2.
GOING CONCERN AND MANAGEMENT’S PLANS
As
of March 31, 2020, the Company had cash, marketable securities, working capital and an accumulated deficit of $1,343,978, $1,952,510,
$2,158,590, and $172,466,081, respectively. During the three months ended March 31, 2020, the Company incurred a net loss
of $2,961,100. During the three months ended March 31, 2020, the Company used cash in operating activities of $3,413,141. 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 is currently funding its operations on a month-to-month basis. Since April 17,
2020 and through May 12, 2020, the Company sold 87,505 shares of common stock under an “at-the-market”
equity offering program for aggregate gross proceeds of approximately $150,000 and received loan proceeds under
the Paycheck Protection Program of approximately $856,000. See Note 12 – Subsequent Events for details.
Since inception, the Company’s operations
have primarily been funded through proceeds received in equity and debt financings. Although management believes that the Company
generally has access to capital resources, the Company continues to evaluate financing opportunities. There is no assurance that
the Company will be able to obtain funds due to current economic uncertainty or on commercially acceptable terms. 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.
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 condensed 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 condensed 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
Since
the Annual Report for the year ended December 31, 2019, there have been no material changes to the Company’s significant
accounting policies, except as disclosed in this note.
CASH
The
Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents
in the condensed 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 March 31, 2020, the
Company had cash balances in excess of FDIC insurance limits of $1,039,663.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
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.
The
following summarizes our investments as of March 31, 2020 and December 31, 2019:
|
|
March
31, 2020
|
|
|
December
31, 2019
|
|
|
|
|
|
|
|
|
Short-term
investments:
|
|
|
|
|
|
|
|
|
Available-
for-sale investments
|
|
$
|
1,952,510
|
|
|
$
|
3,150,332
|
|
The
following is a summary of the unrealized gains, losses, and fair value by investment type as of March 31, 2020 and December 31,
2019:
|
|
March
31, 2020
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair
Value
|
|
Fixed
income
|
|
$
|
2,053,252
|
|
|
$
|
8,005
|
|
|
$
|
(108,747
|
)
|
|
$
|
1,952,510
|
|
|
|
December
31, 2019
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair
Value
|
|
Fixed
income
|
|
$
|
2,967,159
|
|
|
$
|
183,173
|
|
|
$
|
-
|
|
|
$
|
3,150,332
|
|
REVENUE
RECOGNITION
The
Company recognizes revenue primarily from four 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. Other revenues is also comprised of sales related
to alternative fuel credits.
|
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
REVENUE
RECOGNITION - CONTINUED
The
following table summarizes revenue recognized under ASC 606 in the condensed consolidated statements of operations:
|
|
For
The Three Months Ended
|
|
|
|
March
31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Revenues
- Recognized at a Point in Time:
|
|
|
|
|
|
|
|
|
Charging
service revenue - company-owned charging stations
|
|
$
|
319,624
|
|
|
$
|
324,895
|
|
Product
sales
|
|
|
777,423
|
|
|
|
103,204
|
|
Other
|
|
|
133,619
|
|
|
|
51,599
|
|
Total
Revenues - Recognized at a Point in Time
|
|
|
1,230,666
|
|
|
|
479,698
|
|
|
|
|
|
|
|
|
|
|
Revenues
- Recognized Over a Period of Time:
|
|
|
|
|
|
|
|
|
Network
and other fees
|
|
|
63,619
|
|
|
|
90,978
|
|
Total
Revenues - Recognized Over a Period of Time
|
|
|
63,619
|
|
|
|
90,978
|
|
|
|
|
|
|
|
|
|
|
Total
Revenue Under ASC 606
|
|
$
|
1,294,285
|
|
|
$
|
570,676
|
|
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 goods or services, the Company records deferred revenue until the performance obligations
are satisfied.
As
of March 31, 2020, the Company had $132,671 related to contract liabilities where performance obligations have not yet been satisfied,
which has been included within deferred revenue on the condensed consolidated balance sheet as of March 31, 2020. The Company
expects to satisfy its remaining performance obligations for network fees and warranty revenue and recognize the revenue within
the next twelve months.
During
the three months ended March 31, 2020, the Company recognized $63,621 of revenues related to network fees and warranty contracts,
which were included in deferred revenues as of December 31, 2019. During the three months ended March 31, 2020, there was no revenue
recognized from performance obligations satisfied (or partially satisfied) in previous periods.
Grants
and rebates which are not within the scope of ASC 606, pertaining to revenues and periodic expenses are recognized as income when
the related revenue and/or periodic expense are recorded. Grants and rebates related to EV charging stations and their installation
are deferred and amortized in a manner consistent with the related depreciation expense of the related asset over their useful
lives over the useful life of the charging station. During the three months ended March 31, 2020 and 2019, the Company recorded
$4,579 and $6,714, respectively, related to grant and rebate revenue. At March 31, 2020 and December 31, 2019, there was $79,091
and $83,670, respectively, of deferred grant and rebate revenue to be amortized.
CONCENTRATIONS
As
of March 31, 2020 and December 31, 2019, accounts receivable from a significant customer was 11% and 10% of accounts receivable,
respectively. During the three months ended March 31, 2019, sales to a significant customer represented 12% of the Company’s
total revenues. During the three months ended March 31, 2020, sales to another significant customer represented 33% of total revenues.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 Three Months Ended
|
|
|
|
March
31,
|
|
|
|
2020
|
|
|
2019
|
|
Convertible
preferred stock
|
|
|
-
|
|
|
|
1,642,628
|
|
Warrants
|
|
|
6,840,049
|
|
|
|
6,837,061
|
|
Options
|
|
|
382,844
|
|
|
|
105,308
|
|
Unvested
restricted common stock
|
|
|
110,160
|
|
|
|
-
|
|
Total
potentially dilutive shares
|
|
|
7,333,053
|
|
|
|
8,584,997
|
|
INCOME
TAXES
On
March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”).
The CARES Act, amongst other things, includes provisions relating to refundable payroll tax credits, deferment of employer side
social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net
interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. Under
ASC 740, the effects of new legislation are recognized upon enactment. Accordingly, the CARES Act is effective beginning in the
quarter ended March 31, 2020. The Company is currently evaluating how provisions in the CARES Act will impact its condensed consolidated
financial statements, however, it does not currently believe that such provisions will have a material impact on the Company’s
condensed consolidated financial statements.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4.
PREPAID EXPENSES AND OTHER CURRENT ASSETS
As
of March 31, 2020, prepaid expenses and other current assets primarily consisted of alternative fuel credits of $553,177. As of
December 31, 2019, alternative fuel credits was $476,992.
As
of March 31, 2020, the Company had a remaining purchase commitment of $437,808, which will become payable upon the supplier’s
delivery of the charging stations. The purchase commitments were made primarily for future sales and deployments of these charging
stations.
5.
ACCRUED EXPENSES
SUMMARY
Accrued
expenses consist of the following:
|
|
March
31, 2020
|
|
|
December
31, 2019
|
|
|
|
(unaudited)
|
|
|
|
|
Accrued
host fees
|
|
$
|
111,597
|
|
|
$
|
108,683
|
|
Accrued
professional, board and other fees
|
|
|
89,276
|
|
|
|
40,518
|
|
Accrued
wages
|
|
|
258,100
|
|
|
|
295,250
|
|
Warranty
payable
|
|
|
23,000
|
|
|
|
12,000
|
|
Accrued
income, property and sales taxes payable
|
|
|
423,761
|
|
|
|
417,669
|
|
Other
accrued expenses
|
|
|
11,231
|
|
|
|
23,428
|
|
Total
accrued expenses
|
|
$
|
916,965
|
|
|
$
|
897,548
|
|
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
three months ended March 31, 2020, the change in reserve was approximately $11,000. Warranty expenses for the three months ended
March 31, 2020 and 2019 were $114,909 and $88,872, respectively, which has been included within cost of revenues on the condensed
consolidated statements of operations. As of March 31, 2020 and December 31, 2019, the Company recorded a warranty liability of
$23,000 and $12,000, 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 as incurred for chargers
it owns and deploys at host locations. The Company estimates an approximate cost of $254,000 to repair those deployed chargers
which it owns as of March 31, 2020.
6.
ACCRUED ISSUABLE EQUITY
Accrued
issuable equity consists of the following:
|
|
March
31, 2020
|
|
|
December
31, 2019
|
|
|
|
(unaudited)
|
|
|
|
|
Common
stock
|
|
$
|
203,269
|
|
|
$
|
252,584
|
|
Warrants
|
|
|
4,581
|
|
|
|
5,102
|
|
Total
accrued issuable equity
|
|
$
|
207,850
|
|
|
$
|
257,686
|
|
See
Note 8 – Stockholders’ Equity for additional information.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
7.
FAIR VALUE MEASUREMENT
Assumptions
utilized in the valuation of Level 3 liabilities are described as follows:
|
|
For
the Three Months Ended
|
|
|
|
March
31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Risk-free
interest rate
|
|
|
0.17
|
%
|
|
|
2.40
|
%
|
Contractual
term (years)
|
|
|
1.00
|
|
|
|
1.00
|
|
Expected
volatility
|
|
|
78
|
%
|
|
|
140
|
%
|
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:
Warrants
Payable
|
|
|
|
|
Beginning
balance as of January 1, 2020
|
|
$
|
5,102
|
|
Change
in fair value of warrants payable
|
|
|
(521
|
)
|
Ending
balance as of March 31, 2020
|
|
$
|
4,581
|
|
Assets
and liabilities measured at fair value on a recurring or nonrecurring basis are as follows:
|
|
March
31, 2020
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Alternative
fuel credits
|
|
$
|
-
|
|
|
$
|
553,177
|
|
|
$
|
-
|
|
|
$
|
553,177
|
|
Marketable
securities
|
|
|
1,952,510
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,952,510
|
|
Total
assets
|
|
$
|
1,952,510
|
|
|
$
|
553,177
|
|
|
$
|
-
|
|
|
$
|
2,505,687
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
payable
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
4,581
|
|
|
$
|
4,581
|
|
Total
liabilities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
4,581
|
|
|
$
|
4,581
|
|
|
|
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
|
|
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
8.
STOCKHOLDERS’ EQUITY
PREFERRED
STOCK
During
the three months ended March 31, 2020, the holder 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. The Company determined that the
Series D Convertible Preferred Stock did not include a beneficial conversion feature.
STOCK-BASED
COMPENSATION
The
Company recognized stock-based compensation expense related to common stock, stock options and warrants for the three months ended
March 31, 2020 and 2019 of $227,361 and $145,005, respectively, which is included within compensation expense on the condensed
consolidated statements of operations. As of March 31, 2020, there was $264,959 of unrecognized stock-based compensation expense
that will be recognized over the weighted average remaining vesting period of 0.63 years.
9.
RELATED PARTY TRANSACTIONS
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 three months ended March 31, 2020 and 2019, the Company paid Palisades Capital Management LLC fees
of $7,897 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 three months ended March 31, 2020 and 2019, the Company recognized sales of approximately $98,000 and $0, respectively,
to Hellas and as of March 31, 2020, the Company had a receivable from Hellas of approximately $72,000.
10.
LEASES
OPERATING
LEASES
As
of March 31, 2020, the Company had no leases that were classified as a financing lease. As of March 31, 2020, the Company did
not have additional operating and financing leases that have not yet commenced.
Total
operating lease expenses for the three months ended March 31, 2020 and 2019 were $113,599 and $69,941, respectively, and are recorded
in other operating expenses on the condensed consolidated statement of operations.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
10.
LEASES – CONTINUED
Supplemental
cash flows information related to leases was as follows:
|
|
For
The Three Months Ended
|
|
|
|
March
31,
|
|
|
|
2020
|
|
|
2019
|
|
Cash
paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
|
|
Operating
cash flows from operating leases
|
|
|
|
|
|
|
|
|
|
|
$
|
52,743
|
|
|
$
|
30,400
|
|
Right-of-use
assets obtained in exchange for lease obligations:
|
|
|
|
|
|
|
|
|
Operating
leases
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Weighted
Average Remaining Lease Term
|
|
|
|
|
|
|
|
|
Operating
leases
|
|
|
|
|
|
|
|
|
|
|
|
1.41
|
|
|
|
2.32
|
|
Weighted
Average Discount Rate
|
|
|
|
|
|
|
|
|
Operating
leases
|
|
|
6.0
|
%
|
|
|
6.0
|
%
|
Future
minimum payments under non-cancellable leases as of March 31, 2020 were as follows:
For
the Years Ending December 31,
|
|
|
Amount
|
|
|
|
|
|
|
|
2020
|
|
|
$
|
156,274
|
|
|
2021
|
|
|
|
86,819
|
|
|
Total
future minimum lease payments
|
|
|
|
243,092
|
|
|
Less:
imputed interest
|
|
|
|
(13,510
|
)
|
|
Total
|
|
|
$
|
229,582
|
|
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
11.
COMMITMENTS AND CONTINGENCIES
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.
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, the Company filed amended affirmative defenses. 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 filed a 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 May 18, 2020.
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 terminated his employment without cause and in retaliation for his alleged plan to disclose that Company executives
had engaged in alleged “questionable business practices”. The Complaint seeks unspecified monetary damages but alleges
that such damages exceed $1 million. The Company intends to defend the claims vigorously.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
11.
COMMITMENTS AND CONTINGENCIES– CONTINUED
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 the 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. On January 20, 2020, the Company granted immediately vested options to purchase an aggregate of 140,000 shares of common
stock at an exercise price of $2.05 per share to the employee with a grant date fair value of $252,309 which was recognized during
the three months ended March 31, 2020.
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.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
12.
SUBSEQUENT EVENTS
The Company has evaluated events that have
occurred after the balance sheet and through the date the financial statements were issued. Based upon the evaluation, the Company
did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the financial
statements, except as disclosed below.
BRENDAN
S. JONES EMPLOYMENT AGREEMENT
In
April 2020, the Company entered into an employment offer letter with Mr. Jones (the “Offer Letter”). Pursuant to the
Offer Letter, Mr. Jones agreed to devote his full business efforts and time to the Company as its Chief Operating Officer. The
Offer Letter extends for a two-year term expiring on April 20, 2022 and is automatically renewable for an additional one-year
period unless the Company provides notice of non-renewable prior to the initial termination date. The Offer Letter provides that
Mr. Jones is entitled to receive an annual base salary of $350,000, payable in regular installments in accordance with the Company’s
general payroll practices. Mr. Jones will be eligible for an annual performance cash bonus of 40% of his base salary based on
the satisfaction of certain key performance indicators set with the Board’s Compensation Committee. Mr. Jones will also
receive a cash signing bonus of $55,000 and an equity signing bonus of $70,000 worth of the Company’s common stock, which
shares will be granted and vested on April 20, 2021 (provided he is not terminated for Cause).
If
Mr. Jones’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 12 months
of his base salary or such lesser number of months actually worked. If there is a buy-out or a “change of control,”
Mr. Jones will be entitled to obtain his base salary for a period of 12 months as a severance payment. Mr. Jones is also entitled
to relocation assistance in an amount of up to $35,000, a car allowance of up to $1,000 per month, inclusive of insurance, and
other employee benefits in accordance with the Company’s policies.
AT-THE-MARKET
OFFERING
On
April 17, 2020, the Company entered into a sales agreement (“Sales Agreement”) with Roth Capital Partners, LLC (the
“Agent”) to conduct an “at-the-market” equity offering program (the “ATM”), pursuant to which
the Company may issue and sell from time to time shares of its common stock, having an aggregate offering price of up to $20,000,000
(the “Shares”) through the Agent.
Subject
to the terms and conditions of the Sales Agreement, the Agent will use its commercially reasonable efforts to sell the Shares
from time to time, based upon the Company’s instructions. The Company has no obligation to sell any of the Shares and may
at any time suspend sales under the Sales Agreement or terminate the Sales Agreement in accordance with its terms. The Company
has provided the Agent with customary indemnification rights, and the Agent will be entitled to an aggregate fixed commission
of 3.0% of the gross proceeds from Shares sold.
Sales
of the Shares under the Sales Agreement will be made in transactions that are deemed to be “at-the-market offerings”
as defined in Rule 415 under the Securities Act of 1933, as amended, including sales made by means of ordinary brokers’
transactions, including on the Nasdaq Capital Market, at market prices or as otherwise agreed to with the Agent.
A
“shelf” registration statement on Form S-3 for the Shares was filed with the SEC, which became effective on September
16, 2019, and a prospectus supplement thereto was filed with the SEC on April 17, 2020.
Since
April 17, 2020 and through May 12, 2020, the Company sold 87,505 shares of common stock under an “at-the-market”
equity offering program for aggregate gross proceeds of approximately $150,000 under the ATM.
COMMON
STOCK ISSUANCES
During
April 2020, the Company issued 47,542 shares of common stock with an aggregate issuance date fair value of $87,000 as compensation
to certain officers of the Company.
STOCK
OPTION ISSUANCES
During
April 2020, the Company granted options to purchase an aggregate of 110,832 shares of common stock with an exercise price of $2.01
per share as compensation to an officer of the Company of the Company.
During
April 2020, the Company granted options to purchase an aggregate of 49,585 shares of common stock with an exercise price of $1.83
per share as compensation to an officer of the Company of the Company.
PAYCHECK
PROTECTION PLAN LOAN
On
May 7, 2020, the Company received loan proceeds in the amount of approximately $856,000 under the Paycheck Protection Program
(“PPP”). The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”),
provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying
business. The loans and accrued interest are forgivable after eight weeks as long as the borrower uses the loan proceeds for eligible
purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness will
be reduced if the borrower terminates employees or reduces salaries during the eight-week period.
The
unforgiven portion of the PPP loan is payable over two years at an interest rate of 1%, with a deferral of payments for the first
six months. The Company intends to use the proceeds for purposes consistent with the PPP. While the Company currently believes
that its use of the loan proceeds will meet the conditions for forgiveness of the loan, there can be no assurance that the Company
will not take actions that could cause the Company to be ineligible for forgiveness of the loan, in whole or in part.
ITEM
2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
Special
Note Regarding Forward-Looking Information
The
following discussion and analysis of the results of operations and financial condition of Blink Charging Co. together its subsidiaries,
“Blink” and the “Company”) as of March 31, 2020 and for the three months ended March 31, 2020 and 2019
should be read in conjunction with our financial statements and the notes to those financial statements that are included elsewhere
in this Quarterly Report on Form 10-Q. References in this Management’s Discussion and Analysis of Financial Condition and
Results of Operations to “us”, “we”, “our” and similar terms refer to Blink. This Quarterly
Report contains forward-looking statements as that term is defined in the federal securities laws. The events described in forward-looking
statements contained in this Quarterly Report may not occur. Generally, these statements relate to business plans or strategies,
projected or anticipated benefits or other consequences of our plans or strategies, projected or anticipated benefits from acquisitions
to be made by us, or projections involving anticipated revenues, earnings or other aspects of our operating results. The words
“may,” “will,” “expect,” “believe,” “anticipate,” “project,”
“plan,” “intend,” “estimate,” and “continue,” and their opposites and similar
expressions, are intended to identify forward-looking statements. We caution you that these statements are not guarantees of future
performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond our control,
which may influence the accuracy of the statements and the projections upon which the statements are based. Factors that may affect
our results include, but are not limited to, the risks and uncertainties set forth under Item 1A. Risk Factors in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2019, as discussed elsewhere in this Quarterly Report on Form 10-Q
particularly in Item IA - Risk Factors.
At
Blink Charging, our highest priority remains the safety, health and well-being of our employees, their families and our communities
and we remain committed to serving the needs of our customers. The Covid-19 pandemic is a highly fluid situation and it is not
currently possible for us to reasonably estimate the impact it may have on our financial and operating results. We will continue
to evaluate the impact of the Covid-19 pandemic on our business as we learn more and the impact of Covid-19 on our industry becomes
clearer.
Any
one or more of these uncertainties, risks and other influences, as well as our inability to avail ourselves of the loan forgiveness
provisions of the PPP Loan, could materially affect our results of operations and whether forward-looking statements made by us
ultimately prove to be accurate. Our actual results, performance and achievements could differ materially from those expressed
or implied in these forward-looking statements except as required by federal securities laws, We undertake no obligation to publicly
update or revise any forward-looking statements, whether from new information, future events or otherwise.
Overview
We
are a leading owner, operator and provider of electric vehicle (“EV”) charging equipment and networked EV charging
services. We offer both residential and commercial EV charging equipment, enabling EV drivers to easily recharge at various location
types.
Our
principal line of products and services is our Blink EV charging network (the “Blink Network”) and EV charging equipment
(also known as electric vehicle supply equipment) and EV related services. Our Blink Network consists of proprietary cloud-based
software that operates, maintain, and tracks all of the Blink EV charging stations and the associated charging data. The Blink
Network provides property owners, managers and parking companies, who we refer to as our “Property Partners”, with
cloud-based services that enable the remote monitoring and management of EV charging stations payment processing and provide EV
drivers with vital station information including station location, availability and applicable fees.
We
offer our 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
our comprehensive turnkey business model, we own and operate the EV charging equipment, undertake and manage the installation,
maintenance and related services, and we keep substantially all of the EV charging revenue.
|
|
|
|
|
●
|
In
our hybrid business model, the Property Partner incurs the installation costs, while we provide the charging equipment. We
operate and manage the EV charging station and provide connectivity of the charging station to the Blink Network. As a result,
we share a greater portion of the EV charging revenue with the Property Partner than under the turnkey model above.
|
|
|
|
|
●
|
In
our host owned business model, the Property Partner purchases, owns and manages the Blink EV charging station, incurs the
installation costs of the equipment, while we provide site recommendations, connectivity to the Blink Network and optional
maintenance services, and the Property Partner keeps substantially all of the EV charging revenue.
|
We
have 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.
At March 31, 2020, we have sold or deployed a total of approximately 14,643 charging units, of which, 5,283 were level 2 commercial
charging units, 103 were DC Fast Charging EV units and 1,070 were residential charging units. Included in the above total number
are approximately 342 Level 2 units deployed on other networks and 7,845 non-networked, residential charging units.
We believe the coronavirus
COVID-19 (COVID-19) global pandemic had minimal impact on our first quarter 2020 results. We continue to receive orders for our
products; however, some shipments of equipment have been temporarily delayed. We are maintaining regular contact, via telephone
and other electronic means, with our customers and suppliers, and do not currently expect any material change in overall demand
for our products. We are complying with federal, state and local health guidelines regarding safety procedures. These procedures
include, but are not limited to: social distancing, remote working, and teleconferencing versus in person meetings. The extent
of the future impact of the COVID-19 pandemic on our business is uncertain and difficult to predict. Capital markets and the U.S.
economy have also been significantly impacted by the pandemic, and it is possible that access to capital markets and other sources
of liquidity could be significantly restricted to support our ongoing operations. Adverse economic and market conditions as a
result of COVID-19 could also adversely affect the demand for our products and services and may also impact the ability of our
customers to satisfy their obligations to us. If the pandemic continues to cause significant negative impacts to economic conditions,
our results of operations, financial condition and liquidity could be adversely impacted. See Part II, Item 1A – “Risk
Factors”.
As
reflected in our unaudited condensed consolidated financial statements, as of March 31, 2020, we had cash, marketable securities,
working capital and an accumulated deficit of $1,343,978, $1,952,510, and $172,466,081, respectively. During the three months
ended March 31, 2020, we incurred a net loss of $2,961,100. During the three months ended March 31, 2020, we used cash in operating
activities of $3,413,141. We have not yet achieved profitability.
Consolidated
Results of Operations
Revenues
Total
revenue for the three months ended March 31, 2020 increased by $721,474, or 125%, to $1,298,864 compared to $577,390 during the
three months ended March 31, 2019.
Charging
service revenue from Company-owned charging stations was $319,624 for the three months ended March 31, 2020 as compared to $324,895
for the three months ended March 31, 2019, a decrease of $5,271, or 2%. The decrease was attributable to a decrease in the number
of subscribers in Nissan’s No Charge-To-Charge Program. The program is expected to end by June 2020.
Revenue
from product sales was $777,423 for the three months ended March 31, 2020 compared to $103,204 during the three months ended March
31, 2020, an increase of $674,219, or 653%. The increase was attributable to increased sales from Generation 2 chargers that were
rolled out during 2019 and increased sales of DC Fast Chargers when compared to the same period in 2019.
Network fee
revenues were $55,559 for the three months ended March 31, 2020 compared to $74,470 for the three months ended March 31, 2019,
a decrease of $18,911, or 25%. The decrease was primarily attributable to a decrease in network renewals in the first quarter
of 2020 compared to the same period in 2019.
Warranty
revenues were $8,060 for the three months ended March 31, 2020 compared to $16,508 for the three months ended March 31, 2019,
a decrease of $8,448, or 51%. The decrease was primarily attributable to a decrease in the renewal rate of host owned chargers
warranty contracts.
Grant
and rebate revenues were $4,579 during the three months ended March 31, 2020, compared to $6,714 during the three months ended
March 31, 2019, a decrease of $2,135, or 32%. Grant and rebates relating to equipment and the related installation are deferred
and amortized in a manner consistent with the depreciation expense of the related assets over their useful lives. The 2020 revenue
was related to the amortization of previous years’ grants.
Other
revenue increased by $82,020 to $133,619 for the three months ended March 31, 2020 as compared to $51,599 for the three months
ended March 31, 2019. The increase was primarily attributable to higher Low Carbon Fuel Standard (LCFS) credits generated during
the three months ended March 31, 2020 compared to the same period in 2019. We generate these credits from the electricity utilized
by our electric car charging stations as a byproduct from our charging services in the states of California and Oregon. The value
of the credits is subject to market conditions and our current policy is to sell the credits generated every one-to-two years
as market conditions permit.
Cost
of Revenues
Cost
of revenues primarily consists of electricity reimbursements, revenue share payments to our Property Partner hosts, the cost of
charging stations sold, connectivity charges provided by telco and other networks, warranty, repairs and maintenance services,
and depreciation of our installed charging stations. Cost of revenues for the three months ended March 31, 2020 were $990,142
as compared to $523,432 for the three months ended March 31, 2019, an increase of $466,710, or 89%. There is a degree of variability
in our costs in relationship to our revenues from period to period, primarily due to:
|
●
|
electricity
reimbursements that are unique to those Property Partner host agreements which provide for such reimbursements;
|
|
●
|
revenue
share payments are predicated on the contractual obligation under the property partner agreement and the revenue generated
by the applicable chargers;
|
|
●
|
cost
of charging stations sold is predicated on the mix of types of charging stations and parts sold during the period;
|
|
●
|
network
costs are fixed in nature based on the number of chargers connected to the telco network regardless of whether the charger
generates revenue;
|
|
●
|
provisions
for excess and obsolete inventory; and
|
|
●
|
warranty
and repairs and maintenance expenses are based on both the number of service cases completed during the period.
|
Cost
of charging services-company-owned charging stations (electricity reimbursements) decreased by $115 to $29,614 for the three months
ended March 31, 2020 as compared to $29,729 for the three months ended March 31, 2019. The decrease in 2020 was attributable to
the mix of charging stations generating charging service revenues subject to electricity reimbursement.
Host
provider fees increased by $3,390, or 4%, to $85,429 during the three months ended March 31, 2020 as compared to $82,039 during
the three months ended March 31,2019. The increase was a result of the mix of chargers generating revenue and their corresponding
revenue share percentage payments to Property Partner hosts per their agreements.
Cost
of product sales increased by $390,678, or 183%, from $213,320 for the three months ended March 31,2019 as compared to $603,998
for the three months ended March 31, 2020. The increase is primarily due to the increase in product sales during the three months
ended March 31, 2020 compared to the same period in 2019. Furthermore, during the three months ended March 31, 2019 included a
provision for excess and obsolete inventory of $123,808 relating to non-Generation 2 inventory which was not being sold/utilized.
Network
costs decreased by $1,821, or 2%, to $75,402 during the three months ended March 31,2020 as compared to $77,223 during the three
months ended March 31,2019. The decrease was attributable to recently negotiated rate reductions.
Warranty
and repairs and maintenance costs increased by $26,037, or 29%, to $114,909 during the three months ended March 31, 2020 from
$88,872 during the three months ended March 31,2019. The increase in 2020 was attributable to significant efforts expended to
reduce the backlog in warranty and repairs and maintenance cases. As of March 31, 2020, we recorded a liability of $23,000 which
represents the estimated cost of existing backlog of known warranty cases. We estimate the cost to repair chargers which we own
to approximate $254,000.
Depreciation
and amortization expense increased by $48,541, or 151%, to $80,790 for the three months ended March 31,2020 as compared to $32,249
for the three months ended March 31,2019, as additional underlying assets became active on our network during the second half
of 2019 and early 2020.
Operating
Expenses
Compensation
expense increased by $510,982, or 32%, to $2,114,467 (consisting of approximately $1.9 million of cash compensation and benefits
and approximately $0.2 million of non-cash compensation) for the three months ended March 31, 2020. Compensation expense was $1,603,485
(consisting of approximately $1.5 million of cash compensation and benefits and approximately $0.1 million of non-cash compensation)
for the three months ended March 31, 2019.
General
and administrative expenses increased by $388,747, or 151%, to $645,883 for the three months ended March 31, 2020. General and
administrative expenses were $257,136 for the three months ended March 31, 2019. The increase was primarily attributable to an
increase in accounting, tax and legal professional fees of $315,689 related to the Sarbanes-Oxley Section 404 documentation and
strengthening of our internal controls as well as the completion of our federal tax filing project to bring our federal filings
current and up-to-date. Also contributing to the increase was marketing expenses of $47,586 to promote Blink brand awareness and
to support the sales and deployment effort of our Generation 2 chargers.
Other
operating expenses increased by $58,375, or 11%, to $567,200 for the three months ended March 31, 2020 from $508,825 for the three
months ended March 31, 2019. The increase is primarily attributable to larger corporate offices in Miami Beach.
Other
Income (Expense)
Other
income decreased by $364,133 from $421,861 for the quarter ended March 31, 2019 to $57,728 for the quarter ended March 31, 2020.
During the quarter ended March 31, 2020, other income included earned interest income and dividend income of $15,853 from our
cash and marketable securities portfolio, and changes in value of Low Carbon Fuel Standard credits of $32,072. During the quarter
ended March 31, 2019, we settled accounts payable resulting in a gain of $52,500 and $360,000 of notes payable, inclusive of accrued
interest to the former members of 350 Green in exchange for the cancellation of the notes, the return of 8,066 of our common shares
and the payment of $50,000, in 2018, to the former members of 350 Green, resulting in a gain of $310,000. Additionally, we issued
common stock to satisfy a contractual obligation resulting in a loss of $54,742. During the quarter ended March 31, 2019, other
income included earned interest income and dividend income of $99,675 from our cash and marketable securities portfolio, and changes
in value of Low Carbon Fuel Standard credits of $11,828.
Net
Loss
Our
net loss for the three months ended March 31, 2020 increased by $1,067,473, or 56%, to $2,961,100 as compared to $1,893,627 for
the three months ended March 31, 2019. The increase was primarily attributable to a decrease in other income of $364,133 and an
increase of operating expenses of $703,340 offset by an increase in gross profit of $254,764.
Total
Comprehensive Loss
Our
total comprehensive loss for the three months ended March 31, 2020 was $3,142,568 whereas our total comprehensive loss for the
three months ended March 31, 2019 was $1,792,941. The 2020 period included an increase in the fair value of marketable securities
of $181,468.
Liquidity
and Capital Resources
We
measure our liquidity in a number of ways, including the following:
|
|
March
31, 2020
|
|
|
December
31, 2019
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
1,343,978
|
|
|
$
|
3,975,494
|
|
|
|
|
|
|
|
|
|
|
Working
Capital
|
|
$
|
2,158,590
|
|
|
$
|
5,791,444
|
|
|
|
|
|
|
|
|
|
|
Notes
Payable (Gross)
|
|
$
|
10,000
|
|
|
$
|
10,000
|
|
During
the three months ended March 31, 2020, we financed our activities from proceeds derived from debt and equity financings occurring
in prior periods. A significant portion of the funds raised from the sale of capital stock has been used to cover working capital
needs and personnel, office expenses and various consulting and professional fees.
For
the three months ended March 31, 2020 and 2019, we used cash of $3,413,141 and $2,911,587, respectively, in operations. Our cash
use for the three months ended March 31, 2020 was primarily attributable to our net loss of $2,961,100, adjusted for net non-cash
expenses in the aggregate amount of $220,023, and $672,064 of net cash used in changes in the levels of operating assets and liabilities.
Our cash used for the three months ended March 31, 2019 was primarily attributable to our net loss of $1,893,627, adjusted for
net non-cash income in the aggregate amount of $69,417, and by $948,813 of net cash used in changes in the levels of operating
assets and liabilities.
During
the three months ended March 31, 2020, net cash provided by investing activities was $799,614, of which, $1,100,516 was provided
in connection with the sale of marketable securities and $300,902 was used to purchase charging stations and other fixed assets.
During the three months ended March 31, 2019, cash used in investing activities was $27,392, which was used to purchase charging
stations and other fixed assets.
During
the three months ended March. 31, 2020, cash used in financing activities was $17,989 which was used to pay down our liability
in connection with internal use software. There was no cash provided by financing activities for the three months ended March
31, 2019.
Through
March 31, 2020, we incurred an accumulated deficit since inception of $172,466,081. As of March 31, 2020, we had cash, working
capital, and marketable securities of $1,343,978, $2,158,590, and $1,952,510, respectively. During the three months ended March
31, 2020, we incurred a net loss of $2,961,100.
We
estimate an approximate cost of $254,000 to repair deployed chargers, which we own as of March 31, 2020. The remaining commitment
of $437,808 will become due upon delivery of the charging stations.
We
have not yet achieved profitability and expect to continue to incur cash outflows from operations. It is expected that our operating
expenses will continue to increase and, as a result, we will eventually need to generate significant product revenues to achieve
profitability. These conditions indicate that there is substantial doubt about our ability to continue as a going concern within
one year after the issuance date of the financial statements. Historically, we have been able to raise funds to support our business
operations, although there can be no assurance, we will be successful in raising significant additional funds in the future. We
are currently funding our operations on a month-to-month basis.
On
April 17, 2020, we entered into a Sales Agreement (“Sales Agreement”) with Roth Capital Partners, LLC (the “Agent”)
to conduct an “at-the-market” equity offering program (the “ATM”) pursuant to which we may issue and sell
from time to time shares of its common stock, par value $0.001 per share, having an aggregate offering price of up to $20,000,000
(the “Shares”) through the Agent, as our sales agent.
Subject
to the terms and conditions of the Sales Agreement, the Agent will use its commercially reasonable efforts to sell the Shares
from time to time, based upon our instructions. We have no obligation to sell any of the Shares and may at any time suspend sales
under the Sales Agreement or terminate the Sales Agreement in accordance with its terms. We have provided the Agent with customary
indemnification rights, and the Agent will be entitled to an aggregate fixed commission of 3.0% of the gross proceeds from Shares
sold.
Sales
of the Shares under the Sales Agreement will be made in transactions that are deemed to be “at-the-market offerings”
as defined in Rule 415 under the Securities Act of 1933, as amended, including sales made by means of ordinary brokers’
transactions, including on the Nasdaq Capital Market, at market prices or as otherwise agreed to with the Agent.
A
“shelf” registration statement on Form S-3 for the Shares was filed with the SEC, which became effective on September
16, 2019, and a prospectus supplement thereto was filed with the SEC on April 17, 2020.
We
currently anticipate using the net proceeds, if any, from the sale of our shares of common stock offered hereby to supplement
our operating cash flows to fund EV charging station deployment and our acquisition growth plan. We currently have no commitments
or agreements with respect to any acquisitions. We also plan to use any remaining proceeds we receive for working capital and
other corporate purposes. Other corporate purposes include amounts required to pay for continuing product development expenses,
salaries, professional fees, public reporting costs, office-related expenses and other corporate expenses, including overhead.
The amounts and timing of our use of the net proceeds from this offering, if any, will depend on a number of factors, such as
the timing and progress of our EV charging station deployment efforts, the timing and progress of any partnering and collaboration
efforts and technological advances. As of the date of this filing, we cannot specify with certainty all of the particular uses
for the net proceeds to be received by from this offering. Accordingly, our management will have broad discretion in the timing
and application of these proceeds. Pending use of the proceeds as described above, we intend to invest the proceeds in a variety
of capital preservation investments, including short term, interest bearing, investment grade instruments and U.S. government
securities.
Since
April 17, 2020 and through May 12, 2020, the Company sold 87,505 shares of its common stock at an average share
price of $1.72 per share for aggregate gross proceeds of approximately $150,000 under the ATM.
Since inception, our
operations have primarily been funded through proceeds received in equity and debt financings. Although management believes that
we generally have access to capital resources, we continue to evaluate financing opportunities. There is no assurance that we
will be able to obtain funds due to current economic uncertainty or on commercially acceptable terms. There is also no assurance
that the amount of funds we might raise will enable us to complete our development initiatives or attain profitable operations.
If we are unable to obtain additional financing on a timely basis, we may have to curtail our development, marketing and promotional
activities, which would have a material adverse effect on our business, financial condition and results of operations, and ultimately,
we could be forced to discontinue our operations.
Our
operating needs include the planned costs to operate our business, including amounts required to fund working capital and capital
expenditures. Our future capital requirements and the adequacy of our available funds will depend on many factors, including our
ability to successfully commercialize our 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 our product
and service offerings.
On
May 7, 2020, we received loan proceeds in the amount of approximately $856,000 under the Paycheck Protection Program (“PPP”).
The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provides for
loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business.
The loans and accrued interest are forgivable after eight weeks as long as the borrower uses the loan proceeds for eligible purposes,
including payroll, benefits, rent and utilities, and maintains its employee and compensation levels. The amount of loan forgiveness
will be reduced if the borrower terminates employees or reduces salaries during the eight-week period.
The
unforgiven portion of the PPP loan is payable over two years at an interest rate of 1%, with a deferral of payments for the first
six months. We intend to use the proceeds for purposes consistent with the PPP. While we currently believe that its use of the
loan proceeds will meet the conditions for forgiveness of the loan, there can be no assurance that we will not take actions that
could cause us to be ineligible for forgiveness of the loan, in whole or in part.
Critical
Accounting Policies
For
a description of our critical accounting policies, see Note 3 – Summary of Significant Accounting Policies in Part 1, Item
1 of this Quarterly Report on Form 10-Q.
Recently
Issued Accounting Standards
For
a description of our recently issued accounting standards, see Note 3 – Summary of Significant Accounting Policies in Part
1, Item 1 of this Quarterly Report on Form 10-Q.
Off-Balance
Sheet Arrangements
We
do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons,
also known as “special purpose entities” (SPEs).