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 our 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 typically 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. 56 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. 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. 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 years ended December 31, 2023 and 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 2024, 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, 2023. However, if these inflationary pressures continue, our revenue, gross and operating margins and net income could be impacted in the year ending December 31, 2024. 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 57 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 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 our 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 are 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. 58 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, 2023 was $3.9 million, which we expect to be earned in future periods. Market Opportunity We see a significant market opportunity for V2G, totaling approximately over $6 trillion and our management believes it is well positioned to capture this global opportunity for a variety of reasons: • First, our intellectual property includes key patents, making it difficult for competitors to perform V2G functions without violating our intellectual property. Our technology originated with an academic unit at the University of Delaware starting in 1996 and not only had decades of development but tens of millions of dollars in project funding invested prior to our acquisition of the intellectual property and commercialization of the technology. • Second, we are already qualified by multiple Transmission System Operators, which typically take anywhere from one to three years to get approval. With this qualification, it makes it easier for us to expand in other areas. • Third, we have over a decade of experience. Our history and strong relationships with key customers optimize our market participation and value proposition. • Fourth, we have collected a huge amount of data which is a key element for rapid and accurate development, as well as monetization. Because of these factors, we have a significant competitive advantage which is a key differentiator. Further, our global experience allows us to bring the lessons we have learned into each new region which, in turn, enables us to bring the unique experience and incredible benefits of our V2G technology to customers at a faster rate. 59 Results of Operations Year Ended December 31, 2023 Compared with Year Ended December 31, 2022 The following table sets forth information regarding our consolidated results of operations for the years ended December 31, 2023 and 2022. Years Ended December 31, Period-over-Period Change 2023 2022 Change ($) Change (%) Revenue Products $ 5,843,187 $ 4,129,246 $ 1,713,941 41.5 % Services $ 2,162,218 $ 784,710 $ 1,377,508 175.5 % Grants 326,757 459,427 (132,670) (28.9) % Total revenue 8,332,162 5,373,383 2,958,779 55.1 % Operating expenses Cost of products 5,804,011 3,609,461 2,194,550 60.8 % Cost of services 1,177,333 587,327 590,006 100.5 % Selling, general and administrative expenses 24,694,693 30,115,571 (5,420,878) (18.0) % Research and development expense 8,761,400 7,976,568 784,832 9.8 % Total operating expenses 40,437,437 42,288,927 (1,851,490) (4.4) % Operating loss (32,105,275) (36,915,544) 4,810,269 (13.0) % Other income Interest income, net 108,182 134,579 (26,397) (19.6) % Change in fair value of warrants liability 216,263 11,986,462 (11,770,199) NM Change in fair value of derivative liability 49,497 152,723 (103,226) (67.6) % Other, net 436,146 85,074 351,072 412.7 % Total other income, net 810,088 12,358,838 (11,548,750) NM Loss before taxes (31,295,187) (24,556,706) (6,738,481) 27.4 % Income tax expense 1,600 800 800 100.0 % Net loss $ (31,296,787) $ (24,557,506) $ (6,739,281) 27.4 % Less: Net loss attributable to non-controlling interests (12,456) (538,841) 526,385 NM Net loss attributable to Nuvve Holding Corp. $ (31,284,331) $ (24,018,665) $ (7,265,666) 30.3 % ________________ NM - Not Meaningful 60 Revenue Total revenue was $8.3 million for the year ended December 31, 2023, compared to $5.4 million for the year ended December 31, 2022, an increase of $3.0 million, or 55.1%. The increase is attributed to a $1.7 million increase in products and $1.4 million increase in services revenue due to higher customers sales orders and shipments, partially offset by a decrease of $0.1 million in grants revenue. Products and services revenue for the year ended December 31, 2023 consisted of sales of school buses of $1.0 million , DC and AC Chargers of $4.8 million , grid services revenue of $0.8 million , and engineering services of $1.3 million . Cost of Product and Service Revenue Cost of products and services revenues for the year ended December 31, 2023, increased by $2.8 million to $7.0 million, or 66.3%, compared to $4.2 million for the year ended December 31, 2022 due to higher customers sales orders and shipments. Products and services margins for the year ended December 31, 2023 decreased by 1.8%, to 12.8%, compared to 14.6% for the same prior year period. Margin was negatively impacted mostly by a higher mix of hardware charging stations sales, including the impact of lower margin school buses sales, offset by a lower mix of engineering services during the year ended December 31, 2023. 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 $24.7 million for the year ended December 31, 2023 as compared to $30.1 million for the year ended December 31, 2022, a decrease of $5.4 million, or 18.0%. The decrease during the year ended December 31, 2023 was primarily attributable to decreases in compensation expenses of $1.7 million, including share-based compensation, decreases in travel related expenses of $0.7 million , decreases in subcontractor and outside services expenses of $0.3 million , decreases in professional fees related to internal operational reviews of $1.5 million, decreases in insurance related expenses of $1.0 million, partially offset by increases in audit services fees of $0.7 million , increases in bad debt expenses of $0.1 million , increased in lease expenses related to the main corporate office and warehouse of $0.1 million , increase in office expenses of $0.2 million , increase in legal expenses of $0.4 million and software subscriptions expenses of $0.6 million. Expenses resulting from the consolidation of Levo's activities during the year ended December 31, 2023, contributed $2.3 million to the decrease in selling, general and administrative expenses. Research and Development Expenses Research and development expenses increased by $0.8 million, or 9.8%, from $8.0 million for the year ended December 31, 2022 to $8.8 million for the year ended December 31, 2023. The increases during the year ended December 31, 2023 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, net Other income, net consists primarily of interest expense, financing costs, change in fair value of warrants liability and derivative liability, and other income (expense). Other income, net decreased by $11.5 million of income, from $12.4 million of other income for the year ended December 31, 2022 to $0.81 million in other income for the year ended December 31, 2023. The decrease during the year ended December 31, 2023 was primarily attributable to the change in fair value of the warrants liability and derivative liability, partially offset by gains realized from the sale of our equity investment in Switch EV Ltd (See Note 6 ) and sublease income related to the subleasing of part of our main office space (See Note 16 ). 61 Income Taxes In the years ended December 31, 2023 and 2022, we recorded nominal income tax expenses. The income tax expenses during the years ended December 31, 2023 and 2022 were nominal primarily due to operating losses that receive no tax benefits as a result of a valuation allowance. Net loss Net loss increased by $6.7 million, or 27.4%, from $24.6 million for the year ended December 31, 2022 to $31.3 million for the year ended December 31, 2023. The increase in net loss was primarily due to decrease in other expenses of $11.5 million, and an increase in operating expenses of $4.8 million, and which includes an increase in cost of product of $2.8 million mainly associated with the loss on the sale of school buses, partially offset by increase in revenue of $3.0 million for the aforementioned reasons. Net Loss Attributable to Non-Controlling Interest Net loss attributable to the non-controlling interest in Levo was $0.01 million and $0.54 million for the year ended December 31, 2023 and 2022, respectively. 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 entity (“VIE”) in which we are the primary beneficiary. Accordingly, we consolidated Levo and recorded a non-controlling interest for the share of Levo owned by Stonepeak and Evolve during the years ended December 31, 2023 and 2022. 62 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 $32.1 million and $36.9 million for the years ended December 31, 2023 and 2022, respectively. Our cash used in operations were $21.3 million and $34.1 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, we had a cash balance, working capital, and stockholders’ equity of $1.5 million, $4.7 million and $2.6 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, and cash from operations. We plan to fund current operations through increased revenues and raising additional capital. Please see below for details. However, there can be no assurance we will be successful in raising necessary funds in the future, on acceptable terms or at all. February 2024 Public Offering On January 31, 2024, we entered into an underwriting agreement (the “Underwriting Agreement”) with Craig-Hallum Capital Group LLC (“Craig-Hallum”) regarding an underwritten public offering of our securities (the “Offering”). The Offering was conducted pursuant to our Registration Statement on Form S-1 (File No. 333-276415) filed with the SEC, which was declared effective as of January 31, 2024. On February 2, 2024, we completed the Offering for gross proceeds of approximately $9.6 million prior to deducting underwriting discounts and commissions and offering expenses. Craig-Hallum received underwriting discounts and commissions equal to 7.0% of the gross proceeds of the Offering, and is further entitled to receive 7.0% of the gross proceeds received by us in connection with the exercise of any of the outstanding Series B Warrants issued in the Offering. As noted above, on January 31, 2024, we entered into an Underwriting Agreement regarding the Offering which was comprised of the following: 1. 3,035,000 shares of common stock; 2. 1,765,000 pre-funded warrants (“Pre-Funded Warrants”) to purchase shares of common stock; 3. 4,800,000 Series A Warrants (“Series A Warrants”) to purchase shares of common stock, with an initial exercise price of $2.00 per share and a term of five years following the issuance date; 4. 4,800,000 Series B Warrants (“Series B Warrants”) to purchase shares of common stock with an exercise price of $2.00 per share and a term of nine months following the issuance date; and 5. 4,800,000 Series C Warrants (“Series C Warrants”) to purchase shares of common stock with an exercise price of $2.00 per share and a term of five years following the issuance date, subject to early expiration as described below. Each share of common stock and Pre-Funded Warrant issued in the Offering was accompanied by a Series A Warrant to purchase one share of common stock, a Series B Warrant to purchase one share of common stock and a Series C Warrant to purchase one share of common stock. The combined price per share of common stock and the accompanying Series A Warrant, Series B Warrant and Series C Warrant was $2.00. The combined price per share of each Pre-Funded Warrant and accompanying Series A Warrant, Series B Warrant, and Series C Warrant was equal to $1.9999, and the exercise price of each Pre-Funded Warrant is $0.0001 per share. The Series C Warrants may only be exercised to the extent and in proportion to a holder of the Series C Warrants exercising its Series B Warrants, and are subject to an early expiration of nine months, in proportion and only to the extent any Series C Warrants expire unexercised. In addition, we granted Craig-Hallum warrants to purchase up to 480,000 shares of common stock (the “Underwriter Warrants”) at an exercise price of $2.00 per share. The Underwriter Warrants have a term of five years and are immediately exercisable, provided that 240,000 of the shares of common stock underlying the Underwriter Warrants shall only be exercisable pro rata upon the exercise of the Series B Warrants issued in the Offering. Shelf Registration On April 25, 2022, we filed a shelf registration statement with the SEC on Form S-3 which allow us, subject to limitations under the baby shelf rules discussed below, 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. Our ability to utilize the full capacity of our shelf registration, or any future shelf registration on Form S-3, is limited by our compliance with the baby shelf rules. Pursuant to the “baby shelf rules” promulgated by the SEC, if our public float is less than $75.0 million as of specified measurement 63 periods, the number of securities that may be offered and sold by us under a Form S-3 registration statement, including pursuant to our shelf registration statement, in any twelve-month period is limited to an aggregate amount that does not exceed one-third of our public float. As a result, we will be limited by the baby shelf rules until such time 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. At the Market Offerings and Registered Direct Offerings 2022 ATM Offering Program On May 5, 2022, we entered into an at-the-market offering agreement (the "Sales Agreement"), with Craig-Hallum and Chardan Capital Market, LLC ("Chardan"), as agents (the "Agents"). From time to time during the term of the Sales Agreement, we could 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 were entitled to collect a fee equal to 3% of the gross sales price of all shares of common stock sold pursuant to the Sales Agreement. Shares of common stock sold under the Sales Agreement were offered and sold pursuant to our shelf registration statement describe above. During the year ended December 31, 2023, we sold 19,822 shares of common stock pursuant to the Sales Agreement at an average price of $99.40 per share for aggregate net proceeds of approximately $3.8 million. The Sales Agreement terminated pursuant to its terms in June 2022. 2023 ATM Offering Program On January 31, 2023, we entered into an at-the-market Offering Agreement (the “ATM Agreement”) with Craig-Hallum, as sales agent ("Agent"), pursuant to which we could offer and sell, from time to time through the Agent shares of our common stock (the “Shares”), having an aggregate offering price of up to $25,000,000. We paid the Agent a commission of 3.0% of the aggregate gross sales prices of the Shares, and we reimbursed the Agent for fees and disbursements of its legal counsel in the amount of $50,000. During the year ended December 31, 2023 , we sold 37,804 shares of common stock pursuant to the ATM Agreement at an average price of $25.60 per share for aggregate net proceeds of approximately $0.9 million. Effective October 16, 2023, we and the Agent agreed to terminate the ATM Agreement . February 2023 Registered Direct Offering On February 17, 2023, we entered into a subscription agreement with a certain institutional and accredited investor, relating to the issuance and sale of 13,587 shares of common stock in a registered direct offering (the “February 2023 Offering”). The offering price for the shares was $36.80 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. Chardan acted as the placement agent for the February 2023 Offering and received a sales commission of 6.0% of the gross proceeds. April 2023 Registered Direct Offering On April 14, 2023, we entered into a subscription agreement with a certain institutional and accredited investor, relating to the issuance and sale of 45,455 shares of common stock in a registered direct offering (the “April 2023 Offering”). The offering price for the shares was $22.00 per share of common stock. The closing of the April 2023 Offering occurred on April 17, 2023. The aggregate gross proceeds from the April 2023 Offering was approximately $1.0 million. Chardan acted as the placement agent for the April 2023 Offering and received a sales commission of 6.0% of the gross proceeds. June 2023 Registered Direct Offering On June 6, 2023, we entered into a subscription agreement with a certain institutional and accredited investor, relating to the issuance and sale of 62,313 shares of common stock in a registered direct offering (the “June 2023 Offering”). The offering price for the shares was $16.00 per share of common stock. The closing of the June 2023 Offering occurred on June 6, 2023. The aggregate gross proceeds from the June 2023 Offering was approximately $1.0 million. Chardan acted as the placement agent for the June 2023 Offering and received a sales commission of 6.0% of the gross proceeds. October 2023 Offerings On October 18, 2023, we entered into a marketed offering relating to the issuance and sale of 178,571 shares of our common stock. The offering price for the shares was $5.60 per share of common stock. The closing of the offering occurred on October 20, 2023. The aggregate gross proceeds received by us from the market offering was approximately $1.0 million. Aegis Capital Corp acted as the underwriting agent of offering and received underwriting discounts and commissions equal to 7.0% of the gross proceeds. In addition, we granted Aegis Capital Corp. a 45-day option to purchase up to 26,786 of additional shares of common stock, less underwriting discounts and commissions solely to cover over-allotments. On October 20, 2023, Aegis exercised the option to purchase over-allotments shares of 19,931 at offering price of $5.60 per share. The aggregate gross 64 proceeds from the exercise of over-allotments shares was approximately $0.1 million. Aegis Capital Corp received underwriting discounts and commissions equal to 7.0% of the gross proceeds of the exercise of the over-allotment option. On October 25, 2023 we entered into a definitive agreement with a single institutional investor for the purchase and sale of 344,324 shares of common stock and pre-funded warrants to acquire shares of common stock in a registered direct offering. The purchase price of each share was $6.00 per share. The purchase price for the pre-funded warrants is equivalent to the purchase price for the shares, less the exercise price of $0.0001. The aggregate gross proceeds to us was approximately $2.1 million . The transaction closed on October 27, 2023, and was subject to the satisfaction of customary closing conditions. 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, Rhombus Energy Solutions, Inc. (“Rhombus”), for a quantity of DC Chargers and dispensers for EVs (“DC Chargers”), for a total price of $13.2 million. As previously disclosed, a dispute (the "Dispute") arose as to the PO, and an arbitration proceeding was initiated. On February 2, 2024 (the “Settlement Date”), we and Rhombus entered into a settlement and release agreement (the “Settlement Agreement”) pursuant to which, among other things, we agreed to pay Rhombus approximately $0.46 million for certain initial DC Chargers within 15 days from the Settlement Date. We further agreed to pay Rhombus an aggregate of $2.4 million for certain DC Chargers upon shipment with payments correlating to the amounts shipped due prior to shipment, a minimum of 50% of which shall be paid within 12 months after the Settlement date, with the remaining balance, if any, to be paid within 24 months after the Settlement Date. The Settlement Agreement further provides for the dismissal of the legal action as to us and Rhombus. We and Rhombus agreed to release one another from any and all claims relating to the Dispute. 65 Cash Flows Years Ended December 31, 2023 2022 Net cash (used in) provided by: Operating activities $ (21,254,328) $ (34,081,975) Investing activities 1,136,722 (1,438,045) Financing activities 5,862,746 19,063,624 Effect of exchange rate on cash 35,624 (50,228) Net (decrease) increase in cash and restricted cash $ (14,219,236) $ (16,506,624) Net cash used in operating activities during the year ended December 31, 2023 was $21.3 million as compared to net cash used of $34.1 million in the year ended December 31, 2022. The $12.8 million decrease in net cash used in operating activities was primarily attributable to lower use of cash for working capital during the year ended December 31, 2023 as compared to the same prior period. Working capital during the year ended December 31, 2023 was impacted by, among other items, higher operating loss of $32.1 million, resulting from higher costs of sales, partially offset by decreases in compensation expenses, decreases in professional fees related to internal operational reviews, decreases in governance and other public company costs, and decreases in cash purchases to fund inventory levels. Additionally, improved timing and management of vendor terms compared to the cash settlement of such items contributed t o lower c ash use of cash for working capital. During the year ended December 31, 2023 cash provided by investing activities was $1.14 million as compared to net cash used for investing activities of $1.44 million during the year ended December 31, 2022. Net cash provided by investing activities were from the sale of our equity investment in Switch EV Ltd partnership alliance, partially offset by purchase of fixed assets. Net cash provided by financing activities for the year ended December 31, 2023 was $5.9 million, of which $5.0 million were the proceeds from the various 2023 Offerings, partially offset by issuance cost, and $0.9 million was provided in connection with the proceeds from the 2023 at-the-market common stock offering, partially offset by issuance cost. 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 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. 66 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 Annual Report on Form 10-K, 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 account 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 67 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. Share-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. 68 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, 2023 2022 Expected life of options (in years) 7.0 6.0 Dividend yield 0 % 0 % Risk-free interest rate 4.61 % 1.02 % Expected volatility 79.6 % 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 Annual Report, have not been material, are recognized within provision for income taxes. 69 Recent Accounting Pronouncements See Note 2 to the consolidated financial statements included elsewhere in this Annual 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 Annual Report for the recent accounting pronouncements adopted and the recent accounting pronouncements not yet adopted for the year ended December 31, 2023. 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. 70 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 in the F-pages at the beginning on page F-1 of this Annual Report on Form 10-K. Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. None.