Blink Charging Co. 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion and analysis of the results of operations and financial condition for the years ended December 31, 2021 and 2020 should be read in conjunction with our consolidated financial statements and the notes to those consolidated financial statements that are included elsewhere in this Annual Report. This section generally discusses the results of our operations for the year ended December 31, 2021 compared to the year ended December 31, 2020. For a discussion of the year ended December 31, 2020 compared to the year ended December 31, 2019, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the Securities and Exchange Commission on March 31, 2021. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. See “Forward-Looking Statements.” At Blink Charging, our highest priority remains the safety, health and well-being of our employees, their families and our communities and we remain committed to serving the needs of our customers and business partners. The Covid-19 pandemic is a highly fluid situation and it is not currently possible for us to reasonably estimate the impact it may have on our financial and operating results. We will continue to evaluate the impact of the ongoing presence of Covid-19 and multiple Covid-19 variants on our business as we learn more and the impact of Covid-19 on our industry becomes clearer. Any one or more of these uncertainties, risks and other influences, could materially affect our results of operations and whether forward-looking statements made by us ultimately prove to be accurate. Our actual results, performance and achievements could differ materially from those expressed or implied in these forward-looking statements. Except as required by federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether from new information, future events or otherwise. Dollars are reported in thousands. 22 Overview We are a leading owner, operator, and provider of electric vehicle (“EV”) charging equipment and networked EV charging services in the rapidly growing U.S. and international markets for Evs. Blink offers residential and commercial EV charging equipment and services, enabling EV drivers to recharge at various location types. Blink’s principal line of products and services is its nationwide Blink EV charging network (the “Blink Network”) and Blink EV charging equipment, also known as electric vehicle supply equipment (“EVSE”) and other EV-related services. The Blink Network is a proprietary, cloud-based system that operates, maintains, and manages Blink charging stations and handles the associated charging data, back-end operations, and payment processing. The Blink Network provides property owners, managers, parking companies, and state and municipal entities (“Property Partners”), among other types of commercial customers, with cloud-based services that enable the remote monitoring and management of EV charging stations. The Blink Network also provides EV drivers with vital station information, including station location, availability, and fees (if applicable). In order to capture more revenues derived from providing EV charging equipment to commercial customers and to help differentiate Blink in the EV infrastructure market, Blink offers Property Partners a comprehensive range of solutions for EV charging equipment and services that generally fall into one of the business models below, differentiated by who bears the costs of installation, equipment, maintenance, and the percentage of revenue shared. ● In our Blink-owned turnkey business model, Blink incurs the costs of the charging equipment and installation. We own and operate the EV charging station and provide connectivity of the charging station to the Blink Network. In this model, which favors recurring revenues, Blink incurs most costs associated with the EV charging stations; thus, Blink retains substantially all EV charging revenues after deducting network connectivity and processing fees. ● In our Blink-owned hybrid business model, Blink incurs the costs of the charging equipment while the Property Partner incurs the costs of installation. We own and operate the EV charging station and provide connectivity of the charging station to the Blink Network. In this model, the Property Partner incurs the installation costs associated with the EV station; thus, Blink shares a more generous portion of the EV charging revenues with the Property Partner generated from the EV charging station after deducting network connectivity and processing fees. ● In our host-owned business model, the Property Partner purchases, owns and operates the Blink EV charging station and incurs the installation costs. Blink works with the Property Partner, providing site recommendations, connectivity to the Blink Network, payment processing, and optional maintenance services. In this model, the Property Partner retains and keeps all the EV charging revenues after deducting network connectivity and processing fees. ● In our Blink-as-a-Service model, Blink owns and operates the EV charging station, while the Property Partner incurs the installation costs. The Property Partner pays to Blink a fixed monthly fee and keeps all the EV charging revenues after deducting network connectivity and processing fees. Blink also operates a ride-sharing program through the Company’s wholly owned subsidiary, BlueLA Rideshare, LLC and the City of Los Angeles which allows customers the ability to rent electric vehicles through a subscription service. As part of Blink’s mission to facilitate the adoption of EVs through the deployment and operation of EV charging infrastructure globally, we are dedicated to slowing climate change by reducing greenhouse gas emissions caused by road vehicles. With the goal of leading the build out of EV charging infrastructure and of maximizing Blink’s share of the EV charging market, we have established strategic commercial, municipal and retail partnerships across industry verticals and encompassing numerous transit/destination locations, including airports, auto dealers, healthcare/medical, hotels, mixed-use, municipal sites, multifamily residential and condos, parks and recreation areas, parking lots, religious institutions, restaurants, retailers, schools and universities, stadiums, supermarkets, transportation hubs, and workplace locations. As of December 31, 2021, since our inception and excluding Blue Corner, we sold, deployed or acquired through acquisitions 20,684 chargers, of which, 7,366 were connected to the Blink Network (4,611 Level 2 publicly accessible commercial chargers, 1,536 Level 2 private commercial chargers, 91 DC Fast Charging EV publicly accessible chargers, 34 DC Fast Charging EV private chargers, and 1,095 residential Level 2 Blink EV chargers), 920 Level 2 chargers and 45 DC Fast Chargers are pending to be commissioned to the Blink Network, and the remaining 12,353 were non-networked, on other networks or international sales or deployments (159 Level 2 commercial chargers, 6 DC Fast Charging chargers, 10,099 residential Level 2 Blink EV chargers, 1,034 sold to other US networks, 990 sold internationally and 64 deployed internationally). The charger units herein are net of swap-out or replacement units. In addition, as of February 3, 2022, since its inception, our recently acquired subsidiary, Blue Corner, sold or deployed 11,677 independent charge points, all of which were on Blue Corner’s network, which was comprised of 4,566 Level 2 publicly accessible commercial independent charge points, 19 DC Fast Charging publicly assessable commercial independent charge points and 7,092 private L2, private DC Fast Charging and private residential independent charge points. The charger units reported herein are net of swap-out or replacement units. 23 As reflected in our consolidated financial statements as of December 31, 2021, we had a cash balance of $174,795, working capital of $176,303 and an accumulated deficit of $242,470. During the years ended December 31, 2021, 2020 and 2019, we incurred net losses of $55,119, $17,846 and $9,649, respectively. We have not yet achieved profitability. Recent Developments New Product and Service Offerings In January 2022, we announced the next generation of Level 2 chargers to enhance our offering for the residential and the Fleet multifamily residential markets. The HQ 200 Basic is a non-networked residential product and the HQ 200 Smart is a networked residential product. The MQ 200 product is an ideal product for the Fleet and multifamily residential markets. Furthermore , in January 2022, Blink announced the Fleet Management Portal targeted at commercial, municipal and federal fleets that are interested in electrifying their fleets for planning, managing, optimizing their fleets for departure and energy costs. May 2021 Acquisition of Blue Corner On May 10, 2021, pursuant to a Share Purchase Agreement dated April 21, 2021, the Company, through its wholly owned subsidiary in the Netherlands, Blink Holdings, B.V. closed on the acquisition from the shareholders of Blue Corner NV, a Belgian company (“Blue Corner”), of all of the outstanding capital stock of Blue Corner. Headquartered in Belgium, with sales representative offices in several other European cities, Blue Corner owns and operates an EV charging network across Europe. The acquisition of Blue Corner was made to enter the European market and provide an opportunity to expand the Company’s footprint in this region. The purchase price for the acquisition of all of Blue Corner’s outstanding capital stock was approximately $23,775 (or € 20,000), consisting of approximately $22,985 (or € 19,000) in cash and approximately $790 ( € 700) represented by 32,382 shares of the Company’s common stock (the “Consideration Shares”). The fair value of the Consideration Shares was calculated based on the average price of the Company’s common stock during the 30 consecutive trading days immediately preceding the closing date of the Share Purchase Agreement, which equaled $37.66 (or € 30.88) per share, reduced by a discount for illiquidity due to the 12 month lockup that exists on any sales or transfers. The Company executed management agreements with key Blue Corner personnel, including equity incentive packages consisting of additional shares of the Company’s common stock which is compensatory and not included in the purchase price for this acquisition. The Company entered into an escrow agreement pursuant to the Share Purchase Agreement, under which the Company paid approximately $2,100 ( € 1,725) of the purchase price into an escrow account for a period of up to 18 months following the closing to cover any losses or damages the Company may incur by reason of any misrepresentation or breach of warranty by Blue Corner under the Share Purchase Agreement. January 2021 Underwritten Public Offering In January 2021, we completed an underwritten registered public offering of 5,660,000 shares of our common stock at a public offering price of $41.00 per share. We received approximately $232,100 in gross proceeds from the public offering, and approximately $221,400 in net proceeds after deducting the underwriting discount and offering expenses paid by us. Our Chief Executive Officer and one other officer participated in the offering by selling a total of 550,000 shares of our common stock from the exercise of the underwriter’s option to purchase additional shares. The public offering was made pursuant to our automatic shelf registration statement on Form S-3 filed with the SEC on January 6, 2021 and prospectus supplement dated January 7, 2021. Barclays Capital Inc. served as the lead book-running manager of the offering. Government Grants Blink has established a full-time dedicated team to identify and process federal and state funding opportunities for EV charging infrastructure development. Blink is committed to pursuing EV charging development grant opportunities in all 50 states. Sources of funding include funding from the United States Department of Energy, the United States Department of Transportation, the VW mitigation settlement trust fund, and funding initiatives from utility service providers. During the year ended December 31, 2021, we were awarded approximately $26,000 in grants from federal and state agencies. Such awards are expected to be recognized as revenue in future periods based on the grant contract or service life of the chargers. Note on Covid-19 The Covid-19 pandemic has impacted global stock markets and economies. We closely monitor the impact of the continuing presence of Covid-19 and recently identified variants of Covid-19 which appear to be more transmissible and contagious than previous Covid-19 variants and have caused an increase in the number of Covid-19 cases globally. We have taken and continue to take precautions to ensure the safety of our employees, customers and business partners, while assuring business continuity and reliable service and support to our customers. We continue to receive orders for our products, although some shipments of equipment have been temporarily delayed. The global chip shortage and supply chain disruption has caused some delays in equipment orders from our contract manufacturer. As federal, state and local economies begin to return to pre-pandemic levels, we expect demand for charging station usage to increase, however, we are unable to predict the extent of such recovery due to the uncertainty of Covid-19. As a result, we are unable to predict the ultimate impact of equipment order delays, chip shortage and continuous presence of Covid-19 will have on our business, future results of operations, financial position, or cash flows. We intend to continue to monitor the impact of the Covid-19 pandemic on our business closely. For a further discussion of the risks, uncertainties and actions taken in response to the COVID-19 pandemic, refer to Item 1A “Risk Factors”. 24 Key Factors Affecting Operating Results We believe our performance and future success depend on several factors, including those discussed below: Competition - The EV charging equipment and service market is highly competitive, and we expect the market to become increasingly competitive as new entrants enter this growing market. Our products and services compete on product performance and features, the total cost of ownership, sales capabilities, financial stability, brand recognition, product reliability, and the installed base’s size. Existing competitors may expand their product offerings and sales strategies, and new competitors may enter the market. If our market share decreases due to increased competition, its revenue and ability to generate profits in the future may be impacted. Growth - Our growth is highly dependent upon the adoption by consumers of EVs, and we are subject to a risk of any reduced demand for EVs. The market for alternative fuel vehicles is relatively new, rapidly evolving, characterized by rapidly changing technologies, price competition, additional competitors, evolving government regulation and industry standards, frequent new vehicle announcements, long development cycles for EV original equipment manufacturers, and changing consumer demands and behaviors. Factors that may influence the purchase and use of alternative fuel vehicles, and specifically EVs, include perceptions about EV quality, safety (in particular with respect to lithium-ion battery packs), design, performance and cost; the limited range over which EVs may be driven on a single battery charge and concerns about running out of power while in use; improvements in the fuel economy of the internal combustion engine; consumers’ desire and ability to purchase a luxury automobile or one that is perceived as exclusive; the environmental consciousness of consumers; volatility in the cost of oil and gasoline; consumers’ perceptions of the dependency of the United States on oil from unstable or hostile countries and the impact of international conflicts; government regulations and economic incentives promoting fuel efficiency and alternate forms of energy; access to charging stations, standardization of EV charging systems and consumers’ perceptions about convenience and cost to charge an EV; and the availability of tax and other governmental incentives to purchase and operate EVs or future regulation requiring increased use of nonpolluting vehicles. If the market for EVs does not gain broad market acceptance or develops slower than we expect, our business, prospects, financial condition and operating results may be adversely affected. Regulations - Our business is subject to a variety of federal, state and international laws and regulations, including those with respect government incentives promoting fuel efficiency and alternate forms of energy, electric vehicles and others. These laws and regulations, and the interpretation or application of these laws and regulations, could change. Any reduction, elimination or discriminatory application of government subsidies and economic incentives because of policy changes, fiscal tightening or other reasons may result in diminished revenues from government sources and diminished demand for our products. In addition, new laws or regulations affecting our business could be enacted. These laws and regulations are frequently costly to comply with and may divert a significant portion of management’s attention. Changes to these applicable laws or regulations could affect business and/or harm our customers, thereby adversely affect our business, financial condition and results of operations. Expansion through Acquisitions - We may pursue strategic domestic and international acquisitions to expand our operations. Risks in acquisition transactions include difficulties in the integration of acquired businesses into our operations and control environment, difficulties in assimilating and retaining employees and intermediaries, difficulties in retaining the existing clients of the acquired entities, assumed or unforeseen liabilities that arise in connection with the acquired businesses, the failure of counterparties to satisfy any obligations to indemnify us against liabilities arising from the acquired businesses, and unfavorable market conditions that could negatively impact our growth expectations for the acquired businesses. Fully integrating an acquired company or business into our operations may take a significant amount of time. If we are unable to integrate or pursue strategic acquisitions, our financial condition and results of operations would be negatively impacted. 25 Results of Operations Year Ended December 31, 2021 Compared Year Ended December 31, 2020 For The Years Ended December 31, 2021 2020 Difference $ Difference% Revenues: Product sales $ 15,480 $ 4,432 $ 11,048 249 % Charging service revenue - company- owned charging stations 2,978 773 2,205 285 % Network fees 667 345 322 93 % Warranty 220 129 91 71 % Grant and rebate 400 22 378 1718 % Ride-sharing services 769 168 601 358 % Other 426 362 64 18 % Total Revenues 20,940 6,231 14,709 236 % Cost of Revenues: Cost of product sales 11,670 2,860 8,810 308 % Cost of charging services - company-owned charging stations 707 171 536 313 % Host provider fees 1,386 265 1,121 423 % Network costs 454 516 (62 ) -12 % Warranty and repairs and maintenance 892 331 561 169 % Ride-sharing services 1,458 226 1,232 545 % Depreciation and amortization 1,531 345 1,186 344 % Total Cost of Revenues 18,098 4,714 13,384 284 % Gross Profit 2,842 1,517 1,325 87 % Operating Expenses: Compensation 38,389 12,718 25,671 202 % General and administrative expenses 10,516 4,047 6,469 160 % Other operating expenses 9,606 2,566 7,040 274 % Total Operating Expenses 58,511 19,331 39,180 203 % Loss From Operations (55,669 ) (17,814 ) (37,855 ) 213 % Other Income (Expense): Interest income 9 16 (7 ) -44 % Dividend and interest income 294 - 294 N/A Loss on foreign exchange (124 ) - (124 ) N/A Gain on forgiveness of PPP loan 856 - 856 N/A Gain on settlement of accounts payable, net - 22 (22 ) -100 % Change in fair value of derivative and other accrued liabilities 69 (173 ) 242 -140 % Other (expense) income, net (554 ) 103 (657 ) -638 % Total Other Income (Expense) 550 (32 ) 582 -1819 % Net Loss $ (55,119 ) $ (17,846 ) $ (37,273 ) 209 % 26 Revenues Total revenue for the year ended December 31, 2021 was $20,940, compared to $6,231 for the year ended December 31, 2020, an increase of $14,709, or 236%. Revenue from product sales was $15,480 for the year ended December 31, 2021, compared to $4,432 for the year ended December 31, 2020, an increase of $11,048, or 249%. This increase was attributable to increased sales of commercial chargers, DC fast chargers and residential chargers when compared to the same period in 2020 as well as product sales of $5,285 from Blue Corner which we acquired in May 2021. Charging service revenue for Company-owned and operated charging stations was $2,978 for the year ended December 31, 2021, compared to $773 for the year ended December 31, 2020, an increase of $2,205, or 285%. The increase is due to the increase in utilization of chargers, an increased number of chargers on the Blink network as well as charging service revenues of $1,574 from Blue Corner which we acquired in May 2021. Network fee revenue was $667 for the year ended December 31, 2021, compared to $345 for the year ended December 31, 2020, an increase of $322, or 93%. The increase was attributable to increases in host owned units as well as billings and invoicing to Property Partners during the year ended December 31, 2021 compared to the year ended December 31, 2020. Warranty revenue was $220 for the year ended December 31, 2021, compared to $129 for the year ended December 31, 2020, an increase of $91, or 71% The increase was primarily attributable to an increase in warranty contracts sold for year ended December 31, 2021 compared to the year ended December 31, 2020. As of December 31, 2021, we recorded a liability of $10 which represents the estimated cost of existing backlog of known warranty cases. Grant and rebate revenues were $400 for the year ended December 31, 2021, compared to $22 for the year ended December 31, 2020, an increase of $378, or 1,718%. Grant and rebates relating to equipment and the related installation are deferred and amortized in a manner consistent with the depreciation expense of the related assets over their useful lives. The 2021 revenue was primarily related to recognition of $167 in various state grants associated with the installation of chargers during the year ended December 31, 2021 and the amortization of previous years’ grants and grants/rebates of $218 from Blue Corner which we acquired in May 2021. Ride-sharing services revenues were $769 during the year ended December 31, 2021, compared to $168 during the year ended December 31, 2020, an increase of $601, or 358%. These revenues are derived from ride-sharing subscription services through a program with the City of Los Angeles, which was associated with the acquisition of BlueLA in September 2020. Revenues for the year ended December 31, 2020 represents revenues from the date of acquisition in September 2020 to December 31, 2020. Other revenue increased by $64, or 18%, to $426 for the year ended December 31, 2021, compared to $362 for the year ended December 31, 2020. The increase was primarily attributable to Low Carbon Fuel Standard (“LCFS”) revenues generated during the year ended December 31, 2021 compared to the same period in 2020. We generate these revenues based on credits from the electricity utilized by our electric car charging stations as a byproduct from our charging services in the states of California and Oregon and the market value of the credits which declined in 2021 compared to 2020. Cost of Revenues Cost of revenues primarily consists of electricity reimbursements, revenue share payments to our Property Partner hosts, the cost of charging stations sold, connectivity charges provided by Telco and other network providers, warranty, repairs and maintenance services, and depreciation of our installed charging stations. Cost of revenues for the year ended December 31, 2021 were $18,098 as compared to $4,714 for the year ended December 31, 2020, an increase of $13,384, or 284%, of which, $6,201 was from Blue Corner which we acquired in May 2021. There is a degree of variability in our costs in relation to our revenues from period to period, primarily due to: ● electricity reimbursements that are unique to those Property Partner host agreements which provide for such reimbursements; ● revenue share payments are predicated on the contractual obligation under the property partner agreement and the revenue generated by the applicable chargers; ● cost of charging stations sold is predicated on the mix of types of charging stations and parts sold during the period; ● network costs are fixed in nature based on the number of chargers connected to the telco network regardless of whether the charger generates revenue; ● provisions for excess and obsolete inventory; and ● warranty and repairs and maintenance expenses are based on both the number of service cases completed during the period. 27 Cost of product sales increased by $8,810, or 308%, to $11,670 for the year ended December 31, 2021, compared to $2,860 for the year ended December 31, 2020. The increase was primarily due to the increase in product sales of commercial chargers, DC fast chargers and home residential chargers during the year ended December 31, 2021 compared to the same period in 2020 as well as cost of product sales of $4,750 from Blue Corner which we acquired in May 2021. Furthermore, the year ended December 31, 2021 included a reduction in the provision for excess and obsolete inventory of $105 relating primarily to the increased sales of residential home charger units. The year ended December 31, 2020 included a decrease in the provision for excess and obsolete inventory of $12. Cost of charging services for company-owned charging stations (electricity reimbursements) increased by $536, or 313%, to $707 for the year ended December 31, 2021, compared to $171 for the year ended December 31, 2020. The increase in 2021 was attributable to the mix of charging stations generating charging service revenues subject to electricity reimbursement Property Partner host fees increased by $1,121, or 423%, to $1,386 during the years ended December 31, 2021 as compared to $265 during the year ended December 31, 2020. This increase was a result of the mix of chargers generating revenue and their corresponding revenue share percentage payments to Property Partner hosts per their agreements. Network costs decreased by $62, or 12%, to $454 for the year ended December 31, 2021, compared to $516 for the year ended December 31, 2020. The decrease was primarily a result of non-capitalizable costs incurred during the 2020 period related to upgrades of our network systems. Warranty and repairs and maintenance costs increased by $561, or 169%, to $892 for the year ended December 31, 2021, compared to $331 for the year ended December 31, 2020. The increase in 2021 was attributable to significant efforts expended to reduce the backlog in warranty and repairs and maintenance cases. As of December 31, 2021, we recorded a liability of $73 which represents the estimated cost of existing backlog of known warranty cases. Cost of ride-sharing services was $1,458 during the year ended December 31, 2021 compared to $226 during the year ended December 31, 2020, an increase of $1,232, or 545%. These costs are from ride-sharing subscription services through a program with the City of Los Angeles, which was associated with the acquisition of BlueLA in September 2020. Cost of ride-sharing services for the year ended December 31, 2020 represents expenditures from the date of acquisition in September 2020 to December 31, 2020. Depreciation and amortization expense increased by $1,186, or 344%, to $1,531 for the year ended December 31, 2021, compared to $345 for the year ended December 31, 2020. The increase in depreciation expense was attributable to an increase in the number of EV charging stations including those from the Blue Corner acquisition which we acquired in May 2021 and vehicles purchased in December 2020 for the acquired BlueLA operations. Operating Expenses Compensation expense increased by $25,671, or 202%, to $38,389 (consisting of approximately $22,000 of cash compensation and approximately $16,400 of non-cash compensation) for the year ended December 31, 2021, compared to $12,718 (consisting of approximately $11,700 of cash compensation and approximately $1,000 of non-cash compensation) for the year ended December 31, 2020. The increase in compensation expense during the year ended December 31, 2021 was primarily associated with the investment in new personnel and compensation in executive, marketing, sales and operations departments as a result of the anticipated domestic and global growth of the Company. In addition, compensation expense during the year ended December 31, 2021 compared the same period in 2020 increased due to additional personnel in conjunction with the acquisitions of BlueLA and U-Go during 2020 and the acquisition of Blue Corner in May 2021. Also contributing to the increase in compensation expense for the year ended December 31, 2021 is the new employment agreement with our CEO which included increases in cash and equity compensation as well as one-time awards and payments in satisfaction of his 2020 bonuses of $1,280, a restricted stock grant of 19,504 shares of common stock, a grant of 23,862 stock options, and a salary catch-up since the expiration of his prior agreement in June 2020 of $295. Included in non-cash share-based compensation for the year ended December 31, 2021 was $12,570 related to the special four-year performance stock option for the CEO of the Company which is expected to be fully expensed by January 2022. General and administrative expenses increased by $6,469, or 160%, from $4,047 for the year ended December 31, 2020 to $10,516 for the year ended December 31, 2021. The increase was primarily attributable to increases in accounting, legal, investor relations, marketing, consulting and other professional service expenditures of $4,524. Furthermore, general and administrative expenses increased due to increases in amortization expense and acquisition related expenses of $976 and $355, respectively, related to the Blue Corner acquisition. Also contributing to the increase in general and administrative expenses were operating expenditures related to the 2020 acquisitions of BlueLA and U-Go and the acquisition of Blue Corner which occurred in May 2021. Other operating expenses increased by $7,040, or 274%, from $2,566 for the year ended December 31, 2020 to $9,606 for the year ended December 31, 2021. The increase was primarily attributable to increases in insurance, software licensing, hardware and software development costs, rent, annual shareholder meeting and property/use tax expenditures of $2,317. Furthermore, increases in travel and vehicle expenses of $401 and $39, respectively, contributed to the increase in other operating expenses for the year ended December 31, 2021 compared to the same period in 2020. Also contributing to the increase in other operating expenses were operating expenditures related to the 2020 acquisitions of BlueLA and U-Go and the acquisition of Blue Corner which occurred in May 2021. Also contributing to the increase in operating expenses is the settlement and payment of $1,000 by the Company to our CEO regarding the transfer of 260,000 shares of the Company’s common stock to a prior institutional investor. In addition, during 2021, we recorded a settlement loss of $2,680 related to the issuance of 60,000 shares of our common stock to our General Counsel in full settlement of any and all potential claims of harassment involving a former executive. 28 Other Expense Other income (expense) increased by $582 from ($32) for the year ended December 31, 2020 to $550 for the year ended December 31, 2021. The increase was primarily related to a gain of $856 related to the forgiveness of our PPP Loan in 2021, dividend and interest income of $294 in 2021, partially offset by recognition of losses of $438 related to the sale of marketable securities in 2021 which is included in other (expense) income, net. Net Loss Our net loss for the year ended December 31, 2021 increased by $37,273, or 209%, to $55,119 as compared to $17,846 for the year ended December 31, 2020. The increase was primarily attributable to an increase in compensation expense and general and administrative expenses in conjunction with current and anticipated growth of the Company. Total Comprehensive Loss Our total comprehensive loss for the year ended December 31, 2021 was $56,465 whereas our total comprehensive loss for the year ended December 31, 2020 was $18,029, an increase of $38,436 for the same reasons as noted above related to the increase in our net loss. Liquidity and Capital Resources We measure our liquidity in a number of ways, including the following: December 31, 2021 2020 Cash $ 174,795 $ 22,342 Working Capital $ 176,303 $ 19,580 Notes Payable (Gross) $ 10 $ 871 During the years ended December 31, 2021 and 2020, we financed our activities from proceeds derived from debt and equity financings which were raised in prior periods. A significant portion of the funds raised from the sale of capital stock has been used to cover working capital needs and personnel, office expenses and various consulting and professional fees. For the years ended December 31, 2021 and 2020, we used cash of $40,570 and $18,070, respectively, in operations. Our cash used for the year ended December 31, 2021 was primarily attributable to our net loss of $55,119, reduced by net non-cash expenses in the aggregate amount of $23,113, and by $8,564 of net cash used in changes in the levels of operating assets and liabilities. Our cash used for the year ended December 31, 2020 was primarily attributable to our net loss of $17,846, reduced by net non-cash expenses in the aggregate amount of $1,590, and by $1,814 of net cash used in changes in the levels of operating assets and liabilities. During the year ended December 31, 2021, net cash used in investing activities was $30,449, of which, $6,804 was provided in connection with the sale of marketable securities, which was offset by purchases of marketing securities of $7,209, $7,065 was used to purchase charging stations and other fixed assets, $22,742 (net of $243 cash acquired) was used as purchase consideration in connection with the Blue Corner acquisition and $237 was used for engineering services. During the year ended December 31, 2020, cash used in investing activities was $260, of which $2,774 was provided in connection with the sale of marketable securities and $2,547 was used to purchase charging stations and other fixed assets. In connection with the BlueLA acquisition and, in connection with the business combination, the Company acquired $3 of cash. Additionally, the Company acquired $30 of cash in connection with the U-Go Stations, Inc acquisition. 29 During the year ended December 31, 2021, net cash provided by financing activities was $223,271, of which, $221,333 was attributable to the net proceeds from the sale of common stock from the public offering, $1,693 was attributable to the proceeds from warrant exercises, $307 of proceeds were from option exercises, partially offset by $62 used to pay down our financing liability in connection with internal use software. During the year ended December 31, 2020, net cash provided by financing activities was $36,059, of which $856 was attributable to proceeds from our PPP loan, $19,175 was attributable to the net proceeds from the sale of common stock under our ATM program and $16,265 was attributable to the net proceeds from warrant exercises, partially offset by $72 used to pay down our liability in connection with internal use software and $165 used to repay notes payable. As of December 31, 2021, we had cash, working capital and an accumulated deficit of $174,795, $176,303 and $242,470, respectively. During the year ended December 31, 2021, we had a net loss of $55,119. In January 2021, we completed an underwritten registered public offering of 5,660,000 shares of our common stock at a public offering price of $41.00 per share. We received approximately $232,100 in gross proceeds from the public offering, and approximately $221,500 in net proceeds after deducting the underwriting discount and offering expenses paid by us. The public offering was made pursuant to our automatic shelf registration statement on Form S-3 filed with the SEC on January 6, 2021 and prospectus supplement dated January 7, 2021. We are using the net proceeds from the public offering to supplement our operating cash flows to fund EV charging station deployment and, when needed, to finance the costs of acquiring competitive and complementary businesses, products and technologies as a part of our growth strategy, and for working capital and general corporate purposes. We have not yet achieved profitability and expect to continue to incur cash outflows from operations. It is expected that our operating expenses will continue to increase and, as a result, we will eventually need to generate significant product revenues to achieve profitability. Historically, we have been able to raise funds to support our business operations, although there can be no assurance that we will be successful in raising significant additional funds in the future. We expect that our cash on hand will fund our operations for at least 12 months after the issuance date of the financial statements included in this Annual Report. Since inception, our operations have primarily been funded through proceeds received in equity and debt financings. We believe we have access to capital resources and continue to evaluate additional financing opportunities. There is no assurance that we will be able to obtain funds on commercially acceptable terms, if at all. There is also no assurance that the amount of funds we might raise will enable us to complete our EV development initiatives or attain profitable operations. Our operating needs include the planned costs to operate our business, including amounts required to fund working capital and capital expenditures. Our future capital requirements and the adequacy of our available funds will depend on many factors, including our ability to successfully commercialize our products and services, competing technological and market developments, and the need to enter into collaborations with other companies or acquire other companies or technologies to enhance or complement our product and service offerings. As EV charging requirements and technologies change, driven by federal, state or local regulatory authorities or by EV manufacturers or other technology or services providers for the charging station industry, in particular cellular connectivity technology, we may need to upgrade or adapt our charging station products or introduce new products in order to serve new vehicles, conform to new standards, or adapt new technologies to serve existing customers or new customers at substantial research, development, and network upgrades costs. During 2021, many cellular technology providers announced they will require the upgrade from 2G/3G connectivity to 4G LTE during 2022 (the “Upgrade”). The Upgrade is expected to cost approximately $1,750 to upgrade certain of our owned and operated EV charging stations. As a result of the Upgrade, during the fourth quarter of 2021, the Company deemed the Upgrade was a triggering event in accordance with ASC 360 and, accordingly, assessed the recoverability of its long-lived assets related to its US EV charging stations by performing a recoverability test and determined the estimated undiscounted future cash flows (which included the estimated cash outflows related to the estimated cost of the Upgrade) related to its EV chargers exceeded their carrying value and, accordingly, concluded no impairment existed as of December 31, 2021. Contractual Obligations and Commitments We entered into purchase commitments that include purchase orders and agreements in the normal course of business with contract manufacturers, parts manufacturers, vendors for research and development services and outsourced services. As of December 31, 2021, we had purchase commitment of approximately $32,000 of which approximately $13,000 is with a related party, which will become payable upon the suppliers’ delivery of the charging stations, services and other related items. The purchase commitments were made primarily for future sales, deployments of charging stations, inventory management planning and other related items, all of which are expected to be received during the next 12-24 months. Furthermore, the Company has operating lease obligations over the next five years of approximately $2,100. These operating lease obligations are primarily related to corporate office space, warehousing, and parking spaces related to our ride-sharing services. 30 Critical Accounting Estimates The preparation of financial statements and related disclosures must be in conformity with U.S. GAAP. These accounting principles require us to make estimates and judgments that can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenue and expense during the periods presented. We believe that the estimates and judgments upon which it relies are reasonably based upon information available to us at the time that it makes these estimates and judgments. To the extent that there are material differences between these estimates and actual results, our financial results will be affected. The accounting policies that reflect our more significant estimates and judgments and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results are described below. The following is not intended to be a comprehensive list of all of our accounting policies or estimates. Our accounting policies are more fully described in Note 2 – Summary of Significant Accounting Policies, in our financial statements included at the end of this Annual Report. Revenue Recognition We recognize revenue primarily from five different types of contracts: Charging service revenue – company-owned charging stations - Revenue is recognized at the point when a particular charging session is completed. Product sales – Revenue is recognized at the point where the customer obtains control of the goods and the Company satisfies its performance obligation, which generally is at the time it ships the product to the customer. Network fees and other – Represents a stand-ready obligation whereby the Company is obligated to perform over a period of time and, as a result, revenue is recognized on a straight-line basis over the contract term. Network fees are billed annually. Ride-sharing services – Primarily related to ride-sharing services agreement between the Company’s wholly-owned subsidiary, BlueLA Rideshare, LLC and the City of Los Angeles which allows customers the ability to rent electric vehicles through a subscription service. The Company recognizes revenue over the contractual period of performance of the subscription. Other – Primarily related to charging service revenue from non-company-owned charging stations. Revenue is recognized from non-company-owned charging stations at the point when a particular charging session is completed in accordance with a contractual relationship between the Company and the owner of the station. Other revenues also comprise revenues generated from alternative fuel credits. The timing of the Company’s revenue recognition may differ from the timing of payment by its customers. A receivable is recorded when revenue is recognized prior to payment and the Company has an unconditional right to payment. Alternatively, when payment precedes the provision of the related services, the Company records deferred revenue until the performance obligations are satisfied. Grants, rebates and alternative fuel credits, which are not within the scope of ASC 606, pertaining to revenues and periodic expenses are recognized as income when the related revenue and/or periodic expense are recorded. Grants and rebates related to EV charging stations and their installation are deferred and amortized in a manner consistent with the related depreciation expense of the related asset over their useful lives over the useful life of the charging station. Stock-Based Compensation We measure the cost of services received in exchange for an award of equity instruments based on the fair value of the award on the date of grant. The fair value amount of the shares expected to ultimately vest is then recognized over the period for which services are required to be provided in exchange for the award, usually the vesting period. The estimation of stock-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period that the estimates are revised. We account for forfeitures as they occur. Long-Lived Assets Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. We assess the recoverability of our long-lived assets by monitoring current selling prices of EV charging units in the open market, the adoption rate of various auto manufacturers in the EV market and projected EV charging utilization at various public EV charging stations throughout our network in determining fair value. An impairment loss would be recognized when estimated future cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. 31 Income Taxes We account for income taxes pursuant to the asset and liability method of accounting for income taxes pursuant to FASB ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for taxable temporary differences and operating loss carry forwards. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Operating Leases We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in our consolidated balance sheets. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use an incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Goodwill Goodwill is the excess of consideration paid for an acquired entity over the fair value of the amounts assigned to assets acquired, including other identifiable intangible assets, and liabilities assumed in a business combination. To determine the amount of goodwill resulting from a business combination, the Company performs an assessment to determine the acquisition date fair value of the acquired company’s tangible and identifiable intangible assets and liabilities. Goodwill is required to be evaluated for impairment on an annual basis or whenever events or changes in circumstances indicate the asset may be impaired. An entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. These qualitative factors include: macroeconomic and industry conditions, cost factors, overall financial performance and other relevant entity-specific events. If the entity determines that this threshold is met, then the Company may apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The Company determines fair value through multiple valuation techniques and weights the results accordingly. The Company is required to make certain subjective and complex judgments in assessing whether an event of impairment of goodwill has occurred, including assumptions and estimates used to determine the fair value of its reporting units. The Company has elected to perform its annual goodwill impairment review on November 1 of each year. Recently Issued Accounting Standards Our recently issued accounting standards are included in Note 2 - “Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements included in this Annual Report.