrecognized compensation expense related to stock options and RSUs was $4.7 million and $24.4 million, at December 31, 2022 respectively, and is expected to be recognized over a weighted average period of 1.93 and 2.93 years, respectively.
The Company estimated the fair value of its market-based RSUs on the grant date using a BLM incorporating the assumptions noted in the table below:
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| Year ended December 31, |
| 2022 | | 2021 |
| Expected dividend yield | — | % | | — | % |
| Risk-free interest rate | 1.5 | % | | 1.3 | % |
| Expected volatility | 90.0 | % | | 95.0 | % |
| Expected term (in years) | 4.6 | | 4.8 |
Significant modifications
In July 2021, in connection with the resignation of the Company’s former chief financial officer, the Board approved the acceleration of 458,314 unvested stock options on the date of her resignation. The exercise period for 140,000 of the options not previously exercised with partial recourse notes was extended such that the vested shares will remain outstanding and exercisable through the original 10-year term of each respective option. The maturity date of the partial recourse notes issued in exchange for early exercises was also extended from the termination date of July 31, 2021 to December 15, 2021. The Company recorded incremental stock-based compensation expense of approximately $2.4 million for this combination of stock option modifications.
In addition, in August 2021, the Board approved the acceleration of all 110,418 stock options for two individuals in connection with their terminations. The modified options post-termination exercise period was extended such that the vested shares will remain outstanding and exercisable through the original 10-year term. The Company recorded incremental stock-based compensation expense of approximately $0.5 million for these stock option modifications.
The stock option modifications were measured as the excess of the fair value of the modified awards over the fair value of the original awards immediately before the modifications. The incremental stock-based compensation was recorded in selling, general and administrative expense, on the consolidated statement of operations for the year ended December 31, 2021.
James DeGraw Modification
Effective June 2, 2022, James DeGraw resigned as an employee and officer of the Company and, in connection therewith, entered into a settlement and consulting agreement with the Company, dated as of June 2, 2022.
In accordance with Mr. DeGraw’s settlement and consulting agreement, unvested RSU awards and stock options were modified on the date of termination of Mr. DeGraw’s employment to accelerate the vesting in full and to extend the post-termination exercise period upon the condition that Mr. DeGraw serve as a consultant to the Company through the first anniversary of the termination date. With the exception of two option grants held by Mr. DeGraw, all of the stock options had previously been exercised with a partial recourse note which was settled prior to the completion of the Reverse Recapitalization. The unvested portion of those early exercised option grants was also modified to accelerate vesting; the effect of this modification was to release the repurchase right for those early exercised options. The stock option modifications were measured as the excess of the fair value of the modified awards over the fair value of the original awards immediately before the modifications. The fair values immediately after these modifications were determined using the closing price of the Company’s common stock on the modification date for the shares already held by Mr. DeGraw through exercise with and settlement of partial recourse notes, which shares were released from the Company’s repurchase right under the respective early exercise agreements.
Additionally, vested unexercised stock options were modified on the termination date to extend the post-termination exercise period from 90 days to the contractual term of the options. The vested stock option modifications were measured as the excess of the fair value of the modified awards over the fair value of the original awards immediately before the modification determined using a Black-Scholes model. Assumptions used to calculate
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incremental expense for the modified vested stock options during the year ended December 31, 2022 were as follows:
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| Year Ended December 31, 2022 |
| Expected dividend yield | — | % |
| Risk-free interest rate | 1.2% - 2.9% |
| Expected volatility | 52.4% - 61.9% |
| Expected term (in years) | 0.3 - 8.6 |
The incremental stock-based compensation expense relating to these modifications was recognized in full in the period of Mr. DeGraw’s termination as there is no further substantive service required for the awards to vest. Further, the Company reversed the expense previously recorded for the RSUs in accordance with Accounting Standards Codification (“ASC”) Topic 718 as the awards were unvested and effectively forfeited and replaced by new RSUs with no service requirement before the completion of the derived requisite service period of the original awards. There was no previously recorded expense for unvested options.
The components of stock-based compensation expense recorded with respect to the modified awards are as follows:
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| (in thousands) | Year Ended December 31, 2022 | | |
| Reversal of previously recorded RSU expense | $ | (605) | | | |
| Incremental expense for modified RSUs | 1,018 | | | |
| Incremental expense for modified stock options | 804 | | | |
| Total stock-based compensation expense | $ | 1,217 | | | |
Scott Mercer and Chris Wendel Modification
On March 26, 2022, Scott Mercer and Chris Wendel resigned from the Board, and Mr. Wendel also resigned as an employee and officer of the Company. Mr. Mercer’s resignation as an employee and officer of the Company was effective as of April 15, 2022.
In accordance with the separate settlement and release agreements, dated as of March 26, 2022, between the Company and Mr. Mercer and Mr. Wendel, respectively, unvested RSU awards with market-based vesting conditions, 5,250,000 of which were held by Mr. Mercer and 4,500,000 of which were held by Mr. Wendel, granted on November 15, 2021, were modified on their respective termination dates to eliminate the service requirement (to be an active employee on the date of achievement of the market condition). Additionally, the unvested stock options held by Mr. Mercer as of April 15, 2022 were modified to accelerate the vesting and vest in full on April 15, 2022. Substantially all of the stock options for the Founders had previously been exercised with partial recourse notes, which were settled prior to the completion of the Reverse Recapitalization. The unvested portion of those early exercised option grants was also modified to accelerate vesting as of each Founder’s termination date; the effect of this modification was to release the repurchase right for those early exercised options. The stock option and market-based RSU modifications were measured as the excess of the fair value of the modified awards over the fair value of the original awards immediately before the modifications. The fair values immediately after these modifications were determined using a BLM for the market-based RSUs, the Black-Scholes model for the unexercised stock option for Mr. Mercer, and the closing price of the Company’s common stock on the modification date for the shares already held by the Founders through exercise with and settlement of partial recourse notes, which shares were released from the Company’s repurchase right under the respective early exercise agreements.
Volta Inc.
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| Notes to Consolidated Financial Statements |
The incremental stock-based compensation expense relating to these modifications has been recorded in full in the period of each Founder’s respective termination as there is no further service requirement from either Founder. Further, the Company has reversed expense previously recorded for the market-based RSUs in accordance with ASC Topic 718 as the awards were unvested and effectively forfeited and replaced by new market-based RSUs with no service requirement before the completion of the derived requisite service period of the original awards.
The components of stock-based compensation expense recorded for modified awards are as follows:
| | | | | | | | |
| Year Ended December 31, 2022 |
| (in thousands) | Chris Wendel | Scott Mercer (a) |
| Reversal of previously recorded market-based RSU expense | $ | (9,879) | | $ | (11,526) | |
| Incremental expense for modified market-based RSUs | 13,290 | | 15,505 | |
| Incremental expense for modified stock options | 3,662 | | 3,451 | |
| Total stock-based compensation expense | $ | 7,073 | | $ | 7,430 | |
(a) For Mr. Mercer’s stock options, the Company recorded stock-based compensation expense of 0.1 million for the year ended December 31, 2022 for awards that continued to vest until his termination on April 15, 2022.
Assumptions used to calculate incremental expense for the modified market-based RSUs using a Monte Carlo valuation during the year ended December 31, 2022 were as follows:
| | | | | | |
| Year Ended December 31, 2022 | |
| Expected dividend yield | — | % | |
| Risk-free interest rate | 2.5 | % | |
| Expected volatility | 90.0 | % | |
| Expected term (in years) | 4.4 | |
All other outstanding unvested equity awards held by the Founders, consisting of 4,000,000 RSUs granted in the fourth quarter of 2021 and 923,695 RSUs granted in the first quarter of 2022 to Mr. Mercer and 2,750,000 RSUs granted in the fourth quarter of 2021 and 742,972 RSUs granted in the first quarter of 2022 to Mr. Wendel were forfeited as of March 26, 2022. This resulted in the reversal of previously recognized stock-based compensation expense of approximately $0.7 million for Mr. Wendel and $1.0 million for Mr. Mercer related to the grants of RSUs for the year ended December 31, 2022.
The incremental stock-based compensation and reversal of previously recorded stock-based compensation was recorded in selling, general and administrative in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2022.
Compensation expense
Compensation expense related to stock-based awards was recorded in selling, general and administrative in the accompanying consolidated statements of operations and comprehensive loss for $30.0 million and $174.0 million for the years ended December 31, 2022 and 2021, respectively.
Partial recourse promissory notes
As of December 31, 2021, the Company had $0.2 million of promissory notes outstanding from employees and former employees, issued for 186,124 restricted stock purchases of Legacy Volta Class A common stock, and 365,605 shares of stock options exercisable for Legacy Volta Class B common stock, respectively. The two remaining outstanding promissory notes for the exercise of stock options represent the aggregate exercise price of the options and carry an interest rate of 2.26%, and the principal and interest are due upon the earlier of (i) the tenth
Volta Inc.
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| Notes to Consolidated Financial Statements |
anniversary of the note’s issuance, or (ii) the date of a change of control. The promissory notes issued are collateralized by the shares issued in exchange for the note and were considered to be partial recourse as they may be surrendered at the then fair market value of a share of common stock as determined by the Board. The remainder up to 50% of the value of the original principal of the notes is collateralized by the assets of the borrowers. The amount payable is not limited to the fair value of the shares at the time of default or maturity. As such, the shares are not considered exercised for accounting purposes and the shares issued are not reflected as outstanding in the consolidated financial statements until the notes are repaid and the underlying stock options have vested.
The promissory notes with current employees were required to be settled upon the Closing. The notes associated with three former employees were not required to be settled upon the change of control and going public and two remained outstanding as of December 31, 2021 in accordance with the terms of each respective note. During the year ended December 31, 2022, amounts due from these former executives were settled by forfeiture of 71,454 shares value at $0.2 million.
Note 12 - Net Loss Per Share
Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. For stock options that were exercised by employees issuing promissory notes to the Company, the shares of common stock issued under such exercises are not included in the calculation of basic net loss per share until the underlying promissory notes are fully paid or forgiven.
Diluted net loss per share is computed in a similar manner, but it also includes the effect of potential common shares outstanding during the period, when dilutive. Potential common shares include outstanding stock options, warrants and RSUs. The dilutive effect of potentially dilutive common shares is reflected in diluted net loss per share by application of the treasury stock method for RSUs, stock options, and warrants. To the extent these potential common shares are antidilutive, they are excluded from the calculation of diluted net loss per share.
The following table presents the computation of basic and diluted net loss per share for the periods presented:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, |
| 2022 | | 2021 |
| Class A Common Shares | | Class B Common Shares | | | Class A Common Shares | | Class B Common Shares | |
| | | | |
| Numerator: | | | | | | | | | |
| Net loss | $ | (150,505) | | | $ | (4,128) | | | | $ | (242,163) | | | $ | (34,432) | | |
| | | | | | | | | |
| | | | | | | | | |
| Denominator: | | | | | | | | | |
| Basic shares: | | | | | | | | | |
| Weighted-average common shares, basic | 165,762,888 | | | 4,545,964 | | | | 59,034,393 | | | 8,393,797 | | |
| | | | | | | | | |
| | | | | | | | | |
| Diluted shares: | | | | | | | | | |
| Weighted-average common shares, diluted | 165,762,888 | | | 4,545,964 | | | | 59,034,393 | | | 8,393,797 | | |
| Net loss per share attributable to common stockholders: | | | | | | | | | |
| Basic | $ | (0.91) | | | $ | (0.91) | | | | $ | (4.10) | | | $ | (4.10) | | |
| | | | | | | | | |
| | | | | | | | | |
| Diluted | $ | (0.91) | | | $ | (0.91) | | | | $ | (4.10) | | | $ | (4.10) | | |
Volta Inc.
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| Notes to Consolidated Financial Statements |
The following weighted average shares of the potentially dilutive outstanding securities for the year ended December 31, 2022 were excluded from the computation of diluted net loss per share because their effect would have been anti-dilutive given the net loss attributable to common shares. Therefore, the diluted net loss per share is the same as the basic net loss per share for the periods presented.
As a result of the Reverse Recapitalization, the Company has retroactively adjusted the weighted-average number of shares of common stock outstanding then by multiplying them by the exchange ratio of approximately 1.2135 used to determine the number of shares of common stock into which they converted. The common stock issued as a result of the redeemable convertible preferred stock conversion on the Closing Date was included in the basic and diluted net loss per share calculation.
| | | | | | | | | | | |
| Year ended December 31, |
| 2022 | | 2021 |
| Anti-dilutive securities | | | |
| Outstanding stock options | 6,336,542 | | | 30,602,803 | |
| Warrants for common stock | 24,328,608 | | | 24,328,608 | |
| Options and RSAs exercised under notes receivables | — | | | 669,522 | |
| Unvested RSUs | 18,391,859 | | | 29,688,046 | |
| Vested RSUs not yet released | 173,303 | | | — | |
| Total anti-dilutive securities | 49,230,312 | | | 85,288,979 | |
Note 13 - Leases
The Company is a lessee in several noncancellable operating leases, primarily for office space and the use of spaces for the installation of its electric vehicle charging stations (“site leases”). These leases generally have an initial term ranging from five to ten years, with the option to extend the lease for one to five years. In connection with the leases, the Company had asset retirement obligations for the restoration of lease sites of $2.1 million and $1.4 million as of December 31, 2022 and 2021, respectively, in other non-current liabilities within the accompanying consolidated balance sheets.
Supplemental information related to leases within the consolidated balance sheets is as follows:
| | | | | | | | | | | |
| December 31, 2022 | | December 31, 2021 |
| Other operating leases information | | | |
| Weighted-average remaining lease term (years) | 8.0 | | 8.0 |
| Weighted-average discount rate | 11.2 | % | | 11.7 | % |
The Company received COVID-19 related rent concessions indicating that (i) the Company was not obligated to pay rent, or the entirety of the contractual rent, or (ii) the Company received interest-free rent deferrals for the period affected by lockdown measures. There were no such concessions recognized as negative variable lease cost for the years ended December 31, 2022 and 2021. The following lease costs were recognized in other operating (income) expenses within the accompanying consolidated statements of operations and comprehensive loss:
Volta Inc. | | |
| Notes to Consolidated Financial Statements |
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| | | Year ended December 31, |
| | | 2022 | | 2021 |
| (in thousands) |
| Operating lease costs | | | | | |
| Fixed lease cost | | | $ | 17,675 | | | $ | 11,944 | |
| Variable lease cost | | | 479 | | | 252 | |
| Total operating lease costs | | | $ | 18,154 | | | $ | 12,196 | |
Supplemental cash flow information related to leases is as follows:
| | | | | | | | | | | | | | | | | |
| | | Year ended December 31, |
| | | 2022 | | 2021 |
| (in thousands) |
| Cash paid for amounts included in the measurement of lease liabilities | | | | | |
| Operating cash outflows from operating leases | | | $ | 15,641 | | | $ | 10,495 | |
| ROU assets obtained in exchange for lease obligations | | | | | |
| ROU assets obtained in exchange for operating lease liabilities | | | $ | 27,644 | | | $ | 29,036 | |
Amounts disclosed for ROU assets obtained in exchange for lease obligations include amounts added to the carrying amount of ROU assets resulting from lease modifications and reassessments.
Maturities of lease liabilities as of December 31, 2022 are as follows:
| | | | | |
| Fiscal Year | Leases |
| (in thousands) |
| 2023 | 18,795 | |
| 2024 | 18,332 | |
| 2025 | 16,807 | |
| 2026 | 15,745 | |
| 2027 | 15,569 | |
| Thereafter | 47,061 | |
| Total undiscounted lease payments | 132,309 | |
| Less imputed interest | (43,701) | |
| Total lease liabilities | $ | 88,608 | |
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| |
| |
| |
As of December 31, 2022, there are additional operating leases that have not yet commenced of $8.3 million. These operating leases are expected to commence between fiscal year 2023 and fiscal year 2025 with lease terms of five to nine years.
Note 14 - Commitments and Contingencies
Contingencies
From time to time, the Company may become involved in claims and other legal matters, either asserted or unasserted, arising in the ordinary course of business. While the outcome of these claims cannot be predicted with certainty, management does not believe that the outcome of any of these ongoing legal matters, individually and in aggregate, will have a material adverse effect on the Company’s consolidated financial statements.
Volta Inc. | | |
| Notes to Consolidated Financial Statements |
Employee benefit plan
The Company has a 401(k) defined contribution savings plan that covers substantially all of its employees. The Company contributes a matching contribution of 4% of the employee's salary each month under applicable safe harbor rules. Employee contribution is also limited by annual maximum amount determined by the Internal Revenue Service. The Company made contributions of $1.1 million and $1.0 million for the years ended December 31, 2022 and 2021, respectively.
Purchasing Obligations
In the normal course of business, Volta enters into contractual agreements of the purchase of goods and services to ensure availability and timely delivery. As of December 31, 2022, the Company does not have any firm, noncancellable, and unconditional purchase commitments with contract manufacturers and suppliers and therefore has not recorded a liability for any such commitments.
Note 15 - Income Taxes
Loss before income taxes for the years ended December 31, 2022 and 2021 are as follows:
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| Year ended December 31, |
| 2022 | | 2021 |
| (in thousands) |
| United States | $ | (152,250) | | | $ | (274,809) | |
| Foreign | (2,381) | | | (1,747) | |
| Loss before income taxes | $ | (154,631) | | | $ | (276,556) | |
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The provision for income taxes for the years ended December 31, 2022 and 2021 was immaterial, and the individual components (current and deferred, federal and state) were all individually immaterial as well.
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| Year ended December 31, |
| 2022 | | 2021 |
| (in thousands) |
| Current: | | | |
| Federal | $ | — | | | $ | — | |
| State | 2 | | 24 |
| International | | | 15 |
| Deferred: | | | |
| Federal | — | | — |
| State | — | | — |
| Total income tax provision | $ | 2 | | | $ | 39 | |
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| | | |
The difference between the tax provision at the statutory federal income tax rate and the provision for (benefit from) income tax as a percentage of loss before income taxes (effective tax rate) for the years ended December 31, 2022 and 2021 was as follows:
Volta Inc. | | |
| Notes to Consolidated Financial Statements |
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| Year ended December 31, |
| 2022 | | 2021 |
| (in thousands) |
| Benefit from income taxes at U.S. federal statutory rate | $ | (31,741) | | | $ | (58,027) | |
| State statutory rate | 2,160 | | | (12,014) | |
| Foreign tax rate at statutory rate | — | | | 15 | |
| Foreign tax rate differential | (193) | | | (207) | |
| Change in valuation allowance | 13,128 | | | 65,996 | |
| Stock-based compensation | 20,137 | | | 1,987 | |
| Permanent differences | 60 | | | 1,750 | |
| Change in fair value of warrant liability | (5,486) | | | 260 | |
| Alternative fuel vehicle credit | (14,274) | | | (2,706) | |
| Executive Compensation | 10,367 | | | — | |
| Tax accounting method changes | 2,468 | | | — | |
| Other | 3,376 | | | 2,985 | |
| Total provision for (benefit from) income taxes | $ | 2 | | | $ | 39 | |
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The Company’s effective tax rate differs from the federal statutory rate primarily due to the change in valuation allowance and the alternative fuel vehicle credit.
The components of net deferred tax assets as of December 31, 2022 and 2021 consisted of the following:
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| Year ended December 31, |
| 2022 | | 2021 |
| Deferred tax assets: | (in thousands) |
| Net operating loss carryovers | $ | 100,751 | | | $ | 67,756 | |
| Accruals, deferrals, and reserves | 3,076 | | | 5,775 | |
| Operating lease liabilities | 22,128 | | | 18,446 | |
| Stock compensation | 6,400 | | | 32,601 | |
| Credits | 25,776 | | | 11,502 | |
| Research and development expenses | 85 | | | — | |
| Interest Expense | 1,205 | | | — | |
| Gross deferred tax assets | 159,421 | | | 136,080 | |
| Valuation allowance | (124,741) | | | (111,613) | |
| Gross deferred tax assets after valuation allowance | $ | 34,680 | | | $ | 24,467 | |
| Deferred tax liabilities | | | |
| Fixed Assets and intangibles | $ | (10,260) | | | $ | (5,068) | |
| Operating lease right-of-use assets | (22,950) | | | (19,399) | |
| Section 481(a) Adjustment | (1,470) | | | — | |
| Gross deferred tax liabilities | $ | (34,680) | | | $ | (24,467) | |
| Net deferred tax assets | $ | — | | | $ | — | |
Management regularly assesses the ability to realize deferred tax assets recorded based upon the weight of available evidence, including such factors as recent earnings history and expected future taxable income on a jurisdiction by jurisdiction basis. In the event that the Company changes its determination as to the amount of realizable deferred tax assets, the Company will adjust its valuation allowance with a corresponding impact to the provision for income
Volta Inc. | | |
| Notes to Consolidated Financial Statements |
taxes in the period in which such determination is made. During the years ended December 31, 2022 and 2021, the valuation allowance increased by $13.1 million and $66.0 million, respectively.
Utilization of the net operating loss and tax credit carryforwards may be subject to a substantial annual limitation due to the "ownership change" limitations provided by Section 382 and 383 of the Code and other similar state provisions. Any annual limitation may result in the expiration of net operating loss and tax credit carryforwards before utilization.
As of December 31, 2022, the Company had federal, state, and foreign NOL carryforwards of approximately $393.5 million, $269.5 million (post apportionment), and $4.2 million respectively, as reported on its tax returns available to reduce future taxable income, if any. If not utilized, these federal and state NOL carryforwards will begin to expire in the year ending December 31, 2036. As a result of the Tax Cuts and Jobs Act of 2017, $376.0 million in federal NOL carryforwards do not have an expiration date. As of December 31, 2022, the Company also has Alternative Fuel Vehicle Credit carryforwards of $25.8 million that will begin to expire in the year ending December 31, 2036 if not utilized.
The Company accounts for uncertain tax positions in accordance with accounting standards which clarifies the accounting for uncertainty in income taxes in an enterprise’s financial statements by defining the criterion that an individual tax position must meet for any part of the benefit of that position to be recognized in an enterprise’s financial statements. The accounting standard prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken on a tax return as well as guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company filed a tax accounting method change with its 2021 tax return. As a result, the Company released its uncertain tax position related to deferred revenue. As of December 31, 2022, the Company had no uncertain tax positions.
The Company’s policy is to include penalties and interest related to income tax matters within the Company’s benefit from (provision for) income taxes. As of December 31, 2022, the Company had no material accrued interest and penalties related to uncertain tax positions.
A reconciliation of beginning and ending amount of the gross unrecognized tax benefit is as follows:
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| Year ended December 31, |
| 2022 | | 2021 |
| (in thousands) |
| Unrecognized Tax Benefits as of beginning of year | $ | 1,980 | | | $ | — | |
| Gross Increases - tax positions in prior period | — | | | 1,980 | |
| Gross decreases - tax positions in prior period | (1,980) | | | — | |
| Gross increases - tax positions in current period | — | | | — | |
| Settlement | — | | | — | |
| Lapse of statute of limitations | — | | | — | |
| Unrecognized Tax Benefits as end of year | $ | — | | | $ | 1,980 | |
Note 16 - Related Party Transactions
Volta Inc. | | |
| Notes to Consolidated Financial Statements |
2Predict, Inc.
Prior to April 2021, the Company received services from 2Predict, a firm where a former Volta officer was a co-founder and Chief Executive Officer, and recognized expenses of $0.6 million for the year ended December 31, 2021, respectively, in selling, general and administrative in the consolidated statements of operations and comprehensive loss. As of December 31, 2021 the Company had no balance in accounts payable - due to related party for consulting services received as 2Predict, is no longer a related party as certain of its assets were acquired by the Company in April 2021 (see Note 4 - Acquisitions).
Related party loans
During the year ended December 31, 2021, the Company issued 3,891,256 shares of Legacy Volta Series D preferred stock which upon the Closing, were converted into shares of Legacy Volta Class B common stock, which were then converted into 4,722,039 shares of Class A common stock of the Company through a cashless exercise. Of the 3,891,256 shares of Legacy Volta Series D preferred stock, 2,032,271 shares were issued to 19 York Ventures, which Board member Martin Lauber is an officer of, and Energize Ventures, LLC, which Board member John Tough is an officer of, at $7.38 per share for total proceeds of $15.0 million, which upon the Closing, were converted into shares of Legacy Volta Class B common stock, which were then converted into 2,466,161 shares of the Company's Class A common stock (see Note 11 - Stockholders' (Deficit) Equity and Stock-Based Compensation).
Promissory notes
During the year ended December 31, 2021, the Company entered into promissory note agreements with certain executives where the Company loaned $8.6 million at an interest rate of 3.25%.
The promissory notes with current employees were required to be settled upon the Closing. The notes associated with three former employees were not required to be settled upon the Reverse Recapitalization, however one of the notes has been settled while the other two remained outstanding as of December 31, 2021. (see Note 11 - Stockholders' (Deficit) Equity and Stock-Based Compensation).
As of December 31, 2021, the Company had partial recourse promissory notes due from two former executives totaling $0.2 million. During the second quarter of 2022, amounts due from these former executives were settled by way of forfeiture of 71,454 shares valued at $0.2 million with an immaterial balance forgiven.
Note 17 - Subsequent Events
The Company has evaluated events subsequent to December 31, 2022 and through the date the financials are made available. The following events occurring subsequent to the consolidated balance sheet date merited recognition or disclosure in these statements.
Agreement and Plan of Merger
On January 17, 2023, Volta entered into the Merger Agreement with Shell and Merger Sub. The Merger Agreement provides that, upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will merge with and into Volta, with Volta continuing as the surviving corporation and as a wholly-owned subsidiary of Shell.
Loan Agreement
On January 17, 2023, Volta entered into a term loan, guarantee and security agreement (the "Equilon Loan Agreement") with Equilon Enterprises LLC d/b/a Shell Oil Products US, an affiliate of Shell ("Equilon"),
Volta Inc. | | |
| Notes to Consolidated Financial Statements |
concurrently with the execution of the Merger Agreement, pursuant to which Equilon has provided a subordinated secured delayed draw term loan facility to Volta and certain of Volta’s subsidiaries of up to $20 million, of which $20 million has been drawn as of March 30, 2023 (the "Equilon Loans"). Additional amounts are to be drawn in minimum increments of $5 million. The Equilon Loans shall mature on the earliest of (i) the acceleration of obligations by Equilon under the Equilon Loan Agreement, (ii) the later to occur of (x) the date that is 60 days after termination of the Merger Agreement in compliance with Article IX of the Merger Agreement (other than pursuant to a superior proposal), and (y) the date that is 91 days following maturity of the company’s existing senior credit facilities with EICF Agent LLC (the "EICF Loan Agreement"), (iii) the effective time of the merger with Shell and (iv) termination of the Merger Agreement in connection with a superior proposal.
The Equilon Loans will bear interest at 15% per annum, increasing to 18% per annum three months after signing. Interest is capitalized (with monthly compounding). The default interest rate is an additional 2.0% per annum.
Volta’s obligations under the Equilon Loan Agreement are secured by a second priority security interest in the assets securing Volta’s obligations under the EICF Loan Agreement.
The Equilon Loan Agreement contains certain representations, covenants and events of default which are substantially based on the analogous provisions of the EICF Loan Agreement. Prior to a “trigger date”, only certain “key” representations, covenants and defaults are to be applicable under the Equilon Loan Agreement. A “trigger date” occurs upon the earlier of: (x) the date of acceptance of a superior proposal under the Merger Agreement and (y) the date of termination of the Merger Agreement.