Blink Charging Co. (then Car Charging Group, Inc.) — Q1 2015 Form 10-Q
The unaudited quarter ended March 31, 2015 covers Car Charging Group, Inc. and subsidiaries, which operated EV charging stations and the Blink Network and sold charging equipment. The filing was signed March 30, 2016, nearly a year after the reporting period. The company marked that it had not filed all required reports on time.
Key financial results
| Metric | Q1 2015 | Q1 2014 |
|---|---|---|
| Revenue | $1.291 million | $356,000 |
| Gross profit (loss) | $283,000 | ($957,000) |
| Gross margin | 21.9% | (269.1%) |
| Operating expenses | $3.813 million | $3.189 million |
| Loss from operations | ($3.530 million) | ($4.146 million) |
| Net loss | ($3.682 million) | ($3.859 million) |
| Net loss attributable to common shareholders | ($3.938 million) | ($3.859 million) |
| Basic and diluted loss per share | ($0.05) | ($0.05) |
| Cash used in operating activities | ($2.621 million) | ($2.095 million) |
- Revenue rose about 263%. Charging-service revenue increased 52% to $390,000; grant and rebate revenue rose to $646,000 from $63,000; equipment sales increased to $221,000 from $37,000. Management attributed grant revenue principally to an agreement with the Bay Area Air Quality Management District.
- Gross profit improved by $1.240 million, helped by higher revenue and lower depreciation and amortization following 2014 asset impairments. Compensation expense rose 53% to $2.785 million, including $875,000 of share-based compensation related to the new COO agreement. Total stock-based compensation was $1.760 million.
- Cash fell $1.304 million during the quarter, from $1.627 million to $323,000. Investing activities used $130,000; financing provided $1.447 million, including $1.5 million released from escrow for a prior Series C preferred-stock financing.
- At March 31, current assets were $2.359 million and current liabilities were $18.885 million, a working-capital deficit of $16.526 million. Total liabilities were $19.128 million, including $3.682 million of derivative liabilities. Accumulated deficit was $68.474 million and total stockholders’ deficiency was $14.000 million.
- Current and long-term notes payable totaled about $702,000, including a $200,000 secured convertible note. The much larger reported obligations were accounts payable, accrued expenses, deferred revenue and derivative liabilities.
Material changes, outlook and risks
- Despite improved revenue and operating loss, the common-shareholder loss increased about 2%, to $3.938 million, partly because of $202,000 in Series C preferred dividends and financing-related expenses. A $598,000 gain from changes in warrant fair value partly offset expenses; the company also recorded a $463,500 penalty for delinquent SEC filings and $276,000 of investor warrant expense.
- Management stated that substantial doubt existed about the company’s ability to continue as a going concern. It expected to need external funding over the following 12 months, had no committed new financing at the time, and said it was funding operations month to month. Failure to raise capital could force operating cuts or cessation of operations.
- Subsequent-event disclosures report additional preferred-stock financing, including $2.580 million received after quarter-end from escrow release and new Series C sales, and later financings. These events occurred after the quarter and should not be treated as Q1 operating results. Financing terms included warrants, preferred dividends and milestone conditions; the filing also describes potential liquidation-related provisions.
- Nissan terminated its joint marketing agreement on April 2, 2015, citing company default, and sought return of uninstalled chargers. The parties later agreed Nissan would take 28 chargers. The termination followed the quarter and put pressure on a partnership management said had contributed to service revenue growth.
- Other disclosed exposures include an ITT Cannon arbitration claim over $737,425 for charging cables, a legal-services arbitration demand for $87,167, and several claims involving 350 Green, including a $112,500 Sheetz claim. The filing does not provide a clear estimate of the total potential loss for these matters.
- Management concluded disclosure controls were not effective and identified material weaknesses in documentation, accounting resources and expertise, information flow, and audit-committee oversight. It also reported that required audits for 350 Green and Blink Network were incomplete, which management said could limit fundraising from non-accredited investors.
- Potential dilution was substantial: 38.2 million preferred-stock equivalents, 58.1 million warrants, 7.6 million options and 199,000 convertible-note equivalents were excluded from diluted loss per share as anti-dilutive. Series C had a stated liquidation preference of $8.393 million, including accrued dividends, at quarter-end.
Important facts for investors to verify
- Confirm the company’s actual cash runway, financing received and remaining financing commitments; distinguish post-quarter transactions from Q1 results.
- Review the precise status and terms of Series C preferred stock, milestone funding, dividends, redemption provisions and associated warrant dilution.
- Assess the continuing effects of Nissan’s termination, the charger arrangement, and whether grant-driven revenue growth was repeatable.
- Check the current status, estimated exposure and resolution of the disclosed arbitrations, 350 Green claims and other contingencies.
- Verify remediation of control weaknesses, completion of subsidiary audits, and whether the company’s delinquent SEC filings affected financing access or triggered further penalties.