Blink Charging Co. — Q2 2019 Form 10-Q Summary
Business context and reporting period
Quarterly report for the three and six months ended June 30, 2019. Blink owns and operates EV charging stations and sells charging equipment and network services. At quarter-end, it reported approximately 14,687 stations deployed across its network, other networks, and host-owned non-networked installations.
Financial performance and liquidity
- Q2 revenue: $715,828, up 15% from $624,418 a year earlier. Gross profit was $314,544 versus $170,775; gross margin was approximately 44% versus 27%.
- Q2 results: Operating loss was $2.38 million and net loss was $2.24 million, compared with losses of $1.85 million and $1.23 million, respectively, in Q2 2018. Diluted loss per share was $0.09 versus $0.05.
- First-half revenue and results: Revenue was $1.29 million, up 6%. Gross profit was $368,502, approximately 28.5% of revenue, versus $342,596, approximately 28.1%. Net loss was $4.13 million, compared with net income of $971,303 in 2018; prior-year results included significant nonrecurring gains. First-half loss per share was $0.16.
- Cash flow: Operating activities used $5.21 million in the first half, versus $7.90 million in 2018; investing activities used $203,357. No financing cash was raised in the first half. Cash declined $5.42 million to $10.12 million.
- Balance sheet: Marketable securities were $3.03 million; total cash and marketable securities were about $13.16 million. Notes payable were $10,000. Total liabilities were $4.22 million, including operating lease liabilities. Stockholders’ equity was $12.65 million.
Material changes versus prior periods
- Q2 product sales rose 97% to $282,014, reflecting the second-generation charger rollout and a one-time shipment of older product. Network fees grew 36%; company-owned charging revenue declined 2%, partly attributed to fewer Nissan No Charge-To-Charge subscribers.
- First-half cost of product sales increased to $301,120, including a $197,240 provision for slow-moving and obsolete inventory. Compensation expense fell 32% year over year, mainly because 2018 included larger noncash stock awards, while general and administrative and other operating expenses increased.
- Q2 operating expenses rose 34% to $2.70 million. Higher staffing and management compensation, network software work, rent, and internal-control and tax-compliance costs contributed. Q2 net loss worsened despite higher gross profit, in part because other income was lower than in 2018.
- First-half 2018 other income included substantial gains from settlements and changes in fair value of liabilities; these make the reported year-over-year shift from income to loss less indicative of underlying operating performance.
Outlook, risks, contingencies, and unusual items
- Going concern: Management and the auditor-identified financial-statement disclosures state that substantial doubt exists about Blink’s ability to continue as a going concern within one year after issuance. Management expected available cash to fund operations into Q3 2020 while seeking additional debt or equity; there were no financing commitments, and no assurance of financing on acceptable terms.
- Management expects continued operating cash outflows and rising operating expenses; profitability depends on generating significantly higher product revenue. The filing provides no specific revenue or earnings guidance.
- Remaining purchase commitments for second-generation chargers totaled $1.44 million, with $1.26 million due on delivery. Blink also estimated approximately $167,000 of repairs for company-owned deployed chargers.
- Disclosure controls were deemed ineffective at June 30, 2019 because previously reported material weaknesses in internal control over financial reporting continued. Management described remediation work with an outside advisory firm.
- Risks include substantial historical losses, dependence on future financing, potential dilution, customer concentration (one customer represented 32% of receivables), and litigation. A former executive asserted a $90,000 unpaid-bonus claim; Blink was evaluating it. The filing also describes a dispute over approximately $53,000 in legal-service invoices and potential claims related to pre-acquisition 350 Green debts.
- Blink reported that federal and state corporate income tax returns for 2014–2018 had not been filed. It stated it had incurred no tax liability other than required minimums and related interest and penalties.
Important facts for investors to verify
- Reconcile working capital: the balance sheet yields $11.76 million ($15.73 million current assets less $3.97 million current liabilities), and the narrative also gives $11.76 million, but one MD&A liquidity table lists $11.89 million.
- Assess the assumptions underlying management’s projected cash runway to Q3 2020, given first-half operating cash use and the absence of committed financing.
- Track whether charger sales, network fees, and recurring charging revenue grow enough to offset operating costs, and whether inventory provisions or repair costs recur.
- Review progress in remediating internal-control weaknesses, the tax-return filing status, and resolution of the bonus and other legal matters.
- Consider potential dilution: as of August 12, 2019, the filing reported 6,835,811 warrants, 128,408 options, and 1,642,628 shares issuable upon conversion of Series D preferred stock.