10-Q
1
d89336d10q.htm
10-Q
10-Q
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2021
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number 001-39004
ChargePoint Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware
84-1747686
(State or other jurisdiction
of incorporation or organization)
(IRS Employer
Identification No.)
240 East Hacienda Avenue Campbell, CA
95008
(Address of principal executive offices)
(Zip Code)
(408) 841-4500
(Registrants telephone number, including area code)
N/A
(Former name, former
address and former fiscal year, if changed since last report)
Securities
registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.0001
CHPT
New York Stock Exchange
Warrants, each whole warrant exercisable for Common Stock at an exercise price of $11.50 per share
CHPT WS
New York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past
90 days. Yes ☒ No ☐
Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of
this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
☐
Accelerated filer
☐
Non-accelerated filer
☒
Smaller reporting company
☒
Emerging growth company
☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ☐ No ☒
The registrant had outstanding 306,261,388 shares of common
stock as of June 5, 2021.
Table of Contents
CHARGEPOINT HOLDINGS, INC.
Table of Contents
Page
Part I - Financial Information
Item 1.
Condensed Consolidated Financial Statements (Unaudited)
5
Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations
33
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
45
Item 4.
Controls and Procedures
45
Part II - Other Information
Item 1.
Legal Proceedings
48
Item 1A.
Risk Factors
48
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
73
Item 3.
Defaults Upon Senior Securities
73
Item 4.
Mine Safety Disclosures
73
Item 5.
Other Information
73
Item 6.
Exhibits
74
Signatures
75
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q (this Quarterly Report) includes forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). All
statements, other than statements of present or historical fact included in this Quarterly Report, regarding the future financial performance of ChargePoint Holdings, Inc. (ChargePoint or the Company), as well as
ChargePoints strategy, future operations, future operating results, financial position, expectations regarding revenue, losses, and costs, prospects, plans and objectives of management are forward-looking statements. In some cases, you can
identify forward-looking statements by terminology such as may, should, could, would, expect, plan, anticipate, intend, believe,
estimate, continue, project or the negative of such terms and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These statements are based
on various assumptions, whether or not identified herein, and on the current expectations of ChargePoints management and are not predictions of actual performance. These forward-looking statements are provided for illustrative purposes only
and are not intended to serve as, and must not be relied on by any investor as a guarantee, an assurance, a prediction or a definitive statement of, fact or probability. Actual events and circumstances are difficult or impossible to predict and may
differ from assumptions, and such differences may be material. Many actual events and circumstances are beyond the control of ChargePoint. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about
ChargePoint that may cause the actual results, level of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking
statements. If any of these risks materialize or ChargePoints assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. There may be additional risks that ChargePoint does
not presently know or that ChargePoint currently believes are immaterial that could also cause actual results to differ from those contained in the forward-looking statements. In addition, forward-looking statements reflect ChargePoints
expectations, plans or forecasts of future events and views as of the date hereof. The Company anticipates that subsequent events and developments will cause ChargePoints assessments to change. These forward-looking statements should not be
relied upon as representing ChargePoints assessments as of any date subsequent to the date hereof. Accordingly, undue reliance should not be placed upon the forward-looking statements. The Company cautions you that these forward-looking
statements are subject to numerous risk and uncertainties, most of which are all difficult to predict and many of which are beyond the control of ChargePoint.
The following factors, among others, could cause actual results to differ materially from forward-looking statements:
ChargePoints success in retaining or recruiting, or changes in, its officers, key employees or directors;
changes in applicable laws or regulations;
the possibility that COVID-19 may adversely affect the results of
operations, financial position and cash flows of ChargePoint;
ChargePoints ability to expand its business in Europe;
the electric vehicle (EV) market may not continue to grow as expected;
ChargePoint may not attract a sufficient number of fleet owners as customers;
incentives from governments or utilities may be reduced, which could reduce demand for EVs;
the impact of competing technologies that could reduce the demand for EVs;
technological changes;
data security breaches or other network outages;
ChargePoints ability to remediate its material weaknesses in internal control over financial reporting;
the possibility that ChargePoint may be adversely affected by other economic, business or competitive factors;
and
any further changes to our financial statements that may be required due to SEC comments to the Form 10-K, as amended, or further guidance regarding the accounting treatment of the Public Warrants and the Private Placement Warrants (each as defined below), and the quantitative effects of the restatement of
Switchback Energy Acquisition Corporations consolidated historical financial statements.
3
Table of Contents
The foregoing review of important factors should not be construed as exhaustive and should
be read in conjunction with the other risk factors included herein. Forward-looking statements reflect current views about ChargePoints plans, strategies and prospects, which are based on information available as of the date of this Quarterly
Report. Except to the extent required by applicable law, ChargePoint undertakes no obligation (and expressly disclaims any such obligation) to update or revise the forward-looking statements whether as a result of new information, future events or
otherwise.
4
Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ChargePoint Holdings, Inc. Unaudited Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of April
30, 2021 and January 31, 2021 (unaudited)
6
Condensed Consolidated Statements of Operations for the Three Months Ended April 30,
2021 and 2020 (unaudited)
7
Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three
Months Ended April 30, 2021 and 2020 (unaudited)
8
Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and
Stockholders Equity (Deficit) for the Three Months Ended April 30, 2021 and 2020 (unaudited)
9
Condensed Consolidated Statements of Cash Flows for the Three Months Ended April 30,
2021 and 2020 (unaudited)
10
Notes to Condensed Consolidated Financial Statements
(unaudited)
12
5
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ChargePoint Holdings, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
April 30,
2021
January 31,
2021
(in thousands, except share
and per share data)
Assets
Current assets:
Cash and cash equivalents
$
609,809
$
145,491
Restricted cash
400
400
Accounts receivable, net of allowance of $2,100 and $2,000 as of April 30, 2021
and January 31, 2021, respectively
34,932
35,075
Inventories
28,868
33,592
Prepaid expenses and other current assets
19,906
12,074
Total current assets
693,915
226,632
Property and equipment, net
31,211
29,988
Operating lease
right-of-use assets
21,750
21,817
Goodwill
1,215
1,215
Other assets
4,980
10,468
Total assets
$
753,071
$
290,120
Liabilities, Redeemable Convertible Preferred Stock and Stockholders Equity
(Deficit)
Current liabilities:
Accounts payable
$
18,103
$
19,784
Accrued and other current liabilities
42,930
47,162
Deferred revenue
43,864
40,934
Debt, current
10,208
Total current liabilities
104,897
118,088
Deferred revenue, noncurrent
53,763
48,896
Debt, noncurrent
24,686
Operating lease liabilities
22,866
22,459
Common stock warrant liabilities
86,209
Redeemable convertible preferred stock warrant liability
75,843
Other long-term liabilities
996
972
Total liabilities
268,731
290,944
Commitments and contingencies (Note 7)
Redeemable convertible preferred stock: $0.0001 par value; 0 and 185,180,248 shares authorized as
of April 30, 2021 and January 31, 2021, respectively; 0 and 182,934,257 shares issued and outstanding as of April 30, 2021 and January 31, 2021, respectively (liquidation value: $0 and $17,492,964 as of April 30, 2021 and
January 31, 2021, respectively)
615,697
Stockholders equity (deficit):
Common stock: $0.0001 par value; 1,000,000,000 and 299,771,284 shares authorized as of
April 30, 2021 and January 31, 2021, respectively; 305,073,200 and 22,961,032 shares issued and outstanding as of April 30, 2021 and January 31, 2021, respectively
31
2
Preferred stock, $0.0001 par value; 10,000,000 and 0 shares authorized as of April 30, 2021
and January 31, 2021, respectively; 0 issued and outstanding as of April 30, 2021 and January 31, 2021
Additional paid-in capital
1,081,272
62,736
Accumulated other comprehensive income
162
155
Accumulated deficit
(597,125
)
(679,414
)
Total stockholders equity (deficit)
484,340
(616,521
)
Total liabilities, redeemable convertible preferred stock, and stockholders equity
(deficit)
$
753,071
$
290,120
The accompanying notes are an integral part of these condensed consolidated financial statements.
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ChargePoint Holdings, Inc.
Condensed Consolidated Statements of Operations
(unaudited)
Three Months Ended
April 30,
2021
2020
(in thousands, except share and
per share data)
Revenue
Networked charging systems
$
26,800
$
19,657
Subscriptions
10,824
9,004
Other
2,886
4,115
Total revenue
40,510
32,776
Cost of revenue
Networked charging systems
23,742
18,616
Subscriptions
5,640
4,773
Other
1,911
1,623
Total cost of revenue
31,293
25,012
Gross profit
9,217
7,764
Operating expenses
Research and development
25,374
18,026
Sales and marketing
15,974
14,201
General and administrative
14,467
5,089
Total operating expenses
55,815
37,316
Loss from operations
(46,598
)
(29,552
)
Interest income
22
243
Interest expense
(1,499
)
(835
)
Change in fair value of redeemable convertible preferred stock warrant liability
9,237
535
Change in fair value of common stock warrant liabilities
43,761
Change in fair value of contingent earnout liability
84,420
Transaction costs expensed
(7,031
)
Other income (expense), net
15
(432
)
Net income (loss) before income taxes
82,327
(30,041
)
Provision for income taxes
38
57
Net income (loss)
82,289
(30,098
)
Cumulative dividends on redeemable convertible preferred stock
(4,292
)
Deemed dividends attributable to vested option holders
(51,855
)
Deemed dividends attributable to common stock warrant holders
(110,635
)
Net loss attributable to common stockholders - Basic
(84,493
)
(30,098
)
Gain attributable to earnout shares issued
(53,820
)
Change in fair value of dilutive warrants
(49,471
)
Net loss attributable to common stockholders - Diluted
$
(187,784
)
$
(30,098
)
Weighted average shares outstanding - Basic
218,615,863
12,253,092
Weighted average shares outstanding - Diluted
225,533,389
12,253,092
Net loss per share - Basic
$
(0.39
)
$
(2.46
)
Net loss per share - Diluted
$
(0.83
)
$
(2.46
)
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
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ChargePoint Holdings, Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(unaudited)
Three Months Ended
April 30,
2021
2020
(in thousands)
Net income (loss)
$
82,289
$
(30,098
)
Other comprehensive income (loss):
Foreign currency translation adjustment
7
(56
)
Other comprehensive income (loss)
7
(56
)
Comprehensive income (loss)
$
82,296
$
(30,154
)
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
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ChargePoint Holdings, Inc.
Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders Equity (Deficit)
(unaudited)
Redeemable Convertible
Preferred Stock
Common Stock
Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income
Accumulated
Deficit
Total
Stockholders
(Deficit)
Equity
Shares (1)
Amount
Shares (1)
Amount
(in thousands, except share data)
Balances as of January 31, 2021
182,934,257
$
615,697
22,961,032
$
2
$
62,736
$
155
$
(679,414
)
$
(616,521
)
Conversion of redeemable convertible preferred stock into common stock in connection with the
reverse recapitalization, including impact of Series H-1 paid in kind dividend
(182,934,257
)
(615,697
)
194,060,336
20
615,677
615,697
Reclassification of Legacy ChargePoint preferred stock warrant liability upon the reverse
recapitalization
66,606
66,606
Issuance of common stock upon the reverse recapitalization, net of issuance costs
60,746,989
6
200,460
200,466
Issuance of common stock upon exercise of warrants
9,766,774
1
225,375
225,376
Contingent earnout liability recognized upon the closing of the reverse recapitalization
(828,180
)
(828,180
)
Issuance of earnout shares upon triggering events, net of tax withholding
17,539,657
2
488,303
488,305
Reclassification of remaining contingent earnout liability upon triggering event
242,640
242,640
Vesting of early exercised stock options
78
78
Repurchase of early exercised common stock
(1,588
)
Stock-based compensation
7,577
7,577
Net income
82,289
82,289
Other comprehensive income
7
7
Balances as of April 30, 2021
$
305,073,200
$
31
$
1,081,272
$
162
$
(597,125
)
$
484,340
Redeemable Convertible
Preferred Stock
Common Stock
Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Stockholders
Deficit
Shares (1)
Amount
Shares (1)
Amount
(in thousands, except share data)
Balances as of January 31, 2020
160,583,203
$
520,241
11,918,418
$
1
$
20,331
$
37
(482,390
)
$
(462,021
)
Issuance of common stock upon exercise of vested stock options
1,071,203
436
436
Vesting of early exercised stock options
10
10
Stock-based compensation
910
910
Net loss
(30,098
)
(30,098
)
Other comprehensive loss
(56
)
(56
)
Balances as of April 30, 2020
160,583,203
$
520,241
12,989,621
$
1
$
21,687
$
(19
)
$
(512,488
)
$
(490,819
)
(1)
The shares of the Companys common and redeemable convertible preferred stock, prior to the Merger (as
defined in Note 1) have been retroactively restated to reflect the exchange ratio of approximately 0.9966 established in the Merger as described in Note 3.
The accompanying notes are an integral part of these condensed consolidated financial statements.
9
Table of Contents
ChargePoint Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
Three Months Ended
April 30,
2021
2020
(in thousands)
Cash flows from operating activities
Net income (loss)
$
82,289
$
(30,098
)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization
2,741
2,257
Non-cash operating lease cost
977
831
Stock-based compensation
7,577
910
Amortization of deferred contract acquisition costs
399
253
Change in fair value of redeemable convertible preferred stock warrant liability
(9,237
)
(535
)
Change in fair value of common stock warrant liabilities
(43,761
)
Change in fair value of contingent earnout liability
(84,420
)
Transaction costs expensed
7,031
Other
1,096
74
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable, net
32
9,214
Inventories
4,894
(4,092
)
Prepaid expenses and other assets
(6,166
)
(1,211
)
Operating lease liabilities
(373
)
(1,863
)
Accounts payable
(3,463
)
(10,318
)
Accrued and other liabilities
(4,952
)
(1,898
)
Deferred revenue
7,797
1,782
Net cash used in operating activities
(37,539
)
(34,694
)
Cash flows from investing activities
Purchases of property and equipment
(4,138
)
(2,772
)
Maturities of investments
42,403
Net cash (used in) provided by investing activities
(4,138
)
39,631
Cash flows from financing activities
Proceeds from the exercise of public warrants
73,323
Merger and PIPE financing
511,646
Payment of transaction costs related to Merger
(30,115
)
Payment of tax withholding obligations on settlement of earnout shares
(12,815
)
Repayment of borrowings
(36,051
)
Proceeds from exercises of vested and unvested stock options
446
Net cash provided by financing activities
505,988
446
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
7
(56
)
Net increase in cash, cash equivalents, and restricted cash
464,318
5,327
Cash, cash equivalents, and restricted cash at beginning of period
145,891
73,153
Cash, cash equivalents, and restricted cash at end of period
$
610,209
$
78,480
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ChargePoint Holdings, Inc.
Condensed Consolidated Statements of Cash Flows - (continued)
Three Months Ended April 30, 2021 and 2020 (Unaudited)
Three Months Ended
April 30,
2021
2020
(in thousands)
Supplementary cash flow information
Cash paid for interest
$
344
$
476
Cash paid for taxes
$
50
$
68
Supplementary cash flow information on noncash investing and financing activities
Right-of-use
assets obtained in exchange for lease liabilities
$
883
$
Acquisitions of property and equipment included in accounts payable and accrued
liabilities
$
174
$
237
Vesting of early exercised stock options
$
78
$
10
Deferred transaction costs not yet paid
$
2,354
$
Conversion of redeemable convertible preferred stock into common stock in connection with the
reverse recapitalization
$
615,697
$
Reclassification of Legacy ChargePoint redeemable convertible preferred stock warrant liability
upon the reverse capitalization
$
66,606
$
Contingent earnout liability recognized upon the closing of the reverse recapitalization
$
828,180
$
Reclassification of remaining contingent earnout liability upon triggering event
$
242,640
$
The accompanying notes are an integral part of these condensed consolidated financial statements.
11
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ChargePoint Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
1. Description of Business
and Basis of Presentation
ChargePoint Holdings, Inc. (ChargePoint or the Company, it,
its) designs, develops, and markets networked electric vehicle (EV) charging system infrastructure and cloud-based services which enable consumers the ability to locate, reserve, authenticate, and transact charging
sessions for EVs. As part of its networked charging systems, subscriptions, and other offerings, the Company provides an open platform that integrates with system hardware from multiple manufacturers, connecting systems over an intelligent network
that provides real-time information about charging systems. This network provides multiple web-based portals for charging system owners, fleet managers, drivers, and utilities.
The Companys fiscal year ends on January 31. References to fiscal year 2021 relate to the fiscal year ended January 31, 2021
and to fiscal year 2022 refer to the fiscal year ending January 31, 2022.
Basis of Presentation
The condensed consolidated financial statements and accompanying notes are unaudited and have been prepared in accordance with accounting
principles generally accepted in the United States of America (U.S. GAAP) and regulations of the U.S. Securities and Exchange Commission (SEC) for interim financial reporting. The Companys condensed consolidated
financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated upon consolidation. Certain information and footnote disclosures normally included in
consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these condensed consolidated financial statements should be read in conjunction with the
audited consolidated financial statements for the year ended January 31, 2021 and the related notes included in the Companys Current Report on Form 8-K filed with the SEC on March 1, 2021 and
as amended and filed with the SEC on April 1, 2021, which provides a more complete discussion of the Companys accounting policies and certain other information. The information as of January 31, 2021 included on the condensed
consolidated balance sheets was derived from the Companys audited consolidated financial statements. The condensed consolidated financial statements were prepared on the same basis as the audited consolidated financial statements and, in the
opinion of management, reflect all adjustments, which include only normal recurring adjustments necessary for a fair statement of the Companys financial position as of April 30, 2021 and the results of operations and cash flows for the
three months ended April 30, 2021 and 2020. The results of operations for the three months ended April 30, 2021 are not necessarily indicative of the results that may be expected for the year ending January 31, 2022.
The Companys condensed consolidated financial statements have been prepared on the basis of continuity of operations, the realization of
assets, and the satisfaction of liabilities in the ordinary course of business. Since inception, the Company has been engaged in developing its product offerings, raising capital, and recruiting personnel. The Companys operating plan may
change as a result of many factors currently unknown and there can be no assurance that the current operating plan will be achieved in the time frame anticipated by the Company, and it may need to seek additional funds sooner than planned. If
adequate funds are not available to the Company on a timely basis, it may be required to delay, limit, reduce, or terminate certain commercial efforts, or pursue merger or acquisition strategies, all of which could adversely affect the holdings or
the rights of the Companys stockholders. The Company has incurred net operating losses and negative cash flows from operations in every year since inception and expects this to continue for the foreseeable future. As of April 30, 2021,
the Company had an accumulated deficit of $597.1 million.
The Company has funded its operations primarily with proceeds from the
issuance of redeemable convertible preferred stock, borrowings under its loan facilities, customer payments and proceeds from the Reverse Recapitalization (as defined below). The Company had cash, cash equivalents, and restricted cash of
$610.2 million as of April 30, 2021. As of June 11, 2021, the date on which these condensed consolidated financial statements were available to be issued, the Company believes that its cash on hand, together with cash generated from
sales to customers, will satisfy its working capital and capital requirements for at least the next twelve months.
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ChargePoint Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The Companys assessment of the period of time through which its financial resources
will be adequate to support its operations is a forward-looking statement and involves risks and uncertainties. The Companys actual results could vary as a result of, and its near- and long-term future capital requirements will
depend on, many factors, including its growth rate, subscription renewal activity, the timing and extent of spending to support its infrastructure and research and development efforts, the expansion of sales and marketing activities, the timing of
new introductions of products or features, the continuing market adoption of its networked charging systems platform, and the overall market acceptance of EVs. The Company may in the future enter into arrangements to acquire or invest in
complementary businesses, services, and technologies, including intellectual property rights, although it has no agreements or commitments to complete any material transactions as of June 11, 2021, the date on which these condensed consolidated
financial statements were available to be issued. The Company has based its estimates on assumptions that may prove to be wrong, and it could use its available capital resources sooner than it currently expects. The Company may be required to seek
additional equity or debt financing. Future liquidity and cash requirements will depend on numerous factors, including market penetration, the introduction of new products, and potential acquisitions of related businesses or technology. In the event
that additional financing is required from outside sources, the Company may not be able to raise it on acceptable terms or at all. If the Company is unable to raise additional capital when desired, or if it cannot expand its operations or otherwise
capitalize on its business opportunities because it lacks sufficient capital, its business, operating results, and financial condition would be adversely affected.
On February 26, 2021 (Closing Date), Switchback Energy Acquisition Corporation (Switchback), consummated the
previously announced merger with Switchback, Lightning Merger Sub Inc., a wholly owned subsidiary of Switchback incorporated in the State of Delaware and ChargePoint, Inc., a Delaware corporation (Legacy ChargePoint) with the Legacy
ChargePoint surviving as the surviving company and as a wholly-owned subsidiary of Switchback (Merger and, collectively with the other transactions described in the Merger Agreement (as defined below), the Reverse
Recapitalization). As a result of the Merger, Switchback was renamed ChargePoint Holdings, Inc.
Please refer to Note 3
Reverse Recapitalization for further details of the Merger.
2. Summary of Significant Accounting Policies
Other than policies noted below, there have been no significant changes to the significant accounting policies disclosed in Note 2 of the
audited consolidated financial statements as of January 31, 2021 and 2020 and for the years ended January 31, 2021, 2020, and 2019.
Common
Stock Warrants Liabilities
The Company assumed 10,470,562 publicly-traded warrants (Public Warrants) and 6,521,568 private
placement warrants issued to NGP Switchback, LLC (Private Placement Warrants and, together with the Public Warrants, the Common Stock Warrants) upon the Merger, all of which were issued in connection with Switchbacks
initial public offering and subsequent overallotment (other than 1,000,000 Private Placement Warrants that were issued in connection with the closing of the Merger) and entitle the holder to purchase one share of the Companys Common stock, par
value $0.0001 (Common Stock) at an exercise price of $11.50 per share. During the three months ended April 30, 2021, 6,413,057 Public Warrants and 4,347,712 Private Placement Warrants were exercised. The Public Warrants are publicly
traded and are exercisable for cash unless certain conditions occur, such as the failure to have an effective registration statement related to the shares issuable upon exercise or redemption by the Company under certain conditions, at which time
the warrants may be cashless exercised. The Private Placement Warrants are non-redeemable for cash so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement
Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants are redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
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ChargePoint Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The Company evaluated the Common Stock Warrants and concluded that they do not meet the
criteria to be classified within stockholders equity. The agreement governing the Common Stock Warrants includes a provision (Replacement of Securities Upon Reorganization), the application of which could result in a different
settlement value for the Common Stock Warrants depending on their holder. Because the holder of an instrument is not an input into the pricing of a fixed-for-fixed
option on the Companys ordinary shares, the Private Placement Warrants are not considered to be indexed to the Companys own stock. In addition, the provision provides that in the event of a tender or exchange offer accepted
by holders of more than 50% of the outstanding shares of the Companys ordinary shares, all holders of the Common Stock Warrants (both the Public Warrants and the Private Placement Warrants) would be entitled to receive cash for all of their
Common Stock Warrants. Specifically, in the event of a qualifying cash tender offer (which could be outside of the Companys control), all Common Stock Warrant holders would be entitled to cash, while only certain of the holders of the
Companys ordinary shares may be entitled to cash. These provisions preclude the Company from classifying the Common Stock Warrants in stockholders equity. As the Common Stock Warrants meet the definition of a derivative, the Company
recorded these warrants as liabilities on the consolidated balance sheet at fair value, with subsequent changes in their respective fair values recognized in the condensed consolidated statements of operations and comprehensive loss at each
reporting date.
Contingent Earnout Liability
In connection with the Reverse Recapitalization and pursuant to the Merger Agreement and Plan of Merger dated as of September 23, 2020 by
and among the Company, Lightning Merger Sub Inc., and Switchback (Merger Agreement), eligible ChargePoint equity holders are entitled to receive additional shares of the Companys Common Stock upon the Company achieving certain
Earnout Triggering Events (as described in the Merger Agreement and Note 9). In accordance with ASC 815-40, the earnout shares are not indexed to the Common Stock and therefore are accounted for as a
liability at the reverse recapitalization date and subsequently remeasured at each reporting date with changes in fair value recorded as a component of other income (expense), net in the condensed consolidated statements of operations.
The estimated fair value of the contingent consideration was determined using a Monte Carlo simulation using a distribution of potential
outcomes on a monthly basis over the Earnout Period (as defined in Note 9) prioritizing the most reliable information available. The assumptions utilized in the calculation are based on the achievement of certain stock price milestones, including
the current Company Common Stock price, expected volatility, risk-free rate, expected term and dividend rate.
The contingent earnout
liability is categorized as a Level 3 fair value measurement (see Fair Value of Financial Instruments accounting policy as described above) because the Company estimates projections during the Earnout Period utilizing unobservable inputs.
Contingent earnout payments involve certain assumptions requiring significant judgment and actual results may differ from assumed and estimated amounts.
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ChargePoint Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Use of Estimates
The preparation of the accompanying condensed consolidated financial statements in conformity with U.S. GAAP requires management to make
estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenue and expenses.
Actual results and outcomes could differ significantly from the Companys estimates, judgments, and assumptions. Significant estimates include determining standalone selling price for performance obligations in contracts with customers, the
estimated expected benefit period for deferred contract acquisition costs, allowances for doubtful accounts, inventory reserves, the useful lives of long-lived assets, the determination of the incremental borrowing rate used for operating lease
liabilities, the valuation of redeemable convertible preferred stock warrants and common stock warrants, including Common Stock Warrants as a result of the Merger, contingent earnout liability, the value of common stock and other assumptions used to
measure stock-based compensation, and the valuation of deferred income tax assets and uncertain tax positions. These estimates and assumptions are based on managements best estimates and judgment. Management evaluates its estimates and
assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. The Company adjusts such estimates and assumptions when
facts and circumstances dictate. Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods. As future events and their effects cannot be determined with
precision, actual results could materially differ from those estimates and assumptions.
Concentration of Credit Risk and Other Risks and Uncertainties
Financial instruments that potentially subject the Company to credit risk consist primarily of cash and cash equivalents and accounts
receivable. Cash and cash equivalents are held in domestic and foreign cash accounts with large, creditworthy financial institutions. The Company has not experienced any losses on its deposits of cash and cash equivalents through deposits with
federally insured commercial banks and at times cash balances may be in excess of federal insurance limits. The Company has not experienced any losses on its deposits of cash and cash equivalents.
Accounts receivable are stated at the amount the Company expects to collect. The Company generally does not require collateral or other
security in support of accounts receivable. To reduce credit risk, management performs ongoing credit evaluations of its customers financial condition.
Concentration of credit risk with respect to trade accounts receivable is considered to be limited due to the diversity of the Companys
customer base and geographic sales areas. As of April 30, 2021 and January 31, 2021, one customer individually accounted for 11% and 16% of accounts receivable, net, respectively. For the three months ended April 30, 2021 and 2020,
there were no customers that represented 10% or more of total revenue.
The Companys revenue is concentrated in the infrastructure
needed for charging EVs, an industry which is highly competitive and rapidly changing. Significant technological changes within the industry or customer requirements, or the emergence of competitive products with new capabilities or technologies,
could adversely affect the Companys operating results.
Impact of COVID-19
In March 2020, the World Health Organization characterized COVID-19 as a pandemic. The impact of COVID-19, including changes in consumer and business behavior, pandemic fears and market downturns, and restrictions on business and individual activities, has created significant volatility in the global economy
and led to reduced economic activity. The spread of COVID-19 has also created a disruption in the manufacturing, delivery and overall supply chain of vehicle manufacturers and suppliers, and has led to a
decrease in EV sales in some markets.
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ChargePoint Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
As a result of the COVID-19 pandemic, ChargePoint had
initially modified its business practices (including employee travel, recommending that all non-essential personnel work from home and cancellation or reduction of physical participation in sales activities,
meetings, events and conferences), implemented additional safety protocols for essential workers, implemented temporary cost cutting measures in order to reduce its operating costs, some of which it recently reversed, and it may take further actions
as may be required by government authorities or that it determines are in the best interests of its employees, customers, suppliers, vendors and business partners.
While the ultimate duration and extent of the COVID-19 pandemic depends on current and future
developments that cannot be accurately predicted, such as the extent and effectiveness of containment actions and vaccinations, it has already had an adverse effect on the global economy and the ultimate societal and economic impact of the COVID-19 pandemic remains unknown. In particular, the conditions caused by this pandemic are likely to affect the rate of global infrastructure spending, such as work-from-home policies commercial customers are
adopting, and could adversely affect demand for ChargePoints platforms, lengthen its sales cycles, reduce the value, renewal rate or duration of subscriptions, negatively impact collections of accounts receivable, reduce expected spending from
new customers, cause some of its paying customers to go out of business and limit the ability of its direct sales force to travel to customers and potential customers, all of which could adversely affect its business, results of operations and
financial condition during the fiscal year ended January 31, 2022 and potentially future periods.
Segment Reporting
The Company operates as one operating segment because its chief operating decision maker, who is its Chief Executive Officer, reviews its
financial information on a consolidated basis for purposes of making decisions regarding allocating resources and assessing performance.
Fair Value of
Financial Instruments
Fair value is defined as an exchange price that would be received to sell an asset or paid to transfer a
liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. Assets and liabilities measured at fair value are classified into the following categories based on the inputs
used to measure fair value:
(Level 1) Quoted prices in active markets for identical assets or liabilities that the Company
has the ability to access at the measurement date;
(Level 2) Inputs other than quoted prices in active markets that are observable for the asset or
liability, either directly or indirectly; and
(Level 3) Inputs that are unobservable for the asset or liability.
The Company classifies financial instruments in Level 3 of the fair value hierarchy when there is reliance on at least one significant
unobservable input to the valuation model. In addition to these unobservable inputs, the valuation models for Level 3 financial instruments typically also rely on a number of inputs that are readily observable, either directly or indirectly.
The Companys assessment of a particular input to the fair value measurement requires management to make judgments and consider factors specific to the asset or liability. The fair value hierarchy requires the use of observable market data when
available in determining fair value. The Company recognizes transfers between levels within the fair value hierarchy, if any, at the end of each period. There were no transfers between levels during the periods presented. The Company had no material
non-financial assets valued on a non-recurring basis that resulted in an impairment in any period presented.
The carrying values of the Companys cash equivalents, accounts receivable, net, accounts payable, and accrued and other current
liabilities approximate fair value based on the highly liquid, short-term nature of these instruments.
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ChargePoint Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Remaining Performance Obligations
Remaining performance obligations represents the amount of contracted future revenue not yet recognized as the amounts relate to undelivered
performance obligations, including both deferred revenue and non-cancellable contracted amounts that will be invoiced and recognized as revenue in future periods. The Companys Assure, Cloud, and
CPaaS subscription terms typically range from one to five years. Revenue expected to be recognized from remaining performance obligations was $110.1 million as of April 30, 2021, of which 42% is expected to be recognized over the next
twelve months and the remainder thereafter.
Deferred Revenue
Deferred revenue represents billings or payments received in advance of revenue recognition and is recognized in revenue upon transfer of
control. Balances consist primarily of software subscription services and extended Assure maintenance services not yet provided as of the balance sheet date. Contract assets, which represent services provided or products transferred to customers in
advance of the date the Company has a right to invoice, are netted against deferred revenue on a customer-by-customer basis. Deferred revenue that will be
recognized during the succeeding twelve-month period is recorded as deferred revenue with the remainder recorded as deferred revenue, non-current on the condensed consolidated balance sheets. Total
deferred revenue was $97.6 million and $89.8 million as of April 30, 2021 and January 31, 2021, respectively. The Company recognized $15.2 million and $16.4 million of revenue during the three months ended
April 30, 2021 and April 30, 2020, respectively, that was included in the deferred revenue balance at the beginning of the respective period.
Accounting Pronouncements
The Company is
provided the option to adopt new or revised accounting guidance as an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (JOBS Act) either (1) within the same periods as those otherwise
applicable to public business entities, or (2) within the same time periods as non-public business entities, including early adoption when permissible. With the exception of standards the Company
elected to early adopt when permissible, the Company has elected to adopt new or revised accounting guidance within the same time period as non-public business entities, as indicated below.
Recently Issued Accounting Standards Not Yet Adopted
In June 2016, the FASB issued ASU 2016-13, Financial Instruments
Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and has since released various amendments including ASU No. 2019-04. The guidance modifies the measurement of expected
credit losses on certain financial instruments. This guidance will be effective for annual reporting periods beginning after December 15, 2022. Early adoption is permitted. The Company is currently assessing the impact of the guidance on its
condensed consolidated financial statements and disclosures.
In December 2019, the FASB issued ASU
2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which enhances and simplifies various aspects of the income tax accounting guidance, including requirements such as the
elimination of exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, the recognition of deferred tax liabilities for outside basis differences, ownership changes in
investments, and tax basis step-up in goodwill obtained in a transaction that is not a business combination. The guidance will be effective for annual reporting periods beginning after December 15,
2021. Early adoption is permitted. The Company is currently assessing the impact of this guidance on its condensed consolidated financial statements and disclosures and does not anticipate adoption to have a material impact on its condensed
consolidated financial statements.
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ChargePoint Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
In August 2020, the FASB issued ASU 2020-06, Debt
Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entitys Own Equity (Subtopic 815-40), which modifies
and simplifies accounting for convertible instruments. The new guidance eliminates certain separation models that require separating embedded conversion features from convertible instruments. The guidance also addresses how convertible instruments
are accounted for in the diluted earnings per share calculation. The guidance will be effective for annual reporting periods beginning after December 15, 2023. Early adoption is permitted, but no earlier than for fiscal years beginning after
December 15, 2020. The Company is currently assessing the impact of this guidance on its consolidated financial statements and disclosures.
In October 2020, the FASB issued ASU 2020-08, Codification Improvements to Subtopic 310-20 Receivables-Nonrefundable Fees and Other Costs, which clarifies the accounting for the amortization period for certain purchased callable debt securities held at a premium by giving consideration
to securities which have multiple call dates. The guidance will be effective for annual reporting periods beginning after December 15, 2021. Early adoption is permitted for annual reporting periods beginning after December 15, 2020. The
Company is currently assessing the impact of this guidance on its consolidated financial statements and disclosures.
3. Reverse Recapitalization
On February 26, 2021, Switchback merged with Legacy ChargePoint, with Legacy ChargePoint surviving as a wholly-owned subsidiary
of Switchback. As a result of the Merger, Switchback was renamed ChargePoint Holdings, Inc. Immediately prior to the closing of the Merger:
all 22,427,306 shares of Legacy ChargePoints outstanding Series H-1 redeemable convertible
preferred stock was converted into an equivalent number of shares of Legacy ChargePoint common stock on a one-to-one basis and an additional 1,026,084 shares of Common Stock were issued to settle the accumulated dividend to the Series H-1
redeemable convertible preferred stockholders of $21.1 million;
all 160,925,957 shares of Legacy ChargePoints outstanding Series H, Series G, Series F, Series E,
and Series D redeemable convertible preferred stock was converted into an equivalent number of shares of Legacy ChargePoint common stock on a one-to-one basis;
all 45,376 shares of Legacy ChargePoints outstanding Series C redeemable convertible preferred stock
was converted into an equivalent number of shares of Legacy ChargePoint common stock on a 1:73.4403 basis;
all 130,590 shares of Legacy ChargePoints outstanding Series B redeemable convertible preferred stock
was converted into an equivalent number of shares of Legacy ChargePoint common stock on a 1:42.9220 basis; and
all 29,126 shares of Legacy ChargePoints outstanding Series A redeemable convertible preferred stock
was converted into an equivalent number of shares of Legacy ChargePoint common stock on a 1:48.2529 basis.
At the
Merger, eligible ChargePoint equity holders received or have the right to receive shares of Common Stock at a deemed value of $10.00 per share after giving effect to the exchange ratio of 0.9966 as defined in the Merger Agreement (Exchange
Ratio). Accordingly, immediately following the consummation of the Merger, Legacy ChargePoint common stock exchanged into 217,021,368 shares of Common Stock, 68,896,516 shares were reserved for the issuance of Common Stock upon the potential
future exercise of Legacy ChargePoint stock options and warrants that were exchanged into ChargePoint stock options and warrants, and 27,000,000 shares of Common Stock were reserved for the potential future issuance of the earnout shares.
In connection with the execution of the Merger Agreement, Switchback entered into separate subscription agreements (each a Subscription
Agreement) with a number of investors (each a New PIPE Investor), pursuant to which the New PIPE Investors agreed to purchase, and Switchback agreed to sell to the New PIPE Investors, an aggregate of 22,500,000 shares of
Common Stock (PIPE Shares), for a purchase price of $10.00 per share and an aggregate purchase price of $225.0 million, in a private placement pursuant to the subscription agreements (PIPE Financing). The PIPE
Financing closed simultaneously with the consummation of the Merger.
Pursuant to the terms of a letter agreement the initial Switchback
stockholders entered into in connection with the execution of the Merger Agreement (Founders Stock Letter), the initial stockholders surrendered 984,706 of Switchback Class B common stock shares purchased by NGP Switchback, LLC, a
Delaware limited liability company (Sponsor) prior to Switchback Public Offering on May 16, 2019 (Founder Shares) for no consideration, whereupon such Founder Shares were immediately cancelled. Additionally 900,000 Founder
Earn Back Shares, which were previously subjected to potential forfeiture until the closing volume weighted average price per share of Common Stock achieves $12.00 for any ten trading days within any twenty consecutive trading day period during the
five-year period following the Closing (Founder Earn Back Triggering Event), met the Earn Back Triggering Event on March 12, 2021.
At the Closing, the Sponsor exercised its right to convert a portion of the working capital loans made by the Sponsor to Switchback into an
additional 1,000,000 Private Placement Warrants at a price of $1.50 per warrant in satisfaction of $1.5 million principal amount of such loans.
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ChargePoint Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The number of shares of Common Stock issued immediately following the consummation of the
Merger was:
Shares
Common stock of Switchback, outstanding prior to Merger
39,264,704
Less redemption of Switchback shares
(33,009
)
Less surrender of Switchback Founder Shares
(984,706
)
Common stock of Switchback
38,246,989
Shares issued in PIPE
22,500,000
Merger and PIPE financing shares (1)
60,746,989
Legacy ChargePoint shares (2)
217,021,368
Total shares of common stock immediately after Merger
277,768,357
The Merger is accounted for as a reverse recapitalization under U.S. GAAP. This determination is primarily
based on Legacy ChargePoint stockholders comprising a relative majority of the voting power of ChargePoint and having the ability to nominate the members of the Board, Legacy ChargePoints operations prior to the acquisition comprising the only
ongoing operations of ChargePoint, and Legacy ChargePoints senior management comprising a majority of the senior management of ChargePoint. Under this method of accounting, Switchback is treated as the acquired company for
financial reporting purposes. Accordingly, for accounting purposes, the financial statements of ChargePoint represent a continuation of the financial statements of Legacy ChargePoint with the Merger being treated as the equivalent of ChargePoint
issuing stock for the net assets of Switchback, accompanied by a recapitalization. The net assets of Switchback are stated at historical costs, with no goodwill or other intangible assets recorded. Operations prior to the Merger are presented as
those of ChargePoint. All periods prior to the Merger have been retrospectively adjusted using the Exchange Ratio for the equivalent number of shares outstanding immediately after the Merger to effect the reverse recapitalization. Additionally, upon
the consummation of the Merger, the Company gave effect to the issuance of 60,746,989 shares of Common Stock for the previously issued Switchback common stock and PIPE Shares that were outstanding at the Closing Date.
In connection with the Merger, the Company raised $511.6 million of proceeds including the contribution of $286.6 million of cash
held in Switchbacks trust account from its initial public offering, net of redemptions of Switchback public stockholders of $0.3 million, and $225 million of cash in connection with the PIPE financing. The Company incurred
$36.5 million of transaction costs, consisting of banking, legal, and other professional fees, of which $29.5 million was recorded as a reduction to additional paid-in capital of proceeds and the remaining $7.0 million was expensed in
the condensed consolidated statements of operations.
(1)
This includes 900,000 contingently forfeitable Founder Earn Back Shares pending the occurrence of the Founder
Earn Back Triggering Event.
(2)
The number of Legacy ChargePoint shares was determined from the 217,761,738 shares of Legacy
ChargePoint common stock outstanding immediately prior to the closing of the Merger converted at the exchange ratio of 0.9966. All fractional shares were rounded.
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ChargePoint Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
4. Fair Value Measurements
The Companys assets and liabilities that were measured at fair value on a recurring basis were as follows:
Fair Value Measured as of April 30, 2021
Level 1
Level 2
Level 3
Total
(in thousands)
Assets
Money market funds
$
454,710
$
$
$
454,710
Total financial assets
$
454,710
$
$
$
454,710
Liabilities
Common stock warrant liabilities (Public)
$
55,710
$
$
$
55,710
Common stock warrant liabilities (Private Placement)
30,499
30,499
Total financial liabilities
$
55,710
$
$
30,499
$
86,209
Fair Value Measured as of January 31, 2021
Level 1
Level 2
Level 3
Total
(in thousands)
Assets
Money market funds
$
109,703
$
$
$
109,703
Total financial assets
$
109,703
$
$
$
109,703
Liabilities
Redeemable convertible preferred stock warrant liability
$
$
$
75,843
$
75,843
Total financial liabilities
$
$
$
75,843
$
75,843
The money market funds were classified as cash and cash equivalents on the condensed consolidated balance
sheets. The aggregate fair value of the Companys money market funds approximated amortized cost and, as such, there were no unrealized gains or losses on money market funds as of April 30, 2021 and January 31, 2021. Realized gains
and losses, net of tax, were not material for any of the periods presented.
As of April 30, 2021 and January 31, 2021, the
Company had no investments with a contractual maturity of greater than one year.
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ChargePoint Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The following table presents a summary of the changes in the fair value of the Companys
Level 3 financial instruments:
Redeemable
convertible
preferred stock
warrant liability
Private placement
warrant liability
Earnout liability
(in thousands)
Fair value as of January 31, 2021
$
(75,843
)
$
$
Private placement warrant liability acquired as part of the merger
(127,888
)
Contingent earnout liability recognized upon the closing of the reverse recapitalization
(828,180
)
Change in fair value included in other income (expense), net
9,237
45,434
84,420
Reclassification of option warrants to stockholders equity (deficit) due to
exercise
51,955
Reclassification of Legacy ChargePoint preferred stock warrant liability upon the reverse
capitalization
66,606
Issuance of earnout shares upon triggering events
501,120
Reclassification of remaining contingent earnout liability upon triggering event
242,640
Fair value as of April 30, 2021
$
$
(30,499
)
$
The fair value of the private placement warrant liability, redeemable convertible preferred stock warrant
liability and earnout liability are based on significant unobservable inputs, which represent Level 3 measurements within the fair value hierarchy. In determining the fair value of the private placement warrant liability, the Company used the
Binomial-Lattice Model (BLM) model that assumes optimal exercise of the Companys redemption option at the earliest possible date (Note 9). In determining the fair value of the redeemable convertible preferred stock warrant
liability, the Company used the Black-Scholes option pricing model to estimate the fair value using unobservable inputs including the expected term, expected volatility, risk-free interest rate and dividend yield (see Note 9). In determining the
fair value of the earnout liability, the Company used the Monte Carlo simulation valuation model using a distribution of potential outcomes on a monthly basis over the Earnout Period using the most reliable information available (see Note 9).
5. Composition of Certain Financial Statement Items
Inventories
Inventories consisted of the
following:
April 30,
2021
January 31,
2021
(in thousands)
Raw materials
$
9,135
$
13,029
Work-in-progress
1
68
Finished goods
19,732
20,495
Total Inventories
$
28,868
$
33,592
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ChargePoint Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Property and equipment, net
Property and equipment, net consisted of the following:
April 30,
2021
January 31,
2021
(in thousands)
Furniture and fixtures
$
901
$
1,594
Computers and software
5,394
5,384
Machinery and equipment
11,583
10,605
Tooling
7,991
7,705
Leasehold improvements
9,582
9,398
Owned and operated systems
19,733
17,703
Construction in progress
2,629
2,462
57,813
54,851
Less: Accumulated depreciation
(26,602
)
(24,863
)
Total Property and Equipment, Net
$
31,211
$
29,988
Depreciation expense for the three months ended April 30, 2021 and 2020 was $2.7 million and
$2.3 million, respectively.
Accrued and other current liabilities
Accrued and other current liabilities consisted of the following:
April 30,
2021
January 31,
2021
(in thousands)
Accrued expenses
$
14,592
$
18,404
Refundable customer deposits
6,950
6,482
Taxes payable
5,977
5,213
Payroll and related expenses
5,545
7,547
Warranty accruals
3,000
3,000
Operating lease liabilities, current
2,494
2,393
Other liabilities
4,372
4,123
Total Accrued and Other Current Liabilities
$
42,930
$
47,162
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ChargePoint Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Revenue
Revenue consisted of the following:
Three Months Ended April 30,
2021
2020
(in thousands)
United States
$
35,110
$
30,291
Rest of World
5,400
2,485
Total revenue
$
40,510
$
32,776
6. Debt
In July 2018, the Company entered into a term loan facility with certain lenders (2018 Loan) with a borrowing capacity of
$45.0 million to finance working capital and repay all outstanding amounts owed under the previous loans, of which $10.0 million expired unused in June 2019. The Company borrowed $35.0 million, with issuance costs of $1.1 million
and net proceeds of $33.9 million. The 2018 Loan was secured by substantially all of the Companys assets, contained customary affirmative and negative covenants, and required the Company to maintain minimum cash balances and attain
certain customer billing targets. The 2018 Loan had a five-year maturity and interest was calculated at LIBOR plus 6.55%. The 2018 Loan agreement was amended on March 20, 2019 to extend the interest only monthly payments through June 30,
2021 to be followed by equal monthly payments of principal and interest. As of January 31, 2021, the Company was in compliance with all financial and non-financial debt covenants.
Transaction costs upon entering into the 2018 Loan were recorded as debt discount and were amortized over the term of the 2018 Loan.
Total interest expense incurred during the three months ended April 30, 2021 and 2020 was $1.5 million and $0.8 million,
respectively. There was no accrued interest as of April 30, 2021 and January 31, 2021.
In March 2021, the Company repaid the
entire loan balance of $35.0 million plus accrued interest and prepayment fees of $1.2 million.
7. Commitments and Contingencies
Purchase Commitments
Open purchase
commitments are for the purchase of goods and services related to, but not limited to, manufacturing, facilities, and professional services under non-cancellable contracts. As of April 30, 2021, the
Company had open purchase commitments for goods and services of $100.5 million, all of which are expected to be received by January 31, 2024.
Legal Proceedings
The Company may be
involved in various lawsuits, claims, and proceedings, including intellectual property, commercial, securities, and employment matters that arise in the normal course of business. The Company accrues a liability when management believes information
available prior to the issuance of the condensed consolidated financial statements indicates it is probable a loss has been incurred as of the date of the condensed consolidated financial statements and the amount of loss can be reasonably
estimated. The Company adjusts its accruals to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular case. Legal costs are expensed as incurred.
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ChargePoint Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The Company believes it has recorded adequate provisions for any such lawsuits, claims, and
proceedings and, as of April 30, 2021, it was not reasonably possible that a material loss had been incurred in excess of the amounts recognized in the condensed consolidated financial statements. Based on its experience, the Company believes
that damage amounts claimed in these matters are not meaningful indicators of potential liability. Given the inherent uncertainties of litigation, the ultimate outcome of the ongoing matters described herein cannot be predicted with certainty. While
litigation is inherently unpredictable, the Company believes it has valid defenses with respect to the legal matters pending against it. Nevertheless, the condensed consolidated financial statements could be materially adversely affected in a
particular period by the resolution of one or more of these contingencies. Liabilities established to provide for contingencies are adjusted as further information develops, circumstances change, or contingencies are resolved; and such changes are
recorded in the accompanying condensed consolidated statements of operations during the period of the change and reflected in accrued and other current liabilities on the accompanying condensed consolidated balance sheets.
Guarantees and Indemnifications
The
Company has service level commitments to its customers warranting certain levels of uptime reliability and performance and permitting those customers to receive credits in the event that the Company fails to meet those levels. To date, the Company
has not incurred any material costs as a result of such commitments.
The Companys arrangements generally include certain provisions
for indemnifying customers against liabilities if its products or services infringe a third-partys intellectual property rights. Additionally, the Company may be required to indemnify for claims caused by its negligence or willful misconduct.
It is not possible to determine the maximum potential amount under these indemnification obligations due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. To date,
the Company has not incurred any material costs as a result of such obligations and has not accrued any liabilities related to such obligations in the condensed consolidated financial statements.
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ChargePoint Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The Company has also agreed to indemnify its directors and executive officers for costs
associated with any fees, expenses, judgments, fines, and settlement amounts incurred by them in any action or proceeding to which any of them are, or are threatened to be, made a party by reason of their service as a director or officer. The
Company maintains director and officer insurance coverage that would generally enable it to recover a portion of any future amounts paid. The Company also may be subject to indemnification obligations by law with respect to the actions of its
employees under certain circumstances and in certain jurisdictions.
Leases
The Company leases its office facilities under non-cancellable operating leases with various lease
terms. The Company also leases certain office equipment under operating lease agreements.
The Companys future payments under the non-cancellable operating lease are as follows:
Years Ending January 31,
(in thousands)
2022 (remaining nine months)
$
3,835
2023
5,118
2024
4,331
2025
4,154
2026
3,838
Thereafter
13,871
Total undiscounted operating lease payments
35,147
Less: imputed interest
(9,787
)
Total operating lease liabilities
25,360
Less: current portion of operating lease liabilities
(2,494
)
Operating lease liabilities, noncurrent
$
22,866
8. Common Stock
On February 26, 2021, the Merger was consummated and the Company issued 60,746,989 shares for an aggregate purchase price of
$200.5 million, net of issuance costs of $29.4 million. Immediately following the Merger, there were 277,768,357 shares of Common Stock outstanding with a par value of $0.0001. The holder of each share of Common Stock is entitled
to one vote.
The Company has retroactively adjusted the shares issued and outstanding prior to February 26, 2021 to give
effect to the exchange ratio established in the Merger Agreement to determine the number of shares of Common Stock into which they were converted. Immediately prior to the Merger, 484,951,532 shares were authorized to issue at
$0.0001 par value, with 299,771,284 shares designated as Common Stock and 185,180,248 shares of redeemable convertible preferred stock.
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ChargePoint Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Common Stock Reserved for Future Issuance
Shares of Common Stock reserved for future issuance, on an as-if converted basis, were as follows:
April 30,
2021
Common stock reserved for Earnout
9,000,000
Stock options issued and outstanding
29,795,964
Common stock warrants outstanding
43,895,087
Shares available for grant under 2021 Equity Incentive Plan
41,429,526
Shares available for grant under 2021 ESPP
8,177,683
Total shares of common stock reserved
132,298,260
On February 26, 2021, upon the closing of the Merger (Note 3), all of the outstanding redeemable
convertible preferred stock was converted to Common Stock pursuant to the conversion rate effective immediately prior to the Merger and the remaining amount was reclassified to additional paid-in capital.
9. Stock Warrants and Earnouts
Redeemable
Convertible Preferred Stock Warrants
Warrants to purchase a total of 2,358,528 shares of Series B, D and E redeemable convertible
preferred stock were initially recognized as a liability recorded at fair value upon issuance and were subject to remeasurement to fair value at each balance sheet date. As part of the Merger, Legacy ChargePoint redeemable convertible preferred
stock was converted into Legacy ChargePoint common stock pursuant to the conversion rate effective immediately prior to the Merger while all related Legacy preferred stock warrants were converted into warrants exercisable for shares of Common Stock
with terms consistent with the Legacy preferred stock warrants except for the number of shares exercisable therefor and the exercise price, each of which was adjusted using the Exchange Ratio. At that time, the ChargePoint redeemable convertible
preferred stock warrant liability was remeasured and reclassified to Legacy ChargePoint additional paid-in capital.
The liability associated with these warrants was subject to remeasurement at each balance sheet date using the Level 3 fair value inputs.
See Note 4 for further details.
The Level 3 fair value inputs used in the recurring valuation of the redeemable convertible
preferred stock warrant liability were as follows:
February 26,
2021
(Merger Date)
January 31,
2021
Expected volatility
84.3
%
80.5
%
Risk-free interest rate
0.0
%
0.1
%
Dividend rate
0.0
%
0.0
%
Expected term (years)
0.0
1.4
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ChargePoint Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Common Stock Warrants
In addition to the warrants to purchase 2,358,528 shares of Legacy ChargePoint preferred stock described above, Legacy ChargePoint had
outstanding warrants to purchase 36,402,503 shares of Legacy ChargePoint common stock, which now represent warrants to purchase Common Stock.
Private Placement Warrants
The
Private Placement Warrants were initially recognized as a liability on February 26, 2021, at a fair value of $127.9 million and the Private Placement Warrant liability was remeasured to fair value as of any respective exercise dates and as of
April 30, 2021, resulting in a gain of $45.4 million for the three months ended April 30, 2021, classified within change in fair value of warrant liabilities in the condensed consolidated statements of operations.
The Private Placement Warrants were valued using the following assumptions under the Binomial-Lattice Model (BLM) that assumes
optimal exercise of the Companys redemption option at the earliest possible date:
April 30,
2021
February 26,
2021
Market price of public stock
25.3
30.8
Exercise price
11.5
11.5
Expected term (years)
4.8
5.0
Volatility
73.2
%
73.5
%
Risk-free interest rate
0.8
%
0.8
%
Dividend rate
0.0
%
0.0
%
Public Warrants
The Public Warrants may only be exercised for a whole number of shares. The Public Warrants became exercisable 30 days after the completion of
the Merger.
The Public Warrants were initially recognized as a liability on February 26, 2021 at a fair value of $153.7 million and
the public warrant liability was remeasured to fair value based upon the market price as warrants were exercised and as of April 30, 2021, resulting in a loss of $1.6 million for the three months ended April 30, 2021, classified
within change in fair value of warrant liabilities in the condensed consolidated statements of operations.
During the three months ended
April 30, 2021, net proceeds for exercised Public Warrants were $73.3 million.
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ChargePoint Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Activity of warrants is set forth below:
Legacy Common
and Preferred Stock
Warrants (1)
Private
Placement
Warrants
Public
Warrants
Total
Common Stock
Warrants (1)
Outstanding as of January 31, 2021
38,761,031
38,761,031
Common Stock Warrants as Part of the Merger
6,521,568
10,470,562
16,992,130
Warrants Exercised
(1,097,305
)
(4,347,712
)
(6,413,057
)
(11,858,074
)
Outstanding as of April 30, 2021
37,663,726
2,173,856
4,057,505
43,895,087
(1)
The shares (and the warrants exercise prices) subject to the Companys Legacy common and preferred
stock warrants were restated to reflect the exchange ratio of approximately 0.9966 established in the Merger Agreement as discussed in Note 3.
Contingent Earnout Liability
During the five year period starting at the closing of the Merger (Earnout Period), eligible former equity holders of Legacy
ChargePoint may receive up to 27,000,000 additional shares of Common Stock (Earnout Shares) in the aggregate in three equal tranches if certain Earnout Triggering Events (as described in the Merger Agreement) are fully satisfied. An
Earnout Triggering Event means the date on which the closing volume weighted-average price (VWAP) per share of common stock quoted on the NYSE (or the exchange on which the shares of common stock are then listed) is greater
or equal to $15.00, $20.00 and $30.00 for any ten trading days within any 20 consecutive trading day period within the Earnout Period.
Upon the closing of the Merger, the contingent obligation to issue Earnout Shares was accounted for as a liability because the Earnout
Triggering Events that determine the number of Earnout Shares required to be issued include events that are not solely indexed to the common stock of ChargePoint. The estimated fair value of the total Earnout Shares at the closing of the Merger on
February 26, 2021, was $828.2 million based on a Monte Carlo simulation valuation model using a distribution of potential outcomes on a monthly basis over the Earnout Period using the most reliable information available. Assumptions used
in the valuation are described below.
March 12,
2021
February 26,
2021
Current stock price
27.84
30.83
Expected volatility
72.00
%
71.60
%
Risk-free interest rate
0.85
%
0.75
%
Dividend rate
0.00
%
0.00
%
Expected term (years)
4.96
5.00
The first two Earnout Triggering Events for up to 18,000,000 of the Earnout Shares occurred on March 12,
2021, and, after the withholding of some of these Earnout Shares for tax withholding, 17,539,657 Earnout Shares were issued on March 19, 2021, and the estimated fair value of the earnout liability was remeasured to $743.7 million,
including (i) $501.1 million related to the Earnout Shares issuable upon the occurrence of the Earnout Triggering Event associated with the $15.00 and $20.00 VWAP per share thresholds based on the Common Stock price as of March 12, 2021,
and (ii) $242.6 million related to the estimated fair value of earnout liability related to the remaining 9,000,000 Earnout Shares issuable upon the occurrence of the Earnout Triggering Event associated with the $30.00 VWAP per share threshold
based on a Monte Carlo simulation valuation model as of March 12, 2021, as described above. The change in fair value resulted in a gain of $84.4 million recognized in the condensed consolidated statement of operations for the three months
ended April 30, 2021. Upon settlement of the first two tranches, the classification of the remaining 9,000,000 Earnout Shares of the third tranche was changed to equity on March 12, 2021, because the Earnout Shares became an instrument
contingently issuable upon the occurrence of the Earnout Triggering Event into a fixed number of Common Shares that is not based on an observable market price or index other than the Companys own stock price.
10. Equity Plans and Stock-based Compensation
On February 25, 2021, the stockholders of the Company approved the 2021 Equity Incentive Plan (2021 EIP) and the 2021 Employee
Stock Purchase Plan (2021 ESPP). As of April 30, 2021, 41,429,526 and 8,177,683 shares of Common Stock were available under the 2021 EIP and 2021 ESPP, respectively. On the first day of each March, beginning on March 1, 2021 and
continuing through March 1, 2030, the 2021 EIP reserve will automatically increase by a number of shares equal to the lesser of (a) 5% of the total number of shares actually issued and outstanding on the last day of the preceding month and
(b) a number determined by our Board of Directors. Further, on the first day of each March during the term of the 2021 ESPP, commencing on March 1, 2021 and ending on (and including) March 1, 2040, the aggregate number of shares of
stock that may be issued under the 2021 ESPP shall automatically increase by a number equal to the lesser of (i) one percent (1%) of the total number of shares of stock issued and outstanding on the last day of the preceding month, (ii)
5,400,000 shares of stock (subject to standard anti-dilution adjustments), or (iii) a number of shares of stock determined by the Board.
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ChargePoint Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Under the 2021 EIP, the Company can grant stock options, stock appreciation rights,
restricted stock, restricted stock units and certain other awards which are settled in the form of common shares issued under this 2021 EIP. Under the 2021 ESPP, the Company can grant stock options to purchase shares of Common Stock at a purchase
price which shall not be less either than 85% of the fair market value of such share on the first trading day of an offering period or 85% of the fair market value of such share on the purchase date.
No further awards will be granted under Legacy ChargePoints 2017 Stock Plan (2017 Plan) and 24,259,238 shares of Common
Stock remain reserved for outstanding awards issued under the 2017 Plan at the time of adoption of the 2021 EIP and the 2021 ESPP. Additionally, no other awards can be granted under Legacy ChargePoints 2007 Stock Incentive Plan (2007
Plan) and 5,143,849 shares of Common Stock remained reserved for outstanding awards issued under the 2007 Plan at the time of the adoption of the 2021 EIP and the 2021 ESPP.
Activity under the Companys equity plans is set forth below:
Number of
Stock Option
Awards
Weighted
Average
Exercise Price
Weighted
Average
Remaining
Contractual
term (in years)
Aggregate
Intrinsic Value
(in thousands)
Outstanding as of January 31, 2021
30,166,792
$
0.71
7.3
$
1,064,539
Forfeited
(353,478
)
$
0.74
Expired
(17,350
)
$
58.74
Outstanding as of April 30, 2021
29,795,964
$
0.67
6.9
$
734,460
Options vested and expected to vest as of April 30, 2021
29,795,964
$
0.67
6.9
$
734,460
Exercisable as of April 30, 2021
18,248,059
$
0.64
6.0
$
450,546
Activity for exercised awards includes early exercises of stock options such that these awards are not
considered outstanding stock options upon exercise.
The options outstanding as of April 30, 2021, also includes the June 2020 grant
of a stock option to purchase a total of 1.5 million shares of Common Stock subject to both service and performance-based vesting conditions to the Chief Executive Officer under the 2017 Plan (CEO Awards). No stock-based
compensation expense had been recorded as the CEO awards were improbable of vesting before and after two modifications in each of September 2020 and December 2020, because the performance-based vesting condition was contingent upon the closing of
the Merger. Accordingly, the Company commenced recognition of stock-based compensation expense for such CEO Awards following the Merger in February 2021. As of April 30, 2021, the total unrecognized compensation expense related to these
unvested CEO Awards was $38.8 million.
Total stock-based compensation expense for stock awards recognized during the three
months ended April 30, 2021 and 2020 was $7.6 million and $0.9 million, respectively. As of April 30, 2021, total unrecognized stock-based compensation cost related to stock awards was $45.0 million and is expected to
be recognized over a weighted-average period of 2.1 years.
The following sets forth the total stock-based compensation expense
for the Companys stock options (including the CEO Awards) and restricted common stock included in the Companys condensed consolidated statements of operations:
Three Months Ended
April 30,
2021
2020
(in thousands)
Cost of revenue
$
24
$
23
Research and development
675
302
Sales and marketing
598
299
General and administrative
6,280
286
Total stock-based compensation expense
$
7,577
$
910
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ChargePoint Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
11. Income Taxes
The income tax provision for interim periods is determined using an estimate of the Companys annual effective tax rate as adjusted for
discrete items arising in that quarter. The effective income tax rate was nil for the three months ended April 30, 2021 and 2020. The effective tax rate differs from the U.S. statutory rate primarily due to the full valuation allowances on
the Companys net domestic deferred tax assets as it is more likely than not that all of the deferred tax assets will not be realized.
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (CARES Act) was enacted and signed into law in the
United States. The CARES Act includes measures to assist companies, including temporary changes to income and non-income-based tax laws. The Company did not receive a stimulus payment related to the
CARES Act.
12. Related Party Transactions
Daimler AG and its affiliated entities (Daimler) are investors in the Company and one of its employees is a member of the
Companys Board of Directors. The following revenue transactions took place between the Company and Daimler during the three months ended April 30, 2021 and 2020:
Three Months Ended
April 30,
2021
2020
(in thousands)
Daimler
$
1,335
$
726
Revenue from related parties
$
1,335
$
726
Related party accounts receivable as of April 30, 2021 and January 31, 2021 from Daimler was
$1.7 million and $1.2 million, respectively.
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ChargePoint Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
13. Basic and Diluted Net Loss per Share
The following table sets forth the computation of the Companys basic and diluted net loss per share attributable to common stockholders for the three
months ended April 30, 2021 and 2020:
Three Months Ended
April 30,
2021
2020
(in thousands, except share and per
share data)
Numerator:
Net income (loss)
$
82,289
$
(30,098
)
Adjust: Cumulative dividends on redeemable convertible preferred stock
(4,292
)
Adjust: Deemed dividends attributable to vested option holders
(51,855
)
Adjust: Deemed dividends attributable to common stock warrant holders
(110,635
)
Net loss attributable to common stockholders - Basic
(84,493
)
(30,098
)
Less: Gain attributable to earnout shares issued
(53,820
)
Less: Change in fair value of dilutive warrants
(49,471
)
Net loss attributable to common stockholders - Diluted
$
(187,784
)
$
(30,098
)
Denominator:
Weighted average common shares outstanding
218,932,121
12,432,519
Less: Weighted-average unvested restricted shares and shares subject to repurchase
(316,258
)
(179,427
)
Weighted average shares outstanding - Basic
218,615,863
12,253,092
Add: Earnout Shares under the treasury stock method
2,956,122
0
Add: Public and Private Placement Warrants under the treasury stock method
3,961,404
0
Weighted average shares outstanding - Diluted
225,533,389
12,253,092
Net loss per share - Basic
$
(0.39
)
$
(2.46
)
Net loss per share - Diluted
$
(0.83
)
$
(2.46
)
As a result of the Merger, the Company has retroactively adjusted the weighted-average number of shares of
Common Stock outstanding prior to February 26, 2021 (Closing Date) by multiplying them by the exchange ratio of 0.9966 used to determine the number of shares of Common Stock into which they converted. The Common Stock issued as a
result of the redeemable convertible preferred stock conversion on the Closing Date was included in the basic net loss per share calculation on a prospective basis.
Redeemable convertible preferred stock and preferred stock warrants outstanding prior to the Merger Closing Date were excluded from the
diluted net loss per share calculation for the three-months period ended April 30, 2021, because including them would have had an antidilutive effect. Additionally, the remaining 9,000,000 Earnout Shares for which the Earnout Triggering Event
has not occurred yet were excluded from the diluted net loss per share calculation for the three-months period ended April 30, 2021, because the Earnout Triggering Event was not met at the end of the reporting period.
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ChargePoint Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The potential shares of Common Stock that were excluded from the computation of diluted net
loss per share attributable to common stockholders for the periods presented because including them would have had an antidilutive effect were as follows:
April 30, 2021
Options to purchase common stock
29,795,964
Unvested early exercised common stock options
263,982
Common stock warrants
43,895,087
Total potentially dilutive common share equivalents
73,955,033
14. Subsequent Events
On June 4, 2021, the Company issued a notice of the redemption of all of its outstanding Public Warrants that remain outstanding on
July 6, 2021 for a redemption price of $0.01 per warrant. The Private Placement Warrants that are still held by the initial holders thereof or their permitted transferees are not subject to the redemption.
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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion of the results of operations and financial condition of
ChargePoint Holdings, Inc. (ChargePoint or the Company) should be read in conjunction with ChargePoints condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report and the
audited consolidated financial statements for the year ended January 31, 2021 and the related notes included in the Companys Current Report on Form 8-K filed with the SEC on March 1, 2021 and as amended and filed with the SEC on April 1,
2021. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. ChargePoints actual results may differ materially from those anticipated in these
forward-looking statements as a result of various factors, including those set forth under Risk Factors in Part II, Item 1A of this report.
Overview
ChargePoint designs, develops
and markets networked electric vehicle (EV) charging system infrastructure and cloud-based services which enable consumers the ability to locate, reserve, authenticate and transact EV charging sessions (Cloud or
Cloud Services). As part of ChargePoints networked charging systems, subscriptions and other offerings, it provides an open platform that integrates with system hardware from ChargePoint and other manufacturers, connecting systems
over an intelligent network that provides real-time information about charging sessions and full control, support and management of the networked charging systems. This network provides multiple
web-based portals for charging system owners, fleet managers, drivers and utilities.
ChargePoint generates revenue primarily through the sale of networked charging systems, Cloud Services and extended parts and labor warranty
(Assure), which are typically paid for upfront. Assure also includes proactive monitoring, fast response times, parts and labor warranty, expert advice and robust reporting. The ChargePoint as a Service (CPaaS) program
combines the customers use of ChargePoints owned and operated systems with Cloud Services, Assure and other benefits available to subscribers into one subscription. ChargePoint targets three key customer markets: commercial, fleet and
residential. Commercial customers have parking places largely within their workplaces. Fleet includes municipal buses, delivery and work vehicles, port/airport/warehouse and other industrial applications, ridesharing services, and is expected to
eventually include, autonomous transportation. Residential includes single family homes and multifamily residences.
Since
ChargePoints inception in 2007, it has been engaged in developing and marketing its networked charging systems, subscriptions and other offerings, raising capital and recruiting personnel. ChargePoint has incurred net operating losses and
negative cash flows from operations every year since its inception. As of April 30, 2021, ChargePoint had an accumulated deficit of $597.1 million. ChargePoint has funded its operations primarily from sales of its solutions, with proceeds
from the issuance of redeemable convertible preferred stock and common stock and borrowings under its loan facilities.
Recent Developments
Closing of Merger
On February 26,
2021 (Closing Date), Switchback Energy Acquisition Corporation (Switchback), consummated the previously announced merger with Switchback, Lightning Merger Sub Inc., a wholly owned subsidiary of Switchback incorporated in the
State of Delaware (Merger Sub) and ChargePoint, Inc. (Legacy ChargePoint), with the Legacy ChargePoint surviving as the surviving company and as a wholly-owned subsidiary of Switchback. On the Closing Date, and in connection
with the closing of the Merger (Closing), Switchback Energy Acquisition Corporation changed its name to ChargePoint Holdings, Inc.
Pursuant to the terms of the Merger Agreement, each stockholder of Legacy ChargePoint received 0.9966 shares of the Companys common
stock, par value $0.0001 per share (Common Stock) and the contingent right to receive certain Earnout Shares (as defined below), for each share of Legacy ChargePoint common stock, par value $0.0001 per share, owned by such Legacy
ChargePoint stockholder that was outstanding immediately prior to the Closing (other than any shares of Legacy ChargePoint restricted stock). In addition, certain investors purchased an aggregate of 22,500,000 shares of Common Stock (such investors,
the PIPE Investors) concurrently with the Closing for an aggregate purchase price of $225,000,000. Additionally, at the Closing, after giving effect to the forfeiture contemplated by the Founders Stock Letter (as defined below), each
outstanding share of the Companys Class B common stock, par value $0.0001 per share (Founder Shares), was converted into a share of Common Stock on a
one-for-one basis and the Founder Shares ceased to exist.
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In addition, pursuant to the terms of the Merger Agreement, at the effective time of the
Merger (Effective Time), (1) warrants to purchase shares of capital stock of Legacy ChargePoint were converted into warrants to purchase an aggregate of 38,761,031 shares of Common Stock and the contingent right to receive certain
Earnout Shares, (2) options to purchase shares of common stock of Legacy ChargePoint were converted into options to purchase an aggregate of 30,135,695 shares of Common Stock and, with respect to vested options, the contingent right to receive
certain Earnout Shares and (3) unvested restricted shares of common stock of Legacy ChargePoint that were outstanding pursuant to the early exercise of Legacy ChargePoint options were converted into an aggregate of 345,689
restricted shares of ChargePoint (Restricted Shares).
Also at the Closing, NGP Switchback, LLC (Sponsor)
exercised its right to convert a portion of the working capital loans made by the Sponsor to Switchback into an additional 1,000,000 private placement warrants at a price of $1.50 per warrant in satisfaction of $1,500,000 principal amount of such
loans.
During the time period between the Closing and the five-year anniversary of the Closing Date, eligible former equity holders may
receive up to 27,000,000 additional shares of ChargePoints common stock (Earnout Shares) in the aggregate in three equal tranches if the volume-weighted average closing sale price of our Common Stock is greater than or equal to
$15.00, $20.00 and $30.00 for any 10 trading days within any 20 consecutive trading day period (Trigger Events). On March 19, 2021, a total of approximately 18,000,000 shares of Common Stock were released to eligible former equity
holders of Legacy ChargePoint pursuant to the Earnout Shares provisions of the Merger Agreement, as the first two Trigger Events had been met. The Trigger Events were met by virtue of the volume-weighted average closing sale price of Common Stock
having been greater than or equal to $15.00 and $20.00 for ten (10) trading days out of twenty (20) consecutive trading days following the closing of the Merger. The holders of Legacy ChargePoint common stock (other than restricted stock),
warrants and vested options as of the closing of the Merger received their pro rata portion of the Earnout Shares. These Earnout Shares are not subject to a lock-up agreement and may be sold publicly following
receipt. A third Trigger Event will be achieved and 9 million more shares will be released if the volume-weighted average closing sale price of the Common Stock is greater than or equal to $30.00 for ten (10) trading days within any twenty
(20) consecutive trading day period prior to February 26, 2026.
Key Factors Affecting Operating Results
ChargePoint believes its performance and future success depend on several factors that present significant opportunities for it but also pose
risks and challenges, including those discussed below.
Growth in EV Adoption
ChargePoints revenue growth is directly tied to the continued acceptance of passenger and commercial EVs sold, which it believes drives
the demand for charging infrastructure. The market for EVs is still rapidly evolving and although demand for EVs has grown in recent years, there is no guarantee of such future demand. Factors impacting the adoption of EVs include but are not
limited to: perceptions about EV features, quality, safety, performance and cost; perceptions about the limited range over which EVs may be driven on a single battery charge; volatility in the cost of oil and gasoline; availability of services for
EVs; consumers perception about the convenience and cost of charging EVs; and increases in fuel efficiency. In addition, macroeconomic factors could impact demand for EVs, particularly since they can be more expensive than traditional
gasoline-powered vehicles when the automotive industry globally has been experiencing a recent decline in sales. If the market for EVs does not develop as expected or if there is any slow-down or delay in overall EV adoption rates, this
would impact ChargePoints ability to increase its revenue or grow its business.
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Competition
ChargePoint is currently a market leader in North America in the commercial Level 2 Alternating Current (AC) chargers.
ChargePoint also offers chargers for use at home or multifamily settings, and high-power Level 3 Direct Current (DC) Fast chargers for urban fast charging, corridor or long-trip charging and fleet applications. ChargePoint
intends to expand its market share over time in its product categories, leveraging the network effect of its products and Cloud Services software. Existing competitors may expand their product offerings and sales strategies, and new competitors may
enter the market. Furthermore, ChargePoints competition includes other types of alternative fuel vehicles and high fuel-economy gasoline powered vehicles. If ChargePoints market share decreases due to increased competition, its
revenue and ability to generate profits in the future may be impacted.
Europe Expansion
ChargePoint operates in North America and selected countries in Europe. Europe is expected to be a significant contributor to
ChargePoints revenue in future years. ChargePoint plans to use a portion of the proceeds from the Merger to increase its sales and marketing activities in Europe. ChargePoint is also positioned to grow its European business through existing
partnerships with car leasing companies. In Europe ChargePoint primarily competes with smaller providers of EV charging station networks. Many of these competitors have limited funding, which could cause poor experiences and have a negative impact
on overall EV adoption in Europe. ChargePoints growth in Europe requires differentiating itself as compared to these existing competitors. If ChargePoint is unable to continue penetrating the market in Europe, its future revenue growth and
profits may be impacted.
Fleet Expansion
ChargePoints future growth is highly dependent upon fleet applications. Because fleet operators often make large purchases of EVs
volatility may be more pronounced, and any significant decline from these customers reduces ChargePoints potential for future growth.
Impact
of New Product Releases and Investments in Growth
As ChargePoint introduces new products, its gross margins may be temporarily
impacted by launch costs, until its supply chain achieves targeted cost reductions, such as the market introduction of its Level 3 DC Fast charger in fiscal year 2020. In addition, ChargePoint may accelerate its operating expenditures where it
sees growth opportunities which may impact gross margin until upfront costs and inefficiencies are absorbed and normalized operations are achieved. ChargePoint also continuously evaluates and may adjust its operating expenditures based on its launch
plans for its new products, as well as other factors including the pace and prioritization of current projects under development and the addition of new projects. As ChargePoint attains higher revenue, it expects operating expenses as a percentage
of total revenue to decrease as it scales and focuses on increasing operational efficiency and process automation.
Government Mandates, Incentives
and Programs
The U.S. federal government, certain foreign governments and some state and local governments provide incentives to
end users and purchasers of EVs and EV charging stations in the form of rebates, tax credits and other financial incentives. These governmental rebates, tax credits and other financial incentives significantly lower the effective price of EVs and EV
charging stations to customers. However, these incentives may expire on specified dates, end when the allocated funding is no longer available, or be reduced or terminated as a matter of regulatory or legislative policy. In particular, the credits
under Section 30C of the Code which benefit investments in EV charging stations may be reduced or become unavailable if not extended in future years. Any reduction in rebates, tax credits or other financial incentives could reduce the demand
for EVs and for charging infrastructure, including infrastructure ChargePoint offers.
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ChargePoint also derives Other revenue from fees received for transferring regulatory
credits earned for participating in low carbon fuel programs in approved states. ChargePoint claims these regulatory credits only if they are not claimed by purchasers of its EV charging stations; only a small percentage of its customers currently
elect to claim such credits. If a material percentage of its customers were to claim these regulatory credits, ChargePoints revenue from this source could decline significantly, which could have an adverse effect on its revenue and overall
gross margin. Recently, ChargePoint has derived a slight majority of its Other revenue from these regulatory credits, and ChargePoint expects revenue from this source as a percentage of Other and total revenue will decline over time. Further, the
availability of such credits depends on continued governmental support for these programs. If these programs are modified, reduced or eliminated, ChargePoints ability to generate this revenue in the future would be adversely impacted.
Impact of COVID-19
In December 2019, COVID-19 was first reported to the World Health Organization (WHO),
and in January 2020, the WHO declared the outbreak to be a public health emergency. In March 2020, the WHO characterized COVID-19 as a pandemic. The impact of
COVID-19, including changes in consumer and business behavior, pandemic fears and market downturns, and restrictions on business and individual activities, has created significant volatility in the global
economy and led to reduced economic activity. The spread of COVID-19 has also created a disruption in the manufacturing, delivery and overall supply chain of vehicle manufacturers and suppliers, and has
led to a decrease in EV sales in markets around the world.
As a result of the
COVID-19 pandemic, ChargePoint initially modified its business practices (including employee travel, recommending that all non-essential personnel work from
home and cancellation or reduction of physical participation in sales activities, meetings, events and conferences), implemented additional safety protocols for essential workers, implemented temporary cost cutting measures in order to reduce its
operating costs, some of which it recently reversed, and it may take further actions as may be required by government authorities or that it determines are in the best interests of its employees, customers, suppliers, vendors and business partners.
While the ultimate duration and extent of the COVID-19 pandemic depends on future
developments that cannot be accurately predicted, such as the extent and effectiveness of containment actions and vaccinations, it has already had an adverse effect on the global economy and the ultimate societal and economic impact of the COVID-19 pandemic remains unknown. In particular, the conditions caused by this pandemic are likely to affect the rate of global infrastructure spending, such as work-from-home policies commercial customers are
adopting, and could adversely affect demand for ChargePoints platforms, lengthen its sales cycles, reduce the value, renewal rate or duration of subscriptions, negatively impact collections of accounts receivable, reduce expected spending from
new customers, cause some of its paying customers to go out of business and limit the ability of its direct sales force to travel to customers and potential customers, all of which could adversely affect its business, results of operations and
financial condition during the fiscal year ending January 31, 2022 and potentially future periods.
Components of Results of Operations
Revenue
Networked Charging
Systems
Networked charging systems revenue includes revenue related to the deliveries of EV charging system infrastructure, which
include lower priced Level 1 home chargers typically sold to drivers, Level 2 AC chargers for commercial use and Level 3 DC Fast charging systems for urban/corridor charging and for fleet operators. A majority of ChargePoints
networked charging systems revenue is derived from the sale of Level 2 AC chargers. ChargePoint recognizes revenue from sales of networked charging systems upon shipment to the customer, which is when the performance obligation has been
satisfied.
Subscriptions
Subscriptions revenue consists of services related to Cloud, as well as extended maintenance service plans under Assure. Subscriptions revenue
also consists of CPaaS revenue which combines the customers use of ChargePoints owned and operated systems with Cloud and Assure programs into a single subscription. CPaaS subscriptions contain a lease for the customers use of
ChargePoints owned and operated systems unless the location allows it to receive incremental economic benefit from regulatory credits earned on that EV charging system. Lessor revenue relates to operating leases and historically has not been
material. Subscriptions revenue is recognized over time on a straight-line basis as ChargePoint has a stand-ready obligation to deliver such services to the customer.
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Other
Other revenue consists of fees received for transferring regulatory credits earned for participating in low carbon fuel programs in approved
states, charging related fees received from drivers using charging sites owned and operated by ChargePoint, net transaction fees earned for processing payments collected on driver charging sessions at charging sites owned by its customers, and other
professional services. Revenue from regulatory credits is recognized at the point in time the regulatory credits are transferred. Revenue from fees for owned and operated sites is recognized over time on a straight-line basis over the performance
period of the service contract as ChargePoint has a stand-ready obligation to deliver such services. Revenue from driver charging sessions and charging transaction fees is recognized at the point in time the charging session or transaction is
completed. Revenue from professional services is recognized as the services are rendered.
For the remainder of fiscal year 2022,
ChargePoint expects revenue to grow in both networked charging systems and subscriptions due to increased demand in EV and its related charging infrastructure market.
Cost of Revenue
Networked
Charging Systems
ChargePoint uses contract manufacturers to manufacture the majority of its networked charging systems. ChargePoint
conducts the remainder of its manufacturing in-house. ChargePoints cost of revenue for the sale of networked charging systems includes the contract manufacturer costs of finished goods. For
ChargePoints limited in-house production, cost of revenue for the sale of networked charging systems also includes parts, labor, manufacturing costs, and allocated facilities and information technology
expenses. Cost of revenue for the sale of networked charging systems also consists of salaries and related personnel expenses, including stock-based compensation, warranty provisions, depreciation of manufacturing related equipment and facilities,
amortization of capitalized internal-use software, and allocated facilities and information technology expenses. As revenue is recognized, ChargePoint accounts for estimated warranty cost as a charge to cost
of revenue. The estimated warranty cost is based on historical and predicted product failure rates and repair expenses. Costs incurred for shipping and handling are recorded in cost of revenue.
Subscriptions
Cost of
subscriptions revenue includes network and wireless connectivity costs for subscription services, field maintenance costs for Assure to support ChargePoints network of systems, depreciation of owned and operated systems used in CPaaS
arrangements, amortization of capitalized internal-use software development costs, allocated facilities and information technology expenses, salaries and related personnel expenses, including stock-based
compensation and third-party support costs to manage the systems and helpdesk services for drivers and site hosts.
Other
Cost of other revenue includes depreciation and other costs for ChargePoints owned and operated charging sites, salaries and related
personnel expenses, including stock-based compensation, as well as costs of environmental and professional services.
Gross Profit and Gross Margin
Gross profit is revenue less cost of revenue and gross margin is gross profit as a percentage of revenue. ChargePoint offers a
range of networked charging systems products which vary widely in selling price and associated margin. Accordingly, ChargePoints gross profit and gross margin have varied and are expected to continue to vary from period to period due to
revenue levels; geographic, vertical and product mix; new product introductions, and its efforts to optimize its operations and supply chain.
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In the long term, improvements in ChargePoints gross profit and gross margin will
depend on its ability to increase its revenue and continue to optimize its operations and supply chain. However, at least in the short term, as ChargePoint launches new networked charging systems products, grows its presence in Europe where it has
not yet achieved economies of scale, and expands its solutions for its fleet customers, it expects gross margin to experience variability from period to period.
Research and Development Expenses
Research and development expenses consist primarily of salaries and related personnel expenses, including stock-based compensation, for
personnel related to the development of improvements and expanded features for ChargePoints services, as well as quality assurance, testing, product management, amortization of capitalized internal-use
software, and allocated facilities and information technology expenses. Research and development costs are expensed as incurred.
ChargePoint expects its research and development expenses to increase on an absolute basis and they may increase as a percentage of total
revenue for the foreseeable future as it continues to invest in research and development activities to achieve its technology and product roadmap.
Sales and Marketing Expenses
Sales and marketing expenses consist primarily of salaries and related personnel expenses, including stock-based compensation, sales
commissions, professional services fees, travel, marketing and promotional expenses amortization of capitalized internal-use software and allocated facilities and information technology expenses.
ChargePoint expects its sales and marketing expenses to increase on an absolute basis and they may increase as a percentage of total revenue
for the foreseeable future while it continues to add sales and marketing personnel, expand its sales channels and expand in Europe.
General and
Administrative Expenses
General and administrative expenses consist primarily of salaries and related personnel expenses,
including stock-based compensation, related to finance, legal and human resource functions, contractor and professional services fees, audit and compliance expenses, insurance costs, bad debt expenses, amortization of capitalized internal-use software and general corporate expenses, including allocated facilities and information technology expenses.
ChargePoint expects its general and administrative expenses to increase in absolute dollars as it continues to grow its business. ChargePoint
also expects to incur additional expenses as a result of operating as a public company, including expenses necessary to comply with the rules and regulations applicable to companies listed on a national securities exchange and related to compliance
and reporting obligations pursuant to the rules and regulations of the SEC, as well as higher expenses for director and officer insurance, investor relations and legal, accounting and other professional services.
Interest Income
Interest income
consists primarily of interest earned on ChargePoints cash, cash equivalents and short-term investments.
Interest Expense
Interest expense consists primarily of the interest on ChargePoints term loan which was paid off in March 2021.
Change in Fair Value of Redeemable Convertible Preferred Stock Warrant Liability
Redeemable convertible preferred stock warrant liability is subject to remeasurement to fair value at each balance sheet date. Changes in fair
value of redeemable convertible preferred stock warrant liability are recognized in the condensed consolidated statements of operations. ChargePoint adjusts the liability for changes in fair value until the earlier of the exercise or expiration of
the warrants and conversion of redeemable convertible preferred stock into Common Stock.
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Change in Fair Value of Common Stock Warrant Liabilities
Common stock warrant liabilities consist of publicly-traded warrants (Public Warrants) and private placement warrants issued to NGP
Switchback, LLC. (Private Placement Warrants) which ChargePoint assumed in connection with the Merger and are subject to remeasurement to fair value at each balance sheet date. ChargePoint expects to incur an incremental income (expense)
in the condensed consolidated statements of operations for the fair value adjustments for the outstanding common stock warrant liabilities at the end of each reporting period or through the exercise of such warrants.
Change in Fair Value of Contingent Earnout Liability
Contingent Earnout liability was accounted for as a liability as of the date of the Merger and remeasured to fair value until the Earnout
Triggering Event was met for the first two tranches in March 2021 and the Earnout Shares issued. In March 2021, the remaining Earnout liability for the third tranche converted to be accounted for as equity.
Transaction Costs Expensed
Transaction costs consist of legal, accounting, underwriting fees and other costs that were directly related to the consummation of the Merger.
Transaction costs related to the issuance of shares were recognized in shareholders equity (deficit) while costs associated with the warrant liabilities and non-capitalized amounts were expensed in the condensed consolidated statements of
operations upon the completion of the Merger on February 26, 2021.
Other Income (Expense), Net
Other income (expense), net consists primarily of foreign currency transaction gains and losses.
Provision for Income Taxes
ChargePoints provision for income taxes consists of an estimate of federal, state and foreign income taxes based on enacted federal,
state and foreign tax rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities and changes in tax law. Due to the level of historical losses, ChargePoint maintains a valuation
allowance against U.S. federal and state deferred tax assets as it has concluded it is more likely than not that these deferred tax assets will not be realized.
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Results of Operations
Comparison of the Three Months Ended April 30, 2021 to the Three Months Ended April 30, 2020
The following table summarizes ChargePoints results of operations for the periods indicated:
Three Months Ended April 30,
Period-over-Period Change
Three Months
Ended
2021
2020
April 30, 2021 to 2020
(in thousands, except
percentages)
Change ($)
Change (%)
Revenue
Networked charging systems
$
26,800
$
19,657
$
7,143
36
%
Subscriptions
10,824
9,004
1,820
20
%
Other
2,886
4,115
(1,229
)
(30
)%
Total revenue
40,510
32,776
7,734
24
%
Cost of revenue
Networked charging systems
23,742
18,616
5,126
28
%
Subscriptions
5,640
4,773
867
18
%
Other
1,911
1,623
288
18
%
Total cost of revenue
31,293
25,012
6,281
25
%
Gross profit
9,217
7,764
1,453
19
%
Gross margin
23
%
24
%
Operating expenses
Research and development
25,374
18,026
7,348
41
%
Sales and marketing
15,974
14,201
1,773
12
%
General and administrative
14,467
5,089
9,378
184
%
Total operating expenses
55,815
37,316
18,499
50
%
Loss from operations
(46,598
)
(29,552
)
(17,046
)
58
%
Interest income
22
243
(221
)
*
Interest expense
(1,499
)
(835
)
(664
)
80
%
Change in fair value of redeemable convertible preferred stock warrant liability
9,237
535
8,702
*
Change in fair value of common stock warrant liabilities
43,761
43,761
*
Change in fair value of contingent earnout liability
84,420
84,420
*
Transaction costs expensed
(7,031
)
(7,031
)
*
Other income (expense), net
15
(432
)
447
*
Net income (loss) before income taxes
82,327
(30,041
)
112,368
*
Provision for income taxes
38
57
(19
)
*
Net income (loss)
$
82,289
$
(30,098
)
$
112,387
373
%
*
Not Meaningful
Revenue
Revenue increased by
$7.7 million, or 24%, from $32.8 million during the three months ended April 30, 2020 to $40.5 million during the three months ended April 30, 2021, primarily attributable to an increase of $7.1 million in networked
charging systems revenue. This increase was primarily attributable to higher volumes of systems delivered across both ChargePoints Level 1 home chargers and Level 3 DC Fast chargers as well as an increase in the average selling
prices in some categories. Subscriptions revenue also increased by $1.8 million primarily due to growth in the number of charging systems connected to its network. These increases were partially offset by a decrease in other revenue of
$1.2 million due to fewer regulatory credits transferred.
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Cost of Revenue
Cost of revenue increased by $6.3 million, or 25%, from $25.0 million during the three months ended April 30, 2020 to
$31.3 million during the three months ended April 30, 2021, primarily due to an increase of $5.1 million in networked charging systems cost of revenue primarily due to an increase in the number of charging system delivered.
Subscriptions cost of revenue increased by $0.9 million as ChargePoint expanded its network and support capabilities, and other cost of revenue increased by $0.3 million primarily related to higher depreciation on owned and operated
charging sites.
Gross Profit and Gross Margin
Gross profit increased by $1.5 million, or 19%, from $7.8 million during the three months ended April 30, 2020 to
$9.2 million during the three months ended April 30, 2021. Gross margin decreased from 24% during the three months ended April 30, 2020 to 23% during the three months ended April 30, 2021. The decrease was primarily due to a
decrease in other revenue in the form of regulatory credits transferred, which has higher gross margins.
Research and Development Expenses
Research and development expenses increased by $7.3 million, or 41%, from $18.0 million during the three months ended
April 30, 2020 to $25.4 million during the three months ended April 30, 2021. The increase was primarily due to a $3.8 million increase in engineering personnel costs due to headcount growth as well as a $3.0 million
increase in research materials and related operating expenses.
Sales and Marketing Expenses
Sales and marketing expenses increased by $1.8 million, or 12%, from $14.2 million during the three months ended April 30, 2020
to $16.0 million during the three months ended April 30, 2021, primarily due to an increase in personnel costs including payroll, benefit and sales commissions, resulting from headcount and, with respect to sales commissions, revenue
growth.
General and Administrative Expenses
General and administrative expenses increased by $9.4 million, or 184%, from $5.1 million during the three months ended
April 30, 2020 to $14.5 million during the three months ended April 30, 2021. The increase was primarily due to a $5.8 million increase in stock-based compensation and a $2.4 million increase in audit, legal and advisory
fees mainly related to the closing of the Merger.
Interest Income
Interest income did not significantly fluctuate during the three months ended April 30, 2021 as compared to the three months ended
April 30, 2020.
Interest Expense
Interest expense increased by $0.7 million from $0.8 million for the three months ended April 30, 2020 to $1.5 million for
the three months ended April 30, 2021. The increase was due to the prepayment charges associated with the settlement of the outstanding term loan. As of April 30, 2021, ChargePoint had no outstanding loans.
Change in Fair Value of Redeemable Convertible Preferred Stock Warrant Liability
Change in fair value of redeemable convertible preferred stock warrant liability increased by $8.7 million from $0.5 million during
the three months ended April 30, 2020 to $9.2 million during the three months ended April 30, 2021, due to changes in the fair value of Legacy ChargePoints redeemable convertible preferred stock through the date of the Merger.
As of April 30, 2021, ChargePoint had no outstanding redeemable convertible preferred stock warrant liabilities.
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Change in Fair Value of Common Stock Warrant Liabilities
ChargePoint recognized a change in fair value of common stock warrant liabilities of $43.8 million during the three months ended
April 30, 2021 due to the decrease in the fair value of Legacy ChargePoints common stock during the period the warrants were outstanding.
Change in Fair Value of Contingent Earnout Liability
ChargePoint recognized a change in fair value of contingent earnout liability of $84.4 million for the three months ended April 30,
2021 due to the decrease in the fair value of Legacy ChargePoints common stock after ChargePoint announced the Merger.
Transaction Costs
Expensed
ChargePoint expensed transaction costs that related to the warrant liabilities assumed as part of the Merger of
$7.0 million, out of $36.5 million total, for the three months ended April 30, 2021 as a result of the consummation of the Merger.
Other Income (Expense), Net
Other
income (expense) did not significantly fluctuate during the three months ended April 30, 2021 as compared to the three months ended April 30, 2020.
Provision for income taxes
The
provision for income taxes did not significantly fluctuate during the three months ended April 30, 2021 as compared to the three months ended April 30, 2020.
Liquidity and Capital Resources
Sources of
Liquidity
ChargePoint has incurred net losses and negative cash flows from operations since its inception which it anticipates
will continue for the foreseeable future. To date, ChargePoint has funded its operations primarily with proceeds from the issuance of redeemable convertible preferred stock, borrowings under its loan facilities, customer payments and proceeds from
the Reverse Recapitalization. As of April 30, 2021, ChargePoint had cash, cash equivalents and restricted cash of $610.2 million. ChargePoint believes that its cash on hand, together with cash generated from sales to customers will satisfy
its working capital and capital requirements for at least the next twelve months.
From inception to April 30, 2021, ChargePoint has
raised aggregate net cash proceeds of $615.7 million from the sale of shares of redeemable convertible preferred stock and $477.5 million from the Merger and the PIPE.
In March 2021, ChargePoint repaid the entire loan balance of $35.0 million plus accrued interest and prepayment fees of
$1.2 million.
Long-Term Liquidity Requirements
Until ChargePoint can generate sufficient revenue to cover its cost of sales, operating expenses, working capital and capital expenditures, it
expects to primarily fund cash needs through a combination of equity and debt financing. If ChargePoint raises funds by issuing equity securities, dilution to existing stockholders may result. Any equity securities issued may also provide for
rights, preferences or privileges senior to those of holders of Common Stock. If ChargePoint raises funds by issuing debt securities, these debt securities would have rights, preferences and privileges senior to those of holders of Common Stock. The
terms of debt securities or borrowings could impose significant restrictions on ChargePoints operations. The capital markets have in the past, and may in the future, experience periods of upheaval that could impact the availability and cost of
equity and debt financing.
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ChargePoints principal use of cash in recent periods has been funding its operations
and investing in capital expenditures. ChargePoints future capital requirements will depend on many factors, including its revenue growth rate, the timing and the amount of cash received from customers, the expansion of sales and marketing
activities, the timing and extent of spending to support development efforts, expenses associated with its international expansion, the introduction of network enhancements and the continuing market adoption of its network. In the future,
ChargePoint may enter into arrangements to acquire or invest in complementary businesses, products and technologies. ChargePoint may be required to seek additional equity or debt financing. In the event that ChargePoint requires additional
financing, it may not be able to raise such financing on acceptable terms or at all. If ChargePoint is unable to raise additional capital or generate cash flows necessary to expand its operations and invest in continued innovation, it may not be
able to compete successfully, which would harm its business, results of operations and financial condition. If adequate funds are not available, ChargePoint may need to reconsider its expansion plans or limit its research and development activities,
which could have a material adverse impact on its business prospects and results of operations.
Cash Flows
For the Three Months Ended April 30, 2021 and 2020
The following table sets forth a summary of ChargePoints cash flows for the periods indicated:
Three Months Ended
April 30,
2021
2020
(in thousands)
Net cash (used in) provided by:
Operating activities
$
(37,539
)
$
(34,694
)
Investing activities
(4,138
)
39,631
Financing activities
505,988
446
Effects of exchange rates on cash, cash equivalents, and restricted cash
7
(56
)
Net increase in cash, cash equivalents, and restricted cash
$
464,318
$
5,327
Net Cash Used in Operating Activities
During the three months ended April 30, 2021, net cash used in operating activities was $37.5 million, consisting primarily of a net
income of $82.3 million, fully offset by an increase in net operating assets of $2.2 million and non-cash charges of $117.6 million. The increase in net operating assets was primarily due
to a $6.2 million increase in prepaid expenses and other assets, a $5.0 million decrease in accrued and other liabilities, a $3.5 million decrease in accounts payable and a $0.4 million decrease in operating lease liabilities,
largely offset by a $7.8 million increase in deferred revenue and a $4.9 million decrease in inventories. The non-cash charges primarily consisted of $84.4 million change in fair value of
contingent earnout liability, $43.8 million change in fair value of common stock warrant liabilities and $9.2 million change in fair value of redeemable convertible preferred stock warrant liability, partially offset by $7.6 million
of stock-based compensation expense, $7.0 million of transaction costs expensed, $2.7 million of depreciation and amortization expense, and $1.0 million of non-cash operating lease
cost.
During the three months ended April 30, 2020, net cash used in operating activities was $34.7 million, consisting
primarily of a net loss of $30.1 million and an increase in net operating assets of $8.4 million, partially offset by non-cash charges of $3.8 million. The increase in net operating assets
was primarily attributable to a $10.3 million decrease in accounts payable, a $4.1 million increase in inventories, a $1.9 million decrease in operating lease liabilities, a $1.9 million decrease in accrued and other liabilities
and a $1.2 million increase in prepaid expenses and other assets, largely offset by a $9.2 million decrease in accounts receivable, net and $1.8 million increase in deferred revenue. The
non-cash charges primarily consisted of $2.3 million of depreciation and amortization expense, $0.9 million of stock-based compensation expense and $0.8 million of non-cash operating lease cost, partially offset by $0.5 million change in fair value of redeemable convertible preferred stock warrant liability.
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Net Cash Provided By (Used In) Investing Activities
During the three months ended April 30, 2021, net cash used in investing activities was $4.1 million for purchases of property and
equipment.
During the three months ended April 30, 2020, net cash provided by investing activities was $39.6 million,
consisting of maturities of investments of $42.4 million, partially offset by purchases of property and equipment of $2.8 million.
Net
Cash Provided by Financing Activities
During the three months ended April 30, 2021, net cash provided by financing activities
was $506.0 million, consisting of net proceeds from Merger and PIPE financing of $481.5 million and proceeds from the exercise of warrants of $73.3 million, partially offset by repayment of borrowings of $36.1 million and taxes
paid related to net share settlement of earnout shares of $12.8 million.
During the three months ended April 30, 2020, net cash
provided by financing activities was $0.4 million from proceeds from exercises of vested and unvested stock options.
Off-Balance Sheet Arrangements
ChargePoint is not a party to any
off-balance sheet arrangements.
Critical Accounting Policies and Estimates
The Companys discussion and analysis of its financial condition and results of operations are based upon its condensed consolidated
financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these condensed consolidated financial statements requires ChargePoint to make estimates and
assumptions that affect the reported amounts of assets, liabilities, net sales and expenses. The Company evaluates its estimates and assumptions on an ongoing basis, and base its estimates on historical experience and on various other assumptions
that ChargePoint believes to be reasonable under the circumstances, the results of which form the basis for the judgments ChargePoint makes about the carrying value of assets and liabilities that are not readily apparent from other sources. Because
these estimates can vary depending on the situation, actual results may differ from these estimates. Making estimates and judgments about future events is inherently unpredictable and is subject to significant uncertainties, some of which are beyond
ChargePoints control. Should any of these estimates and assumptions change or prove to have been incorrect, it could have a material impact on ChargePoints results of operations, financial position and statement of cash flows.
Other than the policies noted in Part I, Item 1, Note 2, Summary of Significant Accounting Policies, in the Companys notes
to condensed consolidated financial statements in this Quarterly Report on Form 10-Q, there have been no material changes to its critical accounting policies and estimates as compared to those disclosed in its
audited consolidated financial statements as of January 31, 2021 and 2020 and for the years ended January 31, 2021, 2020 and 2019.
Recent
Accounting Pronouncements
For a description of recent accounting pronouncements, including the expected dates of adoption and
estimated effects, if any, on ChargePoints condensed consolidated financial statements, see Part I, Item 1, Note 2, Summary of Significant Accounting Policies, in its notes to condensed consolidated financial statements in this
Quarterly Report on Form 10-Q.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
ChargePoint had cash,
cash equivalents and restricted cash totaling $610.2 million as of April 30, 2021. Cash equivalents were invested primarily in money market funds. ChargePoints investment policy is focused on the preservation of capital and
supporting its liquidity needs. Under the policy, ChargePoint invests in highly rated securities, issued by the U.S. government or liquid money market funds. ChargePoint does not invest in financial instruments for trading or speculative purposes,
nor does it use leveraged financial instruments. ChargePoint utilizes external investment managers who adhere to the guidelines of its investment policy.
A hypothetical 10% change in interest rates would not have a material impact on the value of ChargePoints cash, cash equivalents, net
loss or cash flows.
Foreign Currency Risk
ChargePoint has foreign currency risks related to its revenue and operating expenses denominated in currencies other than the U.S. dollar,
primarily the euro, causing both its revenue and its operating results to be impacted by fluctuations in the exchange rates.
Gains or
losses from the revaluation of certain cash balances, accounts receivable balances and intercompany balances that are denominated in these currencies impact ChargePoints net loss. A hypothetical decrease in all foreign currencies against the
U.S. dollar of 10% would not result in a material foreign currency loss on foreign-denominated balances, as of April 30, 2021. As ChargePoints foreign operations expand, its results may be more materially impacted by fluctuations in
the exchange rates of the currencies in which it does business.
At this time, ChargePoint does not enter into financial instruments to
hedge its foreign currency exchange risk, but it may in the future.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in
our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms. Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to
allow timely decisions regarding required disclosure.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of
April 30, 2021. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, due to the material weaknesses in internal control over financial reporting described below, our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective at the reasonable assurance level as of such date. Notwithstanding
these material weaknesses, management has concluded that the condensed consolidated financial statements included in this quarterly report on Form 10-Q are fairly stated in all material respects in accordance
with U.S. GAAP.
Material Weaknesses in Internal Control over Financial Reporting
In connection with the preparation and audit of ChargePoints consolidated financial statements, material weaknesses were identified in
its internal control over financial reporting as of January 31, 2021. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material
misstatement of ChargePoints annual or interim financial statements will not be prevented or detected on a timely basis.
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ChargePoint did not design and maintain an effective control environment commensurate with
its financial reporting requirements. Specifically, ChargePoint did not maintain a sufficient complement of personnel with an appropriate degree of accounting knowledge, experience and training to appropriately analyze, record and disclose
accounting matters commensurate with its accounting and reporting requirements. This material weakness contributed to the following additional material weaknesses:
ChargePoint did not design and maintain formal accounting policies, procedures and controls over significant
accounts and disclosures to achieve complete, accurate and timely financial accounting, reporting and disclosures, including accounting for complex features associated with warrants, segregation of duties and adequate controls related to the
preparation and review of journal entries; and
ChargePoint did not design and maintain effective controls over certain information technology (IT)
general controls for information systems that are relevant to the preparation of its consolidated financial statements. Specifically, ChargePoint did not design and maintain (a) program change management controls to ensure that IT program and
data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized and implemented appropriately and (b) user access controls to ensure appropriate segregation of duties and that adequately
restrict user and privileged access to its financial applications and data to appropriate company personnel.
The
material weaknesses related to the control environment and lack of formal accounting policies, procedures and controls resulted in material adjustments to warrant liabilities, shareholders equity and related accounts and disclosures and
immaterial adjustments to several other account balances and disclosures in the historical consolidated financial statements.
The IT
deficiencies did not result in a misstatement to the consolidated financial statements however, the deficiencies, when aggregated, could impact maintaining effective segregation of duties, as well as the effectiveness of IT-dependent controls (such as automated controls that address the risk of material misstatement to one or more assertions, along with the IT controls and underlying data that support the effectiveness of
system-generated data and reports) that could result in misstatements potentially impacting all financial statement accounts and disclosures that would not be prevented or detected. Additionally, each of these material weaknesses could result in a
misstatement of account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.
Remediation Plan
ChargePoint has begun
implementation of a plan to remediate these material weaknesses. These remediation measures are ongoing and include the following:
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Hiring additional finance and accounting personnel to bolster the accounting capabilities and capacity, and to
establish and maintain internal control over financial reporting;
Designing and implementing controls to formalize roles and review responsibilities to align with the staffs
skills and experience and designing and implementing controls over segregation of duties;
Providing ongoing training for personnel on accounting, financial reporting and internal control over financial
reporting;
Engaging an external advisor to assist with evaluating and documenting the design and operating effectiveness of
internal control over financial reporting and assist with the remediation of deficiencies, as necessary;
Designing and implementing controls over the preparation and review of journal entries and account
reconciliations, including controls over the segregation of duties; and
Designing and implementing IT general controls, including controls over the provisioning and monitoring of user
access rights and privileges and change management processes and procedures.
ChargePoint is remediating the material
weaknesses as efficiently and effectively as possible and remediation efforts could continue beyond the fiscal year ending January 31, 2023. At this time, we cannot provide an estimate of costs expected to be incurred in connection with implementing
this remediation plan; however, these remediation measures will be time consuming, will result in us incurring significant costs, and will place significant demands on our financial and operational resources.
In order to maintain and improve the effectiveness of its internal control over financial reporting, ChargePoint has expended, and anticipates
to continue to expend, significant resources, including accounting-related costs and significant management oversight.
Changes in Internal Control
Over Financial Reporting
There were no changes in our internal control over financial reporting covered by this Quarterly Report on
Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, ChargePoint may be involved in legal proceedings or subject to claims incident to the ordinary course of business.
Regardless of the outcome, such proceedings or claims can have an adverse impact on ChargePoint because of defense and settlement costs, diversion of resources and other factors, and there can be no assurances that favorable outcomes will be
obtained.
ITEM 1A. RISK FACTORS
An investment in our securities involves a high degree of risk. You should carefully consider the risks described below before making an
investment decision. Our business, prospects, financial condition, or operating results could be harmed by any of these risks, as well as other risks not known to us or that we consider immaterial as of the date of this Quarterly Report. The trading
price of our securities could decline due to any of these risks, and, as a result, you may lose all or part of your investment.
Summary of Principal Risks Associated with ChargePoints Business
ChargePoint is an early-stage company with a history of losses, and expects to incur significant expenses
and continuing losses for the near term.
ChargePoint has experienced rapid growth and expects to invest in growth for the foreseeable future. If it fails
to manage growth effectively, its business, operating results and financial condition could be adversely affected.
ChargePoint currently faces competition from a number of companies, particularly in Europe, and expects to face
significant competition in the future as the market for EV charging develops.
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ChargePoint faces risks related to health pandemics, including the recent coronavirus pandemic, which could have
a material adverse effect on its business and results of operations.
ChargePoint relies on a limited number of suppliers and manufacturers for its charging stations. A loss of any of
these partners could negatively affect its business.
ChargePoints business is subject to risks associated with construction, cost overruns and delays, and other
contingencies that may arise in the course of completing installations, and such risks may increase in the future as ChargePoint expands the scope of such services with other parties.
While ChargePoint to date has not made material acquisitions, should it pursue acquisitions in the future, it
would be subject to risks associated with acquisitions.
If ChargePoint is unable to attract and retain key employees and hire qualified management, technical engineering
and sale personnel, its ability to compete and successfully grow its business would be harmed.
ChargePoint is expanding operations internationally, which will expose it to additional tax, compliance, market
and other risks.
Some members of ChargePoints management have limited experience in operating a public company.
ChargePoint may need to raise additional funds and these funds may not be available when needed.
ChargePoints future revenue growth will depend in significant part on its ability to increase sales of its
products and services to fleet operators.
Computer malware, viruses, ransomware, hacking, phishing attacks and similar disruptions could result in security
and privacy breaches and interruption in service, which could harm ChargePoints business.
ChargePoints headquarters and other facilities are located in an active earthquake zone; an earthquake or
other types of natural disasters or resource shortages, including public safety power shut-offs that have occurred and will continue to occur in California, could disrupt and harm its operations and those of ChargePoints customers.
ChargePoints stock price will be volatile, and you may not be able to sell shares at or above the price at
the Closing.
ChargePoint has never paid cash dividends on its capital stock, and does not anticipate paying dividends in the
foreseeable future.
Concentration of ownership among ChargePoints existing executive officers, directors and their affiliate
may prevent new investors from influencing significant corporate decisions.
ChargePoints future growth and success is highly correlated with and thus dependent upon the continuing
rapid adoption of EVs for passenger and fleet applications.
The EV market currently benefits from the availability of rebates, tax credits and other financial incentives
from governments, utilities and others to offset the purchase or operating cost of EVs and EV charging stations.
ChargePoints business may be adversely affected if it is unable to protect its technology and intellectual
property from unauthorized use by third parties.
ChargePoint has identified material weaknesses in its internal control over financial reporting. If ChargePoint
is unable to remediate these material weaknesses, or if ChargePoint identifies additional material weaknesses in the future or otherwise fails to maintain an effective system of internal control over financial reporting, this may result in material
misstatements of ChargePoints consolidated financial statements or cause ChargePoint to fail to meet its periodic reporting obligations.
ChargePoints Public Warrants and the Private Placement Warrants are being accounted for as a warrant
liability and are being recorded at fair value upon issuance with changes in fair value each period reported in earnings, which may have an adverse effect on the market price of its Common Stock.
Risks Related to ChargePoints Business
ChargePoint is an early-stage company with a history of losses, and expects to incur significant expenses and continuing losses for the near term.
ChargePoint incurred a net loss of $197.0 million for the year ended January 31, 2021 and had net income of $82.3
million for the three months ended April 30, 2021. As of April 30, 2021 ChargePoint had an accumulated deficit of approximately $597.1 million. ChargePoint believes it will continue to incur
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net losses each quarter for the near term. Even if it achieves profitability, there can be no assurance that it will be able to maintain profitability in the future. ChargePoints potential
profitability is particularly dependent upon the continued adoption of EVs by consumers and fleet operators, the widespread adoption of electric trucks and other vehicles and other electric transportation modalities, which may not occur.
ChargePoint has experienced rapid growth and expects to invest in growth for the foreseeable future. If it fails to manage growth effectively, its
business, operating results and financial condition could be adversely affected.
ChargePoint has experienced rapid growth in
recent periods. For example, the number of employees has grown from 743 as of January 31, 2020 to 834 as of January 31, 2021 and to 917 as of April 30, 2021, including 77 employees in Europe as of January 31, 2020 to 101 as of
January 31, 2021 and to 133 as of April 30, 2021. The growth and expansion of its business has placed and continues to place a significant strain on management, operations, financial infrastructure and corporate culture. In the event of
further growth, ChargePoints information technology systems and ChargePoints internal control over financial reporting and procedures may not be adequate to support its operations and may introduce opportunities for data security
incidents that may interrupt business operations and permit bad actors to obtain unauthorized access to business information or misappropriate funds. ChargePoint may also face risks to the extent such bad actors infiltrate the information technology
infrastructure of its contractors.
To manage growth in operations and personnel, ChargePoint will need to continue to improve its
operational, financial and management controls and reporting systems and procedures. Failure to manage growth effectively could result in difficulty or delays in attracting new customers, declines in quality or customer satisfaction, increases in
costs, difficulties in introducing new products and services or enhancing existing products and services, loss of customers, information security vulnerabilities or other operational difficulties, any of which could adversely affect its business
performance and operating results.
ChargePoint currently faces competition from a number of companies, particularly in Europe, and expects to face
significant competition in the future as the market for EV charging develops.
The EV charging market is relatively new and
competition is still developing. ChargePoint primarily competes with smaller providers of EV charging station networks for installations, particularly in Europe. Large early-stage markets, such as Europe, require early engagement across verticals
and customers to gain market share, and ongoing effort to scale channels, installers, teams and processes. Some European customers require solutions not yet available and ChargePoints recent entrance into Europe requires establishing itself
against existing competitors. In addition, there are multiple competitors in Europe with limited funding, which could cause poor experiences, hampering overall EV adoption or trust in any particular provider.
In addition, there are other means for charging EVs, which could affect the level of demand for onsite charging capabilities at businesses.
For example, Tesla Inc. continues to build out its supercharger network across the United States for its vehicles, which could reduce overall demand for EV charging at other sites. Also, third-party contractors can provide basic electric charging
capabilities to potential customers seeking to have on premise EV charging capability as well as for home charging. In addition, many EV charging manufacturers, including ChargePoint, are offering home charging equipment, which could reduce demand
for on premise charging capabilities of potential customers and reduce the demand for onsite charging capabilities if EV owners find charging at home to be sufficient.
Further, ChargePoints current or potential competitors may be acquired by third parties with greater available resources. As a result,
competitors may be able to respond more quickly and effectively than ChargePoint to new or changing opportunities, technologies, standards or customer requirements and may have the ability to initiate or withstand substantial price competition. In
addition, competitors may in the future establish cooperative relationships with vendors of complementary products, technologies or services to increase the availability of their solutions in the marketplace. This competition may also materialize in
the form of costly intellectual property disputes or litigation.
New competitors or alliances may emerge in the future that have greater
market share, more widely adopted proprietary technologies, greater marketing expertise and greater financial resources, which could put ChargePoint at a competitive disadvantage. Future competitors could also be better positioned to serve certain
segments of ChargePoints current or future target markets, which could create price pressure. In light of these factors, even if ChargePoints offerings are more effective and higher quality than those of its competitors, current or
potential customers may accept competitive solutions. If ChargePoint fails to adapt to changing market conditions or continue to compete successfully with current charging providers or new competitors, its growth will be limited which would
adversely affect its business and results of operations.
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Failure to effectively expand ChargePoints sales and marketing capabilities could harm its
ability to increase its customer base and achieve broader market acceptance of its solutions.
ChargePoints ability to grow
its customer base, achieve broader market acceptance, grow revenue, and achieve and sustain profitability will depend, to a significant extent, on its ability to effectively expand its sales and marketing operations and activities. Sales and
marketing expenses represent a significant percentage of its total revenue, and its operating results will suffer if sales and marketing expenditures do not contribute significantly to increasing revenue.
ChargePoint is substantially dependent on its direct sales force to obtain new customers. ChargePoint plans to continue to expand its direct
sales force both domestically and internationally but it may not be able to recruit and hire a sufficient number of sales personnel, which may adversely affect its ability to expand its sales capabilities. New hires require significant training and
time before they achieve full productivity, particularly in new sales territories. Recent hires and planned hires may not become as productive as quickly as anticipated, and ChargePoint may be unable to hire or retain sufficient numbers of qualified
individuals. Furthermore, hiring sales personnel in new countries can be costly, complex and time-consuming, and requires additional set up and upfront costs that may be disproportionate to the initial revenue expected from those countries. There is
significant competition for direct sales personnel with strong sales skills and technical knowledge. ChargePoints ability to achieve significant revenue growth in the future will depend, in large part, on its success in recruiting, training,
incentivizing and retaining a sufficient number of qualified direct sales personnel and on such personnel attaining desired productivity levels within a reasonable amount of time. ChargePoints business will be harmed if continuing investment
in its sales and marketing capabilities does not generate a significant increase in revenue.
ChargePoint faces risks related to health pandemics,
including the recent coronavirus (COVID-19) pandemic, which could have a material adverse effect on its business and results of operations.
The impact of COVID-19, including changes in consumer and business behavior, pandemic fears and market
downturns, and restrictions on business and individual activities, has created significant volatility in the global economy and has led to reduced economic activity. The spread of COVID-19 has also created a
disruption in the manufacturing, delivery and overall supply chain of vehicle manufacturers and suppliers, and has led to a decrease in EV sales in markets around the world. Any sustained downturn in demand for EVs would harm ChargePoints
business.
The pandemic has resulted in government authorities implementing numerous measures to try to contain the virus, such as travel
bans and restrictions, quarantines, stay-at-home or shelter-in-place orders and business
shutdowns. These measures may adversely impact ChargePoints employees and operations and the operations of its customers, suppliers, vendors and business partners, and may negatively impact demand for EV charging stations, particularly at
workplaces. These measures by government authorities may remain in place for a significant period of time and may adversely affect manufacturing and building plans, sales and marketing activities, business and results of operations.
ChargePoint had initially modified its business practices by recommending that all non-essential
personnel work from home and cancelling or reducing physical participation in sales activities, meetings, events and conferences. ChargePoint has also implemented additional safety protocols for essential workers, has implemented cost cutting
measures in order to reduce its operating costs, some of which it recently reversed, and may take further actions as may be required by government authorities or that it determines are in the best interests of its employees, customers, suppliers,
vendors and business partners. There is no certainty that such actions will be sufficient to mitigate the risks posed by the virus or otherwise be satisfactory to government authorities. If significant portions of ChargePoints workforce are
unable to work effectively, including due to illness, quarantines, social distancing, government actions or other restrictions in connection with the COVID-19 pandemic, its operations will be negatively
impacted. Furthermore, if significant portions of its customers or potential customers workforces are subject to stay-at-home orders or otherwise have
substantial numbers of their employees working remotely for sustained periods of time, user demand for charging stations and services will decline.
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The extent to which the COVID-19 pandemic impacts
ChargePoints business, prospects and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the pandemic, its severity, the
actions to contain the virus or treat its impact, and when and to what extent normal economic and operating activities can resume. The COVID-19 pandemic could limit the ability of customers, suppliers, vendors
and business partners to perform, including third-party suppliers ability to provide components and materials used in charging stations or in providing installation or maintenance services. Even after the
COVID-19 pandemic has subsided, ChargePoint may continue to experience an adverse impact to its business as a result of its global economic impact, including any recession that has occurred or may occur in the
future.
Specifically, difficult macroeconomic conditions, such as decreases in per capita income and level of disposable income,
increased and prolonged unemployment or a decline in consumer confidence as a result of the COVID-19 pandemic, as well as reduced spending by businesses, could each have a material adverse effect on the demand
for ChargePoints products and services.
ChargePoint relies on a limited number of suppliers and manufacturers for its charging stations. A
loss of any of these partners could negatively affect its business.
ChargePoint relies on a limited number of suppliers to
manufacture its charging stations, including in some cases only a single supplier for some products and components. This reliance on a limited number of manufacturers increases ChargePoints risks, since it does not currently have proven
reliable alternatives or replacement manufacturers beyond these key parties. In the event of interruption, it may not be able to increase capacity from other sources or develop alternate or secondary sources without incurring material additional
costs and substantial delays. Thus, ChargePoints business could be adversely affected if one or more of its suppliers is impacted by any interruption at a particular location.
If ChargePoint experiences a significant increase in demand for its charging stations, or if it needs to replace an existing supplier, it may
not be possible to supplement or replace them on acceptable terms, which may undermine its ability to deliver products to customers in a timely manner. For example, it may take a significant amount of time to identify a manufacturer that has the
capability and resources to build charging stations in sufficient volume. Identifying suitable suppliers and manufacturers could be an extensive process that requires ChargePoint to become satisfied with their quality control, technical
capabilities, responsiveness and service, financial stability, regulatory compliance, and labor and other ethical practices. Accordingly, a loss of any significant suppliers or manufacturers could have an adverse effect on ChargePoints
business, financial condition and operating results. In addition, our suppliers may face supply chain risks and constraints of their own, which may impact the availability and pricing of our products. For example, supply chain challenges related to
global chip shortages that have impacted companies worldwide both within and outside of our industry may have adverse effects on our suppliers and, as a result, us.
In addition, as a result of the Merger, ChargePoint became subject to requirements under the Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010 (the Dodd-Frank Act) to diligence, disclose, and report whether or not its products contain minerals originating from the Democratic Republic of the Congo and adjoining countries, or conflict minerals. ChargePoint
will incur additional costs to comply with these disclosure requirements, including costs related to determining the source of any of the relevant minerals and metals used in our products. These requirements could adversely affect the sourcing,
availability, and pricing of minerals used in the components used in its products. It is also possible that ChargePoints reputation may be adversely affected if it determines that certain of its products contain minerals not determined to be
conflict-free or if it is unable to alter its products, processes or sources of supply to avoid use of such materials. ChargePoint may also encounter end-customers who require that all of the components of the
products be certified as conflict free. If ChargePoint is not able to meet this requirement, such end-customers may choose to purchase products from a different company.
ChargePoints business is subject to risks associated with construction, cost overruns and delays, and other contingencies that may arise in the
course of completing installations, and such risks may increase in the future as ChargePoint expands the scope of such services with other parties.
ChargePoint does not typically install charging stations at customer sites. These installations are typically performed by ChargePoint partners
or electrical contractors with an existing relationship with the customer and/ or knowledge of the site. The installation of charging stations at a particular site is generally subject to oversight and regulation in accordance with state and
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local laws and ordinances relating to building codes, safety, environmental protection and related matters, and typically requires various local and other governmental approvals and permits that
may vary by jurisdiction. In addition, building codes, accessibility requirements or regulations may hinder EV charger installation because they end up costing the developer or installer more in order to meet the code requirements. Meaningful delays
or cost overruns may impact ChargePoints recognition of revenue in certain cases and/or impact customer relationships, either of which could impact ChargePoints business and profitability.
Furthermore, ChargePoint may in the future elect to install charging stations at customer sites or manage contractors, likely as part of
offering customers a turnkey solution. Working with contractors may require ChargePoint to obtain licenses or require it or its customers to comply with additional rules, working conditions and other union requirements, which can add costs and
complexity to an installation project. In addition, if these contractors are unable to provide timely, thorough and quality installation-related services, customers could fall behind their construction schedules leading to liability to ChargePoint
or cause customers to become dissatisfied with the solutions ChargePoint offers.
While ChargePoint to date has not made material acquisitions,
should it pursue acquisitions in the future, it would be subject to risks associated with acquisitions.
ChargePoint may acquire
additional assets, products, technologies or businesses that are complementary to its existing business. The process of identifying and consummating acquisitions and the subsequent integration of new assets and businesses into ChargePoints own
business would require attention from management and could result in a diversion of resources from its existing business, which in turn could have an adverse effect on its operations. Acquired assets or businesses may not generate the expected
financial results. Acquisitions could also result in the use of cash, potentially dilutive issuances of equity securities, the occurrence of goodwill impairment charges, amortization expenses for other intangible assets and exposure to potential
unknown liabilities of the acquired business.
If ChargePoint completes future acquisitions, it may not ultimately strengthen its
competitive position or achieve its goals and business strategy; ChargePoint may be subject to claims or liabilities assumed from an acquired company, product, or technology; acquisitions ChargePoint completes could be viewed negatively by its
customers, investors, and securities analysts; and ChargePoint may incur costs and expenses necessary to address an acquired companys failure to comply with laws and governmental rules and regulations. Additionally, ChargePoint may be subject
to litigation or other claims in connection with the acquired company, including claims from terminated employees, former stockholders or other third parties, which may differ from or be more significant than the risks ChargePoints business
faces. If ChargePoint is unsuccessful at integrating future acquisitions in a timely manner, or the technologies and operations associated with such acquisitions, the revenue and operating results of the combined company could be adversely affected.
Any integration process may require significant time and resources, which may disrupt ChargePoints ongoing business and divert managements attention, and ChargePoint may not be able to manage the integration process successfully or in a
timely manner. ChargePoint may not successfully evaluate or utilize the acquired technology or personnel, realize anticipated synergies from the acquisition, or accurately forecast the financial impact of an acquisition transaction and integration
of such acquisition, including accounting charges and any potential impairment of goodwill and intangible assets recognized in connection with such acquisitions. ChargePoint may have to pay cash, incur debt, or issue equity or equity-linked
securities to pay for any future acquisitions, each of which could adversely affect its financial condition or the market price of its Common Stock. Furthermore, the sale of equity or issuance of equity-linked debt to finance any future acquisitions
could result in dilution to ChargePoints stockholders. The occurrence of any of these risks could harm ChargePoints business, operating results, and financial condition.
If ChargePoint is unable to attract and retain key employees and hire qualified management, technical, engineering and sales personnel, its ability to
compete and successfully grow its business would be harmed.
ChargePoints success depends, in part, on its continuing ability
to identify, hire, attract, train and develop and retain highly qualified personnel. The inability to do so effectively would adversely affect its business. ChargePoints future performance also depends on the continued services and continuing
contributions of its senior management to execute on its business plan and to identify and pursue new opportunities and product innovations. The loss of services of senior management, or the ineffective management of any leadership transitions,
especially within ChargePoints sales organization, could significantly delay or prevent the achievement of its development and strategic objectives, which could adversely affect its business, financial condition, and operating results.
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Competition for employees can be intense, particularly in Silicon Valley where ChargePoint
is headquartered, and the ability to attract, hire and retain them depends on ChargePoints ability to provide competitive compensation. ChargePoint may not be able to attract, assimilate, develop or retain qualified personnel in the future,
and failure to do so could adversely affect its business, including the execution of its global business strategy.
ChargePoint is expanding
operations internationally, which will expose it to additional tax, compliance, market and other risks.
ChargePoints primary
operations are in the United States and it maintains contractual relationships with parts and manufacturing suppliers in Asia, Mexico and other locations. Also, ChargePoint is continuing to invest to increase its presence in Europe and to expand a
primarily software development team in India. Managing this expansion requires additional resources and controls, and could subject ChargePoint to risks associated with international operations, including:
conformity with applicable business customs, including translation into foreign languages and associated
expenses;
lack of availability of government incentives and subsidies;
challenges in arranging, and availability of, financing for customers;
potential changes to its established business model;
cost of alternative power sources, which could vary meaningfully outside the United States;
difficulties in staffing and managing foreign operations in an environment of diverse culture, laws, and
customers, and the increased travel, infrastructure, and legal and compliance costs associated with international operations;
installation challenges;
differing driving habits and transportation modalities in other markets;
different levels of demand among commercial, fleet and residential customers;
compliance with multiple, potentially conflicting and changing governmental laws, regulations, certifications,
and permitting processes including environmental, banking, employment, tax, information security, privacy, and data protection laws and regulations such as the European Union (the EU) General Data Protection Regulation
(GDPR), national legislation implementing the same and changing requirements for legally transferring data out of the European Economic Area;
compliance with U.S. and foreign anti-bribery laws including the Foreign Corrupt Practices Act (FCPA)
and the United Kingdom Anti-Bribery Act;
conforming products to various international regulatory and safety requirements as well as charging and other
electric infrastructures;
difficulty in establishing, staffing and managing foreign operations;
difficulties in collecting payments in foreign currencies and associated foreign currency exposure;
restrictions on repatriation of earnings;
compliance with potentially conflicting and changing laws of taxing jurisdictions and compliance with applicable
U.S. tax laws as they relate to international operations, the complexity and adverse consequences of such tax laws, and potentially adverse tax consequences due to changes in such tax laws; and
regional economic and political conditions.
As a result of these risks, ChargePoints current expansion efforts and any potential future international expansion efforts may not be successful.
Some members of ChargePoints management have limited experience in operating a public company.
Some of ChargePoints executive officers have limited experience in the management of a publicly-traded company. The management team may
not successfully or effectively manage the transition to a public company that will be subject to significant regulatory oversight and reporting obligations under federal securities laws. Their limited experience in dealing with the increasingly
complex laws pertaining to public companies could be a significant disadvantage in that it is likely that an
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increasing amount of their time may be devoted to these activities, which will result in less time being devoted to the management and growth of our company. ChargePoint may not have adequate
personnel with the appropriate level of knowledge, experience and training in the accounting policies, practices or internal control over financial reporting required of public companies. The development and implementation of the standards and
controls and the hiring of experienced personnel necessary to achieve the level of accounting standards required of a public company may require costs greater than expected.
ChargePoint may need to raise additional funds and these funds may not be available when needed.
ChargePoint may need to raise additional capital in the future to further scale its business and expand to additional markets. ChargePoint may
raise additional funds through the issuance of equity, equity-related or debt securities, or through obtaining credit from government or financial institutions. ChargePoint cannot be certain that additional funds will be available on favorable terms
when required, or at all. If ChargePoint cannot raise additional funds when needed, its financial condition, results of operations, business and prospects could be materially and adversely affected. If ChargePoint raises funds through the issuance
of debt securities or through loan arrangements, the terms of which could require significant interest payments, contain covenants that restrict ChargePoints business, or other unfavorable terms. In addition, to the extent ChargePoint raises
funds through the sale of additional equity securities, ChargePoint stockholders would experience additional dilution.
ChargePoints future
revenue growth will depend in significant part on its ability to increase sales of its products and services to fleet operators.
ChargePoints future revenue growth will depend in significant part on its ability to increase sales of its products and services to fleet
operators. The electrification of fleets is an emerging market, and fleet operators may not adopt EVs on a widespread basis and on the timelines ChargePoint anticipates. In addition to the factors affecting the growth of the EV market generally,
transitioning to an EV fleet can be costly and capital intensive, which could result in slower than anticipated adoption. The sales cycle could also be longer for sales to fleet operators, as they are often larger organizations, with more formal
procurement processes than smaller commercial site hosts. Fleet operators may also require significant additional services and support, and if ChargePoint is unable to provide such services and support, it may adversely affect its ability to attract
additional fleet operators as customers. Any failure to attract and retain fleet operators as customers in the future would adversely affect ChargePoints business and results of operations.
Computer malware, viruses, ransomware, hacking, phishing attacks and similar disruptions could result in security and privacy breaches and interruption
in service, which could harm ChargePoints business.
Computer malware, viruses, physical or electronic break-ins and similar disruptions could lead to interruption and delays in ChargePoints services and operations and loss, misuse or theft of data. Computer malware, viruses, ransomware, hacking and phishing
attacks against online networks have become more prevalent and may occur on ChargePoints systems in the future. Any attempts by cyber attackers to disrupt ChargePoints services or systems, if successful, could harm its business,
introduce liability to data subjects, result in the misappropriation of funds, be expensive to remedy and damage its reputation or brand. Insurance may not be sufficient to cover significant expenses and losses related to cyber-attacks. Efforts to
prevent cyber attackers from entering computer systems are expensive to implement, and ChargePoint may not be able to cause the implementation or enforcement of such preventions with respect to its third-party vendors. Though it is difficult to
determine what, if any, harm may directly result from any specific interruption or attack, any failure to maintain performance, reliability, security and availability of systems and technical infrastructure may, in addition to other losses, harm
ChargePoints reputation, brand and ability to attract customers.
ChargePoint has previously experienced, and may in the future
experience, service disruptions, outages and other performance problems due to a variety of factors, including infrastructure changes, third-party service providers, human or software errors and capacity constraints. If ChargePoints services
are unavailable when users attempt to access them, they may seek other services, which could reduce demand for its solutions from target customers.
ChargePoint has processes and procedures in place designed to enable it to quickly recover from a disaster or catastrophe and continue
business operations and has tested this capability under controlled circumstances. However, there are several factors ranging from human error to data corruption that could materially impact the efficacy of such processes and procedures,
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including by lengthening the time services are partially or fully unavailable to customers and users. It may be difficult or impossible to perform some or all recovery steps and continue normal
business operations due to the nature of a particular disaster or catastrophe, especially during peak periods, which could cause additional reputational damages, or loss of revenue, any of which could adversely affect its business and financial
results.
ChargePoints headquarters and other facilities are located in an active earthquake zone; an earthquake or other types of natural
disasters or resource shortages, including public safety power shut-offs that have occurred and will continue to occur in California, could disrupt and harm its operations and those of ChargePoints customers.
ChargePoint conducts a majority of its operations in the San Francisco Bay area in an active earthquake zone. The occurrence of a natural
disaster such as an earthquake, drought, flood, fire (such as the recent extensive wildfires in California), localized extended outages of critical utilities (such as Californias public safety power shut-offs) or transportation systems, or any
critical resource shortages could cause a significant interruption in its business, damage or destroy its facilities or inventory, and cause it to incur significant costs, any of which could harm its business, financial condition and results of
operations. The insurance ChargePoint maintains against fires, earthquakes and other natural disasters may not be adequate to cover losses in any particular case.
In addition, rolling public safety power shut offs in California or other states can affect user acceptance of EVs, as charging may be
unavailable at the desired times, or at all during these events. These shut offs could also affect the ability of fleet operators to charge their EVs, which, for example, could adversely affect transportation schedules or any service level
agreements to which either ChargePoint or the fleet operator may be a party. If these events persist, the demand for EVs could decline, which would result in reduced demand for charging solutions.
Risks Related to the EV Market
Changes to fuel
economy standards or the success of alternative fuels may negatively impact the EV market and thus the demand for ChargePoints products and services.
As regulatory initiatives have required an increase in the mileage capabilities of cars, consumption of renewable transportation fuels, such as
ethanol and biodiesel, and consumer acceptance of EVs and other alternative vehicles has been increasing. If fuel efficiency of non-electric vehicles continues to rise, whether as the result of regulations or
otherwise, and affordability of vehicles using renewable transportation fuels improves, the demand for electric and high energy vehicles could diminish. In addition, the EV fueling model is different than gas or other fuel models, requiring behavior
change and education of influencers, consumers and others such as regulatory bodies. Developments in alternative technologies, such as advanced diesel, ethanol, fuel cells or compressed natural gas, or improvements in the fuel economy of the
internal combustion engine, may materially and adversely affect demand for EVs and EV charging stations. For example, fuel which is abundant and relatively inexpensive in the United States, such as compressed natural gas, may emerge as preferred
alternative to petroleum-based propulsion. Regulatory bodies may also adopt rules that substantially favor certain alternatives to petroleum-based propulsion over others, which may not necessarily be EVs. This may impose additional obstacles to the
purchase of EVs or the development of a more ubiquitous EV market. Finally, the current litigation between the state of California and the National Highway Traffic Safety Administration (NHTSA) could impact Californias ability to
set fuel economy standards that encourage the adoption of EVs, and could be followed by many other states. If any of the above cause or contribute to consumers or businesses to no longer purchase EVs or purchase them at a lower rate, it would
materially and adversely affect ChargePoints business, operating results, financial condition and prospects.
ChargePoints future growth
and success is highly correlated with and thus dependent upon the continuing rapid adoption of EVs for passenger and fleet applications.
ChargePoints future growth is highly dependent upon the adoption of EVs by businesses and consumers. The market for EVs is still rapidly
evolving, characterized by rapidly changing technologies, competitive pricing and competitive factors, evolving government regulation and industry standards and changing consumer demands and behaviors, changing levels of concern related to
environmental issues and governmental initiatives related to climate change and the environment generally. Although demand for EVs has grown in recent years, there is no guarantee of continuing future demand. If the market for EVs develops more
slowly than expected, or if demand for EVs decreases, ChargePoints business, prospects, financial condition and operating results would be harmed. The market for EVs could be affected by numerous factors, such as:
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perceptions about EV features, quality, safety, performance and cost;
perceptions about the limited range over which EVs may be driven on a single battery charge;
competition, including from other types of alternative fuel vehicles,
plug-in hybrid electric vehicles and high fuel-economy internal combustion engine vehicles;
volatility in the cost of oil and gasoline;
concerns regarding the stability of the electrical grid;
the decline of an EV batterys ability to hold a charge over time;
availability of service for EVs;
consumers perception about the convenience and cost of charging EVs;
increases in fuel efficiency;
government regulations and economic incentives, including adverse changes in, or expiration of, favorable tax
incentives related to EVs, EV charging stations or decarbonization generally;
relaxation of government mandates or quotas regarding the sale of EVs; and
concerns about the future viability of EV manufacturers.
In addition, sales of vehicles in the automotive industry can be cyclical, which may affect growth in acceptance of EVs. It is uncertain how
macroeconomic factors will impact demand for EVs, particularly since they can be more expensive than traditional gasoline-powered vehicles, when the automotive industry globally has been experiencing a recent decline in sales. Furthermore, because
fleet operators often make large purchases of EVs, this cyclicality and volatility in the automotive industry may be more pronounced with commercial purchasers, and any significant decline in demand from these customers could reduce demand for EV
charging and ChargePoints products and services in particular.
Demand for EVs may also be affected by factors directly impacting
automobile prices or the cost of purchasing and operating automobiles, such as sales and financing incentives, prices of raw materials and parts and components, cost of fuel and governmental regulations, including tariffs, import regulation and
other taxes. Volatility in demand may lead to lower vehicle unit sales, which may result in reduced demand for EV charging solutions and therefore adversely affect ChargePoints business, financial condition and operating results.
The EV market currently benefits from the availability of rebates, tax credits and other financial incentives from governments, utilities and others to
offset the purchase or operating cost of EVs and EV charging stations. In particular, ChargePoints marketing efforts have heavily relied upon federal tax credits available to purchasers of its EV charging stations that effectively provide
purchasers with a significantly discounted purchase price. The reduction, modification, or elimination of such benefits could cause reduced demand for EVs and EV charging stations, which would adversely affect ChargePoints financial results.
The U.S. federal government, foreign governments and some state and local governments provide incentives to end users and
purchasers of EVs and EV charging stations in the form of rebates, tax credits and other financial incentives, such as payments for regulatory credits. The EV market relies on these governmental rebates, tax credits and other financial incentives to
significantly lower the effective price of EVs and EV charging stations to customers. However, these incentives may expire on a particular date, end when the allocated funding is exhausted, or be reduced or terminated as a matter of regulatory or
legislative policy. In particular, ChargePoint has heavily relied upon the availability of federal tax credits to purchasers under Section 30C of the Code to market its EV charging stations, which can effectively provide such purchasers with up
to a 30% discount off the purchase price of ChargePoints EV charging stations. The credits under Section 30C of the Code are set to expire on December 31, 2021 and thus would not be available to ChargePoints customers unless
extended. There can be no assurance that the credits under Section 30C of the Code will be extended, or if extended, will not be otherwise reduced. Any reduction in rebates, tax credits or other financial incentives, including the credit under
Section 30C of the Code, could materially reduce the demand for EVs and ChargePoints solutions and, as a result, may adversely impact ChargePoints business and expansion potential.
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ChargePoint also derives other revenue from regulatory credits. If government support of
these credits declines, ChargePoints ability to generate this other revenue in the future would be adversely affected. Recently, ChargePoint has derived a slight majority of its other revenue from regulatory credits, and ChargePoint expects
revenue from this source will decline as a percentage of other and total revenue over time. Further, the availability of such credits may decline even with general governmental support of the transition to EV infrastructure. For example, in
September 2020, California Governor Gavin Newsom issued Executive Order N-79-20 (the EO), announcing a target for all
in-state sales of new passenger cars and trucks to be zero-emission by 2035. While the EO calls for the support of EV infrastructure, the form of this support is
unclear. If California or other jurisdictions choose to adopt regulatory mandates instead of establishing or continuing green energy credit regimes for EV infrastructure, ChargePoints revenue from these credits would be adversely impacted.
The EV charging market is characterized by rapid technological change, which requires ChargePoint to continue to develop new products and product
innovations. Any delays in such development could adversely affect market adoption of its products and ChargePoints financial results.
Continuing technological changes in battery and other EV technologies could adversely affect adoption of current EV charging technology and/or
ChargePoints products. ChargePoints future success will depend upon its ability to develop and introduce a variety of new capabilities and innovations to its existing product offerings, as well as introduce a variety of new product
offerings, to address the changing needs of the EV charging market. As new products are introduced, gross margins tend to decline in the near term and improves as the product become more mature and with a more efficient manufacturing process.
As EV technologies change, ChargePoint may need to upgrade or adapt its charging station technology and introduce new products and services in
order to serve vehicles that have the latest technology, in particular battery cell technology, which could involve substantial costs. Even if ChargePoint is able to keep pace with changes in technology and develop new products and services, its
research and development expenses could increase, its gross margins could be adversely affected in some periods and its prior products could become obsolete more quickly than expected.
ChargePoint cannot guarantee that any new products will be released in a timely manner, or at all, or achieve market acceptance. Delays in
delivering new products that meet customer requirements could damage ChargePoints relationships with customers and lead them to seek alternative providers. Delays in introducing products and innovations or the failure to offer innovative
products or services at competitive prices may cause existing and potential customers to purchase ChargePoints competitors products or services.
If ChargePoint is unable to devote adequate resources to develop products or cannot otherwise successfully develop products or services that
meet customer requirements on a timely basis or that remain competitive with technological alternatives, its products and services could lose market share, its revenue will decline, it may experience higher operating losses and its business and
prospects will be adversely affected.
Certain statements we make about estimates of market opportunity and forecasts of market growth may prove to
be inaccurate.
From time to time, we make statements with estimates of the addressable market for ChargePoints solutions and
the EV market in general. Market opportunity estimates and growth forecasts, whether obtained from third-party sources or developed internally, are subject to significant uncertainty and are based on assumptions and estimates that may prove to be
inaccurate. This is especially so at the present time due to the uncertain and rapidly changing projections of the severity, magnitude and duration of the current COVID-19 pandemic. The estimates and forecasts
relating to the size and expected growth of the target market, market demand and adoption, capacity to address this demand and pricing may also prove to be inaccurate. In particular, estimates regarding the current and projected market opportunity
are difficult to predict. The estimated addressable market may not materialize for many years, if ever, and even if the markets meet the size estimates and growth forecasts, ChargePoints business could fail to grow at similar rates.
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Risks Related to ChargePoints Technology, Intellectual Property and Infrastructure
ChargePoint expects to incur research and development costs and devote significant resources to developing new products, which could significantly reduce
its profitability and may never result in revenue to ChargePoint.
ChargePoints future growth depends on penetrating new
markets, adapting existing products to new applications and customer requirements, and introducing new products that achieve market acceptance. ChargePoint plans to incur significant research and development costs in the future as part of its
efforts to design, develop, manufacture and introduce new products and enhance existing products. ChargePoints research and development expenses were $25.4 million, $75.0 million, $69.5 million and $50.5 million during the
three months ended April 30 201, and during the fiscal years ended January 31, 2021, 2020 and 2019, respectively, and are likely to grow in the future. Further, ChargePoints research and development program may not produce successful
results, and its new products may not achieve market acceptance, create additional revenue or become profitable.
ChargePoint may need to defend
against intellectual property infringement or misappropriation claims, which may be time-consuming and expensive.
From time to
time, the holders of intellectual property rights may assert their rights and urge ChargePoint to take licenses, and/or may bring suits alleging infringement or misappropriation of such rights. There can be no assurance that ChargePoint will be able
to mitigate the risk of potential suits or other legal demands by competitors or other third parties. Accordingly, ChargePoint may consider entering into licensing agreements with respect to such rights, although no assurance can be given that such
licenses can be obtained on acceptable terms or that litigation will not occur, and such licenses and associated litigation could significantly increase ChargePoints operating expenses. In addition, if ChargePoint is determined to have or
believes there is a high likelihood that it has infringed upon or misappropriated a third partys intellectual property rights, it may be required to cease making, selling or incorporating certain key components or intellectual property into
the products and services it offers, to pay substantial damages and/or royalties, to redesign its products and services, and/or to establish and maintain alternative branding. In addition, to the extent that ChargePoints customers and business
partners become the subject of any allegation or claim regarding the infringement or misappropriation of intellectual property rights related to ChargePoints products and services, ChargePoint may be required to indemnify such customers and
business partners. If ChargePoint were required to take one or more such actions, its business, prospects, operating results and financial condition could be materially and adversely affected. In addition, any litigation or claims, whether or not
valid, could result in substantial costs, negative publicity and diversion of resources and management attention.
ChargePoints business may
be adversely affected if it is unable to protect its technology and intellectual property from unauthorized use by third parties.
ChargePoints success depends, at least in part, on ChargePoints ability to protect its core technology and intellectual property.
To accomplish this, ChargePoint relies on, and plans to continue relying on, a combination of patents, trade secrets (including know-how), employee and third-party nondisclosure agreements, copyright,
trademarks, intellectual property licenses and other contractual rights to retain ownership of, and protect, its technology. Failure to adequately protect its technology and intellectual property could result in competitors offering similar
products, potentially resulting in the loss of some of ChargePoints competitive advantage and a decrease in revenue which would adversely affect its business, prospects, financial condition and operating results.
The measures ChargePoint takes to protect its technology intellectual property from unauthorized use by others may not be effective for
various reasons, including the following:
any patent applications ChargePoint submits may not result in the issuance of patents;
the scope of issued patents may not be broad enough to protect proprietary rights;
any issued patents may be challenged by competitors and/or invalidated by courts or governmental authorities;
the costs associated with enforcing patents, confidentiality and invention agreements or other intellectual
property rights may make aggressive enforcement impracticable;
current and future competitors may circumvent patents or independently develop similar trade secrets or works of
authorship, such as software;
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know-how and other proprietary information ChargePoint purports to hold
as a trade secret may not qualify as a trade secret under applicable laws; and
proprietary designs and technology embodied in ChargePoints products may be discoverable by third- parties
through means that do not constitute violations of applicable laws.
Patent, trademark, and trade secret laws vary
significantly throughout the world. Some foreign countries do not protect intellectual property rights to the same extent as do the laws of the United States. Further, policing the unauthorized use of its intellectual property in foreign
jurisdictions may be difficult or impossible. Therefore, ChargePoints intellectual property rights may not be as strong or as easily enforced outside of the United States.
Certain patents in the EV space may come to be considered standards essential. If this is the case with respect to any of
ChargePoints patents, it may be required to license certain technology on fair, reasonable and non-discriminatory terms, decreasing revenue. Further, competitors, vendors, or customers may,
in certain instances, be free to create variations or derivative works of ChargePoint technology and intellectual property, and those derivative works may become directly competitive with ChargePoints offerings. Finally, ChargePoint may not be
able to leverage, or obtain ownership of, all technology and intellectual property developed by ChargePoints vendors in connection with design and manufacture of ChargePoints products, thereby jeopardizing ChargePoints ability to
obtain a competitive advantage over its competitors.
The current lack of international standards may lead to uncertainty, additional competition
and further unexpected costs.
Lack of industry standards for EV station management, coupled with utilities and other large
organizations mandating their own adoption of specifications that have not become widely adopted in the industry, may hinder innovation or slow new product or new feature introduction.
In addition, automobile manufacturers may choose to utilize their own proprietary systems, which could lock out competition for EV charging
stations, or to use their size and market position to influence the market, which could limit ChargePoints market and reach to customers, negatively impacting its business.
Further, should regulatory bodies later impose a standard that is not compatible with ChargePoints infrastructure, it may incur
significant costs to adapt its business model to the new regulatory standard, which may require significant time and, as a result, may have a material adverse effect on its revenue or results of operations.
ChargePoints technology could have undetected defects, errors or bugs in hardware or software which could reduce market adoption, damage its
reputation with current or prospective customers, and/or expose it to product liability and other claims that could materially and adversely affect its business.
ChargePoint may be subject to claims that charging stations have malfunctioned and persons were injured or purported to be injured. Any
insurance that ChargePoint carries may not be sufficient or it may not apply to all situations. Similarly, to the extent that such malfunctions are related to components obtained from third-party vendors, such vendors may not assume responsibility
for such malfunctions. In addition, ChargePoints customers could be subjected to claims as a result of such incidents and may bring legal claims against ChargePoint to attempt to hold it liable. Any of these events could adversely affect
ChargePoints brand, relationships with customers, operating results or financial condition.
Across ChargePoints product line,
ChargePoint develops equipment solutions based on preferred second source or common off-the-shelf vendors. However, due to its designs, ChargePoint does rely on some
single source vendors, the unavailability or failure of which can pose risks to supply chain or product shipping situations.
Furthermore,
ChargePoints software platform is complex, developed for over a decade by many developers, and includes a number of licensed third-party commercial and open-source software libraries. ChargePoints software has contained defects and
errors and may in the future contain undetected defects or errors. ChargePoint is continuing to evolve the features and functionality of its platform through updates and enhancements, and as it does, it may introduce additional defects or errors
that may not be detected until after deployment to customers. In addition, if ChargePoints products and services, including any updates or patches, are not implemented or used correctly or as intended, inadequate performance and disruptions in
service may result.
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Any defects or errors in product or services offerings, or the perception of such defects or
errors, or other performance problems could result in any of the following, each of which could adversely affect ChargePoints business and results of its operations:
expenditure of significant financial and product development resources, including recalls, in efforts to analyze,
correct, eliminate or work around errors or defects;
loss of existing or potential customers or partners;
interruptions or delays in sales;
delayed or lost revenue;
delay or failure to attain market acceptance;
delay in the development or release of new functionality or improvements;
negative publicity and reputational harm;
sales credits or refunds;
exposure of confidential or proprietary information;
diversion of development and customer service resources;
breach of warranty claims;
legal claims under applicable laws, rules and regulations; and
an increase in collection cycles for accounts receivable or the expense and risk of litigation.
Although ChargePoint has contractual protections, such as warranty disclaimers and limitation of liability provisions,
in many of its agreements with customers, resellers and other business partners, such protections may not be uniformly implemented in all contracts and, where implemented, may not fully or effectively protect from claims by customers, reseller,
business partners or other third parties. Any insurance coverage or indemnification obligations of suppliers may not adequately cover all such claims, or cover only a portion of such claims. A successful product liability, warranty, or other similar
claim could have an adverse effect on ChargePoints business, operating results and financial condition. In addition, even claims that ultimately are unsuccessful could result in expenditure of funds in litigation, divert managements time
and other resources and cause reputational harm.
In addition, ChargePoint relies on some open-source software and libraries issued under
the General Public License (or similar copyleft licenses) for development of its products and may continue to rely on similar copyleft licenses. Third-parties may assert a copyright claim against ChargePoint regarding its use of such
software or libraries, which could lead to the adverse results listed above. Use of such software or libraries may also force ChargePoint to provide third parties, at no cost, the source code to its proprietary software, which may decrease revenue
and lessen any competitive advantage ChargePoint has due to the secrecy of its source code.
Interruptions, delays in service or inability to
increase capacity, including internationally, at third-party data center facilities could impair the use or functionality of ChargePoints subscription services, harm its business and subject it to liability.
ChargePoint currently serves customers from third-party data center facilities operated by Amazon Web Services (AWS) located in the
United States, Europe and Canada. In addition to AWS, some ChargePoint services are housed in third-party data centers operated by Rackspace in the United States. Any outage or failure of such data centers could negatively affect ChargePoints
product connectivity and performance. ChargePoints primary environments are behind the Content Delivery Network operated by Cloudflare, and any interruptions of Cloudflares services could negatively affect ChargePoints product
connectivity and performance. Furthermore, ChargePoint depends on connectivity from its charging stations to its data centers through cellular service providers, such as Verizon Wireless. Any incident affecting a data center facilitys or a
cellular service providers infrastructure or operations, whether caused by fire, flood, severe storm, earthquake, power loss, telecommunications failures, breach of security protocols, computer viruses and disabling devices, failure of access
control mechanisms, natural disasters, war, criminal act, military actions, terrorist attacks and other similar events could negatively affect the use, functionality or availability of ChargePoints services.
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Any damage to, or failure of, ChargePoints systems, or those of its third-party
providers, could interrupt or hinder the use or functionality of its services. Impairment of or interruptions in ChargePoints services may reduce revenue, subject it to claims and litigation, cause customers to terminate their subscriptions,
and adversely affect renewal rates and its ability to attract new customers. ChargePoints business will also be harmed if customers and potential customers believe its products and services are unreliable.
Customer-Related Risks
ChargePoint may be unable
to leverage customer data in all geographic locations, and this limitation may impact research and development operations.
ChargePoint relies on data collected through charging stations or its mobile application, including usage data and geolocation data.
ChargePoint uses this data in connection with the research, development and analysis of its technologies. ChargePoints inability to obtain necessary rights to use this data or freely transfer this data out of, for example, the European
Economic Area, could result in delays or otherwise negatively impact ChargePoints research and development efforts.
If ChargePoint fails to
offer high-quality support to station owners and drivers, its business and reputation will suffer.
Once a customer has installed
ChargePoint charging stations and subscribed to ChargePoints services, station owners and drivers will rely on ChargePoint to provide support services to resolve any issues that might arise in the future. Rapid and high-quality customer
support is important so station owners can provide charging services and drivers can receive reliable charging for their EVs. The importance of high-quality customer support will increase as ChargePoint seeks to expand its business and pursue new
customers and geographies. If ChargePoint does not quickly resolve issues and provide effective support, its ability to retain customers or sell additional products and services to existing customers could suffer and its brand and reputation could
be harmed.
ChargePoints business will depend on customers renewing their services subscriptions. If customers do not continue to use its
subscription offerings or if they fail to add more stations, its business and operating results will be adversely affected.
In
addition to selling charging station hardware, ChargePoint also depends on customers continuing to subscribe to its EV charging services and extended warranty coverages. Therefore, it is important that customers renew their subscriptions when the
contract term expires and add additional charging stations and services to their subscriptions. Customers may decide not to renew their subscriptions with a similar contract period, at the same prices or terms or with the same or a greater number of
users, stations or level of functionality. Customer retention may decline or fluctuate as a result of a number of factors, including satisfaction with software and features, functionality of the charging stations, prices, features and pricing of
competing products, reductions in spending levels, mergers and acquisitions involving customers and deteriorating general economic conditions.
If customers do not renew their subscriptions, if they renew on less favorable terms or if they fail to add products or services,
ChargePoints business and operating results will be adversely affected.
Changes in subscriptions or pricing models may not be reflected in
near-term operating results.
ChargePoint generally recognizes subscription revenue from customers ratably over the terms of their
contracts. As a result, most of the subscription revenue reported in each quarter is derived from the recognition of deferred revenue relating to subscriptions entered into during previous quarters. Consequently, a decline in new or renewed
subscriptions in any single quarter will likely have only a small impact on revenue for that quarter. However, such a decline will negatively affect revenue in future quarters. In addition, the severity and duration of events may not be predictable
and their effects could extend beyond a single quarter. Accordingly, the effect of significant downturns in sales and market acceptance of subscription services, and potential changes in pricing policies or rate of renewals, may not be fully
apparent until future periods.
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Financial, Tax and Accounting-Related Risks
ChargePoints financial condition and results of operations are likely to fluctuate on a quarterly basis in future periods, which could cause its
results for a particular period to fall below expectations, resulting in a decline in the price of its Common Stock.
ChargePoints financial condition and results of operations have fluctuated in the past and may continue to fluctuate in the future due to
a variety of factors, many of which are beyond its control.
In addition to the other risks described herein, the following factors could
also cause ChargePoints financial condition and results of operations to fluctuate on a quarterly basis:
the timing and volume of new sales;
fluctuations in service costs, particularly due to unexpected costs of servicing and maintaining charging
stations;
the timing of new product introductions, which can initially have lower gross margins;
weaker than anticipated demand for charging stations, whether due to changes in government incentives and
policies or due to other conditions;
fluctuations in sales and marketing or research and development expenses;
supply chain interruptions and manufacturing or delivery delays;
the timing and availability of new products relative to customers and investors expectations;
the length of the sales and installation cycle for a particular customer;
the impact of COVID-19 on ChargePoints workforce, or those of its
customers, suppliers, vendors or business partners;
disruptions in sales, production, service or other business activities or ChargePoints inability to attract
and retain qualified personnel; and
unanticipated changes in federal, state, local or foreign government incentive programs, which can affect demand
for EVs.
Fluctuations in operating results and cash flow could, among other things, give rise to short-term liquidity
issues. In addition, revenue, and other operating results in future quarters may fall short of the expectations of investors and financial analysts, which could have an adverse effect on the price of the Common Stock.
Changes to applicable U.S. tax laws and regulations or exposure to additional income tax liabilities could affect ChargePoints business and future
profitability.
ChargePoint is a U.S. corporation and thus subject to U.S. corporate income tax on its worldwide operations.
Moreover, the majority of ChargePoints operations and customers are located in the United States, and as a result, ChargePoint is subject to various U.S. federal, state and local taxes. New U.S. laws and policy relating to taxes may have an
adverse effect on ChargePoints business and future profitability. Further, existing U.S. tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to ChargePoint.
For example, on December 22, 2017, the Tax Cuts and Jobs Act of 2017 (Tax Act), was signed into law making significant
changes to the Internal Revenue Code of 1986, as amended, or the Code, and certain provisions of the Tax Act may adversely affect ChargePoint. In particular, sweeping changes were made to the U.S. taxation of foreign operations. Changes include, but
are not limited to, a permanent reduction to the corporate income tax rate, limiting interest deductions, a reduction to the maximum deduction allowed for net operating losses generated in tax years after December 31, 2017, the elimination of
carrybacks of net operating losses, adopting elements of a territorial tax system, assessing a repatriation tax or toll-charge on undistributed earnings and profits of U.S.-owned foreign corporations, and introducing certain anti-base
erosion provisions, including a new minimum tax on global intangible low-taxed income and base erosion and anti-abuse tax. The Tax Act could be subject to potential amendments and technical corrections, and is
subject to interpretations and implementing regulations by the U.S. Treasury and IRS, any of which could mitigate or increase certain adverse effects of the legislation.
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In addition, the Tax Act may impact taxation in other jurisdictions, including with respect
to state income taxes as state legislatures respond to the Tax Act. Additionally, other foreign governing bodies have and may enact changes to their tax laws in reaction to the Tax Act that could result in changes to ChargePoints global tax
position and materially adversely affect its business and future profitability.
As a result of ChargePoints plans to expand operations,
including to jurisdictions in which the tax laws may not be favorable, ChargePoints tax rate may fluctuate, tax obligations may become significantly more complex and subject to greater risk of examination by taxing authorities or ChargePoint
may be subject to future changes in tax law, the impacts of which could adversely affect ChargePoints after-tax profitability and financial results.
Because ChargePoint does not have a long history of operating at its present scale and it has significant expansion plans, ChargePoints
effective tax rate may fluctuate in the future. Future effective tax rates could be affected by operating losses in jurisdictions where no tax benefit can be recorded under U.S. GAAP, changes in the composition of earnings in countries with
differing tax rates, changes in deferred tax assets and liabilities, or changes in tax laws. Factors that could materially affect ChargePoints future effective tax rates include, but are not limited to: (a) changes in tax laws or the
regulatory environment, (b) changes in accounting and tax standards or practices, (c) changes in the composition of operating income by tax jurisdiction and (d) ChargePoints operating results before taxes.
Additionally, after the Merger, ChargePoints operations will be subject to significant income, withholding and other tax obligations in
the United States and may become subject to taxes in numerous additional state, local and non-U.S. jurisdictions with respect to its income, operations and subsidiaries related to those jurisdictions.
ChargePoints after-tax profitability and financial results could be subject to volatility or be affected by numerous factors, including (a) the availability of tax deductions, credits, exemptions,
refunds (including refunds of value added taxes) and other benefits to reduce ChargePoints tax liabilities, (b) changes in the valuation of ChargePoints deferred tax assets and liabilities, (c) expected timing and amount of the
release of any tax valuation allowances, (d) tax treatment of stock-based compensation, (e) changes in the relative amount of ChargePoints earnings subject to tax in the various jurisdictions in which ChargePoint operates or has
subsidiaries, (f) the potential expansion of ChargePoints business into or otherwise becoming subject to tax in additional jurisdictions, (g) changes to ChargePoints existing intercompany structure (and any costs related
thereto) and business operations, (h) the extent of ChargePoints intercompany transactions and the extent to which taxing authorities in the relevant jurisdictions respect those intercompany transactions and (i) ChargePoints
ability to structure ChargePoints operations in an efficient and competitive manner. Due to the complexity of multinational tax obligations and filings, ChargePoint may have a heightened risk related to audits or examinations by U.S. federal,
state, local and non-U.S. taxing authorities. Outcomes from these audits or examinations could have an adverse effect on ChargePoints after-tax profitability and
financial condition. Additionally, the IRS and several foreign tax authorities have increasingly focused attention on intercompany transfer pricing with respect to sales of products and services and the use of intangibles. Tax authorities could
disagree with ChargePoints intercompany charges, cross-jurisdictional transfer pricing or other matters and assess additional taxes. If ChargePoint does not prevail in any such disagreements, its profitability may be affected.
ChargePoints after-tax profitability and financial results may also be adversely impacted by
changes in the relevant tax laws and tax rates, treaties, regulations, administrative practices and principles, judicial decisions and interpretations thereof, in each case, possibly with retroactive effect. For example, the Multilateral Convention
to Implement Tax Treaty Related Measures to Prevent BEPS recently entered into force among the jurisdictions that have ratified it, although the United States has not yet entered into this convention. These recent changes could negatively impact
ChargePoints taxation, especially as ChargePoint expands its relationships and operations internationally.
The ability of ChargePoint to
utilize net operating loss and tax credit carryforwards following the Merger is conditioned upon ChargePoint attaining profitability and generating taxable income. ChargePoint has incurred significant net losses since inception and it is anticipated
that ChargePoint will continue to incur significant losses. Additionally, ChargePoints ability to utilize net operating loss and tax credit carryforwards to offset future taxable income may be limited.
As of January 31, 2021, ChargePoint had $434.7 million of U.S. federal and $229.7 million of California net operating loss
carryforwards available to reduce future taxable income, of which $281.9 million of the U.S. federal net operating loss
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carryforwards can be carried forward indefinitely. The U.S. federal and California state net operating loss carryforwards begin to expire in 2028. In addition, ChargePoint had net operating loss
carryforwards for other states of $134.7 million, which begin to expire in 2022. The Tax Act included a reduction to the maximum deduction allowed for net operating losses generated in tax years after December 31, 2017 and the elimination
of carrybacks of net operating losses. Under the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, which modified the Tax Act, U.S. federal net operating loss carryforwards generated in taxable periods beginning after
December 31, 2017, may be carried forward indefinitely, but the deductibility of such net operating loss carryforwards in taxable years beginning after December 31, 2020, is limited to 80% of taxable income. It is possible that ChargePoint
will not generate taxable income in time to utilize the net operating loss carryforwards. In addition, net operating loss carryforwards and certain tax credits may be subject to significant limitations under Section 382 and Section 383 of
the Code, respectively, and similar provisions of state law. Under those sections of the Code, if a corporation undergoes an ownership change, the corporations ability to use its pre-change
net operating loss carryforwards and other pre-change attributes, such as research tax credits, to offset its post-change income or tax may be limited. In general, an ownership change will occur if
there is a cumulative change in ownership by 5% shareholders that exceeds 50 percentage points over a rolling three-year period. If ChargePoint has experienced an ownership change at any time since its incorporation, ChargePoint may
already be subject to limitations on its ability to utilize its existing net operating loss carryforwards and other tax attributes to offset taxable income or tax liability. In addition, the Merger, and future changes in ChargePoints stock
ownership, which may be outside of ChargePoints control, may trigger an ownership change. Similar provisions of state tax law may also apply to limit ChargePoints use of accumulated state tax attributes. As a result, even if ChargePoint
earns net taxable income in the future, its ability to use its pre-change net operating loss carryforwards and other tax attributes to offset such taxable income or tax liability may be subject to limitations,
which could potentially result in increased future income tax liability to ChargePoint.
ChargePoint performed an analysis to assess
whether an ownership change, as defined by Section 382 of the Code, has occurred from its inception through January 31, 2021 and expects to complete this Section 382 analysis during the year ending January 31, 2022.
Based on this analysis, ChargePoint has experienced ownership changes, limiting the utilization of the net operating loss carryforwards or research and development tax credit carryforwards under Section 382 of the Code by first
multiplying the value of the ChargePoints stock at the time of the ownership change by the applicable long-term tax-exempt rate, and then applying additional adjustments, as required. Any limitation may
result in expiration of a portion of the net operating loss carryforwards or research and development tax credit carryforwards before utilization. In addition, the Merger if consummated, may constitute an ownership change under Sections 382 and 383
of the Code. ChargePoints net operating losses or credits may also be impaired under state law. Accordingly, ChargePoint may not be able to utilize a material portion of the net operating losses or credits. The ability of ChargePoint to
utilize ChargePoints net operating losses or credits following the Merger is conditioned upon ChargePoint attaining profitability and generating U.S. federal and state taxable income. ChargePoint has incurred significant net losses since
inception and will continue to incur significant losses; and therefore, ChargePoint does not know whether or when the combined carryforwards may be or may become subject to limitation by Sections 382 and 383 of the Code.
ChargePoints reported financial results may be negatively impacted by changes in U.S. GAAP.
U.S. GAAP is subject to interpretation by the Financial Accounting Standards Boards Accounting Standards Codification, the SEC and
various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on reported financial results, and may even affect the reporting of transactions
completed before the announcement or effectiveness of a change.
ChargePoint is an emerging growth company and it cannot be certain if
the reduced disclosure requirements applicable to emerging growth companies will make its Common Stock less attractive to investors and may make it more difficult to compare performance with other public companies.
ChargePoint is an emerging growth company as defined in the U.S. legislation Jumpstart Our Business Startups Act of 2012 (the JOBS
Act), and it intends to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor
attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the Sarbanes-Oxley Act), reduced
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disclosure obligations regarding executive compensation in periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive
compensation and stockholder approval of any golden parachute payments not previously approved. Investors may find the Common Stock less attractive because ChargePoint will continue to rely on these exemptions. If some investors find the Common
Stock less attractive as a result, there may be a less active trading market for their Common Stock, and the stock price may be more volatile.
An emerging growth company may elect to delay the adoption of new or revised accounting standards. With Switchback making this election,
Section 102(b)(2) of the JOBS Act allows ChargePoint to delay adoption of new or revised accounting standards until those standards apply to non-public business entities. As a result, the financial
statements contained in this Quarterly Report and those that ChargePoint will file in the future may not be comparable to companies that comply with public business entities revised accounting standards effective dates.
ChargePoint will incur significant increased expenses and administrative burdens as a public company, which could have an adverse effect on its
business, financial condition and results of operations.
ChargePoint will face increased legal, accounting, administrative and
other costs and expenses as a public company that it did not incur as a private company. The Sarbanes-Oxley Act, including the requirements of Section 404, as well as rules and regulations subsequently implemented by the SEC, the Dodd-Frank
Wall Street Reform and Consumer Protection Act of 2010 and the rules and regulations promulgated and to be promulgated thereunder, the Public Company Accounting Oversight Board and the securities exchanges, impose additional reporting and other
obligations on public companies. Compliance with public company requirements will increase costs and make certain activities more time-consuming. A number of those requirements require it to carry out activities ChargePoint has not done previously.
In addition, expenses associated with SEC reporting requirements will be incurred. Furthermore, if any issues in complying with those requirements are identified, such as the restatement of our previously issued consolidated financial statements,
and related material weakness as described in the Form 10-K/A (see also Risk Factors We may face litigation and other risks as a result of the material weakness in our internal control over
financial reporting and the restatement of our financial statements, and Risk Factors ChargePoint has identified material weaknesses in its internal control over financial reporting. If ChargePoint is unable to remediate these
material weaknesses, or if ChargePoint identifies additional material weaknesses in the future or otherwise fails to maintain an effective system of internal control over financial reporting, this may result in material misstatements of
ChargePoints consolidated financial statements or cause ChargePoint to fail to meet its periodic reporting obligations, for more detail), ChargePoint has incurred and could incur additional costs to rectify those or new issues, and the
existence of these issues could adversely affect its reputation or investor perceptions. In addition, as a public company, ChargePoint maintains director and officer liability insurance, for which it must pay substantial premiums. The additional
reporting and other obligations imposed by these rules and regulations increase legal and financial compliance costs and the costs of related legal, accounting and administrative activities. Advocacy efforts by stockholders and third parties may
also prompt additional changes in governance and reporting requirements, which could further increase costs.
ChargePoint has identified material
weaknesses in its internal control over financial reporting. If ChargePoint is unable to remediate these material weaknesses, or if ChargePoint identifies additional material weaknesses in the future or otherwise fails to maintain an effective
internal control over financial reporting, this may result in material misstatements of ChargePoints consolidated financial statements or cause ChargePoint to fail to meet its periodic reporting obligations.
As a public company, ChargePoint is required to provide managements attestation on internal control over financial reporting. Management
may not be able to effectively and timely implement controls and procedures that adequately respond to the increased regulatory compliance and reporting requirements that became applicable after the Merger. If ChargePoint is not able to implement
the additional requirements of Section 404(a) of the Sarbanes-Oxley Act in a timely manner or with adequate compliance, it may not be able to assess whether its internal control over financial reporting is effective, which may subject it to
adverse regulatory consequences and could harm investor confidence.
In connection with the preparation and audit of ChargePoints
consolidated financial statements, material weaknesses were identified in its internal control over financial reporting as of January 31, 2021. A material weakness is a deficiency, or a combination of deficiencies, in internal control over
financial reporting such that there is a reasonable possibility that a material misstatement of ChargePoints annual or interim financial statements will not be prevented or detected on a timely basis.
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ChargePoint did not design and maintain an effective control environment commensurate with
its financial reporting requirements. Specifically, ChargePoint did not maintain a sufficient complement of personnel with an appropriate degree of accounting knowledge, experience and training to appropriately analyze, record and disclose
accounting matters commensurate with its accounting and reporting requirements. This material weakness contributed to the following additional material weaknesses:
ChargePoint did not design and maintain formal accounting policies, procedures and controls over significant
accounts and disclosures to achieve complete, accurate and timely financial accounting, reporting and disclosures, including accounting for complex features associated with warrants, segregation of duties and adequate controls related to the
preparation and review of journal entries; and
ChargePoint did not design and maintain effective controls over certain information technology (IT)
general controls for information systems that are relevant to the preparation of its consolidated financial statements. Specifically, ChargePoint did not design and maintain (a) program change management controls to ensure that information
technology program and data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized and implemented appropriately and (b) user access controls to ensure appropriate segregation of duties
and that adequately restrict user and privileged access to its financial applications and data to appropriate company personnel.
The material weaknesses related to the control environment and lack of formal accounting policies, procedures and controls resulted in
material adjustments to warrant liabilities, shareholders equity and related accounts and disclosures and immaterial adjustments to several other account balances and disclosures in the historical consolidated financial statements.
The IT deficiencies did not result in a misstatement to the consolidated financial statements, however, the deficiencies, when aggregated,
could impact maintaining effective segregation of duties, as well as the effectiveness of IT-dependent controls (such as automated controls that address the risk of material misstatement to one or more
assertions, along with the IT controls and underlying data that support the effectiveness of system-generated data and reports) that could result in misstatements potentially impacting all financial statement accounts and disclosures that would not
be prevented or detected. Additionally, each of these material weaknesses could result in a misstatement of account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that
would not be prevented or detected.
ChargePoint has begun implementation of a plan to remediate these material weaknesses. These
remediation measures are ongoing and include the following:
Hiring additional finance and accounting personnel to bolster the accounting capabilities and capacity, and to
establish and maintain internal control over financial reporting;
Designing and implementing controls to formalize roles and review responsibilities to align with the staffs
skills and experience and designing and implementing controls over segregation of duties;
Providing ongoing training for personnel on accounting, financial reporting and internal control over financial
reporting;
Engaging an external advisor to assist with evaluating and documenting the design and operating effectiveness of
internal control over financial reporting and assist with the remediation of deficiencies, as necessary;
Designing and implementing controls over the preparation and review of journal entries and account
reconciliations, including controls over the segregation of duties; and
Designing and implementing IT general controls, including controls over the provisioning and monitoring of user
access rights and privileges and change management processes and procedures.
ChargePoint is remediating the material
weaknesses as efficiently and effectively as possible and remediation efforts could continue beyond the fiscal year ending January 31, 2023. At this time, we cannot provide an estimate of costs expected to be incurred in connection with
implementing this remediation plan; however, these remediation measures will be time consuming, will result in us incurring significant costs, and will place significant demands on our financial and operational resources.
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In order to maintain and improve the effectiveness of its internal control over financial
reporting, ChargePoint has expended, and anticipates that ChargePoint will continue to expend, significant resources, including accounting-related costs and significant management oversight. ChargePoints independent registered public
accounting firm is not required to formally attest to the effectiveness of its internal control over financial reporting until after it is no longer an emerging growth company as defined in the JOBS Act. At such time, ChargePoints
independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which its internal control over financial reporting is documented, designed or operating. Any failure to maintain
effective disclosure controls and internal control over financial reporting could adversely affect the business and operating results and could cause a decline in the price of our Common Stock.
Risks Related to Legal Matters and Regulations
Privacy concerns and laws, or other domestic or foreign regulations, may adversely affect ChargePoints business.
National and local governments and agencies in the countries in which ChargePoint operates and in which customers operate have adopted, are
considering adopting, or may adopt laws and regulations regarding the collection, use, storage, processing and disclosure of information regarding consumers and other individuals, which could impact its ability to offer services in certain
jurisdictions. Laws and regulations relating to the collection, use, disclosure, security and other processing of individuals information can vary significantly from jurisdiction to jurisdiction and are particularly stringent in Europe. The
costs of compliance with, and other burdens imposed by, laws, regulations, standards and other obligations relating to privacy, data protection and information security are significant. In addition, some companies, particularly larger enterprises,
often will not contract with vendors that do not meet these rigorous standards. Accordingly, the failure, or perceived inability, to comply with these laws, regulations, standards and other obligations may limit the use and adoption of
ChargePoints solutions, reduce overall demand, lead to regulatory investigations, litigation and significant fines, penalties or liabilities for actual or alleged noncompliance, or slow the pace at which we close sales transactions, any of
which could harm its business. Moreover, if ChargePoint or any of its employees or contractors fail or are believed to fail to adhere to appropriate practices regarding customers data, it may damage its reputation and brand.
Additionally, existing laws, regulations, standards and other obligations may be interpreted in new and differing manners in the future, and
may be inconsistent among jurisdictions. Future laws, regulations, standards and other obligations, and changes in the interpretation of existing laws, regulations, standards and other obligations could result in increased regulation, increased
costs of compliance and penalties for non-compliance, and limitations on data collection, use, disclosure and transfer for ChargePoint and its customers. The EU and United States agreed in 2016 to a framework
for data transferred from the EU to the United States, but this framework has been challenged and recently declared invalid by the Court of Justice of the EU, thereby creating additional legal risk for ChargePoint. Additionally, the EU adopted the
GDPR in 2016, and it became effective in May 2018. The GDPR establishes requirements applicable to the handling of personal data and imposes penalties for non-compliance of up to the greater of
20 million or 4% of worldwide revenue. The costs of compliance with, and other burdens imposed by, the GDPR may limit the use and adoption of ChargePoints products and services and could have an adverse impact on its business.
Further, California adopted the California Consumer Privacy Protection Act (CCPA) and the California State Attorney General has begun enforcement actions. Although ChargePoint initiated a compliance program designed to ensure CCPA
compliance after consulting with outside privacy counsel, ChargePoint may remain exposed to ongoing legal risks and compliance costs related to CCPA and the new California Privacy Rights Act (CPRA) that comes into force January 1,
2023.
The costs of compliance with, and other burdens imposed by, laws and regulations relating to privacy, data protection and
information security that are applicable to the businesses of customers may adversely affect ability and willingness to process, handle, store, use and transmit certain types of information, such as demographic and other personal information. In
addition, the other bases on which ChargePoint and its customers rely for the transfer of personal data across national borders, such as the Standard Contractual Clauses promulgated by the EU Commission Decision 2010/87/EU, commonly referred to as
the Model Clauses, continue to be subjected to regulatory and judicial scrutiny. If ChargePoint or its customers are unable to transfer data between and among countries and regions in which it operates, it could decrease demand for its products and
services or require it to modify or restrict some of its products or services.
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In addition to government activity, privacy advocacy groups, the technology industry and
other industries have established or may establish various new, additional or different self-regulatory standards that may place additional burdens on technology companies. Customers may expect that ChargePoint will meet voluntary certifications or
adhere to other standards established by them or third parties. If ChargePoint is unable to maintain these certifications or meet these standards, it could reduce demand for its solutions and adversely affect its business.
Failure to comply with anticorruption and anti-money laundering laws, including the FCPA and similar laws associated with activities outside of the
United States, could subject ChargePoint to penalties and other adverse consequences.
ChargePoint is subject to the FCPA, the U.S.
domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, the UK Bribery Act and possibly other anti-bribery and anti-money laundering laws in countries in which it conducts activities. It faces
significant risks if it fails to comply with the FCPA and other anti-corruption laws that prohibit companies and their employees and third-party intermediaries from promising, authorizing, offering or providing, directly or indirectly, improper
payments or benefits to foreign government officials, political parties and private-sector recipients for the purpose of obtaining or retaining business, directing business to any person or securing any advantage. Any violation of the FCPA, other
applicable anti-corruption laws, and anti-money laundering laws could result in whistleblower complaints, adverse media coverage, investigations, loss of export privileges, or severe criminal or civil sanctions, which could have a materially adverse
effect on ChargePoints reputation, business, operating results and prospects. In addition, responding to any enforcement action may result in a significant diversion of managements attention and resources, significant defense costs and
other professional fees.
Failure to comply with laws relating to employment could subject ChargePoint to penalties and other adverse consequences.
ChargePoint is subject to various employment-related laws in the jurisdictions in which its employees are based. It faces risks if
it fails to comply with applicable United States federal or state wage laws, or wage laws applicable to its employees outside of the United States. In addition, ChargePoint implemented a reduction in force and furloughed employees in 2020, and the
attendant layoffs and/or furloughs could create an additional risk of claims being made on behalf of affected employees. Any violation of applicable wage laws or other labor- or employment-related laws could result in complaints by current or former
employees, adverse media coverage, investigations and damages or penalties which could have a materially adverse effect on ChargePoints reputation, business, operating results and prospects. In addition, responding to any such proceeding may
result in a significant diversion of managements attention and resources, significant defense costs and other professional fees.
Existing and
future environmental health and safety laws and regulations could result in increased compliance costs or additional operating costs or construction costs and restrictions. Failure to comply with such laws and regulations may result in substantial
fines or other limitations that may adversely impact ChargePoints financial results or results of operation.
ChargePoint and
its operations, as well as those of ChargePoints contractors, suppliers and customers, are subject to certain environmental laws and regulations, including laws related to the use, handling, storage, transportation and disposal of hazardous
substances and wastes as well as electronic wastes and hardware, whether hazardous or not. These laws may require ChargePoint or others in ChargePoints value chain to obtain permits and comply with procedures that impose various restrictions
and obligations that may have material effects on ChargePoints operations. If key permits and approvals cannot be obtained on acceptable terms, or if other operational requirements cannot be met in a manner satisfactory for ChargePoints
operations or on a timeline that meets ChargePoints commercial obligations, it may adversely impact our business.
Environmental and
health and safety laws and regulations can be complex and may be subject to change, such as through new requirements enacted at the supranational, national, sub-national and/or local level or new or modified
regulations that may be implemented under existing law. The nature and extent of any changes in these laws, rules, regulations and permits may be unpredictable and may have material effects on ChargePoints business. Future legislation and
regulations or changes in existing legislation and regulations, or interpretations thereof, including those relating to hardware manufacturing, electronic waste or batteries, could cause additional expenditures, restrictions and delays in connection
with ChargePoints operations as well as other future projects, the extent of which cannot be predicted.
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Further, ChargePoint currently relies on third parties to ensure compliance with certain
environmental laws, including those related to the disposal of hazardous and non-hazardous wastes. Any failure to properly handle or dispose of such wastes, regardless of whether such failure is
ChargePoints or its contractors, may result in liability under environmental laws, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), under which liability may be
imposed without regard to fault or degree of contribution for the investigation and clean-up of contaminated sites, as well as impacts to human health and damages to natural resources. Additionally,
ChargePoint may not be able to secure contracts with third parties to continue their key supply chain and disposal services for our business, which may result in increased costs for compliance with environmental laws and regulations.
We may face litigation and other risks as a result of the material weakness in our internal control over financial reporting and the restatement of our
financial statements.
Following the issuance of the Staff Statement, the audit committee of our Board, after considering the
recommendations of management, determined that it was appropriate to restate our previously filed financial statements for the Non-Reliance Periods. See Risk FactorsThe Pubic Warrants and the
Private Placement Warrants are being accounted for as a warrant liability and are being recorded at fair value upon issuance with changes in fair value each period reported in earnings, which may have an adverse effect on the market price of our
Common Stock. As part of this restatement, we identified a material weakness in our internal control over financial reporting.
As a
result of such material weakness, such restatement, the change in accounting for the Public Warrants and the Private Placement Warrants, and other matters raised or that may in the future be raised by the SEC, we face potential for litigation or
other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the restatement and material weaknesses in our internal control over financial reporting and the
preparation of our financial statements. As of the date of this Quarterly Report, we have no knowledge of any such litigation or dispute. However, we can provide no assurance that such litigation or dispute will not arise in the future. Any such
litigation or dispute, whether successful or not, could have a material adverse effect on our business, results of operations and financial condition.
Risks Related to Ownership of our Securities
Concentration of ownership among ChargePoints existing executive officers, directors and their affiliates may prevent new investors from
influencing significant corporate decisions.
As of May 20, 2021, ChargePoints directors, executive officers and their
affiliates as a group beneficially own approximately 39.5% of the outstanding Common Stock. As a result, these stockholders are able to exercise a significant level of control over all matters requiring stockholder approval, including the election
of directors, any amendment of the certificate of incorporation and approval of significant corporate transactions. This control could have the effect of delaying or preventing a change of control or changes in management and will make the approval
of certain transactions difficult or impossible without the support of these stockholders.
ChargePoint has never paid cash dividends on its capital
stock, and does not anticipate paying dividends in the foreseeable future.
ChargePoint has never paid cash dividends on its
capital stock and currently intends to retain any future earnings to fund the growth of its business. Any determination to pay dividends in the future will be at the discretion of the Board and will depend on financial condition, operating results,
capital requirements, general business conditions and other factors that the Board may deem relevant. As a result, capital appreciation, if any, of Common Stock will be the sole source of gain for the foreseeable future.
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Our stock price will be volatile.
The trading price of the Common Stock and the Public Warrants will be volatile and could be subject to wide fluctuations in response to various
factors, some of which are beyond ChargePoints control. These factors include:
actual or anticipated fluctuations in operating results;
failure to meet or exceed financial estimates and projections of the investment community or that we provide to
the public;
issuance of new or updated research or reports by securities analysts or changed recommendations for the industry
in general;
announcements of significant acquisitions, strategic partnerships, joint ventures, collaborations or capital
commitments;
operating and share price performance of other companies in the industry or related markets;
the timing and magnitude of investments in the growth of the business;
actual or anticipated changes in laws and regulations;
additions or departures of key management or other personnel;
increased labor costs;
disputes or other developments related to intellectual property or other proprietary rights, including
litigation;
the ability to market new and enhanced solutions on a timely basis;
sales of substantial amounts of the Common Stock by the Board, executive officers or significant stockholders or
the perception that such sales could occur;
changes in capital structure, including future issuances of securities or the incurrence of debt; and
general economic, political and market conditions.
In addition, the stock market in general, and the stock prices of technology companies in particular, have experienced extreme price and
volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors may seriously affect the market price of our Common Stock, regardless of actual operating
performance. In addition, in the past, following periods of volatility in the overall market and the market price of a particular companys securities, securities class action litigation has often been instituted against these companies. This
litigation, if instituted, could result in substantial costs and a diversion of managements attention and resources.
Anti-takeover provisions
contained in our governing documents and applicable laws could impair a takeover attempt.
ChargePoints Second A&R
Charter and Second A&R Bylaws afford certain rights and powers to the Board that could contribute to the delay or prevention of an acquisition that it deems undesirable. ChargePoint is also subject to Section 203 of the DGCL and other
provisions of Delaware law that limit the ability of stockholders in certain situations to effect certain business combinations. Any of the foregoing provisions and terms that has the effect of delaying or deterring a change in control could limit
the opportunity for stockholders to receive a premium for their shares of their Common Stock, and could also affect the price that some investors are willing to pay for the Common Stock.
Our Second A&R Charter provides, subject to limited exceptions, that the Court of Chancery of the State of Delaware will be the sole and
exclusive forum for certain stockholder litigation matters, which could limit stockholders ability to obtain a more favorable judicial forum for disputes with us or its directors, officers, employees or stockholders.
The Second A&R Charter requires, to the fullest extent permitted by law, that derivative actions brought in name of ChargePoint, actions
against directors, officers and employees for breach of fiduciary duty and other similar actions may be brought in the Court of Chancery in the State of Delaware or, if that court lacks subject matter jurisdiction, another federal or state court
situated in the State of Delaware. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock shall be deemed to have notice of and consented to the forum provisions in the certificate of incorporation. In
addition, the Second A&R Charter and Second A&R Bylaws will provide that the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action under the Securities Act
and the Exchange Act.
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In March 2020, the Delaware Supreme Court issued a decision in Salzburg et al. v.
Sciabacucchi, which found that an exclusive forum provision providing for claims under the Securities Act to be brought in federal court is facially valid under Delaware law. It is unclear whether this decision will be appealed, or what the final
outcome of this case will be. ChargePoint intends to enforce this provision, but it does not know whether courts in other jurisdictions will agree with this decision or enforce it.
This choice of forum provision may limit a stockholders ability to bring a claim in a judicial forum that it finds favorable for
disputes with ChargePoint or any of its directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims. Alternatively, if a court were to find the choice of forum provision contained in the
certificate of incorporation to be inapplicable or unenforceable in an action, ChargePoint may incur additional costs associated with resolving such action in other jurisdictions, which could harm its business, operating results and financial
condition.
We may redeem unexpired Public Warrants prior to their exercise at a time that is disadvantageous to the holders of Public Warrants.
We have the ability to redeem outstanding Public Warrants at any time after they become exercisable and prior to their expiration,
at a price of $0.01 per Public Warrant; provided that the last reported sales price of our Common Stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20
trading days within a 30 trading-day period ending on the third trading day prior to the date on which we give notice of such redemption to the warrant holders. If and when the Public Warrants become
redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. On June 4, 2021, we mailed a Notice of Redemption in respect of
the redemption of all of its outstanding Public Warrants that remain outstanding following 5:00 p.m. New York City time on July 6, 2021 for a redemption price of $0.01 per warrant. The Private Placement Warrants that are still held by the
initial holders thereof or their permitted transferees are not subject to the redemption. Redemption of the outstanding Public Warrants could force the Public Warrant holders to: (i) exercise their Public Warrants and pay the exercise price
therefor at a time when it may be disadvantageous for them to do so; (ii) sell their Public Warrants at the then-current market price when they might otherwise wish to hold their Public Warrants; or (iii) accept the nominal redemption
price which, at the time the outstanding Public Warrants are called for redemption on July 6, 2021, is likely to be substantially less than the market value of their Public Warrants.
Warrants are exercisable for our Common Stock, which would increase the number of shares eligible for future resale in the public market and result in
dilution to our stockholders.
As of April 30, 2021, the Public Warrants and the Private Placement Warrants were exercisable
for 13,839,844 shares of Common Stock at a weighted average exercise price of $10.00 per share and there were additional warrants outstanding exercisable for 30,055,243 shares of Common Stock at a weighted average exercise price of $6.81 per share.
Any shares of our Common Stock issued upon exercise of the Public Warrants and the Private Placement Warrants and other outstanding warrants will result in dilution to the then existing holders of Common Stock and increase the number of shares
eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely affect the market price of our Common Stock.
The Public Warrants and the Private Placement Warrants are being accounted for as a warrant liability and are being recorded at fair value upon issuance
with changes in fair value each period reported in earnings, which may have an adverse effect on the market price of our Common Stock.
Under U.S. GAAP, we are required to evaluate the Public Warrants and the Private Placement Warrants to determine whether they should be
accounted for as a warrant liability or as equity. We have concluded that the Public Warrants and the Private Placement Warrants contain provisions requiring liability classification. Therefore, as described in the financial statements of Switchback
included herein, we are accounting for the Public Warrants and the Private Placement Warrants as a warrant liability and are recording that liability at fair value upon issuance. We will record any subsequent changes in fair value as of the end of
each period for which earnings are reported. The impact of changes in fair value on earnings may have an adverse effect on the market price of our Common Stock and may cause fluctuations in our results of operations based on factors that are outside
of our control.
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ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Recent Sales of Unregistered Securities
The information required by this Item 2 is contained in our Current Report on Form 8-K, as originally
filed with the SEC on March 1, 2021 and as subsequently amended on April 1, 2021.
Issuer Purchases of Equity Securities
None.
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5.
OTHER INFORMATION
None.
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ITEM 6.
EXHIBITS
(a)
Exhibits:
Exhibit No.
Description
3.1
Second Amended and Restated Certificate of Incorporation of Switchback (incorporated by reference to Exhibit 3.1 to ChargePoints Current
Report on Form 8-K (File No. 01- 39004), filed with the SEC on March 1, 2021).
3.2
Second Amended and Restated Bylaws of ChargePoint, effective as of February 26, 2021 (incorporated by reference to Exhibit 3.2 to ChargePoints
Current Report on Form 8-K (File No. 001-39004), filed with the SEC on March 1, 2021).
10.3+
Form of Indemnification Agreement (incorporated by reference to Exhibit 10.9 to ChargePoints Current Report on Form 8-K (File No. 001-39004), filed with the SEC on March 1, 2021).
10.4+
ChargePoint Holdings Incentive Bonus Plan (incorporated by reference to Exhibit 10.10 to ChargePoints Current Report on Form 8-K (File No. 001-39004), filed with the SEC on March 1, 2021).
10.5+
ChargePoint Holdings, Inc. Compensation Program for Non-Employee Directors (incorporated by reference
to Exhibit 10.11 to ChargePoints Current Report on Form 8-K (File No. 001-39004), filed with the SEC on March 1, 2021).
10.6
Amended and Restated Registration Rights Agreement, dated February 26, 2021, by and among ChargePoint, and certain stockholders and equityholders
of ChargePoint (incorporated by reference to Exhibit 10.13 to ChargePoints Current Report on Form 8-K (File No. 001-39004), filed with the SEC on
March 1, 2021).
10.7+
Form of Change in Control Vesting Acceleration Agreement for ChargePoint (Europe) (incorporated by reference to Exhibit 10.18 to ChargePoints
Post-Effective Amendment No. 2 to the Registration Statement on Form S-1 (File no. 333-253759), filed with the SEC on May 28, 2021).
10.8+
Form of Severance and Change in Control Agreement for ChargePoint (US) (incorporated by reference to Exhibit 10.19 to ChargePoints Post-Effective
Amendment No. 2 to the Registration Statement on Form S-1 (File no. 333-253759), filed with the SEC on May 28, 2021).
10.9+
Form of Severance and Change in Control Agreement for ChargePoint Europe Holdings B.V. (Europe) (incorporated by reference to Exhibit 10.20
to ChargePoints Post-Effective Amendment No. 2 to the Registration Statement on Form S-1 (File no. 333-253759), filed with the SEC on May 28, 2021).
31.1
Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a)*
31.2
Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a)*
32.1
Certification of Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350**
32.2
Certification of the Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350**
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema
101.CAL
XBRL Taxonomy Extension Calculation Linkbase
101.DEF
XBRL Taxonomy Extension Definition Linkbase
101.LAB
XBRL Taxonomy Extension Label Linkbase
101.PRE
XBRL Taxonomy Extension Presentation Linkbase
*
Filed herewith
**
Furnished herewith
The schedules and exhibits to this agreement have been omitted pursuant to Item 601(a)(2) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the SEC upon request.
+
Denotes management compensatory plan, contract or arrangement.
74
Table of Contents
SIGNATURES
Pursuant to the requirements of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
June 11, 2021
CHARGEPOINT HOLDINGS, INC.
By:
/s/ Rex S. Jackson
Name:
Rex S. Jackson
Title:
Chief Financial Officer and Principal Financial Officer
75
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.