VOLTA INC. 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 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 theSEC 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 endedDecember 31, 2022 and 2021 The results of operations presented below should be reviewed in conjunction with Volta's consolidated financial statements for the years endedDecember 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 endedDecember 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.
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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
Operating Expenses
Selling, General and Administrative
Selling, general and administrative expenses decreased by$97.3 million , or 37%, for the year endedDecember 31, 2022 as compared to the year endedDecember 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 endedDecember 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 endedDecember 31, 2022 from$11 million for the year endedDecember 31, 2021 . This was primarily due to an increase of 803 Volta-owned installations in service during the year endedDecember 31, 2022 as compared to the year endedDecember 31, 2021 . --------------------------------------------------------------------------------
Other Operating Expense
Other operating expense increased by$0.9 million for the year endedDecember 31, 2022 as compared to the year endedDecember 31, 2021 , primarily due to costs associated with disqualified projects prior to construction during the year endedDecember 31, 2022 compared to the year endedDecember 31, 2021 .
Loss from Operations
Loss from operations decreased by$96.1 million , or 36%, fromDecember 31, 2021 toDecember 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 endedDecember 31, 2021 to the year endedDecember 31, 2022 . The decrease is primarily due to lower average outstanding balance under our term loan during the year endedDecember 31, 2022 compared to the prior year period.
Other Expense, net
Other expense, net decreased by$25.8 million or 309% from the year endedDecember 31, 2021 to the year endedDecember 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 toTortoiseEcofin 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
Net Loss
Net loss decreased
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 theSmall 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 endedDecember 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 ofDecember 31, 2022 . The Company entered into the Business Combination Agreement withTortoise Acquisition Corp. II. onFebruary 7, 2021 and following the Closing onAugust 26, 2021 ,Volta Inc. began trading on the NYSE. OnSeptember 12, 2022 , the Company filed a registration statement on Form S-3 (File No. 333-267374) with theSEC (declared effective by theSEC onSeptember 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 endedDecember 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
Principal Issuance Date Maturity Date Interest Rate December 31,
in thousands Amount December 31, 2022 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 $ -
(1)The interest rate on the term loan as of
OnJune 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 endedDecember 31, 2019 and drew an additional$25 million under the term loan during the year endedDecember 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 onJuly 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 ofDecember 31, 2022 :
The Company's material cash requirements include the following commitments and contractual obligations:
Total Less than 1 More than 1 year
in thousands 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
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) %
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Operating Activities
Net cash used in operating activities increased by$22.2 million for the year endedDecember 31, 2022 as compared to the year endedDecember 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 endedDecember 31, 2022 , as compared to$55.6 million for the year endedDecember 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 endedDecember 31, 2022 , as compared to net cash provided by financing activities for the year endedDecember 31, 2021 . The increase was primarily due to a lower amount of proceeds raised from financing during the year endedDecember 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 endedDecember 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 ofVolta 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 withU.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
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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 theSEC 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 generatesNetwork 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 endedDecember 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.
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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
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
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
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 endedDecember 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
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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 ofDecember 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 afterDecember 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 ofDecember 31, 2022 and 2021, Volta has not engaged in any off-balance sheet arrangements, as defined in the rules and regulations of theSEC .
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.
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