NUVVE HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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| Six Months Ended June 30, |
| 2022 | | 2021 |
Operating activities | | | |
Net loss | $ | (62,429,209) | | | $ | (11,549,026) | |
Adjustments to reconcile to net loss to net cash used in operating activities | | | |
Depreciation and amortization | 137,755 | | | 81,874 | |
Share-based compensation | 3,357,859 | | | 1,352,708 | |
Write-off of deferred financing costs | 43,562,847 | | | — | |
Beneficial conversion feature on convertible debenture | — | | | 427,796 | |
Accretion of discount on convertible debenture | — | | | 116,147 | |
Change in fair value of warrants liability | (684,000) | | | (70,228) | |
Change in fair value of derivative liability | (20,936) | | | — | |
Loss on disposal of asset | — | | | 1,381 | |
Gain on extinguishment of PPP Loan | — | | | (492,100) | |
Noncash lease expense | 283,251 | | | (1,003) | |
Change in operating assets and liabilities | | | |
Accounts receivable | (74,278) | | | (139,140) | |
Inventory | 322,156 | | | (3,164,653) | |
Prepaid expenses and other assets | (1,462,221) | | | (2,209,159) | |
Accounts payable | (2,409,448) | | | 330,890 | |
Accrued expenses | (684,517) | | | 1,595,165 | |
Deferred revenue | 79,576 | | | 305,922 | |
Net cash used in operating activities | (20,021,165) | | | (13,413,426) | |
Investing activities | | | |
Proceeds from sale of property and equipment | — | | | 7,969 | |
Purchase of property and equipment | (317,225) | | | — | |
Investments | (1,000,000) | | | — | |
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Net cash (used) provided in investing activities | (1,317,225) | | | 7,969 | |
Financing activities | | | |
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Proceeds from Newborn Escrow Account | — | | | 58,184,461 | |
Redemption of Newborn shares | — | | | (18,629) | |
Issuance costs related to reverse recapitalization and PIPE offering | — | | | (3,970,657) | |
Proceeds from PIPE offering | — | | | 14,250,000 | |
Repayment of Newborn sponsor loans | — | | | (487,500) | |
Repurchase of common stock from EDF | — | | | (6,000,000) | |
Newborn cash acquired | — | | | 50,206 | |
Purchase of stock from investor | — | | | (2,000,000) | |
Payment of financing costs | — | | | (531,527) | |
Proceeds from forward option put exercise | 1,994,073 | | | — | |
Proceeds from common stock offering, net of offering costs | 1,859,685 | | | — | |
Payment of finance lease Obligations | (4,425) | | | (1,989) | |
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Proceeds from exercise of stock options | 173,575 | | | — | |
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Net cash (used) provided in financing activities | 4,022,908 | | | 59,474,365 | |
Effect of exchange rate on cash | (54,796) | | | 98,193 | |
Net increase (decrease) in cash and restricted cash | (17,370,278) | | | 46,167,101 | |
Cash and restricted cash at beginning of year | 32,740,520 | | | 2,275,895 | |
Cash and restricted cash at end of period | $ | 15,370,242 | | | $ | 48,442,996 | |
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The accompanying notes are an integral part of these condensed consolidated financial statements. |
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NUVVE HOLDING CORP. AND SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) |
(Unaudited) |
| Six Months Ended June 30, |
| 2022 | | 2021 |
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Supplemental Disclosure of Noncash Financing Activity | | | |
Conversion of preferred stock to common stock | $ | — | | | $ | 1,679 | |
Conversion of debenture and accrued interest to common shares | $ | — | | | $ | 3,999,435 | |
Conversion of shares due to reverse recapitalization | $ | — | | | $ | 3,383 | |
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Issuance of common stock for merger success fee | $ | — | | | $ | 2,085,299 | |
Non-cash merger transaction costs | $ | — | | | $ | 2,085,299 | |
Accrued transaction costs related to reverse recapitalization | $ | — | | | $ | 189,434 | |
Issuance of private warrants | $ | — | | | $ | 1,253,228 | |
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Forgiveness of PPP Loan | $ | — | | | $ | 492,100 | |
Issuance of Stonepeak and Evolve warrants | $ | — | | | $ | 27,640,000 | |
Issuance of Stonepeak and Evolve options | $ | — | | | $ | 12,584,000 | |
Transfer of Inventory to property and equipment | $ | 87,095 | | | $ | — | |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
NUVVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Organization and Description of Business
Description of Business
Nuvve Holding Corp., a Delaware corporation headquartered in San Diego, California (the “Company” or “Nuvve”), was founded on November 10, 2020 under the laws of the state of Delaware. On March 19, 2021, the Company (at the time known as NB Merger Corp.) acquired the outstanding shares of Nuvve Corporation (“Nuvve Corp.”), and the Company changed its name to Nuvve Holding Corp.
Structure of the Company
Nuvve has two wholly owned subsidiaries, Nuvve Corp. and Nuvve Co (Nuvve Japan). Nuvve Corp. has three wholly owned subsidiaries: (1) Nuvve Denmark ApS, (“Nuvve Denmark”), a company registered in Denmark, (2) Nuvve SaS, a company registered in France, and (3) Nuvve LTD, a company registered in United Kingdom. In March 2020, following the establishment of its investment in Dreev S.A.S. ('Dreev") in 2019 (Note 6), the Company ceased operations of its subsidiary, Nuvve SaS in France. The two employees of Nuvve SaS resigned from the Company in March 2020 and were concurrently hired by Dreev. Financial results for Nuvve SaS are included in the Company’s financial results through the cessation of operations.
On August 4, 2021, the Company formed Levo Mobility LLC, a Delaware limited liability company ("Levo"), with Stonepeak Rocket Holdings LP, a Delaware limited partnership ("Stonepeak"), and Evolve Transition Infrastructure LP, a Delaware limited partnership ("Evolve"). Levo is a consolidated entity of the Company. Please see Note 2 for the principles of consolidation. Levo is a sustainable infrastructure company focused on rapidly advancing the electrification of transportation by funding V2G-enabled EV fleet deployments as of June 30, 2022. Levo utilizes Nuvve’s 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.
Levo's turnkey solution simplifies and streamlines electrification, can lower the total cost of EV operation for fleet owners, and supports 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 Nuvve’s V2G platform, EV and charging station maintenance, energy management, and technical advice.
Levo initially 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.
NUVVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 2 – Summary of Significant Accounting Policies
For a detailed discussion about the Company’s significant accounting policies, see Note 2, “Summary of Significant Accounting Policies,” in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Form 10-K”).
During the six months ended June 30, 2022, there were no significant updates made to the Company’s significant accounting policies.
Basis of Presentation
The accompanying unaudited (i) condensed consolidated balance sheet as of December 31, 2021, which has been derived from audited financial statements, and (ii) the unaudited interim condensed financial statements have been prepared in accordance pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. Therefore, it is suggested that these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes in the 2021 Form 10-K, filed with the SEC on March 31, 2022.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive loss, cash flows, and stockholders’ equity for the interim periods, but are not necessarily indicative of the results to be anticipated for the full year 2022 or any future period.
In accordance with Accounting Standards Codification ("ASC") 205-40, Presentation of Financial Statements - Going Concern, the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year after the that the consolidated financial statements are issued. Since inception, the Company has incurred recurring losses and negative cash flows from operations since inception and has an accumulated deficit of $107.6 million as of June 30, 2022. Nuvve incurred net losses of approximately $62.4 million as of the six months ended June 30, 2022, and $27.2 million and $4.9 million for the years ended December 31, 2021, and 2020, respectively. As of June 30, 2022, Nuvve had a cash balance, working capital, and stockholders’ equity of $14.9 million, $23.4 million and $23.5 million, respectively. The Company continues to expect to generate operating losses and negative cash flows and may need additional funding to support its planned operating activities through profitability. The transition to profitability is dependent upon the successful expanded commercialization of the Company's Grid Integrated Vehicle ("GIVe") platform and the achievement of a level of revenues adequate to support its cost structure.
On May 5, 2022, the Company entered into an at-the-market offering agreement in which the Company from time to time during the term of the sales agreement, offer and sell shares of its common stock having an aggregate offering price up to a total of $25.0 million in gross proceeds. Shares of common stock sold under the sales agreement are offered and sold pursuant to the Company's shelf registration statement. During the six months ended June 30, 2022, the Company sold 323,746 shares of common stock pursuant to the sales agreement at an average price of $6.12 per share for aggregate net proceeds of approximately $1.9 million. Additionally, during the month of July 2022, the Company sold 469,136 shares of common stock pursuant to the sales agreement at an average price of $4.17 per share for aggregate net proceeds of approximately $1.9 million.
In July 2022, the Company had a direct equity offering of its common stock. See Note 19 for details. The aggregate gross proceeds to the Company from the offering were approximately $14.0 million and net proceeds were $13.1 million.
The Company expects its cash and cash equivalents as of August 11, 2022 will be sufficient to fund current planned operations for at least the next twelve months from the date of issuance of these consolidated financial statements. Management's expectations with respect to its ability to fund current planned operations is based on estimates that are subject to risks and uncertainties. Actual results could be different from management's estimates and should actual results be less favorable than these estimates management would ultimately need to take corrective steps to improve future operating results and its financial condition.
NUVVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Principles of Consolidation
The condensed consolidated financial statements include the accounts and operations of the Company, its wholly owned subsidiaries and its consolidated variable interest entity. All intercompany accounts and transactions have been eliminated upon consolidation.
Variable Interest Entities
Pursuant to the consolidation guidance, the Company first evaluates whether it holds a variable interest in an entity in which it has a financial relationship and, if so, whether or not that entity is a variable interest entity ("VIE"). A VIE is an entity with insufficient equity at risk for the entity to finance its activities without additional subordinated financial support or in which equity investors lack the characteristics of a controlling financial interest. If an entity is determined to be a VIE, the Company evaluates whether the Company is the primary beneficiary. The primary beneficiary analysis is a qualitative analysis based on power and economics. The Company concludes that it is the primary beneficiary and consolidates the VIE if the Company has both (i) the power to direct the activities of the VIE that most significantly influence the VIE's economic performance, and (ii) the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE.
The Company formed Levo with Stonepeak and Evolve, in which the Company owns 51% of Levo's common units. The Company has determined that Levo is a VIE in which the Company is the primary beneficiary. Accordingly, the Company consolidates Levo and records a non-controlling interest for the share of the entity owned by Stonepeak and Evolve.
Assets and Liabilities of Consolidated VIEs
The Company's condensed consolidated financial statements include the assets, liabilities and results of operations of VIEs for which the Company is the primary beneficiary. The other equity holders’ interests are reflected in "Net loss attributable to non-controlling interests" in the condensed consolidated statements of operations and "Non-controlling interests" in the condensed consolidated balance sheets. See Note 18 for details of non-controlling interests. The Company began consolidating the assets, liabilities and results of operations of Levo during the quarter ended September 30, 2021.
The creditors of the consolidated VIE do not have recourse to the Company other than to the assets of the consolidated VIEs. The following table summarizes the carrying amounts of Levo assets and liabilities included in the Company’s condensed consolidated balance sheets at June 30, 2022:
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| June 30, 2022 | | |
Assets | | | |
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Cash | $ | 28,068 | | | |
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Deferred financing costs | — | | | |
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Total Assets | $ | 28,068 | | | |
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Liabilities and Mezzanine Equity | | | |
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Accrued expenses | $ | 212,071 | | | |
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Derivative liability - non-controlling redeemable preferred shares | 491,012 | | | |
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Total Liabilities | $ | 703,083 | | | |
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Redeemable Non-Controlling Interest - Mezzanine Equity
Redeemable non-controlling interest represents the shares of the preferred stock issued by Levo to Stonepeak and Evolve (the "preferred shareholders") who own 49% of Levo common units. The preferred stock is not mandatorily redeemable or currently redeemable, but it could be redeemable with the passage of time at the election of Levo, the preferred shareholders or a trigger event as defined in the preferred stock agreement. As a result of the contingent put right available to the preferred shareholders, the redeemable non-controlling interests in Levo are classified outside of permanent equity in the Company’s unaudited condensed consolidated balance sheets as mezzanine equity. The initial carrying value of the redeemable non-controlling interest is reported at the initial proceeds received on issuance date, reduced by the fair value of embedded derivatives resulting in an adjusted initial carrying value. The adjusted initial carrying value is further adjusted for the accretion of the difference with the redemption price value using the effective interest method. The accretion amount is a deemed dividend recorded against retained earnings or, in its absence, to additional-paid-in-capital. The carrying amount of the redeemable non-controlling interest is measured at the higher of the carrying amount adjusted each reporting period for income (or loss) attributable to the non-controlling interest, or the carrying amount adjusted each reporting period by the accretion amount. See Note 18 for details.
NUVVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Non-controlling interests
The Company presents non-controlling interests as a component of equity on its condensed consolidated balance sheets and reports the portion of its earnings or loss for non-controlling interest as net earnings or loss attributable to non-controlling interests in the condensed consolidated statements of operations.
Emerging Growth Company
Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) permits emerging growth companies (“EGC”) to delay complying with new or revised financial accounting standards that do not yet apply to private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act). The Company qualifies as an EGC. The JOBS Act provides that an EGC can elect to opt-out of the extended transition period and comply with the requirements that apply to non-EGCs, but any such election to opt-out is irrevocable. The Company has elected not to opt-out of such an extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an EGC, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This different adoption timing may make a comparison of the Company’s financial statements with another public company, which is neither an EGC nor an EGC that has opted out of using the extended transition period, difficult or impossible because of the potential differences in accounting standards used.
COVID-19
The novel coronavirus (COVID-19) which was declared a pandemic in March 2020, and the related restrictive measures such as travel restrictions, quarantines, and shutdowns, has negatively impacted the global economy. As national and local governments in different countries ease COVID-19 restrictions, and vaccines are distributed and rolled out successfully, we continue to see improved economic trends. However, COVID-19 and actions taken to mitigate its spread have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries, including the geographical area in which the Company operates. The Company continues to monitor the situation closely but, at this time, is unable to predict the cumulative impact, both in terms of severity and duration, that the coronavirus pandemic has and will have on its business, operating results, cash flows and financial condition, and it could be material if the current circumstances continue to exist for a prolonged period of time. In addition to any direct impact on Nuvve’s business, it is reasonably possible that the estimates made by management in preparing Nuvve’s financial statements have been, or will be, materially and adversely impacted in the near term as a result of the on-going COVID-19 conditions.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions made by management include the impairment of intangible assets, the net realizable value of inventory, the fair value of share-based payments, the fair value of notes payable conversion options, revenue recognition, the fair value of warrants, and the recognition and disclosure of contingent liabilities.
Management evaluates its estimates on an ongoing basis. Actual results could materially vary from those estimates.
Cash and Restricted Cash
The Company maintains cash balances that can, at times, exceed amounts insured by the Federal Deposit Insurance Corporation, which is up to $250,000. The Company has not experienced any losses in these accounts and believes it is not exposed to any significant credit risk in this area.
NUVVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Concentrations of Credit Risk
At June 30, 2022 and December 31, 2021, the financial instruments which potentially expose the Company to concentration of credit risk consist of cash in financial institutions (in excess of federally insured limits) and trade receivables.
The Company had certain customers whose revenue individually represented 10% or more of the Company’s total revenue, or whose accounts receivable balances individually represented 10% or more of the Company’s total accounts receivable, as follows:
For the three and six months ended June 30, 2022 three and two customers accounted for 54.9% and 58.8% of revenue, respectively. For the three and six months ended June 30, 2021 two and three customers in aggregate accounted for 48.6% and 56.4% of revenue, respectively.
During the three and six months ended June 30, 2022, the Company's top five customers accounted for approximately 71.8% and 70.1%, respectively, of the Company’s total revenue. During the three and six months ended June 30, 2021, the Company's top five customers accounted for approximately 68.3% and 71.0%, respectively, of the Company’s total revenue.
At June 30, 2022, two customers in aggregate accounted for 37.1% of accounts receivable. At December 31, 2021, two customers in aggregate accounted for 32.2% of accounts receivable.
Approximately 58.5% and 56.0% of the Company’s trade accounts receivable balance was with five customers at June 30, 2022 and December 31, 2021, respectively. The Company estimates its maximum credit risk for accounts receivable at the amount recorded on the balance sheet. The trade accounts receivables are generally short-term and all probable bad debt losses have been appropriately considered in establishing the allowance for doubtful accounts.
Revenue Recognition
Bill-and-hold arrangements - The Company occasionally enter a bill and hold arrangements in which some customers request that billed products that are ready for delivery be held at our warehouse facility for them until shipment at a later date. In this instance, revenue is recognized when; 1) the risks of ownership, including title, have passed to the customer, 2) the product must be identified separately as belonging to the customer, 3) the product currently must be ready for physical transfer to the customer, and 4) the Company does not have the ability to use the product or to direct it to another customer.
Deferred Financing Costs
Deferred financing costs consist of direct and incremental costs incurred and fees paid for a commitment to obtain financing. As the commitment amount is funded, the carrying amount of the deferred financing costs is reduced and the amount is charged to additional-paid-in-capital. The deferred financing cost will be impaired if it becomes probable that funding of the commitment amount will not occur.
The Company recorded an impairment charge of $43.6 million during the six months ended June 30, 2022. The impairment charge was driven by a write-off of deferred financing costs associated with the carrying value of warrants and stock options granted to Stonepeak and Evolve in May 2021 in return for their capital commitment to fund up to $750 million in V2Genabled EV fleet deployments of school buses through Levo. The Company impaired the deferred financing costs during the six months ended June 30, 2022 primarily because it has not entered into fleet as a service customer contracts requiring preferred capital commitments from Stonepeak and Levo in excess of $43.6 million within one year of the deferred financing costs being capitalized. The impairment charge is non-cash and does not impact the existing capital commitment we have from Stonepeak and Evolve or the pursuit of customer deployments funded by this capital commitment. Note 19 of the Company's 2021 Form 10-K further describes the terms of the capital commitment with Stonepeak and Evolve.
Investments in Equity Securities Without Readily Determinable Fair Values
Investments in equity securities of nonpublic entities without readily determinable fair values are carried at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The Company reviews its equity securities without readily determinable fair values on a regular basis to determine if the investment is impaired. For purposes of this assessment, the Company considers the investee’s cash position, earnings and revenue outlook, liquidity, and management ownership, among other factors, in its review. If management’s assessment indicates that an impairment exists, the Company estimates the fair value of the equity investment and recognizes in current earnings an impairment loss that is equal to the difference between the fair value of the equity investment and its carrying amount.
NUVVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In June 2022, the Company invested $1.0 million in Switch EV Ltd ("Switch"), a nonpublic entity incorporated and registered in the United Kingdom for a future equity ownership. Since Switch is a nonpublic entity, there is no readily determinable fair value. As of June 30, 2022, the Company’s investment in Switch was accounted for as an investment in equity securities without a readily determinable fair value subject to impairment. The Company did not recognize an impairment loss on its investment during the quarter ended June 30, 2022.
Recently adopted accounting pronouncements
None.
Recently issued accounting pronouncements not yet adopted
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 requires, among other things, the use of a new current expected credit loss ("CECL") model in determining the allowances for doubtful accounts with respect to accounts receivable, accrued straight-line rents receivable, and notes receivable. The CECL model requires that an entity estimate its lifetime expected credit loss with respect to these receivables and record allowances that, when deducted from the balance of the receivables, represent the net amounts expected to be collected. Entities will also be required to disclose information about how the entity developed the allowances, including changes in the factors that influenced its estimate of expected credit losses and the reasons for those changes. This update is effective for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.
NUVVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 3 – Revenue Recognition
The disclosures below discuss the Company’s material revenue contracts.
The following table provides information regarding disaggregated revenue based on revenue by service lines for the three and six months ended June 30:
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| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Revenue recognized over time: | | | | | | | |
Services | $ | 73,522 | | | $ | 363,366 | | | $ | 268,172 | | | $ | 530,611 | |
Grants | 233,698 | | | 214,814 | | | 350,947 | | | 701,943 | |
Products | 994,507 | | | 403,150 | | | 3,053,641 | | | 547,808 | |
Total revenue | $ | 1,301,727 | | | $ | 981,330 | | | $ | 3,672,760 | | | $ | 1,780,362 | |
The aggregate amount of revenue for the Company’s existing contracts and grants with customers as of June 30, 2022 expected to be recognized in the future, and classified as deferred revenue on the condensed consolidated Balance Sheet, for years ended December 31, is as follows (this disclosure does not include revenue related to contracts whose original expected duration is one year or less):
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2022 (remaining six months) | $ | 138,399 | |
Thereafter | 643,523 | |
Total | $ | 781,922 | |
Segment Reporting
The Company operates in a single business segment, which is the EV V2G Charging segment. The following table summarizes the Company’s revenues for the three and six months ended June 30, 2022 and 2021:
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| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Revenues: | | | | | | | |
United States | $ | 1,125,586 | | | $ | 812,796 | | | $ | 3,353,976 | | | $ | 1,404,627 | |
United Kingdom | 99,995 | | | 113,703 | | | 137,385 | | | 254,989 | |
Denmark | 76,146 | | | 54,831 | | | 181,399 | | | 120,746 | |
| $ | 1,301,727 | | | $ | 981,330 | | | $ | 3,672,760 | | | $ | 1,780,362 | |
The following table summarizes the Company’s long-lived assets in different geographic locations as of June 30, 2022 and December 31, 2021:
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| June 30, 2022 | | December 31, 2021 |
Long-lived assets: | | | |
United States | $ | 1,915,685 | | | $ | 1,811,607 | |
Denmark | 20,827 | | | 25,664 | |
| $ | 1,936,512 | | | $ | 1,837,271 | |
NUVVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 4 – Fair Value Measurements
The following are the liabilities measured at fair value on the condensed consolidated balance sheet at June 30, 2022 using quoted price in active markets for identical assets (Level 1); significant other observable inputs (Level 2); and significant unobservable inputs (Level 3):
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| Level 1: Quoted Prices in Active Markets for Identical Assets | | Level 2: Significant Other Observable Inputs | | Level 3: Significant Unobservable Inputs | | Total at June 30, 2022 | | Total Gains (Losses) For The Three Months Ended June 30, 2022 | | Total Gains (Losses) For The Six Months Ended June 30, 2022 |
Recurring fair value measurements | | | | | | | | | | | |
Private warrants | $ | — | | | $ | — | | | $ | 182,000 | | | $ | 182,000 | | | $ | 251,000 | | | $ | 684,000 | |
Derivative liability - non-controlling redeemable preferred shares | — | | | — | | | 491,012 | | | 491,012 | | | (32,536) | | | 20,936 | |
Total recurring fair value measurements | $ | — | | | $ | — | | | $ | 673,012 | | | $ | 673,012 | | | $ | 218,464 | | | $ | 704,936 | |
The following is a reconciliation of the opening and closing balances for the liabilities related to the private warrants (Note 11) and derivative liability - non-controlling redeemable preferred shares measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three and six months ended June 30, 2022:
| | | | | | | | | | | |
| Private Warrants | | Non-controlling redeemable preferred shares - derivative liability |
Balance at December 31, 2021 | $ | 866,000 | | | $ | 511,948 | |
| | | |
Total (gains) losses for period included in earnings | (433,000) | | | (53,472) | |
Balance at March 31, 2022 | 433,000 | | | 458,476 | |
Total (gains) losses for period included in earnings | (251,000) | | | 32,536 | |
Balance at June 30, 2022 | $ | 182,000 | | | $ | 491,012 | |
| | | |
| | | |
| | | |
The fair value of the level 3 Private Warrants was estimated at June 30, 2022 using the Black-Scholes model which used the following inputs: term of 3.72 years, risk free rate of 3.0%, no dividends, volatility of 67.0%, and strike price of $11.50.
The fair value of the level 3 derivative liability - non-controlling redeemable preferred shares are estimated at June 30, 2022 using the Monte Carlo Simulation model which used the following inputs: terms range from 2.09 years years to 7.0 years, risk free rate of 3.0%, no dividends, volatility of 57.0% and probability of redemptions triggered of 75.0%.
There were no transfers between Level 1 and Level 2 of the fair value hierarchy in 2022 and 2021.
Cash, accounts receivable, accounts payable, and accrued expenses are generally carried on the cost basis, which management believes approximates fair value due to the short-term maturity of these instruments.
Note 5 - Derivative Liability - Non-Controlling Redeemable Preferred Stock
The Company has determined that the redemption features embedded in the non-controlling redeemable preferred stock is required to be accounted for separately from the redeemable preferred stock as a derivative liability. Separation of the redemption features as a derivative liability is required because its economic characteristics and risks are considered more akin to a debt instrument, and therefore, not considered to be clearly and closely related to the economic characteristics of the redeemable preferred stock. The economic characteristics of the redemption features are considered more akin to an debt instrument because the minimum redemption value could be greater than the face amount, the redemption features are contingently exercisable, and the shares carry a fixed mandatory dividend.
Accordingly, the Company has recorded an embedded derivative liability representing the estimated fair value of the right of the holders to exercise their redemption option upon the occurrence of a redemption event. The embedded derivative liability is adjusted to reflect fair value at each period end with changes in fair value recorded in the “Change in fair value of derivative liability” financial statement line item of the company’s consolidated statements of operations. For additional information on the non-controlling redeemable preferred stock, see Note 18.
NUVVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table display the fair value of derivatives by balance sheet line item at June 30, 2022 and December 31, 2021:
| | | | | | | | | | | |
| June 30, 2022 | | December 31, 2021 |
Other long term liabilities: | | | |
Derivative liability - non-controlling redeemable preferred shares | $ | 491,012 | | | $ | 511,948 | |
| | | |
| | | |
Note 6 – Investments
The Company accounts for its 13% equity ownership in Dreev as an investment in equity securities without a readily determinable fair value subject to impairment. The Company has a consulting services agreement with Dreev related to software development and operations. The consulting services were zero for each of the three and six months ended June 30, 2022 and 2021. The consulting services are being provided to Dreev at the Company’s cost and is recognized, net of consulting costs, as other income, net in the condensed consolidated statements of operations.
In accordance with an advanced subscription agreement dated June 6, 2022, the Company invested $1.0 million in Switch, a nonpublic entity incorporated and registered in the United Kingdom for a future equity ownership expected be more or less than 5% subject to final valuations. Switch will automatically award the Company the equity ownership with conversion shares in equity upon its completion of either a financing round, company sale or IPO, or dissolution event. The Company is expected to account for the investment as an investment in equity securities without a readily determinable fair value subject to impairment. The Company and Switch intends to collaborate in the future to integrate technologies for the advancement of V2G.
Note 7 – Account Receivables, Net
The following tables summarizes the Company's accounts receivable on the consolidated balance sheets at June 30, 2022 and December 31, 2021:
| | | | | | | | | | | | | | |
| | June 30, 2022 | | December 31, 2021 |
| | | | |
Trade receivables | | $ | 2,021,844 | | | $ | 1,949,896 | |
| | | | |
Less: allowance for doubtful accounts | | (63,188) | | | (63,188) | |
| | | | |
| Accounts receivable, net | $ | 1,958,656 | | | $ | 1,886,708 | |
| | | | |
Allowance for doubtful accounts: | | | | |
| | | | |
| Balance December 31, 2021 | $ | (63,188) | | | |
| Provision | — | | | |
| Write-off | — | | | |
| Recoveries | — | | | |
| Balance June 30, 2022 | $ | (63,188) | | | |
| | | | |
| | | | |
| | | | |
| | | | |
NUVVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 8 – Inventories
The following table summarizes the Company’s inventories balance by category:
| | | | | | | | | | | |
| June 30, 2022 | | December 31, 2021 |
DC Chargers | $ | 8,852,624 | | | $ | 7,687,598 | |
AC Chargers | 214,486 | | | 232,920 | |
Vehicles - School Buses (1) | 1,620,000 | | | 3,180,000 | |
Others | 108,922 | | | 17,670 | |
Total | $ | 10,796,032 | | | $ | 11,118,188 | |
__________________
(1)As of June 30, 2022, the Company has taken delivery of ten school buses it has committed to purchase from the manufacturer within one year from the purchase order date of May 26, 2021. Five school buses were sold during first quarter ended March 31, 2022.
Note 9 – Property, Plant and Equipment
The following table summarizes the Company’s property, plant and equipment balance at June 30, 2022 and December 31, 2021:
| | | | | | | | | | | |
| June 30, 2022 | | December 31, 2021 |
| | | |
| | | |
Computers & Servers | $ | 126,931 | | | $ | 105,499 | |
Vehicles | 168,862 | | | 168,862 | |
| | | |
Office furniture and equipment | 332,007 | | | 161,771 | |
Others | 131,607 | | | 6,050 | |
Total | 759,407 | | | 442,182 | |
Less: Accumulated Depreciation | (158,861) | | | (85,988) | |
Property, plant and equipment, net | $ | 600,546 | | | $ | 356,194 | |
| | | |
| June 30, 2022 | | June 30, 2021 |
| | | |
Depreciation expense | $ | 62,265 | | | $ | 12,147 | |
Note 10 – Intangible Assets
At both June 30, 2022 and December 31, 2021, the Company had recorded a gross intangible asset balance of $2,091,556, which is related to patent and intangible property rights acquired. Amortization expense of intangible assets was $34,860 each for the three months ended June 30, 2022 and 2021, respectively. Amortization expense of intangible assets was $69,720 each for the six months ended June 30, 2022 and 2021, respectively. Accumulated amortization totaled $680,200 and $610,480 at June 30, 2022 and December 31, 2021, respectively.
The net amount of intangible assets of $1,411,358 at June 30, 2022, will be amortized over the weighted average remaining life of 10.4 years.
Total estimated future amortization expense is as follows:
| | | | | |
2022 (remaining six months) | $ | 69,719 | |
2023 | 139,437 | |
2024 | 139,437 | |
2025 | 139,437 | |
2026 | 139,437 | |
Thereafter | 783,891 | |
| $ | 1,411,358 | |
NUVVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 11 – Stockholders’ Equity
As of June 30, 2022, the Company has authorized two classes of stock, Common Stock, and Preferred Stock. The total number of shares of all classes of capital stock which the Company has authority to issue is 101,000,000, of which 100,000,000 authorized shares are Common Stock with a par value of $0.0001 per share (“Common Stock”), and 1,000,000 authorized shares are Preferred Stock of the par value of $0.0001 per share (“Preferred Stock”). Please see Note 12, “Stockholders' Equity,” in the Notes to Consolidated Financial Statements included in the Company’s 2021 Form 10-K for a detailed discussion of the Company’s stockholders' equity. Additionally, see Note 19, “Levo Mobility LLC Entity,” in the Notes to Consolidated Financial Statements included in the Company’s 2021 Form 10-K for a detailed discussion of the Company’s Stonepeak and Evolve Warrants and Securities Purchase agreement, and Levo definitive agreements.
Shelf Registration and At the Market Offering
On April 25, 2022, the Company filed a shelf registration statement with the SEC which will allow it 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. The Company believes that it will be able to raise capital by issuing securities pursuant to its effective shelf registration statement.
On May 5, 2022, the Company entered into an at-the-market offering agreement, with Craig-Hallum Capital Group LLC and Chardan Capital Markets, LLC (the "Agent"). From time to time during the term of the Sales Agreement, the Company may offer and sell shares of common stock having an aggregate offering price up to a total of $25.0 million in gross proceeds. The Agents will collect a fee equal to 3% of the gross sales price of all shares of common stock sold. Shares of common stock sold under the Sales Agreement are offered and sold pursuant to our shelf registration statement describe above. During the six months ended June 30, 2022, the Company sold 323,746 shares of common stock pursuant to the Sales Agreement at an average price of $6.12 per share for aggregate net proceeds of approximately $1.9 million.
Warrants - Stonepeak and Evolve
On May 17, 2021, in connection with the signing of a letter of agreement, relating to the formation of Levo (the "Letter Agreement"), the Company issued to Stonepeak and Evolve a ten years warrants to purchase common stock (allocated 90% to Stonepeak and 10% to Evolve). See below for details. The grant-date fair value of the warrants issued to Stonepeak and Evolve were; series B $12.8 million, series C $5.6 million, series D $4.8 million, series E $3.8 million and series F $3.2 million. The fair values of the warrants are recorded in the consolidated balance sheets in additional-paid-in capital in stockholders' equity as the warrants are indexed to the Company’s common stock and meet the conditions for equity classification, and deferred financing costs. The carrying amount of the deferred financing costs is reduced as the commitment amount is funded, and the reduction amount is charged to additional-paid-in capital. As of June 30, 2022, the commitment funded of $3.2 million has reduced the deferred financing costs, and charged to additional-paid-in capital. Additionally, as of June 30, 2022, the Company recorded an impairment charge of the carrying value on the balance sheet of $31.0 million. See Note 2 for details. In connection with the signing of the Letter Agreement, the Company issued to Stonepeak and Evolve the following ten years warrants to purchase common stock (allocated 90% to Stonepeak and 10% to Evolve):
•Series B warrants to purchase 2,000,000 shares of the Company’s common stock, at an exercise price of $10.00 per share, which are fully vested upon issuance,
•Series C warrants to purchase 1,000,000 shares of the Company’s common stock, at an exercise price of $15.00 per share, which are vested as to 50% of the shares upon issuance and vest as to the remaining 50% when Levo has entered into contracts with third parties for $125 million in aggregate capital expenditures,
•Series D warrants to purchase 1,000,000 shares of the Company’s common stock, at an exercise price of $20.00 per share, which are vested as to 50% of the shares upon issuance and vest as to the remaining 50% when Levo has entered into contracts with third parties for $250 million in aggregate capital expenditures,
•Series E warrants to purchase 1,000,000 shares of the Company’s common stock, at an exercise price of $30.00 per share, which are vested as to 50% of the shares upon issuance and vest as to the remaining 50% when Levo has entered into contracts with third parties for $375 million in aggregate capital expenditures, and
•Series F warrants to purchase 1,000,000 shares of the Company’s common stock, at an exercise price of $40.00 per share, which are vested as to 50% of the shares upon issuance and vest as to the remaining 50% when Levo has entered into contracts with third parties for $500 million in aggregate capital expenditures.
The warrants may be exercised at any time on or after the date that is 180 days after the applicable vesting date.
NUVVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Warrants - Public and Private
In connection with its initial public offering on February 19, 2020, Newborn sold 5,750,000 units, which included one warrant to purchase Newborn’s common stock (the “Public Warrants”). Also, on February 19, 2020, NeoGenesis Holding Co., Ltd., Newborn’s sponsor (“the Sponsor”), purchased an aggregate of 272,500 private units, each of which included one warrant (the “Private Warrants”), which have the same terms as the Public Warrants. Upon completion of the merger between Nuvve and Newborn, the Public Warrants and Private Warrants were automatically converted to warrants to purchase Common Stock of the Company.
The terms of the Private Warrants are identical to the Public Warrants as described above, except that the Private Warrants are not redeemable so long as they are held by the Sponsor or its permitted transferees. Concurrently with the execution of the Merger Agreement on November 11, 2020, Newborn entered into subscription agreements with certain accredited investors pursuant to which the investors agreed to purchase 1,425,000 of Newborn’s common stock, at a purchase price of $10.00 per share, for an aggregate purchase price of $14,250,000 (the "PIPE"). Upon closing of the PIPE immediately prior to the closing of the Business Combination, the PIPE investors also received 1.9 PIPE Warrants to purchase the Company’s Common Stock for each share of Common Stock purchased. The PIPE Warrants are each exercisable for one-half of a common share at $11.50 per share and have the same terms as described above for the Public Warrants. The PIPE investors received demand and piggyback registration rights in connection with the securities issued to them.
The following table is a summary of the number of shares of the Company’s Common Stock issuable upon exercise of warrants outstanding at June 30, 2022 (there were no warrants outstanding at December 31, 2021):
| | | | | | | | | | | | | | | | | | | | | | | |
| Number of Warrants | | Number of Warrants Exercisable | | Exercise Price | | Expiration Date |
Public Warrants | 2,875,000 | | 2,875,000 | | | $11.50 | | March 19, 2026 |
Private Warrants | 136,250 | | 136,250 | | | $11.50 | | March 19, 2026 |
PIPE Warrants | 1,353,750 | | 1,353,750 | | | $11.50 | | March 19, 2026 |
Stonepeak/Evolve Warrants - series B | 2,000,000 | | 2,000,000 | | | $10.00 | | May 17, 2031 |
Stonepeak/Evolve Warrants - series C | 1,000,000 | | 500,000 | | | $15.00 | | May 17, 2031 |
Stonepeak/Evolve Warrants - series D | 1,000,000 | | 500,000 | | | $20.00 | | May 17, 2031 |
Stonepeak/Evolve Warrants - series E | 1,000,000 | | 500,000 | | | $30.00 | | May 17, 2031 |
Stonepeak/Evolve Warrants - series F | 1,000,000 | | 500,000 | | | $40.00 | | May 17, 2031 |
| 10,365,000 | | 8,365,000 | | | | | |
Because the Private Warrants have dissimilar terms with respect to the Company’s redemption rights depending on the holder of the Private Warrants, the Company determined that the Private Warrants are required to be carried as a liability in the condensed consolidated balance sheet at fair value, with changes in fair value recorded in the condensed consolidated statement of operations. The Private Warrants are reflected as a liability in the condensed consolidated balance sheet as of June 30, 2022 in the amount of $182,000 and the change in the fair value of the Private Warrants for the three and six months ended June 30, 2022 of is reflected as a gain of $251,000 and $684,000, respectively, in the condensed consolidated statement of operations.
Unit Purchase Option
On February 19, 2020, Newborn sold to the underwriters of its initial public offering for $100, a unit purchase option ("UPO") to purchase up to a total of 316,250 units at $11.50 per unit (or an aggregate exercise price of $3,636,875) commencing on the date of Newborn's initial business combination, March 19, 2021, and expiring February 13, 2025. Each unit issuable upon exercise of the UPO consists of one and one-tenth of a share of the Company's common stock and one warrant to purchase one share of the Company's common stock at the exercise price of $11.50 per share. The warrant has the same terms as the Public Warrant. In no event will the Company be required to net cash settle the exercise of the UPO or the warrants underlying the UPO. The holders of the unit purchase option have demand and "piggy back" registration rights for periods of five and seven years, respectively, from the effective date of the IPO, including securities directly and indirectly issuable upon exercise of the unit purchase option. The UPO is classified within stockholders’ equity as “additional paid-in capital” in accordance with ASC 815-40, Derivatives and Hedging-Contracts in an Entity’s Own Equity, as the UPO is indexed to the Company’s common stock and meets the conditions for equity classification.
NUVVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Securities Purchase Agreement
On May 17, 2021, in connection with the signing of the Letter Agreement, the Company entered into a Securities Purchase Agreement with Stonepeak and Evolve which provide them from time to time between November 13, 2021 and November 17, 2028, in their sole discretion, to purchase up to an aggregate of $250 million in shares of the Company’s common stock at a purchase price of $50.00 per share (allocated 90% to Stonepeak and 10% to Evolve). See below for details. The grant-date fair value of the Securities Purchase Agreement to purchase shares of the Company’s common stock was $12.6 million, and is recorded in the condensed consolidated balance sheet as equity in additional-paid-in capital as it is indexed to the Company’s common stock and meets the conditions for equity classification, and deferred financing costs. The carrying amount of the deferred financing costs is reduced as the commitment amount is funded, and the amount is charged to additional-paid-in capital. As of June 30, 2022, the Company recorded an impairment charge of the carrying value on the balance sheet of $12.6 million. See Note 2 for details. In connection with the signing of the Letter Agreement, as reference above, the Company also entered into a Securities Purchase Agreement (the “SPA”) and a Registration Rights Agreement (the “RRA”) with Stonepeak and Evolve.
•Under the SPA, from time to time between November 13, 2021 and November 17, 2028, Stonepeak and Evolve may elect, in their sole discretion, to purchase up to an aggregate of $250 million in shares of the Company’s common stock at a purchase price of $50.00 per share (allocated 90% to Stonepeak and 10% to Evolve). The SPA includes customary representations and warranties and closing conditions and customary indemnification provisions. In addition, Stonepeak and Evolve may elect to purchase shares under the SPA on a cashless basis in the event of a change of control of the Company.
Note 12 – Stock Option Plan
In 2010, the Company adopted the 2010 Equity Incentive Plan (the “2010 Plan”), which provides for the grant of restricted stock awards, stock options, and other share-based awards to employees, consultants, and directors. In November 2020, the Company’s Board of Directors extended the term of the 2010 Plan to July 1, 2021. In 2021, the Company adopted the 2020 Equity Incentive Plan (the “2020 Plan”), which provides for the grant of restricted stock awards, incentive and non-statutory stock options, and other share-based awards to employees, consultants, and directors. As of June 30, 2022, there is an aggregate of 3,300,000 common shares reserved for issuance under the 2020 Plan. All options granted to date have a ten years contractual life and vesting terms of four years. In general, vested options expire if not exercised at termination of service. As of June 30, 2022, a total of 1,262,865 shares of common stock remained available for future issuance under the 2020 Plan.
Stock-based compensation expense for the three and six months ended June 30 are as follows
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Options | $ | 548,652 | | | $ | 810,738 | | | $ | 1,370,758 | | | $ | 1,063,008 | |
Restricted stock | 1,187,254 | | | 258,137 | | | 1,801,093 | | | 267,972 | |
Total | $ | 1,735,906 | | | $ | 1,068,875 | | | $ | 3,171,851 | | | $ | 1,330,980 | |
The Company uses the Black-Scholes option pricing model to estimate the fair value of stock options. Fair value is estimated at the date of grant for employee and nonemployee options. The following assumptions were used in the Black-Scholes model to calculate the fair value of stock options granted for the six months ended June 30, 2022 for the 2010 Plan and the 2020 Plan.
| | | | | | | | | | | |
| 2010 Plan | | 2020 Plan |
Expected life of options (in years) (1) | 6.1 | | 6.1 |
Dividend yield (2) | 0 | % | | 0 | % |
Risk-free interest rate (3) | 2.00 | % | | 2.00 | % |
Volatility (4) | 54.1 | % | | 54.1 | % |
__________________
(1)The expected life of options is the average of the contractual term of the options and the vesting period.
(2)No cash dividends have been declared on the Company’s common stock since the Company’s inception, and the Company currently does not anticipate declaring or paying cash dividends over the expected life of the options.
NUVVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(3)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.
(4)Volatility is estimated by management. As the Company has been a private company for most of its existence, there is not enough historical volatility data related to the Company’s Common stock as a public entity. Therefore, this estimate is based on the average volatility of certain public company peers within the Company’s industry.
The following is a summary of the stock option activity under the 2010 Plan, as converted to the Company’s shares due to Reverse Recapitalization, for the six months ended June 30, 2022:
| | | | | | | | | | | | | | | | | | | | | | | |
| Shares | | Weighted- Average Exercise Price per Share($) | | Weighted- Average Remaining Contractual Term (Years) | | Aggregate Intrinsic Value($) |
Outstanding - December 31, 2021 | 1,035,035 | | | 3.21 | | | 5.90 | | 5,688,201 | |
Granted | — | | | — | | | — | | | — | |
Exercised | (42,729) | | | 2.42 | | | — | | | — | |
Forfeited | (36,065) | | | 7.61 | | | — | | | — | |
Expired/Cancelled | (5,310) | | | 1.37 | | | — | | | — | |
Outstanding - June 30, 2022 | 950,931 | | | 3.09 | | | 5.24 | | 2,264,735 | |
| | | | | | | |
Options Exercisable at June 30, 2022 | 836,687 | | | 2.52 | | | 4.84 | | 2,257,456 | |
Option Vested at June 30, 2022 | 836,687 | | | 2.52 | | | 4.84 | | 2,257,456 | |
| | | | | | | |
The weighted-average grant-date fair value of options granted during the six months ended June 30, 2022 was zero.
The following is a summary of the stock option activity under the 2020 Plan for the six months ended June 30, 2022:
| | | | | | | | | | | | | | | | | | | | | | | |
| Shares | | Weighted- Average Exercise Price per Share ($) | | Weighted- Average Remaining Contractual Term (Years) | | Aggregate Intrinsic Value($) |
Outstanding - December 31, 2021 | 1,602,850 | | | 13.18 | | | 9.27 | | 46,920 | |
Granted | 121,100 | | | 6.87 | | | 9.86 | | — | |
Exercised | — | | | — | | | — | | | — | |
Forfeited | (128,450) | | | 10.18 | | | — | | | — | |
Expired/Cancelled | (1,250) | | | 8.25 | | | — | | | — | |
Outstanding - June 30, 2022 | 1,594,250 | | | 12.84 | | | 8.83 | | — | |
| | | | | | | |
Options Exercisable at June 30, 2022 | 422,327 | | | 13.38 | | | 8.74 | | — | |
Option Vested at June 30, 2022 | 422,327 | | | 13.38 | | | 8.74 | | — | |
| | | | | | | |
The weighted-average grant-date fair value of options granted during the six months ended June 30, 2022 was $3.55.
During the year ended December 31, 2021 1,640,000 options were modified to lower the exercise price by $0.60 per share, which will result in $246,000 of incremental compensation cost to be recognized over the remaining vesting period. The amount of additional compensation expense for the three and six months ended June 30, 2022, were $25,459 and $45,158, respectively. The amount of additional compensation expense for the three and six months ended June 30, 2021, were $21,728 for both periods.
NUVVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Other Information:
| | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, | | |
| | 2022 | | 2021 | | |
Amount received from option exercised | | $ | 173,575 | | | $ | — | | | |
| | | | | | |
| | June 30, 2022 | | | | Weighted average remaining recognition period |
Total unrecognized options compensation costs | | $ | 7,767,742 | | | | | 2.80 |
No amounts relating to the Plan have been capitalized. Compensation cost is recognized over the requisite service period based on the fair value of the options.
A summary of the status of the Company’s nonvested restricted stock units as of December 31, 2021, and changes during the six months ended June 30, 2022, is presented below:
| | | | | | | | | | | |
| Shares | | Weighted- Average Grant Date Fair Value($) |
Nonvested at December 31, 2021 | 353,817 | | | 11.00 | |
Granted | 134,575 | | | 6.16 | |
Vested/Release | (202,141) | | | 11.15 | |
Cancelled/Forfeited | (6,294) | | | 9.93 | |
Nonvested and Outstanding at June 30, 2022 | 279,957 | | | 8.60 | |
As of June 30, 2022, there was $1,668,498 of total unrecognized compensation cost related to nonvested restricted stock. The Company expects to recognize this compensation cost over a remaining weighted-average period of approximately 1.9 years.
NUVVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 13 – Income Taxes
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Income tax (benefit) expense | $ | — | | | $ | 1,000 | | | $ | — | | | $ | 1,000 | |
Effective tax rate | 0.0 | % | | 0.0 | % | | 0.0 | % | | 0.0 | % |
The effective tax rate used for interim periods is the estimated annual effective tax rate, based on current estimate of full year results, except that taxes related to specific events, if any, are recorded in the interim period in which they occur. The effective tax rate differed from the U.S. federal statutory tax rate primarily due to operating losses that receive no tax benefit as a result of a valuation allowance recorded for such losses.
The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes (“ASC 740”). Under the provisions of ASC 740, management is required to evaluate whether a valuation allowance should be established against its deferred tax assets. The Company currently has a full valuation allowance against its deferred tax assets. As of each reporting date, the Company’s management considers new evidence, both positive and negative, that could impact management’s view with regard to future realization of deferred tax assets. For the six months ended June 30, 2022, there was no material change from the year ended December 31, 2021 in the amount of the Company’s deferred tax assets that are not considered to be more likely than not to be realized in future years.
NUVVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 14 – Net Loss Per Share Attributable to Common Stockholders
The following table sets forth the calculation of basic and diluted net loss per share attributable to common stockholders during the three and six months ended June 30, 2022 and 2021:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Net loss attributable to Nuvve common stockholders | $ | (51,470,807) | | | $ | (6,187,306) | | | $ | (60,669,615) | | | $ | (11,549,026) | |
Weighted-average shares used to compute net loss per share attributable to Nuvve common stockholders, basic and diluted | 19,064,854 | | | 18,668,009 | | | 18,965,167 | | | 14,560,862 | |
Net Loss per share attributable to Nuvve common stockholders, basic and diluted | $ | (2.70) | | | $ | (0.33) | | | $ | (3.20) | | | $ | (0.79) | |
The following outstanding shares of common stock equivalents were excluded from the calculation of the diluted net loss per share attributable to Nuvve common stockholders because their effect would have been anti-dilutive:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Stock options issued and outstanding | 2,688,173 | | 2,505,711 | | | 2,858,756 | | 1,792,556 | |
Nonvested restricted stock issued and outstanding | 869,945 | | 677,543 | | | 867,793 | | 582,148 | |
Public warrants | 2,875,000 | | 2,875,000 | | | 2,875,000 | | 1,627,060 | |
Private warrants | 136,250 | | 136,250 | | | 136,250 | | 77,109 | |
PIPE warrants | 1,353,750 | | 1,353,750 | | | 1,353,750 | | 766,133 | |
Stonepeak and Evolve warrants | 6,000,000 | | 2,901,099 | | | 6,000,000 | | 1,450,549 | |
Stonepeak and Evolve options | 5,000,000 | | 2,417,582 | | | 5,000,000 | | 1,208,791 | |
| | | | | | | |
Total | 18,923,118 | | 12,866,935 | | | 19,091,549 | | 7,504,346 | |
Note 15 – Related Parties
As described in Note 6, the Company holds equity interests in and provides certain consulting services to Dreev, an entity in which a stockholder of the Company owns the other portion of Dreev’s equity interests. During the three and six months ended June 30, 2022 the Company recognized revenue of zero and $28,000, respectively, from an entity that is an investor in the Company. During the three and six months ended June 30, 2021, the Company recognized revenue of $252,000 and $399,620, respectively, from an entity that is an investor in the Company. The Company had a balance of accounts receivable of zero at June 30, 2022 from the same entity that is an investor in the Company.
Equity Forward Purchase
Pursuant to a letter agreement dated April 23, 2021, the Company’s Chief Executive Officer and Chief Operating Officer committed to purchase from the Company, and the Company committed to sell to them, 134,499 shares of the Company’s common stock for $14.87 per share or a total of $2,000,000. As of June 30, 2022, Nuvve's Chief Executive Officer and Chief Operating Officer had fulfilled their obligations and had purchased from Nuvve a total of 134,499 shares of the Company’s common stock for $14.87 per share or a total of approximately $2,000,000.
NUVVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 16 – Leases
The Company has entered into leases for commercial office spaces and vehicles. These leases are not unilaterally cancellable by the Company, are legally enforceable, and specify fixed or minimum amounts. The leases expire at various dates through 2026 and provide for renewal options. In the normal course of business, it is expected that these leases will be renewed or replaced by leases on other properties.
The leases provide for increases in future minimum annual rental payments based on defined increases in the Consumer Price Index, subject to certain minimum increases. Also, the agreements generally require the Company to pay real estate taxes, insurance, and repairs.
On November 3, 2021, the Company entered into an amendment of its Main Office Lease to include an additional 4,811 rentable square feet in the suite adjoining its main office facilities in San Diego, California. The lease term will run concurrently with the main office lease which commenced in December 2021. The lease terms include 3% annual fixed increases in the base rental payment. The lease also requires the Company to pay operating expenses such as utilities, real estate taxes, insurance, and repairs. The lease term commenced on April 15, 2022, and the Company will receive two months of rental abatement to the base rent.
Supplemental unaudited consolidated balance sheet information related to leases is as follows:
| | | | | | | | | | | | | | |
| | Classification | | June 30, 2022 |
| | | | |
Operating lease assets | | Right-of-use operating lease assets | | $ | 5,195,474 | |
Finance lease assets | | Property, plant and equipment, net | | 20,827 | |
Total lease assets | | | | $ | 5,216,301 | |
| | | | |
Operating lease liabilities - current | | Operating lease liabilities - current | | $ | 455,064 | |
Operating lease liabilities - noncurrent | | Operating lease liabilities - noncurrent | | 5,053,219 | |
Finance lease liabilities - current | | Other liabilities - current | | 7,022 | |
Finance lease liabilities - noncurrent | | Other long-term liabilities | | 15,120 | |
Total lease liabilities | | | | $ | 5,530,425 | |
The components of lease expense are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended June 30, | | Three Months Ended June 30, | | Six Months Ended June 30, | | Six Months Ended June 30, |
| | Classification | | 2022 | | 2021 | | 2022 | | 2021 |
| | | | | | | | | | |
Operating lease expense | | Selling, general and administrative | | $ | 164,076 | | | $ | 33,396 | | | $ | 340,597 | | | $ | 91,827 | |
Finance lease expense: | | | | | | | | | | |
Amortization of finance lease assets | | Selling, general and administrative | | 1,451 | | | 2,190 | | | 7,391 | | | 2,190 | |
Interest on finance lease liabilities | | Interest expense | | 599 | | | 510 | | | 1,238 | | | 510 | |
Total lease expense | | | | $ | 166,126 | | | $ | 36,096 | | | $ | 349,226 | | | $ | 94,527 | |
NUVVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
| | | | | | | | | | | | | | |
| | Operating Lease | | Finance Lease |
Maturities of lease liabilities are as follows: | | June 30, 2022 | | June 30, 2022 |
2022 | | $ | 127,621 | | | $ | 3,511 | |
2023 | | 792,918 | | | 7,022 | |
2024 | | 824,712 | | | 7,022 | |
2025 | | 822,352 | | | 7,022 | |
2026 | | 847,022 | | | — | |
Thereafter | | 4,631,866 | | | 1,755 | |
Total lease payments | | 8,046,491 | | | 26,332 | |
Less: interest | | (2,538,208) | | | (4,190) | |
Total lease obligations | | $ | 5,508,283 | | | $ | 22,142 | |
Lease term and discount rate: | | | | | | | | |
| | June 30, 2022 |
Weighted-average remaining lease terms (in years): | | |
Operating lease | | 9.5 |
Finance lease | | 3.8 |
| | |
Weighted-average discount rate: | | |
Operating lease | | 7.8% |
Finance lease | | 7.8% |
Other Information:
| | | | | | | | | | | | | | | | | | |
| | | | Six Months Ended June 30, | | Six Months Ended June 30, |
| | | | 2022 | | 2021 |
Cash paid for amounts included in the measurement of lease liabilities: | | | | | | |
Operating cash flows from operating leases | | | | $ | 80,869 | | | $ | 94,818 | |
Operating cash flows from finance leases | | | | $ | 1,238 | | | $ | 510 | |
Financing cash flows from finance leases | | | | $ | 4,425 | | | $ | 1,989 | |
| | | | | | |
Leased assets obtained in exchange for new finance lease liabilities | | | | $ | 20,827 | | | $ | 29,977 | |
Leased assets obtained in exchange for new operating lease liabilities | | | | $ | — | | | $ | — | |
Sublease
In April 2022, the Company entered into a sublease agreement with certain local San Diego companies to sublease the Company's portion of the 4,811 square foot expansion. The term of the sublease is six months to twelve months with fixed base rental income of $2,250 per month. The sublease has no option for renewal or extension at the end of the sublease term.
Sublease income are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended June 30, | | Three Months Ended June 30, | | Six Months Ended June 30, | | Six Months Ended June 30, |
| | Classification | | 2022 | | 2021 | | 2022 | | 2021 |
| | | | | | | | | | |
Sublease lease income | | Other, net | | $ | 20,125 | | | $ | — | | | $ | 20,125 | | | $ | — | |
NUVVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 17 – Commitments and Contingencies
(a) Legal Matters
The Company is subject to various claims and legal proceedings covering matters that arise in the ordinary course of its business activities, including product liability claims. Management believes that any liability that may ultimately result from the resolution of these matters will not have a material adverse effect on the financial condition or results of operations of the Company.
(b) Research Agreement
Effective September 1, 2016, the Company is party to a research agreement with a third party, which is also a Company stockholder, whereby the third party will perform research activity as specified annually by the Company. Under the terms of the agreement, the Company paid a minimum of $400,000 annually in equal quarterly installments. For the six months ended June 30, 2022 and 2021, $200,000 each was paid under the research agreement, respectively. In October 2021, the agreement was renewed for one year through August 2022. At June 30, 2022, $66,667 remained to be paid under the renewed agreement.
(c) In-Licensing
The Company is a party to a licensing agreement for non-exclusive rights to intellectual property which will expire at the later of the date at which the last patent underlying the intellectual property expires or 20 years from the sale of the first licensed product. Under the terms of the agreement, the Company will pay up to an aggregate of $700,000 in royalties upon achievement of certain milestones. As of June 30, 2022 and December 31, 2021, no royalty expenses had been incurred under this agreement.
In November 2017, the Company executed an agreement ("IP Acquisition Agreement") with the University of Delaware (Seller) whereby all right, title, and interest in the licensed intellectual property was assigned to the Company in exchange for an upfront fee of $500,000 and common shares valued at $1,491,556. The total acquisition cost of $1,991,556 was capitalized and is being amortized over the fifteen years expected life of the patents underlying the intellectual property. Under the terms of the agreement, the Company will pay up to an aggregate $7,500,000 in royalties to the Seller upon achievement of milestones, related to the aggregate number of vehicles that have had access to the Company’s GIVe platform system for a period of at least six consecutive months, and for which the Company has received monetary consideration for such access pursuant to a subscription or other similar agreement with the vehicle’s owner as follows:
| | | | | | | | |
Milestone Event: Aggregated Vehicles | | Milestone Payment Amount |
10,000 | | $ | 500,000 | |
20,000 | | 750,000 | |
40,000 | | 750,000 | |
60,000 | | 750,000 | |
80,000 | | 750,000 | |
100,000 | | 1,000,000 | |
200,000 | | 1,000,000 | |
250,000 | | 2,000,000 | |
| | $ | 7,500,000 | |
The Seller will retain a non-exclusive, royalty-free license, to utilize the intellectual property solely for research and education purposes. As of June 30, 2022, no royalty expenses had been incurred under this agreement.
(d) Investment
The Company is committed to possible future additional contributions to the Investment in Dreev (Note 6) in the amount of $270,000.
NUVVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(e) Purchase Commitments
On July 20, 2021, Nuvve issued a purchase order (“PO”) to its supplier for a quantity of DC Chargers, for a total price of $13.2 million, with the delivery date specified as the week of November 15, 2021. However, the supplier subsequently notified Nuvve that it would be unable to meet the contracted delivery date as a result of supply chain issues. The parties therefore agreed to change the delivery date to on or about December 15, 2021. As of the end of June 30, 2022, Nuvve received a partial shipment of the DC Chargers, for which Nuvve paid $5.3 million. The delivered DC Chargers did not fully conform to required software and hardware specifications. As of June 30, 2022, the supplier is still in the process of bringing the delivered DC Chargers into full conformance. In April 2022, the parties agreed to address the technical issues necessary to bring the DC charges into full conformity with specifications, and to amend the mix defined in original PO for the delivery of the remaining DC Chargers still subject to the original PO.
No amendments to the original PO have been executed. To the extent Nuvve and the supplier are unable to align on mutually agreeable terms to resolve the dispute relating to the PO, Nuvve believes it has no obligation to purchase or accept delivery against the PO given that the supplier failed to timely deliver conforming DC Chargers in accordance with the stated PO terms. The supplier asserts, however, that the original PO was non-cancellable and non-refundable regardless of when in the future the chargers are delivered, and regardless of any non-conformance. Nuvve believes the supplier’s position does not have merit and Nuvve would exercise all available rights and remedies in its defense should any legal proceeding result from such dispute. The outcome of any such proceeding would be inherently uncertain, and the amount and/or timing of any liability or expense resulting from such a proceeding is not reasonably estimable at this time.
NUVVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 18 - Non-Controlling Interest
For entities that are consolidated, but not 100% owned, a portion of the net income or loss and corresponding equity is allocated to owners other than the Company. The aggregate of the net income or loss and corresponding equity that is not owned by the Company is included in non-controlling interests in the condensed consolidated financial statements.
Non-controlling interests are presented outside as a separate component of stockholders’ equity on the Company’s condensed consolidated Balance Sheets. The primary components of non-controlling interests are separately presented in the Company’s condensed consolidated statements of changes in stockholders’ equity to clearly distinguish the interest in the Company and other ownership interests in the consolidated entities. Net income or loss includes the net income or loss attributable to the holders of non-controlling interests on the Company’s condensed consolidated statements of operations. Net income or loss is allocated to non-controlling interests in proportion to their relative ownership interests.
Levo Series B Redeemable Preferred Stock
Levo is authorized to issue 1,000,000 shares of series B preferred stock at no par value.
The Series B Preferred Stock (a) pays a dividend, when, as and if declared by Levo's Board of Directors, of 8.0% per annum of the stated value per share, payable quarterly in arrears, (b) has an initial stated value of $1,000 per share, and dividends are paid in cash. Levo accrues for undeclared and unpaid dividends as they are payable in accordance with the terms of the Certificate of Designations filed with the Secretary of State of the State of Delaware. At June 30, 2022, Levo had accrued preferred dividends of $192,071 on 3,138 issued and outstanding shares of Series B Preferred Stock. Series B Preferred Stock is not a participating or convertible securities. Series B Preferred Stock is not currently redeemable but it could be redeemable with the passage of time at the election of Levo or the preferred shareholders or upon the occurrence of a trigger event as defined in the preferred stock agreement. Since the redeemable preferred stock may be redeemed by the preferred shareholders or upon the occurrence of a trigger event that is not solely within the control of Levo, but is not mandatorily redeemable; therefore, based on its characteristics, Levo has classified the Series B Preferred Stock as mezzanine equity.
At June 30, 2022, Series B Preferred Stock consisted of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Shares Authorized | | Shares Issued and Outstanding | | Stated Value per Share | | Initial Carrying Value | | Accrued Preferred Dividends | | Liquidation Preference |
1,000,000 | | | 3,138 | | | $ | 1,000 | | | $ | 3,138,000 | | | $ | 192,071 | | | $ | 3,330,071 | |
The Company has determined that the redemption features embedded in the non-controlling redeemable preferred stock is required to be accounted for separately from the redeemable preferred stock as a derivative liability. See Note 5 for detail disclosure of the derivative liability.
The redeemable preferred stock has been classified as mezzanine equity and initially recognized at fair value of $3,138,000, the proceeds on the date of issuance. This amount has been further reduced by $497,606, the fair value of the embedded derivative liability at date of issuance, resulting in an adjusted initial value of $2,640,394. Levo is accreting the difference between the adjusted carrying initial value and the redemption price value over the seven-year period from date of issuance of August 4, 2021 through July 4, 2028 (the date at which the preferred shareholders have the unconditional right to redeem the shares, deemed to be the earliest likely redemption date) using the effective interest method. The accretion to the carrying value of the redeemable preferred stock is treated as a deemed dividend, recorded as a charge to retained earnings of Levo. During the six months ended June 30, 2022, Levo accreted $322,932 resulting in the carrying value of the the redeemable preferred stock of $3,208,358.
NUVVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table summarizes Levo non-controlling interests presented as a separate component of stockholders’ equity on the Company’s condensed consolidated balance sheets at June 30, 2022:
| | | | | | | |
| June 30, 2022 | | |
| | | |
| | | |
| | | |
| | | |
Add: net loss attributable to non-controlling interests as of June 30, 2022 | $ | (2,211,837) | | | |
Less: dividends paid to non-controlling interests as of June 30, 2022 | 129,311 | | | |
Less: Preferred share accretion adjustment as of June 30, 2022 | 322,932 | | | |
Non-controlling interests | $ | (2,664,080) | | | |
The following table summarizes Levo non-controlling interests presented as a separate component of the Company’s condensed consolidated statements of operations as of June 30, 2022:
| | | | | | | | | | | |
| Three Months Ended June 30, 2022 | | Six Months Ended June 30, 2022 |
| | | |
| | | |
Net loss attributable to non-controlling interests | $ | (2,110,903) | | | $ | (2,211,837) | |
Redeemable Non-controlling Interest Reconciliation — Mezzanine Equity
| | | | | | | | | |
| | | Six Months Ended June 30, 2022 |
Beginning balance - December 31, 2021 | | | $ | 2,885,426 | |
| | | |
| | | |
| | | |
| | | |
Preferred share Accretion adjustment as of June 30, 2022 | | | 322,932 | |
Ending balance - June 30, 2022 | | | $ | 3,208,358 | |
Profits Interests Units (Class D Incentive Units)
In April 2022, Levo issued Class D Incentive Units to certain key employees in the form of profits interests within the meaning of the Internal Revenue Service (“Profits Interests”). Any future distributions under the Profits Interests will only occur once distributions made to all other member units exceed a threshold amount. The Company performed an analysis of the key features of the Profits Interests to determine whether the nature of the Profits Interests are (a) an equity award which should be accounted for under ASC 718, Compensation – Stock Compensation or (b) a bonus arrangement which should be accounted for under ASC 710, Compensation – General. Based on the features of the Profits Interests, the awards are considered stock compensation to be accounted for as equity. Accordingly, compensation expense for the Profits Interests will be recognized over the vesting period of the awards.
Subject to the grantee not incurring a termination prior to the applicable vesting date, the Incentive Units will vest as follows: (i) 80% of the Incentive Units will vest in equal 25.0% installments on each of the first four (4) anniversaries of the grant date (such that 80% of the total number of Incentive Units issued to the grantee hereunder will be vested on the fourth anniversary of the Grant Date) and (ii) the remaining 20% of the Incentive Units will vest upon a Change of Control. Therefore, the expenses recorded will only reflect the 80% vesting portion.
During the six months ended June 30, 2022, the Company recorded compensation expense under the Profits Interests of $140,850.
The Company uses the Monte Carlo Simulation model to estimate the fair value of Class D Incentive Units. Fair value is estimated at the date of grant for employee and nonemployee options. The following assumptions were used in the Monte Carlo Simulation model to calculate the fair value of Class D Incentive Units granted for the six months ended June 30, 2022.
| | | | | |
| Class D Units |
Expected life of Class D Incentive Units (in years) (1) | 5.5 |
| |
Risk-free interest rate (2) | 3.02 | % |
Volatility (3) | 69.50 | % |
NUVVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
__________________
(1)The expected life of options is the average of the contractual term of the Class D Incentive Units and the vesting period.
(2)The risk-free interest rate is based on the yields on U.S. Treasury debt securities with maturities approximating the estimated life of the options.
(3)Volatility is estimated by management. As the Company has been a private company for most of its existence, there is not enough historical volatility data related to the Company’s Common stock as a public entity. Therefore, this estimate is based on the average volatility of certain public company peers within the Company’s industry.
A summary of the status of the Company’s Class D Incentive Units as of December 31, 2021, and changes during the six months ended June 30, 2022, is presented below:
| | | | | | | | | | | |
| Shares | | Weighted- Average Grant Date Fair Value($) |
Nonvested at December 31, 2021 | — | | | — | |
Granted | 250,000 | | | 13.28 | |
Vested | — | | | — | |
Cancelled | — | | | — | |
Nonvested and Outstanding at June 30, 2022 | 250,000 | | | 13.28 | |
As of June 30, 2022, there was $2,698,822 of total unrecognized compensation cost related to nonvested Class D Incentive Units. The Company expects to recognize this compensation cost over a remaining weighted-average period of approximately 3.8 years.
Note 19 - Subsequent Events
Warehouse Lease
In July 2022, the Company entered into a lease agreement in Westland, Michigan for 10,000 square feet of warehouse space for the purpose of having its own controlled warehouse facility for its finished inventories. The term of the lease is 36 months with a fixed rent of $5,625 per month. There is an option to renew the lease for an additional 36 months, however it is not reasonably certain the Company will exercise the renewal. There is no option to purchase the premises at lease termination.
The following is a maturity analysis of the annual undiscounted cash flows under new lease as of June 30, 2022:
| | | | | | | | |
2022 | | $ | 39,375 | |
2023 | | 67,500 | |
2024 | | 67,500 | |
2025 | | 28,125 | |
| | |
| | |
Total lease payments | | $ | 202,500 | |
Securities Purchase Agreement, Pre-Funded Warrants and Warrants
On July 27, 2022, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with a certain institutional and accredited investor (the “Purchaser”), relating to the issuance and sale of 2,150,000 shares (the “Shares”) of common stock, par value $0.0001 per share (the “Common Stock”), pre-funded warrants to purchase an aggregate of 1,850,000 shares of Common Stock (the “Pre-Funded Warrants”), and warrants (the “Warrants”) to purchase an aggregate of 4,000,000 shares of Common Stock in a registered direct offering (the “Offering”). The offering closed on July 29, 2022.
The offering price for the Shares, and accompanying Warrants, was $3.50 per Share and the offering price for the Pre-Funded Warrants, and accompanying was $3.4999 per Pre-Funded Warrant, which represents the per Share public offering price less $0.0001 per share exercise price for each Pre-Funded Warrant. Each Pre-Funded Warrant has an exercise price of $0.0001 per share of common stock, subject to adjustment for stock splits, reverse stock splits, stock dividends and similar transactions. The Warrants have an exercise price of $3.75 per share of common stock, subject to adjustment for stock splits, reverse stock splits, stock dividends and similar transactions, and each Warrant are exercisable for one share of Common Stock. The Warrants are exercisable beginning six months from the date of issuance and the Pre-Funded Warrants are be exercisable immediately upon issuance. The Pre-Funded Warrants terminate when fully exercised and the Warrants terminate five years from the initial exercisability date. The aggregate gross proceeds to the Company from the Offering were approximately $14.0 million and net
NUVVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
proceeds were approximately $13.1 million, excluding the proceeds, if any, from the exercise of the Pre-Funded Warrants and the Warrants. The Company intends to use the net proceeds from the Offering for working capital and general corporate purposes.
Craig-Hallum Capital Group LLC (the “Placement Agent”) was the exclusive placement agent for the Offering.
The Offering was made pursuant to an effective registration statement on Form S-3 (Registration Statement No. 333-264462), as previously filed with and declared effective by the Securities and Exchange Commission (the “SEC”), a base prospectus included as part of the registration statement, and a final prospectus supplement filed with the SEC on July 28, 2022, pursuant to Rule 424(b) under the Securities Act of 1933, as amended.
Placement Agency Agreement
In connection with the Offering, the Company also entered into a placement agency agreement with the Placement Agent. Pursuant to the Placement Agency Agreement, the Company paid to the Placement Agent a fee equal to 6.0% of the gross proceeds received by the Company in the Offering in the form of cash.