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, 2022 and 2021 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, 2022 compared to the year ended December 31, 2021. For a discussion of the year ended December 31, 2021 compared to the year ended December 31, 2020, 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, 2021, which was filed with the SEC on March 31, 2022. 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. U.S. dollars are reported in thousands except for share and per share amounts 25 Overview We are a leading manufacturer, 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 networks (the “Blink Networks”) and Blink EV charging equipment, also known as electric vehicle supply equipment (“EVSE”) and other EV-related services. The Blink Networks are 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 Networks provide 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 Networks also provide EV drivers with vital station information, including station location, availability and fees (as 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, we incur 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 Networks. In this model, which favors recurring revenues, we incur most costs associated with the EV charging stations; thus, we retain substantially all EV charging revenues after deducting network connectivity and processing fees. Typically, our agreement with the Property Partner lasts seven years with extensions that can bring it to a total of up to 21 years. ● In our Blink-owned hybrid business model, we incur 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 to the Blink Networks. In this model, the Property Partner incurs the installation costs associated with the EV station; thus, we share 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. Typically, our agreement with the Property Partner lasts 5 years with extensions that can bring it up to 15 years. ● In our host-owned business model, the Property Partner purchases, owns and operates the Blink EV charging station and incurs the installation costs. We work with the Property Partner by providing site recommendations, connectivity to the Blink Networks, 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, we own and operate the EV charging station, while the Property Partner incurs the installation costs. The Property Partner pays us a fixed monthly fee for the service and keeps all the EV charging revenues after deducting network connectivity and processing fees. Typically, our agreement with the Property owner lasts 5 years. We also own and operate a ride-sharing program through our wholly owned subsidiary, BlueLA Rideshare, LLC (“BlueLA”), with the City of Los Angeles. This program allows customers the ability to rent electric vehicles through a subscription service and charge those cars through our charging stations. As part of our 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 being a leader in the build out of EV charging infrastructure and of maximizing our 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, 2022, we sold or deployed 66,478 chargers, of which 50,167 were in Blink’s Networks (31,320 Level 2 publicly accessible commercial chargers, 17,613 Level 2 private commercial chargers, 199 DC Fast Charging EV publicly accessible chargers, 116 DC Fast Charging EV private chargers, and 919 residential Level 2 Blink EV chargers, inclusive of 4,802 chargers pending to be commissioned). Included in the Blink Networks are 4,851 chargers owned by us. The remaining 16,478 were non-networked, on other networks or international sales or deployments (937 Level 2 commercial chargers, 151 DC Fast Charging chargers, 11,611 residential Level 2 Blink EV chargers, 2,311 sold to other U.S. networks, 1,221 sold internationally and 80 deployed internationally). The charger units noted above are net of swap-out or replacement units. As reflected in our consolidated financial statements as of December 31, 2022, we had a cash balance of $36,562, working capital of $48,962 and an accumulated deficit of $334,030. During the years ended December 31, 2022, 2021 and 2020, we incurred net losses of $91,560, $55,119 and $17,846, respectively. We have not yet achieved profitability. 26 Recent Developments February 2023 Underwritten Public Offering In February 2023, we completed an underwritten registered public offering of 8,333,333 shares of our common stock at a public offering price of $12.00 per share. We received approximately $100,000 in gross proceeds from the public offering, and approximately $95,000 in net proceeds after deducting the underwriting discount and offering expenses paid by us. In addition, the underwriters have a 30-day option to purchase up to an additional 1,249,999 shares of common stock from us at the public offering price, less the underwriting discounts and commissions. The public offering was made pursuant to our automatic shelf registration statement on Form S-3 ASR filed with the SEC on January 6, 2021, and prospectus supplement dated February 8, 2023. Barclays acted as the sole book-running manager for the offering. H.C. Wainwright & Co., Roth Capital Partners and ThinkEquity acted as co-managers for the offering. 2022 Acquisitions SemaConnect On June 15, 2022, we completed the acquisition of SemaConnect, Inc., a Delaware corporation (“SemaConnect”) pursuant to an Agreement and Plan of Merger, dated as of June 13, 2022 (“Acquisition Agreement”), by and among our company, Blink Sub I Corp., Blink Sub II LLC, SemaConnect and Shareholder Representative Services LLC (solely in its capacity as the stockholders’ representative). Following the closing of the acquisition, SemaConnect became a wholly owned subsidiary of our company. SemaConnect is a leading provider of EV charging infrastructure solutions in North America. The aggregate purchase price was $200,573, which included excess working capital of $1,229 and closing date cash of $3,639. The consideration paid in the acquisition consisted of: (a) $86,736 in cash, (i) of which $46,136 was paid at the closing of the Acquisition Agreement (“Closing”) and (ii) the remaining $40,600 is payable (bearing interest at 7%) until not earlier than nine months following the Closing and not later than three years following the Closing; and (b) 7,454,975 shares of our common stock with a fair value of $113,837. Included in the cash consideration was $8,103 related to payments due to stock option holders of SemaConnect. Subsequent to the closing of the acquisition, payments to the stock option holder were made after the stock option holder signed an option cash-out agreement. Electric Blue Limited On April 22, 2022, pursuant to a Sale and Purchase Agreement dated April 22, 2022, we acquired, through our Dutch subsidiary, Blink Holdings B.V., all of the outstanding capital stock of Electric Blue Limited, a private company limited by shares and registered in England and Wales (“EB”), from its shareholders. Headquartered in St. Albans, United Kingdom, EB is a leading provider of electric vehicle charging and sustainable energy solutions and technologies. EB works with local authorities and businesses to create the infrastructure the United Kingdom needs to meet the 2050 net zero emissions target and prepare for the 2030 ban on the sale of new petrol and diesel cars and vans. The fair value purchase price for the acquisition of all of EB’s outstanding capital stock was $19,317, consisting of $12,651 in cash, 152,803 shares of our common stock with a fair value of $2,852, plus the contingent consideration described in the following paragraph. In addition, provided EB reaches specified gross revenue or new EV charger installation targets over the three years post-closing, we also agreed to issue up to approximately $6,400 in additional shares of our common stock to EB shareholders (the “Contingent Consideration”). The Contingent Consideration was recorded at an estimated fair value of $3,814. As of December 31, 2022, the estimated fair value of the Contingent Consideration was $1,316. Of the purchase price to be issued to the EB shareholders at closing, approximately $650 in cash and 25,466 shares of common stock are being held in escrow accounts for periods of 12 months (cash escrow) and 18 months (stock escrow), respectively, following the closing to cover any losses or damages we may incur by reason of, among other things, any misrepresentation or breach of warranty by EB under the Sale and Purchase Agreement. At-the-Market Offering On September 2, 2022, we entered into a Sales Agreement (“Sales Agreement”) with Barclays Capital Inc., BofA Securities, Inc., HSBC Securities (USA) Inc., ThinkEquity LLC, H.C. Wainwright & Co., LLC and Roth Capital Partners, LLC (the “Agents”) to conduct an “at-the-market” (ATM) equity offering program pursuant to which we may issue and sell from time to time shares of our common stock, having an aggregate offering price of up to $250,000 through the Agents, as our sales agents (the “ATM”). 27 Subject to the terms and conditions of the Sales Agreement, the Agents will use their commercially reasonable efforts to sell shares of our common stock from time to time, based upon our instructions. We have no obligation to sell any of the shares and may at any time suspend sales under the Sales Agreement or terminate the Sales Agreement in accordance with its terms. We have provided the Agents with customary indemnification rights, and the Agents will be entitled to an aggregate fixed commission of up to 3% of the gross proceeds from shares sold. The shares are being offered pursuant to the Sales Agreement under our automatic shelf registration statement on Form S-3ASR and a prospectus supplement filed with SEC on January 6, 2021 and September 2, 2022, respectively. As of December 31, 2022, 558,721 shares have been sold pursuant to the ATM program, representing gross proceeds of approximately $7,697. We currently anticipate using the net proceeds from the sale of our shares of common stock under the ATM program to supplement our operating cash flows to fund EV charging station deployment and our acquisition growth plan. We also plan to use any remaining proceeds we receive for working capital and other corporate purposes. The amounts and timing of our use of the net proceeds will depend on a number of factors, such as the timing and progress of our EV charging station deployment efforts, the timing and progress of any partnering and collaboration efforts and technological advances. New Product and Service Offerings In January 2023, we announced the new products which included the Vision, EQ 200, Series 3, PQ 150, and 30kW DC Fast Charger, which are designed to serve the increasing demands of the growing EV markets across the U.S., Europe, Asia and Latin America. The reimagined Vision is designed as a two-in-one solution to attract and captivate drivers and provide site hosts and advertisers an innovative media solution. With a newly designed 55” LCD screen capable of displaying static and dynamic advertising, the Vision is the ideal point-of-charge advertising solution with two 80 amp, 19.2kW ports that can charge simultaneously. The Vision offers easy payment via RFID, Apple Pay, Google Wallet, and all major credit cards. Additional features include cloud connectivity via built-in 4G LTE signal, retractable cable management and dual cable configurations with two universal J1772 plugs and a built-in camera for additional security. Site owners can benefit from charging and advertising revenue share models for this product. The EQ 200 is an intelligent, affordable, and scalable charging solution designed for European and South American markets. Offering up to 22kW of power and an innovative modular design, this product fits any location and can be tailored to the specific needs of market segments. The EQ 200 is prepared for the future by supporting technologies like ISO-15118, OCPP 2.0, and bi-directional charging, also known as Vehicle-to-Grid (V2G). The charger also offers customization and rebranding options available to fit each user’s needs. The Series 3 is a flexible and versatile EV charging solution designed for both two- and three-wheeler EVs. Designed for the APAC and Latin American markets, the Series 3 provides up to 15 amps of output in a compact form, making it ideal for installation at small shops and residential and commercial parking areas. Its built-in electric metering allows customers to manage electricity costs with an intuitive, smart network connection. Further, up to 45 charging points can be connected with a single communication gateway. The PQ 150 is a smart charging cable designed for residential charging in European markets. Offering up to 22kW of power, the PQ 150 is simple and easy-to-use with no installation necessary and provides the highest safety level on the market today. With Bluetooth, Wi-Fi and optional SIM/GSM & GPS functionality, this product offers advanced technology in a simple, sleek design. The Series 9 30kW DC Fast Charger is our latest solution for fast charging across global markets. A small footprint charging station designed for speed and flexibility, this product was designed to quickly charge tomorrow’s EVs today and offers the perfect balance of size and power, providing up to 100 amps and 1,000 volts of output. A 7-inch LCD touchscreen display provides drivers with an intuitive charging process and the charger integrates with the newly redesigned Blink Networks over a Wi-Fi, ethernet, or 4G connection, offering high-performance, compatibility, and remote monitoring. Letter of Intent and Loan On April 19, 2022, we signed a non-binding letter of intent with a U.S. privately-held company (the “Target”) providing for the possible purchase by us of all of the outstanding shares of the Target from its shareholders in consideration for cash, a note and, under certain circumstances, shares of common stock of a subsidiary of our company or, if such subsidiary’s shares are not publicly- traded, common stock of our company. In addition, in the letter of intent, our company agreed to extend a loan of $1,250 to the Target (the “Initial Loan”), of which $1,000 was loaned by us during the second quarter of 2022 and $250 was loaned in July 2022 pursuant to a 6% Secured Convertible Promissory Note signed by the Target. Under the terms of the Initial Loan, if we proceed with the possible stock purchase of the Target, the principal and accrued interest amount under the Initial Loan will be deducted from the cash consideration paid to the Target’s shareholders at closing. If, however, we determine not to proceed with the possible stock purchase of the Target, the Initial Loan will continue to accrue 6% interest per annum, and mature on the earliest of (i) a “Change of Control” (as defined in such note); (ii) the closing of the next investment round by the Target; (iii) an Event of Default (as defined in such note); or (iv) May 1, 2027. 28 On September 22, 2022, the Company signed a letter agreement concerning the extension of the development work that the Target was performing for a wholly owned subsidiary of the Company (the “Subsidiary”) under a Master Service Agreement that was executed on April 29, 2022 (the “Letter Agreement”). Under the Letter Agreement, the Company agreed to extend additional loans to the Target to enable it to expand the development work and to expedite the delivery of the development outcomes (the “Product”) to the Subsidiary. In addition, the Company extended to the Target additional funding of $350 for hiring additional developers and an additional $600 to support the Target’s operations until the development work is finalized and accepted by the Company. The total amount of the loans is $950 (the “Development Loan”), which had been loaned to the Target as of December 31, 2022. The Development Loan was made pursuant to a 6% Grid Secured Convertible Promissory Note and an additional letter agreement, dated September 22, 2022, signed by the Target with terms and conditions similar to those of the Initial Loan (the “Grid Note”). The Development Loan has additional terms which provide that the Company may forfeit the Development Loan if the Target timely delivers the Product and the Company fails to close the acquisition of the Target shortly thereafter. If, however, the Target fails to complete the development work on time, the Company will not be obligated to close the acquisition of the Target and the entire Development Loan will be payable to the Company under the same terms of the Initial Loan. Note on Covid-19 and Current Economic Conditions 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 have reopened and returns 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. Additionally, other recent macroeconomic events including rising inflation, slowing economic growth, changes in U.S. and foreign government monetary policies, supply chain disruptions, fluctuations in currency exchange rates and the Russian invasion of Ukraine have led to further economic uncertainty. As a result, we are unable to predict the ultimate impact of equipment order delays, chip shortage, the impact of other economic conditions 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 and other global economic factors on our business closely. For a further discussion of the risks, uncertainties and actions taken in response to the Covid-19 pandemic, see “Item 1A Risk Factors.” 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. 29 Results of Operations Year Ended December 31, 2022 Compared Year Ended December 31, 2021 (in thousands) For The Years Ended December 31, 2022 2021 Difference $ Difference% Revenues: Product sales $ 46,018 $ 15,480 $ 30,538 197 % Charging service revenue - company-owned charging stations 6,866 2,978 3,888 131 % Network fees 4,370 667 3,703 555 % Warranty 928 220 708 322 % Grant and rebate 296 400 (104 ) -26 % Ride-sharing services 1,268 769 499 65 % Other 1,393 426 967 227 % Total Revenues 61,139 20,940 40,199 192 % Cost of Revenues: Cost of product sales 31,428 11,670 19,758 169 % Cost of charging services - company-owned charging stations 1,466 707 759 107 % Host provider fees 3,935 1,386 2,549 184 % Network costs 1,463 454 1,009 222 % Warranty and repairs and maintenance 2,795 892 1,903 213 % Ride-sharing services 2,137 1,458 679 47 % Depreciation and amortization 3,113 1,531 1,582 103 % Total Cost of Revenues 46,337 18,098 28,239 156 % Gross Profit 14,802 2,842 11,960 421 % Operating Expenses: Compensation 60,602 38,389 22,213 58 % General and administrative expenses 27,826 10,516 17,310 165 % Other operating expenses 15,645 9,606 6,039 63 % Total Operating Expenses 104,073 58,511 45,562 78 % Loss From Operations (89,271 ) (55,669 ) (33,602 ) 60 % Other Income (Expense): Interest income (1,529 ) 9 (1,538 ) -17089 % Dividend and interest income 454 294 160 N/A Loss on foreign exchange (600 ) (124 ) (476 ) N/A Gain on forgiveness of PPP loan - 856 (856 ) N/A Change in fair value of derivative and other accrued liabilities 66 69 (3 ) -4 % Other (expense) income, net (372 ) (554 ) 182 -33 % Total Other Income (Expense) (1,981 ) 550 (2,531 ) -460 % Loss Before Income Taxes $ (91,252 ) $ (55,119 ) $ (36,133 ) 66 % Provision for income taxes (308 ) - (308 ) N/A Net Loss $ (91,560 ) $ (55,119 ) $ (36,441 ) 66 % 30 Revenues Total revenue for the year ended December 31, 2022 was $61,139, compared to $20,940 for the year ended December 31, 2021, an increase of $40,199, or 192%. Revenue from product sales was $46,018 for the year ended December 31, 2022, compared to $15,480 for the year ended December 31, 2021, an increase of $30,538, or 197%. This increase was attributable to increased sales of commercial chargers, DC fast chargers and residential chargers when compared to the same period in 2021. Also contributing to the increase in product sales was $3,242 from EB, which we acquired in April 2022, and $14,305 from SemaConnect, which we acquired in June 2022. Charging service revenue for company-owned and operated charging stations was $6,866 for the year ended December 31, 2022, compared to $2,978 for the year ended December 31, 2021, an increase of $3,888, or 131%. The increase is due to the increase in utilization of chargers and an increased number of chargers on the Blink Networks. Also contributing to the increase in charging service revenue was $528 from EB, which we acquired in April 2022. Network fee revenue was $4,370 for the year ended December 31, 2022, compared to $667 for the year ended December 31, 2021, an increase of $3,703, or 555%. 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, 2022, as compared to the year ended December 31, 2021. Also contributing to the increase in network fee revenue was $3,199 from SemaConnect, which we acquired in June 2022. Warranty revenue was $928 for the year ended December 31, 2022, compared to $220 for the year ended December 31, 2021, an increase of $708, or 322%. The increase was primarily attributable to an increase in warranty contracts sold for the year December 31, 2022 compared to the year ended December 31, 2021. As of December 31, 2022, we recorded a liability of $176 which represents the estimated cost of existing backlog of known warranty cases. Grant and rebate revenues were $296 for the year ended December 31, 2022, compared to $400 for the year ended December 31, 2021, a decrease of $104, or 26%. 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 decrease in revenue was primarily related to the timing of the amortization of previous years’ state grants/rebates associated with the installation of chargers during the years ended December 31, 2022 and 2021. Ride-sharing services revenues were $1,268 during the year ended December 31, 2022, compared to $769 during the year ended December 31, 2021, an increase of $499, or 65%. 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. Other revenue increased by $967, or 227%, to $1,393 for the year ended December 31, 2022, compared to $426 for the year ended December 31, 2021. The increase was primarily attributable to higher Low Carbon Fuel Standard (LCFS) credits generated during the year ended December 31, 2022 compared to the same period in 2021. We generate these 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. 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 networks, warranty, repairs and maintenance services, and depreciation of our installed charging stations. Cost of revenues for the year ended December 31, 2022 were $46,337 as compared to $18,098 for the year ended December 31, 2021, an increase of $28,239, or 156%. 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. Cost of product sales increased by $19,758, or 169%, to $31,428 for the year ended December 31, 2022, compared to $11,670 for the year ended December 31, 2021. 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, 2022 compared to the same period in 2021, as well as cost of product sales of $2,885 from EB, which we acquired in April 2022, and $6,619 from SemaConnect, which we acquired in June 2022. Cost of charging services for company-owned charging stations (electricity reimbursements) increased by $759, or 107%, to $1,466 for the year ended December 31, 2022, compared to $707 for the year ended December 31, 2021. The increase in 2022 was attributable to the mix of charging stations generating charging service revenues subject to electricity reimbursement. Host provider fees increased by $2,549, or 184%, to $3,935 during the year ended December 31, 2022, compared to $1,386 during the year ended December 31, 2021. This increase was a result of the mix of chargers generating revenue and their corresponding revenue share percentage payments to Property Partner hosts pursuant to their agreements, as well as a reduction in utilization during 2021 due to COVID-19. Network costs increased by $1,009, or 222%, to $1,463 for the year ended December 31, 2022, compared to $454 for the year ended December 31, 2021. The increase was a result of the increase in charging stations on our network and costs incurred related to the upgrading of our network system compared to the same period in 2021. Also contributing to the increase in network costs was $781 from SemaConnect, which we acquired in June 2022. Warranty and repairs and maintenance costs increased by $1,903, or 213%, to $2,795 for the year ended December 31, 2022, compared to $892 for the year ended December 31, 2021. The increase in 2022 was attributable to significant efforts expended to reduce the backlog in warranty and repairs and maintenance cases. Also contributing to the increase was $99 from EB, which we acquired in April 2022, and $98 from SemaConnect, which we acquired in June 2022. As of December 31, 2022, we recorded a liability of $176 which represents the estimated cost of existing backlog of known warranty cases. 31 Cost of ride-sharing services was $2,137 during the year ended December 31, 2022, compared to $1,458 during the year ended December 31, 2021, an increase of $679, or 47%. 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. Depreciation and amortization expense increased by $1,582, or 103%, to $3,113 for the year ended December 31, 2022, compared to $1,531 for the year ended December 31, 2021. The increase in depreciation expense was attributable to an increase in the number of EV charging stations and vehicles associated with the ride-share services. Operating Expenses Compensation expense increased by $22,213, or 58%, to $60,602 (consisting of approximately $44,689 of cash compensation and approximately $15,913 of non-cash compensation) for the year ended December 31, 2022, compared 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. The increase in compensation expense for the year ended December 31, 2022 compared to the same period in 2021 was primarily related to increases in personnel and compensation in executive, marketing, sales and operations departments as a result of the anticipated domestic and international growth of our company. In addition, compensation expense during the year ended December 31, 2022 compared to the same period in 2021 increased due to additional personnel in conjunction with the acquisitions of SemaConnect and EB during the second quarter of 2022. General and administrative expenses increased by $17,310, or 165%, from $10,516 for the year ended December 31, 2021 to $27,826 for the year ended December 31, 2022. The increase was primarily attributable to increases in accounting, legal, investor relations, marketing, consulting , recruiting, software licensing and other professional service expenditures of $7,724. Further, general and administrative expenses increased due to increases in amortization expense of $5,119 related to the acquisitions of SemaConnect and EB during the second quarter of 2022. Also contributing to the increase in general and administrative expenses were acquisition-related expenses of $3,933 related to the 2022 acquisitions of SemaConnect and EB. Other operating expenses increased by $6,039, or 63%, from $9,606 for the year ended December 31, 2021 to $15,645 for the year ended December 31, 2022. The increase was primarily attributable to increases in insurance, software expense, rent, hardware and software development costs and property/use tax expenditures of $4,616. Further, increases in travel and vehicle expenses of $1,754, contributed to the increase in other operating expenses for year ended December 31, 2022 compared to the same period in 2021. Also contributing to the increase in other operating expenses were operating expenditures related to the 2022 acquisitions of SemaConnect and EB. During the year ended December 31, 2022, we incurred expenses of $ 3,809 related to the network upgrade to certain of our company’s EV charging stations. Other (Expense) Income Other expense increased by $2,531 from other income of $550 for the year ended December 31, 2021 to other expense of $1,981 for the year ended December 31, 2022. The increase in other expenses is primarily attributable to interest expense of $1,529 associated with the deferred payment from the SemaConnect acquisition. Also contributing to the increase in other expenses is loss on foreign currency exchange of $600. Provision For Income Taxes Provision for income taxes was $308 during the year ended December 31, 2022 as compared to $0 during the year ended December 31, 2021. The Company’s statutory federal income tax rate for 2022 and 2021 was 21.0%. The Company’s effective tax rate for 2022 and 2021 was 0.3% and 0.0%, respectively. The increase in the provision for income taxes and the effective tax rate was related to certain subsidiaries which generated net income during the year ended December 31, 2022. Net Loss Our net loss for the year ended December 31, 2022 increased by $36,441, or 66%, to $91,560 as compared to $55,119 for the year ended December 31, 2021. The increase was primarily attributable to an increase in compensation expense and general and administrative expenses in conjunction with current and anticipated growth of our company. Total Comprehensive Loss Our total comprehensive loss for the year ended December 31, 2022 was $92,822 whereas our total comprehensive loss for the year ended December 31, 2021 was $56,465, an increase of $36,357 for the same reasons as noted above related to the increase in our net loss. 32 Liquidity and Capital Resources We measure our liquidity in a number of ways, including the following: December 31, 2022 2021 Cash $ 36,562 $ 174,795 Working Capital $ 48,962 $ 176,303 Debt $ 40,618 $ 10 During the years ended December 31, 2022 and 2021, 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, 2022 and 2021, we used cash of $82,365 and $40,570, respectively, in operations. Our cash used for the year ended December 31, 2022 was primarily attributable to our net loss of $91,560, reduced by net non-cash expenses in the aggregate amount of $26,551, and by $17,356 of net cash used in changes in the levels of operating assets and liabilities. 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. During the year ended December 31, 2022, net cash used in investing activities was $58,787, of which, $38,338 was used as cash consideration for SemaConnect (net of cash acquired), $11,360 was used as cash consideration for EB (net of cash acquired), $6,595 was used to purchase charging stations and other fixed assets, $2,200 was used as a note receivable to a target, and $294 was related to the payment of engineering costs that were capitalized . 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, 2022, net cash provided by financing activities was $6,393, of which, $220 was provided by the exercise of warrants and options, offset by $315 used to pay down our liability in connection with internal use software, $217 was used to pay down our finance lease liability and $681 was used to pay down notes payable this was offset by $7,386 was attributable to the net proceeds from the sale of common stock from the public offering. 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. As of December 31, 2022, we had cash, working capital and an accumulated deficit of $36,562, $48,962 and $334,030, respectively. During the year ended December 31, 2022, we had a net loss of $91,560. In February 2023, we completed an underwritten registered public offering of 8,333,333 shares of our common stock at a public offering price of $12.00 per share. We received approximately $100,000 in gross proceeds from the public offering, and approximately $95,000 in net proceeds after deducting the underwriting discount and offering expenses paid by us. In addition, the underwriters have a 30-day option to purchase up to an additional 1,249,999 shares of common stock from us at the public offering price, less the underwriting discounts and commissions. The public offering was made pursuant to our automatic shelf registration statement on Form S-3 ASR filed with the SEC on January 6, 2021, and prospectus supplement dated February 8, 2023. Barclays acted as the sole book-running manager for the offering. H.C. Wainwright & Co., Roth Capital Partners and ThinkEquity acted as co-managers for the 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 $221,500 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 ASR filed with the SEC on January 6, 2021 and prospectus supplement dated January 7, 2021. We used 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. 33 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. On September 2, 2022, we entered into a Sales Agreement (“Sales Agreement”) with Barclays Capital Inc., BofA Securities, Inc., HSBC Securities (USA) Inc., ThinkEquity LLC, H.C. Wainwright & Co., LLC and Roth Capital Partners, LLC (the “Agents”) to conduct an “ATM” equity offering program pursuant to which we may issue and sell from time to time shares of our common stock, par value $0.001 per share, having an aggregate offering price of up to $250,000 through the Agents, as our sales agents. We currently anticipate using the net proceeds from the sale of our shares of common stock under the ATM program to supplement our operating cash flows to fund EV charging station deployment and our acquisition growth plan. We also plan to use any remaining proceeds we receive for working capital and other corporate purposes. The amounts and timing of our use of the net proceeds will depend on a number of factors, such as the timing and progress of our EV charging station deployment efforts, the timing and progress of any partnering and collaboration efforts and technological advances. As of December 31, 2022, 558,721 shares have been sold pursuant to the ATM program representing gross proceeds of approximately $7,697. As electric vehicle charging requirements and technologies change, driven by federal, state or local regulatory authorities or by electric vehicle 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”). During the year ended December 31, 2022, we incurred $3,809 related to these upgrades. As of December 31, 2022, the charger upgrades were substantially complete. 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, 2022, we had purchase commitment of approximately $60,532, 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. Further, we have operating and finance lease obligations over the next five years of approximately $5,500. These operating lease obligations are primarily related to corporate office space, warehousing, and parking spaces related to our ride-sharing services. 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 Consolidated Financial Statements included at the end of this Annual Report. Revenue Recognition We recognize revenue primarily from four different types of contracts: ● 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 or installation of the product. ● Charging service revenue – company-owned charging stations - Revenue is recognized at the point when a particular charging session is completed. ● 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. ● Other – Other revenues primarily comprises of revenues generated from alternative fuel credits. 34 The timing of our 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. Furthermore, ride-sharing services, which are not within scope of ASC 606, pertain to revenues and expenses related to a ride-sharing services agreement with 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 which are short term in nature. 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. 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. 35 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 For a description of our recently issued accounting standards, see Note 2 – Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements included in this Annual Report.