Blink Charging Co. — Q3 2019 Form 10-Q
Reporting period: Three and nine months ended September 30, 2019. The financial statements are unaudited. Blink owns and operates EV charging stations, sells charging equipment, and provides network services under turnkey, hybrid, and host-owned models. It reported approximately 14,719 charging units sold or deployed.
Financial performance and liquidity
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Revenue | $764,486 | $546,844 | $2,057,704 | $1,767,182 |
| Gross profit | $121,247 | $106,763 | $489,749 | $449,359 |
| Gross margin | 15.9% | 19.5% | 23.8% | 25.4% |
| Operating loss | $(2,788,152) | $(3,522,580) | $(7,486,961) | $(9,214,495) |
| Net loss | $(2,622,989) | $(2,148,631) | $(6,753,836) | $(1,164,630) |
| Net loss per share, basic | $(0.10) | $(0.09) | $(0.26) | $(1.33) |
Cash flow: Operating activities used $7.37 million in the first nine months of 2019, versus $10.58 million in the comparable 2018 period. Investing activities used $177,418. There was no financing cash flow in 2019, compared with $31.74 million provided in 2018. Cash declined by $7.55 million to $7.99 million.
Balance sheet at September 30, 2019: Cash was $7.99 million and marketable securities were $3.03 million; working capital was $9.03 million. Total assets were $14.86 million, total liabilities $4.80 million, and stockholders’ equity $10.06 million. Notes payable were $10,000. Operating lease liabilities totaled approximately $402,000, including current and non-current amounts. Accumulated deficit was $166.61 million.
Material changes versus comparable periods
- Q3 revenue rose 40%, primarily on higher Generation 2 equipment sales. Nine-month revenue rose 16%; product sales increased 85%, while company-owned charging revenue was nearly flat.
- Gross profit increased, but gross margin contracted in both comparisons. Product costs included inventory obsolescence provisions of $93,000 in Q3 and $217,000 for the nine-month period, related to older-generation inventory.
- Q3 net loss widened 22%, mainly because other income was much lower than in 2018; lower operating expenses partly offset this. Nine-month net loss also increased, largely reflecting the absence of substantial 2018 gains and other financing-related accounting items. The 2018 common-shareholder loss included a $23.46 million deemed dividend, making per-share and attributable-loss comparisons less directly comparable.
- Compensation expense fell year over year, including lower non-cash compensation, while general and administrative and other operating expenses increased over the nine-month period. Costs included network software work, European-market travel, office rent, insurance, and control-remediation efforts.
Outlook, risks, contingencies, and unusual items
- Going concern: Management disclosed substantial doubt about the company’s ability to continue as a going concern within one year after issuance of the statements. It expected available cash to fund operations into Q3 2020 while pursuing additional capital, but had no committed new financing. Failure to raise funds could require cuts to development, marketing, or other activity, or could ultimately force cessation and liquidation.
- No formal performance guidance: The filing provides no specific revenue, earnings, or profitability forecast. Management expected continued operating cash outflows and said expenses would continue to increase; achieving profitability depends on significant product revenue growth.
- Execution and market risks: Generation 2 commercialization, product demand, competing technology, and the ability to secure financing or strategic partners affect future capital needs. The Nissan No Charge-To-Charge program was expected to end by June 2020, and management attributed some charging-revenue pressure to fewer program subscribers.
- Controls: Management concluded disclosure controls were ineffective because previously identified material weaknesses in internal control over financial reporting remained. Remediation work was ongoing; management did not report that the weaknesses had been resolved.
- Dilution: The filing reported 6,840,049 warrants, 128,008 options, and 1,642,628 shares issuable upon conversion of Series D preferred stock as of November 11, 2019. Exercise or conversion could dilute existing holders.
- Commitments and contingencies: The company reported remaining charging-equipment purchase commitments, including a stated $1.26 million payable upon delivery. It also disclosed litigation over approximately $53,000 of claimed legal-service invoices, which Blink said it intended to defend, and potential claims involving pre-acquisition 350 Green liabilities.
- Customer concentration: One significant customer represented 31% of receivables at September 30, 2019; a significant customer also accounted for 12% of Q3 revenue and 29% of Q3 product sales. Certain charging-service revenue was concentrated in another customer.
Most important facts for investors to verify
- Whether Blink secured financing after the filing and whether its stated cash runway into Q3 2020 remained achievable.
- Subsequent quarterly cash burn, liquidity, and progress toward sustainable revenue and profitability.
- Generation 2 sales, product gross margins, and the extent of further obsolete-inventory charges or repair costs.
- Progress in remediating material weaknesses and the effectiveness of financial reporting controls.
- Potential dilution from warrants, options, preferred-stock conversion, and any additional securities issued to raise capital.
- The resolution and financial exposure, if any, from disclosed litigation, 350 Green claims, and equipment purchase commitments.