| Summary of significant accounting policies | Note 2 – Summary of significant accounting policies Basis of presentation and consolidation The CRIS Business Combination was accounted for as a reverse recapitalization in accordance with accounting principles generally accepted in the United States of America (“GAAP”), primarily due to the fact that EVgo Holdings continues to control the Company through its ownership of the Class B common stock. As described in Note 1, EVgo Services was acquired by EVgo Holdco on the Holdco Merger Date and EVgo HoldCo was partially acquired by EVgo, through EVgo’s acquisition of EVgo OpCo Units, on the CRIS Close Date. EVgo Services’ condensed consolidated financial statements and notes for the periods presented prior to the Holdco Merger Date are labeled “Predecessor.” The Company’s condensed consolidated financial statements and notes as of and after the Holdco Merger Date are labeled “Successor.” The condensed consolidated financial statements are unaudited and prepared in accordance with GAAP for interim financial information, as set by the Financial Accounting Standards Board (“FASB”). Accordingly, they do not include all of the information and disclosures required by GAAP for complete financial statements. References to GAAP issued by the FASB in these notes to the condensed consolidated financial statements are to the FASB Accounting Standards Codification (“ASC”). The unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries and all intercompany transactions have been eliminated in consolidation. The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the operating results for the full year ending December 31, 2021 or any other period. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements of EVgo Holdco as of December 31, 2020 and for the year then ended included in the Company’s Current Report on Form 8-K filed with the SEC on July 8, 2021 (the “Super 8-K”). Change in Presentation of Costs During the third quarter of 2021, the Company changed its presentation of certain costs, including network platform service fees, certain storage and freight costs, pre-operational rent/license fees, call center expenses and certain costs related to field and customer operations. In previous periods, these costs were included as a component of cost of sales. The Company now presents these costs as a component of general and administrative expenses. Management believes this presentation better reflects the nature of the costs, financial performance of the Company, enables better alignment between revenues and cost of sales and provides more clarity about the changes in cost of sales and general and administrative expenses, resulting in improved financial reporting and comparability and consistency of financial results. All periods presented have been retrospectively revised to reflect the effects of the change to cost of sales and general and administrative expenses. There was no net impact to loss from operations, net income (loss) attributable to EVgo or net income (loss) per share for any periods presented. The condensed consolidated balance sheets, condensed consolidated statements of equity (deficit), and the condensed consolidated statements of cash flows are not affected by changes in the presentation of certain costs. The following is a reconciliation for the respective periods: General and Administrative (in thousands) Cost of Sales Expenses For the three months ended September 30, 2021 Computed under previous method $ 9,054 $ 19,662 Change in presentation (1,220) 1,220 As adjusted $ 7,834 $ 20,882 For the three months ended September 30, 2020 Computed under previous method $ 6,953 $ 7,162 Change in presentation (834) 834 As adjusted $ 6,119 $ 7,996 For the nine months ended September 30, 2021 Computed under previous method $ 23,343 $ 42,983 Change in presentation (3,244) 3,244 As adjusted $ 20,099 $ 46,227 For the period from January 16, 2020 through September 30, 2020 Previously reported $ 18,131 $ 19,731 Change in presentation (2,529) 2,529 As adjusted $ 15,602 $ 22,260 For the period from January 1, 2020 through January 15, 2020 Previously reported $ 1,136 $ 1,084 Change in presentation (163) 163 As adjusted $ 973 $ 1,247 Emerging growth company The Company is 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 it 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. The Company has 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, the Company, 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 the Company’s 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. Use of estimates The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Significant estimates made by management include, but are not limited to, charging station depreciable lives, costs associated with asset retirement obligations, the fair value of the share-based compensation, earnout liability, warrant liability and the fair value measurements of assets and liabilities allocated for acquired businesses. Accordingly, the actual results could differ significantly from those estimates. Concentration of business and credit risk The Company maintains its cash accounts in a commercial bank. The total cash balances held in a commercial bank are secured by the Federal Deposit Insurance Corporation up to $250,000. At various times throughout the year, the Company had uninsured balances. The Company has not experienced any losses on such accounts and believes it is not exposed to any significant credit risk on cash. The Company mitigates its risk with respect to cash by maintaining its deposits at high-quality financial institutions and monitoring the credit ratings of those institutions. The Company had accounts receivable with two customers that comprised 50% and two customers that comprised 66% of the Company’s total accounts receivable as of September 30, 2021 and December 31, 2020, respectively. For the nine months ended September 30, 2021 and 2020, one customer represented 12% and two customers represented 23% of total revenue, respectively. The Company had one major vendor that represented approximately 13%, 10% and 19% of total purchases for the nine months ended September 30, 2021 and 2020 and for the period from January 1, 2020 through January 15, 2020, respectively. Reclassifications Certain reclassifications to our previously reported financial information have been made to conform to the current period presentation. Cash and restricted cash Cash and restricted cash include cash held in cash depository accounts in major banks in the United States and are stated at cost. The Company does not hold any highly liquid assets that can be considered as cash equivalents. Cash that is held by a major bank and has restrictions on its availability to us is classified as restricted cash. The Company had unused letters of credit of approximately $0.7 million, as of September 30, 2021, associated with the construction of its charging stations and in connection with one of its operating leases. Cash collateralizing these letters of credit are classified as restricted cash. The Company had no unused letters of credit as of December 31, 2020. Accounts receivable and allowance for doubtful accounts The allowance for doubtful accounts was $0.6 million and $0.3 million as of September 30, 2021 and December 31, 2020, respectively. Cloud implementation costs The Company capitalizes certain implementation costs incurred related to cloud computing arrangements that are service contracts. Such costs are amortized on a straight-line basis over the term of the associated hosting arrangement plus any reasonably certain renewal period. Any capitalized amounts related to such arrangements are recorded within prepaid expense and other current assets and within non-current assets on the consolidated balance sheets. Property, equipment and software Property and equipment include charging stations and other technical installations, construction in process and charging equipment. Property, equipment and software are stated at cost less accumulated depreciation and amortization. Depreciation for property, equipment and software is computed using the straight-line method over the estimated useful lives of the assets, which are approximately three The Company has adopted the provisions of ASC Topic 350-40, Internal-Use Software Customer deposits Customer deposits include prepayments that are refundable. Once deposits are no longer refundable, the Company reclassifies the amounts related to those contracts to deferred revenue. Customer deposits are also comprised of funds that have been received to offset future expenses of the Company for certain marketing expenses reimbursed by customers. Derivative financial instruments The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, Derivatives and Hedging (“ASC 815”). For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the condensed consolidated balance sheets as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet dates. Earnout liability In accordance with ASC 815, Earnout Shares (as defined in Note 3) are recorded as a derivative liability at fair value on the CRIS Close Date, since they are not indexed to the Company’s Class A common stock. They are subsequently remeasured at each reporting date through the change in fair value of earnout liability in the condensed consolidated statements of operations. The estimated fair value of the contingent earnout liability is determined using a Monte Carlo simulation using a distribution of potential outcomes on a monthly basis over the Earnout Period (as defined in Note 14), prioritizing the most reliable information available. The assumptions utilized in the calculation are based on the achievement of certain stock price milestones, including the current common stock price, expected volatility, risk-free rate, expected term and dividend rate. Until its settlement, the contingent earnout liability is categorized as a Level 3 fair value measurement because the Company estimates projections during the Earnout Period utilizing unobservable inputs. Contingent earnouts involve certain assumptions requiring significant judgment and actual results can differ from assumed and estimated amounts. Share-based compensation The Company recognizes compensation expense for all awards granted based on the grant date fair value. Compensation expense for awards that vest in increments is recognized based on an accelerated attribution method. The Company has elected to account for forfeitures as they occur. Sales tax collected from customers As a part of the Company’s normal course of business, sales taxes are collected from customers. Sales taxes collected are remitted, in a timely manner, to the appropriate governmental tax authority on behalf of the customer. The Company’s policy is to present revenue and costs net of sales taxes. Income taxes EVgo and SPAC Sub are each classified as a corporation for federal income tax purposes and are subject to U.S. federal and state income taxes. EVgo and SPAC Sub report U.S. federal income taxes on a consolidated basis and will be taxed at the prevailing corporate tax rates Deferred taxes are recorded using the asset and liability method, whereby tax assets and liabilities are determined based on the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. We regularly evaluate the valuation allowances established for deferred tax assets for which future realization is uncertain. In assessing the realizability of deferred tax assets, we consider both positive and negative evidence, including scheduled reversals of deferred tax assets and liabilities, projected future taxable income, tax planning strategies and results of recent operations. If, based on the weight of available evidence, it is more likely than not that the deferred tax assets will not be realized, a valuation allowance is recorded. ASC Topic 740, Income Taxes Tax receivable agreement In connection with the CRIS Business Combination, we entered into a Tax Receivable Agreement (“Tax Receivable Agreement”) with EVgo Holdings (along with permitted assigns, the “TRA Holders”) and LS Power Equity Advisors, LLC, as agent after the 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 the TRA Holders’ OpCo Units pursuant to the CRIS Business Combination or the exercise of the redemption or call rights set forth in the EVgo 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 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, 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). Amounts payable under the Tax Receivable Agreement are accrued by a charge to income when it is probable that a liability has been incurred and the amount is estimable. In the interim period, no transactions occurred that would result in a cash tax savings benefit that would trigger the recording of a liability based on the terms in the Tax Receivable Agreement. Warrant liability The Company accounts for its issued and outstanding warrants (such warrants, as described in Note 8, the “Warrants”) in accordance with the guidance contained in ASC 815 under which the Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies the Warrants as liabilities at their fair value and adjusts the Warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the statements of operations. The fair value of the redeemable warrants sold as part of the units in the Company, which consisted of one share of Class A common stock and one half of one redeemable warrant of the Company (the “Units”), in the Company’s IPO (“Public Warrants”) has been estimated using the Public Warrants’ quoted market price at September 30, 2021. The Private Placement Warrants were valued using a Modified Black Scholes Option Pricing Model for initial and subsequent measurements. Newly adopted accounting standards In January 2017, the FASB issued ASU 2017-04, Goodwill and Other, Simplifying the Test for Goodwill Impairment . In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes Recently issued accounting standards In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) Leases In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments Financial Instruments – Credit Losses In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606 Revenue From Contracts With Customers On May 3, 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options |
