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 range of business models for EV charging equipment and services. that generally fall into one of
the three business models below.
|
●
|
In
the Company’s comprehensive turnkey business model, Blink owns and operates the EV charging equipment, undertakes and
manages the installation, maintenance and related services, and Blink keeps substantially all of the EV charging revenue
.
|
|
●
|
In the Company’s Hybrid business model,
the Property Partner incurs the installation costs
, while
Blink provides the charging equipment. Blink operates and manages the EV charging station and provides connectivity of the charging
station to the Blink Network.. As a result, Blink shares a greater portion of the EV charging revenue with the Property Partner
than under the turnkey mode above.
|
|
●
|
In
the Company’s Host owned business model, the Property Partner purchases, owns and manages the Blink EV charging station,
incurs the installation costs of the equipment, while Blink provides site recommendations, connectivity to the Blink Network
and optional maintenance services, and the Property Partner keeps substantially all of the EV charging revenue.
|
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 September 30, 2018 and for the three and nine months then ended. The results of operations for
the three and nine months ended September 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 September 30, 2018, the Company had cash, working capital and an accumulated deficit of $21,304,407, $16,955,916 and
$157,599,908, respectively. During the three and nine months ended September 30, 2018, the Company had a net loss of $2,135,933
and $1,164,630, respectively.
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 nine months ended September 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 September 30, 2018, the Company
had cash balances in excess of FDIC insurance limits of $20,667,432 of which $18,024,063 was held in a money market account
at a financial institution at September 30, 2018. No funds were held in money market accounts at December 31, 2017.
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.
|
|
●
|
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.
|
|
●
|
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.
|
|
●
|
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 Nine Months Ended
|
|
|
|
September
30,
|
|
|
September
30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
- Recognized at a Point in Time
|
|
|
|
|
|
|
|
|
|
|
|
|
Charging
service revenue - company-owned charging stations
|
|
$
|
320,388
|
|
|
$
|
295,202
|
|
|
$
|
927,485
|
|
|
$
|
879,428
|
|
Product
sales
|
|
|
102,958
|
|
|
|
157,264
|
|
|
|
381,557
|
|
|
|
367,808
|
|
Other
|
|
|
36,135
|
|
|
|
43,367
|
|
|
|
131,795
|
|
|
|
122,937
|
|
Total
Revenues - Recognized at a Point in Time
|
|
|
459,481
|
|
|
|
495,833
|
|
|
|
1,440,837
|
|
|
|
1,370,173
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
- Recognized Over a Period of Time:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warranty
|
|
|
25,099
|
|
|
|
36,484
|
|
|
|
89,458
|
|
|
|
103,188
|
|
Network
fees
|
|
|
55,540
|
|
|
|
59,604
|
|
|
|
168,825
|
|
|
|
168,334
|
|
Total
Revenues - Recognized Over a Period of Time
|
|
|
80,639
|
|
|
|
96,088
|
|
|
|
258,283
|
|
|
|
271,522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Revenue Under ASC 606
|
|
$
|
540,120
|
|
|
$
|
591,921
|
|
|
$
|
1,699,120
|
|
|
$
|
1,641,695
|
|
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 September 30, 2018, the Company had $307,134 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 September 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 nine months ended September 30, 2018, the Company recognized $67,511 and $237,511, 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 nine months ended September 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 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, which are not within the scope of ASC 606, pertaining to revenues and periodic expenses are recognized as
income when the related revenue and/or periodic expense are recorded. Grants and rebates related to EV charging stations and their
installation are deferred and amortized in a manner consistent with the related depreciation expense of the related asset over
their useful lives over the useful life of the charging station. During the three and nine months ended September 30, 2018, the
Company recorded $6,724 and $68,062, respectively, related to grant and rebate revenue. During the three and nine months ended
September 30, 2017, the Company recorded $14,978 and $93,798, respectively, related to grant and rebate revenue. At September
30, 2018 and December 31,2017, $112,780 and $181,913 of deferred grant and rebate revenue to be amortized.
CONCENTRATIONS
During
the three and nine months ended September 30, 2018, one customer accounted for 11% and less than 10% of revenues respectively.
During the three and nine months ended September 30, 2017, revenues generated from one customer represented approximately 10%
of the Company’s total revenue. As of September 30, 2018 and December 31, 2017, accounts receivable from this same customer
amounted to less 10% of total accounts receivable. As of September 30, 2018 and December 31, 2017, accounts receivable from another
significant customer were approximately 44% and 32%, respectively, of total accounts receivable.
LEASES
In
February 2016, the Financial Accounting Standards Board (“FASB”) issued a new standard related to leases to increase
transparency and comparability among organizations by requiring the recognition of operating lease right-of-use (“ROU”)
assets and lease liabilities on the balance sheet. Most prominent among the changes in the standard is the recognition of ROU
assets and lease liabilities by lessees for those leases classified as operating leases. Under the standard, disclosures are required
to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising
from leases. The Company is also required to recognize and measure new leases at the adoption date and recognize a cumulative-effect
adjustment in the period of adoption using a modified retrospective approach, with certain practical expedients available.
The Company early adopted Accounting Standard
Codification No. (“ASC”) 842 effective July 1, 2018 and elected to apply the available practical expedients
and implemented internal controls and key system functionality to enable the preparation of financial information on adoption.
The standard had an impact on the Company’s condensed consolidated balance sheets but did not have an impact on the Company’s
condensed consolidated statements of operations or condensed consolidated statements of cash flows. The most significant impact
was the recognition of ROU assets and lease liabilities for operating leases, while the Company’s accounting for finance
leases remained substantially unchanged. The adoption of ASC 842 did not have a material impact in prior periods of the current
year and prior year comparative periods and as a result, a cumulative-effect adjustment was not required.
The
Company provides charging services at designated locations on the hosts property at which the charging station is situated. In
consideration thereof, the host shares in the monthly revenue generated by the charging station on percentage basis. As the charging
station monthly revenue generated is variable, the host’s monthly revenue derived there from is similarly variable. In accordance
with ASC 842 the hosts’ portion of revenue is variable and not predicated on an index or rate, as defined, these payments
are not within the scope ASC 842.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
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. 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.
For the three and nine months ended September
30, 2018 and 2017, the Company calculated the potential diluted earnings per share in accordance with ASC 260, as follows:
|
|
For
the Three Months Ended September 30,
|
|
|
For
the Nine Months Ended September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common shareholders
(numerator for basic earnings per share)
|
|
$
|
(2,148,631
|
)
|
|
$
|
(94,448,932
|
)
|
|
$
|
(25,231,361
|
)
|
|
$
|
(103,508,631
|
)
|
Less:
change in fair value of derivative liabilities and other accrued liabilities
|
|
|
(1,040,273
|
)
|
|
|
-
|
|
|
|
(2,897,095
|
)
|
|
|
-
|
|
Adjusted net loss attributable
to common shareholders (denominator for basic earnings per share)
|
|
$
|
(3,188,904
|
)
|
|
$
|
(94,448,932
|
)
|
|
$
|
(28,128,456
|
)
|
|
$
|
(103,508,631
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding (denominator for basic earnings
per share)
|
|
|
24,867,869
|
|
|
|
2,723,437
|
|
|
|
18,916,432
|
|
|
|
1,989,022
|
|
Plus: incremental shares from
assumed common stock issuance
|
|
|
424,681
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Plus:
incremental shares from assumed conversion of debt
|
|
|
-
|
|
|
|
-
|
|
|
|
196,994
|
|
|
|
-
|
|
Adjusted weighted average shares outstanding
(denominator for diluted earnings per share)
|
|
|
25,292,550
|
|
|
|
2,723,437
|
|
|
|
19,113,426
|
|
|
|
1,989,022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
(0.09
|
)
|
|
$
|
(34.68
|
)
|
|
$
|
(1.33
|
)
|
|
$
|
(52.04
|
)
|
Diluted earnings per share
|
|
$
|
(0.13
|
)
|
|
$
|
(34.68
|
)
|
|
$
|
(1.47
|
)
|
|
$
|
(52.04
|
)
|
The
following common share equivalents are excluded from the calculation of weighted average common shares outstanding because their
inclusion would have been anti-dilutive:
|
|
September
30,
|
|
|
|
2018
|
|
|
2017
|
|
Convertible
preferred stock
|
|
|
1,747,756
|
|
|
|
2,884,383
|
|
Warrants
|
|
|
6,852,861
|
|
|
|
266,143
|
|
Options
|
|
|
106,108
|
|
|
|
147,300
|
|
Convertible
notes
|
|
|
-
|
|
|
|
19,856
|
|
Total
potentially dilutive shares
|
|
|
8,706,725
|
|
|
|
3,317,682
|
|
RECLASSIFICATIONS
Certain
prior year balances have been reclassified in order to conform to current year presentation. These reclassifications have no effect
on previously reported results of operations or loss per share.
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 ASU 2018-07 did not have a material impact on the Company’s condensed
consolidated financial statements.
In
July 2018, the FASB issued Accounting Standards Update No. 2018-10, “Codification Improvements to Topic 842, Leases,”
(“ASU 2018-10”). The amendments in ASU 2018-10 are to address stakeholders’ questions about how to apply certain
aspects of the new guidance in ASC 842. The clarifications address the rate implicit in the lease, impairment of the net investment
in the lease, lessee reassessment of lease classification, lessor reassessment of lease term and purchase options, variable payments
that depend on an index or rate and certain transition adjustments. The amendments in ASC Topic 842 are effective for public business
entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The Company early
adopted ASU 2018-10, along with ASC 842, effective July 1, 2018. The adoption of ASU 2018-10 did not have a material impact on
the Company’s condensed consolidated financial statements.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
RECENTLY
ISSUED ACCOUNTING PRONOUNCEMENTS - CONTINUED
In
July 2018, the FASB issued Accounting Standards Update No. 2018-11, “Leases (Topic 842): Targeted Improvements,” (“ASU
2018-11”). The amendments in ASU 2018-11 related to transition relief on comparative reporting at adoption affect all entities
with lease contracts that choose the additional transition method and separating components of a contract affect only lessors
whose lease contracts qualify for the practical expedient. The amendments in ASC Topic 842 are effective for public business entities
for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The Company early adopted ASU
2018-11, along with ASC 842, effective July 1, 2018. The adoption of ASU 2018-11 did not have a material impact on the Company’s
condensed consolidated financial statements.
In
August 2018, the FASB issued Accounting Standards Update No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes
to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The amendments in ASU 2018-13 modify the
disclosure requirements on fair value measurements based on the concepts in the Concepts Statement, including the consideration
of costs and benefits. The amendments on changes in unrealized gains and losses, the range and weighted average of significant
unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty
should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption.
All other amendments should be applied retrospectively to all periods presented upon their effective date. The amendments are
effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years.
Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating ASU 2018-13 and its
impact on its condensed consolidated financial statements.
3.
PREPAID EXPENSES AND OTHER CURRRENT ASSETS
During
the nine months ended September 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 $792,204 for these charging stations,
which is included within prepaid expenses and other current assets on the Company’s condensed consolidated balance sheet
as of September 30, 2018. As of September 30, 2018, the Company had a remaining purchase commitment of $2,512,010, which will
become payable upon the supplier’s delivery of the charging stations.
The purchase
commitments were made primarily for future sales of these
charging stations.
4.
ACCRUED EXPENSES
SUMMARY
Accrued
expenses consist of the following:
|
|
September
30, 2018
|
|
|
December
31, 2017
|
|
|
|
(unaudited)
|
|
|
|
|
Accrued
host fees
|
|
$
|
1,251,553
|
|
|
$
|
1,657,663
|
|
Accrued
professional, board and other fees
|
|
|
182,581
|
|
|
|
2,683,557
|
|
Accrued
wages
|
|
|
373,898
|
|
|
|
1,016,563
|
|
Accrued
commissions
|
|
|
2,300
|
|
|
|
883,763
|
|
Warranty
payable
|
|
|
121,000
|
|
|
|
171,000
|
|
Accrued
taxes payable
|
|
|
646,841
|
|
|
|
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
|
|
|
-
|
|
|
|
12,980,588
|
|
Dividend
payable
|
|
|
-
|
|
|
|
1,892,800
|
|
Other
accrued expenses
|
|
|
127,137
|
|
|
|
19,115
|
|
Total
accrued expenses
|
|
$
|
2,737,344
|
|
|
$
|
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:
|
|
September
30, 2018
|
|
|
December
31, 2017
|
|
|
|
(unaudited)
|
|
|
|
|
Investment
banking fees
|
|
$
|
-
|
|
|
$
|
860,183
|
|
Legal
fees related to public offering
|
|
|
-
|
|
|
|
436,715
|
|
Professional
fees
|
|
|
179,319
|
|
|
|
684,673
|
|
Board
fees
|
|
|
-
|
|
|
|
608,945
|
|
Other
|
|
|
3,263
|
|
|
|
93,041
|
|
Total
accrued professional, board and other fees
|
|
$
|
182,582
|
|
|
$
|
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 nine months ended September 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.
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:
|
|
September
30, 2018
|
|
|
December
31, 2017
|
|
|
|
(unaudited)
|
|
|
|
|
Warrants
|
|
$
|
2,903
|
|
|
$
|
1,154,120
|
|
Common
Stock
|
|
|
1,039,559
|
|
|
|
1,735,047
|
|
Options
|
|
|
89,012
|
|
|
|
50,739
|
|
Total
accrued issuable equity
|
|
$
|
1,131,474
|
|
|
$
|
2,939,906
|
|
On
April 3, 2018, the Company issued 25,668 shares of common stock with an issuance date fair value of $70,000 in settlement of a
liability.
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 – Stockholder’s Equity – Warrant Issuances and Note 12- Subsequent Events for additional information.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 nine months ended September 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.
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 nine months ended September 30, 2018.
During
the nine months ended September 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 nine months ended September 30, 2018 was $0 and $898,716 respectively. Interest expense for the three
and nine months ended September 30, 2017 was $95,215 and $454,164, 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 Nine Months Ended
|
|
|
|
September
30,
|
|
|
September
30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk-free
interest rate
|
|
|
2.12%
- 2.63
|
%
|
|
|
1.55-1.62
|
%
|
|
|
1.62%
- 2.63
|
%
|
|
|
1.47%-1.62
|
%
|
Contractual
term (years)
|
|
|
0.03
- 2.75
|
|
|
|
1.28-3.75
|
|
|
|
0.25-3.25
|
|
|
|
1.28-4.00
|
|
Expected
volatility
|
|
|
171%
- 217
|
%
|
|
|
114%-130
|
%
|
|
|
113%-217
|
%
|
|
|
114%-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
|
|
|
(2,992,530
|
)
|
Ending
balance as of September 30, 2018
|
|
$
|
24,240
|
|
|
|
|
|
|
Warrants
Payable
|
|
|
|
|
Beginning
balance as of January 1, 2018
|
|
$
|
1,154,120
|
|
Exchange
of warrants payable for equity
|
|
|
(1,281,456
|
)
|
Accrual
of other warrant obligations
|
|
|
2,135,430
|
|
Change
in fair value of warrants payable
|
|
|
(2,005,191
|
)
|
Ending
balance as of September 30, 2018
|
|
$
|
2,903
|
|
See
Note 5 - Accrued Issuable Equity for additional information.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
7.
FAIR VALUE MEASUREMENT – CONTINUED
Assets
and liabilities measured at fair value on a recurring or nonrecurring basis are as follows:
|
|
September
30, 2018
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
liabilities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
24,240
|
|
|
$
|
24,240
|
|
Warrants
payable
|
|
|
-
|
|
|
|
-
|
|
|
|
2,903
|
|
|
|
2,903
|
|
Total
liabilities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
27,143
|
|
|
$
|
27,143
|
|
|
|
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
|
|
See
Note 5 - Accrued Issuable Equity for additional information.
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.
2018
INCENTIVE COMPENSATION PLAN
On
September 7, 2018, the Board of the Company , as well as a majority of the Company’s shareholders approved the Company’s
2018 Incentive Compensation Plan (the “2018 Plan”), which enables the Company to grant stock options, restricted stock,
dividend equivalents, stock payments, deferred stock, restricted stock units, stock appreciation rights, performance share awards,
and other incentive awards to associates, directors, consultants, and advisors of the Company and its affiliates, and to improve
the ability of the Company to attract, retain, and motivate individuals upon whom the Company’s sustained growth and financial
success depend, by providing such persons with an opportunity to acquire or increase their proprietary interest in the Company.
Stock options granted under the 2018 Plan may be non-qualified stock options or incentive stock options, within the meaning of
Section 422(b) of the Internal Revenue Code of 1986, except that stock options granted to outside directors and any consultants
or advisers providing services to the Company or an affiliate shall in all cases be non-qualified stock options. The option price
must be at least 100% of the fair market value on the date of grant and if issued to a 10% or greater shareholder must be at least
110% of the fair market value on the date of the grant.
The
2018 Plan is to be administered by the Compensation Committee of the Board, which shall have discretion over the awards and grants
thereunder. The aggregate maximum number of shares of common stock for which stock options or awards may be granted pursuant to
the 2018 Plan is 5,000,000, adjusted as provided in Section 4 of the 2018 Plan. No awards may be issued on or after September
7, 2028. As of September 30, 2018, the Company issued 188,501 shares of restricted common stock pursuant the 2018 Plan to members
of our Board of Directors and Management. As of September 30, 2018, there were 4,811,499 securities available for future issuance
under the 2018 Plan.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
8.
STOCKHOLDERS’ EQUITY – CONTINUED
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 nine months ended September 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 nine months ended September 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 nine months ended September 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 and September 12, 2018, JMJ
elected to convert 4,368 and 2,184 shares of Series D Convertible Preferred Stock into 1,400,000 and 700,000 shares of the Company’s
common stock, respectively, at a conversion price of $3.12 per common share. The Company determined that the Series D Convertible
Preferred Stock did not include a beneficial conversion feature.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
8.
STOCKHOLDERS’ EQUITY – CONTINUED
COMMON
STOCK
See
Note 8 – Stockholders’ Equity – Preferred Stock – Series D Convertible Preferred Stock, Note 9 –
Related Parties – Letter Agreements and Note 11 – Commitments and Contingencies for additional details.
During
the nine months ended September 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 $2,136,860 during the three and nine months ended September 30, 2018, respectively.
On
August 1, 2018, the Company retired 23,529 shares of common stock previously held as collateral for a certain debt obligation.
See Note 11 – Commitments and Contingencies – Litigation and Disputes for additional details.
On
September 7, 2018 the Company issued an aggregate of 188,501 immediately vested shares of restricted common stock to officers
and directors of the Company for services rendered. The shares had an aggregate grant date fair value of $601,318 which was recognized
immediately within the statement of operations during the three and nine months ended September 30, 2018.
STOCK-BASED
COMPENSATION
The
Company recognized stock-based compensation expense related to common stock, stock options and warrants for the three and nine
months ended September 30, 2018 of $737,416 and $3,685,291, respectively, and for the three and nine months ended September
30, 2017 of $322,426 and $1,432,832, respectively, which is included within compensation expense on the condensed consolidated
statement of operations. As of September 30, 2018, there was $8,216 of unrecognized stock-based compensation expense that will
be recognized over the weighted average remaining vesting period of 0.31 years.
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 nine months ended September 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 nine months ended September 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 nine months ended September 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
|
|
|
(184,659
|
)
|
|
|
47.09
|
|
|
|
|
|
|
|
|
|
Outstanding,
September 30, 2018
|
|
|
6,852,861
|
|
|
$
|
4.66
|
|
|
|
4.4
|
|
|
$
|
18,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable,
September 30, 2018
|
|
|
6,852,861
|
|
|
$
|
4.66
|
|
|
|
4.4
|
|
|
$
|
18,900
|
|
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 nine months ended September 30, 2018
with a corresponding credit to additional paid-in capital.
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.
LEASES
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 May 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 September 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.
As
of September 30, 2018, the Company had no leases that were classified as a financing lease. As of September 30, 2018, the Company
did not have additional operating and financing leases that have not yet commenced.
Total
operating lease expenses for the three and nine months ended September 30, 2018 was $68,960 and $147,113, respectively,
and is recorded in other operating expenses on the condensed consolidated statements of operations. Total rent expense
for the three and nine months ended September 30, 2017 was $39,976 and $117,194, respectively, and is recorded in other operating
expenses on the condensed consolidated statements of operations.
Supplemental
cash flows information related to leases was as follows:
|
|
Nine
Months Ended
September
30, 2018
|
|
|
|
|
|
Cash
paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
Operating
cash flows from operating leases
|
|
$
|
30,538
|
|
|
|
|
|
|
Right-of-use
assets obtained in exchange for lease obligations:
|
|
|
|
|
Operating
leases
|
|
$
|
323,301
|
|
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
10.
LEASES – CONTINUED
Weighted
Average Remaining Lease Term
|
|
|
Operating
leases
|
|
2.75
years
|
|
|
|
Weighted
Average Discount Rate
|
|
|
Operating
leases
|
|
6.0%
|
Future
minimum payments under non-cancellable leases as of September 30, 2018 were as follows:
For
the Years Ending December 31,
|
|
Amount
|
|
|
|
|
|
2018
|
|
$
|
30,495
|
|
2019
|
|
|
125,538
|
|
2020
|
|
|
131,814
|
|
2021
|
|
|
56,035
|
|
Total
future minimum lease payments
|
|
|
343,882
|
|
Less:
imputed interest
|
|
|
(60,468
|
)
|
Total
|
|
$
|
283,414
|
|
11.
COMMITMENTS AND CONTINGENCIES
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 $177,000 and $178,000 as of September
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 September
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.
LITIGATION
AND DISPUTES
O
n 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 November 9, 2018, the
Company had received all charging cables due from ITT Cannon.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
11.
COMMITMENTS AND CONTINGENCIES – CONTINUED
LITIGATION
AND DISPUTES - CONTINUED
From
time to time, the Company is a defendant or plaintiff in various legal actions that arise in the normal course of business.
In
July 2017, the Company was served with a complaint by Zwick and Banyai PLLC and Jack Zwick for breach of a written agreement and
unjust enrichment for failure to pay invoices in the aggregate amount of $53,069 for services rendered, plus interest and costs.
The plaintiffs’ complaint was subsequently amended in February 2018. In June 2018, the court denied the Company’s
motion to dismiss the amended complaint, although the plaintiffs voluntarily withdrew certain counts in the amended complaint.
In July 2018, the Company filed its answer and affirmative defense to the amended complaint denying liability. As of October 26, 2018, Company
updated its affirmative defenses in its answer and the parties are proceeding with discovery. The Company intends
to continue to defend this case vigorously.
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.
In May 2013, JNS Power & Control Systems, Inc. (“JNS”) filed a complaint against 350 Green,
LLC, a former subsidiary of the Company, alleging claims for breach of contract, specific performance and indemnity. The lawsuit
arose out of an asset purchase agreement from April 2013 between JNS and 350 Green, under which JNS agreed to purchase car chargers
and related assets from 350 Green. Following court judgments in favor of JNS on its claim for specific performance, in April 2016,
JNS amended its complaint to add the Company, alleging an unspecified amount of lost revenues from the car chargers, among other
matters, caused by the defendants. In February 2018, the parties entered into an agreement 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. 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. 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 and were subsequently
cancelled. See Note 8 – Stockholder’s Equity – Common Stock for additional details. Concomitantly, JNS filed
a motion to dismiss the lawsuit with prejudice. On March 26, 2018, the Court dismissed the case without prejudice and with leave
to reinstate by November 1, 2018. In August 2018, the Company satisfied the last of its payment obligations to JNS, however,
on October 29, 2018, JNS filed a motion to extend the date for reinstatement to January 11, 2019 to allow additional time to lift
restrictions on the stock it received in the asset purchase. On November 1, 2018, the Court granted the motion.
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.
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.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
11.
COMMITMENTS AND CONTINGENCIES – CONTINUED
LIABILITY
CONVERSION AGREEMENTS - CONTINUED
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
AGREEMENTS
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 paying a portion of the CFO’s base salary, up to $112,500.
Upon shareholder approval of an omnibus incentive plan, the CFO will be entitled to awards under the plan with a value of $112,500.
On
August 28, 2018, the Company entered into a two-year employment agreement with its President 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 President’s employment without cause (as defined in the agreement), the Company
is required to continue paying a portion the President’s base salary, up to $125,000. Upon shareholder approval
of an omnibus incentive plan, the President will be entitled to awards under the plan with a value of $125,000. Effective October
18, 2018, the Company’s President assumed the duties and additional position of Chief Operating Officer.
12.
SUBSEQUENT EVENTS
REPOSITIONING
OF EXECUTIVE EMPLOYMENT AGREEMENT
On
October 19, 2018, the Company entered into an agreement with its then-Chief Executive Officer (“Former CEO”), whereby
the Former CEO will be repositioned as the Company’s Senior Vice President of Sales (“VP of Sales”) in conjunction
with his resignation of his position as CEO. In connection with the agreement the parties agreed to the following:
|
●
|
the
VP of Sales will be entitled to receive a base salary of $10,000 per month as well as
commissions on sales;
|
|
●
|
the
VP of Sales will be entitled to receive an aggregate payment of $225,000 in connection
with the VP of Sales’ previous employment agreement with the Company dated July
16, 2015 payable in January 2019;
|
|
●
|
the
VP of Sales is entitled to receive restricted common stock with an aggregate value of
$250,000, half of which vests in January 2019 and half vests on October
19, 2019; and
|
|
●
|
all
previously outstanding vested options may be exercised in accordance with their terms
and all previously outstanding unvested options shall be forfeited;
|
COMMON
STOCK ISSUANCES
Subsequent
to September 30, 2018, the Company issued an aggregate of 35,482 shares of common stock for services rendered.