Nuvve Holding Corp. 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. This Annual Report on Form 10-K (this “Annual Report”) includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking statements. Forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other filings with the Securities and Exchange Commission (“SEC”). References in this Annual Report to “we,” “us” and “our” and to “Nuvve” and the “Company” are to Nuvve Holding Corp. and its subsidiaries. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Annual Report. Overview We are a green energy technology company that provides, directly and through business ventures with its partners, a globally-available, commercial V2G technology platform that enables EV batteries to store and resell unused energy back to the local electric grid and provide other grid services. Our proprietary V2G technology — Grid Integrated Vehicle ("GIVe") platform — has the potential to refuel the next generation of EV fleets through cutting-edge, bi-directional charging solutions. Our proprietary V2G technology enables us to link multiple EV batteries into a virtual power plant to provide bi-directional services to the electrical grid. Our GIVe software platform was created to harness capacity from “loads” at the edge of the distribution grid (i.e., aggregation of EVs and small stationary batteries) in a qualified, controlled and secure manner to provide many of the grid services offered by conventional generation sources (i.e., coal and natural gas plants). Our current addressable energy and capacity markets include grid services such as frequency regulation, demand charge management, demand response, energy optimization, distribution grid services and energy arbitrage. Our customers and partners include owner/operators of light duty fleets, heavy duty fleets (including school buses), automotive manufacturers, charge point operators, and strategic partners (via joint ventures, other business ventures and special purpose financial vehicles). We also operate a small number of company-owned charging stations serving as demonstration projects funded by government grants. We expect growth in company-owned charging stations and the related government grant funding to continue, but for such projects to constitute a declining percentage of our future business as our commercial operations expand. We offer our customers networked charging stations, infrastructure, software, professional services, support, monitoring and parts and labor warranties required to run electric vehicle fleets, as well as low and in some cases free energy costs. We expect to generate revenue primarily from the provision of services to the grid via our GIVe software platform and sales of V2G-enabled charging stations. In the case of light duty fleet and heavy duty fleet customers, we also may receive a mobility fee, which is a recurring fixed payment made by fleet customers per fleet vehicle. In addition, we may generate non-recurring engineering services revenue derived from the integration of our technology with automotive OEMs and charge point operators. In the case of recurring grid services revenue generated via automotive OEM and charge point operator customer integrations, we may also share the recurring grid services revenue with the customer. On August 4, 2021, we formed Levo Mobility LLC ("Levo"), a Delaware limited liability company, with Stonepeak Rocket Holdings LP ("Stonepeak"), a Delaware limited partnership and Evolve Transition Infrastructure LP ("Evolve"), a Delaware limited partnership. Levo is our consolidated subsidiary. Levo is a sustainable infrastructure company focused on rapidly advancing the electrification of transportation by funding V2G-enabled EV fleet deployments. Levo utilizes our V2G technology and committed capital from Stonepeak and Evolve to offer Fleet-as-a-Service for school buses, last-mile delivery, ride hailing and ride sharing, municipal services, and more to eliminate the primary barriers to EV fleet adoption including large upfront capital investments and lack of expertise in securing and managing EVs and associated charging infrastructure. 51 Levo's turnkey solution simplifies and streamlines electrification, can lower the total cost of EV operation for fleet owners, and support the grid when the EVs are not in use. For a fixed monthly payment with no upfront cost, Levo will provide the EVs, such as electric school buses, charging infrastructure powered by our V2G platform, EV and charging station maintenance, energy management, and technical advice. Levo focuses on electrifying school buses, providing associated charging infrastructure, and delivering V2G services to enable safer and healthier transportation for children while supporting carbon dioxide emission reduction, renewable energy integration, and improved grid resiliency. Business Combination On March 19, 2021, we consummated the Business Combination with Newborn and Nuvve Corp. contemplated by the Merger Agreement. See Note 2 to the Consolidated Financial Statements included in this annual report on Form 10-K for more information. The Business Combination was effected in two steps, as follows: (i) Newborn reincorporated to the State of Delaware by merging with and into us, with us surviving the merger as the new public company (the "Reincorporation Merger"), and (ii) immediately after the Reincorporation Merger, Merger Sub merged with and into Nuvve Corp., with Nuvve Corp. surviving the merger as our wholly-owned subsidiary (the "Acquisition Merger"). Also on March 19, 2021, we consummated the Private Investment in Public Equity ("PIPE"), generating net proceeds of $14,250,000. The most significant change in our future reported financial position and results as a result of the completion of the Business Combination and the PIPE was an estimated net increase in cash of approximately $62,018,410. Total transaction costs of $3,702,421 were treated as a reduction of the cash proceeds with capital raising costs being deducted from our additional paid-in capital. In addition, the net cash proceeds were reduced by our payment of $6,000,000 to EDF Renewables in connection with the repurchase from them of 600,000 shares of our common stock pursuant to the Purchase and Option Agreement, payment of $487,500 to NeoGenesis Holding Co. Ltd., the sponsor of Newborn, in repayment of loans made by the sponsor to Newborn, and deposit of $495,000 into escrow for the potential repayment of Nuvve Corp.'s PPP loan. Upon forgiveness of the PPP loan in June 2021, the $495,000 was released to us. Upon consummation of the Business Combination, Nuvve Corp-designated directors were appointed to five of the seven seats of our combined board of directors; Nuvve Corp’s Chief Executive Officer was appointed as Chairman of our combined board of directors; Nuvve Corp’s senior management became the senior management of our combined company; and the former stockholders of Nuvve Corp became the owners of approximately 48.3% of the outstanding shares of common stock of our combined company. Accordingly, the Business Combination was accounted for as a Reverse Recapitalization, whereby Nuvve Corp was the acquirer for accounting and financial reporting purposes and Newborn is the legal acquirer. A Reverse Recapitalization does not result in a new basis of accounting, and the financial statements of the combined entity represent the continuation of the consolidated financial statements of legacy Nuvve Corp in many respects. The shares of Newborn remaining after redemptions, and the unrestricted net cash and cash equivalents on the date the Business Combination is consummated, were accounted for as a capital infusion to Nuvve Corp. As a consequence of the Business Combination, Nuvve Corp effectively became an SEC-registered, Nasdaq-listed company, which has required our combined company to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. Our combined company had incurred additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting, legal and administrative expenses. Additionally, we expect capital and operating expenses to increase significantly in connection with ongoing activities as we invest additional working capital for heavy-duty DC-V2G charging stations and level 2 AC-V2G charging stations, additional investments in equipment to meet increased project needs, and additional operating expenses to hire project managers, technicians, sales, partnership and customer service personnel, data scientists, trading teams, software engineers and administrative staff. Our historical operations and statements of assets and liabilities may not be comparable to the operations and statements of assets and liabilities of our combined company as a result of the Business Combination. 52 Supply Chain Constraints Global inventory delays, increased and unpredictable lead times, labor shortages, and process capacity pressures, could impact our ability to service customer demand. During the latter part of the year ended December 31, 2021, and the first half of the year ended December 31, 2022, we estimated that these disruptions could result in our future inability to fulfill customer orders which will in turn impact our net revenues. In an effort to mitigate unpredictable lead times, we increased our inventory orders contributing to our elevated inventory levels at the end of those periods. While we expect supply chain disruption to continue in 2023, we are planning a reduction in inventory buys, as we expect to fulfill customer demand using inventories on-hand. Additionally, competition for, and price volatility of resources throughout the supply chain have increased, resulting in higher product costs. Trends affecting the supply chain included fluctuating prices and inflationary pressures on labor and raw materials. Trends such as these can result in higher product costs and increased pressure to reduce costs and raise product prices. We continue to pursue mitigation strategies and create new efficiencies in our global supply chain. Effects of Inflation As inflationary pressures continued to have negative impact on global revenue, operating margins and net income, including increased costs of labor, products and freight, it did not have a significant impact on our results of operations in the year ended December 31, 2022. However, if these inflationary pressures continue, our revenue, gross and operating margins and net income could be impacted in the year ending December 31, 2023. Key Factors Affecting Our Business We believe that our performance and future success depend on several factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in the Risk Factors described in Part I, Ite m 1A of this Annual report. Growth in EV Adoption Our revenue growth is tied to the overall acceptance of commercial fleet and passenger EVs, which we believe will help drive the demand for intelligent vehicle-grid-integration solutions. The market for EVs is still rapidly evolving and although demand for EVs has grown in recent years, there is no guarantee of such future demand. Factors impacting the adoption of EVs include but are not limited to: perceptions about EV features, quality, safety, performance and cost; perceptions about the limited range over which EVs may be driven on a single battery charge; volatility in the cost of oil and gasoline; availability of services for EVs; consumers’ perception about the convenience and cost of charging EVs; and increases in fuel efficiency. In addition, macroeconomic factors could impact demand for EVs, particularly since they can be more expensive than traditional gasoline-powered vehicles when the automotive industry globally has been experiencing a recent decline in sales. If the market for EVs does not develop as expected or if there is any slow-down or delay in overall EV adoption rates, this would impact our ability to increase our revenue or grow our business. Fleet Expansion Our future growth is highly dependent upon the fleet applications associated with our technology. Because fleet operators often make large purchases of EVs, this cyclicality and volatility may be more pronounced, and any significant decline from these customers reduces our potential for future growth. Government Mandates, Incentives and Programs The U.S. federal government, foreign governments and some state and local governments provide incentives to end users and purchasers of EVs and EV charging stations in the form of rebates, tax credits, and other financial incentives, such as payments for regulatory credits. The EV market relies on these governmental rebates, tax credits, and other financial incentives to significantly lower the effective price of EVs and EV charging stations to customers. However, these incentives may expire on a particular date, end when the allocated funding is exhausted, or be reduced or terminated as a matter of regulatory or legislative policy. In the future, we will derive other revenue from fees received for transferring regulatory credits earned for participating in low carbon fuel programs in approved states. Generally, only the owner of EV charging stations can either claim or assign such regulatory credits. If a material percentage of our customers were to claim these regulatory credits or choose to not assign the regulatory credits to us, our revenue from this source could decline significantly, which could have an adverse effect on our revenues and overall gross margin. Further, the availability of such credits depends on continued governmental support for these programs. If these programs are modified, reduced or eliminated, our ability to generate this revenue in the future could be 53 adversely impacted. While we have derived an immaterial percentage of other revenue from these regulatory credits, we expect revenue from this source as a percentage of revenue to increase over time. Competition We offer proprietary V2G technology and services and intend to expand our market share over time in our product categories, leveraging the network effect of its V2G technology, services and GIVe software platform. Existing competitors may expand their product offerings and sales strategies, and new competitors may enter the market. Furthermore, our competition includes other types of electric vehicle charging technologies, such as uni-directional “smart-charging” and lower cost (unmanaged) charging solutions. If due to increased competition our market share does not grow, our revenue and ability to generate profits in the future may be impacted. Geographic Expansion We operate in North America, selected countries in Europe (directly and through our business venture with EDF), and Japan. Revenue from North America and Europe is expected to contribute significantly to our total revenue in the near-to-intermediate term, while revenue from Japan is expected to increase over the longer run due to the early stage nature of Japan's market for V2G technology and services. We have used a portion of the proceeds from the Business Combination to increase our sales and marketing activities, and may in the future pursue potentially strategic acquisitions in North America and Europe. We are also positioned to grow our North American and European business through future partnerships with charge point operators, OEMs and leasing companies. However, we may experience competition with other providers of EV charging station networks for installations. Many of these competitors have limited funding, which could lead to poor customer experiences and have a negative impact on overall EV adoption. Our growth in North America and Europe requires differentiating ourself as compared to the several existing competitors. If we are unable to penetrate the market in North America and Europe, our future revenue growth and profits will be impacted. Backlog Our total backlog represents the estimated transaction prices on unsatisfied and partially satisfied performance obligations to our customers for products and services. Backlog is converted into revenue in future periods as we satisfy the performance obligations to our customers for products and services, primarily based on the cost incurred or at delivery and acceptance of products, depending on the applicable accounting method. Our estimated backlog on December 31, 2022 was $4.1 million, which we expect to be earned in future periods. Market Opportunity We see a significant market opportunity for V2G, totaling approximately over $6 trillion and our management believes it is well positioned to capture this global opportunity for a variety of reasons: • First, our intellectual property ("IP") includes key patents, making it difficult for competitors to perform V2G functions without violating our IP. Our technology originated with an academic unit at the University of Delaware starting in 1996 and not only had decades of development but tens of millions of dollars in project funding invested prior to our acquisition of the IP and commercialization of the technology. • Second, we are already qualified by multiple Transmission System Operators, which typically take anywhere from one to three years to get approval. With this qualification, it makes it easier for us to expand in other areas. • Third, we have over a decade of experience. Our history and strong relationships with key customers optimize our market participation and value proposition. • Fourth, we have collected a huge amount of data which is a key element for rapid and accurate development, as well as monetization. Because of these factors, we have a significant competitive advantage which is a key differentiator. Further, our global experience allows us to bring the lessons we have learned into each new region which, in turn, enables us to bring the unique experience and incredible benefits of our V2G technology to customers at a faster rate. 54 Results of Operations Year Ended December 31, 2022 Compared with Year Ended December 31, 2021 The following table sets forth information regarding our consolidated results of operations for the years ended December 31, 2022 and 2021. Years Ended December 31, Period-over-Period Change 2022 2021 Change ($) Change (%) Revenue Products and services $ 4,913,956 $ 2,920,627 $ 1,993,329 68.3 % Grants 459,427 1,270,138 (810,711) (63.8) % Total revenue 5,373,383 4,190,765 1,182,618 28.2 % Operating expenses Cost of product and service revenue 4,196,788 2,002,197 2,194,591 109.6 % Selling, general and administrative expenses 30,115,571 22,896,125 7,219,446 31.5 % Research and development expense 7,976,568 6,524,245 1,452,323 22.3 % Total operating expenses 42,288,927 31,422,567 10,866,360 34.6 % Operating loss (36,915,544) (27,231,802) (9,683,742) 35.6 % Other income (expense) Interest income (expense) 134,579 (585,157) 719,736 (123.0) % Financing costs — (46,754,794) 46,754,794 100.0 % Change in fair value of private warrants liability 11,986,462 (312,400) 12,298,862 (3,936.9) % Change in fair value of derivative liability 152,723 (14,342) 167,065 NM Other, net 85,074 282,183 (197,109) (69.9) % Total other income (expense), net 12,358,838 (47,384,510) 59,743,348 NM Loss before taxes (24,556,706) (74,616,312) 50,059,606 -67.1 % Income tax expense 800 1,000 (200) (20.0) % Net loss $ (24,557,506) $ (74,617,312) $ 50,059,806 -67.1 % Less: Net loss attributable to non-controlling interests (538,841) (2,138,272) 1,599,431 NM Net loss attributable to Nuvve Holding Corp. $ (24,018,665) $ (72,479,040) $ 48,460,375 -66.9 % ________________ NM - Not Meaningful 55 Revenue Total revenue was $5.4 million for the year ended December 31, 2022, compared to $4.2 million for the year ended December 31, 2021, an increase of $1.2 million, or 28.2%. The increase is attributed to a $2.0 million increase in products and services revenue, partially offset by a decrease of $0.8 million in grants revenue. Products and services revenue for the year ended December 31, 2022 consist of sales of school buses of $1.7 million, DC and AC Chargers, including lease interest revenue of approximately $2.4 million, grid services revenue of $0.4 million, and engineering services of $0.3 million. Cost of Product and Service Revenue Cost of product and service revenues for the year ended December 31, 2022, increased by $2.2 million, or 109.6%, and margins decreased by 17.5%, to 14.0%, from 31.4% compared to the prior year period. The decrease in margin was mostly due to the impact of lower margin school buses sales, and a higher mix of hardware charging stations sales and a lower mix of engineering services during the year ended December 31, 2022. Selling, General and Administrative Expenses Selling, general and administrative expenses consist of selling, marketing, advertising, payroll, administrative, legal finance, and professional expenses. Selling, general and administrative expenses were $30.1 million for the year ended December 31, 2022 as compared to $22.9 million for the year ended December 31, 2021, an increase of $7.2 million, or 31.5%. The increases during the year ended December 31, 2022 were primarily attributable to increases in compensation expenses of $1.6 million, including share-based compensation, office and warehouse facilities lease expenses of $0.8 million, Directors and Officers insurance expenses of $0.5 million, professional fees related to internal operational reviews of $1.5 million, governance and other public company costs of $2.3 million , and software subscriptions expenses of $0.5 million. Expenses resulting from the consolidation of Levo's activities during the year ended December 31, 2022, contributed $1.6 million to the increase in selling, general and administrative expenses. Research and Development Expenses Research and development expenses increased by $1.5 million, or 22.3%, from $6.5 million for the year ended December 31, 2021 to $8.0 million for the year ended December 31, 2022. The increases during the year ended December 31, 2022 were primarily attributable to hiring of engineering personnel, which resulted in increases in compensation expenses and subcontractor expenses used to advance the Company's platform functionality and integration with more vehicles. Other Income (Expense) Other income (expense) consists primarily of interest expense, financing costs, change in fair value of warrants liability and derivative liability, and other income (expense). Other income (expense) increased by $59.74 million of income, from $47.38 million of other expense for the year ended December 31, 2021 to $12.36 million in other income for the year ended December 31, 2022. The increase in income during the year ended December 31, 2022 were primarily attributable to the change in fair values of the warrants liability, derivative liability and interest income, and because financing costs recorded in 2021 did not recur in 2022. The financing costs were associated with the fair value of warrants and stock option ("Instruments") granted to Stonepeak and Evolve in May 2021 in conjunction with the formation of Levo. We recorded the estimated fair value of the Instruments issued as an expense during the second quarter of 2021 because we determined that there was not sufficient basis to record deferred financing costs associated with Stonepeak and Evolve’s plans to contribute capital to the Levo venture. The expense is non-cash and does not impact the existing conditional capital contribution commitment we have from Stonepeak and Evolve or the pursuit of customer deployments funded by this conditional capital contribution commitment.. Additionally, during the year ended December 31, 2022, a gain of $8.68 million resulting from change in the carry value of the Stonepeak unvested warrants was recognized as the fair value of the unvested warrants decreased to zero because it was determined that it is not probable that the warrants will vest. Also, the fair value of the private warrants liability decrease significantly by $0.86 million driven by the decline in our common stock price. 56 Income Taxes In the years ended December 31, 2022 and 2021, we recorded nominal income tax expenses. The income tax expenses during the years ended December 31, 2022 and 2021 were nominal primarily due to operating losses that receive no tax benefits as a result of a valuation allowance recorded for such losses. Net loss Net loss increased by $50.1 million, or 67.1%, from $74.6 million for the year ended December 31, 2021 to $24.6 million for the year ended December 31, 2022. The increase in net loss was primarily due to increase in operating expenses of $9.7 million and increase in other expenses of $59.7 million for the aforementioned reasons. Net Loss Attributable to Non-Controlling Interest Net loss attributable to the non-controlling interest in Levo was $0.5 million for the year ended December 31, 2022. Net loss is allocated to non-controlling interests in proportion to the relative ownership interests of the holders of non-controlling interests in Levo, an entity formed by us with Stonepeak and Evolve. We own 51% of Levo's common units and Stonepeak and Evolve own 49% of Levo's common units. We have determined that Levo is a variable interest entities (“VIE”) in which we are the primary beneficiary. Accordingly, we consolidate Levo and record a non-controlling interest for the share of Levo owned by Stonepeak and Evolve during the years ended December 31, 2022 and 2021. 57 Liquidity and Capital Resources Sources of Liquidity We are an early-stage business enterprise. We have not yet demonstrated a sustained ability to generate sufficient revenue from sales of our technology and services or conduct sales and marketing activities necessary for the successful commercialization of our GIVe platform. We have not yet achieved profitability and have experienced substantial net losses, and we expect to continue to incur substantial losses for the foreseeable future. We have incurred operating losses of approximately $36.9 million and $27.2 million for the years ended December 31, 2022 and 2021, respectively. Our cash used in operations were $34.1 million and $29.2 million for the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022, we had a cash balance, working capital, and stockholders’ equity of $15.8 million, $24.0 million and $23.2 million, respectively. We have incurred net losses and negative cash flows from operations since our inception. We have funded our business operations primarily with the issuance of equity and convertible notes, borrowings and cash from operations. During the year ended December 31, 2021, we raised net proceeds of $61.8 million from the Business Combination and PIPE Offering (see our 2021 Form 10-K/A for details) to support our business operations. However, there can be no assurance we will be successful in raising necessary funds in the future, on acceptable terms or at all. On April 25, 2022, we filed a shelf registration statement with the SEC which will allow us to issue unspecified amounts of common stock, preferred stock, warrants for the purchase of shares of common stock or preferred stock, debt securities, and units consisting of any combination of any of the foregoing securities, in one or more series, from time to time and in one or more offerings up to a total dollar amount of $100.0 million. The shelf registration statement was declared effective on May 5, 2022. We believe that we will be able to raise capital by issuing securities pursuant to its effective shelf registration statement. On May 5, 2022, we entered into an at-the-market offering agreement (the "Sales Agreement"), with Craig-Hallum Capital Group LLC and Chardan Capital Markets, LLC (the "Agents"). From time to time during the term of the Sales Agreement, we may offer and sell shares of common stock having an aggregate offering price up to a total of $25.0 million in gross proceeds. The Agents will collect a fee equal to 3% of the gross sales price of all shares of common stock sold. Shares of common stock sold under the Sales Agreement are offered and sold pursuant to our shelf registration statement describe above. During the year ended December 31, 2022, we sold 792,882 shares of common stock pursuant to the Sales Agreement at an average price of $4.97 per share for aggregate net proceeds of approximately $3.8 million. The Sales Agreement terminated pursuant to its terms in June 2022. January 2023 ATM Offering Program On January 31, 2023, we entered into an At the Market Offering Agreement (the “ATM Agreement”) with Craig-Hallum Capital Group LLC (“Craig-Hallum”), as the sales agent (the “Agent”), pursuant to which we may offer and sell, from time to time through the Agent, shares of its common stock (the “Shares”), having an aggregate offering price of up to $25,000,000 (the “January 2023 ATM Offering”). We will pay the Agent a commission of 3.0% of the aggregate gross sales prices of the Shares. We will also reimburse the Agent for fees and disbursements of its legal counsel in an amount not to exceed $50,000. We intend to use the net proceeds from the January 2023 ATM Offering for working capital and general corporate purposes. Under current SEC regulations, as of the filing of this Annual Report on Form 10-K, our public float is less than $75 million, and under SEC regulations for so long as our public float remains less than $75 million, the amount we can raise through primary public offerings of securities in any twelve-month period using shelf registration statements is limited to an aggregate of one-third of our public float, which is referred to as the baby shelf rules. As of March 21, 2023 , our public float was approximately $ $9.0 million, based on 15,865,441 share s of outstanding common stock held by non-affiliates and at a price of $0.57 per share, which was the last reported sale price of our common stock on the Nasdaq Capital Market on March 21, 2023 . As a result of our public float being below $75 million, we will be limited by the baby shelf rules until such time as our public float exceeds $75 million, which means we only have the capacity to sell shares up to one-third of our public float under shelf registration statements in any twelve-month period. In January and February 2023, we sold 78,638 shares of common stock pursuant to the ATM Agreement at an average price of $1.79 per share for aggregate net proceeds of approximately $0.1 million. February 2023 Registered Direct Offering On February 17, 2023, we entered into a subscription agreement (the “Subscription Agreement”) with a certain institutional and accredited investor, relating to the issuance and sale of 543,478 shares of common stock in a registered direct offering (the “February 2023 Offering”). The offering price for the shares was $0.92 per share of common stock. The closing of the February 2023 Offering occurred on February 21, 2023. The aggregate gross proceeds from the February 2023 Offering was approximately $0.5 million. We intend to use the net proceeds from the February 2023 Offering for working capital and general 58 corporate purposes. Chardan Capital Markets LLC acted as the placement agent for the February 2023 Offering and received a sales commission of 3% of the gross proceeds. July 2022 Securities Purchase Agreement, Pre-Funded Warrants and Warrants On July 27, 2022, we entered into a securities purchase agreement (the “Purchase Agreement”) with a certain institutional and accredited investor (the “Purchaser”), relating to the issuance and sale of 2,150,000 shares (the “Shares”) of common stock, pre-funded warrants to purchase an aggregate of 1,850,000 shares of common stock (the “Pre-Funded Warrants”), and warrants (the “July 2022 Warrants”) to purchase an aggregate of 4,000,000 shares of common stock in a registered direct offering (the “July 2022 Offering”). The Offering was made pursuant to the effective shelf registration statement described above and closed on July 29, 2022. The offering price for the Shares was $3.50 per Share and the offering price for the Pre-Funded Warrants was $3.4999 per Pre-Funded Warrant, which represents the per Share public offering price less $0.0001 per share exercise price for each Pre-Funded Warrant. Each Pre-Funded Warrant has an exercise price of $0.0001 per share of common stock, subject to adjustment for stock splits, reverse stock splits, stock dividends and similar transactions. The July 2022 Warrants have an exercise price of $3.75 per share of common stock, subject to adjustment for stock splits, reverse stock splits, stock dividends and similar transactions, and each July 2022 Warrant will be exercisable for one share of common stock. The July 2022 Warrants are exercisable beginning six months from the date of issuance and the Pre-Funded Warrants are exercisable immediately upon issuance. The Pre-Funded Warrants terminate when fully exercised and the July 2022 Warrants terminate five years from the initial exercisability date. The aggregate gross proceeds to the Company from the July 2022 Offering were approximately $14.0 million and net proceeds were $13.1 million. The Company used the net proceeds from the July 2022 Offering for working capital and general corporate purposes. Craig-Hallum Capital Group LLC (the “Placement Agent”) was the exclusive placement agent for the July 2022 Offering and received 6.0% of the gross proceeds of the July 2022 Offering. We believe that our cash balance as of December 31, 2022, in addition to our cash flows from operations, will be sufficient to fund our working capital and capital expenditure requirements for the next 12 months from the filing date of this Annual Report. Equity Forward Purchase Pursuant to a letter agreement dated April 23, 2021, our Chief Executive Officer and Chief Operating Officer committed to purchase from us, and we committed to sell to them, 134,499 shares of our common stock for $14.87 per share or a total of $2,000,000. As of June 30, 2022, Nuvve's Chief Executive Officer and Chief Operating Officer fulfilled their obligations and have purchased from us a total of 134,499 shares of our common stock for $14.87 per share or a total of approximately $2,000,000. Levo On August 4, 2021, we formed Levo with Stonepeak and Evolve to rapidly accelerate the deployment of electric fleets, including zero-emission electric school buses for school districts in the United States through V2G hubs and TaaS. Levo utilizes our proprietary V2G technology, and the conditional capital contribution commitment from Stonepeak and Evolve of $750 million, subject to project approval process as outlined under the terms of the definitive agreements, to fund acquisition of electric fleets, and construction of EV infrastructure. Stonepeak and Evolve have the option to increase their conditional capital contribution commitment to $1.0 billion when Levo has entered into contracts with third parties for $500 million in aggregate capital expenditures. See Note 11 to the Consolidated Financial Statements included in this annual report on Form 10-K for summary of the definitive agreements. Purchase Commitments On July 20, 2021, we issued a purchase order (“PO”) to our supplier for a quantity of DC Chargers, for a total price of $13.2 million , with the delivery date specified as the week of November 15, 2021. However, the supplier subsequently notified us that they would be unable to meet the contracted delivery date as a result of supply chain issues. The parties therefore agreed to change the delivery date to on or about December 15, 2021. As of the end of December 31, 2021, we received a partial shipment of the DC Chargers, for which we paid $6.3 million . The delivered DC Chargers did not fully conform to required software and hardware specifications. In April 2022, the parties agreed to address the technical issues necessary to bring the DC charges into full conformity with specifications, and to amend the mix defined in the original PO for the delivery of the remaining DC Chargers still subject to the original PO. As of December 31, 2022, the supplier is still in the process of bringing the delivered DC Chargers into full conformance. 59 No amendments to the original PO have been executed. To the extent we and the supplier are unable to align on mutually agreeable terms to resolve the dispute relating to the PO, we believe that we have no obligation to purchase or accept delivery against the PO given that the supplier failed to timely deliver conforming DC Chargers in accordance with the stated PO terms. The supplier asserts, however, that the original PO was non-cancellable and non-refundable regardless of when in the future the chargers are delivered, and regardless of any non-conformance. We believe that the supplier’s position does not have merit and we intend to exercise all available rights and remedies in our defense should any legal proceeding result from such dispute. On November 2, 2022, we received a demand for arbitration from our supplier in connection with the dispute. The outcome of any such proceeding would be inherently uncertain, and the amount and/or timing of any liability or expense resulting from such a proceeding is not reasonably estimable at this time. Cash Flows Years Ended December 31, 2022 2021 Net cash (used in) provided by: Operating activities $ (34,081,975) $ (29,190,718) Investing activities (1,438,045) (265,475) Financing activities 19,063,624 59,721,226 Effect of exchange rate on cash (50,228) 199,592 Net (decrease) increase in cash and restricted cash $ (16,506,624) $ 30,464,625 Net cash used in operating activities during the year ended December 31, 2022 was $34.1 million as compared to net cash used of $29.2 million in the year ended December 31, 2021. The $4.9 million increase in net cash used in operating activities was primarily attributable to higher use of cash for working capital during the year ended December 31, 2022 as compared to the same prior period. Working capital during the year ended December 31, 2022 was impacted by, among other items, the higher net loss of $24.6 million, resulting from increases in compensation expenses, increases in professional fees related to internal operational reviews, increases in governance and other public company costs, and cash purchases to fund higher inventory levels. These were partially offset by improved timing and management of vendor terms compared to the cash settlement of such items. During the year ended December 31, 2022 and 2021, cash used in investing activities was $1.44 million and $0.27 million, respectively. Net cash used in investing activities were used to purchase fixed assets and a future equity investment in a partnership alliance. Net cash provided by financing activities for the year ended December 31, 2022 was $19.1 million, of which $13.1 million were the proceeds from the July 2022 Offering, partially offset by issuance cost, $3.8 million was provided in connection with the proceeds from the 2022 at-the-market common stock offering, partially offset by issuance cost, proceeds from the equity forward option put exercise of $2.0 million, and proceeds from the exercise of stock options of $0.2 million. Cash provided by financing activities for the year ended December 31, 2021 was $59.7 million, of which $58.2 million was provided in connection with the Business Combination, $14.3 million was provided in connection with the PIPE offering, $3.1 million was provided through the issuance of Levo's preferred stock, and $0.6 million was provided from the exercise of stock options, partially offset by issuance costs of $4.0 million, the repayment of Newborn sponsor loans of $0.5 million, the $6.0 million repurchase of common stock, the payment of investor stock liability of $2.0 million and the payment of legal and accounting costs of $1.0 million associated with the Business Combination. 60 Critical Accounting Policies and Estimates Management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of the consolidated financial statements requires us to make estimates and assumptions for the reported amounts of assets, liabilities, revenue, expenses and related disclosures. Our estimates are based on our historical experience and on various other factors that we believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions and any such differences may be material. While our significant accounting policies are described in more detail in Note 2 to our consolidated financial statements included elsewhere in this report, we believe the following accounting policies and estimates to be most critical to the preparation of its consolidated financial statements. Revenue Recognition We recognizes revenue using the five-step model under ASC 606 in determining revenue recognition that requires us to exercise judgment when considering the terms of contracts, which includes: (a) identification of the contract, or contracts, with a customer; (b) identification of the performance obligations in the contract; (c) determination of the transaction price; (d) allocation of the transaction price to the performance obligations in the contract; and (e) recognition of revenue when, or as, it satisfies a performance obligation. We may enter into contracts with customers that include promises to transfer multiple products and services, such as charging systems, software subscriptions, extended maintenance, and professional services. For arrangements with multiple products and services, we evaluates whether the individual products and services qualify as distinct performance obligations. In our assessment of whether products and services are a distinct performance obligation, we determine whether the customer can benefit from the product or service on its own or with other readily available resources and whether the service is separately identifiable from other products or services in the contract. This evaluation requires us to assess the nature of each of our networked charging systems, subscriptions, and other performance obligations and how they are provided in the context of the contract with the customer, including whether the performance obligations are significantly integrated, which requires judgment based on the facts and circumstances of the contract. The transaction price for each customer contract is determined based on the amount we expect to be entitled to receive in exchange for transferring the promised products or services to the customer. For the most part, collectability of revenue is reasonably assured based on historical evidence of collectability of fees we charge our customers. However, judgement may be required in estimating variable consideration promised in customer contracts. The transaction price in the contract is allocated to each distinct performance obligation in an amount that represents the relative amount of consideration expected to be received in exchange for satisfying each performance obligation. Revenue is recognized when performance obligations are satisfied. Revenue is recorded based on the transaction price excluding amounts collected on behalf of third parties such as sales taxes, which are collected on behalf of and remitted to governmental authorities, or driver fees, collected on behalf of customers who offer public charging for a fee. When agreements involve multiple distinct performance obligations, we accounts for individual performance obligations separately if they are distinct. We apply significant judgment in identifying and accounting for each performance obligation, as a result of evaluating terms and conditions in contracts. The transaction price is allocated to the separate performance obligations on a relative standalone selling price (“SSP”) basis. We determine SSP based on the observable standalone selling price when it is available, as well as other factors, including the price charged to our customers, our discounting practices and our overall pricing objectives, while maximizing observable inputs. In situations where pricing is highly variable, or a product is never sold on a stand-alone basis, we estimate the SSP using the residual approach. We have entered into certain agreements for research and development services. These arrangements typically include terms whereby we receive milestone payments in accordance with the scope of services outlined in the respective agreement and/or reimbursement for allowable costs. At the inception of each arrangement that includes milestone payments, we evaluate whether a significant reversal of cumulative revenue associated with achieving the milestones is probable and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant reversal of cumulative revenue would not occur, the associated milestone value is included in the transaction price. We apply considerable judgment in evaluating factors such as the scientific, regulatory, commercial, and other risks that must be overcome to achieve the particular milestone in making this assessment. At the end of each subsequent reporting period, we reevaluate the probability of achievement of all milestones subject to certain constraints, such as site preparation for EV 61 charging station installations, and, if necessary, we adjust our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment. Revenue for other service contracts is recognized over time using an input method where progress on the performance obligation is measured based on the proportion of actual costs incurred to date relative to the total costs expected to be required to satisfy the performance obligation. The payment terms for some of our service contracts include revenue sharing arrangements whereby we are entitled to the right to receive a portion of the revenue generated by the customer selling energy through the GIVe platform or from carbon credits received as a result of the customer using the GIVe platform. We occasionally enter into agreements with customers in which EV charging stations are sold at a discount in exchange for a higher percentage of revenue share from the customer selling energy through the GIVe platform or from carbon credits. Due to the long-term nature of these payment terms, certain contracts are considered to have significant financing components as it relates to the equipment. We estimate the effect of any significant financing component and records the revenue associated with the equipment at the estimated present value of the expected stream of payments. As payments are received, the difference between the total payment and the amortized value of the receivable is recorded to interest income using the effective yield method. Areas of Judgment and Estimates Determining whether multiple promises in a contract constitute distinct performance obligations that should be accounted for separately or as a single performance obligation requires significant judgment. In reaching our conclusion, we assess the nature of each individual service or product offering and how the services and products are provided in the context of the contract, including whether the services are significantly integrated which may require judgment based on the facts and circumstances of the contract. Determining the relative SSP for contracts that contain multiple performance obligations requires significant judgment. We determine SSP using observable pricing when available, which takes into consideration market conditions and customer specific factors. When observable pricing is not available, we first allocate to the performance obligations with established SSPs and then apply the residual approach to allocate the remaining transaction price. Principles of Consolidation We consolidate entities based on either a variable interest model or voting interest model. As such, for entities that are determined to be VIEs, we consolidate those entities where we have both significant economics and the power to direct the activities of the entity that impact economic performance. The consolidation guidance requires qualitative and quantitative analysis to determine whether our involvement, through holding interests directly or indirectly in the entity or contractually through other variable interests would give us a controlling financial interest. This analysis requires judgment. These judgments include: (1) determining whether the equity investment at risk is sufficient to permit the entity to finance its activities without additional subordinated financial support, (2) evaluating whether the equity holders, as a group, can make decisions that have a significant effect on the success of the entity, (3) determining whether two or more parties’ equity interests should be aggregated, (4) determining whether the equity investors have proportionate voting rights to their obligations to absorb losses or rights to receive returns from an entity and (5) evaluating the nature of relationships and activities of the parties involved in determining which party within a related-party group is most closely associated with a VIE and hence would be deemed the primary beneficiary. Stock-based compensation We grant stock options to employees and non-employees. Determining the grant date fair value of options using the Black-Scholes option-pricing model requires management to make certain assumptions and judgments. These estimates involve inherent uncertainties, and, if different assumptions had been used, stock-based compensation expense could have been materially different from the amounts recorded. Stock-based compensation is measured at the grant date, based on the fair value of the award and is recognized as an expense on a straight-line basis over the requisite service period. We recognize forfeitures as they occur. The determination of the grant date fair value of stock option awards issued is affected by a number of variables, including the fair value of our underlying common stock, our expected common stock price volatility over the term of the option award, the expected term of the award, risk-free interest rates, and the expected dividend yield of our Common Stock. 62 The following table summarizes the weighted-average assumptions used in estimating the fair value of stock options granted during each of the periods presented: Years Ended December 31, 2022 2021 Expected life of options (in years) 6.1 6.0 Dividend yield 0 % 0 % Risk-free interest rate 2.75 % 1.02 % Expected volatility 56.2 % 60.2 % • Expected Life . The expected term represents the expected life of options is the average of the contractual term of the options and the vesting period. • Dividend Yield . The expected dividend yield is zero as we have never declared or paid cash dividends and have no current plans to do so over the expected life of the options. • Risk Free Interest Rate . The risk-free interest rate is based on the yields on U.S. Treasury debt securities with maturities approximating the estimated life of the options. • Expected Volatility . As we have only been a public company for a short period of time, the volatility rate was estimated by management based on the average volatility of certain public company peers within our industry corresponding to the expected term of the awards. Income Taxes We utilize the asset and 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. We make estimates, assumptions, and judgments to determine our provision for income taxes, deferred tax assets and liabilities, and any valuation allowance recorded against deferred tax assets. We assess the likelihood that our deferred tax assets will be recovered from future taxable income, and to the extent we believe that recovery is not likely, we established a valuation allowance. We recognize 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. Interest and penalties related to unrecognized tax benefits which, as of the date of this report, have not been material, are recognized within provision for income taxes. 63 Recent Accounting Pronouncements See Note 2 to the consolidated financial statements included elsewhere in this report for more information regarding recently issued accounting pronouncements. Emerging Growth Company Accounting Election Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can choose not to take advantage of the extended transition period and comply with the requirements that apply to non-emerging growth companies, and any such election to not take advantage of the extended transition period is irrevocable. We are an “emerging growth company” as defined in Section 2(A) of the Securities Act of 1933, as amended, and have elected to take advantage of the benefits of this extended transition period. We expect to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public business entities and non-public business entities until the earlier of the date we (a) are no longer an emerging growth company or (b) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. This may make it difficult or impossible to compare our financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions because of the potential differences in accounting standards used. See Note 2 to the consolidated financial statements included elsewhere in this report for the recent accounting pronouncements adopted and the recent accounting pronouncements not yet adopted for the year ended December 31, 2022. In addition, we intend to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an emerging growth company, we intend to rely on such exemptions,we are not required to, among other things: (a) provide an auditor’s attestation report on our system of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; (b) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act; (c) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the consolidated financial statements (auditor discussion and analysis); or (d) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation. We will remain an emerging growth company under the JOBS Act until the earliest of (a) the last day of our first fiscal year following the fifth anniversary of Newborn’s IPO, which was consummated on February 19, 2020, (b) the last date of our fiscal year in which we have total annual gross revenue of at least $1.235 billion, (c) the date on which we are deemed to be a “large accelerated filer” under the rules of the SEC with at least $700.0 million of outstanding securities held by non-affiliates or (d) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the previous three years. 64 Item 7A. Quantitative and Qualitative Disclosures About Market Risk Not applicable. Item 8. Financial Statements and Supplementary Data The information required by this item is incorporated by reference to the consolidated financial statements and accompanying notes set forth at the end of this Annual Report on Form 10-K. Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. None.