Blink Charging Co. — Q1 2019 Form 10-Q
Reporting period: Three months ended March 31, 2019; financial statements are unaudited. Blink owns and operates EV charging stations and sells charging equipment and network services. At quarter-end, it reported approximately 14,314 networked stations deployed, including 5,082 commercial Level 2 units, 104 DC fast chargers and 1,670 residential units in service, plus approximately 7,458 non-networked residential stations.
Key financial results
| Metric | Q1 2019 | Q1 2018 |
|---|---|---|
| Revenue | $577,390 | $595,920 |
| Gross profit (margin) | $53,958 (9.3%) | $171,821 (28.8%) |
| Operating expenses | $2,369,446 | $3,973,760 |
| Operating loss | $(2,315,488) | $(3,801,939) |
| Net income (loss) | $(1,893,627) | $2,204,088 |
| Net loss attributable to common shareholders | $(1,893,627) | $(21,862,643) |
| Cash used in operating activities | $(2,911,857) | $(4,814,971) |
Revenue declined 3% year over year. Charging-service revenue rose 6% and network-fee revenue rose 30%, while product sales fell 24%, warranty revenue fell 46%, and grant and rebate revenue fell 59%. Gross margin contracted as cost of revenue rose 23% despite slightly lower revenue; product-sales cost included a $124,000 provision for slow-moving and obsolete inventory.
Compensation expense fell 57% to $1.60 million, mainly because Q1 2018 included substantially higher non-cash stock compensation. General and administrative expense rose to $257,136, and other operating expenses rose to $508,825. The reported 2018 profit and common-shareholder loss were heavily affected by unusual financing and equity items, including approximately $5.8 million gain on settlement with JMJ and a $23.46 million deemed dividend. Thus, the year-over-year common-shareholder loss comparison is not a straightforward measure of operating improvement.
Liquidity, debt and balance sheet
At March 31, 2019, cash was $12.60 million, marketable securities were $2.99 million, working capital was $14.00 million, total assets were $19.39 million, and stockholders’ equity was $14.62 million. Cash decreased $2.94 million during the quarter; investing activities used $27,392 and financing activities provided no cash. Gross notes payable were $10,000, down from $287,966 at year-end 2018. Total liabilities were $4.77 million. Accumulated deficit was $161.75 million.
Management stated that available cash should fund operating and capital requirements for at least 12 months from the filing date. The company said it may need further equity or debt financing thereafter; it had no commitment for new financing, and there is no assurance financing will be available on acceptable terms.
Outlook, risks and notable items
- No specific revenue, earnings, or other quantitative guidance was provided. Management said results for the quarter are not necessarily indicative of full-year results.
- Blink was not profitable and reported a $1.89 million quarterly net loss. Management warned that failure to raise capital, if needed, could require curtailing development, marketing and promotional activity and could ultimately threaten continued operations.
- Second-generation charging-station purchases carried a $1.01 million commitment, with $674,899 remaining due upon delivery after deposits. The company also estimated $113,000 of repairs to company-owned chargers.
- Warranty and repair costs increased as Blink worked through a backlog; it recorded an $11,000 liability for known backlog cases. Management estimated company-owned charger repairs at approximately $113,000.
- The company had not filed federal and state corporate income tax returns for 2014–2018; it reported no tax liability other than required minimums and related interest and penalties.
- Litigation included a dispute over approximately $53,069 in claimed service invoices, which Blink intended to defend. The company also disclosed potential claims by creditors of acquired 350 Green relating to pre-acquisition debts.
- In February 2019, the CEO asserted claims for unpaid bonuses of $90,000 for 2017 and $120,000 for 2018. The 2018 amount was paid; the 2017 claim was under evaluation.
- Management concluded disclosure controls were not effective because previously identified material weaknesses in internal control over financial reporting continued. Remediation efforts were underway.
- Potential dilution is substantial: the filing disclosed 6,836,661 warrants, 105,308 options and 1,642,628 shares issuable upon conversion of Series D preferred stock as of May 7, 2019, along with authorization for substantial additional common-share issuance.
Important facts for investors to verify
- Whether revenue growth in charging services and network fees can offset declining product sales and the sharp deterioration in gross margin.
- Cash-burn trajectory, committed equipment purchases and the basis for management’s stated 12-month liquidity runway.
- Progress and cost of the second-generation charger rollout, inventory disposition, and warranty backlog repairs.
- Availability and potential dilution of future financing, including conversion and exercise of outstanding securities.
- Remediation of material weaknesses and the status of overdue tax filings, litigation and the disputed 2017 bonus claim.