NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1.
|
BUSINESS
ORGANIZATION, NATURE OF OPERATIONS, RISKS AND UNCERTAINTIES AND BASIS OF PRESENTATION
|
Organization
and Operations
Blink
Charging Co., through its wholly-owned subsidiaries (collectively, the “Company” or “Blink”), is a leading
owner, operator, and supplier of proprietary electric vehicle (“EV”) charging equipment and networked EV charging
services. Blink serves both residential and commercial EV charging settings, enabling EV drivers to easily recharge at various
location types. Blink offers its Property Partners a range of business models for EV charging equipment and services that generally
fall into one of the four 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.
|
|
|
|
|
●
|
In
the Company’s Blink-as-a-service model, the Company owns and operate the EV charging station, while the Property Partner
incurs the installation cost. The Company operates and manages the EV charging station and the Property Partner pays Blink
a fixed monthly fee and keeps all the charging revenues less network connectivity and processing fees.
|
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.
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 September 30, 2020, the Company had deployed 15,716 charging stations, of which 6,944 were on the Blink Network (5,512 Level
2 commercial charging units, 101 DC Fast Charging EV chargers, and 1,331 residential Level 2 Blink EV charging units), and the
remainder are non-networked or on other networks (239 Level 2 commercial charging units, 8,333 residential Level 2 Blink EV charging
stations and 200 charging stations acquired with the BlueLA acquisition).
Risks
and Uncertainties
The
Company continues to closely monitor the impact on its business of the current outbreak of a novel strain of coronavirus (“COVID-19”).
The Company has taken precautions to ensure the safety of its employees, customers and business partners, while assuring business
continuity and reliable service and support to its customers. The Company has experienced what it expects is a temporary reduction
in the usage of its charging stations, which has resulted in a decrease in its charging service revenue. While the Company has
not seen a significant adverse impact to its overall financial results from COVID-19, if the pandemic continues to cause significant
negative impacts to economic conditions, the Company’s results of operations, financial condition and liquidity could be
adversely impacted.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1.
|
BUSINESS
ORGANIZATION, NATURE OF OPERATIONS, RISKS AND UNCERTAINTIES AND BASIS OF PRESENTATION – CONTINUED
|
Basis
of Presentation
The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions
to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required
by U.S. GAAP for complete financial statements. In the opinion of management, such statements include all adjustments (consisting
only of normal recurring items) which are considered necessary for a fair presentation of the condensed consolidated financial
statements of the Company as of September 30, 2020 and for the three and nine months then ended. The results of operations for
the three and nine months ended September 30, 2020 are not necessarily indicative of the operating results for the full year ending
December 31, 2020 or any other period. These unaudited condensed consolidated financial statements should be read in conjunction
with the audited consolidated financial statements and related disclosures of the Company as of December 31, 2019 and for the
year then ended, which were filed with the Securities and Exchange Commission (“SEC”) on April 2, 2020 as part of
the Company’s Annual Report on Form 10-K.
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
Since
the Annual Report on Form 10-K 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.
LIQUIDITY
As
of September 30, 2020, the Company had cash, working capital and an accumulated deficit of $14,863,434, $12,983,846 and
$179,409,943, respectively. During the three and nine months ended September 30, 2020, the Company incurred a net loss of $3,914,349
and $9,904,962, respectively. During the nine months ended September 30, 2020, the Company used cash in operating activities of
$10,157,011.
Since
April 17, 2020 and through November 11, 2020, the Company has sold 3,566,971 shares of common stock under an “at-the-market”
equity offering program for aggregate gross proceeds of approximately $19.5 million. See Note 9 – Stockholders’ Equity.
The
Company expects that its cash on hand will fund its operations for a least 12 months after the issuance date of these financial
statements.
Since
inception, the Company’s operations have primarily been funded through proceeds received in equity and debt financings.
The Company believes it has access to capital resources and continues to evaluate additional financing opportunities. 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.
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.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
|
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 September 30, 2020,
the Company had cash balances in excess of FDIC insurance limits of $14,590,675. 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.
The
following summarizes the Company’s investments as of September 30, 2020 and December 31, 2019:
|
|
September
30, 2020
|
|
|
December
31, 2019
|
|
|
|
|
|
|
|
|
Short-term
investments:
|
|
|
|
|
|
|
|
|
Available-
for-sale investments
|
|
$
|
-
|
|
|
$
|
2,956,989
|
|
The
following is a summary of the unrealized gains, losses, and fair value by investment type as of September 30, 2020 and December
31, 2019:
|
|
September
30, 2020
|
|
|
|
|
Amortized
Cost
|
|
|
|
Gross
Unrealized Gains
|
|
|
|
Gross
Unrealized Losses
|
|
|
|
Fair
Value
|
|
Fixed
income
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
December
31, 2019
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized Gains
|
|
|
Gross
Unrealized Losses
|
|
|
Fair
Value
|
|
Fixed
income
|
|
$
|
2,773,816
|
|
|
$
|
183,173
|
|
|
$
|
-
|
|
|
$
|
2,956,989
|
|
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
|
SUBSCRIPTION
RECEIVABLE
The
Company records stock issuances at the effective date. If the subscription is not funded upon issuance, the Company records a
stock subscription receivable as an asset on a balance sheet. When stock subscription receivables are not received prior to the
issuance of financial statements at a reporting date in satisfaction of the requirements under FASB ASC 505, the stock
subscription receivable is reclassified as a contra account to stockholders’ equity on the balance sheet.
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 are also comprised of sales related
to alternative fuel credits.
|
The
following table summarizes revenue recognized under ASC 606 in the condensed consolidated statements of operations:
|
|
For
The Three Months Ended
|
|
|
For
The Nine Months Ended
|
|
|
|
September
30,
|
|
|
September
30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
- Recognized at a Point in Time:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charging
service revenue - company-owned charging stations
|
|
$
|
162,654
|
|
|
$
|
317,990
|
|
|
$
|
569,528
|
|
|
$
|
937,870
|
|
Product
sales
|
|
|
556,859
|
|
|
|
319,254
|
|
|
|
2,608,636
|
|
|
|
704,472
|
|
Other
|
|
|
69,119
|
|
|
|
34,148
|
|
|
|
330,142
|
|
|
|
122,408
|
|
Total
Revenues - Recognized at a Point in Time
|
|
|
788,632
|
|
|
|
671,392
|
|
|
|
3,508,306
|
|
|
|
1,764,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
- Recognized Over a Period of Time:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Network
and other fees
|
|
|
114,248
|
|
|
|
88,516
|
|
|
|
257,557
|
|
|
|
275,137
|
|
Total
Revenues - Recognized Over a Period of Time
|
|
|
114,248
|
|
|
|
88,516
|
|
|
|
257,557
|
|
|
|
275,137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Revenue Under ASC 606
|
|
$
|
902,880
|
|
|
$
|
759,908
|
|
|
$
|
3,765,863
|
|
|
$
|
2,039,887
|
|
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 September 30, 2020, the Company had $242,258 related to contract liabilities where performance obligations have not yet been
satisfied, which has been included within deferred revenue on the condensed consolidated balance sheet as of September 30, 2020.
The Company expects to satisfy its remaining performance obligations for network fees and warranty revenue and recognize the revenue
within the next 12 months.
During
the three and nine months ended September 30, 2020, the Company recognized $104,865 and $244,525, respectively, of revenues related
to network fees and warranty contracts, which were included in deferred revenues as of December 31, 2019. During the three and
nine months ended September 30, 2020, there was no revenue recognized from performance obligations satisfied (or partially satisfied)
in previous periods.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
|
REVENUE
RECOGNITION – CONTINUED
Grants
and rebates which are not within the scope of ASC 606, pertaining to revenues and periodic expenses are recognized as income when
the related revenue and/or periodic expense are recorded. Grants and rebates related to EV charging stations and their installation
are deferred and amortized in a manner consistent with the related depreciation expense of the related asset over their useful
lives over the useful life of the charging station. During the three months ended September 30, 2020 and 2019, the Company recognized
$2,580 and $4,578, respectively, related to grant and rebate revenue. During the nine months ended September 30, 2020 and 2019,
the Company recognized $11,071 and $17,817, respectively, related to grant and rebate revenue. At September 30, 2020 and December
31, 2019, there was $72,598 and $83,670, respectively, of deferred revenues attributable to grants and rebates.
CONCENTRATIONS
As
of September 30, 2020 and December 31, 2019, accounts receivable from a significant customer was 10% and 11% of accounts receivable,
respectively. As of September 30, 2020, accounts receivable from another significant customer was 28% of accounts receivable.
During the three and nine months ended September 30, 2020, revenues from one significant customer represented 10% and 32%, respectively,
of total revenues. There were no revenue concentrations during the three and nine months ended September 30, 2019.
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 and Nine Months Ended
|
|
|
|
September
30,
|
|
|
|
2020
|
|
|
2019
|
|
Convertible
preferred stock
|
|
|
-
|
|
|
|
1,642,628
|
|
Warrants
|
|
|
7,143,360
|
|
|
|
6,840,049
|
|
Options
|
|
|
647,218
|
|
|
|
128,008
|
|
Unvested
restricted common stock
|
|
|
103,713
|
|
|
|
-
|
|
Total
potentially dilutive shares
|
|
|
7,894,291
|
|
|
|
8,610,685
|
|
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 does not currently believe that such provisions will have a material impact on the Company’s
condensed consolidated financial statements.
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.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
|
RECENTLY
ISSUED ACCOUNTING STANDARDS
In
April 2019, the Financial Accounting Standards Board (‘FASB”) issued Accounting Standards Update (“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 adoption of this ASU effective January 1, 2020 did not have a material impact on the
Company’s consolidated financial statements.
In
August 2020, FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives
and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts
in an Entity’s Own Equity” (“ASU 2020-06”). Under ASU 2020-06, the embedded conversion features are no
longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted
for as derivatives under Topic 815, or that do not result in substantial premiums accounted for as paid-in capital. Consequently,
a convertible debt instrument will be accounted for as a single liability measured at its amortized cost, as long as no other
features require bifurcation and recognition as derivatives. The new guidance also requires the if-converted method to be applied
for all convertible instruments. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim
periods within those fiscal years, with early adoption permitted. Adoption of the standard requires using either a modified retrospective
or a full retrospective approach. The Company is currently evaluating the effect of the adoption of ASU 2020-06 will have on its
condensed consolidated financial statements and related disclosures.
On
July 17, 2020, the Company signed a non-binding term sheet (“Term Sheet”) to acquire certain assets of an EV charging
operator (“Operator”). Concurrently with signing the Term Sheet, the Company provided a letter of financial support
for a project awarded to the Operator and the state providing the project award. The Company committed to fund and invest up to
$2.2 million in this state project representing the capital required to complete the development of the EV charger infrastructure
whereby a grant of $1.76 million would be received at the completion of this project. In the event that the Company does not execute
an agreement with the Operator and close the acquisition pursuant to the Term Sheet, the Company will be entitled to obtain the
grant funds awarded in this project and take ownership and all rights and interests in all EV chargers, assets and rights relating
to or arising from this project.
On
September 11, 2020 (“Closing Date”), the Company’s wholly-owned subsidiary, Blink Mobility, LLC (the “Purchaser”),
entered into an Ownership Interest Purchase Agreement (the “Agreement”) with Blue Systems USA, Inc. (the “Seller”),
and pursuant thereto acquired from the Seller all of the ownership interests of BlueLA Carsharing, LLC (“BlueLA”).
The
consideration by the Purchaser for the acquisition of BlueLA included: (a) a cash payment of $1.00, which was paid to the Seller
at closing, and (b) in the event BlueLA timely amends its carsharing services agreement with the City of Los Angeles, California
dated January 17, 2017 (the “City of Los Angeles Agreement”), a cash payment to the Seller of $1,000,000, payable
within three business days after such amendment (“Contingent Consideration”). The amendment to the City of Los
Angeles Agreement must be obtained by BlueLA no later than December 31, 2020, subject to an extension to March 31, 2021 if
a representative of the City of Los Angeles indicates to the Purchaser by the December 31, 2020 deadline its approval of the modifications
to the City of Los Angeles Agreement, as more particularly outlined in the Agreement. The total consideration paid or payable
by the Purchaser excludes transaction costs. The Company has agreed to guaranty the performance of the Purchaser’s obligations
under the Agreement as an inducement for the Seller to enter into the Agreement. The Company had acquired BlueLA in order to
expand its presence in the State of California.
The
Agreement contains customary representations, warranties and covenants for a transaction of this type and nature. Pursuant to
the terms of the Agreement, the Seller will indemnify the Company, the Purchaser and their respective affiliates and representatives
for breaches of the Seller’s representations and warranties, breaches of covenants and losses related to pre-closing taxes
of BlueLA. The Purchaser has agreed to indemnify the Seller and its affiliates and representatives for any breaches of the Purchaser’s
representations and warranties, breaches of covenants and losses related to post-closing taxes of BlueLA. The representations
and warranties under the Agreement will survive until December 10, 2021.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3.
|
BUSINESS
COMBINATION – CONTINUED
|
Pursuant
to the Agreement, the Seller and BlueLA entered into a Transition Service Agreement pursuant to which the Seller and its affiliate,
Bluecarsharing, S.A.S., agreed to provide certain transition and support services to BlueLA and the Purchaser following the closing
and until December 31, 2020. The Seller also guaranteed the payment of up to $175,000 in parking fees payable by BlueLA to the
City of Los Angeles, and BlueLA agreed to pay the Seller for any as-yet uncollected grants and rebates that BlueLA is entitled
to obtain under the City of Los Angeles Agreement. In addition, the Seller agreed that, until September 10, 2023, the Seller
will not and will cause its subsidiaries or affiliates not to directly or indirectly, (i) own, operate, acquire, or establish
a business, or in any other manner engage alone or with others in carsharing and/or electric vehicle charging operation, or activity
in the State of California (whether as an operator, manager, employee, officer, director, consultant, advisor, representative
or otherwise) excluding any de minimis ownership interest in any business); or (ii) intentionally induce or attempt to
induce any customer, supplier or other business relation of BlueLA to cease or refrain from working with BlueLA, or in any way
adversely interfere with the relationship between any such customer, supplier or other business relation and BlueLA. Lastly,
the Seller provided a guarantee to BlueLA that BlueLA will only be liable for payments on the lease of 30 cars at a monthly fee
of $500 per car per month, or $15,000 per month in the aggregate, under the existing car lease agreement between BlueLA and SDV
Cartrading LLC dated May 4, 2017 (“Car Lease Agreement”).
Under
the terms of the City of Los Angeles Agreement, amongst other obligations, during the initial term of the City of Los Angeles
Agreement (defined as approximately six years from the effective date of the City of Los Angeles Agreement), BlueLA shall provide,
manage, operate and maintain (i) usage agreements for electric vehicles in a quantity of no less than one hundred (100) (see payment
terms of Car Lease Agreement) and (ii) charging stations in a quantity of no less than two hundred (200) at approximately forty
(40) locations for an aggregate cost of approximately $20,000 per month. Following the initial term, the City of Los Angeles shall
have the right to renew the City of Los Angeles Agreement for renewal terms of two (2) years each, with prior notice required,
for a maximum of three renewal terms.
The
Company has accounted for this transaction as a business combination under ASC 805. Accordingly, the assets acquired and the liabilities
assumed were recorded at their estimated fair value based on the date of acquisition. Goodwill from the acquisition principally
relates to the Contingent Consideration as well as the excess value of assumed liabilities over the fair value of identified net
assets. Since this transaction was a stock acquisition, goodwill is not tax deductible.
At
the date of acquisition, the preliminary purchase consideration consisted of cash, assumed liabilities and Contingent Consideration.
The preliminary purchase price allocation is expected to be completed within 12 months after the acquisition date. The Contingent
Consideration of $1,000,000 is non-interest bearing and was recorded at its estimated fair value of $245,000 based on a probability-weighted
valuation technique used to determine the fair value of the Contingent Consideration on the acquisition date. See Note 8 –
Fair Value Measurement for assumptions utilized in the estimate of fair value of the Contingent Consideration. The aggregate preliminary
purchase price was allocated to the assets acquired and liabilities assumed as follows:
Purchase
Consideration:
|
|
|
|
|
Cash
|
|
$
|
1
|
|
Contingent
consideration
|
|
|
245,000
|
|
Assumed
liabilities
|
|
|
87,860
|
|
|
|
|
|
|
Total
Purchase Consideration
|
|
$
|
332,861
|
|
|
|
|
|
|
Less:
|
|
|
|
|
Right
of use assets
|
|
|
597,812
|
|
Non-current portion of lease liabilities
|
|
|
(370,698
|
)
|
Debt-free
net working capital deficit
|
|
|
(145,910
|
)
|
|
|
|
|
|
Fair
Value of Identified Net Assets
|
|
|
81,204
|
|
|
|
|
|
|
Remaining
Unidentified Goodwill Value
|
|
$
|
251,657
|
|
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3.
|
BUSINESS
COMBINATION – CONTINUED
|
The
components of debt free net working capital are as follows:
Current
assets:
|
|
|
|
|
Cash
|
|
$
|
3,379
|
|
Accounts
receivable
|
|
|
372,599
|
|
Prepaid
expenses and other current assets
|
|
|
103,633
|
|
|
|
|
|
|
Total
current assets
|
|
$
|
479,611
|
|
|
|
|
|
|
Less
current liabilities:
|
|
|
|
|
Accounts
payable
|
|
|
337,648
|
|
Current portion of lease liabilities
|
|
|
227,114
|
|
Accrued
expenses and other current liabilities
|
|
|
60,759
|
|
|
|
|
|
|
Total
current liabilities
|
|
$
|
625,521
|
|
|
|
|
|
|
Debt
free net working capital deficit
|
|
$
|
(145,910
|
)
|
The
below table provides select unaudited, pro forma consolidated results of operations as if the acquisition of BlueLA had occurred
on January 1, 2019. The pro forma results are not indicative of (i) the results of operations that would have occurred had the
operations of this acquisition actually occurred at the beginning of fiscal year 2019 or (ii) future results of operations.
|
|
For
the Nine Months Ended
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
4,107,080
|
|
|
$
|
2,453,530
|
|
Net
loss
|
|
$
|
(11,915,295
|
)
|
|
$
|
(9,826,476
|
)
|
The
above pro forma information includes pro forma adjustments to remove the effect of the following non-recurring transactions:
|
1)
|
Gain
of $15,550,263 recognized in the Seller’s results of operations during the nine months ended September 30, 2020 related
to the forgiveness of debt associated with liabilities to the Seller’s parent;
|
|
2)
|
Interest
expense of $164,946 and $236,146 recognized in the Seller’s results of operations during the nine months ended September
30, 2020 and 2019, respectively, associated with the debt due to the Seller’s parent that was subsequently forgiven;
and
|
|
3)
|
Nonrecurring
merger expenses of $17,535 recognized in the Company’s results of operations during the nine months ended September
30, 2020.
|
As
of the date of the acquisition and September 30, 2020, the Company expects to collect all contractual cash flows related to receivables
acquired in the acquisition. Acquisition related costs are expensed as incurred and are recorded within general and administrative
expenses on the consolidated statements of operations. Acquisition-related costs were $17,535 during the three and nine
months ended September 30, 2020.
4.
|
PREPAID
EXPENSES AND OTHER CURRRENT ASSETS
|
As
of September 30, 2020, prepaid expenses and other current assets primarily consisted of alternative fuel credits of $164,647.
As of December 31, 2019, alternative fuel credits were $476,992.
As
of September 30, 2020 and December 31, 2019, the Company had a remaining purchase commitment of $3,263,440 and $3,156,629, respectively,
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.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Accrued
expenses consist of the following:
|
|
September
30, 2020
|
|
|
December
31, 2019
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
Accrued
host fees
|
|
$
|
116,930
|
|
|
$
|
108,683
|
|
Accrued
professional, board and other fees
|
|
|
334,882
|
|
|
|
40,518
|
|
Accrued
wages
|
|
|
509,492
|
|
|
|
295,250
|
|
Warranty
payable
|
|
|
12,000
|
|
|
|
12,000
|
|
Accrued
income, property and sales taxes payable
|
|
|
364,531
|
|
|
|
417,669
|
|
Other
accrued expenses
|
|
|
65,105
|
|
|
|
23,428
|
|
Total
accrued expenses
|
|
$
|
1,402,940
|
|
|
$
|
897,548
|
|
6.
|
ACCRUED
ISSUABLE EQUITY
|
Accrued
issuable equity consists of the following:
|
|
September
30, 2020
|
|
|
December
31, 2019
|
|
|
|
(unaudited)
|
|
|
|
|
Common
stock
|
|
$
|
174,094
|
|
|
$
|
252,584
|
|
Warrants
|
|
|
40,813
|
|
|
|
5,102
|
|
Total
accrued issuable equity
|
|
$
|
214,907
|
|
|
$
|
257,686
|
|
See
Note 9 – Stockholders’ Equity for additional information.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On
May 7, 2020, the Company received $855,666 in connection with a loan (the “PPP Loan”) under the CARES Act Paycheck
Protection Program (the “PPP”). The PPP provides for loans to qualifying businesses for amounts of up to 2.5 times
their average monthly payroll expenses. The loan principal and accrued interest are forgivable, as long as the borrower uses loan
proceeds for eligible purposes during the covered period following disbursement, such as payroll, benefits, rent, and utilities,
and maintains its payroll levels. The amount of loan forgiveness is reduced if the borrower terminates employees or reduces salaries
during the covered period, subject to certain qualifications and exclusions. The unforgiven portion of the PPP loan is payable
over two years at an interest rate of 1%. The Company used PPP proceeds it received for purposes consistent with PPP criteria.
While the Company believes its use of PPP loan proceeds should meet the conditions for forgiveness of the loan, it cannot provide
assurance that it will not take actions that may cause the Company to be ineligible for loan forgiveness in whole or in part or
that PPP eligibility requirements may not change that would result in making the Company or the Company’s use of the PPP
proceeds ineligible. As of September 30, 2020, the Company had not received any notice of forgiveness of the PPP Loan. Once an
amount is forgiven under the PPP Loan, the Company intends to recognize a gain on forgiveness of note payable in the period in
which it obtained forgiveness. As of September 30, 2020, the Company utilized all $855,666 of the proceeds of the PPP Loan.
On
June 5, 2020, the President signed into law the Payroll Protection Program Flexibility Act (“PPP Flexibility Act”)
which made several critical changes to the PPP, which was created under the CARES Act. Under the act, the deferral period was
extended to the date the lender received the forgiven amount from SBA. If the Company does not apply for loan forgiveness within
10 months following the end of the covered period, the deferral period will end on the date that is 10 months after the last day
of the covered period. Following enactment of the CARES Act, SBA issued guidance requiring that no more than 25 percent of the
forgiven amount be attributable to non-payroll costs. This meant that if payroll costs did not account for at least 75 percent
of the total costs eligible for forgiveness, then the borrower’s loan forgiveness would be capped at the 75 percent level.
The PPP Flexibility Act loosens this requirement and increases the percentage for non-payroll costs to up to 40 percent. However,
the actual language of the PPP Flexibility Act requiring a borrower to use at least 60 percent of the loan amount for payroll
costs.
8.
|
FAIR
VALUE MEASUREMENT
|
Assumptions
utilized in the valuation of Level 3 liabilities are described as follows:
|
|
For
the Three Months Ended
|
|
|
For
the Nine Months Ended
|
|
|
|
September
30,
|
|
|
September
30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk-free
interest rate
|
|
|
0.36
|
%
|
|
|
1.47%-1.75
|
%
|
|
|
0.16%-1.69
|
%
|
|
|
1.47%-2.45
|
%
|
Contractual
term (years)
|
|
|
6.00
|
|
|
|
1.00
- 5.00
|
|
|
|
1.00-8.00
|
|
|
|
1.00
- 10.00
|
|
Expected
volatility
|
|
|
137
|
%
|
|
|
118%
- 139
|
%
|
|
|
78%-138
|
%
|
|
|
106%
- 140
|
%
|
Expected
dividend yield
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
For
the purposes of estimating the fair value of the Contingent Consideration as of the date of the acquisition and September 30,
2020, the Company utilized the following assumptions: (i) a probability threshold of 25% that the Seller would satisfy the conditions
of the Contingent Consideration and (ii) a 5% discount rate. See Note 3 – Business Combination for details.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
8.
|
FAIR
VALUE MEASUREMENT – CONTINUED
|
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:
Contingetnt
Consideration
|
|
|
|
Beginning
balance as of January 1, 2020
|
|
$
|
-
|
|
Contingent
consideration assumed in BlueLA acquisition
|
|
|
245,000
|
|
Change
in fair value of contingent consideration
|
|
|
-
|
|
Ending
balance as of September 30, 2020
|
|
|
245,000
|
|
|
|
|
|
|
Warrants
Payable
|
|
|
|
|
Beginning
balance as of January 1, 2020
|
|
$
|
5,102
|
|
Change
in fair value of warrants payable
|
|
|
35,711
|
|
Ending
balance as of September 30, 2020
|
|
$
|
40,813
|
|
Assets
and liabilities measured at fair value on a recurring or nonrecurring basis are as follows:
|
|
September
30, 2020
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alternative
fuel credits
|
|
$
|
-
|
|
|
$
|
164,647
|
|
|
$
|
-
|
|
|
$
|
164,647
|
|
Total
assets
|
|
$
|
-
|
|
|
$
|
164,647
|
|
|
$
|
-
|
|
|
$
|
164,647
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent
consideration
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
245,000
|
|
|
$
|
245,000
|
|
Warrants
payable
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
40,813
|
|
|
$
|
40,813
|
|
Total
liabilities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
285,813
|
|
|
$
|
285,813
|
|
|
|
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)
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 Agent is
entitled to an aggregate fixed commission of 3.0% of the gross proceeds from the Shares sold and the Company provided the Agent
with customary indemnification rights. Sales of the Shares under the Sales Agreement are 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 September 30, 2020, the Company has sold an aggregate of 3,521,971 shares of common stock under the
ATM program for aggregate gross proceeds of $18,953,323, less issuance costs of $737,109 which were recorded as a reduction to
additional paid-in capital. As of September 30, 2020, $419,494 of net proceeds had not been received by the Company and was included
as a subscription receivable on the accompanying balance sheet. Subsequent to September 30, 2020, the Company collected the subscription
receivable in full.
Since
April 17, 2020 and through November 11, 2020, the Company has sold 3,566,971 shares of common stock under the ATM program
for aggregate gross proceeds of approximately $19.5 million.
PREFERRED
STOCK
During
the nine months ended September 30, 2020, a 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. There are no longer any currently outstanding
shares of Series D Convertible Preferred Stock.
COMMON
STOCK
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.
During
June 2020, the Company issued 10,000 shares of common stock with an aggregate issuance date fair value of $23,500 as compensation
to a consultant.
During
July 2020, the Company issued 6,847 shares of common stock with an aggregate issuance date fair value of $46,560 as compensation
to a consultant.
See
Note 9 – Stockholder’s Equity - Preferred Stock for details associated with the issuance of common stock in connection
with the conversion of Series D Convertible Preferred Stock.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
9.
|
STOCKHOLDERS’
EQUITY – CONTINUED
|
STOCK
OPTIONS
During
April 2020, the Company granted five-year options to purchase an aggregate of 160,416 shares of common stock to executives with
an exercise prices ranging from of $1.83-$2.01 per share. 54,325 options will vest one year from the date of grant, 53,433 options
will vest the second year and 52,658 will vest the third year. The options had an aggregate grant date fair value of $180,000,
which will be recognized over the vesting period.
During
June 2020, the Company granted five-year options to purchase an aggregate of 150,000 shares of common stock to executives with
an exercise price of $2.20 per share. One-third of the options will vest on February 7, 2021, the second third will vest on February
7, 2022 and the final third will vest on February 7, 2023. The options had an aggregate grant date fair value of $298,911, which
will be recognized over the vesting period.
During
September 2020, the Company granted five-year options to purchase an aggregate of 603 shares of common stock to employees with
an exercise price of $9.14 per share. The options vest on September 27, 2021. The options had an aggregate grant date fair value
of $5,000, which will be recognized over the vesting period.
STOCK
WARRANTS
During
the nine months ended September 30, 2020, the Company issued 161,126 shares of common stock upon the cashless exercise of warrants.
During
the nine months ended September 30, 2020, the Company issued an aggregate of 34,403 shares of the Company’s common stock
pursuant to the exercise of warrants at an exercise price of $4.25 per share for aggregate gross and net cash proceeds of $146,213
and $144,313, respectively.
STOCK-BASED
COMPENSATION
The
Company recognized stock-based compensation expense related to common stock, stock options and warrants for the three and nine
months ended September 30, 2020 of $148,964 and $480,359, respectively, and for the three and nine months ended September 30,
2019 of $197,133 and $737,416, respectively, which is included within compensation expense on the condensed consolidated statements
of operations. As of September 30, 2020, there was $483,840 of unrecognized stock-based compensation expense that will be recognized
over the weighted average remaining vesting period of 1.04 years.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
10.
|
RELATED
PARTY TRANSACTIONS
|
TRANSACTIONS
WITH PALISADES CAPITAL MANAGEMENT LLC
Mr.
Engel is currently a consultant to Palisades Capital Management LLC, which serves as an investment advisor with regard to the
Company’s marketable securities portfolio. During the three and nine months ended September 30, 2020, the Company paid Palisades
Capital Management LLC fees of $1,265 and $14,092, respectively. No fees were paid during the three and nine months ended September
30, 2019.
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 and nine months ended September 30, 2020, the Company recognized sales of approximately $0 and $272,964, respectively,
to Hellas. No sales were recognized during the three and nine months ended September 30, 2019. As of September 30, 2020 and December
31, 2019, the Company had a receivable from Hellas of approximately $0 and $42,000, respectively.
OPERATING
LEASES
See Note 3 – Business Combination
regarding details associated with lease agreements for (i) certain parking locations in connection with the City of Los Angeles
Agreement.
As
of September 30, 2020, the Company had no leases that were classified as a financing lease. As of September 30, 2020, the Company
did not have additional operating and financing leases that have not yet commenced.
Total
operating lease expenses for the three and nine months ended September 30, 2020 were $97,989 and $332,045, respectively,
and for the three and nine months ended September 30, 2019 were $40,762 and $151,694, respectively, and are recorded in other
operating expenses on the condensed consolidated statements of operations.
Supplemental
cash flows information related to leases was as follows:
|
|
For
The Nine Months Ended
|
|
|
|
September
30,
|
|
|
|
2020
|
|
|
2019
|
|
Cash
paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
|
|
|
|
Operating
cash flows from operating leases
|
|
$
|
160,451
|
|
|
$
|
151,694
|
|
|
|
|
|
|
|
|
|
|
Right-of-use
assets obtained in exchange for lease obligations:
|
|
|
|
|
|
|
|
|
Operating
leases
|
|
$
|
597,812
|
|
|
$
|
266,103
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average Remaining Lease Term
|
|
|
|
|
|
|
|
|
Operating
leases
|
|
|
2.24
|
|
|
|
1.79
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average Discount Rate
|
|
|
|
|
|
|
|
|
Operating
leases
|
|
|
6.0
|
%
|
|
|
6.0
|
%
|
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
OPERATING
LEASES - CONTINUED
Future
minimum payments under non-cancellable leases as of September 30, 2020 were as follows:
For
the Years Ending December 31,
|
|
Amount
|
|
|
|
|
|
2020
|
|
$
|
114,421
|
|
2021
|
|
|
336,139
|
|
2022
|
|
|
249,320
|
|
2023
|
|
|
72,728
|
|
Total
future minimum lease payments
|
|
|
772,608
|
|
Less:
imputed interest
|
|
|
(40,598
|
)
|
Total
|
|
$
|
732,010
|
|
12.
|
COMMITMENTS
AND CONTINGENCIES
|
JAMES
CHRISTODOULOU LITIGATION SETTLEMENT
As
previously reported in the Company’s Current Report on Form 8-K filed with the SEC on October 9, 2020, the litigation between
the Company and its former President pending in Miami-Dade County Court, State of Florida, James Christodoulou vs. Blink Charging
Co. et al., has been settled for an aggregate sum of $400,000, of which $125,000 related to compensation related matters. As a
result, the Company has recorded a loss on settlement of $400,000 within operating expenses on its condensed consolidated statements
of operations during the three and nine months ended September 30, 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, 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. On July 20, 2020 the Company settled this case for approximately
$48,000. On July 24, 2020, the Company was dropped as a party from the case.
On
August 24, 2020, a purported securities class action lawsuit, captioned Bush v. Blink Charging Co. et al., Case No. 20-cv-23527,
was filed in the United States District Court for the Southern District of Florida against the Company, Michael Farkas (Blink’s
Chairman of the Board and Chief Executive Officer), and Michael Rama (Blink’s Chief Financial Officer) (the “Bush
Lawsuit”). The Bush complaint asserts that the defendants made materially false or misleading statements during the putative
class period, and includes claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The Bush complaint does
not quantify damages, but seeks to recover damages on behalf of investors who purchased or otherwise acquired Blink’s common
stock between March 6, 2020 and August 19, 2020. The Bush complaint alleges, among other things, that the defendants made false
or misleading statements about the number, accessibility and functionality of the charging stations in the Blink Network and Blink’s
partnerships and expansions with third parties. On September 1, 2020, another purported securities class action lawsuit, captioned
Vittoria v. Blink Charging Co. et al., Case No. 20-cv-23643, was filed in the United States District Court for the Southern District
of Florida against the same defendants and seeking to recover the same alleged damages (the “Vittoria Lawsuit”). On
October 1, 2020, the court consolidated the Vittoria Lawsuit with the Bush Lawsuit. The Company disputes these claims and intends
to defend the consolidated action vigorously.
BLINK
CHARGING CO. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
12.
|
COMMITMENTS
AND CONTINGENCIES – CONTINUED
|
LITIGATION
AND DISPUTES - CONTINUED
On
September 15, 2020, a shareholder derivative lawsuit, captioned Klein (derivatively on behalf of Blink Charging Co.) v. Farkas
et al., Case No. 20-19815CA01, was filed in Miami-Dade County Circuit Court seeking to pursue claims belonging to the Company
against Blink’s Board of Directors and Michael Rama (the “Klein Lawsuit”). Blink is named as a nominal defendant.
The Klein Lawsuit asserts that the Director defendants caused Blink to make the statements that are at issue in the securities
class action and, as a result, the Company will incur costs defending against the securities class action and other unidentified
investigations. The Klein Lawsuit asserts claims against the Director defendants for breach of fiduciary duties and corporate
waste and against all of the defendants for unjust enrichment. Klein did not quantify the alleged damages in his complaint, but
he seeks damages sustained by the Company as a result of the defendants’ breaches of fiduciary duties, corporate governance
changes, restitution and disgorgement of profits from the defendants, and attorneys’ fees and other litigation expenses.
The parties agreed to temporarily stay the Klein Lawsuit until there is a ruling on a yet-to-be-filed motion to dismiss in
the consolidated Bush Lawsuit.
EMPLOYMENT
AGREEMENTS
DONALD
ENGEL EMPLOYMENT AGREEMENT
Effective
January 9, 2020, Donald Engel, a 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 nine months ended September 30, 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.
MICHAEL
P. RAMA EMPLOYMENT AGREEMENT
In
February 2020, the Company entered into an Employment Offer Letter with Michael P. 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 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.
|
COMMITMENTS
AND CONTINGENCIES – CONTINUED
|
EMPLOYMENT
AGREEMENTS – CONTINUED
BRENDAN
S. JONES EMPLOYMENT AGREEMENT
The
Company entered into an Employment Offer Letter, dated as of March 29, 2020, with Brendan S. Jones. 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 is 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 received a cash signing bonus
of $55,000 and an equity signing bonus of $70,000 worth of the Company’s common stock, which vests 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.
WARRANTY
The
Company estimates an approximate cost of $160,000 to repair deployed chargers, which the Company owns as of September 30, 2020.
STOCK
WARRANTS
Subsequent
to September 30, 2020, the Company issued an aggregate of 480,360 shares of the Company’s common stock pursuant to the exercise
of warrants at an exercise price of $4.25 per share for aggregate gross of $2,041,530.
COMMON
STOCK
Subsequent
to September 30, 2020, the Company issued an aggregate of 45,000 shares of the Company’s common stock for aggregate net
proceeds of $487,769 under the ATM.
Subsequent
to September 30, 2020, the Company issued an aggregate of 18,687 shares of the Company’s common stock as compensation with
an issuance date fair value of $187,884.