NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2019 AND 2018
1.
BUSINESS ORGANIZATION AND NATURE OF OPERATIONS
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 the Blink EV charging stations and their 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, and 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 retains 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
model above.
|
|
|
|
|
●
|
In
the Company’s Host owned business model, the Property Partner purchases, owns and manages the Blink EV charging station,
and 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 retains substantially all of the EV charging revenue.
|
The
Company has strategic partnerships across numerous transit/destination locations, including airports, auto dealers, healthcare/medical,
hotels, mixed-use, municipal locations, multifamily residential and condos, parks and recreation areas, parking lots, religious
institutions, restaurants, retailers, schools and universities, stadiums, supermarkets, transportation hubs, and workplace locations.
As of December 31, 2019, we had 14,778 charging stations deployed, of which 5,199 were Level 2 commercial charging units, 104
were DC Fast Charging EV chargers and 1,200 were residential charging units. Additionally, as of December 31, 2019, we had 353
Level 2 commercial charging units on other networks and there were also 7,922 non-networked, residential Blink EV charging stations.
2.
GOING CONCERN AND MANAGEMENT’S PLANS
As
of December 31, 2019, the Company had cash, marketable securities, working capital and an accumulated deficit of $3,975,494,
$3,150,332, $5,791,444 and $169,504,981, respectively. During the year ended December 31, 2019, the Company
incurred a net loss of $9,648,500. During the year ended December 31, 2019, the Company used cash in operating activities
of $10,958,156. These conditions raise substantial doubt about the Company’s ability to continue as a going concern
within a year after the issuance date of these financial statements. The Company expects to have the cash required to fund its
operations into the second quarter of 2020 while it continues to apply efforts to raise additional capital.
Since
inception, the Company’s operations have primarily been funded through proceeds received in equity and debt financings.
Although management believes that the Company has access to capital resources, there are currently no commitments in place for
new financing at this time and there is no assurance that the Company will be able to obtain funds on commercially acceptable
terms, if at all. 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.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2019 AND 2018
2.
GOING CONCERN AND MANAGEMENT’S PLANS – CONTINUED
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.
The
accompanying consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation
of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business.
The consolidated financial statements do not include any adjustment that might become necessary should the Company be unable to
continue as a going concern.
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES
OF CONSOLIDATION
The
consolidated financial statements include the accounts of Blink Charging Co. and its wholly-owned subsidiaries. All intercompany
transactions and balances have been eliminated in consolidation.
USE
OF ESTIMATES
Preparation
of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S.
GAAP”) requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses, together with amounts disclosed in the related notes to the financial statements. The Company’s significant
estimates used in these financial statements include, but are not limited to, stock-based compensation, accounts receivable reserves,
warranty reserves, inventory valuations, the valuation allowance related to the Company’s deferred tax assets, the carrying
amount of intangible assets, right of use assets and related leases payable estimates of future EV sales and the effects thereon,
derivative liabilities and the recoverability and useful lives of long-lived assets. Certain of the Company’s estimates
could be affected by external conditions, including those unique to the Company and general economic conditions. It is reasonably
possible that these external factors could have an effect on the Company’s estimates and could cause actual results to differ
from those estimates.
CASH
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 December 31, 2019, the Company had
cash balances in excess of FDIC insurance limits of $3,494,360.
INVESTMENTS
Available-for-sale
debt securities are recorded at fair value with the net unrealized gains and losses (that are deemed to be temporary) reported
as a component of other comprehensive income (loss). Realized gains and losses and charges for other-than-temporary impairments
are included in determining net income, with related purchase costs based on the first-in, first-out method. The Company evaluates
its available-for-sale-investments for possible other-than-temporary impairments by reviewing factors such as the extent to which,
and length of time, an investment’s fair value has been below the Company’s cost basis, the issuer’s financial
condition, and the Company’s ability and intent to hold the investment for sufficient time for its market value to recover.
For impairments that are other-than-temporary, an impairment loss is recognized in earnings equal to the difference between the
investment’s cost and its fair value at the balance sheet date of the reporting period for which the assessment is made.
The fair value of the investment then becomes the new amortized cost basis of the investment and it is not adjusted for subsequent
recoveries in fair value.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2019 AND 2018
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
INVESTMENTS
- CONTINUED
The
following summarizes our investments as of December 31, 2019 and 2018:
|
|
December
31,
|
|
|
|
2019
|
|
|
2018
|
|
Short-term
investments:
|
|
|
|
|
|
|
|
|
Available-
for-sale investments
|
|
$
|
3,150,332
|
|
|
$
|
2,878,664
|
|
The
following is a summary of the unrealized gains, and fair value by investment type as of December 31, 2019 and 2018:
|
|
December
31, 2019
|
|
|
|
Unrealized
Gains, Net
|
|
|
Fair
Value
|
|
Fixed
income
|
|
$
|
183,173
|
|
|
$
|
3,150,332
|
|
|
|
December
31, 2018
|
|
|
|
Unrealized
Gains, Net
|
|
|
Fair
Value
|
|
Fixed
income
|
|
$
|
-
|
|
|
$
|
2,878,664
|
|
ACCOUNTS
RECEIVABLE
Accounts
receivable are carried at their contractual amounts, less an estimate for uncollectible amounts. As of December 31, 2019 and 2018,
there was an allowance for uncollectible amounts of $71,935 and $84,542, respectively. Management estimates the allowance
for bad debts based on existing economic conditions, the financial conditions of the customers, and the amount and age of past
due accounts. Receivables are considered past due if full payment is not received by the contractual due date. Past due accounts
are generally written off against the allowance for bad debts only after all collection attempts have been exhausted.
INVENTORY
Inventory
is comprised of electric charging stations and related parts, which are available for sale or for warranty requirements. Inventory
is stated at the lower of cost and net realizable value. Cost is determined by the first-in, first-out method. Inventory that
is sold to third parties is included within cost of sales and inventory that is installed on the premises of participating owner/operator
properties, where the Company retains ownership, is transferred to property and equipment at the carrying value of the inventory.
The Company periodically reviews for slow-moving, excess or obsolete inventories. Products that are determined to be obsolete,
if any, are written down to net realizable value. Based on the aforementioned periodic reviews, the Company recorded an inventory
reserve for slow-moving or excess inventory of $892,000 and $396,000 as of December 31, 2019 and 2018, respectively.
As
of December 31, 2019 and 2018, the Company’s inventory was comprised solely of finished goods and parts that are available
for sale.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2019 AND 2018
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
PROPERTY
AND EQUIPMENT
Property
and equipment is stated at cost, net of accumulated depreciation and amortization which is recorded commencing at the in-service
date using the straight-line method over the estimated useful lives of the assets.
|
|
Useful
Lives
|
Asset
|
|
(In
Years)
|
|
|
|
Computer
software and office and computer equipment
|
|
3 - 5
|
Machinery and equipment,
automobiles, furniture and fixtures
|
|
3 - 10
|
Installed Level 2 electric
vehicle charging stations
|
|
3 - 7
|
Installed Level 3 (DC
Fast Chargers (“DCFC”)) electric vehicle charging stations
|
|
5
|
When
property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts
and any resulting gain or loss is included in the statements of operations for the respective period. Minor additions and repairs
are expensed in the period incurred. Major additions and repairs which extend the useful life of existing assets are capitalized
and depreciated using the straight-line method over their remaining estimated useful lives.
EV
charging stations represents the cost, net of accumulated depreciation, of charging devices that have been installed on the premises
of participating owner/operator properties or are earmarked to be installed. The Company had no EV charging stations that were
not placed in service as of December 31, 2019 and 2018.
The
Company’s long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount of the asset may not be recoverable. The Company assesses the recoverability of its long-lived assets by monitoring current
selling prices of car charging units in the open market, the adoption rate of various auto manufacturers in the EV market and
projected car charging utilization at various public car charging stations throughout its network in determining fair value. An
impairment loss would be recognized when estimated future cash flows expected to result from the use of the asset and its eventual
disposition are less than its carrying amount. See Note 5 – Property and Equipment for additional details.
INTANGIBLE
ASSETS
Intangible
assets were acquired in conjunction with the acquisition of Blink Network LLC (“Blink Network”) during 2013 and were
recorded at their fair value at such time. Trademarks are amortized on a straight-line basis over their useful life of ten years.
Patents are amortized on a straight-line basis over the lives of the patent (twenty years or less), commencing when the patent
is approved and placed in service. Internal-use software is amortized over the term of the agreement with the software provider.
See Note 6 – Intangible Assets for additional details.
SEGMENTS
The
Company operates a single segment business. The Company’s Chief Executive Officer, who is the chief operating decision maker,
views the Company’s operating performance on a consolidated basis as Blink’s only business is the sale and distribution
of electric vehicle charging equipment and its associated revenues earned from customers and/or Property Partners who use equipment
connected to its network.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2019 AND 2018
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
REVENUE
RECOGNITION
The
Company recognizes revenue pursuant to Topic 606 of the Financial
Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), “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
previous 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
consolidated financial statements as of the date of adoption. As a result, a cumulative-effect adjustment was not required.
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 and other – Represents a stand-ready obligation whereby the Company is obligated to perform over a period of
time and, as a result, revenue is recognized on a straight-line basis over the contract term. Network fees are billed annually.
|
|
●
|
Other
– Primarily related to charging service revenue from non-company-owned charging stations. Revenue is recognized
from non-company-owned charging stations at the point when a particular charging session is completed in accordance with a
contractual relationship between the Company and the owner of the station.
|
The
following table summarizes our revenue recognized under ASC 606 in our consolidated statements of operations:
|
|
For
The Years Ended
|
|
|
|
December
31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Revenues
- Recognized at a Point in Time
|
|
|
|
|
|
|
|
|
Charging
service revenue - company-owned charging stations
|
|
$
|
1,359,218
|
|
|
$
|
1,264,719
|
|
Product
sales
|
|
|
856,243
|
|
|
|
476,930
|
|
Other
|
|
|
166,710
|
|
|
|
187,252
|
|
Total
Revenues - Recognized at a Point in Time
|
|
|
2,382,171
|
|
|
|
1,928,901
|
|
|
|
|
|
|
|
|
|
|
Revenues
- Recognized Over a Period of Time:
|
|
|
|
|
|
|
|
|
Network
and other fees
|
|
|
354,623
|
|
|
|
351,440
|
|
Total
Revenues - Recognized Over a Period of Time
|
|
|
354,623
|
|
|
|
351,440
|
|
|
|
|
|
|
|
|
|
|
Total
Revenue Under ASC 606
|
|
$
|
2,736,794
|
|
|
$
|
2,280,341
|
|
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2019 AND 2018
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
REVENUE
RECOGNITION - CONTINUED
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 December 31, 2019, the Company had $484,508 related to contract liabilities where performance obligations have not yet been
satisfied, which has been included within deferred revenue on the consolidated balance sheets as of December 31, 2019.
The Company expects to satisfy its remaining performance obligations for network fees, warranty revenue, and product sales and
recognize the revenue within the next twelve months.
During
the year ended December 31, 2019, the Company recognized $190,860 of revenues related to network fees and warranty contracts,
which was included in deferred revenues as of December 31, 2018. During the year ended December 31, 2018, the Company recognized
$324,956 of revenues related to network fees and warranty contracts, which was included in deferred revenues as of December 31,
2017.
During
the years ended December 31, 2019 and 2018, there was no revenue recognized from performance obligations satisfied (or partially
satisfied) in previous periods.
Grants,
rebates and alternative fuel credits, which are not within the scope of ASC 606, pertaining to revenues and periodic expenses
are recognized as income when the related revenue and/or periodic expense are recorded. Grants and rebates related to EV charging
stations and their installation are deferred and amortized in a manner consistent with the related depreciation expense of the
related asset over their useful lives over the useful life of the charging station. During the years ended December 31, 2019 and
2018, the Company recorded $22,396 and $74,776, respectively, related to grant and rebate revenue. At December 31, 2019 and 2018,
there was $83,670 and $106,066, respectively, of deferred grant and rebate revenue to be amortized. During the years ended December
31, 2019 and 2018, the Company recognized $123,446 and $331,120, respectively, of revenue related to alternative fuel credits,
which is included within other revenue on the consolidated statement of operations.
CONCENTRATIONS
As
of December 31, 2019 and 2018, accounts receivable from a significant customer were approximately 10% and 35%, respectively, of
total accounts receivable. During the year ended
December 31, 2019, sales to significant customer represented 11% of product sales.
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.
The fair value of the award is measured on the grant date and then is 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.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2019 AND 2018
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
LEASES
The
Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”)
assets and operating lease liabilities in our consolidated balance sheets.
ROU
assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make
lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on
the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, The Company uses
its incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the
lease payments at commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives.
Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that
option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
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.
INCOME
TAXES
The
Company recognizes deferred tax assets and liabilities for the expected future tax consequences of items that have been included
in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences
between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which
the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes
it is more likely than not that the assets will not be realized. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in the statements of operations in the period that includes the enactment date. As of December 31,
2019 and 2018, the Company maintained a full valuation allowance against its deferred tax assets, since it is more likely than
not that the future tax benefit on such temporary differences will not be realized.
The
Company recognizes the tax benefit from an uncertain income tax position only if it is more likely than not that the tax position
will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized
in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood
of being realized upon ultimate settlement by examining taxing authorities. The Company has open tax years going back to 2014
(or the tax year ended December 31, 2011 if the Company were to utilize its NOLs) which will be subject to audit by federal
and state authorities upon filing. The Company’s policy is to recognize interest and penalties accrued on uncertain income
tax positions in interest expense in the Company’s consolidated statements of operations. As of December 31, 2019 and 2018,
the Company had no liability for unrecognized tax benefits. The Company does not expect the unrecognized tax benefits to change
significantly over the next 12 months.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2019 AND 2018
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
NET
LOSS PER COMMON SHARE
Basic
net loss per common share is computed by dividing net loss attributable to common shareholders by the weighted average number
of common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss attributable
to common shareholders 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:
|
|
For
the Years Ended
|
|
|
|
December
31,
|
|
|
|
2019
|
|
|
2018
|
|
Convertible
preferred stock
|
|
|
1,642,628
|
|
|
|
1,647,756
|
|
Warrants
|
|
|
6,840,049
|
|
|
|
6,837,061
|
|
Options
|
|
|
265,550
|
|
|
|
109,546
|
|
Total
potentially dilutive shares
|
|
|
8,748,227
|
|
|
|
8,594,363
|
|
COMMITMENTS
AND CONTINGENCIES
Liabilities
for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it
is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.
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 STANDARDS
In
June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU
2016-13”) and also issued subsequent amendments to the initial guidance: ASU 2018-19, ASU 2019-04, and ASU 2019-05 (collectively,
“Topic 326”). Topic 326 requires measurement and recognition of expected credit losses for financial assets held.
The Company will be required to adopt this ASU for fiscal years beginning after December 15, 2022, including interim periods
within those fiscal years . The adoption of Topic 326 is not expected to have a material on the Company’s financial
statements and financial statement disclosures.
In
April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic
815, Derivatives and Hedging, and Topic 825, Financial Instruments (“ASU 2019-04”). The new ASU provides narrow-scope
amendments to help apply these recent standards. The Company will be required to adopt the provisions of this ASU on January 1,
2020, with early adoption permitted for certain amendments. The adoption of this ASU is not expected to have a material on the
Company’s financial statements and financial statement disclosures.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2019 AND 2018
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
RECENTLY
ISSUED ACCOUNTING STANDARDS - CONTINUED
In
August 2018, the FASB issued ASU 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 adoption of this ASU effective January 1, 2020 did not have a material impact
on the Company’s consolidated financial statements.
In
November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic
808 and Topic 606 (“ASU 2018-18”), which clarifies that certain transactions between participants in a collaborative
arrangement should be accounted for under ASC 606 when the counterparty is a customer. In addition, ASU 2018-18 precludes an entity
from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the
counterparty is not a customer for that transaction. For public business entities, the amendments in this update are effective
for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For all other entities, the
amendments are effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning
after December 15, 2021. Early adoption is permitted, including adoption in any interim period, (1) for public business entities
for periods for which financial statements have not yet been issued and (2) for all other entities for periods for which financial
statements have not yet been made available for issuance. The Company is currently evaluating the effect that adopting this new
accounting guidance will have on its consolidated financial statements and related disclosures.
In
November 2019, the FASB issued ASU 2019-10, “Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging
(Topic 815), and Leases (Topic 842)” (“ASU 2019-10”). ASU 2019-10 (i) provides a framework to stagger effective
dates for future major accounting standards and (ii) amends the effective dates for certain major new accounting standards to
give implementation relief to certain types of entities. Specifically, ASU 2019-10 changes some effective dates for certain new
standards on the following topics in the FASB Accounting Standards Codification (ASC): (a) Derivatives and Hedging (ASC 815) –
now effective for fiscal years beginning after December 15, 2020 and interim periods within fiscal years beginning after December
15, 2021; (b) Leases (ASC 842) - now effective for fiscal years beginning after December 15, 2020 and interim periods within fiscal
years beginning after December 15, 2021; (c) Financial Instruments — Credit Losses (ASC 326) - now effective for fiscal
years beginning after December 15, 2022, including interim periods within those fiscal years; and (d) Intangibles — Goodwill
and Other (ASC 350) - now effective for fiscal years beginning after December 15, 2019, including interim periods within those
fiscal years. The Company adopted certain provisions which have become effective during fiscal 2020 within ASU 2019-10
and its adoption did not have a material impact on the Company’s financial statements and financial statement disclosures.
The Company is currently evaluating the effect that adopting the remaining new accounting guidance will have on its consolidated
financial statements and related disclosures.
In
November 2019, the FASB issued ASU 2019-11, “Codification Improvements to Topic 326, Financial Instruments – Credit
Losses” (“ASU 2019-11”). ASU 2019-11 is an accounting pronouncement that amends ASU 2016-13, “Financial
Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The amendments update
guidance on reporting credit losses for financial assets. These amendments affect loans, debt securities, trade receivables, net
investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded
from the scope that have the contractual right to receive cash. The amendments in this ASU are effective for annual reporting
periods beginning after December 15, 2022, including interim periods within those fiscal years. All entities may adopt
the amendments through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in
which the guidance is effective (that is, a modified-retrospective approach). The Company is currently evaluating ASU 2019-11
and its impact on its consolidated financial statements and financial statement disclosures.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2019 AND 2018
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
RECENTLY
ISSUED ACCOUNTING STANDARDS - CONTINUED
In
December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,”
which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to
the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12
is effective for the Company beginning in fiscal 2021. The Company is currently assessing the impact that this pronouncement will
have on its consolidated financial statements.
4.
PREPAID EXPENSES AND OTHER CURRRENT ASSETS
As
of December 31, 2019, prepaid expenses and other current assets primarily consisted of alternative fuel credits of $476,992. As
of December 31, 2018 alternative fuel credits was $331,120.
During
the year ended December 31, 2018, the Company entered into purchase commitments to acquire second generation charging stations
with an aggregate value of $3,156,629. As of December 31, 2019, the Company had a remaining purchase commitment of $1,563,600
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.
5.
PROPERTY AND EQUIPMENT
Property
and equipment consist of the following:
|
|
December
31,
|
|
|
|
2019
|
|
|
2018
|
|
EV charging
stations
|
|
$
|
3,094,537
|
|
|
$
|
3,972,354
|
|
Software
|
|
|
464,997
|
|
|
|
464,997
|
|
Automobiles
|
|
|
13,950
|
|
|
|
132,751
|
|
Office and computer
equipment
|
|
|
241,803
|
|
|
|
199,817
|
|
Leasehold improvements
|
|
|
44,893
|
|
|
|
35,046
|
|
Machinery
and equipment
|
|
|
177,484
|
|
|
|
176,884
|
|
|
|
|
4,037,664
|
|
|
|
4,981,849
|
|
Less:
accumulated depreciation
|
|
|
(2,690,355
|
)
|
|
|
(4,598,282
|
)
|
Property
and equipment, net
|
|
$
|
1,347,309
|
|
|
$
|
383,567
|
|
Depreciation
and amortization expense related to property and equipment was $187,214 and $280,547 for the years ended December 31, 2019
and 2018, respectively, of which, $127,929 and $259,581, respectively, was recorded within cost of sales in the accompanying
consolidated statements of operations.
During
the years ended December 31, 2019 and 2018, the Company disposed of property and equipment with a net book value of $65,488 and
$66,746 which resulted in a loss on disposal of $65,488 and $66,746, respectively, which was included within general and administrative
expenses in the consolidated statements of operations.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2019 AND 2018
6.
INTANGIBLE ASSETS
Intangible
assets consist of the following:
|
|
December
31,
|
|
|
|
2019
|
|
|
2018
|
|
Trademarks
|
|
$
|
-
|
|
|
$
|
17,581
|
|
Internal use software
|
|
|
184,141
|
|
|
|
184,141
|
|
Patents
|
|
|
-
|
|
|
|
132,661
|
|
|
|
|
184,141
|
|
|
|
334,383
|
|
Less:
accumulated amortization
|
|
|
(76,725
|
)
|
|
|
(54,390
|
)
|
Intangible
assets, net
|
|
$
|
107,415
|
|
|
$
|
279,993
|
|
On
October 16, 2018, the Company entered into a software license agreement with Oracle America, Inc. for the purchase of a three-year
license, related training, custom programming and implementation of NetSuite SuiteSuccess Wholesale/Distribution Emerging Edition
Cloud Service. The performance obligations of NetSuite commenced in December 2018. The Company’s payment obligations were
deferred for six months from NetSuite’s performance obligation date, however, the payment schedule was condensed to a 30
month schedule of equal monthly payments. The Company’s outstanding liability of $131,762 and $184,141 as of December
31, 2019 and 2018, respectively, is included within other current liabilities and other liabilities on the consolidated balance
sheets.
During
the year ended December 31, 2019, the Company determined the carrying value of its trademarks and patents was not recoverable
and, as a result, recorded an impairment charge of $83,135 which was included within general and administrative expenses on
the consolidated statement of operations.
Amortization
expense related to intangible assets was $89,442 and $10,315 for the years ended December 31, 2019 and 2018, respectively.
The
estimated future amortization expense is as follows:
For
the Years Ending December 31,
|
|
Total
|
|
2020
|
|
$
|
61,380
|
|
2021
|
|
|
46,035
|
|
|
|
$
|
107,415
|
|
7.
OTHER ASSETS
As
of December 31, 2019 and 2018, other assets primarily consisted of deposits for rent, utilities and professional services.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2019 AND 2018
8.
ACCRUED EXPENSES
Accrued
expenses consist of the following:
|
|
December
31,
|
|
|
|
2019
|
|
|
2018
|
|
Accrued
host fees
|
|
$
|
108,683
|
|
|
$
|
54,527
|
|
Accrued professional
fees
|
|
|
40,518
|
|
|
|
159,500
|
|
Accrued wages
|
|
|
295,250
|
|
|
|
493,069
|
|
Accrued commissions
|
|
|
-
|
|
|
|
22,300
|
|
Warranty payable
|
|
|
12,000
|
|
|
|
9,700
|
|
Accrued income,
property and sales taxes payable (Note 17)
|
|
|
417,669
|
|
|
|
556,211
|
|
Accrued interest
expense
|
|
|
-
|
|
|
|
32,034
|
|
Inventory in transit
|
|
|
-
|
|
|
|
195,480
|
|
Other
accrued expenses
|
|
|
23,428
|
|
|
|
22,100
|
|
Total
accrued expenses
|
|
$
|
897,548
|
|
|
$
|
1,544,921
|
|
See
Note 17 – Commitments and Contingencies – Taxes.
WARRANTY
PAYABLE
The
Company provides a limited product warranty against defects in materials and workmanship for its Blink Network residential and
commercial chargers, ranging in length from one to two years. The Company accrues for estimated warranty costs at the time of
revenue recognition and records the expense of such accrued liabilities as a component of cost of sales. Estimated warranty costs
are based on historical product data and anticipated future costs. Should actual cost to repair and failure rates differ significantly
from estimates, the impact of these unforeseen costs would be recorded as a change in estimate in the period identified. For the
year ended December 31, 2019, the change in reserve was approximately $2,300. Warranty expenses for the years ended December 31,
2019 and 2018 were $187,016 and $258,000, respectively, which has been included within cost of revenues on the consolidated statement
of operations. As of December 31, 2019 and 2018, the Company recorded a warranty liability of $12,000 and $9,700, respectively,
which represents the estimated cost to repair those chargers under warranty or host owned chargers for which the host has procured
a maintenance contract. The Company records maintenance and repairs expenses for chargers it owns deployed at host locations as
incurred. The Company estimates an approximate cost of $231,000 to repair those deployed chargers which it owns as of December
31, 2019.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2019 AND 2018
9.
ACCRUED ISSUABLE EQUITY
Accrued
issuable equity, which represents the fair value of unissued equity instruments that the Company was obligated to issue, consists
of the following:
|
|
December
31,
|
|
|
|
2019
|
|
|
2018
|
|
Warrants
|
|
$
|
5,102
|
|
|
$
|
5,965
|
|
Common stock
|
|
|
252,584
|
|
|
|
187,523
|
|
Options
|
|
|
-
|
|
|
|
125,005
|
|
Total
accrued issuable equity
|
|
$
|
257,686
|
|
|
$
|
318,493
|
|
The common stock balance as of December
31, 2019 is primarily related to the fair value of compensation earned by the Company’s Board members and officers that
is to be settled by the future issuance of common stock.
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.
During
the year ended December 31, 2019, the Company accrued approximately $412,000 related to equity awards that were not issued. During
the year ended December 31, 2019, the Company issued various equity instruments in satisfaction of approximately $407,000 of accrued
obligations. During the year ended December 31, 2019, the Company recognized a loss on the change in fair value of the accrued
equity obligations of approximately $65,000.
See
Note 12 – Fair Value Measurement and Note 13 - Stockholders’ Equity for additional details.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2019 AND 2018
10.
NOTES PAYABLE
JMJ
PROMISSORY NOTE AND 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”) 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 $5,800,175
on the consolidated statement of operations during the year ended December 31, 2018. The Series D Convertible Preferred Stock
was determined to be permanent equity on the Company’s consolidated balance sheet. See Note 13 – 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 15 – 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 to FGI (including principal repayments
of $545,000) in satisfaction of the debt.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2019 AND 2018
10.
NOTES PAYABLE – CONTINUED
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 year ended December 31, 2018.
During
the year ended December 31, 2018, in addition to the repayment of the $55,000 note discussed above, the Company made principal
repayments of $160,000.
During
the year ended December 31, 2018, the Company made aggregate principal repayments of $50,000 associated with other notes payable.
INTEREST
EXPENSE
Interest
expense on notes payable for the years ended December 31, 2019 and 2018 was $0 and $106,060, respectively.
11.
DEFERRED REVENUE
The
Company is the recipient of various private and governmental grants, rebates and marketing incentives. Reimbursements of periodic
expenses are recognized as income when the related expense is incurred. Private and government grants and rebates related to EV
charging stations and their installation are deferred and amortized in a manner consistent with the recognition of the related
depreciation expense of the related asset over their useful lives.
Grant,
rebate and incentive revenue recognized during the years ended December 31, 2019 and 2018 was $22,396 and $74,776, respectively.
During the year ended December 31, 2019, the Company recognized $315,324 of revenue related to warranty and network fees, of which,
$190,860 was included within deferred revenue as of December 31, 2018.
During
the year ended December 31, 2019, the Company received a $338,817 deposit for a $1.1 million dollar purchase order for charging
stations from Interenergy. As of December 31, 2019, the Company has not shipped any charging stations related to this purchase
order, such that the entire amount was included in deferred revenue as of such date.
Deferred
revenue consists of the following:
|
|
December
31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Interenergy
|
|
$
|
338,817
|
|
|
$
|
-
|
|
PA Turnpike
|
|
|
8,287
|
|
|
|
21,236
|
|
AFIG-PAT
|
|
|
75,382
|
|
|
|
80,748
|
|
Prepaid network and
maintenance fees
|
|
|
145,692
|
|
|
|
190,860
|
|
Other
|
|
|
-
|
|
|
|
78,082
|
|
Total deferred revenue
|
|
|
568,178
|
|
|
|
370,926
|
|
Deferred
revenue, non-current portion
|
|
|
(565
|
)
|
|
|
(13,878
|
)
|
Current
portion of deferred revenue
|
|
$
|
567,613
|
|
|
$
|
357,048
|
|
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2019 AND 2018
11.
DEFERRED REVENUE – CONTINUED
It
is anticipated that deferred revenue as of December 31, 2019 will be recognized as follows:
For
the Year Ending
|
|
|
|
December
31,
|
|
Revenue
|
|
|
|
|
|
2020
|
|
$
|
567,613
|
|
2021
|
|
|
565
|
|
Total
|
|
$
|
568,178
|
|
12.
FAIR VALUE MEASUREMENT
Assumptions
utilized in the valuation of Level 3 liabilities are described as follows:
|
|
For
the Years Ended
|
|
|
|
December
31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Risk-free
interest rate
|
|
|
1.47%-2.45
|
%
|
|
|
1.62
- 2.63
|
%
|
Contractual term (years)
|
|
|
1.00-10.00
|
|
|
|
0.25
- 3.25
|
|
Expected volatility
|
|
|
74%-140
|
%
|
|
|
113%
- 217
|
%
|
Expected dividend yield
|
|
|
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:
|
|
December
31,
|
|
|
|
2019
|
|
|
2018
|
|
Derivative
Liabilities
|
|
|
|
|
|
|
|
|
Beginning balance as of January
1
|
|
$
|
-
|
|
|
$
|
3,448,390
|
|
Conversion of derivative
liability to equity
|
|
|
-
|
|
|
|
(419,415
|
)
|
Reclassify derivative
liability to equity
|
|
|
-
|
|
|
|
(36,445
|
)
|
Change
in fair value of derivative liability
|
|
|
-
|
|
|
|
(2,992,530
|
)
|
Ending balance
as of December 31
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Warrants
Payable
|
|
|
|
|
|
|
|
|
Beginning balance as of January 1
|
|
$
|
5,965
|
|
|
$
|
1,154,120
|
|
Exchange of warrants
payable for equity
|
|
|
-
|
|
|
|
(1,183,091
|
)
|
Accrual of other warrant
obligations
|
|
|
-
|
|
|
|
2,135,430
|
|
Change
in fair value of warrants payable
|
|
|
(863
|
)
|
|
|
(2,100,494
|
)
|
Ending balance
as of December 31
|
|
$
|
5,102
|
|
|
$
|
5,965
|
|
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2019 AND 2018
12.
FAIR VALUE MEASUREMENT – CONTINUED
Assets
and liabilities measured at fair value on a recurring or nonrecurring basis are as follows:
|
|
December
31, 2019
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alternative
fuel credits
|
|
$
|
-
|
|
|
$
|
476,992
|
|
|
$
|
-
|
|
|
$
|
476,992
|
|
Marketable
securities
|
|
|
3,150,332
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,150,332
|
|
Total
assets
|
|
$
|
3,150,332
|
|
|
$
|
476,992
|
|
|
$
|
-
|
|
|
$
|
3,627,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
payable
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
5,102
|
|
|
$
|
5,102
|
|
Total
liabilities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
5,102
|
|
|
$
|
5,102
|
|
|
|
|
December
31, 2018
|
|
|
|
|
Level
1
|
|
|
|
Level
2
|
|
|
|
Level
3
|
|
|
|
Total
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alternative fuel credits
|
|
$
|
-
|
|
|
$
|
331,120
|
|
|
$
|
-
|
|
|
$
|
331,120
|
|
Marketable
securities
|
|
|
2,878,664
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,878,664
|
|
Total
assets
|
|
$
|
2,878,664
|
|
|
$
|
331,120
|
|
|
$
|
-
|
|
|
$
|
3,209,784
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
payable
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
5,965
|
|
|
$
|
5,965
|
|
Total
liabilities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
5,965
|
|
|
$
|
5,965
|
|
13.
STOCKHOLDERS’ EQUITY
AUTHORIZED
CAPITAL
The
Company is authorized to issue 500,000,000 shares of common stock, $0.001 par value, and 40,000,000 shares of preferred stock,
$0.001 par value. The holders of the Company’s common stock are entitled to one vote per share. The preferred stock is designated
as follows: 20,000,000 shares to Series A Convertible Preferred Stock; 10,000 shares to Series B Convertible Preferred Stock;
250,000 shares to Series C Convertible Preferred Stock; 13,000 shares to Series D Convertible Preferred Stock; and 19,727,000
shares undesignated.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2019 AND 2018
13.
STOCKHOLDERS’ EQUITY – CONTINUED
OMNIBUS
INCENTIVE PLANS
On
March 31, 2014, the Board of the Company approved the Company’s 2014 Omnibus Incentive Plan (the “2014 Plan”),
which enables the Company to grant stock options, stock appreciation rights, restricted stock, restricted stock units, phantom
stock and dividend equivalent rights 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 2014 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 110% of the fair market value on the date of the grant. The 2014 Plan is to be administered by 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 2014 Plan is 5,000,000, adjusted as provided in Section 11 of the 2014 Plan.
No awards may be issued after December 1, 2016. The 2014 Plan was approved by a majority of the Company’s shareholders on
April 17, 2014. As of December 31, 2019 and 2018, options to purchase 22,768 and 32,601 common stock were outstanding to employees
and former members of the of the Board of Directors and 43,166 shares of common stock were outstanding to consultants of the Company.
On
February 10, 2015, the Board of the Company approved the Company’s 2015 Omnibus Incentive Plan (the “2015 Plan”),
which enables the Company to grant stock options, stock appreciation rights, restricted stock, restricted stock units, phantom
stock and dividend equivalent rights 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 2015 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 110% of the fair market value on the date of the grant. The 2015 Plan is to be administered by 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 2015 Plan is 5,000,000, adjusted as provided in Section 11 of the 2015 Plan.
No awards may be issued after March 11, 2017. The 2015 Plan was approved by a majority of the Company’s shareholders on
April 21, 2015. As of December 31, 2019 and 2018, options to purchase 3,700 shares of common stock were outstanding to employees.
As of December 31, 2019 and 2018, 9,788 shares of common stock were outstanding to consultants of the Company.
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 December 31, 2019 and 2018, options to purchase 239,082
and 47,540 shares of common stock were outstanding to employees, respectively. As of December 31, 2019 and 2018, 849,919
and 642,473 shares of common stock were outstanding to employees and members of the Board of Directors of the Company, respectively.
As
of December 31, 2019 and 2018, there were 3,910,999 and 4,309,987 securities available for future issuance under the 2018 Plan,
respectively.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2019 AND 2018
13.
STOCKHOLDERS’ EQUITY – CONTINUED
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
The
Series A Convertible Preferred Stock have a par value of $0.001 and are convertible into 2.5 shares of common stock for every
Series A Convertible Preferred share so long as Series C Convertible Preferred Stock is outstanding. The Series A Convertible
Preferred Stock has no redemption rights. The Series A Convertible Preferred Stock shall have no liquidation preference so long
as the Series C Convertible Preferred Stock shall be outstanding. Up until December 23, 2014 (the date of issuance of Series C
Convertible Preferred Stock), the Series A Convertible Preferred Stock had five times the vote of a share of its common stock
equivalent. At the point in time that the Series C Convertible Preferred Stock is no longer outstanding, the super voting rights
are automatically reinstated.
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.
See
Note 15 – Related Parties for additional details.
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 $825,000 during the year ended December 31, 2018.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2019 AND 2018
13.
STOCKHOLDERS’ EQUITY – CONTINUED
PREFERRED
STOCK – CONTINUED
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 year ended December 31, 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 $22,633,931 during the year ended December 31, 2018.
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.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2019 AND 2018
13.
STOCKHOLDERS’ EQUITY – CONTINUED
PREFERRED
STOCK – CONTINUED
SERIES
D CONVERTIBLE PREFERRED STOCK – CONTINUED
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 10 – Notes Payable – JMJ Agreement for additional details.
During
the year ended December 31, 2018, JMJ elected to convert 6,864 shares of Series D Convertible Preferred Stock into 2,200,000 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.
On
February 22, 2019, JMJ elected to convert 16 shares of Series D Convertible Preferred Stock into 5,128 shares of the Company’s
common stock at a conversion price of $3.12 per share.
COMMON
STOCK
During
the year ended December 31, 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 $2,136,860 during the year ended December 31, 2018.
On
August 1, 2018, the Company retired 23,529 shares of common stock previously held as collateral for a certain debt obligation.
See Note 17 – 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 year ended December 31, 2018.
During
the year ended December 31, 2018, the Company issued an aggregate of 453,972 shares of common stock with an issuance date fair
value of $954,937 for services rendered which was recognized immediately within the statement of operations during the year ended
December 31, 2018.
On
February 2, 2019, the Company issued 51,724 shares of common stock to independent board members for services rendered during 2018
and 2019 with a grant date fair value of $114,310. Such amounts were accrued for as of December 31, 2018.
On
February 19, 2019, the Company retired 8,066 shares of common stock in accordance with a settlement agreement with the former
members of 350 Green LLC. See Note 17 – Commitments and Contingencies – Litigation and Disputes for additional details.
On
February 22, 2019, the Company issued 56,948 shares of common stock to Michael J. Calise, the Company’s former CEO, in connection
with his repositioning agreement with a grant date fair value of $199,888. Such amount was previously accrued for as of December
31, 2018.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2019 AND 2018
13.
STOCKHOLDERS’ EQUITY – CONTINUED
COMMON
STOCK – CONTINUED
On
April 18, 2019, the Company issued 12,995 shares of common stock to executives with a grant date fair value of $40,155. Such amount
was previously accrued for as of December 31, 2018.
On
July 26, 2019, the Company issued 4,630 shares of restricted common stock to a consultant for services rendered with an issuance
date fair value of $12,316.
On
September 25, 2019, the Company issued 20,000 shares of common stock to consultants with a issuance date fair value of $52,800.
On
October 31, 2019, the Company issued 56,948 shares of common stock to executives with a grant date fair value of $120,160. Such
amount was previously accrued for as of December 31, 2018.
On
December 18, 2019, the Company issued 4,201 shares of restricted common stock to a consultant with an issuance date fair value
of $8,612 for services rendered which was recognized immediately within the statement of operations during the year ended December
31, 2019.
See
elsewhere within this note and Note 15 – Related Parties for additional details.
STOCK-BASED
COMPENSATION
The
Company recognized stock-based compensation expense related to common stock, stock options and warrants for the years ended December
31, 2019 and 2018 of $728,541 and $3,811,866, respectively, which is included within compensation expense on the consolidated
statement of operations. As December 31, 2019, there was $216,753 of unrecognized stock-based compensation expense that will be
recognized over the weighted average remaining vesting period of 1.0 years.
WARRANT
AND OPTION VALUATION
The
Company has computed the fair value of certain warrants and options granted using the Black-Scholes option pricing model. Option
forfeitures are estimated at the time of valuation and reduce expense ratably over the vesting period. This estimate will be adjusted
periodically based on the extent to which actual option forfeitures differ, or are expected to differ, from the previous estimate,
when it is material. The Company estimated forfeitures related to option grants at an annual rate of 0% for options granted during
the years ended December 31, 2019 and 2018. The expected term used for options issued is the estimated period of time that options
granted are expected to be outstanding. The Company utilizes the “simplified” method to develop an estimate of the
expected term of “plain vanilla” employee option grants. The Company is utilizing an expected volatility figure based
on a review of the historical volatility of the Company over a period of time equivalent to the expected life of the instrument
being valued. The risk-free interest rate was determined from the implied yields from U.S. Treasury zero-coupon bonds with a remaining
term consistent with the expected term of the instrument being valued.
STOCK
OPTIONS
In
applying the Black-Scholes option pricing model to options granted, the Company used the following assumptions:
|
|
For
the Years Ended
|
|
|
|
December
31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Risk free
interest rate
|
|
|
1.52%-1.71
|
%
|
|
|
2.75
|
%
|
Expected term (years)
|
|
|
5.00-6.00
|
|
|
|
2.50
|
|
Expected volatility
|
|
|
131.10%-138.40
|
%
|
|
|
150.10
|
%
|
Expected dividends
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2019 AND 2018
13.
STOCKHOLDERS’ EQUITY – CONTINUED
STOCK
OPTIONS – CONTINUED
During
the year ended December 31, 2018, the Company granted five-year immediately vested, options to executive officers to purchase
an aggregate of 47,450 shares of common stock with exercise prices ranging from $2.17 – $37.50 per share. The options had
an aggregate issuance date fair value of $64,790.
During the year ended December 31, 2019, the Company issued five and ten-year immediately vested options to purchase an aggregate
of 4,700 shares of common stock to the Chief Executive Officer with exercise prices ranging from $2.55 to $3.30 per share. The
options had an aggregate grant date fair value of $12,522, which was recognized immediately.
During
the year ended December 31, 2019, the Company granted options to purchase an aggregate of 72,000 shares of common stock to an
executive with an exercise price of $3.45 per share. The options vest ratably over a six-month period from the date of grant.
The options had an aggregate grant date fair value of $220,831, which will be recognized ratably over the vesting period. During
the year ended December 31, 2019, the Company recognized $147,221 of expense related to this award.
During
the year ended December 31, 2019, the Company granted five year options to purchase an aggregate of 4,467 shares of common stock
to an executive with an exercise prices ranging from $2.45-$2.63 per share. 2,313 options vested immediately and the remainder
will vest on September 28, 2020. The options had an aggregate grant date fair value of $4,467 which will be recognized ratably
over the vesting period.
During
the year ended December 31, 2019, the Company granted options to employees with an aggregate value of $122,011 for bonuses
earned during 2018. The option grants will vest in three tranches with each tranche having a six year, seven year, and eight year
contractual term. The tranches vest yearly from the date of grant. The number of options issued under this award is
42,176. The Company recognized $40,671 expense related to the award during the year ended December 31, 2019.
During
the year ended December 31, 2019, the Company granted six-year vested, options to an employee to purchase an aggregate of 260,000
shares of common stock with exercise prices and value to be determined on each grant date. One-third of the options
will be granted immediately and will vest one year from the date of grant. The second third will be granted on
the first anniversary of the first grant and will be vest one year from the date of grant. The final third will be granted on
the first anniversary of the first grant and will be vest one year from the date of grant. The Company recognized $47,902
of expense related to these awards during the year ended December 31, 2019.
A
summary of the option activity during the year ended December 31, 2019 is presented below:
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Number
of
|
|
|
Exercise
|
|
|
Life
|
|
|
Intrinsic
|
|
|
|
Shares
|
|
|
Price
|
|
|
In
Years
|
|
|
Value
|
|
Outstanding, January 1,
2019
|
|
|
105,308
|
|
|
$
|
33.10
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
191,542
|
|
|
|
2.88
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Cancelled/forfeited/expired
|
|
|
(31,300
|
)
|
|
|
44.79
|
|
|
|
|
|
|
|
|
|
Outstanding,
December 31, 2019
|
|
|
265,550
|
|
|
$
|
9.93
|
|
|
|
5.6
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable,
December 31, 2019
|
|
|
136,708
|
|
|
$
|
16.74
|
|
|
|
3.6
|
|
|
$
|
-
|
|
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2019 AND 2018
13.
STOCKHOLDERS’ EQUITY – CONTINUED
STOCK
OPTIONS - CONTINUED
The
following table presents information related to stock options at December 31, 2019:
|
|
Options
Outstanding
|
|
|
Options
Exercisable
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
Range
of
|
|
Average
|
|
|
Outstanding
|
|
|
Average
|
|
|
Exercisable
|
|
Exercise
|
|
Exercise
|
|
|
Number
of
|
|
|
Remaining
Life
|
|
|
Number
of
|
|
Price
|
|
Price
|
|
|
Options
|
|
|
In
Years
|
|
|
Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$2.17
- $13.50
|
|
|
3.10
|
|
|
|
209,042
|
|
|
|
4.19
|
|
|
|
80,200
|
|
|
$15.50
- $47.50
|
|
|
32.59
|
|
|
|
48,508
|
|
|
|
2.88
|
|
|
|
48,508
|
|
|
$50.00
- $78.00
|
|
|
50.50
|
|
|
|
8,000
|
|
|
|
1.30
|
|
|
|
8,000
|
|
|
|
|
|
|
|
|
|
265,550
|
|
|
|
3.6
|
|
|
|
136,708
|
|
STOCK
WARRANTS
See
Note 10 – Notes Payable, Note 9 – Accrued Issuable Equity, Note 12 – Fair Value Measurement, and elsewhere within
this note for additional details.
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 consolidated statement of operations during the year ended December 31, 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 year ended December 31, 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 year ended December 31, 2019:
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Number
of
|
|
|
Exercise
|
|
|
Life
|
|
|
Intrinsic
|
|
|
|
Shares
|
|
|
Price
|
|
|
In
Years
|
|
|
Value
|
|
Outstanding, January 1,
2019
|
|
|
6,837,061
|
|
|
$
|
4.64
|
|
|
|
|
|
|
|
|
|
Issued
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Cancelled/forfeited/expired
|
|
|
(1,250
|
)
|
|
|
35.00
|
|
|
|
|
|
|
|
|
|
Outstanding,
December 31, 2019
|
|
|
6,835,811
|
|
|
$
|
4.64
|
|
|
|
3.2
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable,
December 31, 2019
|
|
|
6,835,811
|
|
|
$
|
4.64
|
|
|
|
3.2
|
|
|
$
|
-
|
|
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2019 AND 2018
13.
STOCKHOLDERS’ EQUITY – CONTINUED
STOCK
WARRANTS - CONTINUED
The
following table presents information related to stock warrants at December 31, 2019:
|
|
|
Warrants
Outstanding
|
|
|
Warrants
Exercisable
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
Range
of
|
|
|
Average
|
|
|
Outstanding
|
|
|
Average
|
|
|
Exercisable
|
|
Exercise
|
|
|
Exercise
|
|
|
Number
of
|
|
|
Remaining
Life
|
|
|
Number
of
|
|
Price
|
|
|
Price
|
|
|
Warrants
|
|
|
In
Years
|
|
|
Warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$4.25
- $75.00
|
|
|
$
|
4.60
|
|
|
|
6,833,278
|
|
|
|
3.2
|
|
|
|
6,833,278
|
|
|
$100.00
- $150.00
|
|
|
|
100.26
|
|
|
|
2,533
|
|
|
|
2.6
|
|
|
|
2,533
|
|
|
|
|
|
|
|
|
|
|
6,835,811
|
|
|
|
3.2
|
|
|
|
6,835,811
|
|
14.
INCOME TAXES
The
Company is subject to U.S. federal and various state income taxes.
During the year ended December 31, 2019
and into the first quarter of fiscal 2020, the Company brought itself into compliance with respect to all federal, state and local
income and franchise tax filings through fiscal 2018. As part of the filings of the Company’s net operating loss carryforwards
of were reduced by approximately $30 million.
The
income tax provision (benefit) for the years ended December 31, 2019 and 2018 consists of the following:
|
|
For the Year Ended
|
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Federal:
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
-
|
|
|
$
|
-
|
|
Deferred
|
|
|
4,684,600
|
|
|
|
(581,300
|
)
|
|
|
|
|
|
|
|
|
|
State and local:
|
|
|
|
|
|
|
|
|
Current
|
|
|
-
|
|
|
|
-
|
|
Deferred
|
|
|
1,115,400
|
|
|
|
(127,000
|
)
|
|
|
|
5,800,000
|
|
|
|
(708,300
|
)
|
Change in valuation allowance
|
|
|
(5,800,000
|
)
|
|
|
708,300
|
|
Income tax provision (benefit)
|
|
$
|
-
|
|
|
$
|
-
|
|
No
current tax provision has been recorded for the years ended December 31, 2019 and 2018 because the Company had net operating losses
for federal and state tax purposes. The net operating loss carryovers may be subject to annual limitations under Internal Revenue
Code Section 382, and similar state provisions, should there be a greater than 50% ownership change as determined under the applicable
income tax regulations. The amount of the limitation would be determined based on the value of the company immediately prior to
the ownership change and subsequent ownership changes could further impact the amount of the annual limitation. An ownership change
pursuant to Section 382 may have occurred in the past or could happen in the future, such that the NOLs available for utilization
could be significantly limited. The Company will perform a Section 382 analysis in the future. The related decrease in
the deferred tax asset was offset by the decrease in valuation allowance.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2019 AND 2018
14.
INCOME TAXES – CONTINUED
A
reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows:
|
|
For the Year Ended
|
|
|
|
December
31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Tax benefit at federal statutory rate
|
|
|
(21.0
|
)%
|
|
|
(21.0
|
)%
|
State income taxes, net of federal benefit
|
|
|
(5.0
|
)%
|
|
|
(5.0
|
)%
|
Permanent differences
|
|
|
|
|
|
|
|
|
Derivative liabilities
|
|
|
0.0
|
%
|
|
|
22.9
|
%
|
Other
|
|
|
0.8
|
%
|
|
|
(3.5
|
)%
|
Tax credits
|
|
|
0.2
|
%
|
|
|
(1.4
|
)%
|
True-up and deferred adjustment
|
|
|
85.1
|
%
|
|
|
0.0
|
%
|
Change in valuation allowance
|
|
|
(60.1
|
)%
|
|
|
8.0
|
%
|
Effective income tax rate
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
The
Company has determined that a valuation allowance for the entire net deferred tax asset is required. A valuation allowance is
required if, based on the weight of evidence, it is more likely than not that some or the entire portion of the deferred tax asset
will not be realized. After consideration of all the evidence, both positive and negative, management has determined that a full
valuation allowance is necessary to reduce the deferred tax asset to zero, the amount that will more likely not be realized.
The disaggregation of the Company’s
domestic and foreign pre-tax loss for the years ended December 31, 2019 and 2018 is as follows:
|
|
For the Year Ended
|
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
U.S.
|
|
$
|
(9,433,649
|
)
|
|
$
|
(3,390,213
|
)
|
Foreign
|
|
|
(214,851
|
)
|
|
|
(30,990
|
)
|
Total
|
|
$
|
(9,648,500
|
)
|
|
$
|
(3,421,203
|
)
|
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2019 AND 2018
14.
INCOME TAXES – CONTINUED
The
tax effects of temporary differences that give rise to deferred tax assets and liabilities are presented below:
|
|
For The Years Ended
|
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Deferred Tax Assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
20,650,000
|
|
|
$
|
26,073,500
|
|
Stock-based compensation
|
|
|
240,700
|
|
|
|
-
|
|
Accruals
|
|
|
129,400
|
|
|
|
296,300
|
|
Goodwill
|
|
|
728,500
|
|
|
|
1,586,300
|
|
Interest expense
|
|
|
-
|
|
|
|
233,700
|
|
Intangible assets
|
|
|
299,800
|
|
|
|
245,000
|
|
Inventory
|
|
|
178,900
|
|
|
|
53,000
|
|
Allowance for doubtful accounts
|
|
|
18,700
|
|
|
|
22,000
|
|
Capital loss
|
|
|
39,200
|
|
|
|
-
|
|
Tax credits
|
|
|
508,100
|
|
|
|
536,600
|
|
Gross deferred tax assets
|
|
|
22,793,300
|
|
|
|
29,046,400
|
|
|
|
|
|
|
|
|
|
|
Deferred Tax Liabilities:
|
|
|
|
|
|
|
|
|
Alternative fuel credits
|
|
|
(32,100
|
)
|
|
|
-
|
|
Fixed assets
|
|
|
(43,200
|
)
|
|
|
(528,400
|
)
|
Gross deferred tax liabilities
|
|
|
(75,300
|
)
|
|
|
(528,400
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
|
22,718,000
|
|
|
|
28,518,000
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance
|
|
|
(22,718,000
|
)
|
|
|
(28,518,000
|
)
|
|
|
|
|
|
|
|
|
|
Deferred tax asset, net of valuation allowance
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Changes in valuation allowance
|
|
$
|
(5,800,000
|
)
|
|
$
|
708,300
|
|
As of December 31, 2019, the Company had net operating loss carry
forwards for federal and state income tax purposes of approximately $79.4 million, of which, $62.3 million may be used to offset
future taxable income through 2037 and the remaining $17.1 million of net operating loss carry forwards incurred in 2019 and 2018
do not have an expiration date.
15.
RELATED PARTIES
See
Note 10 - Notes Payable, Note 13 – Stockholders’ Equity and Note 17 – Commitments and Contingencies for additional
details.
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 consolidated statements of operations during the year ended December 31, 2018 with a corresponding
credit to additional paid-in capital.
LETTER
AGREEMENTS
On
March 22, 2018 the Company issued 550,000 shares of common stock pursuant to certain letter agreements. (See Note 12 – Stockholder’s
Equity for additional details.)
On
January 4, 2018, the Company and both Mr. Farkas and Mr. Feintuch have agreed to extend the expiration dates of their respective
agreements from December 29, 2017 to February 14, 2018.
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.
TRANSACTIONS
WITH PAISADES CAPITAL MANAGEMENT LLC
Mr.
Engel is currently a consultant to Palisades Capital Management LLC which serves as an investment advisor with regard to our marketable
securities portfolio. For the years ended December 31, 2019 and 2018, the Company paid Palisades Capital Management LLC fees of
$29,057 and $0, respectively.
JOINT
VENTURE
The
Company and a group of three Cyprus entities entered into a shareholders’ agreement on February 11, 2019, pertaining to
the parties’ respective shareholdings in a new joint venture entity, Blink Charging Europe Ltd. (the “Entity”),
that was formed under the laws of Cyprus on the same date. The Company owns 40% of the Entity while the other three entities own
60% of the Entity. The Entity currently owns 100% of a Greek subsidiary, Blink Charging Hellas SA (“Hellas”), which
started operations in the Greek EV market. There are currently no plans for the Company to make any capital contributions or investments.
During the year ended December 31, 2019, the Company recognized sales of approximately $42,000 to Hellas and as of December 31,
2019, the Company had a receivable from Hellas of approximately $42,000.
16.
LEASES
OPERATING
LEASES
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. 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.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2019 AND 2018
16.
LEASES – CONTINUED
OPERATING
LEASES – CONTINUED
On
March 5, 2019, the Company entered into a 26-month lease agreement for an additional 1,241 square feet of office space in its
current Miami Beach office building, beginning April 1, 2019 and ending May 31, 2021. The tenant and landlord have the option
to cancel the contract after the first six months with 90 day’s written notice. The lease does not contain an option to
extend past the lease term.
On
November 7, 2019 the Company entered into a 18-month lease agreement for an additional 1,600 square feet of office space in its
current Miami Beach office building, beginning December 1, 2019 and ending May 31, 2021. The tenant and landlord have the option
to cancel the contract after the first six months with 90 day’s written notice. The lease does not contain an option to
extend past the lease term.
As
of December 31, 2019, the Company had no leases that were classified as a financing lease. As of December 31, 2019, the Company
did not have additional operating and financing leases that have not yet commenced.
Total
operating lease expenses for the year ended December 31, 2019 and 2018 was $409,419 and $264,014, respectively, and is
recorded in other operating expenses on the consolidated statements of operations. Operating lease expenses consist of rent
expense, CAM adjustments and other expenses.
Supplemental
cash flows information related to leases was as follows:
|
|
For
the Year Ended
|
|
|
|
December
31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Cash paid for amounts
included in the measurement of lease liabilities:
|
|
|
|
|
|
|
|
|
Operating
cash flows from operating leases
|
|
$
|
157,672
|
|
|
$
|
83,144
|
|
|
|
|
|
|
|
|
|
|
Right-of-use assets
obtained in exchange for lease obligations:
|
|
|
|
|
|
|
|
|
Operating
leases
|
|
$
|
143,339
|
|
|
$
|
330,381
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Remaining
Lease Term
|
|
|
|
|
|
|
|
|
Operating
leases
|
|
|
1.42
|
|
|
|
2.58
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Discount
Rate
|
|
|
|
|
|
|
|
|
Operating
leases
|
|
|
6.0
|
%
|
|
|
6.0
|
%
|
Future
minimum payments under non-cancellable leases as of December 31, 2019 were as follows:
For
the Years Ending December 31,
|
|
Amount
|
|
|
|
|
|
2020
|
|
|
215,463
|
|
2021
|
|
|
90,888
|
|
Total
future minimum lease payments
|
|
|
306,351
|
|
Less:
imputed interest
|
|
|
(30,690
|
)
|
Total
|
|
$
|
275,661
|
|
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2019 AND 2018
17.
COMMITMENTS AND CONTINGENCIES
PATENT
LICENSE AGREEMENT
On
March 29, 2012, the Company, as licensee (the “Licensee”) entered into an exclusive patent license agreement with
the Executive Chairman of the Board and Balance Holdings, LLC (an entity controlled by the Executive Chairman) (collectively,
the “Licensor”), whereby the Company agreed to pay a royalty of 10% of the gross profits received by the Company from
commercial sales and/or use of two provisional patent applications, one relating to an inductive charging parking bumper and one
relating to a process which allows multiple EVs to plug into an EV charging station simultaneously and charge as the current becomes
available.
On
March 11, 2016, the Licensee and the Licensor entered into an agreement related to the March 29, 2012 patent license agreement.
The parties acknowledged that the Licensee has paid a total of $8,525 in registration and legal fees for the U.S. Provisional
Patent Application No. 61529016 (the “Patent Application”) (related to the inductive charging parking bumper) to date.
Effective March 11, 2016, the patent license agreement, solely with respect to the Patent Application and the parties’ rights
and obligations thereto, was terminated. The Executive Chairman of the Board agreed to be solely responsible for all future costs
and fees associated with the prosecution of the patent application. In the event the Patent Application is successful, the Executive
Chairman of the Board shall grant a credit to the Licensee in the amount of $8,525 to be applied against any outstanding amount(s)
owed to him. If the Licensee does not have any outstanding payment obligations to the Executive Chairman of the Board at the time
the Patent Application is approved, the Executive Chairman of the Board shall remit the $8,525 to the Licensee within twenty (20)
days of the approval. The parties agreed to a mutual release of any claims associated with the patent license agreement. As of
December 31, 2019, the Company has not paid nor incurred any royalty fees related to this patent license agreement.
TAXES
During
the third quarter of 2019, the Company filed its Federal corporate income tax returns for the years ended December 31, 2014, 2015,
2016, 2017 and 2018. The Company has sustained losses for the years ended December 31, 2014, 2015, 2016, 2017, and 2018. The Company
has determined that no tax liability, other than required minimums and related interest and penalties, has been incurred. The
Company expects to be current with its state and local tax filings in the first calendar quarter of 2020.
LITIGATION
AND DISPUTES
In July 2017, the Company was sued by Zwick
and Banyai PLLC and Jack Zwick. The case alleges a breach of contract and unjust enrichment for failure to pay invoices in the
aggregate amount of $53,069 for services rendered, plus interest and costs. The Company is one of six defendants in the
case.
On
October 26, 2018, Michael Bernstein, Esq. filed amended affirmative defenses on behalf of the Company. Following that, there was
no record activity in the case and on September 20, 2019, the Court entered its Notice of Lack of Prosecution and Order to Appear
for Hearing on November 19, 2019. When Plaintiffs failed to appear for the hearing, the Court dismissed the case. A couple of
weeks later, Plaintiffs filed a motion to vacate the dismissal, asserting that they had moved offices in June of 2019, and were
never provided notice of the hearing at their new address. At the January 23, 2020 hearing on Plaintiffs’ motion to vacate,
the Court vacated the dismissal, over the objections of counsel, and the case is once again pending.
On
January 31, 2020, the Company’s new attorney for this matter, Mr. Yechezkel Rodal, Esq. filed his notice of appearance
and took over as defense counsel. On February 11, 2020, Jack Zwick and Zwick & Banyai PLLC each served a Request for Production
of Documents on the Company, and Zwick & Banyai PLLC served a set of 14 Interrogatories. The Company’s responses to
the discovery requests are due on April 20, 2020.
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.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2019 AND 2018
17.
COMMITMENTS AND CONTINGENCIES – CONTINUED
LITIGATION
AND DISPUTES – CONTINUED
350
Green, LLC – Continued
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.
On
December 31, 2018, the Company entered into a modification of the Settlement Agreement and Mutual Release dated August 21, 2015
with the former members of 350 Green LLC whereby the members would return to the Company 8,064 common shares and would also cancel
the outstanding note (“Note”) issued to the members with a balance of $360,000, both, initially issued in conjunction
with the acquisition of 350 Green LLC in exchange for $50,000. The Company paid the $50,000 as of December 31, 2018. The Note
and common shares were returned and canceled in January 2019. The Company recorded a gain of $310,000 during the year ended December
31, 2019 which was included in other income and expense on the consolidated statement of operations.
Repositioning
of Executive Employment Agreement
On
February 13, 2018, the Company and Genweb2 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 $116,999 owed to Genweb2 as follows: (i) the
Company will pay $48,500 in cash out of the proceeds of the public offering; and (ii) in satisfaction of the remaining liability
of $48,500, the Company will issue shares of restricted common stock at a price equal to 80% of the per unit price in the public
offering. On February 16, 2018, the Company paid $48,500 in cash. On March 16, 2018, the Company issued 17,132 shares of common
stock.
On
February 13, 2018, the Company and Dickinson Wright PLLC (“Dickinson Wright”) 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
$88,845 owed to Dickinson Wright as follows: (i) the Company will pay $88,845 in cash out of the proceeds of the public offering.
On February 16, 2018, the Company paid the full amount owed to Dickinson Wright.
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:
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the VP of Sales will be entitled to receive
a base salary of $10,000 per month as well as commissions on sales;
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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;
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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
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all previously outstanding vested options may
be exercised in accordance with their terms and all previously outstanding unvested options shall be forfeited.
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As
of December 31, 2018, there was $145,000 of vested restricted common stock included within accrued issuable equity. During the
year ended December 31, 2019, the Company issued 56,948 shares is satisfaction of this obligation. See Note 13- Stockholders’
Equity for additional details.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2019 AND 2018
18.
SUBSEQUENT EVENTS
EMPLOYMENT
AGREEMENTS
DONALD
ENGEL EMPLOYMENT AGREEMENT
Effective
January 9, 2020, Donald Engel, a current member of the Company’s Board of Directors, entered into an employment agreement
with the Company. The employment agreement with Mr. Engel extends for a term expiring on January 9, 2021, subject to automatic
renewal for two additional one-year periods if not otherwise previously terminated by either party. Pursuant to the employment
agreement. The employment agreement provides that Mr. Engel will receive a base salary at an annual rate of $175,000 for services
rendered in such position. In addition, he will be eligible to earn stock options to purchase up to 700,000 shares of our common
stock, in increments of 140,000 options on each occasion that he Company executes an agreement for the sale or deployment of electric
vehicle charging stations or ancillary eco-friendly energy products with a customer he has introduced to the Company. The stock
options will have an exercise price equal to the closing market price of our common stock immediately prior to the issuance date,
expire five years after the issuance date and be subject to the terms of the Company’s 2018 Incentive Compensation Plan.
Subsequent to December 31, 2019, the Company granted options to purchase an aggregate of 140,000 shares of common stock at
an exercise price of $2.05 per share to the employee.
The
employment agreement provides for termination by the Company for cause upon conviction of a felony, misconduct resulting in significant
economic or reputational harm to the Company, any act of fraud or a material breach of his obligations to us. Upon a change of
control of the Company, Mr. Engel’s employment will terminate and he will be entitled to all unpaid and outstanding salary
and expenses due through the termination date. The employment agreement also contains covenants restricting Mr. Engel from engaging
in any activities competitive with the Company’s business during the term of the employment agreement and two years thereafter,
and prohibiting him from disclosure of confidential information regarding us at any time. Mr. Engel will continue to be a member
of the Company’s Board but will no longer qualify as an “independent director” under Nasdaq rules.
MICHAEL
P. RAMA EMPLOYMENT AGREEMENT
In
February 2020, the Company entered into an Employment Offer Letter with Mr. Rama. Pursuant to the Offer Letter, Mr. Rama agreed
to devote his full business efforts and time to the Company as its Chief Financial Officer. The Offer Letter extends for a term
expiring on February 10, 2022 and is automatically renewable for an additional one-year period. The Offer Letter provides that
Mr. Rama is entitled to receive an annual base salary of $300,000, payable in regular installments in accordance with the Company’s
general payroll practices. Mr. Rama will be eligible for an annual performance cash bonus of 25% of his base salary based on the
satisfaction of certain key performance indicators set with the Board’s Compensation Committee. Mr. Rama will be entitled
to receive equity awards under the Company’s 2018 Incentive Compensation Plan with an aggregate annual award value equal
to 50% of his base salary in the form of restricted stock and stock options. Mr. Rama has also received a $50,000 cash signing
bonus.
If
Mr. Rama’s employment is terminated by the Company other than for Cause (which includes willful material misconduct and
willful failure to materially perform his responsibilities to the Company), he is entitled to receive severance equal to up to
12 months of his base salary. If there is a buy-out or a “change of control,” Mr. Rama will also be entitled to obtain
his base salary for a period of 12 months as a severance payment. Mr. Rama is entitled to vacation and other employee benefits
in accordance with the Company’s policies.
PREFERRED STOCK CONVERSION
Subsequent to December 31, 2019, JMJ elected
to convert 5,125 shares of Series D Convertible Preferred Stock into 1,642,628 shares of the Company’s common stock at a
conversion price of $3.12 per share.
18.
SUBSEQUENT EVENTS – CONTINUED
JAMES CHRISTODOULOU TERMINATION
Effective March 13, 2020, the Company terminated
the employment of the Company’s President and Chief Operating Officer, James Christodoulou. No amounts are owed to Mr. Christodoulou
pursuant to the terms of his employment letter. The termination was unrelated to the Company’s financial reporting or disclosure
controls and procedures.
LITIGATION AND DISPUTES
On March 26, 2020, James Christodoulou,
the former President and Chief Operating Officer of the Company, filed a Complaint in the Miami-Dade County Court, State
of Florida, James Christodoulou vs. Blink Charging Co. et al. The Complaint asserts claims against the Company, as
well as Michael Farkas, Aviv Hilo and Yechiel Baron. Mr. Farkas is Chairman of the Board and Chief Executive Officer. Messrs.
Hilo and Baron are the Company’s General Counsel and Assistant General Counsel, respectively. The Complaint asserts
claims for breach of contract in connection with Mr. Christodoulou’s termination by the Company in March 2020, as well as
claims under Florida state law for alleged retaliatory termination and slander. Among other things, Mr. Christodoulou asserts
that the Company erred in terminating his employment for cause. The Complaint seeks unspecified monetary damages but alleges that
such damages exceed $1 million. The Company intends to defend the claims vigorously.