S-1 1 tm2122501d1_s1.htm S-1

 

As filed with the Securities and Exchange Commission on July 20, 2021

 

Registration No. 333-

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

 

 

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

 

 

 

EVGO INC.
(Exact Name of Registrant as Specified in its Charter)
     
Delaware 001-39572 85-2326098
(State or Other Jurisdiction of
Incorporation or Organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification No.)
     
 

11835 West Olympic Boulevard
Los Angeles, CA 90064
(877) 494-3833

 
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

 

 

 

 

Francine Sullivan
Chief Legal Officer
11835 West Olympic Boulevard
Los Angeles, CA 90064
(877) 494-3833

 
(Name, Address Including Zip Code, and Telephone Number Including Area Code, of Agent for Service)

 

 

 

 

COPIES TO:
Ramey Layne
Brenda Lenahan

 

Vinson & Elkins L.L.P.
1001 Fannin Street
25th Floor, Ste. 2500
Houston, TX
(713) 758-2222

 

 

 

Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this registration statement.

 

 

 

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. x

 

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

 

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

 

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

 

Large accelerated filer ¨ Accelerated filer ¨
Non-accelerated filer x Smaller reporting company x
  Emerging growth company x

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ¨

 

 

 

CALCULATION OF REGISTRATION FEE

 

Title of Each Class of Securities
to be Registered
Amount to be
Registered(1)
Proposed Maximum
Offering Price Per Share
Proposed Maximum
Aggregate Offering Price
Amount of
Registration Fee
Class A Common Stock, par value $0.0001 per share 63,849,988(2) $12.13(3) $774,500,354 $84,498
Warrants to purchase Class A Common Stock 6,600,000(4) —(5)
Total       $84,498

 

(1)Pursuant to Rule 416 under the Securities Act of 1933, as amended (the “Securities Act”), the registrant is also registering an indeterminate number of additional shares of Class A Common Stock that may become issuable as a result of any stock dividend, stock split, recapitalization or other similar transaction.

(2)Consists of (i) 52,350,000 shares of Class A Common Stock registered for sale by the selling securityholders named in this registration statement (including the shares referred to in the following clause (ii)), (ii) 6,600,000 shares of Class A Common Stock issuable upon exercise of 6,600,000 Private Warrants (as defined below), and (iii) 11,499,988 shares of Class A Common Stock issuable upon the exercise of 11,499,988 Public Warrants (as defined below).

(3)Pursuant to Rule 457(c) under the Securities Act, and solely for the purpose of calculating the registration fee, the proposed maximum offering price per share is $12.13, which is the average of the high and low prices of the Class A Common Stock on July 16, 2021 on The Nasdaq Global Select Market (“Nasdaq”).

(4)Represents the resale of 6,600,000 Private Warrants.

(5)In accordance with Rule 457(i), the entire registration fee for the Private Warrants is allocated to the shares of Class A Common Stock underlying the Private Warrants, and no separate fee is payable for the Private Warrants.

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine. 

 

 

 

 

SUBJECT TO COMPLETION, DATED JULY 20, 2021

 

The information in this preliminary prospectus is not complete and may be changed. Neither we nor the selling securityholders may sell these securities until the registration statement filed with the Securities and Exchange Commission becomes effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

PRELIMINARY PROSPECTUS

 

 

EVgo Inc.

 

Up to 52,350,000 Shares of Class A Common Stock
Up to 18,099,988 Shares of Class A Common Stock Issuable Upon Exercise of Warrants

Up to 6,600,000 Warrants

 

 

 

This prospectus relates to the issuance by EVgo Inc. (formerly known as Climate Change Crisis Real Impact I Acquisition Corporation or “CRIS”) (the “Company,” “we,” “our” or “us”) of up to an aggregate of up to 18,099,988 shares of our Class A common stock, $0.0001 par value per share (“Class A Common Stock”), which consists of (i) up to 6,600,000 shares of Class A Common Stock that are issuable upon the exercise of 6,600,000 warrants (the “Private Warrants”) originally issued in a private placement in connection with the IPO (as defined below) of CRIS, at an exercise price of $11.50 per share of Class A Common Stock and (ii) up to 11,499,988 shares of Class A Common Stock that are issuable upon the exercise of 11,499,988 warrants (the “Public Warrants” and, together with the Private Warrants, the “Warrants”) originally issued in the IPO of CRIS, at an exercise price of $11.50 per share of Class A Common Stock.

 

This prospectus also relates to the resale from time to time by the Selling Securityholders named in this prospectus (the “Selling Securityholders”) of (A) up to 52,350,000 shares of Class A Common Stock, including (i) 5,750,000 shares of Class A Common Stock converted from Class B Common Stock of CRIS, (ii) 6,600,000 shares of Class A Common Stock that may be issued upon exercise of the Private Warrants, and (iii) 40,000,000 PIPE Shares (as defined below) and (B) up to 6,600,000 Private Warrants.

 

This prospectus provides you with a general description of such securities and the general manner in which we and the Selling Securityholders may offer or sell the securities. More specific terms of any securities that we and the Selling Securityholders may offer or sell may be provided in a prospectus supplement that describes, among other things, the specific amounts and prices of the securities being offered and the terms of the offering. The prospectus supplement may also add, update or change information contained in this prospectus.

 

We will not receive any proceeds from the sale of shares of Class A Common Stock or Private Warrants by the Selling Securityholders or of shares of Class A Common Stock by us pursuant to this prospectus, except with respect to amounts received by us upon exercise of the Warrants. However, we will pay the expenses, other than any underwriting discounts and commissions, associated with the sale of securities pursuant to this prospectus.

 

We are registering the securities for resale pursuant to the Selling Securityholders’ registration rights under certain agreements between us and the Selling Securityholders. Our registration of the securities covered by this prospectus does not mean that either we or the Selling Securityholders will issue, offer or sell, as applicable, any of the securities. The Selling Securityholders may offer and sell the securities covered by this prospectus in a number of different ways and at varying prices. We provide more information about how the Selling Securityholders may sell the shares or Warrants in the section entitled “Plan of Distribution.”

 

You should read this prospectus and any prospectus supplement or amendment carefully before you invest in our securities.

 

Our Class A Common Stock and Public Warrants are listed on the Nasdaq under the symbols “EVGO” and “EVGOW,” respectively. On July 16, 2021, the closing price of our Class A Common Stock was $11.77 and the closing price for our Public Warrants was $2.50.

 

 

 

See the section entitled “Risk Factors” beginning on page 9 of this prospectus to read about factors you should consider before buying our securities.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

 

 

The date of this prospectus is July 20, 2021.

 

 

 

TABLE OF CONTENTS

 

About This Prospectus ii
Frequently Used Terms iii
Cautionary Statement Regarding Forward-Looking Statements vi
Summary 1
Risk Factors 8
Use of Proceeds 41
Determination of Offering Price 42
Market Information for Class A Common Stock and Dividend Policy 43
Selected Historical Consolidated Financial Information of EVgo 44
Unaudited Pro Forma Condensed Combined Financial Information 45
Capitalization 58
Management’s Discussion and Analysis of Financial Condition and Results of Operations of EVgo 59
Business 80
Management 92
Executive Compensation 101
Certain Relationships and Related Transactions 109
Beneficial Ownership of Securities 118
Selling Securityholders 119
Certain United States Federal Income Tax Considerations 130
Description of Securities 140
Restrictions on Resale of Securities 149
Plan of Distribution 151
Legal Matters 154
Experts 154
Change in Auditor 154
Where You Can Find More Information 155
Index to Financial Statements F-1

 

i

 

 

About This Prospectus

 

This prospectus is part of a registration statement on Form S-1 that we filed with the Securities and Exchange Commission (the “SEC”) using the “shelf” registration process. Under this shelf registration process, the Selling Securityholders may, from time to time, sell the securities offered by them described in this prospectus. We will not receive any proceeds from the sale by such Selling Securityholders of the securities offered by them described in this prospectus. This prospectus also relates to the issuance by us of the shares of Class A Common Stock issuable upon the exercise of any Warrants. We will receive proceeds from any exercise of the Warrants for cash.

 

Neither we nor the Selling Securityholders have authorized anyone to provide you with any information or to make any representations other than those contained in this prospectus or any applicable prospectus supplement or any free writing prospectuses prepared by or on behalf of us or to which we have referred you. Neither we nor the Selling Securityholders take responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. Neither we nor the Selling Securityholders will make an offer to sell these securities in any jurisdiction where the offer or sale is not permitted.

 

We may also provide a prospectus supplement or post-effective amendment to the registration statement to add information to, or update or change information contained in, this prospectus. You should read both this prospectus and any applicable prospectus supplement or post-effective amendment to the registration statement together with the additional information to which we refer you in the sections of this prospectus entitled “Where You Can Find More Information.”

 

On July 1, 2021 (the “Closing Date”), EVgo Inc., a Delaware corporation (f/k/a Climate Change Crisis Real Impact I Acquisition Corporation) (the “Company”), consummated the previously announced transaction (the “Business Combination”) pursuant to that certain Business Combination Agreement, dated January 21, 2021 (the “Business Combination Agreement”), by and among the Company, EVgo Holdings, LLC, a Delaware limited liability company (“Holdings”), EVgo HoldCo, LLC, a Delaware limited liability company (“HoldCo”) and EVGO OPCO, LLC, a Delaware limited liability company (“OpCo”) and CRIS Thunder Merger LLC, a Delaware limited liability company and wholly-owned subsidiary of the Company (“SPAC Sub”).

 

On the Closing Date, and in connection with the closing of the Business Combination (the “Closing”), Climate Change Crisis Real Impact I Acquisition Corporation changed its name to EVgo Inc.

 

Unless the context indicates otherwise, references in this prospectus to the “Company,” “EVgo,” “we,” “us,” “our” and similar terms refer to EVgo Inc. (f/k/a Climate Change Crisis Real Impact I Acquisition Corporation) and its consolidated subsidiaries. References to “CRIS” refer to our predecessor company prior to the consummation of the Business Combination.

 

ii

 

 

Frequently Used Terms

 

Unless the context indicates otherwise, the following terms have the following meanings when used in this prospectus:

 

Board” means the board of directors of EVgo Inc.

 

Business Combination” means the transactions contemplated by the Business Combination Agreement.

 

Business Combination Agreement” means that business combination agreement entered into on January 21, 2021 by and among CRIS, SPAC Sub and the EVgo Parties, as may be amended from time to time.

 

Call Right” means, with respect to an exercise of the OpCo Unit Redemption Right, the right of the Company Group pursuant to the OpCo A&R LLC Agreement to elect, for administrative convenience, to acquire each tendered OpCo Unit (together with a corresponding share of Class B common stock) directly from such redeeming holder of OpCo Units for, at the election of the Company Group, (a) one share of Class A common stock, subject to conversion rate adjustments for stock splits, stock dividends and reclassification and other similar transactions, or (b) an approximately equivalent amount of cash as determined pursuant to the terms of the OpCo A&R LLC Agreement.

 

Class A Common Stock” means Class A Common Stock of EVgo Inc., par value $0.0001 per share.

 

Class B Common Stock” means Class B Common Stock of EVgo Inc., par value $0.0001 per share.

 

Closing” means the closing of the Business Combination.

 

Code” means the U.S. Internal Revenue Code of 1986, as amended.

 

common stock” means Class A Common Stock and Class B Common Stock.

 

Company Group” means EVgo Inc., SPAC Sub or any of their subsidiaries (other than OpCo and its subsidiaries).

 

DGCL” means the General Corporation Law of the State of Delaware.

 

EVgo” means the Company and its subsidiaries.

 

EVgo Parties” means OpCo, HoldCo and Holdings.

 

Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

Founder Shares” means the 5,750,000 shares of Class A Common Stock issued upon conversion of the Class B common stock of CRIS in connection with the Closing collectively held by the initial stockholders.

 

GAAP” means United States generally accepted accounting principles, consistently applied, as in effect from time to time.

 

HoldCo” means EVgo HoldCo, LLC, a Delaware limited liability company.

 

Holdings” means EVgo Holdings, LLC, a Delaware limited liability company.

 

initial stockholders” means the Sponsor, Mary Powell, Richard, L. Kauffman, Mimi Alemayehou, Anne Frank-Shapiro, Daniel Gross, Amir Chireh Mehr and Stephen Moch.

 

IPO” or “initial public offering” means CRIS’s initial public offering of units consummated on October 2, 2020.

 

“IRS” means the Internal Revenue Service.

 

iii

 

 

JOBS Act” means the Jumpstart Our Business Startups Act of 2012, as amended.

 

LS Power” means LS Power Equity Partners IV, L.P. and its affiliates, unless the context otherwise requires.

 

Nasdaq” means The Nasdaq Global Select Market.

 

Nomination Agreement” means the nomination agreement entered into concurrently with the Closing, by and between the Company and Holdings, pursuant to which Holdings will have certain director nomination rights.

 

NYSE” means The New York Stock Exchange.

 

OpCo” means EVGO OPCO, LLC, a Delaware limited liability company.

 

OpCo A&R LLC Agreement” means the amended and restated limited liability company agreement of OpCo entered into in connection with the Closing.

 

OpCo Unit Redemption Right” means the right of a holder of OpCo Units (other than SPAC Sub) pursuant to the OpCo A&R LLC Agreement to cause OpCo to redeem all or a portion of its OpCo Units (together with a corresponding number of shares of Class B Common Stock) for, at the election of OpCo, (a) shares of Class A Common Stock at a redemption ratio of one share of Class A Common Stock for each OpCo Unit redeemed, subject to conversion rate adjustments for stock splits, stock dividends and reclassification and other similar transactions, or (b) an approximately equivalent amount of cash as determined pursuant to the terms of the OpCo A&R LLC Agreement.

 

OpCo Units” means the equity interests of OpCo.

 

PIMCO” means Pacific Investment Management Company LLC.

 

PIPE” means the sale of 40,000,000 shares of Class A Common Stock to the PIPE Investors, for a purchase price of $10.00 per share and an aggregate purchase price of $400,000,000, in a private placement.

 

PIPE Investors” means investors in the PIPE.

 

PIPE Proceeds” means net cash proceeds from the PIPE.

 

PIPE Shares” means the 40,000,000 shares of Class A Common Stock sold to PIPE Investors pursuant to the PIPE.

 

private placement warrants” means the 6,600,000 warrants purchased by the Sponsor in a private placement simultaneously with the closing of the IPO, each of which is exercisable for one share of Class A Common Stock at $11.50 per share, at a price of $1.00 per warrant, generating gross proceeds of $6,600,000.

 

public shares” means the shares of Class A Common Stock included in the units sold by CRIS in its IPO.

 

public stockholder” means a holder of public shares.

 

public warrants” means the 11,499,988 redeemable warrants sold as part of the units in the IPO.

 

Registration Rights Agreement” means the registration rights agreement entered into concurrently with the Closing, by and among EVgo Inc., Holdings, the Sponsor and the other initial stockholders.

 

SEC” means the U.S. Securities and Exchange Commission.

 

Securities Act” means the Securities Act of 1933, as amended.

 

Sponsor” means CRIS’s sponsor, Climate Change Crisis Real Impact I Acquisition Holdings, LLC, a Delaware limited liability company.

 

iv

 

 

Sponsor Agreement” means the letter agreement entered into concurrently with the Business Combination Agreement by and among CRIS, the Co-Investors, the Sponsor and the other initial stockholders, pursuant to which the Sponsor, other initial stockholders and the Co-Investors agreed, among other things, to vote all of their shares of common stock held or subsequently acquired by them in favor of the approval of the business combination.

 

Tax Receivable Agreement” means the tax receivable agreement, entered into at Closing, by and among CRIS, SPAC Sub, Holdings and LS Power Equity Advisors, LLC, as agent.

 

transfer agent” means Continental Stock Transfer & Trust Company.

 

warrants” means the private placement warrants and public warrants.

 

v

 

 

Cautionary Statement Regarding Forward-Looking Statements

 

This prospectus and any accompanying prospectus supplement, or some of the information incorporated herein by reference, contains statements that are forward-looking and as such are not historical facts. These forward-looking statements include, without limitation, statements regarding future financial performance, business strategies, expansion plans, future results of operations, estimated revenues, losses, projected costs, prospects, plans and objectives of management. These forward-looking statements are based on our management’s current expectations, estimates, projections and beliefs, as well as a number of assumptions concerning future events, and are not guarantees of performance. Such statements can be identified by the fact that they do not relate strictly to historical or current facts. When used in this prospectus and any accompanying prospectus supplement, words such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “continue,” “project” or the negative of such terms or other similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this prospectus and any accompanying prospectus supplement and in any document incorporated by reference in this prospectus may include, for example, statements about:

 

·trends in the climate sector, transportation sector or electric mobility sector and trends specific to clean energy, renewables and carbon removal;

 

·our ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition and our ability to grow and manage growth profitably following the Business Combination;

 

·the possibility that COVID-19 may adversely affect the results of our operations, financial position and cash flows;

 

·our expansion plans and opportunities;

 

·our expectations regarding future expenditures;

 

·our public securities’ potential liquidity and trading;

 

·the lack of a market for our securities; and

 

·our future financial performance following the Business Combination.

 

The forward-looking statements contained in this prospectus are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to:

 

·our ability to maintain the listing of our Class A Common Stock on the Nasdaq following the Business Combination;

 

·our ability to raise financing in the future;

 

·our success in retaining or recruiting, or changes required in, our officers, key employees or directors;

 

·changes adversely affecting the business in which we are engaged;

 

·the risks associated with cyclical demand for our services and vulnerability to industry downturns and regional or national downturns;

 

·fluctuations in our revenue and operating results;

 

vi

 

 

·unfavorable conditions or further disruptions in the capital and credit markets;

 

·our ability to generate cash, service indebtedness and incur additional indebtedness;

 

·competition from existing and new competitors;

 

·our ability to integrate any businesses we acquire;

 

·our ability to recruit and retain experienced personnel;

 

·risks related to legal proceedings or claims, including liability claims;

 

·our dependence on third-party contractors to provide various services;

 

·our ability to obtain additional capital on commercially reasonable terms;

 

·safety and environmental requirements that may subject us to unanticipated liabilities;

 

·general economic or political conditions; and

 

·other factors detailed under the section entitled “Risk Factors” and in our periodic filings with the SEC.

 

Our SEC filings are available publicly on the SEC website at www.sec.gov. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. Accordingly, forward-looking statements in this prospectus and in any document incorporated herein by reference should not be relied upon as representing our views as of any subsequent date, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

 

vii

 

 

 

Summary

 

This summary highlights selected information appearing elsewhere in this prospectus. Because it is a summary, it may not contain all of the information that may be important to you. To understand this offering fully, you should read this entire prospectus carefully, including the information set forth under the heading “Risk Factors” and our financial statements.

 

The Company

 

We own and operate the nation’s largest public direct current (“DC”) fast-charging network for battery electric vehicles (“EVs”) by number of locations and are the first EV charging network in the United States powered by 100% renewable electricity, through the use of renewable energy certificates (“RECs”). See “Business — Government Regulation — Renewable Energy Markets.” We seek to locate our charging infrastructure in high traffic, high density urban, suburban and exurban locations to provide EV drivers of all types with easy access to convenient, reliable high-speed charging. Our network is capable of natively charging (i.e., charging without an adaptor) all EV models and charging standards currently available in the U.S. and serves a wide variety of private retail and commercial customers. Founded in 2010, we have been a leader and innovator in the EV charging space and are well positioned to continue to capitalize on our sustainable first-mover and first-learner advantages as EV adoption accelerates. To take advantage of the expected rapid growth in North American EVs on the road, we are rapidly expanding our network of owned charging stations, prioritizing development of locations with favorable traffic and utilization characteristics.

 

Background

 

We were originally known as Climate Change Crisis Real Impact I Acquisition Corporation. On July 1, 2021, we consummated the Business Combination pursuant to the Business Combination Agreement dated as of January 21, 2021 among us, SPAC Sub and the EVgo Parties. In connection with the Closing, we changed our name to EVgo Inc. EVgo was deemed to be the accounting acquirer in the Business Combination based on an analysis of the criteria outlined in Accounting Standards Codification 805. While we were the legal acquirer in the Business Combination, because EVgo was deemed the accounting acquirer, the historical financial statements of EVgo became the historical financial statements of the combined company, upon the consummation of the Business Combination.

 

At the Closing, the following actions took place pursuant to the Business Combination Agreement:

 

(i)CRIS contributed all of its assets to SPAC Sub, including but not limited to (1) an amount of funds equal to (A) funds held in the Trust Account (net of any amounts paid to holders of shares of Class A Common Stock who elect to redeem their shares (the “Redemption Amount”) and the payment of any deferred underwriting fees from the IPO), plus (B) net cash proceeds from the PIPE (the “PIPE Proceeds”), plus (C) any cash held by CRIS in any working capital or similar account, less (D) any transaction expenses of CRIS and the EVgo Parties; and (2) 195,800,000 newly issued shares of Class B Common Stock (the “Holdings Class B Shares” and such transaction, the “SPAC Contribution”);

 

(ii)immediately following the SPAC Contribution, Holdings contributed to OpCo all of the issued and outstanding limited liability company interests of the Company and, in connection therewith, (1) OpCo was recapitalized as set forth in the OpCo A&R LLC Agreement, and (2) OpCo issued to Holdings 195,800,000 units of OpCo (“OpCo Units” and such transactions, the “Holdings Contribution”);

 

(iii)immediately following the Holdings Contribution, SPAC Sub transferred to Holdings the Holdings Class B Shares and the right to enter into the Tax Receivable Agreement (such applicable transactions, the “SPAC Sub Transfer”); and

 

(iv)immediately following the SPAC Sub Transfer, SPAC Sub contributed to OpCo all of its remaining assets in exchange for the issuance by OpCo to SPAC Sub of a number of OpCo Units equal to the number of shares of Class A common stock issued and outstanding after giving effect to the Business Combination and the PIPE (the “Issued OpCo Units,” such transaction, the “SPAC Sub Contribution” and together with the SPAC Contribution, the Holdings Contribution and the SPAC Sub Transfer, the “Transactions”).

 

 

1

 

 

The shares of Class B common stock of CRIS automatically converted into shares of Class A Common Stock at the time of the Business Combination on a one-for-one basis.

 

Following the Closing, the combined company is organized in an “Up-C” structure in which the business of HoldCo and its subsidiaries are held by OpCo and continue to operate through the subsidiaries of HoldCo, and in which the Company’s only direct assets consist of equity interests in SPAC Sub, which, in turn, immediately after the Closing, holds only the Issued OpCo Units. OpCo’s only direct assets consist of its equity interests in HoldCo. Immediately following the Closing, CRIS, through SPAC Sub, owns approximately 26.0% of the OpCo Units, and SPAC Sub controls OpCo as the sole managing member of OpCo in accordance with the terms of the OpCo A&R LLC Agreement. OpCo owns all of the equity interests in HoldCo. Upon the Closing, CRIS changed its name to “EVgo Inc.” Holdings holds the Holdings OpCo Units and the Holdings Class B Shares.

 

The amount of cash contributed by SPAC Sub to OpCo at the Closing was approximately $601.6 million. Net cash received after all direct and incremental costs related to the Business Combination were paid was approximately $573.4 million. Immediately following the Business Combination, Holdings held 195,800,000 OpCo Units, representing approximately 74.0% of the total outstanding OpCo Units, and an equal of number of Holdings Class B Shares.

 

Each OpCo Unit, together with one share of Class B common stock, is redeemable, subject to certain conditions, for either one share of Class A common stock, or, at OpCo’s election, the cash equivalent to the market value of one share of Class A common stock, pursuant to and in accordance with the terms of the OpCo A&R LLC Agreement.

 

At Closing, CRIS, SPAC Sub, Holdings and LS Power Equity Advisors, LLC, as agent, entered into the Tax Receivable Agreement. The Tax Receivable Agreement generally provides for the payment by the Company Group to certain holders of OpCo Units of 85% of the net cash savings, if any, in U.S. federal, state and local income tax and franchise tax that the Company Group actually realizes (or is deemed to realize in certain circumstances) in periods after the Business Combination as a result of (i) certain increases in tax basis that occur as a result of the Company Group’s acquisition (or deemed acquisition for U.S. federal income tax purposes) of all or a portion of such holder’s OpCo Units pursuant to the Business Combination or the exercise of the redemption or call rights set forth in the OpCo A&R LLC Agreement and (ii) imputed interest deemed to be paid by the Company Group as a result of, and additional tax basis arising from, any payments the Company Group makes under the Tax Receivable Agreement. The Company Group will retain the benefit of the remaining 15% of these net cash savings. If the Company Group elects to terminate the Tax Receivable Agreement early (or it is terminated early due to the Company Group’s failure to honor a material obligation thereunder or due to certain mergers, asset sales, other forms of business combinations or other changes of control), the Company Group is required to make an immediate payment equal to the present value of the anticipated future payments to be made by it under the Tax Receivable Agreement (based upon certain assumptions and deemed events set forth in the Tax Receivable Agreement).

 

On January 21, 2021, a number of purchasers (each, a “Subscriber”) agreed to purchase from the Company an aggregate of 40,000,000 shares of Class A Common Stock (the “PIPE Shares”), for a purchase price of $10.00 per share and an aggregate purchase price of $400 million, pursuant to separate subscription agreements (each, a “Subscription Agreement”) entered into and effective as of January 21, 2021. Pursuant to the Subscription Agreements, the Company gave certain registration rights to the Subscribers with respect to the PIPE Shares. The sale of PIPE Shares was consummated concurrently with the Closing.

 

Our Class A Common Stock and Public Warrants are currently listed on the Nasdaq under the symbols “EVGO” and “EVGOW,” respectively.

 

The rights of holders of our Class A Common Stock, Class B Common Stock and Warrants are governed by our second amended and restated certificate of incorporation (the “Charter”), our amended and restated bylaws (the “Bylaws”) and the Delaware General Corporation Law (the “DGCL”), and, in the case of the Warrants, the Warrant Agreement, dated September 29, 2020, between CRIS and the Continental Stock Transfer & Trust Company (the “Warrant Agreement”). See the sections entitled “Description of Securities” and “Selling Securityholders.”

 

 

2

 

 

 

Corporate Information

 

We were originally incorporated in the State of Delaware on August 4, 2020, as a special purpose acquisition company, formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, recapitalization, reorganization or similar business combination with one or more businesses. CRIS completed its IPO on October 2, 2020. In July 2021, we consummated the Transactions pursuant to the Business Combination Agreement and changed our name to EVgo Inc. The mailing address of EVgo’s principal executive office is 11835 West Olympic Boulevard, Suite 900E, Los Angeles, California 90064, and its phone number is (877) 494-3833. Our website address is www.evgo.com. Information contained on our website or connected thereto does not constitute part of, and is not incorporated by reference into, this prospectus or the registration statement of which it forms a part.

 

 

3

 

 

 

The Offering

 

IssuerEVgo Inc. (f/k/a Climate Change Crisis Real Impact Acquisition Corporation)
  
Issuance of Class A Common Stock 

 

Shares of Class A Common Stock
Offered by us
18,099,988 shares of Class A Common Stock issuable upon exercise of the Warrants, consisting of (i) 6,600,000 shares of Class A Common Stock that are issuable upon the exercise of 6,600,000 Private Warrants and (ii) 11,499,988 shares of Class A Common Stock that are issuable upon the exercise of 11,499,988 Public Warrants
   
Shares of Common Stock Outstanding
Prior to Exercise of All Warrants
264,536,770 shares (as of July 1, 2021)
 
Shares of Common Stock Outstanding
Assuming Exercise of All Warrants
282,636,758 shares (based on the total shares outstanding as of July 1, 2021)
   
Exercise Price of the Warrants $11.50 per share, subject to adjustments as described herein
   
Use of proceeds We will receive up to an aggregate of approximately $208.2 million from the exercise of the Warrants, assuming the exercise in full of all of the Warrants for cash. We expect to use the net proceeds from the exercise of the Warrants for general corporate purposes. See “Use of Proceeds.”
   
Resale of Class A Common Stock and Warrants
   
Shares of Class A Common Stock Offered
by the Selling Securityholders
52,350,000 shares of Class A Common Stock (including up to 6,600,000 shares of Class A Common Stock that may be issued upon exercise of the Private Warrants)

 

Warrants Offered by the Selling
Securityholders
6,600,000 Private Warrants

 

RedemptionThe Warrants are redeemable in certain circumstances. See “Description of Securities—Redeemable Warrants” for further discussion.
  
Use of ProceedsWe will not receive any proceeds from the sale of shares of Class A Common Stock or Private Warrants (assuming the cashless exercise provision is used) by the Selling Securityholders.
  
Transfer RestrictionsCertain of our stockholders are subject to certain restrictions on transfer until the termination of applicable lock-up periods. See “Restrictions on Resale of Securities.”
  
Market for Class A Common Stock and
Warrants
Our Class A Common Stock and Warrants are currently traded on the Nasdaq under the symbols, “EVGO” and “EVGOW,” respectively.
  
Risk FactorsSee “Risk Factors” and other information included in this prospectus for a discussion of factors you should consider before investing our securities.

 

 

4

 

 

 

Summary Risk Factors

 

An investment in shares of our common stock involves a high degree of risk. If any of the factors enumerated below or in the section entitled “Risk Factors” occurs, our business, financial condition, liquidity, results of operations and prospects could be materially and adversely affected.

 

Risks Related to Our Business

 

·We are an early stage company with a history of operating losses, and expects to incur significant expenses and continuing losses at least for the near — and medium-term.

 

·Our forecasts and projections are based upon assumptions, analyses and internal estimates developed by our management. If these assumptions, analyses or estimates prove to be incorrect or inaccurate, our actual operating results may differ materially from those forecasted or projected.

 

·We currently face competition from a number of companies and expect to face significant competition in the future as the market for EV charging develops.

 

·Because we are currently dependent upon a limited number of customers and original equipment manufacturer (“OEM”) partners, the loss of a significant customer or OEM partner could adversely affect its operating results.

 

·We will be required to install a substantial number of chargers under our agreement with General Motors (“GM”). If we do not meet our obligations under this agreement, we may not be entitled to payments from GM and may be required to pay liquidated damages, which may be significant.

 

·We face risks related to health pandemics, including the COVID-19 pandemic, which could have a material adverse effect on our business and results of operations.

 

·We rely on a limited number of vendors for our charging equipment and related support services. A loss of any of these partners would negatively affect our business.

 

·Our business is subject to risks associated with construction, cost overruns and delays, and other contingencies that may arise in the course of completing installations, and such risks may increase in the future as we expand the scope of such services with other parties.

 

·Many of our facilities are located in active earthquake zones or in areas susceptible to hurricanes, wildfires and other severe weather events. An earthquake, a wildfire, a major hurricane or other types of disasters or resource shortages, including public safety power shut-offs that have occurred and will continue to occur in California or other states, could disrupt and harm our operations and those of our customers.

 

·We are dependent upon the availability of electricity at our current and future charging stations. Cost increases, delays and/or other restrictions on the availability of electricity would adversely affect our business and results of operations.

 

·Our success depends on our ability to develop and maintain relationships with automotive OEM and fleet partners.

 

·Our revenue growth will depend in significant part on our ability to increase sales of our products and services to fleet operators including medium and heavy-duty vehicle fleets and rideshare operators.

 

Risks Related to the EV Market

 

·Our growth and success is highly correlated with and thus dependent upon the continuing rapid adoption of and demand for EVs.

 

 

5

 

 

 

·The rideshare and commercial fleets may not electrify as quickly as expected and may not rely on public fast charging or on our network as much as expected. Future demand for battery EVs from the medium and heavy duty vehicle segment may develop as anticipated or take longer to develop than expected.

 

·The EV market currently benefits from the availability of rebates, tax credits and other financial incentives from governments, utilities and others to offset the purchase or operating cost of EVs and EV charging stations. The reduction, modification or elimination of such benefits could adversely affect our financial results.

 

·The EV charging market is characterized by rapid technological change, which requires us to continue to develop new products and product innovations. Any delays in such development could adversely affect market adoption of our products and our financial results.

 

Risks Related to Our Technology, Intellectual Property and Infrastructure

 

·We may need to defend against intellectual property infringement or misappropriation claims, which may be time-consuming and expensive, and our business could be adversely affected.

 

·Our technology could have undetected defects, errors or bugs in hardware or software which could reduce market adoption, damage its reputation with current or prospective customers, and/or expose it to product liability and other claims that could materially and adversely affect its business.

 

·We may be unable to leverage customer data in all geographic locations, and this limitation may impact research and development operations.

 

Financial, Tax and Accounting-Related Risks

 

·Our financial condition and results of operations are likely to fluctuate on a quarterly basis in future periods, which could cause our results for a particular period to fall below expectations, resulting in a decline in the price of the post-combination company’s common stock.

 

·We have identified material weaknesses in our internal control over financial reporting. If we are unable to remediate these material weaknesses, or if we identify additional material weaknesses in the future or otherwise fails to maintain an effective system of internal control over financial reporting, this may result in material misstatements of our consolidated financial statements or cause us to fail to meet our periodic reporting obligations.

 

Risks Related to our “Up-C” Structure and the Tax Receivable Agreement

 

·Holdings owns the majority of our voting stock and therefore has the right to appoint a majority of our board members, and its interests may conflict with those of other stockholders.

 

·Our only principal asset is our interest in SPAC Sub, which, in turn, holds only units issued by OpCo; accordingly, we depend on distributions from OpCo and SPAC Sub to pay taxes, make payments under the Tax Receivable Agreement and cover our corporate and other overhead expenses.

 

Sources of Industry and Market Data

 

Where information has been sourced from a third-party, the source of such information has been identified.

 

Unless otherwise indicated, the information contained in this prospectus on the market environment, market developments, growth rates, market trends and competition in the markets in which we operate is taken from publicly available sources, including third-party sources, or reflects our estimates that are principally based on information from publicly available sources.

 

 

6

 

 

 

Implications of Being an Emerging Growth Company and a Smaller Reporting Company

 

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

 

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (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) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

 

We will remain an emerging growth company until the earlier of (i) the last day of the fiscal year (a) following the fifth anniversary of the completion of its initial public offering, (b) in which it has total annual gross revenue of at least $1.07 billion (as adjusted for inflation pursuant to SEC’s rules and regulations from time to time), or (c) in which we are deemed to be a large accelerated filer, which means the market value of shares of Class A Common Stock that are held by non-affiliates exceeds $700 million as of the prior June 30 and (ii) the date on which we have issued more than $1.00 billion in non-convertible debt during the prior three-year period.

 

We are also be a “smaller reporting company” as defined under the Securities Act and Exchange Act. We may continue to be a smaller reporting company so long as either (i) the market value of shares of our common stock held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of shares of our common stock held by non-affiliates is less than $700 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company, we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and have reduced disclosure obligations regarding executive compensation, and, similar to emerging growth companies, if we are a smaller reporting company under the requirements of (ii) above, we would not be required to obtain an attestation report on internal control over financial reporting issued by our independent registered public accounting firm.

 

 

7

 

 

Risk Factors

 

Investing in our securities involves risks. Before you make a decision to buy our securities, in addition to the risks and uncertainties discussed above under “Cautionary Statement Regarding Forward-Looking Statements,” you should carefully consider the specific risks set forth herein. If any of these risks actually occur, it may materially harm our business, financial condition, liquidity and results of operations. As a result, the market price of our securities could decline, and you could lose all or part of your investment. Additionally, the risks and uncertainties described in this prospectus or any prospectus supplement are not the only risks and uncertainties that we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may become material and adversely affect our business.

 

Risks Related to Our Business

 

We are an early stage company with a history of operating losses, and expect to incur significant expenses and continuing losses at least for the near- and medium-term.

 

We have a history of operating losses and negative operating cash flows. We incurred a net loss of $16.6 million and $48.2 million for the three months ended March 31, 2021 and the year ended December 31, 2020, respectively, and, as of March 31, 2021, had a working capital deficit of approximately $45.3 million. We believe we will continue to incur operating and net losses each quarter at least for the medium term. Even if we achieve profitability, there can be no assurance that we will be able to maintain profitability in the future. Our potential profitability is particularly dependent upon the continued adoption of EVs by consumers and fleet operators, the widespread adoption of electric trucks and other vehicles, and other electric transportation modalities, continued support from regulatory programs and in each case, the use of our chargers, any of which may not occur at the levels we currently anticipate or at all. We may need to raise additional financing through loans, securities offerings or additional investments in order to fund our ongoing operations. There is no assurance that we will be able to obtain such additional financing or that we will be able to obtain such additional financing on favorable terms.

 

Our management concluded that these conditions raise substantial doubt about our ability to meet our financial obligations as they become due for the next twelve months, and our ability to continue as a going concern. In addition, our independent registered public accounting firm included an emphasis of matter paragraph regarding our ability to continue as a going concern in our opinion on our audited consolidated financial statements as of and for the years ended December 31, 2020 and 2019, due to the factors noted above. Our unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2021 and 2020 and audited consolidated financial statements as of and for the years ended December 31, 2020 and 2019 do not include any adjustments that may result from the outcome of this uncertainty and do not reflect the transactions contemplated by the business combination.

 

Our growth and success is highly correlated with and thus dependent upon the continuing rapid adoption of and demand for EVs.

 

Our growth is highly dependent upon the adoption of EVs both by businesses and consumers. The market for EVs is still rapidly evolving, characterized by rapidly changing technologies, increasing consumer choice as it relates to available EV models, their pricing and performance, evolving government regulation and industry standards, changing consumer preferences and behaviors, intensifying levels of concern related to environmental issues, and governmental initiatives related to climate change and the environment generally. Our revenues are driven in large part by EV drivers’ driving and charging behavior. Potential shifts in behavior may include but are not limited to changes in annual vehicle miles traveled, preferences for urban vs suburban vs rural and public vs private charging, demand from rideshare or urban delivery fleets, and the emergence of autonomous vehicles and/or new forms of mobility. Although demand for EVs has grown in recent years, there is no guarantee of continuing future demand. Public DC fast charging in particular may not develop as expected and may fail to attract projected market share of total EV charging. If the market for EVs develops more slowly than expected, or if demand for EVs decreases, our growth would be reduced and our business, prospects, financial condition and operating results would be harmed. The market for EVs could be affected by numerous factors, such as:

 

·perceptions about EV features, quality, driver experience, safety, performance and cost;

 

8

 

 

·perceptions about the limited range over which EVs may be driven on a single battery charge and about availability and access to sufficient public EV charging stations;

 

·competition, including from other types of alternative fuel vehicles (such as hydrogen fuel cell vehicles), plug-in hybrid EVs and high fuel-economy internal combustion engine (“ICE”) vehicles;

 

·increases in fuel efficiency in legacy ICE and hybrid vehicles;

 

·volatility in the price of gasoline and diesel at the pump;

 

·EV supply chain disruptions including but not limited to availability of certain components (e.g. semiconductors), ability of EV OEMs to ramp-up EV production, availability of batteries, and battery materials;

 

·concerns regarding the stability of the electrical grid;

 

·the decline of an EV battery’s ability to hold a charge over time;

 

·availability of service for EVs;

 

·consumers’ perception about the convenience, speed, and cost of EV charging;

 

·government regulations and economic incentives, including adverse changes in, or expiration of, favorable tax incentives related to EVs, EV charging stations or decarbonization generally;

 

·relaxation of government mandates or quotas regarding the sale of EVs;

 

·the number, price and variety of EV models available for purchase; and

 

·concerns about the future viability of EV manufacturers.

 

In addition, sales of vehicles in the automotive industry can be cyclical, which may affect growth in acceptance of EVs. It is uncertain how macroeconomic factors will impact demand for EVs, particularly since they can be more expensive than traditional gasoline-powered vehicles, when the automotive industry globally has been experiencing a recent decline in sales. Furthermore, because fleet operators often make large purchases of EVs, this cyclicality and volatility in the automotive industry may be more pronounced with commercial purchasers, and any significant decline in demand from these customers could reduce demand for EV charging and our products and services in particular.

 

While many global OEMs and several new market entrants have announced plans for new EV models, the lineup of EV models with increasing fast charging needs expected to come to market over the next several years may not materialize in that timeframe or may fail to attract sufficient customer demand. Demand for EVs may also be affected by factors directly impacting automobile prices or the cost of purchasing and operating automobiles, such as sales and financing incentives, prices of raw materials and parts and components, cost of fuel and governmental regulations, including tariffs, import regulation and other taxes. Volatility in demand may lead to lower vehicle unit sales, which may result in reduced demand for EV charging solutions and therefore adversely affect our business, financial condition and operating results.

 

We have experienced rapid growth and expect to invest our earnings in growth for the foreseeable future. If we fail to manage growth effectively, our business, operating results and financial condition would be adversely affected.

 

We have experienced rapid growth in recent periods. For example, the number of employees has grown from 57 in December 2017 to 152 in March 2021. The expected continued growth and expansion of our business may place a significant strain on management, business operations, financial condition and infrastructure and corporate culture.

 

9

 

 

With continued fast growth, our information technology systems and our internal control over financial reporting and procedures may not be adequate to support our operations and may allow data security incidents that may interrupt business operations and allow third parties to obtain unauthorized access to business information or misappropriate funds. We may also face risks to the extent such third parties infiltrate the information technology infrastructure of our contractors.

 

To manage growth in operations and personnel, we will need to continue to improve our operational, financial and management controls and reporting systems and procedures. Failure to manage growth effectively could result in difficulty or delays in attracting new customers, declines in quality or customer satisfaction, increases in costs, difficulties in introducing new products and services or enhancing existing products and services, loss of customers, information security vulnerabilities or other operational difficulties, any of which could adversely affect our business performance and operating results. Our strategy is based on a combination of growth and maintenance of strong performance on our existing asset base, and any inability to scale, maintain customer experience or manage operations at our charging stations may impact our growth trajectory.

 

Our forecasts and projections are based upon assumptions, analyses and internal estimates developed by our management. If these assumptions, analyses or estimates prove to be incorrect or inaccurate, our actual operating results may differ materially and adversely from those forecasted or projected.

 

Our forecasts and projections are subject to significant uncertainty and are based on assumptions, analyses and internal estimates developed by our management, any or all of which may not prove to be correct or accurate. If these assumptions, analyses or estimates prove to be incorrect or inaccurate, our actual operating results may differ materially and adversely from those forecasted or projected. Realization of the results forecasted will depend on the successful implementation of our proposed business plan, and policies and procedures consistent with the assumptions. Future results will also be affected by events and circumstances beyond our control, for example, the competitive environment, our executive team, rapid technological change, economic and other conditions in the markets in which we propose to operate, governmental regulation and, uncertainties inherent in product development and testing, our future financing needs and our ability to grow and to manage growth effectively. In particular, our forecasts and projections include forecasts and estimates relating to the expected size and growth of the markets in which we operate or seek to enter. See “— Our estimates of market opportunity and forecasts of market growth may prove to be inaccurate.” Our forecasts and projections also assume that we are able to perform our obligations under our commercial contracts. See “— Because we are currently dependent upon a limited number of customers and OEM partners, the loss of a significant customer or OEM partner could adversely affect our operating results.” For the reasons described above, it is likely that the actual results of our operations will be different from the results forecasted and those differences may be material and adverse. The forecasts were prepared by our management and have not been certified or examined by an accountant. We do not have any duty to update the financial projections included in this prospectus.

 

Our estimates of market opportunity and forecasts of market growth may prove to be inaccurate.

 

Estimates of future EV adoption in the United States, the total addressable market, serviceable addressable market for our products and services and the EV market in general are included in this prospectus. Market opportunity estimates and growth forecasts, whether obtained from third-party sources or developed internally, are subject to significant uncertainty and are based on assumptions and estimates that may prove to be inaccurate. This is especially so at the present time due to the uncertain and rapidly changing projections of the severity, magnitude and duration of the COVID-19 pandemic. The estimates and forecasts included in this prospectus relating to the size and expected growth of the target market, market demand, EV adoption across individual market verticals and use cases, capacity of automotive and battery OEMs and ability of charging infrastructure to address this demand and related pricing may also prove to be inaccurate. In particular, estimates regarding the current and projected market opportunity for public and commercial fast charging and future fast charging throughput or EVgo market share capture are difficult to predict. The estimated addressable market may not materialize in the timeframe of the projections included herein, if ever, and even if the markets meet the size estimates and growth estimates presented in this prospectus, our business could fail to grow at similar rates.

 

10

 

 

We currently face competition from a number of companies and expect to face significant competition in the future as the market for EV charging develops.

 

The EV charging market is relatively new and we currently face competition from a number of companies. We believe the main competitors to our core business are Electrify America and Blink. We indirectly compete with site hosts, fleets and utilities that choose to own their own charging infrastructure and procure their electric vehicle supply equipment (“EVSE”) from third-party vendors, such as EVBox and ChargePoint, rather than leveraging our public or dedicated charging offerings. The principal competitive factors in the industry include charger count, locations and accessibility; charger connectivity to EVs and ability to charge all standards; speed of charging relative to expected vehicle dwell times at the location; direct current fast charger (“DCFC”) network reliability, scale and local density; software-enabled services offering and overall customer experience; and operator brand, track record and reputation; access to equipment vendors, service providers, and policy incentives and pricing. Large early stage markets require early engagement across verticals and customers to gain market share, and ongoing effort to scale channels, installers, teams and processes. In addition, there are competitors, in particular those with limited funding, experience or commitment to quality assurance, which could cause poor experiences, hampering overall EV adoption or trust in any particular provider. Further, our current or potential competitors may be acquired by third parties with different commercial objectives and imperatives and greater available resources.

 

In addition, there are other means for charging EVs, which could affect the level of demand for charging at our DCFCs. For example, Tesla Inc. (“Tesla”) continues to build out its supercharger network across the United States for Tesla vehicles, which could reduce overall demand for EV charging at our sites. Tesla may also open its supercharger network to support charging of non-Tesla EVs in the future, which could further reduce demand for charging at our sites. Also, other companies sell chargers designed for customers seeking to have on premise EV charging capability as well as for home or workplace charging, which may reduce the demand for fast charging if EV owners find “slow” charging at a workplace, at home, or other parking locations to be sufficient. Municipalities may decide to convert street lighting poles and lampposts to public charging points for EV drivers who rent, have no access to home charging, or park their EVs on the street, potentially reducing our serviceable markets. Retailers, utilities or other site hosts or commercial, municipal and federal fleet businesses may opt to become owners and operators of public or private EV fast charging equipment and purchase that equipment and associated management software directly from vendors in the marketplace.

 

Additionally, future changes in charging preferences; the development of inductive EV charging capabilities; battery chemistries, ultralong-range batteries or energy storage technologies, industry standards or applications; driver behavior or battery EV efficiency may develop in ways that limit our future share gains in certain high promising market verticals or slow the growth of our addressable or serviceable market. Competitors may be able to respond more quickly and effectively than us to new or changing opportunities, technologies, standards or customer requirements, and may be better equipped to initiate or withstand substantial price competition. In addition, competitors may in the future establish cooperative relationships with vendors of complementary products, technologies or services to increase the availability of their solutions in the marketplace.

 

The EV charging business may become more competitive, pressuring future increases in utilization and margins. Competition is still developing and is expected to increase as the number of EVs sold increases. Today, our largest competitor is Electrify America, a subsidiary of Volkswagen. Electrify America was formed as part of Volkswagen’s consent decree with the U.S. Environmental Protection Agency in connection with its diesel emissions scandal. Volkswagen was forced to commit $2 billion to Electrify America and the expansion of its EV charger network over a ten-year period which began in January 2017. Electrify America expects to install (or have under development) approximately 800 public charging stations with about 3,500 chargers by December 2021 and is currently approaching completion of cycle 2 of its 4-cycle spending program. Because Electrify America’s expansion of its EV charger network is mandated by the consent decree and not necessarily done in a manner designed to maximize economic return, Electrify America’s rate of expansion may outpace ours, at least in the short term.

 

Barriers to entry in the EV charging market may erode as a result of government intervention, leading to more competitors. In addition, in some jurisdictions, we may see competition from local utilities who may be interested in, and receive regulatory approval for, ownership of public EV charging equipment, from various owners of non-networked Level 2 chargers, and from new entrants into the U.S. fast charging market.

 

12 

 

 

New competitors or alliances may emerge in the future that secure greater market share, have proprietary technologies that drivers prefer, more effective marketing abilities and/or face different financial hurdles, which could put us at a competitive disadvantage. Further, our current strategic initiatives, pilots and contracts with major OEM partners, business-to-business customers and key hosts may fail to result in a sustainable competitive advantage for us. Future competitors could also be better positioned to serve certain segments of our current or future target markets, which could create price pressure or erode our market share. In light of these factors, current or potential customers may utilize charging services of competitors. If we fail to adapt to changing market conditions or continue to compete successfully with current charging providers or new competitors, our growth will be inhibited, adversely affecting our business and results of operations.

 

Because we are currently dependent upon a limited number of customers and OEM partners, the loss of a significant customer or OEM partner could adversely affect our operating results.

 

Given the nascent stage of the industry, a limited number of contractual commercial customers and OEM partners currently account for a substantial portion of our income. For the three months ended March 31, 2021 and the year ended December 31, 2020, two customers and one customer, respectively, that represented approximately 34% and 11%, respectively, of our total revenue. Our operating projections are currently contingent on our performance under our commercial contracts. At least in the short term, we expect that a majority of our sales outside of the retail customer market will continue to come from a concentrated number of commercial customers and OEM partners. We expect a substantial portion of our cash receipts in the near future to be from GM and Nissan North America (“Nissan”) and as a result, is subject to any risks specific to those entities and the jurisdictions and markets in which they operate, including their ability to develop a portfolio of EV models and attract customers for those models. We may be unable to accomplish our business plan to diversify and expand our customer and OEM partner base by attracting a broad array of customers and OEM partners, which could negatively affect our business, results of operations and financial condition.

 

We will be required to install a substantial number of chargers under our agreement with GM. If we do not meet our obligations under this agreement, we may not be entitled to payments from GM and may be required to pay liquidated damages, which may be significant.

 

Pursuant to our agreement with GM dated July 20, 2020 (the “GM Agreement”), we are required to meet certain quarterly milestones measured by the number of chargers installed, and GM is required to make certain payments based on chargers installed. Under the GM Agreement, we are required to install a total of 2,750 chargers by December 31, 2025, 80% of which are required to be installed by December 31, 2023. The GM Agreement calls for a year-over-year increase in annual charger additions in each of the next two years before the installation run rate declines post 2023. Meeting these milestones will require additional funds beyond the amounts committed by GM, and we may face delays in construction, commission or aspects of installation of the chargers we are obligated to develop. In addition, we are required to maintain network availability (i.e. the percentage of time a charger is operational and available on the network) of at least 93%.

 

The GM Agreement is subject to early termination in certain circumstances, including in the event we fail to meet the quarterly charger-installation milestones or fail to maintain the specified level of network availability. If GM terminates the agreement, we may not be entitled to receive continued payments from GM and instead may be required to pay liquidated damages to GM. In the event we fail to meet a charger-installation milestone or maintain the required network availability in a calendar quarter, GM has the right to provide us with a notice of such deficiency within thirty days of the end of the quarter. If the same deficiency still exists at the end of the quarter immediately following the quarter for which a deficiency notification was delivered, GM may immediately terminate the agreement and seek pre-agreed liquidated damages of up to $15.0 million. As of May 14, 2021, we had 82 chargers left to install in order to meet our charger-installation milestone for the quarter ending June 30, 2021. We believe that we may not meet the charger-installation milestone for the quarter ending June 30, 2021, due to delays in permitting, commissioning, and utility interconnection resulting from COVID-19 disruptions in business operations across the engineering and permitting chain, as well as industry and regulatory adaptation to the requirements of high powered charger installation including slower than expected third party approvals of certain site acquisitions and site plans. Going forward it is uncertain if these, or other potential issues in the procurement, installation, or energization of DCFC, will be resolved in a timely fashion, and we believe that our ability to meet our charger-installation milestones under the GM Agreement may continue to be impacted by circumstances similar to those experienced during the first quarter of 2021.

 

13 

 

 

Nissan has the right to terminate its agreements with us in certain circumstances. Additionally, we may be subject to monetary penalties if we are unable to fulfill our obligations under our agreements with Nissan.

 

We have two program services agreements in place with Nissan. Under the terms of the agreement dated July 3, 2014 (the “Nissan Agreement”), purchasers of Nissan LEAF electric vehicles in certain markets can receive charging services at an EVgo station or a participating third-party charging station. Pursuant to the Nissan Agreement, we are required to support, maintain and make available at least 850 chargers through July 7, 2021. The Nissan Agreement is subject to early termination upon ninety days’ notice in certain circumstances, including our failure to maintain the specified charger counts. As of April 30, 2021, we have fulfilled all build, support and maintenance obligations under the Nissan Agreement.

 

On June 13, 2019, we entered into a professional services agreement with Nissan (the “Nissan 2.0 Agreement”). The Nissan 2.0 Agreement includes a capital-build program requiring us to install, operate and maintain public, high-power dual-standard chargers in specified markets pursuant to a Build Schedule (defined below). Under the terms of the Nissan 2.0 Agreement, we are required to adhere to a schedule that outlines the build timelines for the chargers to be constructed (“Build Schedule”) as negotiated at the beginning of each year. Due to the extenuating circumstances of the COVID-19 pandemic, we and Nissan have extended the current Build Schedule deadline through June 30, 2021 and no penalties may be assessed prior to such date. Pursuant to the Nissan 2.0 Agreement, as modified by this extension, we are required to install 46 chargers at 17 sites by June 30, 2021 and an aggregate of 210 chargers by February 29, 2024 at a number of sites to be determined with each Build Schedule. As of April 30, 2021, we had 12 chargers at 4 sites left to install in order to meet our Build Schedule obligations by June 30, 2021. We believe that we may not meet the June 30, 2021 Build Schedule obligations due to delays in permitting, commissioning, slower than expected third party approvals of certain site acquisitions, delays in utility interconnection resulting from industry adaptation to the requirements of high-powered charger installation, as well as supply chain issues. Going forward we are uncertain if these, or other potential issues in the procurement, installation, or energization of DCFC, will be resolved in a timely fashion. If we fail to meet our future Build Schedule obligations, we may invoke a penalty of up to $35,000 per delayed site, up to 40 sites.

 

At this time, we believe that our ability to meet future Build Schedule obligations may continue to be impacted by circumstances similar to those experienced during the first quarter of 2021, or other potential issues including, but not limited to, equipment design and procurement, timing of third-party funding agreements, and the siting, permitting, construction, commissioning, energizing of DCFC, or delays in releasing public grant funding.

 

Nissan has the right to terminate the Nissan 2.0 Agreement, without penalty or obligation of any kind, upon thirty days’ written notice if it is unable to secure funding to make payments required under the Nissan 2.0 Agreement. Nissan receives budget approvals annually from Nissan Motor Company Limited. As of April 30, 2021, Nissan has not given us any indication that it will be unable to secure funding to meet its payment obligations under the Nissan 2.0 Agreement. If Nissan terminates the Nissan 2.0 Agreement due to a lack of funding, we will still be required to do the following: (i) meet charger installation milestones through the date of termination; (ii) provide an aggregate of $1.6 million in joint marketing activities; and (iii) provide $4.8 million worth of charging credits that shall continue to be administered. If Nissan terminates either agreement with us, it may have adverse effects on our revenues and results of operations.

 

We face risks related to health pandemics, including the COVID-19 pandemic, which could have a material adverse effect on our business and results of operations.

 

The impact of COVID-19, including changes in consumer and business behavior, pandemic fears and market downturns and restrictions on business and individual activities, has created significant volatility in the global and domestic economies and led to reduced economic activity. The spread of COVID-19 has created charging equipment supply chain and shipping constraints and delayed the installation of over 400 new chargers. See “EVgo’s Management’s Discussion and Analysis of Results of Operations and Financial Condition of EVgo — Recent Developments — COVID-19 Outbreak.” As a result, we did not meet the Build Schedule for 2020 under the Nissan 2.0 Agreement. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations of EVgo — Nissan Agreement.” The COVID-19 pandemic has also caused a delays in our build out in Virginia and as a result, we have exercised our option to extend the investment cycle. See “Business — Governmental Regulation — Grants and Incentives.” Finally, impacts related to COVID-19 also delayed the installation of chargers pursuant to the GM Agreement.

 

14 

 

 

COVID-19 has also disrupted the manufacturing, delivery and overall supply chain of vehicle manufacturers and suppliers and has led to a decrease in vehicle sales, including EV sales, in markets around the world, and the accompanying demand for our charging services. We experienced a significant decline in monthly GWh throughput beginning in March 2020, decreasing by as much as 64%. Between March and July 2020, we deactivated over 70 chargers due to decreased usage as a result of COVID-19, experiencing an average downtime of 38 days when host sites were closed. While our business showed steady recovery with multiple metrics improving month-over-month since that time, total GWh throughput for the three months ended March 31, 2021 was lower than the same prior-year period by 0.6 GWh and total GWh throughput for the year ended December 31, 2020 was 12.9 GWh lower than expected. Any sustained downturn in demand for EVs would harm our business and negatively impact the growth of our charging station network.

 

The COVID-19 pandemic also impacted our operations through construction delays and supply chain and shipping constraints. We delayed operational dates of over 400 chargers by six to nine months due to delays in various stages site planning and construction caused by COVID-19. When governments and businesses shut down in response to shelter in place orders and other similar actions by state and local governments, permitting, inspection and other city and municipal services were suspended, and we had reduced access to host sites for construction and on-site survey and design. We also experienced delays in our site host negotiations as hosts devoted more time to day-to-day operations and employee health and safety. In addition, we experienced delays in equipment fulfillment and other logistics related to reduced operational capacity of warehouses and shipping vessel backlogs, which has caused additional delay in early 2021.

 

The pandemic has resulted in government authorities implementing numerous measures to try to contain COVID-19, such as travel bans and restrictions, quarantines, stay-at-home or shelter-in-place orders, and business shutdowns. These measures adversely impact our employees and operations and the operations of our customers, suppliers, vendors and business partners and negatively impact demand for EV charging. These measures by government authorities may remain in place for a significant period of time and may adversely affect manufacturing and building plans, sales and marketing activities, business and results of operations.

 

We have modified our business practices in response to the COVID-19 pandemic and currently recommend that all non-essential personnel work from home. We have implemented various safety protocols for essential personnel who must leave their homes for work such as requiring regular certifications of health status to such employees’ supervisors and our human resources department, requiring the use of protective face masks and social distancing and providing employees with access to testing. All employees are currently prohibited from work-related airline travel unless vaccinated. We may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, suppliers, vendors and business partners. There is no certainty that such actions will be sufficient to mitigate the risks posed by COVID-19 or otherwise be satisfactory to government authorities. If significant portions of our workforce are unable to work effectively, including due to illness, quarantines, social distancing, government actions or other restrictions in connection with the COVID-19 pandemic, our operations will be negatively impacted. Furthermore, if significant portions of our customers are subject to stay at home orders or otherwise work remotely or are not travelling via EV for sustained periods of time, user demand for charging and services will decline.

 

The extent to which the COVID-19 pandemic impacts our business, prospects and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration, spread and severity of the pandemic, the actions to contain COVID-19 or treat its impact, and when and to what extent normal economic and operating activities can resume. The COVID-19 pandemic could limit the ability of customers, suppliers, vendors, permitting agencies, utilities and business partners to perform, including third party suppliers’ ability to provide components and materials used in charging stations or in providing installation or maintenance services. Even after the COVID-19 pandemic has subsided, we may continue to experience an adverse impact to our business as a result of the pandemic’s global economic impact, including any recession that has occurred or may occur in the future. Specifically, difficult macroeconomic conditions, such as decreases in per capita income and level of disposable income, increased and prolonged unemployment or a decline in consumer confidence as a result of the COVID-19 pandemic, as well as reduced spending by businesses, could each have a material adverse effect on the demand for our products and services.

 

15 

 

 

We rely on a limited number of vendors for our charging equipment and related support services. A loss of any of these partners would negatively affect our business.

 

We rely on a limited number of vendors for design, testing and manufacturing of charging equipment which at this stage of the industry is unique to each supplier and thus singularly sourced with respect to components as well as aftermarket maintenance and warranty services. For the three months ended March 31, 2021, we had one major vendor that represented approximately 12% of total purchases. For the year ended December 31, 2020, we had no major vendors that represented over 10% of total purchases. This reliance on a limited number of vendors increases our risks, since we do not currently have proven reliable alternative or replacement vendors beyond these key parties. In the event of production interruptions or supply chain disruptions including but not limited to availability of certain key components such as semiconductors, we may not be able to take advantage of increased production from other sources or develop alternate or secondary vendors without incurring material additional costs and substantial delays. Thus, our business would be adversely affected if one or more of our vendors is impacted by any interruption at a particular location.

 

As the demand for public fast charging increases, the charging equipment vendors may not be able to dedicate sufficient supply chain, production, or sales channel capacity to keep up with the required pace of charging infrastructure expansion. In addition, as the EV market grows, the industry may be exposed to deteriorating design requirements, undetected faults or the erosion of testing standards by charging equipment and component suppliers, which may adversely impact the performance, reliability and lifecycle cost of the chargers. If we or our suppliers experience a significant increase in demand, or if we need to replace an existing supplier, we may not be able to supplement service or replace them on acceptable terms, which may undermine our ability to install chargers in a timely manner. For example, it may take a significant amount of time to identify a vendor that has the capability and resources to supply and/or service charging equipment in sufficient volume. Identifying and approving suitable vendors could be an extensive process that requires us to become satisfied with their quality control, technical capabilities, responsiveness and service, financial stability, regulatory compliance, and labor and other ethical practices. Accordingly, a loss of any significant vendor would have an adverse effect on our business, financial condition and operating results.

 

Further, should the Biden Administration and Congress require that charging equipment be manufactured in the U.S. in order to access federal financial support or secure contracts with the federal government, we will have to source equipment from alternative vendors or work with current vendors to develop manufacturing capacity in the U.S. to participate in the covered federal programs.

 

Our business is subject to risks associated with construction, cost overruns and delays, and other contingencies that may arise in the course of completing installations, and such risks may increase in the future as we expand the scope of such services with other parties.

 

We do not typically install charging stations at our sites. These installations are typically performed by electrical contractors managed by us. The installation of charging stations at a particular site is generally subject to oversight and regulation in accordance with state and local laws and ordinances relating to building codes, safety, environmental protection and related matters, and typically requires local utility cooperation in design and interconnection request approval and commissioning, as well as various local and other governmental approvals and permits that vary by jurisdiction. In addition, building codes, accessibility requirements, utility interconnect specifications, review, approval or study lead time or regulations may hinder EV charger installation because they end up costing the developer or installer more in order to meet the code requirements. In addition, increased demand for the components necessary to install charging stations could lead to higher installed costs. Meaningful delays or cost overruns caused by our vendor supply chains, contractors, or inability of local utilities and approving agencies to cope with the level of activity may impact our recognition of revenue in certain cases and/or impact our relationships, either of which could impact our business and profitability, pace of growth and prospects. For example, the installation of chargers under the GM Agreement have required significant utility upgrades to accommodate the higher capacity chargers. Delays in these upgrades have in turn caused delays in the construction of the chargers pursuant to the GM Agreement. As a result, we believe that we may not meet the charger-installation milestone for the quarter ending June 30, 2021. See “— We will be required to install a substantial number of chargers under our agreement with GM. If we do not meet our obligations under this agreement, we may not be entitled to payments from GM and may be required to pay liquidated damages, which may be significant.

 

16 

 

 

Working with contractors may require us to obtain licenses or require us or our customers to comply with additional rules, working conditions and other union requirements, which can add costs and complexity to an installation project. If these contractors are unable to provide timely, thorough and quality installation-related services, we could fall behind our construction schedules or cause customers to become dissatisfied with the solutions we offer. As the demand for public fast charging increases and qualification requirements for contractors become more stringent, we may encounter shortages in the number of qualified contractors available to complete all of our desired installations. If we fail to timely pay our contractors, they may file liens against our site hosts’ properties, which we are required to remove.

 

Our business model is predicated on the presence of qualified and capable electrical and civil contractors and subcontractors in the new markets we intend to enter. There is no guarantee that there will be an adequate supply of such partners. A shortage in the number of qualified contractors may impact the viability of the business plan, increase risks around the quality of works performed and increase costs if outside contractors are brought into a new market.

 

In addition, our network expansion plan relies on our site development efforts, and our business is exposed to risks associated with receiving site control and access necessary for the construction of the charging station and operation of the charging equipment, electrical interconnection and power supply at identified locations sufficient to host chargers and on a timely basis. We generally do not own the land at the charging sites and rely on the site licenses with hosts that convey the right to build, own, and operate the charging equipment on the site. We may not be able to renew the site licenses or retain site control. The process of establishing or extending site control and access could take longer or become more competitive. As the EV market grows, competition for premium sites may intensify, the power distribution grid may require upgrading, electrical interconnection with local utilities may become competitive, all of which may lead to delays in construction and/or commissioning. As a result, we may be exposed to increased interconnection costs and utility fees, as well as delays, which may slow the growth of our network expansion.

 

If we are unable to attract and retain key employees and hire qualified management, technical, engineering and sales and business development personnel, our ability to compete and successfully grow our business would be harmed.

 

Our success depends, in part, on our continuing ability to identify, hire, attract, train and develop and retain highly qualified personnel. The inability to do so effectively would adversely affect our business. Competition for employees can be intense and the ability to attract, hire and retain them depends on our ability to provide meaningful work at competitive compensation. We may not be able to attract, assimilate, develop or retain qualified personnel in the future, and failure to do so would adversely affect our business, including the execution of our global business strategy.

 

Failure to effectively expand our sales and marketing capabilities could harm our ability to increase our customer base and achieve broader market acceptance of our solutions.

 

Our ability to grow our customer base, achieve broader market acceptance, grow revenue, and achieve and sustain profitability will depend, to a significant extent, on our ability to effectively expand our sales and marketing operations and activities. We rely on our business development, sales and marketing teams to obtain new OEM and fleet customers and grow our retail business, and on the technology, site development, and project management personnel to build out and serve new sites. We plan to continue to expand in these functional areas but we may not be able to recruit and hire a sufficient number of competent personnel with requisite skills, technical expertise and experience, which may adversely affect our ability to expand our sales capabilities. The hiring process can be costly and time-consuming, and new employees may require significant training and time before they achieve full productivity. Recent hires and planned hires may not become as productive as quickly as anticipated, and we may be unable to hire or retain sufficient numbers of qualified individuals. Our ability to achieve significant revenue growth in the future will depend, in large part, on our success in recruiting, training, incentivizing and retaining a sufficient number of qualified personnel attaining desired productivity levels within a reasonable time. Our business will be harmed if investment in personnel related to business development and related company activities does not generate a significant increase in revenue.

 

17 

 

 

We may need to raise additional funds and these funds may not be available when needed or may be available only on unfavorable terms.

 

We may need to raise additional capital in the future to further scale our business and expand to additional markets. We may raise additional funds through the issuance of equity, equity-related or debt securities, through obtaining credit from government or financial institutions or through grant funding. We cannot be certain that additional funds or incentives will be available on favorable terms when required, or at all, or that we will be able to capture expected grant funding under various existing and new state and local programs in the future. If we cannot raise additional funds when needed, our financial condition, results of operations, business and prospects could be materially and adversely affected. If we raise funds through the issuance of debt securities or through loan arrangements, the terms of which could require significant interest payments, contain covenants that restrict our business, or other unfavorable terms. In addition, to the extent we raise funds through the sale of additional equity securities, our stockholders would experience additional dilution.

 

Many of our facilities are located in active earthquake zones or in areas susceptible to hurricanes, wildfires and other severe weather events. An earthquake, a wildfire, a major hurricane or other types of disasters or resource shortages, including public safety power shut-offs that have occurred and will continue to occur in California or other states, could disrupt and harm our operations and those of our customers.

 

Many of our facilities are located in California, an active earthquake zone, and Florida and Texas, areas susceptible to hurricanes. The occurrence of a natural disaster such as an earthquake, hurricane, drought, flood, fire (such as the recent extensive wildfires in California, Oregon and Colorado), localized extended outages of critical utilities (such as California’s public safety power shut-offs) or transportation systems, or any critical resource shortages could cause a significant interruption in our business, damage or destroy our facilities or inventory, and cause us to incur significant costs, any of which could harm our business, financial condition, and results of operations. The insurance we maintain against fires, earthquakes, hurricanes and other disasters and damage may not be adequate to cover losses in any particular case.

 

In addition, rolling public safety power shut offs in California or other states can affect throughput and/or user acceptance of EVs, as charging may be unavailable at the desired times, or at all during these events. These shut offs could also affect the ability of fleet operators to charge their EVs, which, for example, could adversely affect transportation schedules or any service level agreements to which either we or the fleet operator may be a party. If these events persist, the demand for EVs could decline, which would result in reduced demand for charging.

 

Further, severe natural disasters could affect our data centers in a temporal or longer-term fashion which would adversely affect our ability to operate our network.

 

Our charging stations are often located in areas that are publicly accessible and may be exposed to vandalism or misuse by customers or other individuals, which would increase our replacement and maintenance costs.

 

Our public chargers may also be exposed to vandalism or misuse by customers and other individuals, increasing wear and tear of the charging equipment. Such increased wear and tear could shorten the usable lifespan of the chargers and require us to increase our spending on replacement and maintenance costs.

 

We are dependent upon the availability of electricity at our current and future charging stations. Cost increases, delays and/or other restrictions on the availability of electricity would adversely affect our business and results of operations.

 

The operation and development of our charging stations is dependent upon the availability of electricity, which is beyond our control. Our charging stations are affected by problems accessing electricity sources, such as planned or unplanned power outages. In recent years, shortages of electricity have resulted in increased costs to users and interruptions in service. In particular, California has experienced rolling blackouts due to excessive demands on the electrical grid or as precautionary measures against the risk of wildfire. In the event of a power outage, we will be dependent on the utility company, and in some cases the site host, to restore power. Any prolonged power outage could adversely affect customer experience and our business and results of operations.

 

18 

 

 

Changes in utility electricity pricing or new and restrictive constructs from regulations applicable to pricing may adversely impact future operating results. For example, some jurisdictions may force us to adopt different pricing constructs such as switching from pricing on a per-minute basis to a per kWh basis, which may intensify competitive pressures. Further, utility rates may change in a way that adversely affects fast charging or in a way that may limit our ability to access certain beneficial rate schedules. In addition, utilities or other regulated entities with monopoly power may receive authority to provide charging services that result in an anti-competitive advantage relative to us and other private sector operators.

 

Some of our business objectives are dependent upon the purchase of renewable energy certificates and an increase in the cost of such certificates may adversely impact our business and results of operations.

 

As part of our business strategy, we market the electricity provided from our charging stations as 100% renewable. Therefore, we purchase various RECs in order to qualify the electricity we distribute through charging stations as renewable energy. Several states have passed renewable energy portfolio standards, which set a minimum percentage of energy that must be generated from renewable sources. These standards may require utilities or load serving entities to acquire RECs annually in order to demonstrate their compliance. Other regulations may also impact the supply of, and demand for, such RECs. While higher renewable energy portfolio standards may also increase the amount of renewable energy available, we cannot predict the impact such regulations may have on the price or availability of RECs. If we are unable to purchase a sufficient amount of RECs, we may be unable to achieve this objective, which may negatively impact our reputation in the marketplace. If the cost of RECs increase, we may be unable to fully pass the higher cost of RECs through to our customers, and increases in the price of RECs may decrease our results of operations.

 

Our success depends on our ability to develop and maintain relationships with automotive OEM and fleet partners.

 

The success of our business depends on our ability to develop and maintain relationships with OEMs, such as GM, Nissan and Tesla. These relationships help us access new customers and build brand awareness through co-marketing. We may also benefit from promotional programs sponsored by OEMs, such as prepaid charging credits. In some cases, our OEM partners have agreed to fund capital expenditures related to the build out of our charger network. For example, GM is providing payments for over 2,700 chargers over five years to help fund the accelerated build-out of our fast charger network. If we fails to maintain or develop relationships with OEMs, or if OEMs opt to partner with competitors rather than us, our revenues may decline and our business may suffer.

 

There can be no certainty that we will be able to identify and contract with suitable additional OEM and fleet partners. To the extent we do identify such partners, we will need to negotiate the terms of a commercial agreement with such partners. There can be no assurance that we will be able to negotiate commercially-attractive terms with additional OEM and fleet partners, if at all. We may also be limited in negotiating future commercial agreements by the provisions of our existing contracts such as “most-favored nations” clauses. For example, our contracts with GM and Nissan prohibit us from entering into agreements for similar programs on terms more favorable than the terms afforded to GM and Nissan under their respective agreements for a limited period of time. See “Business — Customers, Partnerships and Strategic Relationships.

 

In addition, we may be unable to maintain successful relationships with our OEM and fleet partners. Certain of our existing agreements require us to meet specified performance criteria. If we fail to meet such criteria, the agreements could be terminated and we may be obligated to pay significant penalties or other damages. If an agreement is terminated, any support payments pursuant to the contract would cease. Finally, if OEMs observe us failing to meet our specified performance criteria, our reputation may be damaged and it may become more difficult for us to establish new partnerships with OEMs.

 

Our revenue growth will depend in significant part on our ability to increase sales of our products and services to fleet operators including medium- and heavy-duty vehicle fleets and rideshare operators.

 

Our revenue growth will depend in significant part on our ability to increase sales of our products and services to fleet operators including medium- and heavy-duty vehicle fleets and rideshare operators. The electrification of fleets is an emerging market, and fleet operators may not adopt EVs on a widespread basis, operate on the timelines we anticipates or rely on public and/or private fast charging and our network. In addition to the factors affecting the growth of the EV market generally, transitioning to an EV fleet can be costly and capital intensive, which could result in slower than anticipated adoption. The sales cycle could also be longer for sales to fleet operators with formal procurement processes. Fleet operators may also require significant additional services and support, and if we are unable to provide such services and support, it may adversely affect our ability to attract additional fleet operators as customers. Any failure to attract and retain fleet operators as customers in the future would adversely affect our business and results of operations.

 

19 

 

 

If we fail to offer high-quality support to host sites and drivers, or fail to maintain high charger availability and strong user experience, our business and reputation will suffer.

 

Once EVgo charging stations are installed, host sites and drivers will rely on us to provide maintenance services to resolve any issues that might arise in the future. Rapid and high-quality customer and equipment support is important so drivers can receive reliable charging for their EVs. The importance of high-quality customer and equipment support will increase as we seek to expand our business and pursue new customers and geographies. If we do not quickly resolve issues and provide effective support, our ability to retain customers or sell additional products and services to existing customers could suffer and our brand and reputation could be harmed.

 

Computer malware, viruses, ransomware, hacking, phishing attacks and other network disruptions could result in security and privacy breaches, loss of proprietary information and interruption in service, which would harm our business.

 

Computer malware, viruses, physical or electronic break-ins and similar disruptions could lead to interruption and delays in our services and operations and loss, misuse or theft of data. Computer malware, viruses, ransomware, hacking, phishing attacks or denial of service, against online networks have become more prevalent and may occur on our systems. Any attempts by cyber attackers to disrupt our services or systems, if successful, could harm our business, introduce liability to data subjects, result in the misappropriation of funds, be expensive to remedy and damage our reputation or brand. Insurance may not be sufficient to cover significant expenses and losses related to cyber-attacks. Even with the security measures implemented by us, such as managed security services that are designed to detect and protect against cyber-attacks, and any additional measures we may implement or adopt in the future, our facilities and systems, and those of our third-party service providers, could be vulnerable to security breaches, computer viruses, lost or misplaced data, programming errors, scams, burglary, human errors, acts of vandalism, or other events. Efforts to prevent cyber attackers from entering computer systems are expensive to implement, and we may not be able to cause the implementation or enforcement of such preventions with respect to our third-party vendors. Though it is difficult to determine what, if any, harm may directly result from any specific interruption or attack, any failure to maintain performance, reliability, security and availability of systems and technical infrastructure may, in addition to other losses, harm our reputation, brand and ability to attract customers.

 

We have previously experienced, and may in the future experience, service disruptions, outages and other performance problems due to a variety of factors, including infrastructure changes, third-party service providers, human or software errors and capacity constraints. We rely on carrier networks to support reliable operation, management and maintenance of our charger network, charging session management, and driver authentication, and payment processing depend on reliable connections with wireless communications networks. As a result, our operations depend on a handful of public carriers and are exposed to disruptions related to network outages and other communications issues on the carrier networks. See “— Risks Related to Our Technology, Intellectual Property and Infrastructure — Interruptions, delays in service, communications outages or inability to increase capacity at third-party data center facilities could impair the use or functionality of our subscription services, harm our business and subject us to liability.” If our services are unavailable when users attempt to access them, they may seek other services, which could reduce demand for our solutions from customers.

 

There are several factors ranging from human error to data corruption that could materially impact the efficacy of any processes and procedures designed to enable us to recover from a disaster or catastrophe, including by lengthening the time services are partially or fully unavailable to customers and users. It may be difficult or impossible to perform some or all recovery steps and continue normal business operations due to the nature of a particular cyber-attack, disaster or catastrophe or other disruption, especially during peak periods, which could cause additional reputational damages, or loss of revenues, any of which would adversely affect our business and financial results.

 

20 

 

 

Growing our customer base depends upon the effective operation of our mobile applications with mobile operating systems, networks and standards that we do not control.

 

We are dependent on the interoperability of our mobile applications with popular mobile operating systems that we do not control, such as Google’s Android and Apple’s iOS, and any changes in such systems that degrade our products’ functionality or give preferential treatment to competitive products could adversely affect the usage of our applications on mobile devices. Additionally, in order to deliver high quality mobile products, it is important that our products work well with a range of mobile technologies, systems, networks and standards that we do not control. We may not be successful in developing relationships with key participants in the mobile industry or in developing products that operate effectively with these technologies, systems, networks or standards.

 

In addition, a significant portion of our software platform depends on our partnership with Driivz, an EV charging management platform. If for any reason we are no longer able to maintain that partnership, we may face a material challenge in efficiently migrating our software offering to a new partner.

 

While we to date have not made material acquisitions, should we pursue acquisitions in the future, we would be subject to risks associated with acquisitions.

 

We may acquire additional assets, products, technologies or businesses that are complementary to our existing business. The process of identifying and consummating acquisitions and the subsequent integration of new assets and businesses into our own business would require attention from management and could result in a diversion of resources from our existing business, which in turn could have an adverse effect on our operations. Acquired assets or businesses may not generate the expected financial results. Acquisitions could also result in the use of cash, potentially dilutive issuances of equity securities or securities convertible into equity securities, the occurrence of goodwill impairment charges, amortization expenses for other intangible assets and exposure to potential unknown liabilities of the acquired business. Moreover, the costs of identifying and consummating acquisitions may be significant. To date, we have no experience with material acquisitions and the integration of acquired assets, businesses and personnel. Failure to successfully identify, complete, manage and integrate acquisitions could materially and adversely affect our business, financial condition and results of operations.

 

Risks Related to the EV Market

 

Changes to fuel economy standards or the success of alternative fuels may negatively impact the EV market and thus the demand for our products and services.

 

As regulatory initiatives have required an increase in the mileage capabilities of cars and consumption of renewable transportation fuels, such as ethanol and biodiesel, consumer acceptance of EVs and other alternative vehicles has been increasing. However, the EV fueling model is different from gasoline and other fuel models, requiring behavior changes and education of businesses, consumers, regulatory bodies, local utilities, and other stakeholders. Further developments in, and improvements in affordability of, alternative technologies, such as renewable diesel, biodiesel, ethanol, hydrogen fuel cells or compressed natural gas, proliferation of hybrid powertrains involving such alternative fuels, or improvements in the fuel economy of the ICE vehicles, whether as the result of regulation or otherwise, may materially and adversely affect demand for EVs and EV charging stations in some market verticals. Regulatory bodies may also adopt rules that substantially favor certain alternatives to petroleum-based propulsion over others, which may not necessarily be EVs. Local jurisdictions may also impose restrictions on urban driving due to congestion, which may prioritize and accelerate micromobility trends and slow EV adoption growth. Finally, the currently-paused litigation between the state of California and the National Highway Transit Safety Administration (“NHTSA”) could impact California’s ability to set fuel economy standards that encourage the adoption of EVs, which are followed by many other states, should the Biden Administration not substantially modify NHTSA and EPA’s current rules on preemption in its pending reconsideration of these rules. If any of the above cause or contribute to automakers reducing the availability of EV models or cause or contribute to consumers or businesses to no longer purchase EVs or purchase fewer of them, it would materially and adversely affect our business, operating results, financial condition and prospects.

 

21 

 

 

The rideshare and commercial fleets may not electrify as quickly as expected and may not rely on public fast charging or on our network as much as expected. Future demand for EVs from the medium and heavy duty vehicle segment may not develop as anticipated or take longer to develop than expected.

 

The EV market is in the early stages of development and the medium- and heavy-duty vehicle segments, often particularly exposed to economic cycles, may not electrify as expected. The medium- and heavy-duty vehicle fleets that lend themselves well to electrification via EV powertrains are often linked to municipal and commercial budgets and may take longer to electrify as a result of budget or business constraints and administrative approvals. The mix of zero and low emission powertrains in certain vehicle classes and use cases in the medium- and heavy-duty sector may evolve less favorably for EV solutions due to future development of technologies and policy incentives that may favor existing diesel fuel, hybrid, natural gas or hydrogen fuel cell drivetrains. Medium- and heavy-duty vehicle OEMs may choose not to manufacture EVs in sufficient quantities or at all.

 

We derive a substantial portion of our revenue from the sale of regulatory credits. There are a number of factors beyond our control that could have a material adverse effect on our ability to generate such revenue.

 

In connection with the production, delivery, placement into service and ongoing operation of charging stations, we earn and expect to continue to earn various tradable regulatory credits, in particular California’s Low-Carbon Fuel Standard (“LCFS”) credits. We currently participate in California’s LCFS, Oregon’s LCFS, and California’s Fast Charging Infrastructure (“FCI”) programs. We sell these credits, and expect 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. However, there is no guarantee that such credits will continue to be available for sale at prices forecasted by us, or that regulatory restrictions would not be imposed on the proceeds from the sale of such credits in the future. See “— The EV market currently benefits from the availability of rebates, tax credits and other financial incentives from governments, utilities and others to offset the purchase or operating cost of EVs and EV charging stations. The reduction, modification or elimination of such benefits could adversely affect our financial results.” For example, LCFS credit pricing may fluctuate and may come under pressure if clean fuels, possibly including EVs, achieve a higher-than-expected market penetration. Further, we may not be able to market all LCFS credits, may have to sell LCFS credits at below projected prices or may not be able to sell LCFS credits at all. In addition, LCFS program rules may be revised in the future in ways that disadvantage certain types of clean fuels, including charging electricity used in EVs, or may not be extended further. The related FCI program provides incentives to owners of EV fast chargers put in place in 2019 and after and is designed to compensate for low utilization in the near term. However, there is no guarantee that the FCI program will not be terminated or amended or that the LCFS credits under the FCI program will continue to be available for sale.

 

Our LCFS projection is based on a fundamental price forecast produced by a reputable market consultant. However, the price for which the regulatory credits may be sold cannot be known with certainty at the time the activities that generate the credits are undertaken. As a result, we bear the risk in the pricing of the credits between the time that the activities that generate the credits are undertaken and the credits are monetized, which we may not be able to mitigate through hedging going forward. Our inability to generate revenue from the sale of regulatory credits could have a materially adverse effect on our future financial results.

 

The EV market currently benefits from the availability of rebates, tax credits and other financial incentives from governments, utilities and others to offset the purchase or operating cost of EVs and EV charging stations. The reduction, modification or elimination of such benefits could adversely affect our financial results.

 

The U.S. federal government and some state and local governments provide incentives to end users and purchasers of EVs and EV charging stations in the form of rebates, tax credits, and other financial incentives, such as payments for regulatory credits. The EV market relies on these governmental rebates, tax credits, and other financial incentives to significantly lower the effective price of EVs and EV charging stations. However, these incentives may expire on a particular date, end when the allocated funding is exhausted, or be reduced or terminated as a matter of regulatory or legislative policy. In particular, we have benefitted from the availability of federal tax credits under Section 30C of the Code, which effectively subsidize the cost of placing in service our charging stations. The credits under Section 30C of the Code are set to expire on December 31, 2021 and thus would not be available going forward unless extended. There can be no assurance that the credits under Section 30C of the Code will be extended, or if extended, will not be otherwise reduced. Any reduction in rebates, tax credits or other financial incentives, including the credit under Section 30C of the Code, could negatively affect the EV market and adversely impact our business operations and expansion potential. In addition, there is no assurance we will have the necessary tax attributes to utilize any such credits and may not be able to monetize them given the nascent state of the market for such credits or be able to monetize such credits on favorable terms. New tariffs and policies that could incentivize overbuilding of infrastructure may also have a negative impact on the economics of our stations. Furthermore, new tariffs and policy incentives could be put in place by the Biden Administration that favor equipment manufactured by or assembled at American factories, which may put our fast charging equipment vendors at a competitive disadvantage, including by increasing the cost or delaying the availability of charging equipment, by challenging or eliminating our ability to apply or qualify for grants and other government incentives, or by disqualifying us from the ability to compete for certain charging infrastructure buildout solicitations and programs, including those initiated by federal government agencies.

 

22 

 

 

As noted above, we also derive revenue from the sale of regulatory credits and expect that such revenue will increase as a percentage of total revenue over time. If the availability of these credits declines or the terms of the credits are modified, our ability to generate this revenue in the future could be adversely affected. For example, in September 2020, California Governor Gavin Newsom issued Executive Order N-79-20 (the “EO”), announcing a target for all in-state sales of new passenger cars and trucks to be zero-emission by 2035. While the EO calls for the support of EV infrastructure, the form of this support is unclear. If California or other jurisdictions choose to adopt regulatory mandates instead of establishing or continuing renewable energy credit regimes for EV infrastructure, our revenue from these credits could be adversely impacted. Similarly, new federal legislation, such as the 2020 Energy Bill, contemplates increased support for climate initiatives, which may include EVs; however, we cannot predict what form such incentives may take at this time. If we are not eligible for grants or other incentives under such programs, while our competitors are, it may adversely affect our competitiveness or results of operation.

 

Risks Related to Our Technology, Intellectual Property and Infrastructure

 

We may need to defend against intellectual property infringement or misappropriation claims, which may be time-consuming and expensive, and our business could be adversely affected.

 

From time to time, the holders of intellectual property rights may assert their rights and urge us to take licenses, and/or may bring suits alleging infringement or misappropriation of such rights. There can be no assurance that we will be able to mitigate the risk of potential suits or other legal demands by competitors or other third parties. Accordingly, we may consider entering into licensing agreements with respect to such rights, although no assurance can be given that such licenses can be obtained on acceptable terms or that litigation will not occur, and such licenses and associated litigation could significantly increase our operating expenses. In addition, if we are determined to have or believe there is a high likelihood that we have infringed upon or misappropriated a third party’s intellectual property rights, we may be required to cease making, selling or incorporating certain key components or intellectual property into the products and services we offer, to pay substantial damages and/or royalties, to redesign our products and services, and/or to establish and maintain alternative branding. In addition, to the extent that our customers and business partners become the subject of any allegation or claim regarding the infringement or misappropriation of intellectual property rights related to our products and services, we may be required to indemnify such customers and business partners. The scope of these indemnity obligations varies, but may, in some instances, include indemnification for damages and expenses, including attorneys’ fees. Even if we are not a party to any litigation between a customer or business partner and a third party relating to infringement by our products, an adverse outcome in any such litigation could make it more difficult for us to defend our products against intellectual property infringement claims in any subsequent litigation in which we are a named party. If we were required to take one or more such actions, our business, prospects, brand, operating results and financial condition could be materially and adversely affected. In addition, any litigation or claims, whether or not valid, could result in substantial costs, negative publicity, reputational harm and diversion of resources and management attention.

 

23 

 

 

Our business may be adversely affected if we are unable to protect our technology and intellectual property from unauthorized use by third parties.

 

Our success depends, at least in part, on our ability to protect our core technology and intellectual property. To accomplish this, we rely on, and plan to continue relying on, a combination of trade secrets (including know-how), employee and third-party nondisclosure agreements, copyright, trademarks, intellectual property licenses and other contractual rights to retain ownership of, and protect, our technology. In addition, we have one United States pending non-provisional patent application. Failure to adequately protect our technology and intellectual property could result in competitors offering similar products, potentially resulting in the loss of some of our competitive advantage and a decrease in revenue which would adversely affect our business, prospects, financial condition and operating results.

 

The measures we take to protect our technology intellectual property from unauthorized use by others may not be effective for various reasons, including the following:

 

·the patent application we have submitted may not result in the issuance of any patents;

 

·the scope of any issued patents that may result from the pending patent application may not be broad enough to protect proprietary rights;

 

·the costs associated with enforcing patents, trademarks, confidentiality and invention agreements or other intellectual property rights may make enforcement impracticable;

 

·current and future competitors may circumvent patents or independently develop similar inventions, trade secrets or works of authorship, such as software;

 

·know-how and other proprietary information we purport to hold as a trade secret may not qualify as a trade secret under applicable laws; and

 

·proprietary designs and technology embodied in our products may be discoverable by third parties through means that do not constitute violations of applicable laws.

 

Intellectual property and trade secret laws vary significantly throughout the world. Some foreign countries do not protect intellectual property rights to the same extent as do the laws of the United States. Further, policing the unauthorized use of our intellectual property in foreign jurisdictions may be costly, difficult or even impossible. Therefore, our intellectual property rights may not be as strong or as easily enforced outside of the United States.

 

Any issued patent which may result from the pending patent application may come to be considered “standards essential.” If this is the case, we may be required to license certain technology on “fair, reasonable and non-discriminatory” terms, decreasing revenue. Further, competitors, vendors, or customers may, in certain instances, be free to create variations or derivative works of our technology and intellectual property, and those derivative works may become directly competitive with our offerings. Finally, we may not be able to leverage, or obtain ownership of, all technology and intellectual property developed by our vendors in connection with design and manufacture of our products, thereby jeopardizing our ability to obtain a competitive advantage over our competitors.

 

The current lack of industry standards may lead to uncertainty, additional competition and further unexpected costs.

 

The EV industry is new and evolving as are the standards governing EV charging which have not had the benefit of time-tested use cases. These immature industry standards could result in future incompatibilities and issues that could require significant resources and or time to remedy. Utilities and other large market participants also mandate their own adoption of specifications that have not become widely adopted in the industry, may hinder innovation or slow new product or new feature introduction.

 

In addition, automobile manufacturers, such as Tesla, may choose to develop and promulgate their own proprietary charging standards and systems, which could lock out competition for EV charging stations, or to use their size and market position to influence the market, which could limit our market and reach to customers, negatively impacting our business.

 

Further, should regulatory bodies later impose a standard that is not compatible with our infrastructure or products, we may incur significant costs to adapt our business model to the new regulatory standard, which may require significant time and expense and, as a result, may have a material adverse effect on our revenues or results of operations.

 

24 

 

 

Our technology could have undetected defects, errors or bugs in hardware or software which could reduce market adoption, damage our reputation with current or prospective customers, and/or expose us to product liability and other claims that could materially and adversely affect our business.

 

We may be subject to claims that charging stations have malfunctioned and persons were injured or purported to be injured due to latent defects. Any insurance that we carry may not be sufficient or it may not apply to all situations. Similarly, to the extent that such malfunctions are related to components obtained from third-party vendors, such vendors may not assume responsibility for such malfunctions. Any of these events could adversely affect our brand, reputation, operating results or financial condition.

 

Our software platform is complex and includes a number of licensed third-party commercial and open-source software libraries. Our software may contain latent defects or errors that may be difficult to detect and remediate. We are continuing to evolve the features and functionality of our platform through updates and enhancements, and as we do, we may introduce additional defects or errors that may not be detected until after deployment to customers. In addition, if our products and services, including any updates or patches, are not implemented or used correctly or as intended, inadequate performance and disruptions in service may result.

 

Any defects or errors in product or services offerings, or the perception of such defects or errors, or other performance problems could result in any of the following, each of which could adversely affect our business and results of operations:

 

·expenditure of significant financial and product development resources, including recalls, in efforts to analyze, correct, eliminate or work around errors or defects;

 

·loss of existing or potential customers or partners;

 

·interruptions or delays in sales;

 

·equipment replacements;

 

·delayed or lost revenue;

 

·delay or failure to attain market acceptance;

 

·delay in the development or release of new functionality or improvements;

 

·negative publicity and reputational harm;

 

·sales credits or refunds;

 

·exposure of confidential or proprietary information;

 

·diversion of development and customer service resources;

 

·breach of warranty claims;

 

·legal claims under applicable laws, rules and regulations; and

 

·the expense and risk of litigation.

 

We also face the risk that any contractual protections we seek to include in our agreements with customers are rejected, not implemented uniformly or may not fully or effectively protect from claims by customers, reseller, business partners or other third parties. In addition, any insurance coverage or indemnification obligations of suppliers for our benefit may not adequately cover all such claims, or cover only a portion of such claims. A successful product liability, warranty, or other similar claim could have an adverse effect on our business, operating results, and financial condition. In addition, even claims that ultimately are unsuccessful could result in expenditure of funds in litigation, divert management’s time and other resources and cause reputational harm.

 

25 

 

 

Interruptions, delays in service, communications outages or inability to increase capacity at third-party data center facilities could impair the use or functionality of our subscription services, harm our business and subject us to liability.

 

We currently serve customers from third-party data center facilities operated by Amazon Web Services and Google as well as others. All our services are housed in third-party data centers operated in the United States, and we employ geographically distributed redundant, back-up data centers for all services. Any outage or failure of such data centers could negatively affect our product connectivity and performance. Our primary environments are operated by Google and Amazon, and any interruptions of these primary and backup data centers could negatively affect our product connectivity and performance. Furthermore, we depend on connectivity from our charging stations to our data centers through cellular service and virtual private networking providers, such as AT&T and Verizon. Any incident affecting a data center facility’s or cellular and/or virtual private networking services provider’s infrastructure or operations, whether caused by fire, flood, storm, earthquake, power loss, telecommunications failures, breach of security protocols, computer viruses and disabling devices, failure of access control mechanisms, natural disasters, war, criminal act, military actions, terrorist attacks and other similar events could negatively affect the use, functionality or availability of our services.

 

Any damage to, or failure of, our systems, or those of our third-party providers, could interrupt or hinder the use or functionality of our services. Impairment of or interruptions in our services may reduce revenue, subject us to claims and litigation, cause customers to terminate their subscriptions, and adversely affect renewal rates and our ability to attract new customers. Our business will also be harmed if customers and potential customers believe our products and services are unreliable.

 

The EV charging market is characterized by rapid technological change, which requires us to continue to develop new products and product innovations. Any delays in such development could adversely affect market adoption of our products and financial results.

 

Continuing technological changes in battery and other EV technologies could adversely affect adoption of current EV charging technology, continuing and increasing reliance on EV charging infrastructure and/or the use of our products and services. Our future success will depend in part upon our ability to develop and introduce a variety of new capabilities and innovations to our existing product offerings, as well as introduce a variety of new product offerings to address the changing needs of the EV charging market.

 

As EV technologies change, we may need to upgrade or adapt our charging station technology and introduce new products and services in order to serve vehicles that have the latest technology, in particular battery technology, which could involve substantial costs. Even if we are able to keep pace with changes in technology and develop new products and services, our research and development expenses could increase, our gross margins could be adversely affected in some periods and our prior products could become obsolete more quickly than expected.

 

We cannot guarantee that any new products will be released in a timely manner, or at all, or achieve market acceptance. Delays in delivering new products that meet customer requirements could damage our relationships with customers and lead them to seek alternative products or services. Delays in introducing products and innovations or the failure to offer innovative products or services at competitive prices may cause existing and potential customers to use our competitors’ products or services.

 

If we are unable to devote adequate resources to develop products or cannot otherwise successfully develop products or services that meet customer requirements on a timely basis or that remain competitive with technological alternatives, our products and services could lose market share, our revenue will decline, we may experience higher operating losses and our business and prospects will be adversely affected.

 

26 

 

 

We expect to incur research and development costs and devote significant resources to developing new products, which could significantly reduce our profitability and may never result in revenue to us.

 

Our future growth depends on penetrating new markets, adapting existing products to new applications and customer requirements, and introducing new products that achieve market acceptance. We plan to incur significant research and development costs in the future as part of our efforts to design, develop, manufacture and introduce new products and enhance existing products. Further, our research and development program may not produce successful results, and our new products may not achieve market acceptance, create additional revenue or become profitable.

 

We may be unable to leverage customer data in all geographic locations, and this limitation may impact research and development operations.

 

We rely on data collected through charging stations or our mobile application. We use this data in connection with the research, development and analysis of our technologies, creating and delivering value-add customer services, and in assessing future charger locations as well as charging station capacities. Our inability to obtain necessary rights to use this data or freely transfer this data could result in delays or otherwise negatively impact our research and development and expansion efforts and limit our ability to derive revenues from value-add customer services. For instance, consumer privacy regulations may limit our ability to make intelligent, data driven business decisions conduct microtargeting marketing strategy or provide microtargeting based offering to EV drivers.

 

Financial, Tax and Accounting-Related Risks

 

Our financial condition and results of operations are likely to fluctuate on a quarterly basis in future periods, which could cause our results for a particular period to fall below expectations, resulting in a decline in the price of our company’s common stock.

 

Our financial condition and results of operations have fluctuated in the past and may continue to fluctuate in the future due to a variety of factors, many of which are beyond our control.

 

In addition to the other risks described herein, the following factors could also cause our financial condition and results of operations to fluctuate on a quarterly basis:

 

·the timing and volume of new sales;

 

·fluctuations in service costs, particularly due to unexpected costs of servicing and maintaining charging stations, changes in utility tariffs affecting costs of electricity, increases in property taxes and expenses related to permits, changes in dynamics with site-host partners that may result in higher site-license fees and unexpected increases in third-party software costs;

 

·the timing of new charger installations and new product rollouts;

 

·weaker than anticipated demand for DC fast charging, whether due to changes in government incentives and policies or due to other conditions;

 

·fluctuations in sales and marketing, business development or research and development expenses;

 

·supply chain interruptions and manufacturing or delivery delays;

 

·the timing and availability of new products relative to customers’ and investors’ expectations;

 

·the length of the installation cycle for a particular location or market;

 

·the timing of recognition of any cash received from GM, Nissan or other OEM partners as revenue;

 

·the impact of COVID-19 on our workforce, or those of our customers, suppliers, vendors or business partners;

 

27 

 

 

·disruptions in sales, production, service or other business activities or our inability to attract and retain qualified personnel;

 

·unanticipated changes in federal, state, local, or foreign government incentive programs, which can affect demand for EVs;

 

·the potential adoption of time-of-day or time-of-use rates by local utilities, which may reduce our margins; and

 

·seasonal fluctuations in driving patterns.

 

Fluctuations in operating results and cash flow could, among other things, give rise to short-term liquidity issues. In addition, revenue, and other operating results may fall short of the expectations of investors and financial analysts, which could have an adverse effect on the price of the common stock.

 

We have identified material weaknesses in our internal control over financial reporting. If we are unable to remediate these material weaknesses, or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal control over financial reporting, this may result in material misstatements of our consolidated financial statements or cause us to fail to meet our periodic reporting obligations.

 

As a public company, we are required to provide management’s attestation on internal control over financial reporting. Management may not be able to effectively and timely implement controls and procedures that adequately respond to the increased regulatory compliance and reporting requirements that will be applicable after the Business Combination. If we are not able to implement the additional requirements of Section 404(a) of the Sarbanes-Oxley Act in a timely manner or with adequate compliance, we may not be able to assess whether our internal control over financial reporting is effective, which may subject us to adverse regulatory consequences and could harm investor confidence.

 

In connection with the preparation and review of our unaudited consolidated financial statements as of March 31, 2021 and for the three months ended March 31, 2021 and 2020 and preparation and audit of our audited consolidated financial statements as of and for the years December 31, 2020 and 2019, material weaknesses were identified in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

 

We did not design or maintain an effective control environment commensurate with our financial reporting requirements. Specifically, material weaknesses were identified with respect to segregation of duties and review; account reconciliations, preparation of supporting documentation and analysis; effective review of technical accounting matters; separate review and approval of journal entries; and review of key inputs for estimates of asset retirement obligations. These material weaknesses resulted in material misstatements that were corrected prior to the issuance of our condensed consolidated financial statements as of and for the years ended December 31, 2020 and 2019. The material weaknesses could result in future misstatements of account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

 

The misstatements related to the period as of and for the year ended December 31, 2019 were primarily related to the misclassification of charging equipment, the cut-off of payments resulting in the improper timing of cost of sales and expenses and in misstatements of accounts payable and prepaid expense, the accounting over asset retirement obligations resulting from inappropriate inputs used to calculate the liability, and the classification of certain contracts resulting in reclassifications between revenue, other income, cost of sales and depreciation. These adjustments that were corrected resulted in a net decrease to total assets of approximately $3.6 million, a net decrease to total liabilities of approximately $3.7 million, and an increase to members equity of approximately $0.1 million as of December 31, 2019 and an increase in net loss of approximately $0.6 million for the year ended December 31, 2019.

 

28 

 

 

In addition, there were material misstatements in our unaudited financial statements as of September 30, 2020 and for the period from January 16, 2020 through December 31, 2020 that were not corrected before the issuance of the September 30, 2020 financial statements. These material misstatements related to the incorrect accounting of a contingent transaction bonus that was erroneously included in the acquisition price in push-down accounting. As disclosed in Note 1 of the audited consolidated financial statements as of and for the year ended December 31, 2020 included elsewhere in this prospectus, these adjustments have now been corrected in such financial statements, and resulted in a decrease of approximately $4.2 million of goodwill and members’ equity as of January 16, 2020 and an increase in net loss of approximately $5.3 million. See Note 1 to EVgo’s audited consolidated financial statements for the year ended December 31, 2020 included elsewhere in this prospectus.

 

In order to address these identified material weaknesses, we have increased resources within our organization, including the expansion of our accounting, control and compliance functions (including but not limited to hiring of a Director of SEC Reporting, Vice President of Internal Audit, Director of Tax and Accounting Manager) to develop and implement continued improvements and enhancements to address the overall deficiencies that led to the material weaknesses. These additions will enable us to address the material weaknesses that were identified. We are in the process of documenting existing, and implementing additional, internal controls over financial reporting. Additionally, we have engaged external consultants to assist with documentation of our existing internal controls over financial reporting and identification of control gaps, including the existing material weaknesses, to be remediated.

 

As new personnel are integrated and processes and controls are updated, the identification of additional remediation opportunities is anticipated. Finally, additional training programs are being implemented for the finance and accounting staff related to the requirements of being a public company and internal controls over financial reporting.

 

In order to maintain and improve the effectiveness of our internal control over financial reporting, we have expended, and anticipate that we will continue to expend, significant resources, including accounting-related costs and significant management oversight.

 

In addition, our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting until after we are no longer an “emerging growth company” as defined in the JOBS Act. In the event that a management assessment of internal control over financial reporting is required to be included in the Annual Report on Form 10-K for the year ending December 31, 2021, we do not believe it will be possible to conduct a management assessment of internal control over financial reporting for such period because the business combination will not close earlier than the second quarter of 2021. In these circumstances, SEC rules permit EVgo to exclude a management’s report on internal control over financial reporting from its Annual Report on Form 10-K for such period. As a result, EVgo does not anticipate including a management assessment or obtaining an independent audit of its internal control over financial reporting until its Annual Report on Form 10-K for the year ending December 31, 2022. At such time, EVgo’s independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which its internal control over financial reporting is documented, designed or operating. Any failure to maintain effective disclosure controls and internal control over financial reporting could adversely affect the business and operating results after the Business Combination and could cause a decline in the price of the combined company’s Class A Common Stock.

 

Changes to applicable U.S. tax laws and regulations or exposure to additional income tax liabilities could affect our and OpCo’s business and future profitability.

 

We have no material assets other than our indirect interest in OpCo, which holds, directly or indirectly, all of the operating assets of the EVgo business. OpCo generally will not be subject to U.S. federal income tax, but may be subject to certain U.S. state and local and non-U.S. taxes. We are a U.S. corporation that will be subject to U.S. corporate income tax on our worldwide operations, including our share of income of OpCo. Moreover, our operations and customers are located in the United States, and as a result, we and OpCo are subject to various U.S. federal, state and local taxes. New U.S. laws and policy relating to taxes may have an adverse effect on our business and future profitability. Further, existing U.S. tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us or OpCo.

 

29 

 

 

For example, on December 22, 2017, legislation sometimes known as the Tax Cuts and Jobs Act (the “TCJA”), was signed into law making significant changes to the Code, and certain provisions of the TCJA may adversely affect us or OpCo. In particular, sweeping changes were made to the U.S. taxation of foreign operations. Changes include, but are not limited to, a permanent reduction to the corporate income tax rate, limiting interest deductions, a reduction to the maximum deduction allowed for net operating losses generated in tax years after December 31, 2017, the elimination of carrybacks of net operating losses, adopting elements of a territorial tax system, assessing a repatriation tax or “toll-charge” on undistributed earnings and profits of U.S.-owned foreign corporations, and introducing certain anti-base erosion provisions, including a new minimum tax on global intangible low-taxed income and base erosion and anti-abuse tax. The TCJA could be subject to potential amendments and technical corrections, and is subject to interpretations and implementing regulations by the Treasury and the Internal Revenue Service (the “IRS”), any of which could mitigate or increase certain adverse effects of the legislation.

 

In addition to the impact of the TCJA on our federal income taxes, the TCJA may adversely affect our or OpCo’s taxation in other jurisdictions, including with respect to state income taxes as state legislatures may not have had sufficient time to respond to the TCJA. Accordingly, there is uncertainty as to how the laws will apply in various state jurisdictions. Additionally, other foreign governing bodies may enact changes to their tax laws in reaction to the TCJA that could result in changes to our global tax profile and materially adversely affect our business and future profitability.

 

President Joe Biden has set forth several tax proposals that would, if enacted, make significant changes to U.S. tax laws (including provisions enacted pursuant to the TCJA). Such proposals include, but are not limited to, (i) an increase in the U.S. income tax rate applicable to corporations (including us) from 21% to 28%, (ii) an increase in the maximum U.S. federal income tax rate applicable to individuals and (iii) an increase in the U.S. federal income tax rate for long term capital gain for certain taxpayers with income in excess of a threshold amount.  Congress may consider, and could include, some or all of these proposals in connection with tax reform to be undertaken by the current administration.  It is unclear whether these or similar changes will be enacted and, if enacted, how soon any such changes could take effect. The passage of any legislation as a result of these proposals and other similar changes in U.S. federal income tax laws could adversely affect our or OpCo’s business and future profitability.

 

Additionally, on December 27, 2020, the Consolidated Appropriations Act was signed into law. As a result of this legislation, several tax credits and incentives relating to the renewable energy sector, including tax credits under Section 30C of the Code, were extended, among other changes to U.S. tax laws. The lapsing of such tax credits and incentives could negatively affect our or OpCo’s business and future profitability.

 

As a result of plans to expand our business operations, including to jurisdictions in which tax laws may not be favorable, our and OpCo’s obligations may change or fluctuate, become significantly more complex or become subject to greater risk of examination by taxing authorities, any of which could adversely affect our or OpCo’s after-tax profitability and financial results.

 

In the event our operating business expands domestically or internationally, our and OpCo’s effective tax rates may fluctuate widely in the future. Future effective tax rates could be affected by operating losses in jurisdictions where no tax benefit can be recorded under U.S. GAAP, changes in deferred tax assets and liabilities, or changes in tax laws. Additionally, we and OpCo may be subject to tax on more than one-hundred percent of our income as a result of such income being subject to tax in multiple state, local or non U.S. jurisdictions. Factors that could materially affect our and OpCo’s future effective tax rates include, but are not limited to: (a) changes in tax laws or the regulatory environment, (b) changes in accounting and tax standards or practices, (c) changes in the composition of operating income by tax jurisdiction and (d) pre-tax operating results of our business.

 

Additionally, we and OpCo may be subject to significant income, withholding and other tax obligations in the United States and may become subject to taxation in numerous additional state, local and non-U.S. jurisdictions with respect to income, operations and subsidiaries related to those jurisdictions. Our and OpCo’s after-tax profitability and financial results could be subject to volatility or be affected by numerous factors, including (a) the availability of tax deductions, credits, exemptions, refunds and other benefits to reduce tax liabilities, (b) changes in the valuation of deferred tax assets and liabilities, if any, (c) the expected timing and amount of the release of any tax valuation allowances, (d) the tax treatment of stock-based compensation, (e) changes in the relative amount of earnings subject to tax in the various jurisdictions, (f) the potential business expansion into, or otherwise becoming subject to tax in, additional jurisdictions, (g) changes to existing intercompany structure (and any costs related thereto) and business operations, (h) the extent of intercompany transactions and the extent to which taxing authorities in relevant jurisdictions respect those intercompany transactions and (i) the ability to structure business operations in an efficient and competitive manner. Outcomes from audits or examinations by taxing authorities could have an adverse effect on our or OpCo’s after-tax profitability and financial condition. Additionally, the IRS and several foreign tax authorities have increasingly focused attention on intercompany transfer pricing with respect to sales of products and services and the use of intangibles. Tax authorities could disagree with our or OpCo’s intercompany charges, cross-jurisdictional transfer pricing or other matters and assess additional taxes. If we or OpCo, as applicable, do not prevail in any such disagreements, our profitability may be adversely affected.

 

30 

 

 

Our or OpCo’s after-tax profitability and financial results may also be adversely affected by changes in relevant tax laws and tax rates, treaties, regulations, administrative practices and principles, judicial decisions and interpretations thereof, in each case, possibly with retroactive effect.

 

Risks Related to our “Up-C” Structure and the Tax Receivable Agreement

 

Holdings owns the majority of our voting stock and therefore has the right to appoint a majority of our board members, and its interests may conflict with those of other stockholders.

 

Holdings owns the majority of our voting stock and is therefore entitled to appoint the majority of the Board. As a result, Holdings is able to substantially influence matters requiring our stockholder or board approval, including the election of directors, approval of any of our potential acquisitions, changes to our organizational documents and significant corporate transactions. This concentration of ownership makes it unlikely that any other holder or group of holders of Class A Common Stock will be able to affect the way we are managed or the direction of our business. The interests of Holdings with respect to matters potentially or actually involving or affecting us, such as future acquisitions, financings and other corporate opportunities and attempts to acquire us, may conflict with the interests of our other stockholders.

 

For example, Holdings may have different tax positions from us, especially in light of the Tax Receivable Agreement, that could influence its decisions regarding whether and when to support the disposition of assets or the incurrence or refinancing of new or existing indebtedness, or the termination of the Tax Receivable Agreement and acceleration of our obligations thereunder. In addition, the determination of future tax reporting positions, the structuring of future transactions and the handling of any challenge by any taxing authority to our tax reporting positions may take into consideration tax or other considerations of Holdings, including the effect of such positions on our obligations under the Tax Receivable Agreement, which may differ from our considerations or the considerations of other stockholders. See “Certain Relationships and Related Transactions – Agreements Related to the Business Combination – Tax Receivable Agreement.”

 

Our only principal asset is our interest in SPAC Sub, which, in turn, holds only units issued by OpCo; accordingly, we depend on distributions from OpCo and SPAC Sub to pay taxes, make payments under the Tax Receivable Agreement and cover our corporate and other overhead expenses.

 

We are a holding company and have no material assets other than our ownership interest in SPAC Sub. SPAC Sub only holds OpCo Units, which at the time immediately following the Closing were equal to the number of shares of Class A Common Stock issued and outstanding after giving effect to the Business Combination and the PIPE. Neither we nor SPAC Sub have independent means of generating revenue or cash flow. To the extent OpCo has available cash and subject to the terms of any current or future debt instruments, the OpCo A&R LLC Agreement requires OpCo to make pro rata cash distributions to holders of OpCo Units, including SPAC Sub, in an amount sufficient to allow the Company Group to pay its taxes and to make payments under the Tax Receivable Agreement. We generally expect OpCo to fund such distributions out of available cash, and if payments under the Tax Receivable Agreement are accelerated, we generally expect to fund such accelerated payment out of the proceeds of the change of control transaction giving rise to such acceleration. When OpCo makes distributions, the holders of OpCo Units will be entitled to receive proportionate distributions based on their interests in OpCo at the time of such distribution. In addition, the OpCo A&R LLC Agreement requires OpCo to make non-pro rata payments to SPAC Sub to reimburse it for its corporate and other overhead expenses, which payments are not treated as distributions under the OpCo A&R LLC Agreement. To the extent that we need funds and OpCo or its subsidiaries are restricted from making such distributions or payments under applicable law or regulation or under the terms of any current or future financing arrangements, or are otherwise unable to provide such funds, our liquidity and financial condition could be materially adversely affected.

 

31 

 

 

Moreover, because we have no independent means of generating revenue, our ability to make tax payments and payments under the Tax Receivable Agreement is dependent on the ability of OpCo to make distributions to SPAC Sub in an amount sufficient to cover the Company Group’s tax obligations and obligations under the Tax Receivable Agreement. This ability, in turn, may depend on the ability of OpCo’s subsidiaries to make distributions to it. The ability of OpCo, its subsidiaries and other entities in which it directly or indirectly holds an equity interest to make such distributions will be subject to, among other things, (i) the applicable provisions of Delaware law (or other applicable jurisdiction) that may limit the amount of funds available for distribution and (ii) restrictions in relevant debt instruments issued by OpCo or its subsidiaries and other entities in which it directly or indirectly holds an equity interest. To the extent that we are unable to make payments under the Tax Receivable Agreement for any reason, such payments will be deferred and will accrue interest until paid.

 

We will be required to make payments under the Tax Receivable Agreement for certain tax benefits that we may claim, and the amounts of such payments could be significant.

 

In connection with the Business Combination, we entered into the Tax Receivable Agreement. This agreement generally provides for the payment by the Company Group to Holdings of 85% of the net cash savings, if any, in U.S. federal, state and local income tax and franchise tax (computed using simplifying assumptions to address the impact of state and local taxes) that Company Group actually realizes (or is deemed to realize in certain circumstances) in periods after the consummation of the Business Combination as a result of certain increases in tax basis available to the Company Group as a result of the Business Combination, the acquisition of OpCo Units pursuant to an exercise of the OpCo Unit Redemption Right or the Call Right (including any increases in tax basis relating to prior transfers of such OpCo Units that will be available to the Company Group as a result of its acquisition of such OpCo Units), and certain benefits attributable to imputed interest. The Company Group will retain the benefit of the remaining net cash savings, if any.

 

The term of the Tax Receivable Agreement commenced upon the consummation of the Business Combination and will continue until all tax benefits that are subject to the Tax Receivable Agreement have been utilized or expired, and all required payments are made, unless the Company Group exercises its right to terminate the Tax Receivable Agreement (or the Tax Receivable Agreement is terminated due to other circumstances, including the Company Group’s breach of a material obligation thereunder or certain mergers or other changes of control), and the Company Group makes the termination payment specified in the Tax Receivable Agreement. In addition, payments the Company Group makes under the Tax Receivable Agreement will be increased by any interest accrued from the due date (without extensions) of the corresponding tax return.

 

The payment obligations under the Tax Receivable Agreement are the Company Group’s obligations and not obligations of OpCo, and we expect that the payments the Company Group will be required to make under the Tax Receivable Agreement will be substantial. Estimating the amount and timing of the Company Group’s realization of tax benefits subject to the Tax Receivable Agreement is by its nature imprecise. The actual increases in tax basis covered by the Tax Receivable Agreement, as well as the amount and timing of the Company Group’s ability to use any deductions (or decreases in gain or increases in loss) arising from such increases in tax basis, are dependent upon future events, including but not limited to the timing of redemptions of OpCo Units, the price of Class A Common Stock at the time of each redemption, the extent to which such redemptions are taxable transactions, the amount of the redeeming member’s tax basis in its OpCo Units at the time of the relevant redemption, the depreciation and amortization periods that apply to the increase in tax basis, the amount, character, and timing of taxable income the Company Group generates in the future, the timing and amount of any earlier payments that the Company Group may have made under the Tax Receivable Agreement, the U.S. federal income tax rate then applicable, and the portion of the Company Group’s payments under the Tax Receivable Agreement that constitute imputed interest or give rise to depreciable or amortizable tax basis. Accordingly, estimating the amount and timing of payments that may become due under the Tax Receivable Agreement is also by its nature imprecise. For purposes of the Tax Receivable Agreement, net cash savings in tax generally are calculated by comparing the Company Group’s actual tax liability (determined by using the actual applicable U.S. federal income tax rate and an assumed combined state and local income tax rate) to the amount the Company Group would have been required to pay had it not been able to utilize any of the tax benefits subject to the Tax Receivable Agreement. Thus, the amount and timing of any payments under the Tax Receivable Agreement are also dependent upon significant future events, including those noted above in respect of estimating the amount and timing of the Company Group’s realization of tax benefits. Any distributions made by OpCo to the Company Group to enable the Company Group to make payments under the Tax Receivable Agreement, as well as any corresponding pro rata distributions made to the other holders of OpCo Units, could have an adverse impact on our liquidity.

 

32

 

 

Payments under the Tax Receivable Agreement will not be conditioned upon a holder of rights under the Tax Receivable Agreement having an ownership interest in us or OpCo. In addition, certain rights of the holders of OpCo Units (including the right to receive payments) under the Tax Receivable Agreement will be transferable in connection with transfers permitted under the OpCo A&R LLC Agreement of the corresponding OpCo Units or after the corresponding OpCo Units have been acquired pursuant to the OpCo Unit Redemption Right or Call Right. For additional information regarding the Tax Receivable Agreement, see “Certain Relationships and Related Party Transactions—Agreements Related to the Business Combination—Tax Receivable Agreement.”

 

In certain cases, payments under the Tax Receivable Agreement may be accelerated and/or significantly exceed the actual benefits, if any, the Company Group realizes in respect of the tax attributes subject to the Tax Receivable Agreement.

 

If we experience a change of control (as defined under the Tax Receivable Agreement, which includes certain mergers, asset sales and other forms of business combinations) or the Tax Receivable Agreement terminates early (at the Company Group’s election or as a result of the Company Group’s breach), the Company Group would be required to make an immediate payment equal to the present value of the anticipated future payments to be made by it under the Tax Receivable Agreement (determined by applying a discount rate equal to one-year LIBOR (or an agreed successor rate, if applicable) plus 100 basis points) and such early termination payment is expected to be substantial. The calculation of anticipated future payments will be based upon certain assumptions and deemed events set forth in the Tax Receivable Agreement, including (i) that the Company Group has sufficient taxable income on a current basis to fully utilize the tax benefits covered by the Tax Receivable Agreement, and (ii) that any OpCo Units (other than those held by the Company Group or its subsidiaries, other than OpCo) outstanding on the termination date or change of control date, as applicable, are deemed to be redeemed on such date. Any early termination payment may be made significantly in advance of, and may materially exceed, the actual realization, if any, of the future tax benefits to which the early termination payment relates.

 

If we experience a change of control (as defined under the Tax Receivable Agreement) or the Tax Receivable Agreement otherwise terminates early (at the Company Group’s election or as a result of the Company Group’s breach), the Company Group’s obligations under the Tax Receivable Agreement could have a substantial negative impact on our liquidity and could have the effect of delaying, deferring or preventing certain mergers, asset sales, or other forms of business combinations or changes of control. For example, if the Tax Receivable Agreement were terminated immediately after the consummation of the business combination, the estimated early termination payment would, in the aggregate, be approximately $490 million (calculated using a discount rate equal to one-year LIBOR (or an agreed successor rate, if applicable) plus 100 basis points, applied against an undiscounted liability of approximately $558 million calculated based on certain assumptions, including but not limited to a $10.00 per share trading price, a 21% U.S. federal corporate income tax rate and estimated applicable state and local income tax rates, no material change in U.S. federal income tax law, and that the Company Group will have sufficient taxable income on a current basis to utilize such estimated tax benefits). The foregoing number is merely an estimate and the actual payment could differ materially. If the Company Group’s obligation to make payments under the Tax Receivable Agreement is accelerated as a result of a change of control, we generally expect the accelerated payments due under the Tax Receivable Agreement to be funded out of the proceeds of the change of control transaction giving rise to such acceleration. However, the Company Group may be required to fund such payment from other sources, and as a result, any early termination of the Tax Receivable Agreement could have a substantial negative impact on our liquidity. We do not currently expect to cause an acceleration due to the Company Group’s breach, and we do not currently expect that the Company Group would elect to terminate the Tax Receivable Agreement early, except in cases where the early termination payment would not be material. There can be no assurance that the Company Group will be able to meet its obligations under the Tax Receivable Agreement. For additional information regarding the Tax Receivable Agreement, see “Certain Relationships and Related Party Transactions—Agreements Related to the Business Combination—Tax Receivable Agreement.”

 

33

 

 

If the Company Group’s payment obligations under the Tax Receivable Agreement are accelerated upon certain mergers, other forms of business combinations or other changes of control, the consideration payable to holders of Class A common stock could be substantially reduced.

 

If we experience a change of control (as defined under the Tax Receivable Agreement, which includes certain mergers, asset sales and other forms of business combinations), then the Company Group’s obligations under the Tax Receivable Agreement would be based upon certain assumptions and deemed events set forth in the Tax Receivable Agreement, and in such situations, payments under the Tax Receivable Agreement may be significantly in advance of, and may materially exceed, the actual realization, if any, of the future tax benefits to which the payment relates. As a result of the Company Group’s payment obligations under the Tax Receivable Agreement, holders of Class A common stock could receive substantially less consideration in connection with a change of control transaction than they would receive in the absence of such obligation. Further, the Company Group’s payment obligations under the Tax Receivable Agreement will not be conditioned upon holders of OpCo Units having a continued interest in us or OpCo. Accordingly, the interests of the holders of OpCo Units may conflict with those of the holders of Class A common stock. See “— In certain cases, payments under the Tax Receivable Agreement may be accelerated and/or significantly exceed the actual benefits, if any, the Company Group realizes in respect of the tax attributes subject to the Tax Receivable Agreement” and “Certain Relationships and Related Party Transactions—Agreements Related to the Business Combination—Tax Receivable Agreement.”

 

We will not be reimbursed for any payments made under the Tax Receivable Agreement in the event that any tax benefits are subsequently disallowed.

 

Payments under the Tax Receivable Agreement will be based on the tax reporting positions that the Company Group will determine, and the IRS or another tax authority may challenge all or part of the tax basis increases upon which payment under the Tax Receivable Agreement are based, as well as other related tax positions the Company Group takes, and a court could sustain such challenge. The holders of OpCo Units will not reimburse us for any payments previously made under the Tax Receivable Agreement if any tax benefits that have given rise to payments under the Tax Receivable Agreement are subsequently disallowed, except that excess payments made to any holder of OpCo Units will be netted against future payments that would otherwise be made to such holder of OpCo Units, if any, after the Company Group’s determination of such excess (which determination may be made a number of years following the initial payment and after future payments have been made). As a result, in such circumstances, the Company Group could make payments that are greater than its actual cash tax savings, if any, and may not be able to recoup those payments, which could materially adversely affect its liquidity.

 

If OpCo were to become a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, we and OpCo might be subject to potentially significant tax inefficiencies, and we would not be able to recover payments previously made by it under the Tax Receivable Agreement even if the corresponding tax benefits were subsequently determined to have been unavailable due to such status.

 

We intend to operate such that OpCo does not become a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes. A “publicly traded partnership” is a partnership the interests of which are traded on an established securities market or are readily tradable on a secondary market or the substantial equivalent thereof. Under certain circumstances, redemptions of OpCo Units pursuant to the OpCo Unit Redemption Right (or the Call Right) or other transfers of OpCo Units could cause OpCo to be treated as a publicly traded partnership. Applicable U.S. Treasury regulations provide for certain safe harbors from treatment as a publicly traded partnership, and we intend to operate such that redemptions or other transfers of OpCo Units qualify for one or more such safe harbors. For example, we intend to limit the number of holders of OpCo Units, and the OpCo A&R LLC Agreement, which was entered into in connection with the consummation of the Business Combination, provides for limitations on the ability of holders of OpCo Units to transfer their OpCo Units and provides SPAC Sub, as the managing member of OpCo, with the right to impose restrictions (in addition to those already in place) on the ability of holders of OpCo Units to redeem their OpCo Units pursuant to the OpCo Unit Redemption Right (or Call Right) to the extent we believe it is necessary to ensure that OpCo will continue to be treated as a partnership for U.S. federal income tax purposes.

 

34

 

 

If OpCo were to become a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, significant tax inefficiencies might result for us and OpCo, including as a result of the Company Group’s inability to file a consolidated U.S. federal income tax return with OpCo. In addition, the Company Group may not be able to realize tax benefits covered under the Tax Receivable Agreement, and the Company Group would not be able to recover any payments previously made by it under the Tax Receivable Agreement, even if the corresponding tax benefits (including any claimed increase in the tax basis of OpCo’s assets) were subsequently determined to have been unavailable.

 

Risks Related to Legal Matters and Regulations

 

Privacy concerns and laws, or other regulations, may adversely affect our business.

 

State and local governments and agencies in the jurisdictions in which we operate, and in which customers operate, have adopted, are considering adopting, or may adopt laws and regulations regarding the collection, use, storage, processing, and disclosure of information regarding consumers and other individuals, which could impact our ability to offer services in certain jurisdictions. Laws and regulations relating to the collection, use, disclosure, security, and other processing of individuals’ information can vary significantly from jurisdiction to jurisdiction. The costs of compliance with, and other burdens imposed by, laws, regulations, standards, and other obligations relating to privacy, data protection, and information security are significant. In addition, some companies, particularly larger enterprises, often will not contract with vendors that do not meet these rigorous standards. Accordingly, the failure, or perceived inability, to comply with these laws, regulations, standards, and other obligations may limit the use and adoption of our products and services, reduce overall demand, lead to regulatory investigations, litigation, and significant fines, penalties, or liabilities for actual or alleged noncompliance, or slow the pace at which we close sales transactions, any of which could harm our business. Moreover, if we or any of our employees or contractors fail or are believed to fail to adhere to appropriate practices regarding customers’ data, it may damage our reputation and brand.

 

Additionally, existing laws, regulations, standards, and other obligations may be interpreted in new and differing manners in the future, and may be inconsistent among jurisdictions. Future laws, regulations, standards, and other obligations, and changes in the interpretation of existing laws, regulations, standards, and other obligations could result in increased regulation, increased costs of compliance and penalties for non-compliance, and limitations on data collection, use, disclosure, and transfer for us and our customers. Further, California adopted the California Consumer Privacy Protection Act (“CCPA”) and the California State Attorney General has begun enforcement actions. Further, on November 3, 2020, California voters approved the California Privacy Rights Act (“CPRA”). Although we initiated a compliance program designed to comply with CCPA after consulting with outside privacy counsel, we remain exposed to ongoing legal risks related to the CCPA and the expansion of the CCPA under the CPRA, which becomes effective January 1, 2023. The costs of compliance with, and other burdens imposed by, laws and regulations relating to privacy, data protection, and information security that are applicable to the businesses of customers may adversely affect ability and willingness to process, handle, store, use, and transmit certain types of information, such as demographic and other personal information.

 

In addition to government activity, privacy advocacy groups, the technology industry and other industries have established or may establish various new, additional or different self-regulatory standards that may place additional burdens on technology companies. Customers may expect that we will meet voluntary certifications or adhere to other standards established by them or third parties. If we are unable to maintain these certifications or meet these standards, it could reduce demand for our solutions and adversely affect our business.

 

Existing and future environmental health and safety laws and regulations could result in increased compliance costs or additional operating costs or construction costs and restrictions. Failure to comply with such laws and regulations may result in substantial fines or other limitations that may adversely impact our financial results or results of operation.

 

We and our operations, as well as those of our contractors, suppliers and customers, are subject to certain environmental laws and regulations, including laws related to the use, handling, storage, transportation and disposal of hazardous substances and wastes as well as electronic wastes and hardware, whether hazardous or not. These laws may require us or others in our value chain to obtain permits and comply with procedures that impose various restrictions and obligations that may have material effects on our operations. If key permits and approvals cannot be obtained on acceptable terms, or if other operational requirements cannot be met in a manner satisfactory for our operations or on a timeline that meets our commercial obligations, it may adversely impact our business.

 

35

 

 

Environmental and health and safety laws and regulations can be complex and may be subject to change, such as through new requirements enacted at the supranational, national, sub-national, and/or local level or new or modified regulations that may be implemented under existing law. The nature and extent of any changes in these laws, rules, regulations and permits may be unpredictable and may have material effects on our business. Future legislation and regulations or changes in existing legislation and regulations, or interpretations thereof, including those relating to hardware manufacturing, electronic waste, or batteries, could cause additional expenditures, restrictions and delays in connection with our operations as well as other future projects, the extent of which cannot be predicted. For instance, California may adopt more stringent regulation for DC fast charging by 2024. Additionally, we could be regulated as a retail electric service provider in the future.

 

Further, we currently rely on third parties to ensure compliance with certain environmental laws, including those related to the disposal of hazardous and non-hazardous wastes. Any failure to properly handle or dispose of wastes, regardless of whether such failure is ours or our contractors, may result in liability under environmental laws, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) and state analogs, under which liability may be imposed without regard to fault or degree of contribution for the investigation and clean-up of contaminated sites, as well as impacts to human health and damages to natural resources. We may also generate or dispose of solid wastes, which may include hazardous wastes that are subject to the requirements of the Resource Conservation and Recovery Act (“RCRA”), and comparable state statutes. While RCRA regulates both solid and hazardous wastes, it imposes strict requirements on the generation, storage, treatment, transportation and disposal of hazardous wastes. Certain components of our charging stations may be excluded from RCRA’s hazardous waste regulations, provided certain requirements are met. However, if these components do not meet all of the established requirements for the exclusion, or if the requirements for the exclusion change, we may be required to treat such products as hazardous waste, which are subject to more rigorous and costly disposal requirements. Any such changes in the laws and regulations, or our ability to qualify the materials we use for exclusions under such laws and regulations, could adversely affect our operating expenses. Additionally, we may not be able to secure contracts with third parties to continue their key supply chain and disposal services for our business, which may result in increased costs for compliance with environmental laws and regulations.

 

Risks Related to our Securities

 

We may redeem your unexpired warrants prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless.

 

We have the ability to redeem outstanding warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of Class A Common Stock equals or exceeds $18.00 per share (as adjusted for adjustment to the number of shares issuable upon exercise or the exercise price of a warrant as described under the heading “Description of Securities — Redeemable Warrants — Public Warrants — Anti-Dilution Adjustments”) for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date on which we give proper notice of such redemption and provided certain other conditions are met. If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding warrants could force you (i) to exercise your warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (ii) to sell your warrants at the then-current market price when you might otherwise wish to hold your warrants or (iii) to accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of your warrants.

 

In addition, we have the ability to redeem the outstanding public warrants at any time after they become exercisable and prior to their expiration, at a price of $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that the closing price of our Class A Common Stock equals or exceeds $10.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant as described under the heading “Description of Securities — Redeemable Warrants — Public Warrants — Anti-Dilution Adjustments”) for any 20 trading days within a 30 trading-day period ending on the third trading day prior to proper notice of such redemption and provided that certain other conditions are met, including that holders will be able to exercise their warrants prior to redemption for a number of shares of Class A Common Stock determined based on the redemption date and the fair market value of shares of Class A Common Stock. Please see “Description of Securities — Redeemable Warrants — Public Warrants — Redemption of warrants when the price per share of Class A Common Stock equals or exceeds $10.00.” The value received upon exercise of the warrants (1) may be less than the value the holders would have received if they had exercised their warrants at a later time where the underlying share price is higher and (2) may not compensate the holders for the value of the warrants, including because the number of shares received is capped at 0.361 shares of Class A Common Stock per whole warrant (subject to adjustment) irrespective of the remaining life of the warrants.

 

36

 

 

None of the private placement warrants will be redeemable by us (except as set forth under “Description of Securities — Redeemable Warrants — Public Warrants — Redemption of warrants when the price per share of Class A Common Stock equals or exceeds $10.00”) so long as they are held by our sponsor or its permitted transferees.

 

The warrants are being accounted for as a warrant liability and are being recorded at fair value upon issuance with changes in fair value each period reported in earnings, which may have an adverse effect on the market price of the Class A Common Stock.

 

As described in our financial statements included in this prospectus, we are accounting for our issued and outstanding warrants as a warrant liability and are recording that liability at fair value upon issuance and are recording any subsequent changes in fair value as of the end of each period for which earnings are reported. The impact of changes in fair value on earnings may have an adverse effect on our balance sheet and statement of operations or the market price of the Class A Common Stock.

 

We are a “controlled company” within the meaning of the rules of Nasdaq and the rules of the SEC. As a result, we qualify for, and rely on, exemptions from certain corporate governance requirements that would otherwise provide protection to stockholders of other companies.

 

Immediately following the completion of the Business Combination, Holdings controlled a majority of the voting power of our outstanding common stock. As a result, we are a “controlled company” within the meaning of the corporate governance standards of Nasdaq. Under these rules, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including:

 

·the requirement that a majority of our board of directors consist of “independent directors” as defined under the rules of Nasdaq;

 

·the requirement that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities;

 

·the requirement that we have a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and

 

·the requirement for an annual performance evaluation of the compensation and nominating and corporate governance committees.

 

Following the Business Combination, we utilized some or all of these exemptions. As a result, our nominating and corporate governance committee and compensation committee may not consist entirely of independent directors and such committees will not be subject to annual performance evaluations. Accordingly, you may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of Nasdaq.

 

37

 

 

Provisions in our Charter and Delaware law may have the effect of discouraging lawsuits against our directors and officers.

 

Our Charter requires, unless we consent in writing to the selection of an alternative forum, that (a) the federal courts of the United States shall have exclusive jurisdiction to hear, settle and/or determine any dispute, controversy or claim arising under the federal securities laws; and (b) the Court of Chancery in the State of Delaware shall have exclusive jurisdiction to hear (i) any derivative action or proceeding brought on its behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee to us or our stockholders, (iii) any action asserting a claim against us, our directors, officers or employees arising pursuant to any provision of the DGCL or our Charter or our bylaws, or (iv) any action asserting a claim against us, our directors, officers or employees governed by the internal affairs doctrine, in each case subject to such Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein. If an action described in clause (b) above is brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service of process on such stockholder’s counsel. However, Section 22 of the Securities Act provides for concurrent federal and state court jurisdiction over actions under the Securities Act and the rules and regulations thereunder and there is uncertainty as to whether a court would enforce this provision as it relates to actions arising under the Securities Act.

 

Although we believe this provision benefits us by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies, a court may determine that this provision is unenforceable, and to the extent it is enforceable, the provision may have the effect of discouraging lawsuits against our directors and officers, although our stockholders will not be deemed to have waived our compliance with federal securities laws and the rules and regulations thereunder.

 

Provisions in our Charter may inhibit a takeover of the Company, which could limit the price investors might be willing to pay in the future for Class A Common Stock and could entrench management.

 

Our Charter authorizes the Board to issue one or more classes or series of preferred stock, the terms of which may be established and the shares of which may be issued without shareholder approval, and which may include super voting, special approval, dividend, repurchase rights, liquidation preferences or other rights or preferences superior to the rights of the holders of Class A Common Stock. The terms of one or more classes or series of preferred stock could adversely impact the value of the Class A Common Stock. Furthermore, if the Board elects to issue preferred stock, it could be more difficult for a third party to acquire us. For example, the Board may grant holders of preferred stock the right to elect some number of directors in all events or upon the occurrence of specified events or the right to veto specified transactions.

 

In addition, some provisions of our Charter could make it more difficult for a third party to acquire control of us, even if the change of control would be beneficial to the shareholders, including: (i) prohibiting us from engaging in any business combination with any interested shareholder for a period of three years following the time that the shareholder became an interested shareholder, subject to certain exceptions, (ii) establishing that provisions with regard to the nomination of candidates for election as directors are subject to the Nomination Agreement, (iii) providing that the authorized number of directors may be changed only by resolution of the board of directors and in any case subject to the Nomination Agreement, (iv) providing that all vacancies in the Board may, except as otherwise be required, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum, (v) providing that our Charter and bylaws may be amended, and directors may be removed, by the affirmative vote of the holders of at least 75% of the then outstanding voting stock after LS Power owns less than 30% of our voting capital stock, (vi) providing for the Board to be divided into three classes of directors, (vii) providing that the amended and restated bylaws can be amended by the Board, (viii) limitations on the ability of shareholders to call special meetings, (ix) limitations on the ability of shareholders to act by written consent, and (x) renouncing any reasonable expectancy interest that we have in, or right to be offered an opportunity to participate in, any corporate or business opportunities that are from time to time presented to LS Power, directors affiliated with LS Power, their respective affiliates and non-employee directors.

 

In addition, certain change of control events have the effect of accelerating the payments due under the Tax Receivable Agreement, which could result in a substantial, immediate lump-sum payment that could serve as a disincentive to a potential acquirer of the Company, please see “— In certain cases, payments under the Tax Receivable Agreement may be accelerated and/or significantly exceed the actual benefits, if any, the Company Group realizes in respect of the tax attributes subject to the Tax Receivable Agreement.

 

38

 

 

LS Power, non-employee directors and their affiliates will not be limited in their ability to compete with us, and the corporate opportunity provisions in our Charter could enable such persons to benefit from corporate opportunities that might otherwise be available to us.

 

Our Charter provides that (i) LS Power and any investment funds or entities controlled or advised by LS Power and (ii) non-employee directors and their affiliates (each, an “Identified Person”) would not be not restricted from owning assets or engaging in businesses that compete directly or indirectly with us. In particular, subject to the limitations of applicable law and our Charter, an Identified Person may among other things:

 

·engage in a corporate opportunity in the same or similar business activities or lines of business in which we or our affiliates has a reasonable expectancy interest or property right;

 

·purchase, sell or otherwise engage in transactions involving our securities or indebtedness or our affiliates, provided that such transactions do not violate our insider trading policies; and

 

·otherwise compete with us.

 

One or more of the Identified Persons may become aware, from time to time, of certain business opportunities (such as acquisition opportunities) and may direct such opportunities to other businesses in which they have invested, in which case we may not become aware of or otherwise have the ability to pursue such opportunity. Further, such businesses may choose to compete with us for these opportunities, possibly causing these opportunities to not be available to us or causing them to be more expensive for us to pursue. As a result, our renunciation of our interest and expectancy in any business opportunity that may be from time to time presented to an Identified Person, could adversely impact our business or prospects if attractive business opportunities are procured by such parties for their own benefit rather than for ours.

 

The market price of Class A Common Stock could be adversely affected by sales of substantial amounts of Class A Common Stock in the public or private markets or the perception in the public markets that these sales may occur, including sales by Holdings after the redemption of any OpCo Units or other large holders.

 

After the Business Combination, we had 68,750,000 shares of Class A Common Stock and 195,800,000 shares of Class B Common Stock outstanding. Pursuant to the terms of the Nomination Agreement, any shares of Class A Common Stock Holdings acquires through the redemption of any OpCo Units may not be transferred until the earlier of (i) 180 days after the Closing, and (ii) subsequent to the Closing, the date the volume weighted average price of our Class A Common Stock equals or exceeds $12.00 per share for any 20 trading days within any 30-trading day period or the date following the Closing on which we complete a liquidation, merger, capital stock exchange, reorganization or other similar transaction with a third party that results in all of our stockholders having the right to exchange their shares of Class A Common Stock for cash, securities or other property. In addition, we have agreed to provide registration rights to Holdings pursuant to the Registration Rights Agreement. Sales by Holdings after the redemption of any OpCo Units or other large holders of a substantial number of shares of Class A Common Stock in the public markets following the Business Combination, or the perception that such sales might occur, could have a material adverse effect on the price of the Class A Common Stock or could impair our ability to obtain capital through an offering of equity securities in the future. Alternatively, we may be required to undertake a future public or private offering of Class A Common Stock and use the net proceeds from such offering to purchase an equal number of OpCo Units from Holdings.

 

We cannot predict the size of any redemptions of OpCo Units or other future issuances of Class A Common Stock or securities convertible into Class A Common Stock or the effect, if any, that future issuances or sales of shares of Class A Common Stock will have on the market price of Class A Common Stock. Sales of substantial amounts of Class A Common Stock, or the perception that such sales could occur, may adversely affect prevailing market prices of Class A Common Stock.

 

Because we have no current plans to pay cash dividends on Class A Common Stock for the foreseeable future, you may not receive any return on investment unless you sell Class A Common Stock for a price greater than that which you paid for it.

 

We may retain future earnings, if any, for future operations, expansion and debt repayment and have no current plans to pay any cash dividends for the foreseeable future. Any decision to declare and pay dividends as a public company in the future will be made at the discretion of the Board and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions and other factors that the Board may deem relevant. In addition, our ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness we or our subsidiaries incur. As a result, you may not receive any return on an investment in Class A Common Stock unless you sell Class A Common Stock for a price greater than that which you paid for it.

 

39

 

 

If securities or industry analysts do not publish or cease publishing research or reports about us, our business, or our market, or if they change their recommendations regarding our securities adversely, the price and trading volume of our securities could decline.

 

The trading market for our securities will be influenced by the research and reports that industry or securities analysts may publish about us, our business, market or competitors. Securities and industry analysts do not currently, and may never, publish research on us. If no securities or industry analysts commence coverage of us, our share price and trading volume would likely be negatively impacted. If any of the analysts who may cover us change their recommendation regarding our shares of common stock adversely, or provide more favorable relative recommendations about our competitors, the price of our shares of common stock would likely decline. If any analyst who may cover us were to cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our share price or trading volume to decline.

 

40

 

 

Use of Proceeds

 

All of the Class A Common Stock and Warrants offered by the Selling Securityholders pursuant to this prospectus will be sold by the Selling Securityholders for their respective accounts. We will not receive any of the proceeds from these sales.

 

We will receive up to an aggregate of approximately $208.2 million from the exercise of the Warrants, assuming the exercise in full of all of the Warrants for cash. We expect to use the net proceeds from the exercise of the Warrants for general corporate purposes. We will have broad discretion over the use of proceeds from the exercise of the Warrants. There is no assurance that the holders of the Warrants will elect to exercise any or all of such Warrants. To the extent that the Warrants are exercised on a “cashless basis,” the amount of cash we would receive from the exercise of the Warrants will decrease.

 

41

 

 

Determination of Offering Price

 

The offering price of the shares of Class A Common Stock underlying the Private Warrants offered hereby is determined by reference to the exercise price of the Warrants of $11.50 per share. The Public Warrants are listed on the Nasdaq under the symbol “EVGOW.”

 

We cannot currently determine the price or prices at which shares of our Class A Common Stock or Warrants may be sold by the Selling Securityholders under this prospectus.

 

42

 

 

Market Information for Class A Common Stock and Dividend Policy

 

Market Information

 

Our Class A Common Stock and Public Warrants are currently listed on the Nasdaq under the symbols “EVGO” and “EVGOW,” respectively. Prior to the consummation of the Business Combination, our Class A Common Stock and our Public Warrants were listed on the NYSE under the symbols “CLII” and “CLII WS,” respectively. As of July 1, 2021 following the completion of the Business Combination, there were 153 holders of record of our Class A Common Stock and four holders of record of our Warrants. We currently do not intend to list the Private Warrants offered hereby on any stock exchange or stock market. Our Class B Common Stock is not registered and we do not currently intend to list the Class B Common Stock on any exchange or stock market.

 

Dividend Policy

 

We have not paid any cash dividends on our Class A Common Stock to date. We may retain future earnings, if any, for future operations, expansion and debt repayment and have no current plans to pay cash dividends for the foreseeable future. Any decision to declare and pay dividends in the future will be made at the discretion of the Board and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions and other factors that the Board may deem relevant. In addition, our ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness we or our subsidiaries incur. We do not anticipate declaring any cash dividends to holders of the Class A Common Stock in the foreseeable future.

 

Securities Authorized for Issuance under Equity Compensation Plans

 

As of March 31, 2021, we did not have any securities authorized for issuance under equity compensation plans. In connection with the Business Combination, our stockholders approved the EVgo Inc. 2021 Equity Incentive Plan (the “2021 Plan”).

 

We intend to file one or more registration statements on Form S-8 under the Securities Act to register the shares of Class A Common Stock issued or issuable under the 2021 Plan. Any such Form S-8 registration statement will become effective automatically upon filing. We expect that the initial registration statement on Form S-8 will cover shares of Class A Common Stock underlying the 2021 Plan. Once these shares are registered, they can be sold in the public market upon issuance, subject to applicable restrictions.

 

43

 

 

Selected Historical Consolidated Financial Information of EVgo

 

The following tables show selected historical financial information of EVgo for the periods and as of the dates indicated. Unless the context otherwise requires, all references in this section to “EVgo” for any period on or before January 15, 2020 refer to EVgo Services, LLC, as the predecessor company, and its consolidated subsidiaries, and for any period after January 15, 2020 refer to HoldCo as the successor company, and its consolidated subsidiaries.

 

The selected historical financial information of EVgo as of and for the years ended December 31, 2020 and 2019 was derived from the audited historical consolidated financial statements of EVgo included elsewhere in this prospectus. The selected historical financial information of EVgo as of and for the three months ended March 31, 2021 was derived from the unaudited condensed consolidated financial statements of EVgo included elsewhere in this prospectus.

 

The following table should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations of EVgo” and the historical financial statements and the notes and schedules related thereto, included elsewhere in this prospectus. The historical results presented below are not necessarily indicative of financial results to be achieved by the business following the Business Combination.

 

    Successor     Combined
Successor and
Predecessor
    Combined
Successor and
Predecessor
    Predecessor  
                         
    Three Months Ended
March 31,
    Year Ended
December 31,
 
             
    (unaudited)     (audited)  
    2021     2020     2020     2019  
                         
    (in thousands)     (in thousands)  
Revenue   $ 3,569     $ 3,788     $ 13,221     $ 15,070  
Revenue from related parties     561       65       1,355       2,452  
Total revenues     4,130       3,853       14,576       17,522  
Cost of sales     6,739       6,396       27,189       26,269  
Gross loss     (2,609 )     (2,543 )     (12,613 )     (8,747 )
General and administrative     11,073       6,860       31,766       24,576  
Transaction bonus           5,316       5,316        
Depreciation, amortization and accretion     2,510       2,107       9,505       1,627  
Operating loss     (16,192 )     (16,826 )     (59,200 )     (34,950 )
Interest expense (income) – related party     876       122       1,414        
Other income – related party           (342 )     (342 )     (10,232 )
Other expenses (income), net     (458 )     (1,796 )     (12,061 )     33  
Net loss   $ (16,610 )   $ (14,810 )   $ (48,211 )   $ (24,751 )

 
   March 31,   December 31, 
   2021   2020   2019 
   (unaudited)   (audited)   (audited) 
      (in thousands)    
Balance Sheet Data               
Total assets  $207,347   $182,141   $69,571 
Total liabilities  $133,990   $92,654   $55,178 
Total members’ equity  $73,357   $89,487   $14,393 

 

44

 

 

Unaudited Pro Forma Condensed Combined Financial Information

 

Unless otherwise indicated, defined terms included below shall have the same meaning as terms defined and included elsewhere in the prospectus.

 

Introduction

 

The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X. For each of the periods presented, the unaudited pro forma condensed combined financial information reflects the combination of historical financial information of EVgo and CRIS, adjusted to give effect to (1) CRIS’s initial public offering (which was completed on October 2, 2020, as further explained below), concurrent private placement of warrants to purchase its Class A common stock and payment of offering expenses and (2) the Business Combination, the PIPE, the payment of transaction costs associated therewith and the cash settlement of certain obligations in accordance with CRIS’s initial public offering (for purposes of this section, collectively, the “Transactions”). For purposes of this section, EVgo and CRIS are collectively referred to as the “Companies,” and the Companies, subsequent to the Business Combination, are referred to herein as the “Combined Company.”

 

The unaudited pro forma condensed combined financial information has been presented to provide relevant information necessary for an understanding of the Combined Company subsequent to completion of the Transactions. The unaudited pro forma condensed combined balance sheet, which has been presented for the Combined Company as of March 31, 2021, gives effect to the Transactions as if they were consummated on March 31, 2021, excluding the IPO (which was completed on October 2, 2020). The unaudited pro forma condensed combined statements of operations, which have been presented for the three months ended March 31, 2021 and the year ended December 31, 2020, give pro forma effect to the Transactions as if they had occurred on January 1, 2020. The unaudited pro forma condensed combined balance sheet does not purport to represent, and is not necessarily indicative of, what the actual financial condition of the Combined Company would have been had the Transactions taken place on March 31, 2021, nor is it indicative of the financial condition of the Combined Company as of any future date. The unaudited pro forma condensed combined statements of operations do not purport to represent, and are not necessarily indicative of, what the actual results of operations of the Combined Company would have been had the Transactions taken place on January 1, 2020, nor are they necessarily indicative of the results of operations of the Combined Company for any future period.

 

The unaudited pro forma condensed combined financial information was derived from, and should be read in conjunction with, the following historical financial statements and notes thereto, which are included in the prospectus and incorporated herein by reference:

 

·The unaudited historical condensed consolidated financial statements of EVgo as of and for the three months ended March 31, 2021 and the audited historical consolidated financial statements of EVgo as of and for the year ended December 31, 2020, which combine the predecessor and successor periods; and

 

·The unaudited historical condensed financial statements of CRIS as of and for the three months ended March 31, 2021 and the audited historical financial statements of CRIS as of December 31, 2020 and for the period from August 4, 2020 (inception) through December 31, 2020.

 

This unaudited pro forma condensed combined financial information should be read together with the sections of the prospectus entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of EVgo,” as well as other information included elsewhere in the prospectus, which is incorporated herein by reference.

 

Description of the Transactions

 

CRIS was formed as a blank check company incorporated as a Delaware corporation for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. CRIS completed its initial public offering of 23,000,000 units at an offering price of $10.00 per unit on October 2, 2020 (the “IPO”). Simultaneously with the closing of the IPO, CRIS completed a private placement of 6,600,000 warrants issued to the Sponsor, generating total proceeds of $6.6 million. A total of $230 million from the net proceeds of the IPO and the private placement were placed in the Trust Account and are invested in U.S. government treasury bills with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as amended, which invest only in direct U.S. government treasury obligations.

 

45

 

 

On July 1, 2021, CRIS and SPAC Sub consummated the Business Combination with the EVgo Parties, pursuant to the Business Combination Agreement amongst the parties dated as of January 21, 2021. With CRIS being the legal acquirer of EVgo, consideration for the Business Combination consisted of shares of CRIS’s common stock and Holdings OpCo Units issued in exchange for all outstanding equity of EVgo. However, for financial reporting purposes, EVgo is deemed the accounting acquirer and CRIS the acquired company. See the “—Accounting for the Business Combination.”

 

The following activities are reflected in the unaudited pro forma condensed combined financial statements below (either in the historical results or through pro forma adjustments):

 

·In connection with the IPO:

 

·The issuance by CRIS of 23,000,000 units at an offering price of $10.00 per unit, which includes 11,500,000 redeemable warrants (the “public warrants”), and receipt of proceeds therefrom;

 

·The issuance by CRIS of 6,600,000 redeemable private placement warrants to the Sponsor and receipt of proceeds therefrom;

 

·A total of $230 million of net proceeds from the IPO and the private placement placed in the Trust Account; and

 

·The payment of offering expenses and repayment of a note payable to fund offering expenses.

 

·In connection with the Closing:

 

·The issuance by CRIS of 40,000,000 PIPE Shares and receipt of an aggregate purchase price of $400 million in exchange;

 

·The payment of deferred legal fees, underwriting commissions, and other costs incurred by CRIS in connection with the IPO;

 

·The repayment or conversion to equity of certain of the Companies’ outstanding notes;

 

·The payment of transaction costs incurred by both EVgo and CRIS;

 

·The redemption of 13,230 shares of Class A common stock held by CRIS’s public stockholders (see additional information below);

 

·The conversion of CRIS’s founder shares to shares of Class A common stock on a one-for-one basis (see additional information below);

 

·In the SPAC Contribution, CRIS’s contribution of all of its assets to SPAC Sub, including but not limited to, (1)(A) the proceeds from the Trust Account (net of proceeds used to redeem any of CRIS’s publicly traded shares as described below and the payment of any deferred underwriting fees from the IPO), plus (B) the PIPE Proceeds, plus (C) any cash held by CRIS in any working capital or similar account, less (D) any transaction expenses of CRIS and the EVgo Parties; and (2) the Holdings Class B Shares equal to the 195,800,000 Holdings OpCo Units issued to Holdings under the Business Combination Agreement;

 

·Immediately following the SPAC Contribution, in the Holdings Contribution, Holdings’ contribution to OpCo of all of the issued and outstanding limited liability company interests of EVgo and, in connection therewith, OpCo issues to Holdings the Holdings OpCo Units;

 

·Immediately following the Holdings Contribution, in the SPAC Sub Transfer, SPAC Sub’s transfer to Holdings of the Holdings Class B Shares and the right to enter into the Tax Receivable Agreement;

 

46

 

 

·Immediately following the SPAC Sub Transfer, in the SPAC Sub Contribution, SPAC Sub’s contribution to OpCo of all of its remaining assets in exchange for the issuance by OpCo to SPAC Sub of the Issued OpCo Units; and

 

·Execution of the Tax Receivable Agreement.

 

Following the Closing, the Combined Company is organized in an “Up-C” structure in which the business of HoldCo and its subsidiaries are held by OpCo and continue to operate through the subsidiaries of HoldCo, and in which CRIS’s only direct assets consist of equity interests in SPAC Sub, which, in turn, immediately after the Closing, holds only the Issued OpCo Units. OpCo’s only direct assets consist of its equity interests in HoldCo. Immediately following the Closing, CRIS, through SPAC Sub, owns approximately 26.0% of the OpCo Units, and SPAC Sub controls OpCo as the sole managing member of OpCo in accordance with the terms of the OpCo A&R LLC Agreement. OpCo owns all of the equity interests in HoldCo. Upon the Closing, CRIS changed its name to “EVgo Inc.” Holdings holds the Holdings OpCo Units and the Holdings Class B Shares.

 

The amount of cash contributed by SPAC Sub to OpCo at the Closing was approximately $601.6 million. Net cash received after all direct and incremental costs related to the Business Combination were paid was approximately $573.4 million. Immediately following the Business Combination, Holdings held 195,800,000 OpCo Units, representing approximately 74.0% of the total outstanding OpCo Units, and an equal of number of Holdings Class B Shares.

 

Each OpCo Unit, together with one share of Class B common stock, is redeemable, subject to certain conditions, for either one share of Class A common stock, or, at OpCo’s election, the cash equivalent to the market value of one share of Class A common stock, pursuant to and in accordance with the terms of the OpCo A&R LLC Agreement.

 

At Closing, CRIS, SPAC Sub, Holdings and LS Power Equity Advisors, LLC, as agent, entered into the Tax Receivable Agreement. The Tax Receivable Agreement generally provides for the payment by the Company Group to certain holders of OpCo Units of 85% of the net cash savings, if any, in U.S. federal, state and local income tax and franchise tax that the Company Group actually realizes (or is deemed to realize in certain circumstances) in periods after the Business Combination as a result of (i) certain increases in tax basis that occur as a result of the Company Group’s acquisition (or deemed acquisition for U.S. federal income tax purposes) of all or a portion of such holder’s OpCo Units pursuant to the Business Combination or the exercise of the redemption or call rights set forth in the OpCo A&R LLC Agreement and (ii) imputed interest deemed to be paid by the Company Group as a result of, and additional tax basis arising from, any payments the Company Group makes under the Tax Receivable Agreement. The Company Group will retain the benefit of the remaining 15% of these net cash savings. If the Company Group elects to terminate the Tax Receivable Agreement early (or it is terminated early due to the Company Group’s failure to honor a material obligation thereunder or due to certain mergers, asset sales, other forms of business combinations or other changes of control), the Company Group is required to make an immediate payment equal to the present value of the anticipated future payments to be made by it under the Tax Receivable Agreement (based upon certain assumptions and deemed events set forth in the Tax Receivable Agreement).

 

Founder Shares

 

The 5,750,000 shares of Class B common stock held by the initial stockholders of CRIS (the “founder shares”) converted into Class A common stock on a one-for-one basis upon the consummation of the Business Combination, subject to the terms of the Sponsor Agreement as follows:

 

·75% (4,312,500) of the founder shares (the “Lock-Up Shares”) are subject to a lockup following the Closing until the earlier of (x) 12 months following Closing and (y) the date the Class A common stock trades above $12.00 for 20 out of 30 trading days commencing at least 150 days following the Closing; and

 

·25% (1,437,500) of the founder shares (the “Earnout Shares”) are subject to an earnout following the Closing as follows: (i) 50% will be forfeited if the Class A common stock fails to trade above $12.50 for 20 out of 30 trading days within the five years following Closing, and (ii) 50% will be forfeited if the Class A common stock fails to trade above $15.00 for 20 out of 30 trading days within the five years following Closing.

 

47

 

 

Based on the above, the founder shares are deemed to be issued and outstanding upon consummation of the Business Combination, including the Earnout Shares that are subject to potential forfeiture based upon triggering events that have not yet been achieved and thus subject to liability classification (see Note 4 to the unaudited pro forma condensed combined financial information).

 

Accounting for the Business Combination

 

Notwithstanding the legal form of the Business Combination pursuant to the Business Combination Agreement, the Business Combination was accounted for as a reverse recapitalization in accordance with U.S. GAAP.  Under this method of accounting, CRIS was treated as the acquired company for financial reporting purposes, and EVgo was treated as the accounting acquirer. In accordance with this accounting method, the Business Combination was treated as the equivalent of EVgo issuing stock for the net assets of CRIS, accompanied by a recapitalization. The net assets of CRIS were stated at historical cost, with no goodwill or other intangible assets recorded, and operations prior to the Business Combination are those of EVgo. EVgo has been deemed the accounting acquirer for purposes of the Business Combination based on an evaluation of the following facts and circumstances:

 

·EVgo’s existing equity holders hold a majority ownership interest in the Combined Company;

 

·EVgo’s existing senior management team comprise the senior management of the Combined Company;

 

·EVgo is the larger of the Companies based on historical assets and revenue and employee base; and

 

·EVgo’s operations comprise the ongoing operations of the Combined Company.

 

Following the Closing, the ownership of OpCo by Holdings is represented by non-controlling interests in the Combined Company’s financial statements. Holdings holds a corresponding share of Class B common stock for each OpCo Unit it holds. Each Holdings OpCo Unit can be redeemed for a share of Class A common stock or an approximately equivalent amount of cash and a corresponding share of Class B common stock will be cancelled. Since the cash redemption option is deemed to be outside the control of Combined Company, the non-controlling interests are included in temporary equity in the financial statements of the Combined Company. The non-controlling interests will decrease as OpCo Units are redeemed for shares of Class A common stock and corresponding shares of Class B common stock are cancelled.

 

Basis of Pro Forma Presentation

 

In accordance with Article 11 of Regulation S-X, pro forma adjustments to the historical combined financial information of EVgo and CRIS only give effect to events that are both factually supportable and directly attributable to the Transactions.  In addition, for purposes of preparation of the unaudited pro forma condensed combined statement of operations, adjustments have only been made to give effect to events that are expected to have a continuing impact on the results of the Combined Company following the Business Combination. The unaudited pro forma condensed combined financial information does not give effect to any synergies, operating efficiencies, or other benefits that may result from consummation of the Transactions. In addition, EVgo and CRIS have not had any historical relationship prior to the Business Combination. Therefore, preparation of the accompanying pro forma financial information did not require any adjustments related to such historical transactions.

 

Pursuant to CRIS’s former charter, CRIS’s public stockholders were offered the opportunity to redeem their shares of Class A common stock for cash upon consummation of the Business Combination, irrespective of whether they voted for or against the Business Combination. If a public stockholder properly exercised its right to redemption of its shares, CRIS redeemed each share for cash equal to the public stockholder’s pro rata portion of the Trust Account, calculated as of two business days prior to the consummation of the Business Combination.

 

The unaudited pro forma condensed combined financial information has been prepared to reflect the redemption of 13,230 shares of Class A common stock for $132,306.

 

The ownership percentages were 26.0% for controlling interests and 74.0% for non-controlling interests at the Closing, after the redemption of shares of Class A common stock.

 

48

 

 

There are no pro forma adjustments related to the outstanding public warrants and private placement warrants issued in connection with the IPO that are classified as warrant liability in CRIS’s historical balance sheet, as such securities continue to be classified as a liability after the Closing.

 

The following table provides a pro forma summary of the shares of the Combined Company’s common stock that would have been outstanding if the Transactions had occurred on March 31, 2021:

 

   Shares   % 
Stockholder          
EVgo rollover equity (1)   195,800,000    74%
CRIS’s Class A stockholders (2)   22,986,770    9%
PIPE Investors   40,000,000    15%
CRIS’s converted founder shares (3)   5,750,000    2%
Closing shares   264,536,770    100%

 

 

(1)Represents the shares of Class B common stock issued to Holdings to consummate the Business Combination (classified as non-controlling interests). The pro forma shares attributable to Holdings are calculated by dividing the rollover equity value of $1.985 billion by the per share price of $10.00.

 

(2)Represents the shares of Class A common stock held by CRIS’s public stockholders giving effect to the redemption of 13,230 shares of Class A common stock.

 

(3)Represents the shares of Class A common stock held by the initial stockholders of CRIS upon the one-for-one conversion of the founder shares into Class A common stock immediately prior to the consummation of the Business Combination, including the 1,437,500 Earnout Shares that are subject to potential forfeiture based upon triggering events that have not yet been achieved.

 

HoldCo considered the income tax impacts and related pro forma adjustments associated with the Transactions, pursuant to which the Combined Company is organized in an “Up-C” structure. A deferred tax asset (“DTA”) was contemplated given the historical net losses of EVgo. However, the DTA has a full valuation allowance, which reduces the balance to zero. Additionally, no tax liability is deemed to have been triggered upon consummation of the Business Combination, including related to the Tax Receivable Agreement.

 

The unaudited pro forma condensed combined financial information has been presented for illustrative purposes only. The pro forma adjustments represent estimates based on information available as of the date of the unaudited pro forma condensed combined financial information and are subject to change as additional information becomes available.  Assumptions and estimates underlying the pro forma adjustments set forth in the unaudited pro forma condensed combined financial information are described in the accompanying notes. The actual financial position and results of operations of the Combined Company subsequent to consummation of the Transactions may differ significantly from the pro forma amounts reflected herein.

 

49

 

 

PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF MARCH 31, 2021
(UNAUDITED)

 

   HISTORICAL   Pro Forma    Pro Forma  
   EVgo   CRIS   Adjustments   Combined 
Assets                
Current Assets                    
Cash and cash equivalents  $23,595,141   $385,272   $573,371,860(A)  $597,352,273 
Accounts receivable, net of allowance for doubtful accounts   1,989,712            1,989,712 
Accounts receivable - capital build   4,070,251             4,070,251 
Receivables from related parties   30,690             30,690 
Prepaid expenses and other current assets   9,257,111    420,646    (5,745,103)(I)   3,932,654 
Total current assets   38,942,905    805,918    567,626,757    607,375,580 
Property, plant, and equipment, net   79,111,432            79,111,432 
Intangible assets, net   65,808,871            65,808,871 
Goodwill   22,111,166            22,111,166 
Investments held in Trust Account       230,006,837    (230,006,837)(C)    
Other noncurrent assets   1,372,532            1,372,532 
Total Assets  $207,346,906   $230,812,755   $337,619,920   $775,779,581 
Liabilities                    
Current liabilities                    
Accounts payable  $2,835,469   $   $(98,817)(G)  $2,736,652 
Accrued expenses   12,858,511    2,216,885    (5,516,909)(F)(G)   9,558,487 
Deferred revenue, current   2,354,627            2,354,627 
Customer deposits   6,795,262            6,795,262 
Note payable - related party   57,040,167        (57,040,167)(J)    
Payables to related parties   1,521,178        (41,600)(G)   1,479,578 
Capital-build, NEDO buyout liability   660,935            660,935 
Earnout share liability           19,765,625(K)   19,765,625 
Other current liabilities   178,090            178,090 
Total current liabilities   84,244,239    2,216,885    (42,931,868)   43,529,256 
Deferred revenue, noncurrent   22,583,999            22,583,999 
Capital-build liability, excluding NEDO buyout liability   17,403,291            17,403,291 
Asset retirement obligations   9,758,847            9,758,847 
Warrant liability       61,855,000        61,855,000 
Deferred underwriting fee payable       8,050,000    (8,050,000)(D)    
Total liabilities   133,990,376    72,121,885    (50,981,868)   155,130,393 
Class A common stock subject to possible redemption (M)       153,690,860    (153,690,860)(L)    
Non-controlling interests - Class B (M)           459,478,720(L)   459,478,720 
Stockholders’ / Members’ Equity:                    
Members’ equity   136,348,127        (136,348,127)(L)    
Preferred stock (M)                
Class A common stock (M)       763    5,967(L)   6,730 
Founder shares - Class B (M)       575    (575)(L)    
Additional paid-in capital   1,408,631    50,223,046    109,532,061(L)   161,163,738 
Accumulated deficit   (64,400,228)   (45,224,374)   109,624,602(L)    
Total Stockholders’ Equity   73,356,530    5,000,010    82,813,928    161,170,468 
Total Liabilities, Non-controlling Interests and Stockholders’ Equity  $207,346,906   $230,812,755   $337,619,920   $775,779,581 

 

See the accompanying notes to the unaudited pro forma condensed combined financial statements.

 

50

 

 

PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2021
(UNAUDITED)

 

   HISTORICAL   Pro Forma    Pro Forma  
   EVgo   CRIS   Adjustments   Combined 
Revenue  $3,568,795   $   $   $3,568,795 
Revenue from related party   561,700            561,700 
Total revenue   4,130,495            4,130,495 
Cost of sales   6,739,547            6,739,547 
Gross loss   (2,609,052)           (2,609,052)
Operating expenses                    
General and administrative   11,072,993        (1,191,467)(a)   9,881,526 
Formation and operating costs       1,914,450    (1,914,450)(a)    
Depreciation, amortization, and accretion   2,510,228            2,510,228 
Total operating expenses   13,583,221    1,914,450    (3,105,917)   12,391,754 
Operating loss   (16,192,273)   (1,914,450)   3,105,917    (15,000,806)
Other (income) expense                    
Interest income, bank       (15)       (15)
Interest earned on investments held in Trust Account       (3,457)   3,457(b)    
Interest expense, related party   875,784        (875,784)(c)    
Change in fair value of warrant liability       29,011,000        29,011,000 
Other income, net   (457,888)           (457,888)
Total other (income) expense, net   417,896    29,007,528    (872,327)   28,553,097 
Net loss   (16,610,169)   (30,921,978)   3,978,244    (43,553,903)
Net loss attributable to non-controlling interests           (32,236,933)(d)   (32,236,933)
Net loss attributable to controlling interests  $(16,610,169)  $(30,921,978)  $36,215,177   $(11,316,970)
Pro forma net loss per share information:                    
Weighted average shares outstanding                  68,736,770(e)
Basic and diluted net loss per share                 $(0.16)(e)

 

See the accompanying notes to the unaudited pro forma condensed combined financial statements.

 

51

 

 

PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2020
(UNAUDITED)

 

   HISTORICAL   Pro Forma   Pro Forma 
   EVgo   CRIS*   Adjustments   Combined 
Revenue  $13,220,704   $   $   $13,220,704 
Revenue from related party   1,354,994            1,354,994 
Total revenue   14,575,698            14,575,698 
Cost of sales   27,188,926            27,188,926 
Gross loss   (12,613,228)           (12,613,228)
Operating expenses                    
General and administrative   31,765,955        (1,051,328)(a)   30,714,627 
Formation and operating costs       1,009,807    (1,009,807)(a)    
Transaction bonus   5,316,124            5,316,124 
Depreciation, amortization, and accretion   9,504,484            9,504,484 
Total operating expenses   46,586,563    1,009,807    (2,061,135)   45,535,235 
Operating loss   (59,199,791)   (1,009,807)   2,061,135    (58,148,463)
Other (income) expense                    
Interest income – bank       (31)       (31)
Interest earned on investments held in Trust Account       (3,380)   3,380(b)    
Interest expense - related party   1,414,383        (1,414,383)(c)    
Interest expense – other   90            90 
Change in fair value of warrant liability       13,296,000        13,296,000 
Other income - related party   (341,954)           (341,954)
Other income, net   (12,061,386)           (12,061,386)
Total other (income) expense, net   (10,988,867)   13,292,589    (1,411,003)   892,719 
Net loss   (48,210,924)   (14,302,396)   3,472,138    (59,041,182)
Net loss attributable to non-controlling interests           (43,700,025)(d)   (43,700,025)
Net loss attributable to controlling interests  $(48,210,924)  $(14,302,396)  $47,172,163   $(15,341,157)
Pro forma net loss per share information:                    
Weighted average shares outstanding                  68,736,770(e)
Basic and diluted net loss per share                 $(0.22)(e)

 

 

* Represents CRIS for the period from August 4, 2020 (inception) through December 31, 2020.

 

See the accompanying notes to the unaudited pro forma condensed combined financial statements.

 

52 

 

 

Notes to Unaudited Pro Forma Condensed Combined Financial Statements

 

NOTE 1 – BASIS OF PRO FORMA PRESENTATION

 

The Business Combination was accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, CRIS was treated as the acquired company for financial reporting purposes, and EVgo was treated as the accounting acquirer. In accordance with this accounting method, the Business Combination was treated as the equivalent of EVgo issuing stock for the net assets of CRIS, accompanied by a recapitalization. The net assets of CRIS are stated at historical cost, with no goodwill or intangible assets recorded. Operations prior to the Business Combination are those of EVgo.

 

The unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2021 and the year ended December 31, 2020 give pro forma effect to the Transactions as if they had occurred on January 1, 2020. The unaudited pro forma condensed combined balance sheet as of March 31, 2021 assumes that the Transactions were completed on March 31, 2021, excluding the IPO (which was completed on October 2, 2020).

 

The unaudited pro forma condensed combined financial information was derived from, and should be read in conjunction with, the following historical financial statements and notes thereto, which are included elsewhere in the prospectus and incorporated herein by reference:

 

·The unaudited historical consolidated financial statements of EVgo as of and for the three months ended March 31, 2021 and the audited historical consolidated financial statements of EVgo as of and for the year ended December 31, 2020, which combine the predecessor and successor periods; and

 

·The unaudited historical condensed financial statements of CRIS as of and for the three months ended March 31, 2021 and the audited historical financial statements of CRIS as of December 31, 2020 and for the period from August 4, 2020 (inception) through December 31, 2020.

 

Management has made significant estimates and assumptions in its determination of the pro forma adjustments. The pro forma adjustments, which are described in the accompanying notes, may be revised as additional information becomes available and is evaluated. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments, and it is possible the differences may be material. Management believes that its assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the Transactions based on information available to management as of the date of the unaudited pro forma condensed combined financial information, and the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information.

 

NOTE 2 – ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF MARCH 31, 2021

 

The unaudited pro forma condensed combined balance sheet as of March 31, 2021 includes the following adjustments:

 

A – Represents the aggregate impact of the following pro forma adjustments to cash to give effect to the Transactions:

 

Cash inflow from the PIPE  $400,000,000(B)
Cash inflow from CRIS’s Trust Account   230,006,837(C)
Payment of CRIS’s deferred IPO fees   (8,050,000)(D)
Payment of transaction and advisory fees for the PIPE and the Business Combination   (35,004,312)(E)
Payment of estimated transaction fees incurred by CRIS   (6,526,633)(F)
Payment of estimated transaction fees incurred by EVgo   (6,921,726)(G)
Redemption of CRIS’s publicly traded shares   (132,306)(H)
Net Pro Forma Adjustment to Cash  $573,371,860(A)

 

53 

 

 

B – Represents gross cash proceeds attributable to the issuance of 40 million shares of Class A common stock for $10.00 per share, or $400 million in aggregate gross proceeds, upon the closing of the PIPE that occurred immediately prior to consummation of the Business Combination.

 

C – Represents cash equivalents that were released from the Trust Account and relieved of restrictions regarding use upon consummation of the Business Combination and, accordingly, are available for general use by the Combined Company.

 

D – Represents cash used to pay underwriting fees incurred by CRIS in connection with the IPO, for which payment was deferred until consummation of the Business Combination.

 

E – Represents cash used to pay transaction and advisory fees incurred in connection with the PIPE and the Business Combination.

 

F – Represents cash used to pay the estimated direct and incremental transaction costs, comprised of legal and other fees, that were due from CRIS upon Closing, including $2.2 million of costs expensed by CRIS that are accrued and reported as a liability on CRIS’s balance sheet as of March 31, 2021, net of $0.2 million of costs recorded to prepaid expenses and other current assets. For purposes of a reverse recapitalization transaction, direct and incremental transaction costs are treated as a reduction of the cash proceeds resulting from the Transactions and, accordingly, are reported as a reduction to additional paid-in capital (for deferred offering costs) and accumulated deficit (for incremental costs to be expensed by CRIS). Refer to balance sheet adjustment (L) for the corresponding pro forma adjustments to additional paid-in capital and accumulated deficit reported for the Combined Company.

 

G – Represents cash used to pay the estimated direct and incremental transaction costs, comprised of legal and other fees, that were due from EVgo upon Closing. For purposes of a reverse recapitalization transaction, direct and incremental transaction costs are treated as a reduction of the cash proceeds resulting from the Transactions and, accordingly, are reported as a reduction to additional paid-in capital (for deferred offering costs) and accumulated deficit (for incremental costs to be expensed by EVgo). Refer to balance sheet adjustment (L) for the corresponding pro forma adjustments to additional paid-in capital and accumulated deficit reported for the Combined Company. Of these costs:

 

·$5.5 million was deferred in prepaid expenses and other current assets, of which $3.4 million was accrued in accounts payable, accrued expenses and payables to related parties by EVgo as of March 31, 2021.

 

·$1.4 million reflects preliminary estimated transaction costs related to the Transactions, which will be expensed by EVgo as incurred subsequent to March 31, 2021 in accordance with U.S. GAAP. These costs are reflected as if incurred on March 31, 2021, the assumed date of the consummation of the Business Combination for purposes of the unaudited pro forma condensed combined balance sheet, and represent a non-recurring item.

 

H – Represents the impact to the amount of cash available to the Combined Company upon the redemption of 13,230 shares of Class A common stock in exchange for cash held in the Trust Account. Refer to balance sheet adjustment (L) for the corresponding adjustment to par value and additional paid-in capital reported for the Combined Company.

 

I – Represents deferred accounting, consulting and other costs directly related to the Transactions incurred and reported as an asset on EVgo’s and CRIS’s balance sheets as of March 31, 2021. For purposes of a reverse recapitalization transaction, direct and incremental transaction costs are treated as a reduction of the cash proceeds resulting from the Transactions (see balance sheet adjustments (A) and (G)) and, accordingly, are reported as a reduction to additional paid-in capital (see balance sheet adjustment (L)).

 

J – Represents the reclassification of EVgo’s note payable – related party into additional paid-in capital upon consummation of the Business Combination. The outstanding balance of the note payable – related party, including accrued interest, was approximately $59.6 million as of June 30, 2021. The Combined Company has no liability under the note payable – related party after the consummation of the Business Combination. Refer to balance sheet adjustment (L) for the corresponding adjustment to additional paid-in capital reported for the Combined Company.

 

54 

 

 

K – Reflects the preliminary estimated fair value of the Earnout Shares issued to the CRIS equity holders at Closing that are subject to possible forfeiture based upon triggering events that have not yet been achieved as a liability. The preliminary estimated fair values were determined using the most reliable information available. The actual fair values could change materially once the final valuation is determined as of the Closing. Refer to Note 4 for more information.

 

L – Represents the net impact of the following pro forma adjustments related to the Transactions on the capital accounts of the Combined Company:

 

       Par Value (1)                     
   Members’
Equity
   Class A
Common Stock
   Founder Shares
- Class B
   Additional Paid-
In Capital
  
Accumulated
Deficit
   Total
Stockholders’
Equity
   Class A common
stock subject to
possible
redemption
   Non-controlling
Interests -
Class B
 
Historical EVgo  $136,348,127   $   $   $1,408,631    $(64,400,228  $73,356,530   $   $ 
Historical CRIS       763    575    50,223,046    (45,224,374)   5,000,010    153,690,860     
Total historical balance   136,348,127    763    575    51,631,677    (109,624,602)   78,356,540    153,690,860     
EVgo rollover equity (2)   (136,348,127)                   (136,348,127)       136,348,127 
Conversion of CRIS’s founder shares to Class A common shares (3)       575    (575)                    
Estimated fair value of the Earnout Shares contingently issuable to the CRIS equity holders (4)       (144)       (19,765,481)       (19,765,625)        
Reclassification of Class A common stock subject to possible redemp-tion       1,537        153,689,323        153,690,860    (153,690,860)    
PIPE Investors       4,000        399,996,000        400,000,000         
Adjustments for share issuance and conversion transactions   (136,348,127)   5,968    (575)   533,919,842        397,577,108    (153,690,860)   136,348,127 
Transaction and advisory fees for the PIPE and the Business Combination               (35,004,312)       (35,004,312)        
Estimated transaction fees incurred by CRIS (5)               (3,647,508)   (865,255)   (4,512,763)        
Estimated transaction fees incurred by EVgo (5)               (7,616,366)   (1,407,007)   (9,023,373)        
Reclassification of EVgo’s note payable - related party               57,040,167        57,040,167         
Elimination of CRIS’s historical accumulated deficit               (46,089,629)   46,089,629             
Reclassification of EVgo’s historical accumulated deficit (6)               (65,807,235)   65,807,235             
Redemption of Class A common stock (7)       (1)       (132,305)       (132,306)        
Allocate amount to non-controlling interests (8)               (323,130,593)       (323,130,593)       323,130,593 
Total pro forma adjustments to equity   (136,348,127)   5,967    (575)   109,532,061    109,624,602    82,813,928    (153,690,860)   459,478,720 
Total pro forma balance  $   $6,730   $   $161,163,738   $   $161,170,468   $   $459,478,720 

 

 

(1)Represents the par value of CRIS’s common stock prior to the Business Combination and the par value of the common stock subsequent to the Business Combination.

(2)Shares of Class B common stock were issued to Holdings to consummate the Business Combination (classified as non-controlling interests). The pro forma shares attributable to Holdings are calculated by dividing the rollover equity value of $1.985 billion by the per share price of $10.00.

(3)Represents CRIS’s issued and outstanding founder shares that were converted into shares of Class A common stock on a one-for-one basis immediately prior to consummation of the Business Combination and are outstanding subsequent to the Business Combination, including the 1,437,500 Earnout Shares that are subject to potential forfeiture based upon triggering events that have not yet been achieved.

(4)Represents the adjustment to reflect the liability for the 1,437,500 Earnout Shares that are subject to potential forfeiture based upon triggering events that have not yet been achieved (see balance sheet adjustment (K)).

(5)Consists of the adjustments for estimated transaction fees (balance sheet adjustments (F) and (G)) included in the cash table above and the prepaid deferred costs included in balance sheet adjustment (I), net of the amounts accrued in balance sheet adjustments (F) and (G).

 

55 

 

 

(6)Represents the adjustment to reclassify EVgo’s historical accumulated deficit to additional paid-in capital as part of the reverse recapitalization of the Business Combination.

(7)Represents the adjustment to reflect the redemption of 13,230 shares of Class A common stock in exchange for cash held in the Trust Account (see balance sheet adjustment (H)).

(8)Represents an adjustment to revise non-controlling interests to their 74.0% ownership percentage.

 

M – Authorized, issued and outstanding shares for each class of common stock and preferred stock as of March 31, 2021 on a historical basis and on a pro forma basis are as follows:

 

   Historical   Pro Forma 
   Authorized   Issued   Outstanding   Authorized   Issued   Outstanding 
Preferred Stock   1,000,000            1,000,000         
Common Stock - Class A   100,000,000    N/A    N/A    100,000,000    N/A    N/A 
CRIS’s Class A stockholders (1)   N/A    23,000,000    23,000,000    N/A    22,986,770    22,986,770 
PIPE Investors   N/A            N/A    40,000,000    40,000,000 
CRIS’s converted founder shares (2)   

N/A

            

N/A

    5,750,000    5,750,000 
Total Common Stock - Class A   100,000,000    23,000,000    23,000,000    100,000,000    68,736,770    68,736,770 
Common stock - Class B (3)   10,000,000    N/A    N/A    195,800,000    N/A    N/A 
CRIS’s founder shares   N/A    5,750,000    5,750,000    N/A         
EVgo rollover equity (4)   

N/A

            

N/A

    195,800,000    195,800,000 
Total Common Stock - Class B   10,000,000    5,750,000    5,750,000    195,800,000    195,800,000    195,800,000 
Total Common Stock   110,000,000    28,750,000    28,750,000    295,800,000    264,536,770    264,536,770 

 

 

(1)Represents the shares of Class A common stock held by CRIS’s public stockholders giving effect to the redemption of 13,230 shares of Class A common stock. The historical issued and outstanding shares included 15,369,086 shares that were subject to possible redemption.

(2)Represents the shares of Class A common stock held by the initial stockholders of CRIS upon the one-for-one conversion of the founder shares into Class A common stock immediately prior to the consummation of the Business Combination, including the 1,437,500 Earnout Shares that are subject to potential forfeiture based upon triggering events that have not yet been achieved.

(3)For pro forma purposes, the authorized number of shares of Class B common stock was assumed to equal the number of issued and outstanding shares since the stockholders of CRIS are being asked to approve an increase in authorized shares in connection with the Business Combination as described in the Proxy Statement, which is incorporated by reference.

(4)Represents the shares of Class B common stock issued to Holdings to consummate the Business Combination (classified as non-controlling interests). The pro forma shares attributable to Holdings are calculated by dividing the rollover equity value of $1.985 billion by the per share price of $10.00.

 

NOTE 3 – ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND THE YEAR ENDED DECEMBER 31, 2020

 

The unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2021 and the year ended December 31, 2020 include the following adjustments:

 

a – Represents the elimination of formation and operating costs of CRIS and incremental costs that are expensed as incurred by EVgo related to the Transactions.

 

b – Represents the elimination of interest income earned on the Investments held in Trust Account.

 

c – Represents the elimination of interest expense incurred on EVgo’s note payable – related party, which was reclassified into equity upon consummation of the Business Combination.

 

56 

 

 

d – Represents an adjustment to net loss attributable to non-controlling interests based on their 74.0% ownership percentage.

 

e – Represents the pro forma weighted average shares of common stock outstanding and pro forma loss per share calculated after giving effect to the Transactions, including the redemption of 13,230 shares of Class A common stock, as follows:

 

   For the
Three Months ended March 31, 2021
 
Numerator     
Pro forma net loss attributable to controlling interests  $(11,316,970)
Denominator     
CRIS’s Class A stockholders (1)   22,986,770 
CRIS’s converted founder shares (2)   5,750,000 
PIPE Investors   40,000,000 
Basic and diluted weighted average shares outstanding   68,736,770 
Loss per share     
Basic and diluted (3)  $(0.16)

 

   For the
Year ended
December 31, 2020
 
Numerator     
Pro forma net loss attributable to controlling interests  $(15,341,157)
Denominator     
CRIS’s Class A stockholders (1)   22,986,770 
CRIS’s converted founder shares (2)   5,750,000 
PIPE Investors   40,000,000 
Basic and diluted weighted average shares outstanding   68,736,770 
Loss per share     
Basic and diluted (3)  $(0.22)

 

 

(1)Represents the shares of Class A common stock held by CRIS’s public stockholders giving effect to the redemption of 13,230 shares of Class A common stock. As the Transactions are assumed to have occurred as of January 1, 2020 for purposes of preparing the pro forma condensed combined statement of operations, these shares are assumed to have been outstanding shares of common stock for the entire three-month and annual periods.

(2)Represents the shares of Class A common stock held by the initial stockholders of CRIS upon the one-for-one conversion of the founder shares into Class A common stock immediately prior to the consummation of the Business Combination. Consistent with the assumption related to the Transactions, this conversion is assumed to have occurred on January 1, 2020 and, accordingly, these shares, including the 1,437,500 Earnout Shares that are subject to potential forfeiture based upon triggering events that have not yet been achieved, are assumed to have been outstanding shares of common stock for the entire three-month and annual periods.

(3)Potentially dilutive shares have been deemed to be anti-dilutive due to the net loss position and, accordingly, have been excluded from the calculation of diluted loss per share. Potentially dilutive shares that have been excluded from the determination of diluted loss per share include 18,100,000 outstanding warrants issued in connection with the IPO and private placement.

 

NOTE 4 – EARNOUT SHARES

 

The Earnout Shares are accounted for as liability-classified equity instruments that are earned upon achieving the triggering events, which include events that are not indexed to CRIS’s common stock. The preliminary estimated fair value of the 1,437,500 Earnout Shares issued and outstanding upon Closing is $19.8 million based on the respective trigger prices for the Earnout Shares. The actual fair values of the Earnout Shares are subject to change as additional information becomes available and additional analyses are performed and such changes could be material once the final valuation is determined as of the Closing.

 

57 

 

 

Capitalization

 

The following table sets forth the cash, cash equivalents and restricted cash and capitalization of CRIS and EVgo on an unaudited historical basis and on an unaudited pro forma combined basis as of March 31, 2021.

 

Please refer to the historical financial statements of CRIS and EVgo and the related notes included elsewhere in this prospectus, as well as the section entitled “Unaudited Pro Forma Condensed Combined Financial Information.”

 

   March 31, 2021 
   Historical   Pro Forma  
  CRIS   EVgo   Combined 
             
   (in thousands) 
Cash, cash equivalents and restricted cash:               
Cash and cash equivalents  $385   $23,595   $597,352 
Investment held in trust account   230,007         
Total cash, cash equivalents and restricted cash  $230,392   $23,595   $597,352 
Capitalization:               
Debt and similar liabilities:               
Note payable – related party  $   $57,040   $ 
Capital-build liabilities       18,064    18,064 
Earnout share liability           19,766 
Warrant liability   61,855        61,855 
Total debt and similar liabilities   61,855    75,104    99,685 
Temporary equity:               
Common stock subject to possible redemption   153,691         
Non-controlling interests – Class B common stock           459,479 
Total temporary equity   153,691        459,479 
Members’ / Stockholders’ equity:               
Members’ equity       136,348     
Class A common stock   1        6 
Founder shares – Class B common stock            
Additional paid-in capital   50,223    1,409    161,164 
Accumulated deficit   (45,224)   (64,400)    
Total stockholders’ equity   5,000    73,357    161,170 
Total capitalization  $220,546   $148,461   $720,334 

 

58 

 

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations of EVgo

 

The following discussion and analysis should be read in conjunction with EVgo’s unaudited condensed consolidated financial statements as of March 31, 2021 and the three months ended March 31, 2021 and March 31, 2020 and audited consolidated financial statements as of and for the years ended December 31, 2020 and December 31, 2019, including the related notes thereto, as well as the unaudited pro forma condensed combined financial information as of and for the three months ended March 31, 2021 and for the year ended December 31, 2020, in each case, included elsewhere in this prospectus. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties, and assumptions that could cause EVgo’s actual results to differ materially from management’s expectations due to a number of factors, including those discussed in the sections entitled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” appearing elsewhere in this prospectus. Factors which could cause such differences are discussed herein. Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations of EVgo” to “EVgo” and “the Company” refer to the business and operations of EVgo Services and its consolidated subsidiaries prior to the Business Combination and to Evgo Inc. and its consolidated subsidiaries, following the consummation of the Business Combination.

 

Overview

 

EVgo owns and operates the nation’s largest public DC fast-charging network for EVs by number of locations and is the first EV charging network in the United States powered by 100% renewable electricity. EVgo seeks to locate its charging infrastructure in high traffic, high density, urban, suburban and exurban locations to provide EV drivers of all types with easy access to convenient, reliable high-speed charging. EVgo’s network is currently capable of natively charging (i.e., charging without an adaptor) all EV models and charging standards currently available in the U.S., and serves a wide variety of private retail and commercial customers. Founded in 2010, EVgo has been a leader and innovator in the EV charging space and is well-positioned to continue to capitalize on its sustainable first-mover and first-learner advantages as EV adoption accelerates. To take advantage of the expected rapid growth in North American EVs on the road, EVgo is rapidly expanding its network of owned charging stations, prioritizing development of locations with favorable traffic and utilization characteristics.

 

EVgo’s primary business is the provision of EV charging services to individual EV drivers, commercial customers, and fleet owners through its owned infrastructure. As the owner of charging infrastructure, EVgo also monetizes regulatory credits generated by its charging activities. EVgo partners with a wide range of automotive OEMs, transportation network companies (“TNCs”), rideshare operators and other channel partners to build chargers in locations important to those partners, acquire EV customers and provide charging services to EV owners and drivers. Additionally, EVgo develops and deploys fleet-charging solutions for light-, medium-, and heavy-duty EV fleets , in which it may retain ownership of the charging infrastructure in exchange for contractual or guaranteed payment streams. EVgo is currently piloting and expects to offer its ChaaS solution and additional cloud-based, value-added services to drivers and partners to enhance the customer experience by layering EVgo’s proprietary technology functionality on top of its charging network. These include smart reservations, loyalty and microtargeted advertisement programs, seamless entry to parking garage pay gates, shopping coupons and Autocharge, a technology that allows registered customers to use their vehicles as identification and authorization for fast-charging, thus bypassing the need for separate payment.

 

EVgo undertakes and manages the siting, development and installation of the charging stations, operates and maintains the stations for use by EV drivers, and typically retains ownership of the chargers. EVgo uses software-enabled functionality of its network to provide remote monitoring and management of the charging stations, to manage all aspects of vehicle charging, backend operations and payment processing, and to convey real-time information on station location, status, charging equipment availability and pricing to EV drivers and partners. EVgo designs its network of fast charging stations to continue to scale with rapid electrification of transportation and meet all major customer use cases and requirements expected in its served markets.

 

EVgo has established commercial relationships with automotive OEMs such as GM, Tesla, Nissan and BMW; rideshare and other fleets such as Uber and Lyft; site hosts such as Whole Foods, Safeway and Kroger; state governments including California, Virginia, Pennsylvania and Washington; and a wide range of electric utilities. EVgo believes these commercial relationships will facilitate EVgo’s long-term growth at or above the unprecedented rate of growth of the EV market generally over the next several years.

 

59 

 

 

EVgo has multiple channels through which it earns revenue. EVgo’s principal revenue stream is from the provision of charging services for EVs of all types on EVgo’s network. In addition, a variety of business-to-business commercial relationships provide EVgo with revenue or cash payments based on commitments to build new infrastructure, provide guaranteed access to charging, and offer marketing, data and software-driven services. EVgo also earns revenue from the sale of regulatory credits generated through sales of electricity and its operation and ownership of its DCFC network. This combination of revenue streams can drive long-term margin expansion and customer retention.

 

Specifically, revenue is earned through the following streams:

 

·Charging revenue, retail: EVgo sells electricity directly to drivers who access EVgo’s publicly available networked chargers. Various pricing plans exist for customers, and drivers have the choice to charge as members (with monthly fees and reduced per minute pricing), through a subscription service or as non-members. Drivers locate the chargers through EVgo’s mobile application, their vehicle’s in-dash navigation system or third-party databases that license charger-location information from EVgo. Additionally, EVgo has established interoperability and roaming agreements with other charging networks allowing EVgo customers to charge seamlessly at non-EVgo stations and allowing non-EVgo customers to utilize EVgo chargers. EVgo believes roaming agreements are an effective avenue to acquire customers, enhance customer experience and accelerate EV adoption. Over the last twelve months, EVgo has experienced net inbound traffic via its roaming partners, with inbound revenues outpacing outbound revenues by approximately four times. EVgo installs its chargers in parking spaces owned or leased by commercial or public-entity site hosts that desire to provide EV charging services at their respective location. Commercial site hosts include retail centers, offices, medical complexes, airports and convenience stores. EVgo believes its offerings are well aligned with the goals of site hosts, as many commercial businesses increasingly view EV-charging capabilities as essential to attract tenants, employees, customers and visitors, and achieve sustainability goals. Site hosts are generally able to obtain these benefits at no cost when partnering with EVgo, as EVgo is responsible for the installation and operation of chargers located on site hosts’ properties.

 

·Charging revenue, OEM: EVgo is a leader in OEM charging programs and has pioneered innovative revenue models to meet a wide variety of OEM objectives related to the availability of charging infrastructure and the provision of charging services for EV drivers. EVgo contracts directly with OEMs to provide charging services to drivers who have purchased or leased such OEMs’ EVs and who access EVgo’s public charger network, to expand EVgo’s network of owned DCFCs and to provide other related services. Other related services currently provided to OEMs by EVgo include data services and digital application services. EVgo views its OEM relationships as a core customer acquisition channel.

 

·Charging revenue, commercial: High volume fleet customers, such as TNCs or delivery services, can access EVgo’s charging infrastructure through the EVgo public network. Pricing for charging services is negotiated directly between EVgo and the fleet owner based on the business needs and usage patterns of the fleet. Typically in these arrangements EVgo contracts with, and bills, the fleet owner directly rather than individual fleet drivers utilizing EVgo chargers. Access to EVgo’s public network allows fleet and rideshare operators to support mass adoption of transportation electrification and achieve sustainability goals without needing to directly invest capital in charging infrastructure or incur operating costs associated with charging equipment.

 

In addition to offering access to its public network, EVgo offers dedicated charging solutions to fleets. As part of this offering, EVgo typically builds, owns, and operates charging infrastructure for the exclusive use of a dedicated customer and is currently piloting flexible ownership models, such as its ChaaS offering. EVgo’s dedicated and ChaaS offerings provide a value proposition for fleets who might otherwise feel compelled to procure, install and manage their own EVSE. EVgo offers a variety of pricing models for its dedicated charging solutions, including a mix of volumetric commitments and variable and fixed payments to EVgo for provision of its services. ChaaS and dedicated charging allow for tailored fleet charging solutions without requiring fleets to directly incur capital expenditures or operating and management costs related to charging EVs. Together, EVgo’s dedicated charging solutions and public fleet charging services provide fleets with a more robust and flexible charging solution.

 

60 

 

 

·Network revenue, OEM: Revenue related to contracts that have significant charger infrastructure build programs, which represent set-up costs under ASC 606. Proceeds from these contracts are allocated to performance obligations including marketing activities, memberships, reservations and the expiration of unused charging credits. Marketing activities are recognized at a point in time as the services are performed and measurement is based on amounts spent. For memberships and reservations, revenue is recognized over time and measured based on the charging activity of subscriber members at each measurement period. Any unused charging credits are recognized as breakage using the proportional method or, for programs where there is not enough information to determine the pattern of rights exercised by the customer, the remote method.

 

·Ancillary revenue: Historically, ancillary revenue has consisted primarily of maintenance services and development and project management revenue, including EVSE installation, networking and operations. EVgo also provides data-driven and technology-driven services to its retail, OEM, fleet, government, and site hosts to best meet their needs. These offerings currently include customization of digital applications and charging data integration. EVgo is currently piloting micro-targeted advertising services, smart charging reservations, loyalty programs, and access to chargers behind parking lot pay gates. EVgo believes the ability to layer ancillary revenue streams on core charging revenues differentiates EVgo and enhances brand loyalty from customers and partners.

 

·Regulatory credit sales: As a charging station owner and operator, EVgo earns regulatory credits, such as LCFS and other regulatory credits, in states where such programs are enacted — currently, FCI in California and Clean Fuel Standards in Oregon. These credits are generated through charging station operations based on kWh of charging electricity sold. EVgo earns additional revenue through the sale of these credits to buyers obligated to purchase the credits to comply with the program mandates.

 

Recent Developments

 

COVID-19 Outbreak

 

The global outbreak of COVID-19 has resulted in the implementation of numerous actions taken by governments, governmental agencies and other entities and organizations in an attempt to mitigate the spread of the virus. These measures have resulted in a significant reduction in worldwide economic activity and extreme volatility in the global financial markets which have affected new car sales, including EVs, and significantly reduced people’s mobility, and the accompanying demand for EVgo charging services. EVgo experienced a significant decline in monthly GWh throughput beginning in March 2020, decreasing by as much as 64%. Between March and July 2020, EVgo deactivated over 70 chargers due to decreased usage as a result of COVID-19, experiencing an average downtime of 38 days when host sites were closed. While EVgo’s business showed steady recovery with multiple metrics improving month-over-month since that time, total GWh throughput for the three months ended March 31, 2021 was lower than the same prior-year period by 0.6 GWh and total GWh throughput for the year ended December 31, 2020 was 12.9 GWh lower than expected.

 

The COVID-19 pandemic also impacted EVgo’s operations through construction delays and supply chain and shipping constraints. EVgo delayed operational dates of over 400 chargers by six to nine months due to delays in various stages site planning and construction caused by COVID-19. When governments and businesses shut down in response to shelter in place orders and other similar actions by state and local governments, permitting, inspection and other city and municipal services were suspended, and EVgo had reduced access to host sites for construction and on-site survey and design. EVgo also experienced delays in its site host negotiations as hosts devoted more time to day-to-day operations and employee health and safety. In addition, EVgo experienced delays in equipment fulfillment and other logistics related to reduced operational capacity of warehouses and shipping vessel backlogs, which has caused additional delay in early 2021.

 

As part of the modified business practices in response to COVID-19, the incremental costs encompassed mainly the purchase of personal protective equipment, a subscription to Go Evo, a COVID-19 employee screening app, and COVID-19 testing expenses. The total cost has not been material and was approximately $16,000.

 

61 

 

 

Business Combination

 

On January 21, 2021, the EVgo Parties entered into the Business Combination Agreement with CRIS and SPAC Sub, pursuant to which the parties underwent a series of transactions. As a result of the Business Combination, CRIS’s only direct assets now consists of all of the issued and outstanding equity interests in SPAC Sub, which, in turn, now holds only the Issued OpCo Units. OpCo’s only direct assets now consists of all of the issued and outstanding equity interests in HoldCo. Following the Business Combination, CRIS was renamed “EVgo Inc.”

 

The Business Combination was accounted for as a reverse recapitalization. EVgo was deemed the accounting predecessor and the combined entity was the successor registrant, meaning that EVgo’s financial statements for previous periods will be disclosed in the registrant’s future periodic reports filed with the SEC. Under this method of accounting, CRIS was treated as the acquired company for financial statement reporting purposes. The most significant change in the successor’s reported financial position and results was a net increase in cash (as compared to EVgo’s Consolidated Balance Sheet at March 31, 2021) of $573.4 million. Total transaction costs were approximately $57 million.

 

The combined company listed the Class A Common Stock and warrants on Nasdaq under the symbols “EVGO” and “EVGOW,” respectively, upon the Closing, and requireed EVgo to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. EVgo expects to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees, and additional internal and external accounting, legal and administrative resources, including increased personnel costs, audit and other professional service fees.

 

General Motors Agreement

 

On July 20, 2020, EVgo Services and GM, entered into a five-year contract to build 2,750 fast chargers that EVgo will own and operate as part of its public network. GM will make quarterly payments and requires a minimum of chargers be built each quarter. In addition to the capital build program, EVgo Services commits to providing a certain number of new GM EV car owners with an EVgo charging credit and limited time access to other EVgo services at a discounted rate. GM will make quarterly payments beginning with the quarter ended March 31, 2021. The GM agreement places certain requirements on the Company related to progress of charger deployment and network availability. Should EVgo Services fail to meet these requirements, GM has the right, but not the obligation, to terminate the agreement and to seek pre-agreed liquidated damages related to such shortfall. The agreement contains customary provisions allowing GM to terminate, subject to a cure period, in certain cases including extended force majeure or a material breach of the agreement by EVgo Services. EVgo management believes this agreement will serve to accelerate EVgo’s development plans and enhance its customer acquisition and brand equity among retail drivers. See “Business — Customers, Partnerships and Strategic Relationships — General Motors.”

 

State EV Initiatives

 

In September 2020, California Governor Gavin Newsom issued the EO, announcing a target for all in-state sales of new passenger cars and trucks to be zero-emission by 2035. California has also enacted its Clean Miles Standard and Incentive Program aiming to reduce greenhouse gases emissions from rideshare vehicles through electrification. In addition, several states — including California, Oregon, New York, Maryland and Massachusetts — have created mandates for EVs with the goal of having more than 6 million EVs on the road by 2030. EVgo believes these regulations, combined with a shift toward car-sharing and mobility as a service offering, will rapidly accelerate EV adoption by fleets in the coming years.

 

Key Components of Results of Operations

 

Revenue

 

EVgo’s revenues are generated across various business lines. The majority of EVgo’s revenue is generated from the sale of charging services, which are comprised of retail, OEM and commercial business lines. In addition, EVgo generates ancillary revenues through the sale of data services, consumer retail services and the development and project management of third-party owned charging sites. EVgo also offers network services to OEM customers, including memberships and marketing. Finally, as a result of owning and operating the EV charging stations, EVgo earns regulatory credits such as LCFS credits which are sold to generate additional revenue.

 

62 

 

 

Revenue from Related Parties

 

Historical revenue from related parties consists primarily of revenue received from the Nissan Agreement for the period in which Nissan was a minority owner of EVgo. EVgo provided, and continues to provide, several service offerings under the Nissan contracts, including charging and ancillary. As of January 16, 2020, the date LS Power completed its acquisition of EVgo, Nissan is no longer a related party. In addition, during 2020, EVgo entered into various agreements with an affiliate of LS Power for the purchase and sale of California LCFS credits at prevailing market prices. See “Certain Relationships and Related Transactions — EVgo’s Related Party Transactions — Transactions with LS Power.”

 

Cost of Sales

 

Cost of sales consists primarily of energy usage fees, depreciation and amortization expenses, site operating and maintenance expenses, customer service and network charges, warranty and repair services, and site lease and rental expense associated with charging equipment.

 

Gross Profit (Loss) and Gross Margin

 

Gross profit (loss) consists of EVgo’s revenue less its cost of sales. Gross margin is gross profit (loss) as a percentage of revenue.

 

General and Administrative Expenses

 

General and administrative expenses primarily consist of payroll and related personnel expenses, IT and office services, office rent expense and professional services. EVgo expects its general and administrative expenses to increase in absolute dollars as it continues to grow its business but to decrease over time as a percentage of revenue. EVgo also expects to incur additional expenses as a result of operating as a public company, including expenses necessary to comply with the rules and regulations applicable to companies listed on a national securities exchange and related to compliance and reporting obligations pursuant to the rules and regulations of the SEC, as well as higher expenses for general and director and officer insurance, investor relations and other professional services.

 

Transaction Bonus

 

Transaction bonus consists of expenses related to the contingent transaction bonus awarded to certain eligible employees in connection with the January 16, 2020 LS Power acquisition of EVgo.

 

Depreciation, Amortization and Accretion

 

Depreciation, amortization and accretion consists of depreciation related to EVgo’s property and equipment not associated with charging equipment, and, therefore, not included in the depreciation and amortization expenses recorded in cost of sales. This includes amortization of EVgo’s intangible assets and accretion related to EVgo’s asset retirement obligations.

 

Operating Loss and Operating Margin

 

Operating loss consists of EVgo’s gross profit (loss) less general and administrative expenses, transaction bonus expense, and depreciation, amortization, and accretion. Operating margin is operating loss as a percentage of revenue.

 

Interest Expense — Related Party

 

Interest expense — related party consists primarily of interest due under the Secured Grid Demand Promissory Note, dated January 16, 2020, by and between the Company and Holdings (the “LS Power Note”). As of March 31, 2021 and December 31, 2020, $57.0 million and $39.2 million, respectively, was outstanding under the LS Power Note. Pursuant to the terms of the Business Combination Agreement, immediately prior to Closing, the LS Power Note was cancelled immediately and deemed to be an equity contribution to the Company, and EVgo had no ongoing liability or obligations with respect to the LS Power Note after such time. See “Certain Relationships and Related Transactions — EVgo’s Related Party Transactions — Transactions With LS Power.”

 

63 

 

 

Other Income — Related Party

 

Other income — related party consisted of income received under agreements with NRG and Nissan. On June 16, 2017, EVgo entered into a Master EV Services Agreement (the “NRG Agreement”) with NRG to install and operate a network of EV charging stations on behalf of NRG. NRG compensated EVgo for costs incurred for operating the charging network. In addition, on March 29, 2016, EVgo entered into a Program Services Agreement (the “NEDO Agreement”) with Nissan to install and operate a number of chargers on behalf of Nissan. Nissan compensated EVgo for costs incurred for operating the charging network. Under both agreements, the cost of the chargers was included in property and equipment and the related capital build liability for each agreement is included as a long-term liability on the balance sheet. After January 16, 2020, the date of LS Power’s acquisition of EVgo, income received under the NRG Agreement and the NEDO Agreement is classified as other (income) expense, net.

 

Other (Income) Expense, net

 

Prior to January 16, 2020, other income was comprised of contingent consideration that was reclassified from a liability to other income upon the determination that the milestones for the consideration would not be met, therefore, payment would not be required and other expense was related to transaction costs related to LS Power’s acquisition of EVgo.

 

After January 16, 2020, other (income) expense, net, consists primarily of income received under agreements with NRG and Nissan as well as unrealized gains on marketable securities.

 

Net Loss

 

Net loss consists of EVgo’s operating loss and interest expense — related party less other income — related party and other (income) expenses, net.

 

Key Performance Indicators

 

EVgo management uses several performance metrics to manage the business and evaluate financial and operating performance. EVgo considers the following indicators to be of critical importance:

 

Network Throughput

 

Network throughput represents the total amount of kWh that were consumed by EVs using EVgo’s chargers and charging stations. EVgo typically monitors kWh sales by business line, customer, and customer class. EVgo believes monitoring of component trends and contributions is the appropriate way to monitor and measure business-related health.

 

Number of DC Stalls on EVgo’s Network

 

Number of DC stalls represents the total number of DC stalls that EVgo has operational on its network. There are certain configurations of EVgo sites where one DC charger is capable of charging two vehicles simultaneously — all chargers at such a site would be counted as two stalls. Each stall is able to charge one vehicle at a time and such chargers are counted as two stalls.

 

64 

 

 

The following table represented network throughput and number of DC stalls on EVgo’s network for the periods presented:

 

   Successor   Combined Successor And Predecessor   Combined Successor And Predecessor   Predecessor 
                 
   Three Months Ended
March 31,
   Year ended
December 31,
 
   2021   2020   2020   2019 
Network throughput (GWh)   4.1    4.8    15.7    25.5 
Number of DC stalls on EVgo network   1,449    1,327    1,422    1,278 

 

Factors Affecting EVgo’s Operating Results

 

EVgo believes its performance and future success depend on several factors, including those discussed below and in the “Risk Factors” section.

 

·EV Sales. EVgo’s revenue growth is directly tied to the adoption and continued acceptance and usage of passenger and commercial EVs sold, which it believes drives the demand for electricity, charging infrastructure and charging services. The market for EVs is still rapidly evolving and although demand for EVs has grown in recent years, there is no guarantee of such future demand. Factors impacting the adoption of EVs include perceptions about EV features, quality, safety, performance and cost; perceptions about the limited range over which EVs may be driven on a single battery charge; availability of services for EVs; consumers’ perception about the convenience, speed and cost of EV charging; volatility in the price of gasoline and diesel; EV supply chain disruptions including but not limited to availability of certain components (e.g. semiconductors), ability of EV OEMs to ramp-up EV production, availability of batteries, and battery materials; availability, cost and desirability of other alternative fuel vehicles, plug-in hybrid electric vehicles and high fuel-economy gasoline and diesel-powered vehicles; and increases in fuel efficiency. In addition, macroeconomic factors could impact demand for EVs, particularly since EVs can be more expensive than traditional gasoline-powered vehicles. If the market for EVs does not develop as expected or if there is any slowdown or delay in overall adoption of EVs, EVgo’s operating results may be adversely affected.

 

·EV drivers’ usage pattern. EVgo’s revenues are driven by EV drivers’ driving and charging behaviors. The EV market is still developing and current behavioral patterns may not be representative of future behaviors. Key behavioral shifts may include but are not limited to: annual vehicle miles traveled, preferences for urban, suburban or exurban locations, preferences for public or private fast charging, preference for home or workplace charging, demand from rideshare or urban delivery services, and the emergence of autonomous vehicles, micromobility and mobility as-a-service platforms requiring EV charging services.

 

·Electrification of fleets. EVgo management projects meaningful revenue contribution from light-, medium-, and heavy-duty fleet charging as commercial and government fleet owners accelerate electrification initiatives. EVgo faces competition in the fleet segment, including from certain fleet customers who may opt to install and own the charging equipment on their property, but believes its unique set of offerings to fleets and existing charging network positions EVgo advantageously to win business from fleets. Fleet owners are generally more sensitive to TCO than private-vehicle owners. As such, electrification of vehicle fleets may occur more slowly or more rapidly than management forecasts based on the cost to purchase, operate and maintain EVs and the general availability of such vehicles relative to those of legacy ICE vehicles. EVgo’s, and other competitors’, ability to offer competitive charging services and value-added ancillary services may impact the cadence at which fleets electrify and impact EVgo’s ability to capture market share in fleets. Additionally, federal, state and local government support and regulations directed at fleets (or lack thereof) may accelerate or delay fleet electrification and increase or reduce EVgo’s business opportunity. EVgo’s management is currently monitoring several key rules that may encourage fleet electrification including California’s Advanced Clean Truck Rule and the implementation of California’s Clean Miles Standard as well as similar proposals in other zero emission vehicle states.

 

65 

 

 

·Competition. The EV charging industry is increasingly competitive. The principal factors on which industry participants compete include charger count, locations and accessibility; charger connectivity to EVs and ability to charge all standards; speed of charging relative to expected vehicle dwell times at the location; DCFC network reliability, scale and local density; software-enabled services offering and overall customer experience; operator brand, track record and reputation; and access to equipment vendors, service providers and policy incentives, and pricing. Existing competitors may expand their product offerings and sales strategies, new competitors may enter the market and certain fleet customers may choose to install and operate their own charging infrastructure. If EVgo’s market share decreases due to increased competition, its revenue and ability to generate profits in the future may be impacted.

 

·Regulatory environment. EVgo is subject to federal, state and local regulations including consumer laws and regulations, tax laws and regulations, consumer privacy laws and regulations, engineering and civil and electrical construction laws and regulations. EVgo’s current business plan assumes no material change in these laws and regulations. In the event any such change occurs, compliance with new laws and regulations might significantly affect EVgo operations and cost of doing business.

 

·Government mandates, incentives and programs. The U.S. federal government, some state and local governments, and certain utilities provide incentives to end users and purchasers of EVs and EV charging stations in the form of rebates, tax credits, grants and other financial incentives. The EV market relies on these governmental rebates, tax credits, and other financial incentives to significantly lower the effective price of EVs and EV charging stations. However, these incentives may expire on specified dates, end when the allocated funding is no longer available, or be reduced or terminated as a matter of regulatory or legislative policy. In particular, the credits under Section 30C of the Code, and state, local and utility funding allocations may sunset or become fully utilized without renewal. There can be no assurance that any of these programs, including credits under Section 30C will have sufficient availability or be extended, or if extended, will not be otherwise reduced. Any reduction in rebates, tax credits, grants or other financial incentives, including the credits under Section 30C of the Code, could negatively affect the EV market and adversely impact EVgo’s business operations and expansion potential. In addition, there is no assurance EVgo will have the necessary tax attributes to utilize any such credits and may not be able to monetize them given the nascent state of the market for such credits or be able to monetize such credits on favorable terms. New tariffs and policies that could incentivize overbuilding of infrastructure may also have a negative impact on the economics of EVgo’s stations. Furthermore, future tariffs and policy incentives may favor equipment manufactured or assembled at American factories, which may put EVgo’s fast charging equipment vendors at a competitive disadvantage, including by increasing the cost or delaying the availability of charging equipment, by challenging or eliminating EVgo’s ability to apply or qualify for grants and other government incentives, or by disqualifying EVgo from the ability to compete for certain charging infrastructure buildout solicitations and programs, including those initiated by federal government agencies.

 

·Technology Risks. EVgo relies on numerous internally developed and externally sourced hardware and software technologies to operate its network and generate earnings. EVgo engages a variety of third-party vendors for non-proprietary hardware and software components. The ability of EVgo to continue to integrate its technology stack with technological advances in the wider EV ecosystem including EV model characteristics, charging standards, charging hardware, software and battery chemistries will determine EVgo’s sustained competitiveness in offering charging services. There is a risk that some or all of the components of the EV technology ecosystem become obsolete and EVgo will be required to make significant investment to continue to effectively operate its business. EVgo’s management believes EVgo’s “build, own and operate” model is well-positioned to enable EVgo to remain technology-, vendor- and OEM-agnostic over time and allow the business to remain competitive regardless of long-term technological shifts in EVs, batteries or modes of charging.

 

·Sale of regulatory credits. EVgo derives revenue from selling regulatory credits earned for participating in low carbon fuel standard programs, or other similar carbon or emissions trading schemes, in various states and jurisdictions in the United States. EVgo currently sells these credits at market prices. These credits are exposed to various market and supply and demand dynamics which can drive price volatility and are difficult to predict. Price fluctuations in credits may have a material effect on future earnings. The availability of such credits depends on continued governmental support for these programs. If these programs are modified, reduced or eliminated, EVgo’s ability to generate this revenue in the future would be adversely impacted. In addition to current programs, EVgo’s management is currently monitoring proposed programs in Colorado, New York, Massachusetts, Washington, New Mexico and several other states along with a potential federal program as potential future revenue streams.

 

66 

 

 

Results of Operations

 

EVgo accounted for its acquisition by LS Power as a business combination under ASC 805. Pursuant to ASC 805, EVgo elected to apply pushdown accounting. Under this method, the purchase price is allocated to the identifiable assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. Any excess of the amount paid over the estimated fair values of the identifiable net assets acquired is allocated to goodwill. Refer to Note 3 of the notes to consolidated financial statements and Note 3 of the notes to the unaudited condensed consolidated financial statements of EVgo for additional information. As a result of the acquisition, EVgo’s consolidated financial statements for the period from and after January 16, 2020 are presented on a different basis than that for the periods before January 16, 2020 due to the application of purchase accounting as of acquisition date and, therefore, are not comparable.

 

The acquisition resulted in the following principal impacts for the period subsequent to the acquisition date:

 

·Increased depreciation, amortization, and accretion expense resulting from recording of tangible and intangible assets at fair value;

 

·Increased interest expense resulting from entering into the LS Power Note with LS Power in conjunction with the close of the business combination; and

 

·Increased stock-based compensation expense resulting from the share-based compensation plan formed in accordance with the terms of the acquisition agreement.

 

EVgo believes reviewing its operating results, for the three months ended March 31, 2020 and the year ended December 31, 2020, by combining results of the 2020 predecessor period and 2020 successor period is more useful in discussing overall operating performance when compared to the 2021 successor period and 2019 predecessor period. Results presented separately for the predecessor period and successor period are included within the financial statements included elsewhere in this prospectus.

 

Three Months Ended March 31, 2021 Compared With Three Months Ended March 31, 2020

 

The table below presents EVgo’s results of operations for the three months ended March 31, 2021 and 2020:

 

   Successor   Combined
Successor and
Predecessor
         
                 
   Three months ended
March 31
   Change 
         
   2021   2020   $   % 
                 
   (unaudited) (dollars in thousands) 
Revenue  $3,569   $3,788   $(219)   (6)%
Revenue from related parties   561    65    496    760%
Total revenues   4,130    3,853    277    7%
Cost of sales   6,739    6,396    343    5%
Gross loss   (2,609)   (2,543)   (66)   3%
General and administrative   11,073    6,860    4,213    61%
Transaction bonus       5,316    (5,316)   (100)%
Depreciation, amortization, and accretion   2,510    2,107    403    19%
Operating loss   (16,192)   (16,826)   634    (4)%
Interest expense, related party   876    122    754    619%
Other income, related party       (342)   342    (100)%
Other income, net   (458)   (1,796)   1,338    (75)%
Net loss  $(16,610)  $(14,810)  $(1,800)   12%
Gross margin   (63.2)%   (66.0)%          
Operating margin   (392.1)%   (436.7)%          

 

67 

 

 

   Successor   Combined
Successor and
Predecessor
         
                 
   Three months ended
March 31
   Change 
         
   2021   2020   $   % 
                 
   (unaudited) (dollars in thousands) 
Network throughput (GWh)   4.1    4.8         
Number of DC stalls   1,449    1,327           

 

Revenue

 

   Successor   Combined Successor and Predecessor         
                 
   Three months ended
March 31,
   Change 
         
   2021   2020   $   % 
                 
   (dollars in thousands)         
   (unaudited) 
Revenue:                    
Charging revenue, retail  $1,803   $1,623   $180    11%
Charging revenue, OEM   332    456    (124)   (27)%
Charging revenue, commercial   491    396    95    24%
Network revenue, OEM   532    70    462    660%
Ancillary revenue   403    318    85    27%
Regulatory credit sales   569    990    (421)   (43)%
Total revenue  $4,130   $3,853   $277    7%

 

Charging revenue, retail

 

Charging revenue, retail for the three months ended March 31, 2021 increased $0.2 million, or 11%, to $1.8 million compared to $1.6 million for the three months ended March 31, 2020. Period-over-period growth was due to an overall increase in usage and subscription fees driven primarily by increased charging volume related to the ongoing recovery from COVID-19.

 

Charging revenue, OEM

 

Charging revenue, OEM, for the three months ended March 31, 2021 decreased $0.1 million, or 27%, to $0.3 million compared to $0.5 million for the three months ended March 31, 2020. The decrease was primarily driven by the end of Nissan No Charge to Charge program, in which purchasers of the Nissan LEAF EV receive complimentary charging services at EVgo locations.

 

Charging revenue, commercial

 

Charging revenue, commercial for the three months ended March 31, 2021 increased $0.1 million, or 24%, to $0.5 million compared to $0.4 million for the three months ended March 31, 2020. The increase was the attributable to new fleet contracts signed during 2020.

 

Network revenue, OEM

 

Network revenue, OEM for the three months ended March 31, 2021 increased $0.5 million, or 660%, to $0.5 million compared to $0.1 million due to increased revenue under the Nissan 2.0 Agreement related to marketing activities, memberships fees and the breakage of prepaid charging credits.

 

Ancillary revenue

 

Ancillary revenue for the three months ended March 31, 2021 increased $0.1 million, or 27%, to $0.4 million compared to $0.3 million for the three months ended March 31, 2020. The increase was the result of period-over-period increases in miscellaneous non-charging revenue. Partially offsetting these increases were period-over-period decreases in maintenance revenue.

 

68 

 

 

Regulatory credit sales

 

Regulatory credits for the three months ended March 31, 2021 decreased $0.4 million, or 43%, to $0.6 million compared to $1.0 million for the three months ended March 31, 2020. The period-over-period decrease was due to lower network throughput during the prior periods in which the regulatory credits were generated, resulting in less regulatory credits that were available for sale. Network throughput generated during the period June 2020 to December 2020 was significantly impacted by COVID-19 compared to network throughput generated during the period from June 2019 to December 2019.

 

Cost of Sales

 

Cost of sales for the three months ended March 31, 2021 increased $0.3 million, or 5%, to $6.7 million compared to $6.4 million for the three months ended March 31, 2020. The increase in cost of sales during the three months ended March 31, 2021 was primarily due to increase of $0.4 million in depreciation expenses and $0.2 million in maintenance of charging equipment partially offset by decreases of $0.2 million in costs related to equipment sales.

 

Gross Loss and Gross Margin

 

Gross loss for the three months ended March 31, 2021 increased $0.1 million, or 3%, to $2.6 million compared to $2.5 million for the three months ended March 31, 2020. The increase in gross loss was driven by the $0.3 million increase in cost of sales, partially offset by a $0.3 million increase in total revenues. Gross margin for the three months ended March 31, 2021 improved 3% to negative 63% compared to negative 66% for the three months ended March 31, 2020 due to the improved leveraging of costs related to charging services provided.

 

General and Administrative

 

General and administrative costs for the three months ended March 31, 2021 increased $4.2 million, or 61%, to $11.1 million compared to $6.9 million for the three months ended March 31, 2020. The increase was driven by $2.1 million of professional services primarily related to the business combination, $1.4 million due to increased headcount and $0.9 million in site survey costs incurred to expand our charging network, partially offset by a $0.2 million decrease in travel and related expenses.

 

Transaction Bonus

 

There was no transaction bonus awarded during the three months ended March 31, 2021. Transaction bonus for the three months ended March 31, 2020 was $5.3 million, which was awarded to certain eligible employees in conjunction with the LS Power acquisition of EVgo.

 

Depreciation, Amortization and Accretion

 

Depreciation, amortization and accretion expenses for the three months ended March 31, 2021 increased $0.4 million, or 19%, to $2.5 million compared to $2.1 million for the three months ended March 31, 2020. The increase was primarily due to additional intangible asset amortization expense recognized as a result of the LS Power acquisition of EVgo.

 

Operating Loss and Operating Margin

 

During the three months ended March 31, 2021, EVgo had an operating loss of $16.2 million, an improvement of $0.6 million, or 4%, compared to $16.8 million for the three months ended March 31, 2020. Operating margin for the three months ended March 31, 2021 improved to negative 392% compared to negative 437% for the three months ended March 31, 2020. The improvement in operating loss and operating margin period-over-period was primarily due to the transaction bonus that was paid during 2020, partially offset by the increase in general and administrative expenses.

 

69 

 

 

Interest Expense, Related Party

 

Interest expense, related party for the three months ended March 31, 2021 increased $0.8 million, or 619%, to $0.9 million compared to $0.1 million for the three months ended March 31, 2020. The increase was related to increased borrowings under the LS Power Note entered into in January 2020.

 

Other Income, Related Party

 

Other income, related party for the three months ended March 31, 2020 was $0.3 million. The decrease was due to the reclassification of reimbursements received under the NRG Agreement and NEDO Agreement to other income, net, as a result of the LS Power Merger. Following the close of the merger, the entities were no longer related parties.

 

Other Income, Net

 

Other income, net, for the three months ended March 31, 2021 decreased $1.3 million, or 75%, to $0.5 million compared to $1.8 million for the three months ended March 31, 2020. The decrease was primarily due to the decrease in income from one of the capital build programs that ended during 2020, partially offset by an unrealized gain on investment.

 

Net Loss

 

Net loss for the three months ended March 31, 2021 was $16.6 million, a $1.8 million, or 12%, increase compared to $14.8 million for the three months ended March 31, 2020. The increased net loss was primarily due to the decrease in other income and other income, related party and the increase in interest expense, partially offset by the improvement in operating loss.

 

Year Ended December 31, 2020 Compared With Year Ended December 31, 2019

 

The table below presents EVgo’s results of operations for the years ended December 31, 2020 and 2019:

 

   Combined
Successor and
Predecessor
   Predecessor         
                 
   Year ended
December 31
   Change 
   2020   2019   $   % 
                 
   (dollars in thousands) 
Revenue  $13,221   $15,070   $(1,849)   (12)%
Revenue from related parties   1,355    2,452    (1,097)   (45)%
Total revenues   14,576    17,522    (2,946)   (17)%
Cost of sales   27,189    26,269    920    4%
Gross loss   (12,613)   (8,747)   (3,866)   44%
General and administrative   31,766    24,576    7,190    29%
Transaction bonus   5,316        5,316    N/A 
Depreciation, amortization, and accretion   9,505    1,627    7,878    484%
Operating loss   (59,200)   (34,950)   (24,250)   69%
Interest expense – related party   1,414        1,414    N/A 
Other income – related party   (342)   (10,232)   9,890    (97)%
Other (income) expense, net   (12,061)   33    (12,094)   (36,648)%
Net loss  $(48,211)  $(24,751)  $(23,460)   95%
Gross margin   (86.5)%   (49.9)%          
Operating margin   (406.1)%   (199.5)%          
Network throughput (GWh)   15.7    25.5           
Number of DC stalls   1,422    1,278           

 

70 

 

 

Revenue

 

   Combined
Successor and
Predecessor
   Predecessor         
                 
   Year ended
December 31,
   Change 
   2020   2019   $   % 
                 
   (dollars in thousands)         
Revenue:                    
Charging revenue, OEM  $1,393   $3,511   $(2,118)   (60)%
Charging revenue, retail   5,866    6,073    (207)   (3)%
Charging revenue, commercial   1,661    2,650    (989)   (37)%
Network revenue, OEM   561        561    N/A 
Ancillary revenue   1,858    1,843    15    1%
Regulatory credit sales   3,237    3,445    (208)   (6)%
Total Revenue  $14,576   $17,522   $(2,946)   (17)%

 

Total revenue for the year ended December 31, 2020 decreased $2.9 million, or 17%, to $14.6 million compared to $17.5 million for the year ended December 31, 2019. The decrease in revenue during 2020 was primarily due to a 60% decrease in OEM charging revenue and a 37% decrease in commercial charging revenue. These decreases are the result of a reduction in network throughput related to COVID-19 along with fewer fleet vehicles in operation year-over year. Partially offsetting these decreases were non-charging revenue — OEM recognized in 2020 and increases in ancillary revenue of 1%.

 

Charging revenue, OEM

 

Charging revenue, OEM for the year ended December 31, 2020 decreased $2.1 million, or 60%, to $1.4 million compared to $3.5 million for the year ended December 31, 2019. The decrease was primarily attributable to a $2.2 million decrease in revenue due to the sunset of OEM agreements as well as a reduction in network throughput due to COVID-19, which represented a decrease of less than $0.01 million.

 

Charging revenue, retail

 

Charging revenue, retail for the year ended December 31, 2020 decreased $0.2 million, or 3%, to $5.9 million compared to $6.1 million for the year ended December 31, 2019. Year-over-year growth was not achieved due to adverse effects of COVID-19.

 

Charging revenue, commercial

 

Charging revenue, commercial for the year ended December 31, 2020 decreased $1.0 million, or 37%, to $1.7 million compared to $2.7 million for the year ended December 31, 2019. The decrease was the result of fewer ride share vehicles operating on the EVgo network as a result of COVID-19. Partially offsetting these decreases were increases in fleet service and facility fees year-over-year.

 

Network revenue, OEM

 

Network revenue, OEM for the year ended December 31, 2020 was $0.6 million due to memberships purchased by OEMs, which drove the revenue recognition.

 

Ancillary revenue

 

Ancillary revenue for the year ended December 31, 2020 increased by 1%, to $1.9 million compared to $1.8 million for the year ended December 31, 2019. The increase was the result of increases in membership revenue as well as increased charger operation and maintenance revenue year-over-year.

 

71 

 

 

Regulatory credit sales

 

Regulatory credit sales for the year ended December 31, 2020 decreased $0.2 million, or 6%, to $3.2 million compared to $3.4 million for the year ended December 31, 2019. The decrease was the result of lower volumes related to COVID-19 partially offset by higher realized pricing.

 

Cost of Sales

 

Cost of sales for the year ended December 31, 2020 increased $0.9 million, or 4%, to $27.2 million compared to $26.3 million for the year ended December 31, 2019. The increase in cost of sales during 2020 was primarily due to increased depreciation expenses related to chargers, with a net increase of 144 stalls becoming operational during the period and increased depreciable basis due to acquisition accounting related to the LS Power merger. Partially offsetting those cost increases were decreases year-over-year in energy fees related to the decrease in utilization.

 

Gross Loss and Gross Margin

 

Gross loss for the year ended December 31, 2020 increased $3.9 million, or 44%, to $12.6 million compared to $8.7 million for the year ended December 31, 2019. The increase in gross loss was driven by the impacts of COVID-19 and the cost associated with expanded operations year-over-year. In addition, depreciation, amortization, and accretion increased year-over-year due to the acquisition accounting related to the LS Power acquisition. Gross margin for the year ended December 31, 2020 decreased to (87%) compared to (50%) for the year ended December 31, 2019.

 

General and Administrative

 

General and administrative costs for the year ended December 31, 2020 increased $7.2 million, or 29%, to $31.8 million compared to $24.6 million for the year ended December 31, 2019. The increase was driven primarily by an expansion of salary and administrative expenses undertaken by EVgo in order to drive ongoing growth year-over-year. In addition, losses related to disposals of assets increased year-over-year.

 

Transaction Bonus

 

Transaction bonus expense for the year ended December 31, 2020 was $5.3 million due to a transaction bonus expense was due to a contingent transaction bonus awarded to certain eligible employees in conjunction with the LS Power acquisition of EVgo.

 

Depreciation, Amortization and Accretion

 

Depreciation, amortization and accretion expenses for the year ended December 31, 2020 increased $7.9 million, or 484%, to $9.5 million compared to $1.6 million for the year ended December 31, 2019. The increase was primarily due to purchase accounting related to LS Power’s acquisition of EVgo, which resulted in a higher amount of intangible assets that were amortized in 2020 compared to the prior year.

 

Operating Loss and Operating Margin

 

During the year ended December 31, 2020, EVgo had an operating loss of $59.2 million, an increase of $24.3 million, or 69%, compared to $35.0 million for the year ended December 31, 2019. The increase year-over-year was primarily due to the impact of COVID-19 as well as the transaction bonus, increased salaries, and depreciation, amortization and accretion expenses due to an increased number of chargers in EVgo’s network and the LS Power acquisition. Operating margin for the year ended December 31, 2020 decreased to (406%) compared to (199%) for the year ended December 31, 2019.

 

Interest Expense — Related Party

 

Interest expense — related party for the year ended December 31, 2020 was $1.4 million due to entering into the LS Power Note in January 2020.

 

72 

 

 

Other Income — Related Party

 

Other income — related party for the year ended December 31, 2020 decreased $9.9 million, or 97%, to $0.3 million compare to $10.2 million for the year ended December 31, 2019. The decrease was due to the reclassification of reimbursements received under the NRG Agreement and NEDO Agreement to other (income) expenses, net, as a result of the LS Power Merger. Following the close of the merger, the entities were no longer related parties.

 

Other (Income) Expense, net

 

Other (income) expense, net, for the year ended December 31, 2020 increased to $12.1 million compared to other expense, net, that was de minimis for the year ended December 31, 2019. The increase was due to expense reimbursements related to the NRG Agreement and NEDO Agreement, as in the Successor period there are no longer related parties. In addition, $4.0 million was released into other expense (income), net, from contingent liability during the year related to LS Power’s acquisition of EVgo.

 

Net Loss

 

Net loss for the year ended December 31, 2020 was $48.2 million, a $23.5 million, or 95%, increase compared to $24.8 million for the year ended December&nb