Volta (VLTA) 10-K2022 FY Annual report

Volta Inc. is a holding company for its wholly owned subsidiaries, Volta Charging Industries, LLC, Volta Charging, LLC, Volta Charging Services, LLC, Volta Canada Inc., Volta Charging Germany GmbH, Volta France SARL, Volta Rakko B.V., Rakko Holding B.V., and Volta Media, LLC (inactive) (collectively, the “Company” or “Volta”). Volta’s mission is to build the fueling infrastructure of the future. Volta’s vision is to create an electric vehicle (“EV”) charging network that capitalizes on and catalyzes the shift from gas cars to electric cars. Volta places its charging stations in high traffic public locations that driver and consumer behavior data suggest are stopping points in EV drivers' daily routines. Generally located near the front door entrances of the retail and other commercial facilities at these locations, the digital display screens on Volta's media enabled stations offer its media partners the opportunity to advertise to potential consumers, both EV drivers and non-EV drivers, just before they enter that facility. By both attracting EV drivers to a particular location to run an errand that was on their to-do list and providing a high impact advertising opportunity just before a purchasing decision may be made, Volta's charging stations allow it to enhance its site and media partners' core commercial interests.

Founded in 2010, Volta primarily owns, operates and maintains EV charging stations and has expanded its network across the United States to include over 3000 chargers across 31 states and territories that generated over 259,000 estimated charging sessions per month on average for year ended December 31, 2022, forming one of the most utilized charging networks in the United States on a station-by-station basis. On August 26, 2021 (“Closing Date”), Tortoise Acquisition Corp. II (“Tortoise Corp II”) consummated the reverse recapitalization contemplated by the Business Combination Agreement ("Reverse Recapitalization"), by and among Tortoise Corp II, SNPR Merger Sub I, Inc., SNPR Merger Sub II, LLC, and Legacy Volta (the "Business Combination Agreement"). On the Closing Date, and in connection with the closing of the Business Combination Agreement (the “Closing”), Tortoise Corp II was renamed Volta Inc. and began trading on the New York Stock Exchange (“NYSE”) under the ticker symbol “VLTA”. The Company's public warrants also trade on the NYSE under the ticker symbol “VLTA WS” (the "Public Warrants"). Additionally, in 2021, Volta expanded its international footprint, opening business offices in Paris, France, and Berlin, Germany, and a technical development office in Montreal, Canada and commenced installation of its first stations in Europe.

Volta’s business entails partnering with real estate and retail partners with national and regional multi-site portfolios of commercial and retail properties, as well as communities, municipalities, and local business owners, to locate and deploy its EV charging stations in premier locations. These site hosts span a wide array of industries and locations, including retail centers, grocery stores, pharmacies, movie theaters, parking lots, healthcare/medical facilities, municipalities, sport and entertainment venues, parks and recreation areas, restaurants, schools and universities, certain transit and fueling locations and office buildings and other locations. Volta generally signs long-term contracts to locate its charging stations at site host properties and grows its footprint over time as its station utilization justifies further capital investment in its EV charging infrastructure. Volta also sells charging stations to certain business partners, while continuing to perform related installation, operation and maintenance services. For both Volta-owned and partner-owned media-enabled charging stations, Volta sells media display time on the charging stations’ digital displays to its media and advertising partners.

Volta’s business model includes pay-per-use by the driver across a portion of its direct current fast charging ("DCFC") stations, as well as free charging services to drivers who use its Level 2 charging stations as well as select DCFC stations (meaning that drivers can charge their EVs at no cost to them). Volta’s network has a distinguished business model among other competitors in the EV charging industry, as it can draw on several sources of revenue to build earlier and stronger unit economics than other solutions currently available in the market, by tapping into multiple commercial opportunities, consisting of the sale of advertising content on its charging station digital displays to its commercial partners, installation, operation and maintenance services related to its charging stations, license or service fees from the licensing of Volta’s proprietary software tools, the sale of low-carbon fuel standard (“LCFS”) credits and fees associated with pay-for-use by the driver charging services.

On January 17, 2023, Volta entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Shell USA, Inc., a Delaware corporation (“Shell”), and SEV Subsidiary, Inc., a Delaware corporation, a direct, wholly-owned subsidiary of Shell ("Merger Sub"). The Merger Agreement provides that, upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will merge with and into Volta, with Volta continuing as the surviving corporation and as a wholly-owned subsidiary of Shell.

On November 23, 2022, Volta was notified by the NYSE that it is not in compliance with Section 802.01C of the NYSE Listed Company Manual because the average closing price of the Company’s Class A common stock was less than $1.00 over a consecutive 30 trading-day period. The notice did not result in the immediate delisting of the Company's Class A common stock from the NYSE.

Volta’s solution is to provide a differentiated model that uses media and EV charging to draw drivers to Volta's site partners' locations and influence purchasing or other behavior. By choosing Volta charging stations, charging becomes more than just an amenity that a site host can offer its customers — it can serve as an independent driver of revenue, loyalty and driver engagement for site hosts. Volta’s content partners similarly benefit from access to unique locations served by Volta’s EV charging stations, reaching audiences when they are about to enter retail or

commercial facilities. Finally, Volta believes its EV charging stations' role in slowing climate change by reducing greenhouse gas emissions by enabling EV transportation closely aligns with the values of its site hosts, content partners and the drivers that use Volta chargers.

Volta’s principal products and services are its EV charging stations and related services, including its content delivery activities for its media and advertising partners. Volta’s EV charging equipment consists of a managed network of Alternate Current (“AC”) and DCFC chargers equipped with digital displays (which Volta refers to as its “content-driven” or “media-enabled” charging stations) and chargers without digital displays. Volta’s EV charging network is facilitated by proprietary software that operates, maintains, and monitors its EV charging stations and associated charging data. Volta remotely monitors and manages its EV charging stations to assist with driver engagement at host sites to provide EV drivers with vital station information, including charger location and availability. Volta’s media-enabled charging stations also provide its commercial partners with an extensive network of digital displays in prime locations that drivers visit on a day-to-day basis.

Volta has invested in and maintains long-term relationships with suppliers and service providers. Volta designs its EV charging stations in-house with the assistance of professional design consultants and outsources production to contract manufacturers. At this stage of the industry, equipment can be unique to each supplier with respect to components and aftermarket maintenance and warranty services. Volta relies on a limited number of suppliers and manufacturers, and in some cases only a single supplier for some components, for the manufacture and supply of its charging stations. Peerless-AV ("Peerless"), which assembles Volta’s charging stations, was Volta’s principal supplier for the years ended December 31, 2021 and 2022, accounting for 53% and 64% of Volta’s supply-related expenditures for such periods, respectively. For the years ended December 31, 2021 and 2022, no other supplier or manufacturer for the supply or manufacture of Volta’s charging stations accounted for greater than 10% of Volta’s supply-related expenditures for the applicable period.

Volta’s and Peerless' supply relationship is governed by a Supply Agreement under which Volta has the right to place orders for the purchase of charging stations and related equipment (the “Peerless Supply Agreement”). The materials purchased from Peerless pursuant to any purchase order are covered by terms within the Peerless Supply Agreement customary for these types of arrangements, including customary warranty, delivery, payment and liability provisions. The Peerless Supply Agreement requires Volta to purchase at least 60 and no more than 200 charging stations a quarter unless otherwise agreed by Volta and Peerless. The Peerless Supply Agreement may be terminated by either party by notice given at least thirty days before its annual renewal date, by Peerless on six months’ notice, and at any time by the giving of not less than 30-days’ notice upon breach by a party (subject to customary cure rights), except that termination of the Peerless Supply Agreement will not terminate any then-existing purchase order (other than due to breach by the applicable party, subject to customary cure rights). The Peerless Supply Agreement does not require Volta to deal exclusively with Peerless.

In addition, Volta is typically responsible for the installation of its charging stations at its partners’ sites. These installations are generally performed by electrical and civil contractors, consistent and in accordance with accepted industry practices. Those electrical and civil contractors are engaged and managed by Volta under the oversight of Volta’s construction project managers. To facilitate its installation and maintenance activities, Volta has formed relationships with construction and maintenance companies that have significant experience building and maintaining EV charging sites.

The EV charging market is relatively new and is increasingly competitive with many newcomers. Volta currently faces competition from a number of companies. Volta believes its current competitors to its EV charging owner-operator business activities include EVgo Services LLC, Electrify America LLC, Allego N.V., Tesla Inc., and Rivian Automotive Inc. There are also many other large and small EV charging companies that offer non-networked or “basic” chargers that have limited customer leverage but could provide a low-cost solution for basic charger needs in commercial and retail locations, such as Pod Point Limited, EVConnect, Inc., Power Dot SA, SemaConnect, Inc., and Engie SA, as well EV charging equipment manufacturers that also compete with Volta, like ChargePoint, Inc., EVBox Group, FLO Services USA Inc., Revel Transit Inc., and Blink Charging Co., in addition to charging networks being developed by original equipment manufacturers ("OEMs"), such as IONITY GmbH, and utilities, such as EDF Group, or in partnership with any of the aforementioned competitors.

The principal competitive factors in the EV charging industry include the number of stations in a network; capital deployment efficiency; number of revenue lines and diversity of revenue opportunities, charger utilization and pricing to drivers; charger connectivity to EVs and ability to charge all models and standards; charger network reliability, scale and local density; charger locations and accessibility; speed of charging relative to expected vehicle dwell times at the location; software-enabled service offerings and overall business partner and driver user

experience; operator brand, track record and reputation; access to equipment vendors and service providers; installation expertise and costs; brand recognition and reputation; mobile application interface and ease of use; partnerships with OEMs; and policy incentives. Large initial stage markets require significant early capital expenditures, engagement across verticals and driver engagement to gain market share and a continued effort to scale product and service offerings, channels, installers, teams and processes. There are also competitors who may have limited funding, experience or commitment to quality assurance, which could cause poor experiences, hampering overall EV adoption or trust in any particular provider of charging services. Volta believes these additional competitors may struggle with gaining the necessary network traction but could gain momentum in the future. Further, Volta’s current or potential competitors may be acquired by third parties with different commercial objectives and imperatives and greater available resources.

Volta believes it has a competitive advantage in delivering charging services driven by its differentiated business model, EV charging station design, charging station placement, network tools and the additional value Volta’s charging stations can deliver to its site hosts and business partners by combining content display offerings with charging services to drive higher utilization as compared to Volta’s competitors.

The place-based digital media industry is fragmented, consisting of a few traditional companies operating on a national and international basis, such as Outfront Media, Inc., Amscreen, Clear Channel Outdoor, Lamar, JCDecaux, Intersection and GSTV, as well as newer, digitally-forward, omni-channel platforms like Google, Facebook and Twitter, and hundreds of smaller regional and local companies operating a limited number of displays in a single or a few local geographic markets. Volta competes with all of these companies for its content customers. Volta also competes with other content, including broadcast and cable television, radio, podcasts, OTT print media, internet and mobile and direct mail marketers, within their respective markets. In addition, Volta competes with a wide variety of out-of-home media, including media in shopping centers, grocery stores, movie theaters, transit locations and sports and entertainment venues. Advertisers compare relative costs of available media, cost per thousand impressions of a piece of content, the efficacy of the media, as well as markets, locations and audiences, particularly when delivering a message to customers with distinct demographic characteristics. In competing with other content, Volta intends to rely on its differentiated product and its media-enabled charging station placement which can provide access to a high-value audience, historically unavailable locations, an uncluttered media experience, the opportunity to influence purchase and brand decisions immediately prior to site visitors entering a retail environment, a compelling halo effect for brands desiring alignment with sustainability and the growing ability to prove efficacy of digital content in the real world.

Government regulations for installation and operation of EV charging stations and place-based media content vary from jurisdiction to jurisdiction and may include, but are not limited to, permitting and sign code requirements, inspection requirements, licensing of contractors, certifications, environmental requirements, health and safety requirements and restrictions around digital display placement and content.

Compliance with such regulations is an important aspect of Volta’s ability to continue its operations and avoid additional costs and installation delays for its EV charging stations. The descriptions that follow are summaries and should be read in conjunction with the texts of the regulations described herein, which are subject to change. The descriptions do not purport to describe all present and proposed regulations affecting Volta’s business. Volta is not currently materially dependent on any government programs supporting EV technology.

Volta continuously pursues public grants, subsidies and incentives to reduce its capital expenditures. This includes the $7.5 billion that has been allocated to deploy 500,000 EV chargers by 2030 as part of the Bipartisan Infrastructure Law ("BIL"), the National Electric Vehicle Infrastructure Formula Program ("NEVI") which includes $5 billion to build out a national electric vehicle charging network and the Inflation Reduction Act ("IRA") which includes nearly $400 billion in federal funding to clean energy that will be delivered through a mix of tax incentives, grants and loan guarantees. To this end, Volta has dedicated, and plans to further dedicate, a number of internal and external resources to monitor, apply for and utilize available grant, subsidy and incentive funding for the

development of charging infrastructure on a state, local, national and international level. Volta may inform its network expansion and local build plans based on expected timing for and availability of funding of this type. Volta has received grants from a number of third parties.

Volta intends to continue to seek additional grants, rebates, subsidies and incentives as an effective avenue to reduce its capital investment in the promotion, purchase and installation of charging stations where applicable.

Some 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, as discussed in more detail below. The EV market relies on these governmental rebates, tax credits and other financial incentives to significantly lower the effective costs associated with EVs and EV charging stations.

For example, in the U.S., the regulations mandated by the Corporate Average Fuel Economy (“CAFE”) standards set the average new vehicle fuel economy, as weighted by sales, that a manufacturer’s fleet must achieve. The United States Environmental Protection Agency (“EPA”) has established vehicle carbon dioxide emissions standards through model year 2026 for light-duty vehicles; however, the Biden Administration has announced plans to reconsider these standards and the EPA has restored California’s authority to establish its own more stringent standards, which several other states have elected to follow. Although Volta is not a car manufacturer, and thus not directly subject to the CAFE standards, such standards may still indirectly affect Volta’s business. The adoption of more stringent standards may create further incentives for vehicle manufacturers to increase their EV offerings, which would likely result in increased demand for charging services. Additionally, several states, such as California, Massachusetts and New York, have adopted or are considering adopting bans on the sale of internal combustion engine vehicles by 2035 and a number of European countries, including France, Norway and the United Kingdom, have adopted or are considering adopting bans on the sale of new internal combustion engine vehicles between 2025 and 2040.

Volta earns various tradable regulatory credits, in particular California’s LCFS credits, as well as carbon credits under comparable LCFS programs in other states. Volta earns credits for the kilowatt-hours distributed by its stations and, in certain cases, the installation of DCFC infrastructure under California’s Fast Charging Infrastructure program. Volta earns revenue from the sale of these credits, and expects to continue to sell future credits, to entities that generate deficits under the LCFS programs and are obligated to purchase the credits and use them to offset their deficits or emissions, primarily petroleum refiners and marketers, and other entities that can use the credits to comply with the program requirements, or through exchanges. Volta actively seeks to maximize the number of regulatory credits generated per kilowatt hour of energy dispensed. Volta’s management is actively monitoring proposed and newly enacted LCFS programs in other jurisdictions (including, for example, states, such as Massachusetts, New York, Colorado and Washington) as potential future revenue streams. The availability of such credits depends on continued governmental support for these programs and regulatory frameworks that make it possible for Volta to participate in these credit markets. There is no guarantee that such credits will continue to be available for sale or that regulatory restrictions would not be imposed on the proceeds from the sale of such credits in the future. Additionally, to the extent government incentives result in increased build-out of electric or other low-carbon fuel dispensing infrastructure that also produce LCFS or similar regulatory credits, the revenue received from the sale of such credits may diminish.

On December 16, 2019, California adopted amendments to the state’s electric vehicle supply equipment specifications that prohibit, or will prohibit, public-charging operators from billing customers by the minute within the state. The prohibition on per-minute billing currently applies to all new AC chargers installed or replaced on or after January 1, 2021 and to new DCFCs installed or replaced on or after January 1, 2023. Chargers installed before 2021 can continue time-based billing until 2031 for AC chargers and 2033 for DCFCs.

California, Colorado, Florida, Hawaii, Illinois, Maryland, Massachusetts, Minnesota, New York, Oregon, Pennsylvania, Utah, Virginia, Washington and the District of Columbia have determined that companies that sell EV

charging services to the public will not be regulated as utilities. While these individual state determinations are not binding on any other regulator or jurisdiction, they demonstrate a trend in the way states view the nascent EV charging industry. Other jurisdictions are in the process of adopting such reforms.

Volta does not directly manufacture or assemble its charging stations; however, Volta may still be subject to the Occupational Safety and Health Act of 1970, as amended (“OSHA”) in the United States and occupational health and safety regulations in Europe. OSHA establishes certain employer responsibilities, including maintenance of a workplace free of recognized hazards likely to cause death or serious injury, compliance with standards promulgated by the Occupational Safety and Health Administration and various record keeping, disclosure and procedural requirements. Various standards, including standards for notices of hazards, safety in excavation and demolition work and the handling of asbestos, may apply to Volta’s operations.

In addition, in the U.S., the National Electrical Manufacturers Association (“NEMA”) is the association of electrical equipment and medical imaging manufacturers. NEMA provides a forum for the development of technical standards that are in the best interests of the industry and users, advocacy of industry policies on legislative and regulatory matters, and collection, analysis, and dissemination of industry data.

Several states, including California, have adopted variations of the national guidelines governing electric vehicle fueling systems set forth in the National Institute of Standards and Technology Handbook 44, which provide safety, pricing, labeling, testing, certification, and other requirements for electric vehicle charging stations that charge fees to users for the delivery of electricity. As Volta introduces charging fees for the receipt of electricity from its stations, the regulatory burden will likely increase and Volta will likely need to expend additional resources to meet such increased regulatory burden. A failure of Volta to timely meet regulatory requirements in its design or implementation of stations or in implementing updates to its stations that are already installed in order to meet these regulatory requirements could delay Volta’s ability to implement fees for users and have a material impact on its business.

Volta is subject to environmental laws and regulations regarding the handling and disposal of hazardous substances and solid wastes, including electronic wastes and batteries. These laws regulate the generation, storage, treatment, transportation and disposal of solid and hazardous waste and may impose strict, joint and several liability for the investigation and remediation of areas where hazardous substances may have been released or disposed. For instance, the U.S.’s Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) and comparable state laws impose liability, without regard to fault or the legality of the original conduct, on certain classes of persons that contributed to the release of a hazardous substance into the environment. These persons include current and prior owners or operators of the site where the release of the hazardous substance occurred as well as companies that disposed or arranged for the disposal of hazardous substances found at the site. Under CERCLA, these persons may be subject to joint and several strict liability for the costs of cleaning up the hazardous substances that have been released into the environment, for damages to natural resources and the costs of certain health studies. CERCLA also authorizes the EPA and, in some instances, third parties to act in response to threats to the public health or the environment and seek to recover costs incurred from the responsible classes of persons. In the course of ordinary operations, Volta, through third parties and contractors, may handle hazardous substances within the meaning of CERCLA and similar state statutes and, as a result, may be jointly and severally liable for all or part of the costs required to clean up sites as which these hazardous substances have been released into the environment.

Volta may also be subject to the Resource Conservation and Recovery Act (“RCRA”) in the U.S. and comparable state statutes for the generation or disposal of solid wastes, which may include hazardous wastes. RCRA regulates both solid and hazardous wastes, but in particular, imposes strict requirements on the generation, storage, treatment, transportation and disposal of hazardous wastes. Provided that certain requirements are met, certain components of our charging stations may be excluded from RCRA’s hazardous waste regulations; however, if these components do not meet all established requirements for the exclusion to apply, or if the requirements for the exclusion change, Volta may be required to treat such products as hazardous waste which are subject to more rigorous and costly

disposal requirements. Any changes in the laws or regulations, or any changes in Volta’s ability to qualify the materials used for exclusions under such laws and regulations, could adversely affect Volta’s operating expenses.

In Europe, Volta may be subject to additional environmental regulations.

The place-based media and outdoor media industry is subject to governmental regulation and enforcement at all levels of government in the United States and Europe. These regulations have a significant impact on the outdoor media industry and may have an impact on Volta’s content sales activities.

In particular, construction, repair, maintenance, lighting, upgrading, height, size, spacing, the location and permitting of outdoor digital displays and the use of new technologies for changeable displays, such as digital displays, are regulated by governments, and, from time to time, governments have prohibited or significantly limited the construction of new outdoor media displays or structures. Since digital displays have been developed and introduced relatively recently into the market on a large scale, existing regulations that currently do not apply to them by their terms could be revised or new regulations could be enacted to impose greater restrictions on digital displays due to alleged concerns over aesthetics or driver safety.

In recent years, outdoor media also has become the subject of other targeted taxes and fees and, from time to time, legislation has been introduced attempting to impose taxes on revenue from outdoor media or for the right to use outdoor media assets. In particular, a number of U.S. governments have implemented or initiated taxes, fees and registration requirements in an effort to decrease or restrict the number of outdoor signs and/or to raise revenue. Several U.S. jurisdictions have imposed such taxes as a percentage of outdoor media revenue generated in that jurisdiction or based on the size and type of display technology. These laws may affect prevailing competitive conditions in specified markets in a variety of ways. Such laws may reduce Volta’s expansion opportunities or may increase or reduce competitive pressure from other members of the outdoor media industry.

In addition, restrictions on the use of outdoor media to display certain products, services or other content have been imposed by laws and regulations. For example, in the U.S. and Germany, tobacco products have been effectively banned from outdoor media in most jurisdictions and state and local governments in some cases limit outdoor advertising of alcohol. Further, certain municipalities may limit issue-based outdoor advertising or place restrictions on advertising off-site or off-premises products or services. Additional restrictions on outdoor media of certain products and services are or may be imposed by laws and regulations.

Volta protects its intellectual property and proprietary rights through patent, trademark, copyright, trade secret and unfair competition laws, augmented by its own confidentiality protocols. Volta undertakes actions as necessary to ensure that its proprietary rights are protected while at the same time respecting the intellectual property rights of other persons.

Volta has a number of issued design patents, pending design patent applications, issued utility patents and pending utility patent applications in both the United States and internationally. Volta continues to regularly assess opportunities for seeking patent protection for those aspects of its technology, designs and methodologies that it believes provide a meaningful competitive advantage.

As of December 31, 2022, Volta had 208 total employees, comprised of 176 full-time employees in the U.S., 6 full-time employees in Canada and 26 full-time employees in Europe.

None.

Volta’s primary office is located at 155 De Haro St, San Francisco, California 94103, where Volta occupies facilities totaling approximately 8,480 rentable square feet under a lease that, as currently amended, expires in August 2025. Volta uses this facility for office space and warehouse purposes. Volta also maintains facilities in New York, New York; Montreal, Canada; Berlin, Germany; Paris, France and Amsterdam, Netherlands. Volta believes its existing facilities are adequate for its current requirements.

Please refer to “Note 14 - Commitments and Contingencies”, of the accompanying consolidated financial statements for additional information.

As of March 27, 2023, there were 150 holders of record of our Class A common stock. The number of record holders is based upon the actual number of holders registered on our books at such date and does not include holders of shares in street name or persons, partnerships, associations, corporations or other entities identified in security position listings maintained by depository trust companies.

We have never declared or paid any cash dividends on our common stock. We currently intend to retain any future earnings and do not expect to pay any dividends in the foreseeable future. Any future determination to declare cash dividends will be made at the discretion of our board of directors, subject to applicable laws, and will depend on a number of factors, including our financial condition, results of operations, capital requirements, contractual restrictions, including under any future loan facilities, general business conditions and other factors that our Board may deem relevant.

Components of Results of Operations

Selling, general and administrative expenses decreased by $97.3 million, or 37%, for the year ended December 31, 2022 as compared to the year ended December 31, 2021. This decrease primarily relates to a $144.0 million decrease in stock-based compensation expense due to the Company issuing fewer equity awards, an increase in equity award forfeitures and a decrease in the fair value of new equity grants caused by a decrease in the Company’s stock price compared to the year ended December 31, 2021. Refer to Note 11 - Stockholders' (Deficit) Equity and Stock-Based Compensation of the accompanying financial statements for further discussion. Additionally, there was a decrease of $1.7 million in bonus and commissions due to the change in calculation of the bonus accrual from 20% of annualized salary to 10%. This amount was partially offset by a $21.5 million increase in payroll-related costs largely driven by an increase in our average employee headcount to 355 from 254. Additionally, there was an increase of $13.9 million in outside services, an increase of $7.3 million in other selling, general and administrative expense primarily due to insurance costs, an increase of $2.2 million in software, hardware, and hosting costs due to prepaid software amortization and prototyping expenses, an increase of $1.3 million in travel, meals and related expenses due to the easing of COVID-19 travel restrictions, and an increase of $1.2 million in rent and facilities expense.

Liquidity and Capital Resources

The Company entered into the Business Combination Agreement with Tortoise Acquisition Corp. II. on February 7, 2021 and following the Closing on August 26, 2021, Volta Inc. began trading on the NYSE. On September 12, 2022, the Company filed a registration statement on Form S-3 (File No. 333-267374) with the SEC (declared effective by the SEC on September 20, 2022) which permits the Company to offer up to 500 million shares of Class A common stock, preferred stock, depositary shares, debt securities, warrants and rights in one or more offerings and in any combination, including in units from time to time (the “Shelf Registration Statement”). Please refer to “Note 1 - Description of Business” of the accompanying consolidated financial statements for the year ended December 31, 2022 for additional information. Additional cash obligations in the next twelve months are expected to include investments in the operations and purchases to expand the business. Management has considered conditions and events which provide substantial doubt about the Company's ability to continue as a going concern for the 12 months following the issuance of the consolidated financial statements. While Volta has engaged in significant cost-cutting efforts, the Company concluded that there is substantial doubt that the Company cannot continue as a going concern in the next twelve months based on reasonable information available to us as of the date of this analysis. No assurances can be provided that additional funding will be available at terms acceptable to the Company, if at all. If the Company is unable to raise additional capital, the Company may significantly curtail its operations, modify strategic plans and/or dispose of certain operations or assets.

Please refer to “Note 9 - Debt Facilities”, of the accompanying consolidated financial statements for additional information.

Subsequent Events

Critical Accounting Policies and Estimates

Volta generates Network Development revenue from the sales of products, including charging stations to select site partners and infrastructure to utility companies as well as related installation services and operations and maintenance services on charging stations owned by third parties. Some of Volta’s agreements include non-standard terms and conditions and include promises to transfer multiple goods and services. As a result, significant interpretation and judgment is required to determine the appropriate accounting for these transactions, including: (1) whether performance obligations are considered distinct that should be accounted for separately versus together, how the price should be allocated among the performance obligations, and when to recognize revenue for each performance obligation; (2) developing an estimate of the stand-alone selling price (“SSP”) of each distinct performance obligation; (3) combining contracts that may impact the allocation of the transaction price between product and services; and (4) estimating the consideration payable to a customer as a reduction of the transaction price.

Changes in judgments with respect to these assumptions and estimates could impact the timing or amount of revenue recognition. Please refer to “Note 2 - Summary of Significant Accounting Policies,” of the accompanying consolidated financial statements for the year ended December 31, 2022 for additional information on revenue recognition.

Volta used the market approach to determine the fair value of the Volta common stock. This approach measures the value of an asset or business through an analysis of recent sales or offerings of comparable investments or assets and gives consideration to the financial condition and operating performance of an entity relative to those of public entities operating in the same or similar lines of business. Volta applies the market approach by utilizing the Backsolve method, which uses a Black-Scholes option pricing model to calculate the implied value based on the recent transaction price. For purposes of allocating the fair value of common stock, Volta used the Option Pricing Method (“OPM”). Under the OPM, shares are valued by creating a series of call options with exercise prices based on the liquidation preferences and conversion terms of each equity class. The estimated fair values of the Preferred and common stock are inferred by analyzing these options. This method is appropriate to use when the range of possible future outcomes is so difficult to predict that estimates would be highly speculative, and dissolution or liquidation is not imminent.

Volta estimates the fair value of the Public and Private Warrants using the Binomial Lattice Valuation Model (“BLM”). Volta is required to make assumptions and estimates in determining an appropriate risk-free interest rate, volatility, term, dividend yield, discount due to exercise restrictions and the fair value of Volta common stock. Any significant adjustments to the unobservable inputs would have a direct impact on the fair value of the warrant liability. Please refer to “Note 6 - Fair Value Measurements,” of the accompanying consolidated financial statements for additional information.

Please refer to “Note 2 - Summary of Significant Accounting Policies,” and “Note 13 - Leases,” of the accompanying consolidated financial statements for additional information about leases.

Off-Balance Sheet Arrangements

Recent Accounting Pronouncements

Refer to “Note 2 - Summary of Significant Accounting Policies,” of the accompanying consolidated financial statements for a discussion of the impact of recent accounting pronouncements.

Related Party Transactions

Refer to “Note 16 - Related Party Transactions,” of the accompanying consolidated financial statements for additional information for related party transactions.

For the years ended December 31, 2022 and 2021, the Company was managed as one operating segment as we only report financial information on an aggregate and consolidated basis to the interim CEO, our Chief Operating Decision Maker (“CODM”), who regularly reviews financial operating results on a consolidated basis for purposes of allocating resources and evaluating financial performance. Although the Company has different revenue streams, the CODM managed the Company as a whole and made decisions at the consolidated level. There are no segment managers who are held accountable for operations, operating results, and plans for components or types of products or services below the consolidated unit level. As of December 31, 2022, a substantial portion of our long-lived assets were located in the United States and a majority of our revenue was earned in the United States.

Inventory consists of finished goods in the form of assembled charging stations. Inventory is measured using the first-in, first-out (“FIFO”) method and stated at the lower of cost or net realizable value as of December 31, 2022 and 2021. The value of inventories is reduced by estimates for excess and obsolete inventories. The estimate for excess and obsolete inventories is based upon management’s review of utilization of inventories in light of projected sales, current market conditions, and market trends. The Company monitors inventory to identify events that would require impairment due to obsolete inventory and adjusts the value of inventory when required. Inventory losses of $0.6 million were incurred during both the years ended December 31, 2022 and 2021.

The Company’s common stock warrants are freestanding warrants that were issued by Legacy Volta in connection with certain debt and equity financing transactions (“Legacy Volta Warrants”). At the Closing, the Legacy Volta Warrants were converted into warrants to purchase Volta Class A common stock (“Converted Warrants”). The Converted Warrants were classified as equity instruments at the grant date fair value calculated using the OPM Backsolve approach and were not subject to revaluation at the consolidated balance sheet date. Additionally, Tortoise Corp II sold Public Warrants and issued Private Warrants. The warrants are convertible to Volta Class A common stock. As of December 31, 2022, the Public Warrants are classified as equity instruments and are not subject to revaluation at the consolidated balance sheet date. As the Private Warrants do not meet the criteria for equity treatment, they are recorded as liabilities on the consolidated balance sheets. Accordingly, the Company classifies the Private Warrants as liabilities and records them at fair value, with the change recorded in the change in fair value of warrant liability in the accompanying consolidated statements of operations and comprehensive loss.