NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1.
BUSINESS ORGANIZATION, NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Blink
Charging Co., through its wholly-owned subsidiaries (collectively, the “Company” or “Blink”), is a leading
owner, operator, and provider of electric vehicle (“EV”) charging equipment and networked EV charging services. Blink
offers both residential and commercial EV charging equipment, enabling EV drivers to easily recharge at various location types.
Blink’s
principal line of products and services is its Blink EV charging network (the “Blink Network”) and EV charging equipment,
also known as electric vehicle supply equipment (“EVSE”) and EV-related services. The Blink Network is a proprietary
cloud-based software that operates, maintains, and tracks all of the Blink EV charging stations and the associated charging data.
The Blink Network provides property owners, managers, and parking companies (“Property Partners”) with cloud-based
services that enable the remote monitoring and management of EV charging stations, payment processing, and provides EV drivers
with vital station information including station location, availability, and applicable fees.
Blink
offers its Property Partners a flexible range of business models for EV charging equipment and services. In its comprehensive
and turnkey business model, Blink owns and operates the EV charging equipment, manages the installation, maintenance, and related
services; and shares a portion of the EV charging revenue with the property owner. Alternatively, Property Partners may share
in the equipment and installation expenses, with Blink operating and managing the EV charging stations and providing connectivity
to the Blink Network. For Property Partners interested in purchasing and owning EV charging stations that they manage, Blink provides
EV charging hardware, site recommendations, connectivity to the Blink Network, and service and maintenance services.
The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions
to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required
by U.S. GAAP for complete financial statements. In the opinion of management, such statements include all adjustments (consisting
only of normal recurring items) which are considered necessary for a fair presentation of the condensed consolidated financial
statements of the Company as of June 30, 2018 and for the three and six months then ended. The results of operations for the three
and six months ended June 30, 2018 are not necessarily indicative of the operating results for the full year ending December 31,
2018 or any other period. These unaudited condensed consolidated financial statements should be read in conjunction with the audited
consolidated financial statements and related disclosures of the Company as of December 31, 2017 and for the year then ended,
which were filed with the Securities and Exchange Commission (“SEC”) as part of the Company’s Annual Report
on Form 10-K on April 17, 2018, as amended on May 10, 2018.
Effective
August 29, 2017, pursuant to authority granted by the stockholders of the Company, the Company implemented a 1-for-50 reverse
split of the Company’s issued and outstanding common stock (the “Reverse Split”). The number of authorized shares
remains unchanged. All share and per share information has been retroactively adjusted to reflect the Reverse Split for all periods
presented, unless otherwise indicated.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The
Company’s significant accounting policies are disclosed in Note 2 – Summary of Significant Accounting Policies in
the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. Since the date of the Annual Report, there
have been no material changes to the Company’s significant accounting policies, except as disclosed below.
LIQUIDITY
AND FINANCIAL CONDITION
As
of June 30, 2018, the Company had cash, working capital and an accumulated deficit of $23,996,609, $17,582,649 and $155,463,975,
respectively. During the three and six months ended June 30, 2018, the Company had net (loss) income of $(1,232,785) and $971,303,
respectively, but a loss from operations of $1,834,791 and $5,636,730, respectively. The Company has not yet achieved
profitability from operations.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
LIQUIDITY
AND FINANCIAL CONDITION - CONTINUED
On
February 16, 2018, the Company closed its underwritten public offering of an aggregate 4,353,000 shares of the Company’s
common stock and warrants to purchase an aggregate of 8,706,000 shares of common stock at a combined public offering price of
$4.25 per unit comprised of one share and two warrants. The Public Offering resulted in $18,504,320 and $14,880,815 of gross and
net proceeds, respectively, including underwriting discounts, commissions and other offering expenses of $3,623,505, which was
recorded as a reduction of additional paid-in capital. Furthermore, during the six months ended June 30, 2018, the Company issued
an aggregate of 4,033,660 shares of the Company’s common stock pursuant to the exercise of warrants at an exercise price
of $4.25 per share for aggregate gross proceeds of $17,143,056. See Note 8 – Stockholders’ Equity – Public Offering
and Warrant Issuances for additional details.
The
Company believes its current cash on hand is sufficient to meet its operating and capital requirements for at least twelve months
from the issuance date of these financial statements. Thereafter, the Company may need to raise further capital through the sale
of additional equity or debt securities or other debt instruments to support its future operations. The Company’s operating
needs include the planned costs to operate its business, including amounts required to fund working capital and capital expenditures.
The Company’s future capital requirements and the adequacy of its available funds will depend on many factors, including
the Company’s ability to successfully commercialize its products and services, competing technological and market developments,
and the need to enter into collaborations with other companies or acquire other companies or technologies to enhance or complement
its product and service offerings.
There
is also no assurance that the amount of funds the Company might raise will enable the Company to complete its development initiatives
or attain profitable operations. If the Company is unable to obtain additional financing on a timely basis, it may have to curtail
its development, marketing and promotional activities, which would have a material adverse effect on the Company’s business,
financial condition and results of operations, and ultimately, the Company could be forced to discontinue its operations and liquidate.
CASH
AND CASH EQUIVALENTS
The
Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents
in the consolidated financial statements. The Company has cash on deposits in several financial institutions which, at times,
may be in excess of Federal Deposit Insurance Corporation (“FDIC”) insurance limits. The Company has not experienced
losses in such accounts and periodically evaluates the creditworthiness of its financial institutions. The Company reduces its
credit risk by placing its cash and cash equivalents with major financial institutions. As of June 30, 2018, the Company had cash
balances in excess of FDIC insurance limits of $23,730,827.
RECLASSIFICATIONS
Certain
prior period balances have been reclassified in order to conform to current period presentation. These reclassifications have
no effect on previously reported results of operations or loss per share.
REVENUE
RECOGNITION
On
January 1, 2018, the Company adopted Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts
with Customers” (“ASC 606”). The core principle of ASC 606 requires that an entity recognize revenue to depict
the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects
to be entitled in exchange for those goods or services. ASC 606 defines a five-step process to achieve this core principle and,
in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under
existing accounting principles generally accepted in the United States of America (“U.S. GAAP”) including identifying
performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and
allocating the transaction price to each separate performance obligation.
The
Company adopted ASC 606 for all applicable contracts using the modified retrospective method, which would have required a cumulative-effect
adjustment, if any, as of the date of adoption. The adoption of ASC 606 did not have a material impact on the Company’s
condensed consolidated financial statements as of the date of adoption. As a result, a cumulative-effect adjustment was not required.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
REVENUE
RECOGNITION - CONTINUED
The
Company recognizes revenue primarily from five different types of contracts:
|
●
|
Charging
service revenue – company-owned charging stations
- Revenue is recognized at the point when a particular charging
session is completed.
|
|
●
|
Product
sales
– Revenue is recognized at the point where the customer obtains control of the goods and the Company
satisfies its performance obligation, which generally is at the time it ships the product to the customer.
|
|
●
|
Warranty
revenue
– Represents a stand-ready obligation whereby the Company is obligated to perform over a period of time
and, as a result, revenue is recognized on a straight-line basis over the contract term.
|
|
●
|
Network
fees
– Represents a stand-ready obligation whereby the Company is obligated to perform over a period of time and,
as a result, revenue is recognized on a straight-line basis over the contract term.
|
|
●
|
Other
– Primarily related to charging service revenue from non-company-owned
charging stations. Revenue is recognized at the point when a particular charging session is completed.
|
The
following table summarizes our revenue recognized under ASC 606 in our condensed consolidated statements of operations:
|
|
For
The Three Months Ended
|
|
|
For
The Six Months Ended
|
|
|
|
June
30,
|
|
|
June
30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
- Recognized at a Point in Time
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charging
service revenue - company-owned charging stations
|
|
$
|
301,350
|
|
|
$
|
244,931
|
|
|
$
|
607,097
|
|
|
$
|
512,805
|
|
Product
sales
|
|
|
142,839
|
|
|
|
56,957
|
|
|
|
278,599
|
|
|
|
210,544
|
|
Other
|
|
|
45,131
|
|
|
|
55,408
|
|
|
|
95,660
|
|
|
|
112,670
|
|
Total
Revenues - Recognized at a Point in Time
|
|
|
489,320
|
|
|
|
357,296
|
|
|
|
981,356
|
|
|
|
836,019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
- Recognized Over a Period of Time:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warranty
revenue
|
|
|
33,957
|
|
|
|
31,855
|
|
|
|
64,359
|
|
|
|
66,704
|
|
Network
fees
|
|
|
56,034
|
|
|
|
59,492
|
|
|
|
113,285
|
|
|
|
108,730
|
|
Total
Revenues - Recognized Over a Period of Time
|
|
|
89,991
|
|
|
|
91,347
|
|
|
|
177,644
|
|
|
|
175,434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Revenue Under ASC 606
|
|
$
|
579,311
|
|
|
$
|
448,643
|
|
|
$
|
1,159,000
|
|
|
$
|
1,011,453
|
|
The
timing of the Company’s revenue recognition may differ from the timing of payment by its customers. A receivable is recorded
when revenue is recognized prior to payment and the Company has an unconditional right to payment. Alternatively, when payment
precedes the provision of the related services, the Company records deferred revenue until the performance obligations are satisfied.
As
of June 30, 2018, the Company had $281,255 related to contract liabilities where performance obligations have not yet been satisfied,
which has been included within deferred revenue on the condensed consolidated balance sheet as of June 30, 2018. The Company expects
to satisfy its remaining performance obligations for network fees and warranty revenue and recognize the revenue within the next
twelve months.
During
the three and six months ended June 30, 2018, the Company recognized approximately $75,000 and $170,000, respectively, of revenues
related to network fees, warranty contracts, and product sales, which was included in deferred revenues as of December 31, 2017.
During
the three and six months ended June 30, 2018, there was no revenue recognized from performance obligations satisfied (or partially
satisfied) in previous periods. The Company has elected
not to disclose information about
remaining performance obligations pertaining to contracts with an original expected length of one year or less, as permitted under
the guidance.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
REVENUE
RECOGNITION - CONTINUED
Grants
and rebates pertaining to revenues and periodic expenses are recognized as income when the related revenue and/or periodic expense
are recorded. Grants and rebates related to EV charging stations and their installation are deferred and amortized in a manner
consistent with the related depreciation expense of the related asset over their useful lives
over
the useful life of the charging station. During the three and six months ended June 30, 2018, the Company recorded $45,107 and
$61,338, respectively, related to grant and rebate revenue. During the three and six months ended June 30, 2017, the Company recorded
$84,331 and $117,141, respectively, related to grant and rebate revenue.
CONCENTRATIONS
There
were no revenue concentrations during the three and six months ended June 30, 2018. During the three and six months ended June
30, 2017, revenues generated from one customer represented approximately 11% of the Company’s total revenue. As of June
30, 2018 and December 31, 2017, accounts receivable from this same customer amounted to less than 10% of total accounts receivable.
As of June 30, 2018 and December 31, 2017, accounts receivable from another significant customer were approximately 31% and 32%,
respectively, of total accounts receivable.
STOCK-BASED
COMPENSATION
The
Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award.
For employees and non-employees, the fair value of the award is measured on the grant date. The fair value amount is then recognized
over the period during which services are required to be provided in exchange for the award, usually the vesting period. Awards
granted to non-employee directors for their service as a director are treated on the same basis as awards granted to employees.
The Company computes the fair value of equity-classified warrants and options granted using the Black-Scholes option pricing model.
NET
LOSS PER COMMON SHARE
Basic
net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during
the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of common shares
outstanding, plus the number of additional common shares that would have been outstanding if the common share equivalents had
been issued (computed using the treasury stock or if converted method), if dilutive.
The
following common share equivalents are excluded from the calculation of weighted average common shares outstanding because their
inclusion would have been anti-dilutive:
|
|
June
30,
|
|
|
|
2018
|
|
|
2017
|
|
Convertible
preferred stock
|
|
|
2,447,756
|
|
|
|
1,248,174
|
|
Warrants
|
|
|
6,855,224
|
|
|
|
1,061,994
|
|
Options
|
|
|
106,408
|
|
|
|
147,833
|
|
Convertible
notes
|
|
|
-
|
|
|
|
20,335
|
|
Total
potentially dilutive shares
|
|
|
9,409,388
|
|
|
|
2,478,336
|
|
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
RECENTLY
ISSUED ACCOUNTING PRONOUNCEMENTS
In
June 2018, the FASB issued Accounting Standards Update (“ASU”) No. 2018-07, “Compensation —
Stock Compensation (Topic 718),” (“ASU 2018-07”). ASU 2018-07 is intended to reduce cost and complexity and
to improve financial reporting for nonemployee share-based payments. Currently, the accounting requirements for nonemployee and
employee share-based payment transactions are significantly different. ASU 2018-07 expands the scope of Topic 718, Compensation
— Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued
to nonemployees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees will
be substantially aligned. This ASU supersedes Subtopic 505-50, Equity — Equity-Based Payments to Nonemployees. The amendments
in this ASU are effective for fiscal years beginning after December 15, 2018, and interim periods within that fiscal year. Early
adoption is permitted, but no earlier than a company’s adoption date of Topic 606, Revenue from Contracts with Customers.
The Company early adopted ASU 2018-07 effective April 1, 2018. The adoption of this ASU did not have a material impact on the
Company’s condensed consolidated financial statements.
3.
OTHER ASSETS
During
the six months ended June 30, 2018, the Company entered into purchase commitments to acquire second generation charging
stations with an aggregate value of $3,156,629. The Company has an aggregate deposit of $986,031 for these charging stations,
which is included within other assets on the Company’s condensed consolidated balance sheet as of June 30, 2018. As of June
30, 2018, the Company had a remaining purchase commitment of $2,170,598, which will come due upon delivery of the charging
stations.
4.
ACCRUED EXPENSES
SUMMARY
Accrued
expenses consist of the following:
|
|
June
30, 2018
|
|
|
December
31, 2017
|
|
|
|
(unaudited)
|
|
|
|
|
Accrued host fees
|
|
$
|
1,254,762
|
|
|
$
|
1,657,663
|
|
Accrued professional, board and other
fees
|
|
|
242,686
|
|
|
|
2,683,557
|
|
Accrued wages
|
|
|
15,000
|
|
|
|
1,016,563
|
|
Accrued commissions
|
|
|
500
|
|
|
|
883,763
|
|
Warranty payable
|
|
|
143,000
|
|
|
|
171,000
|
|
Accrued taxes payable
|
|
|
589,810
|
|
|
|
551,190
|
|
Accrued payroll taxes payable
|
|
|
-
|
|
|
|
632,078
|
|
Accrued interest expense
|
|
|
32,034
|
|
|
|
347,027
|
|
Accrued lease termination costs
|
|
|
-
|
|
|
|
300,000
|
|
Accrued settlement reserve costs
|
|
|
100,000
|
|
|
|
12,980,588
|
|
Dividend payable
|
|
|
-
|
|
|
|
1,892,800
|
|
Other accrued
expenses
|
|
|
23,030
|
|
|
|
19,115
|
|
Total accrued
expenses
|
|
$
|
2,400,822
|
|
|
$
|
23,135,344
|
|
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4.
ACCRUED EXPENSES – CONTINUED
ACCRUED
PROFESSIONAL, BOARD AND OTHER FEES
Accrued
professional, board and other fees consist of the following:
|
|
June
30, 2018
|
|
|
December
31, 2017
|
|
|
|
(unaudited)
|
|
|
|
|
Investment
banking fees
|
|
$
|
-
|
|
|
$
|
860,183
|
|
Legal
fees related to public offering
|
|
|
-
|
|
|
|
436,715
|
|
Professional
fees
|
|
|
94,949
|
|
|
|
684,673
|
|
Board
fees
|
|
|
147,737
|
|
|
|
608,945
|
|
Other
|
|
|
-
|
|
|
|
93,041
|
|
Total
accrued professional, board and other fees
|
|
$
|
242,686
|
|
|
$
|
2,683,557
|
|
On
June 8, 2017, the Board approved aggregate compensation of $490,173 (compromised of $344,311 to be paid in cash and $145,862 to
be paid in units consisting of shares of the Company’s common stock and warrants (with each such warrant having an exercise
price equal to the price per unit of the units sold in the public offering) at a 20% discount to the price per unit sold in the
public offering to be paid to members of the Board based on the accrued amounts owed to such Board members as of March 31, 2017.
The compensation will be paid by the third business day following: (i) a public offering of the Company’s securities; and
(ii) the listing of the Company’s shares of common stock on the NASDAQ or other national securities exchange. During the
six months ended June 30, 2018, the Company paid $344,311 in cash and issued 80,704 shares of common stock with an issuance date
fair value of $314,414. On April 9, 2018, the Company issued warrants to purchase 1,030,115 shares of common stock with
an issuance date fair value of $247,360, which was included within additional paid- capital. See Note 8 – Stockholders’
Equity – Warrant Issuances.
See
Note 11 – Commitments and Contingencies – Taxes.
5.
ACCRUED ISSUABLE EQUITY
Accrued
issuable equity consists of the following:
|
|
June
30, 2018
|
|
|
December
31, 2017
|
|
|
|
(unaudited)
|
|
|
|
|
Warrants
|
|
$
|
11,351
|
|
|
$
|
1,154,120
|
|
Common
Stock
|
|
|
2,137,826
|
|
|
|
1,735,047
|
|
Options
|
|
|
198,292
|
|
|
|
50,739
|
|
Total
accrued issuable equity
|
|
$
|
2,347,469
|
|
|
$
|
2,939,906
|
|
See
Note 8 – Stockholder’s Equity – Warrant Issuances for additional information.
6.
NOTES PAYABLE
JMJ
AGREEMENT
Pursuant
to a Lockup, Conversion, and Additional Investment Agreement dated October 23, 2017, as amended on November 29, 2017, January
4, 2018, and February 1, 2018 (the “JMJ Agreement”) with JMJ Financial (“JMJ”) whereby the Company and
JMJ agreed to settle the current defaults under the promissory note with JMJ upon the closing of the public offering, on
February 16, 2018, the Company issued 12,005 shares of Series D Convertible Preferred Stock with an issuance date fair value of
$12,005,000, which represents the fair value of securities required to be issued pursuant to the JMJ Agreement, in satisfaction
of aggregate liabilities previously owed to JMJ of $17,805,175, such that the Company recorded a gain on settlement of $0 and
$5,800,175 on the condensed consolidated statement of operations during the three and six months ended June 30, 2018, respectively.
The Series D Convertible Preferred Stock was determined to be permanent equity on the Company’s condensed consolidated balance
sheet. See Note 8 – Stockholder’s Equity – Series D Convertible Preferred Stock for additional information.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
6.
NOTES PAYABLE – CONTINUED
JMJ
ADVANCE
Separate
from and unrelated to the JMJ Agreement, on January 22, 2018, JMJ advanced $250,000 to the Company (the “JMJ Advance”).
On
February 1, 2018, the Company and JMJ entered into a letter agreement whereby the parties agreed that, concurrent with the closing
of the public offering, the Company will convert the JMJ Advance into units, with each unit consisting of one share of restricted
common stock and a warrant to purchase one share of restricted common stock at an exercise price equal to the exercise price of
the warrants sold as part of the public offering, at a price equal to 80% of the per unit price in the public offering. On March
16, 2018, the Company issued 73,529 shares of common stock with an issuance date fair value of $205,881 to JMJ, pursuant to this
agreement. On April 9, 2018, the Company issued the 147,058 warrants to purchase shares of common stock with an issuance date
fair value of $35,313, which was included within additional paid-in capital.
See
Note 9 – Related Parties – BLNK Holdings Transfers to JMJ for additional information.
CONVERTIBLE
AND OTHER NOTES – RELATED PARTY
Farkas
Group Inc. (“FGI”) Notes
On
February 16, 2018 and pursuant to the closing of the public offering, the Company paid $688,238 (including principal repayments
of $545,000) in satisfaction of the debt.
BLNK
Holdings, LLC (“BLNK Holdings”) Notes
On
March 16, 2018, the Company issued 74,753 shares of common stock with an issuance date fair value of $209,308 to BLNK Holdings
in exchange of the principal and accrued and unpaid interest on the notes.
OTHER
NOTES
On
February 14, 2018, the Company issued a note payable in the principal amount of $55,000. Interest on the notes accrues at a rate
of 8% annually and is payable monthly. The note was repaid during the six months ended June 30, 2018.
During
the six months ended June 30, 2018, in addition to the repayment of the $55,000 note discussed above, the Company made principal
repayments of $160,000.
INTEREST
EXPENSE
Interest
expense for the three and six months ended June 30, 2018 was $11,662 and $116,645, respectively. Interest expense for the three
and six months ended June 30, 2017 was $218,288 and $358,949, respectively.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
7.
FAIR VALUE MEASUREMENT
Assumptions
utilized in the valuation of Level 3 liabilities are described as follows:
|
|
For
the Three Months Ended
|
|
|
For
the Six Months Ended
|
|
|
|
June
30,
|
|
|
June
30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk-free
interest rate
|
|
|
2.39%-2.63
|
%
|
|
|
1.50-1.55
|
%
|
|
|
1.62%-2.63
|
%
|
|
|
1.47%-1.55
|
%
|
Contractual
term (years)
|
|
|
0.28-3.00
|
|
|
|
1.28-5.00
|
|
|
|
0.25-3.25
|
|
|
|
1.28-5.00
|
|
Expected
volatility
|
|
|
131%-171
|
%
|
|
|
130%-149
|
%
|
|
|
113%-171
|
%
|
|
|
130%-149
|
%
|
Expected
dividend yield
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
The
following table sets forth a summary of the changes in the fair value of Level 3 warrant liabilities that are measured at fair
value on a recurring basis:
Derivative
Liabilities
|
|
|
|
|
Beginning
balance as of January 1, 2018
|
|
$
|
3,448,390
|
|
Exchange
of derivative liability for equity
|
|
|
(395,175
|
)
|
Reclassify
derivative liability to equity
|
|
|
(36,445
|
)
|
Issuance
of warrants
|
|
|
-
|
|
Change
in fair value of derivative liability
|
|
|
(2,965,365
|
)
|
Ending
balance as of June 30, 2018
|
|
$
|
51,405
|
|
|
|
|
|
|
Warrants
Payable
|
|
|
|
|
Beginning
balance as of January 1, 2018
|
|
$
|
1,154,120
|
|
Exchange
of warrants payable for equity
|
|
|
(2,595,729
|
)
|
Accrual
of other warrant obligations
|
|
|
2,135,430
|
|
Change
in fair value of warrants payable
|
|
|
(682,470
|
)
|
Ending
balance as of June 30, 2018
|
|
$
|
11,351
|
|
See
Note 5 - Accrued Issuable Equity for additional information.
Assets
and liabilities measured at fair value on a recurring or nonrecurring basis are as follows:
|
|
June
30, 2018
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
liabilities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
51,405
|
|
|
$
|
51,405
|
|
Warrants
payable
|
|
|
-
|
|
|
|
-
|
|
|
|
11,351
|
|
|
|
11,351
|
|
Total
liabilities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
62,756
|
|
|
$
|
62,756
|
|
|
|
December
31, 2017
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
liabilities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3,448,390
|
|
|
$
|
3,448,390
|
|
Warrants
payable
|
|
|
-
|
|
|
|
-
|
|
|
|
1,154,120
|
|
|
|
1,154,120
|
|
Total
liabilities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
4,602,510
|
|
|
$
|
4,602,510
|
|
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
8.
STOCKHOLDERS’ EQUITY
PUBLIC
OFFERING
On
February 16, 2018, the Company closed its underwritten public offering of an aggregate of 4,353,000 shares of the Company’s
common stock and warrants to purchase an aggregate of 8,706,000 shares of common stock at a combined public offering price of
$4.25 per unit comprised of one share and two warrants. Each warrant is exercisable for five years from the date of issuance and
has an exercise price equal to $4.25 per share. The public offering resulted in $18,504,320 and $14,880,815 of gross and
net proceeds, respectively, including underwriting discounts, commissions and other offering expenses of $3,623,505, which was
recorded as a reduction of additional paid-in capital.
The
Company granted the underwriters a 45-day option to purchase up to an additional 652,950 shares of common stock and/or warrants
to purchase 1,305,900 shares of common stock to cover over-allotments, if any. In connection with the closing of the public
offering, the underwriters partially exercised their over-allotment option and purchased additional warrants to purchase 406,956
shares of common stock at an exercise price of $4.25 per share for aggregate gross proceeds of $4,070, or $0.01 per warrant.
PREFERRED
STOCK
SERIES
A CONVERTIBLE PREFERRED STOCK
On
March 22, 2018, pursuant to letter agreements dated December 6, 2017 and December 7, 2017, the Company issued 550,000 shares of
common stock upon automatic conversion of 11,000,000 shares of Series A Convertible Preferred Stock.
SERIES
B CONVERTIBLE PREFERRED STOCK
On
March 16, 2018, pursuant to a conversion agreement dated May 19, 2017, the Company issued 223,235 shares of common stock upon
automatic conversion of 8,250 shares of Series B Convertible Preferred Stock with a value of $825,000. The Company determined
that the Series B Convertible Preferred Stock included a beneficial conversion feature since the commitment date market price
of the Company’s common stock exceeded the effective conversion price and, as a result, the Company recorded a deemed dividend
in the amount of $0 and $825,000 during the three and six months ended June 30, 2018, respectively.
SERIES
C CONVERTIBLE PREFERRED STOCK
Effective
January 8, 2018, the Company’s Board of Directors and its shareholders amended the Certificate of Designation of
its Series C Convertible Preferred Stock to add the following provisions: (a) upon closing of a public offering of the Company’s
securities and the listing of the Company’s shares of common stock on an exchange, all outstanding shares of Series C Convertible
Preferred Stock will be converted into that number of shares of Common Stock determined by the number of shares of Series C Preferred
multiplied by a factor of 115 divided by 80% of the per share price of common stock in the offering; and (b) until 270 days after
the effective date specified within the automatic preferred conversion notice, no holder of Series C Convertible Preferred Stock
may offer, pledge, sell, contract to sell, grant, lend, or otherwise transfer or dispose of any Series C Preferred Shares without
the prior written consent of the underwriter of the offering.
During
the six months ended June 30, 2018, 25,006 shares of Series C Convertible Preferred Stock were issued as payment of dividends
in kind.
On
March 28, 2018, pursuant to the terms of the amended Certificate of Designation,
the Company
issued an aggregate of 9,111,644 shares of common stock upon
automatic
conversion
of 254,557 shares of Series C Convertible Preferred Stock.
The Company determined that the Series C Convertible Preferred
Stock included a beneficial conversion feature since the commitment date market price of the Company’s common stock exceeded
the effective conversion price and, as a result, the Company recorded a deemed dividend in the amount of $0 and $22,633,931 during
the three and six months ended June 30, 2018, respectively.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
8.
STOCKHOLDERS’ EQUITY – CONTINUED
PREFERRED
STOCK – CONTINUED
SERIES
D CONVERTIBLE PREFERRED STOCK
On
February 13, 2018, the Company’s Board of Directors approved the designation of 13,000 shares of the 40,000,000 authorized
shares of preferred stock as Series D Convertible Preferred Stock, par value $0.001 per share (the “Series D Convertible
Preferred Stock”). On February 15, 2018, the Company filed the Certificate of Designation with the State of Nevada related
to the Series D Convertible Preferred Stock. Each share of Series D Convertible Preferred Stock will have a stated value of $1,000
per share.
Conversion.
Each share of Series D Convertible Preferred Stock is convertible into shares of common stock (subject to adjustment as provided
in the related certificate of designation of preferences, rights and limitations) at any time at the option of the holder at a
conversion price equal to the price of the units in the public offering. Holders of Series D Convertible Preferred Stock are prohibited
from converting Series D Convertible Preferred Stock into shares of common stock if, as a result of such conversion, the holder,
together with its affiliates, would own more than 9.99% of the total number of shares of common stock then issued and outstanding.
Liquidation
Preference.
In the event of the liquidation, dissolution or winding-up of the Company, holders of Series D Convertible Preferred
Stock will be entitled to receive the same amount that a holder of common stock would receive if the Series D Convertible Preferred
Stock were fully converted into shares of common stock at the conversion price (disregarding for such purposes any conversion
limitations) which amounts shall be paid pari passu with all holders of Common Stock.
Voting
Rights.
Shares of Series D Convertible Preferred Stock will generally have no voting rights, except as required by law and
except that the affirmative vote of the holders of a majority of the then outstanding shares of Series D Convertible Preferred
Stock is required to, (a) alter or change adversely the powers, preferences or rights given to the Series D Convertible Preferred
Stock, (b) amend the Company’s articles of incorporation or other charter documents in any manner that materially adversely
affects any rights of the holders, (c) increase the number of authorized shares of Series D Convertible Preferred Stock, or (d)
enter into any agreement with respect to any of the foregoing.
Dividends
.
Shares of Series D Convertible Preferred Stock will not be entitled to receive any dividends, unless and until specifically declared
by the Company’s board of directors. The holders of the Series D Convertible Preferred Stock will participate, on an as-if-converted-to-common
stock basis, in any dividends to the holders of common stock.
Redemption.
The Company is not obligated to redeem or repurchase any shares of Series D Convertible Preferred Stock. Series D Convertible
Preferred Stock are not otherwise entitled to any redemption rights or mandatory sinking fund or analogous fund provisions.
Exchange
Listing.
The Company does not plan on making an application to list the Series D Convertible Preferred Stock on any national
securities exchange or other nationally recognized trading system.
See
Note 6 – Notes Payable – JMJ Agreement for additional details.
On
May 10, 2018, JMJ elected to convert 4,368 shares of Series D Convertible Preferred Stock into 1,400,000 shares of the Company’s
common stock at a conversion price of $3.12 per share. The Company determined that the Series D Convertible Preferred Stock did
not include a beneficial conversion feature.
COMMON
STOCK
During
the six months ended June 30, 2018, the Company issued an aggregate of 1,513,690 shares of common stock with an aggregate issuance
date fair value of $4,353,988 in satisfaction of debt and other liabilities. In connection with the issuances, the Company recorded
a loss on settlement of $0 and $2,192,045 during the three and six months ended June 30, 2018, respectively.
See
Note 9 – Related Parties – Letter Agreements and Note 11 – Commitments and Contingencies for additional details.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
8.
STOCKHOLDERS’ EQUITY – CONTINUED
STOCK-BASED
COMPENSATION
The
Company recognized stock-based compensation expense related to common stock, stock options and warrants for the three and six
months ended June 30, 2018 of $135,563 and $2,952,877, and respectively, for the three and six months ended June 30, 2017 of $921,683
and $1,088,931, respectively, which is included within compensation expense on the condensed consolidated statement of operations.
As of June 30, 2018, there was no unrecognized stock-based compensation expense.
STOCK
WARRANTS
On
April 9, 2018, the Company issued five-year immediately vested warrants to purchase an aggregate of 1,703,429 shares of
common stock at an exercise price of $4.25 per share in satisfaction of accrued issuable equity. The Company recorded a gain of
$1,726,388 on the condensed consolidated statement of operations during the three and six months ended June 30, 2018 related to
the change in fair value of the warrant liability on the date of issuance. The warrants had an issuance date fair value of
$409,042, which was charged to additional paid-in capital.
During
the six months ended June 30, 2018, the Company issued an aggregate of 4,033,660 shares of the Company’s common stock pursuant
to the exercise of warrants at an exercise price of $4.25 per share for aggregate cash proceeds of $17,143,056.
The
following table accounts for the Company’s warrant activity for the six months ended June 30, 2018:
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Number
of
|
|
|
Exercise
|
|
|
Life
|
|
|
Intrinsic
|
|
|
|
Shares
|
|
|
Price
|
|
|
In
Years
|
|
|
Value
|
|
Outstanding, December 31, 2017
|
|
|
275,332
|
|
|
$
|
43.15
|
|
|
|
|
|
|
|
|
|
Issued
|
|
|
10,795,848
|
|
|
|
4.25
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(4,033,660
|
)
|
|
|
4.25
|
|
|
|
|
|
|
|
|
|
Cancelled/forfeited/expired
|
|
|
(182,296
|
)
|
|
|
47.69
|
|
|
|
|
|
|
|
|
|
Outstanding,June 30, 2018
|
|
|
6,855,224
|
|
|
$
|
4.66
|
|
|
|
4.7
|
|
|
$
|
6,009,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, June 30, 2018
|
|
|
6,855,224
|
|
|
$
|
4.66
|
|
|
|
4.7
|
|
|
$
|
6,009,038
|
|
9.
RELATED PARTIES
BLNK
HOLDINGS TRANSFERS TO JMJ
In
February 2018, prior to the closing of the public offering, Mr. Farkas reached an agreement with JMJ that, following the
closing of the public offering, BLNK Holdings, an entity for which Mr. Farkas had voting power and investment power with
regard to this entity’s holdings, would transfer 260,000 shares to JMJ as additional consideration for JMJ agreeing to waive
its claims to $12 million as a mandatory default amount pursuant to previous agreements with the Company. This transfer took place
on April 18, 2018. Prior to entering into this agreement, Mr. Farkas did not bring the matter to the entire Board for a vote.
The fair value of $785,200 of the 260,000 shares of common stock that were to be transferred to JMJ by BLNK Holdings is reflected
as interest expense on the Company’s condensed consolidated statements of operations during the six months ended June 30,
2018 with a corresponding credit to additional paid-in capital.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
9.
RELATED PARTIES – CONTINUED
LETTER
AGREEMENTS
On
March 22, 2018, pursuant to a letter agreement dated December 6, 2017, the Company issued 886,119 shares of common stock to Mr.
Farkas as compensation with an issuance date fair value of $2,534,300. On April 16, 2018, Mr. Farkas returned 2,930,596 shares
of common stock to the Company which were then retired.
On
March 22, 2018, pursuant to a letter agreement dated December 7, 2017, the Company issued 26,500 shares of common stock to Mr.
Feintuch as compensation with an issuance date fair value of $75,790.
10.
COMMITMENTS AND CONTINGENCIES
OPERATING
LEASE
On
April 20, 2018, the
Company entered into a three-year
operating lease agreement for 3,425 square feet of office space in Miami Beach, Florida beginning June 1, 2018
and ending May 31, 2021. The tenant and landlord have the option to cancel the contract after the first year with a 90-day written
notice. As of June 30, 2018, the lease had a remaining term of approximately three years. The lease does
not contain an option to extend past the existing lease term. Over the duration of the lease, payments will escalate 5% every
year.
Future
minimum payments under non-cancellable leases as of June 30, 2018 were as follows:
For
the Year Ending December 31,
|
|
Amount
|
|
|
|
|
|
2018
|
|
$
|
81,320
|
|
2019
|
|
|
126,046
|
|
2020
|
|
|
132,348
|
|
2021
|
|
|
44,828
|
|
Total
future minimum lease payments
|
|
$
|
384,542
|
|
Total
operating lease costs for the three and six months ended June 30, 2018 was $30,751 and $78,153, respectively, and is recorded
in other operating expenses on the condensed consolidated statements of operations. Total operating lease costs for the three
and six months ended June 30, 2017 was $30,615 and $62,067, respectively, and is recorded in other operating expenses on the condensed
consolidated statements of operations.
TAXES
The
Company has not filed its Federal and State corporate income tax returns for the years ended December 31, 2014, 2015, 2016 and
2017. The Company has sustained losses for the years ended December 31, 2014, 2015, 2016 and 2017. The Company has determined
that no tax liability, other than required minimums and related interest and penalties, have been incurred.
The
Company is also delinquent in filing and, in certain instances, paying sales taxes collected from customers in specific states
that impose a tax on sales of the Company’s products. The Company accrued approximately $225,000 and $178,000 as of June
30, 2018 and December 31, 2017, respectively, related to this matter.
As of December 31, 2017, the Company was delinquent in remitting approximately $632,000 of federal and state payroll
taxes withheld from employees. During the year ended December 31, 2017, the Company sent two letters to the Internal Revenue Service
(“IRS”) notifying the IRS of its intention to resolve the delinquent taxes upon the receipt of additional working
capital. Additionally, on March 27, 2018, the Company submitted its Forms 940 and 941 for the year ended December 31, 2017 to
the IRS. As of June 30, 2018, the Company is no longer delinquent on federal and state payroll taxes, as the
Company has remitted all the requisite federal and state payroll taxes withheld from employees to the appropriate taxing
authorities.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
10.
COMMITMENTS AND CONTINGENCIES – CONTINUED
LITIGATION
AND DISPUTES
On
January 31, 2018, ITT Cannon, Blink Network and the Company agreed that if the Company fails to consummate a registered public
offering of its common stock, list such stock on NASDAQ and issue to ITT Cannon shares of the same class of the Company’s
securities by February 28, 2018, the settlement agreement will expire. The public offering closed on February 16, 2018. The Company
issued 47,059 shares on March 16, 2018 to ITT Cannon. This was a partial payment of the $200,000 in stock owed to ITT Cannon.
On April 3, 2018 the Company issued an additional 25,669 shares to satisfy in full its obligations to ITT. As of April 16, 2018,
ITT Cannon has shipped approximately 4,600-4,900 charging cables and as of August 6, 2018, the remaining cables are awaiting shipment.
On
July 21, 2017, as amended on February 26, 2018, the Company was served with a complaint from Zwick and Banyai PLLC and Jack Zwick
for a breach of a written agreement and unjust enrichment for failure to pay invoices in the aggregate of amount $53,069 for services
rendered, plus interest and costs, which has been accrued as of June 30, 2018 (“Amended Complaint”). On June 21, 2018,
the court denied the Company’s motion to dismiss the Amended Complaint, while the plaintiffs voluntarily withdrew certain
counts in the Amended Complaint. On July 11, 2018, the Company filed its Answer and Affirmative Defense to the Amended Complaint.
From
time to time, the Company is a defendant or plaintiff in various legal actions that arise in the normal course of business.
350
Green, LLC
350
Green lawsuits relate solely to alleged pre-acquisition unpaid debts of 350 Green. Also, there are other unpaid creditors, aside
from those noted above, that claim to be owed certain amounts for pre-acquisition work done on behalf of 350 Green solely, that
potentially could file lawsuits at some point in the future.
On
May 30, 2013, JNS Power & Control Systems, Inc. (“JNS”) filed a complaint against 350 Green, LLC alleging claims
for breach of contract, specific performance and indemnity arising out of an Asset Purchase Agreement between JNS and 350 Green
entered on April 13, 2013, whereby JNS would purchase car chargers and related assets from 350 Green. On September 24, 2013, the
District Court entered summary judgment in favor of JNS on its claim for specific performance. On September 9, 2015, the United
States Court of Appeals for the Seventh Circuit of Chicago, Illinois affirmed the ruling of the District Court, which affirmed
the sale of certain assets by 350 Green to JNS and the assumption of certain 350 Green liabilities by JNS. On April 7, 2016, JNS
amended the complaint to add the Company, alleging an unspecified amount of lost revenues from the chargers, among other matters,
caused by the defendants. Plaintiff also seeks indemnity for its unspecified attorney’s fees and costs in connection with
enforcing the Asset Purchase Agreement in courts in New York and Chicago. On July 26, 2017, the District Court denied the Company’s
motion to dismiss the Company from the suit. The Company answered the second amended complaint on August 16, 2017. The deadline
for the parties to complete discovery is December 8, 2017. The next status hearing on the matter is set for December 8, 2017.
As of December 31, 2017, the Company accrued a $750,000 liability in connection with its settlement offer to JNS. On February
2, 2018, the parties entered into an asset purchase agreement whereby the parties agreed to settle the litigation. The Company
purchased back the EV chargers it previously sold to JNS for: (a) shares of Common Stock worth $600,000 with a price per share
equal to $4.25 (the price per share of the Offering); (b) $50,000 cash payment within ten days of the closing of the Offering;
and (c) $100,000 cash payment within six months following the closing of the Offering. The Offering closed on February 16, 2018.
The Company issued 141,176 shares on March 16, 2018. The Company made the $50,000 payment on March 16, 2018. JNS filed a motion
to dismiss the lawsuit without prejudice on March 23, 2018 and the judge granted the motion on March 26, 2018. JNS will file a
motion to convert the dismissal without prejudice to dismissal with prejudice within three business days of the $100,000 payment.
On March 16, 2018, the Company issued 23,529 shares of Common Stock to JNS to be held in escrow as security for the $100,000 payment.
At the time the $100,000 payment is made by the Company, the 23,529 shares currently held in escrow will be cancelled. On August
2, 2018, the Company paid the $100,000 to JNS and the 23,529 shares of common stock were returned to the Company.
On
March 26, 2018, final judgment has been reached relating to the Assignment for the Benefit of the Creditors, whereby all remaining
assets of 350 Green are abandoned to their respective property owners where the charging stations have been installed, thus on
March 26, 2018, the assignment proceeding has closed.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
10.
COMMITMENTS AND CONTINGENCIES – CONTINUED
LITIGATION
AND DISPUTES – CONTINUED
Concurrent
with the closing of the public offering, the Company was to pay the former principals of 350 Green LLC $25,000 in installment
debt and $50,000 within 60 days thereafter in settlement of a $360,000 debt (inclusive of imputed interest) and the return of
8,065 shares of the Company’s common stock by the former principals of 350 Green LLC, in accordance with a Settlement Agreement
between the parties dated August 21, 2015, that would have resulted in a gain of $285,000. As of the date of filing, this payment
has not been made, the aforementioned gain has not been recognized, and the common shares have not been returned by the former
principals of 350 Green LLC.
LIABILITY
CONVERSION AGREEMENTS
See
Note 8 – Stockholders’ Equity – Common Stock for additional details.
On
January 31, 2018, the Company, SemaConnect Inc. (“SemaConnect”) and their legal counsel entered into an amendment
to their settlement agreement dated June 23, 2017 whereby the parties agreed that, concurrent with the closing of the public offering,
the Company will settle the outstanding liabilities of $153,529 by issuing shares of common stock at a price equal to 80% of the
price of the shares sold in the public offering, plus an additional 1,500 shares of common stock. On March 16, 2018, the Company
issued 17,595 shares of common stock with an issuance date fair value of $49,266 to SemaConnect.
On
February 3, 2018, the Company and Schafer & Weiner, PLLC (“Schafer & Weiner”) entered into a letter agreement
whereby the parties agreed that, concurrent with the closing of the public offering, the Company will settle outstanding liabilities
of $813,962 owed to Schafer & Weiner as follows: (i) the Company will pay $406,981 in cash out of the proceeds of the public
offering; and (ii) in satisfaction of the remaining liability of $406,981, the Company will issue units, with each unit consisting
of one share of restricted common stock and a warrant to purchase one share of restricted common stock at an exercise price equal
to the exercise price of the warrants sold as part of the public offering, at a price equal to 80% of the per unit price in the
public offering. In consideration, Schafer & Weiner agreed to return to the Company 11,503 shares of common stock of the Company.
On February 16, 2018, the Company paid $406,981 in cash. On March 19, 2018, the Company issued 119,700 shares of common stock
with an issuance date fair value of $345,933 to Schafer & Weiner. On April 16, 2018, Schafer and Weiner returned and the Company
then retired the 11,503 shares of common stock.
EMPLOYMENT
AGREEMENT
On
June 17, 2018, the Company entered into a two-year employment agreement with its Chief Financial Officer (“CFO”) that
will be renewed automatically for an additional one-year term, unless the Company provides a notice of non-renewal at least thirty
(30) days prior to the end of the term. If the Company terminates the CFO’s employment without cause (as defined in the
agreement), the Company is required to continue payment of the CFO’s base salary, up to $125,000. Upon shareholder approval
of an omnibus incentive plan, the CFO will be entitled to awards under the plan with a value of $125,000.