Blink Charging Co. (then Car Charging Group, Inc.) — Q1 2016 Form 10-Q
Reporting period: Three months ended March 31, 2016; filed August 3, 2016. The company acquires and installs EV charging stations, operates charging services and a network, and sells charging equipment. Dollar amounts below are U.S. dollars.
Financial performance and position
| Metric | Q1 2016 | Q1 2015 / comparison |
|---|---|---|
| Revenue | $863,540 | $1,291,301; down 33% |
| Gross profit / margin | $93,362 / 10.8% | $232,163 / 18.0% |
| Operating loss | $1,984,124 | $3,581,141 |
| Net loss | $4,400,792 | $3,682,033 |
| Net loss attributable to common shareholders | $4,719,192; $0.06 per share | $3,937,770; $0.05 per share |
| Cash used in operating activities | $823,037 | $2,621,345 |
- Revenue mix: charging services $384,470 (down 1%); grants and rebates $99,780 (down 85%); equipment sales $290,205 (up 31%); other revenue $89,085 (up 158%). Management attributed the grant decline mainly to a non-recurring 2015 grant.
- Gross margin fell despite lower cost of revenue, which management linked partly to renegotiated network-provider fees. Operating expenses declined 46% to $2,077,486, primarily from lower compensation and general and administrative expenses.
- Other expense was $2,416,668, chiefly including a $2,014,408 loss from revaluing warrant liabilities. This non-cash item drove the year-over-year increase in net loss despite improved operating loss.
- Cash was $191,924 at March 31, 2016. Current assets were $1,632,206 versus current liabilities of $18,959,939; working-capital deficit was $17,327,733. Total liabilities were $19,088,211, and stockholders’ deficiency was $16,756,852.
- Reported notes and convertible notes included $50,000 of past-due secured convertible debt, $352,067 current notes payable, and $1,268 long-term notes payable. The balance sheet also included substantial accrued obligations, including $2,654,598 in public-information fees and $3,283,067 in derivative liabilities.
- Financing activities provided $831,566, mainly from $900,000 gross proceeds from Series C preferred stock and warrants, partly offset by issuance costs and debt repayments. Cash increased only $2,693 during the quarter.
Changes, outlook, and risks
- Revenue fell 33% year over year, largely from lower grant revenue; equipment and other revenue grew. Operating loss improved, but net loss worsened because of warrant revaluation expense and higher preferred dividends.
- Management said the business was being funded month to month and would require external capital over the next 12 months. The filing states that substantial doubt exists about the company’s ability to continue as a going concern; no assurance was given that financing would be available on acceptable terms. Management warned that failure to raise funds could require cost cuts or curtailment of development and marketing, and could ultimately force discontinuation of operations.
- After quarter-end, the company reported receiving an additional $467,120 under milestone-based Series C financing. It also disclosed three short-term convertible notes totaling $400,000 issued in June and July to an entity wholly owned by the Executive Chairman, bearing 18% annual interest and convertible at $0.70 per share, with associated warrants. The filing also described a broader March financing agreement with milestone-dependent proceeds.
- Potential dilution was substantial: 116,267,698 potentially dilutive shares were excluded from diluted EPS as anti-dilutive, including preferred stock, warrants, options, and convertible debt. Common shares outstanding were 79,480,389 at quarter-end.
- Contingencies include an ITT Cannon arbitration over a $737,425 charging-cable contract and lawsuits involving 350 Green, including a post-quarter amendment adding the company to a JNS dispute for unspecified damages. Subsequent events also included legal-fee claims of $178,893 and $172,645; the company said the invoices had already been accrued.
- Disclosure controls were deemed ineffective due to material weaknesses, including inadequate written controls, limited accounting resources and expertise, insufficient segregation of duties and communication, and ineffective audit-committee oversight. The company also indicated it had not filed all required reports during the preceding 12 months.
- Management described plans to grow equipment sales and charging/network services, and to pursue occupancy fees, subscriptions, and advertising; the filing provides no quantified revenue or earnings guidance.
Important facts for investors to verify
- Whether the company obtained sufficient external financing after the filing and met its near-term obligations, including overdue debt and accrued liabilities.
- The terms, funding status, repayment or conversion of the Executive Chairman-affiliated notes, and the resulting warrant and equity dilution.
- The nature and potential cash consequences of registration-rights and public-information penalties, litigation, and other accrued claims.
- Whether the company remediated its material weaknesses and restored timely SEC filing compliance.
- Whether recurring charging-service and equipment economics can support improved gross margins and reduce dependence on grants and financing.