Blink Charging Co. annual report, FY2011

Business context and reporting period

The supplied filing is Car Charging Group, Inc.’s Form 10-K for the fiscal year ended December 31, 2011, filed April 16, 2012. It does not identify Blink Charging Co. as the registrant, and it reports a full fiscal year rather than a 2011 Q4-only period. The company described itself as a development-stage EV charging network operator that installs and owns charging stations at partner properties, shares service revenue with property owners, and also sells charging equipment.

At year-end, the company reported agreements with 37 entities and 46 installed charging stations; management also stated that 39 stations were installed during 2011. It remained in an early deployment stage, with significant charging-service use not expected until after Q4 2012.

Key financial metrics

At December 31, 2011, cash was $406,859, current assets were $742,811, current liabilities were $368,903, and working capital was approximately $373,908. Total assets were $1,323,566 and total liabilities were $368,903. The balance sheet showed $3,750 of past-due related-party convertible notes; the remaining notes and accrued interest were converted into common stock in February 2012. Derivative liabilities were reduced from $3,467,864 at year-end 2010 to zero at year-end 2011.

Material changes versus the prior comparable period

• Revenue began in 2011: $59,490 from equipment sales and $2,799 from service fees, compared with no operating revenue in 2010. Gross profit was only $242.
• Net loss narrowed by about $4.57 million, but results included a $3,488,615 gain from changes in derivative fair value. Management attributed this largely to agreements eliminating reset features in convertible notes and warrants; the gain is not equivalent to operating cash generation.
• Operating cash use increased by about $497,000 year over year, while investment in charging stations and other depreciable property rose to $466,515 from $173,826.
• Common shares outstanding increased from 1,796,817 at December 31, 2010 to 37,384,414 at December 31, 2011. The company also had 10,918,169 warrants outstanding at year-end.

Outlook, risks, contingencies, and unusual items

• Management anticipated no substantial revenue or profit in the near term and said significant capital would be needed during 2012 and 2013 to expand the network. It believed available resources could fund operations through at least December 31, 2012, but this depended on assumptions and future financing.
• The company relied on equity financing and had an accumulated deficit of $13,650,817. In November 2011 it agreed to sell 2.5 million shares for $2.5 million; $999,000 was recorded as stock subscriptions receivable at year-end. The filing reports receipt of the next installment on April 3, 2012.
• A master agreement committed the company to purchase 250 charging stations during the year, at more than $3,100 per unit. Failure to take the specified units could require reimbursement of certain discounts on previously received units.
• A $1 million Pennsylvania grant for EV infrastructure on the Pennsylvania Turnpike was subject to final documentation and carried spending limits and funding obligations.
• A consulting firm’s $41,000 claim was reserved in accounts payable. A former officer and director filed actions in March and April 2012 concerning compensation, warrant rights, and termination; management said it would defend the claims, but the outcome was uncertain.
• Management identified a material weakness in internal control over financial reporting: no independent audit committee or audit committee financial expert. The auditor expressed an unqualified opinion on the financial statements but did not attest to internal-control effectiveness.
• Other risks included limited operating history, dependence on EV-market adoption and additional capital, competition, thin OTCBB trading, and potential shareholder dilution. The company had no independent directors or separate board committees.

Important facts for investors to verify

• Confirm the registrant and corporate relationship: this source filing names Car Charging Group, Inc., not Blink Charging Co.
• Reconcile station deployment disclosures (39 installed during 2011 versus 46 installed by year-end) and verify the number operating and generating service revenue.
• Assess the quality and repeatability of 2011 results, especially the derivative fair-value gain, minimal gross profit, and operating cash burn.
• Verify actual cash availability, collection of stock-subscription proceeds, financing needs, and the company’s ability to meet the charging-station purchase commitment.
• Review dilution exposure, including the large increase in common shares, outstanding warrants, and preferred stock voting and conversion terms.
• Check the resolution and financial effects of the former officer’s lawsuits, the consulting-fee claim, and the Pennsylvania grant conditions; also track remediation of the disclosed control weakness.