UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2017
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission File No. 001-38392
BLINK CHARGING CO.
(Exact name of registrant as specified in its charter)
| Nevada | 03-0608147 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
| 3284 N 29th Court | ||
| Hollywood, Florida | 33020-1320 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (305) 521-0200
Securities registered under Section 12(b) of the Exchange Act:
| Title of each class: | Name of each exchange on which registered: | |
Common Stock, par value $0.001 per share Common Stock Purchase Warrants (Expiring February 16, 2023) |
The NASDAQ Stock Market LLC The NASDAQ Stock Market LLC |
Securities registered under Section 12(g) of the Exchange Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ ] No [X]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference Part III of this Form 10-K or any amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | [ ] | Accelerated filer | [ ] |
| Non-accelerated filer | [ ] | Smaller reporting company | [X] |
| (Do not check if a smaller reporting company) | |||
| Emerging growth company | [ ] |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [X]
State the aggregate market value of the voting and non-voting common equity held by non-affiliates (965,475 shares) computed by reference to the price at which the common equity was last sold ($8.50) as of the last business day of the registrant’s most recently completed second fiscal quarter (June 30, 2017): $8,206,534.
As of April 16, 2018, the registrant had 19,265,471 shares of common stock issued and outstanding.
Documents Incorporated by Reference: None.
EXPLANATORY NOTE
This Amendment No. 1 on Form 10-K/A (the “Amendment”) amends Blink Charging Co.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 (the “Form 10-K”), as filed with the Securities and Exchange Commission on April 17, 2018, and is being filed solely to correct a typographical error in the date of the Report of Independent Registered Public Accounting Firm from April 17, 2017 to April 17, 2018. Pursuant to Rule 12b-15 promulgated under the Securities Exchange Act of 1934, as amended, we have repeated the entire text of Item 8 of the Form 10-K in this Amendment. However, there have been no changes to the text of such item other than the change in the date of the auditor’s report. This Amendment includes new certifications by our Principal Executive Officer and Principal Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 attached as Exhibits 31.1, 31.2, 32.1 and 32.2 hereto.
Except as expressly set forth above, this Amendment does not, and does not purport to, amend, update or restate the information in any other item of the Form 10-K or reflect any events that have occurred after the filing of the Form 10-K.
BLINK CHARGING CO.
FORM 10-K/A
Table of Contents
| Page | ||
| PART II | ||
| Item 8. | Financial Statements and Supplementary Data. | 3 |
| PART IV | ||
| Item 15. | Exhibits, Financial Statement Schedules. | 4 |
| Signatures | 5 | |
| 2 |
| ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
The financial statements required by this Item 8 are included in this Annual Report following Item 15 hereof. As a smaller reporting company, we are not required to provide supplementary financial information.
| 3 |
| ITEM 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES. |
(a) The following documents are filed as part of this Annual Report on Form 10-K:
(1) Financial Statements:
Our consolidated financial statements and the Report of Independent Registered Public Accounting Firm are included herein as part of Item 8. Financial Statements and Supplementary Data above.
(2) The following listed documents are filed as Exhibits to this report:
| Exhibit Number |
Exhibit Description | |
| 31.1* | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended. | |
| 31.2* | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended. | |
| 32.1** | Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350. | |
| 32.2** | Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350. | |
| 101.INS** | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |
| 101.SCH** | XBRL Taxonomy Extension Schema Linkbase Document. | |
| 101.CAL** | XBRL Taxonomy Calculation Linkbase Document. | |
| 101.DEF** | XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB** | XBRL Taxonomy Label Linkbase Document. | |
| 101.PRE** | XBRL Taxonomy Presentation Linkbase Document. | |
| * Filed herewith | ||
** Furnished herewith | ||
| 4 |
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Dated: May 10, 2018 | BLINK CHARGING CO. | |
| By: | /s/ Michael D. Farkas | |
| Michael D. Farkas | ||
|
Executive Chairman (Principal Executive Officer)
| ||
| By: | /s/ Michael J. Calise | |
| Michael J. Calise | ||
| Chief Executive Officer | ||
| (Principal Financial Officer and Interim Principal Accounting Officer) | ||
| 5 |
BLINK CHARGING CO. AND SUBSIDIARIES
(FORMERLY CAR CHARGING GROUP, INC.)
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
| 6 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
Blink Charging Co. and Subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Blink Charging Co. and Subsidiaries (the “Company”) as of December 31, 2017 and 2016, the related consolidated statements of operations, changes in stockholders’ deficiency, and cash flows for each of the two years in the period ended December 31, 2017, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provides a reasonable basis for our opinion.
/s/ Marcum llp
Marcum llp
We have served as the Company’s auditor since 2014.
New York, NY
April 17, 2018
| F-1 |
BLINK CHARGING CO. AND SUBSIDIARIES
(FORMERLY CAR CHARGING GROUP, INC.)
| December 31, | ||||||||
| 2017 | 2016 | |||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash | $ | 185,151 | $ | 5,898 | ||||
| Accounts receivable and other receivables, net | 227,918 | 128,315 | ||||||
| Inventory, net | 247,466 | 394,825 | ||||||
| Prepaid expenses and other current assets | 108,352 | 84,631 | ||||||
| Total Current Assets | 768,887 | 613,669 | ||||||
| Fixed assets, net | 376,920 | 755,682 | ||||||
| Intangible assets, net | 106,167 | 116,482 | ||||||
| Deferred public offering costs | 1,367,730 | 335,475 | ||||||
| Other assets | 67,309 | 89,573 | ||||||
| Total Assets | $ | 2,687,013 | $ | 1,910,881 | ||||
| Liabilities and Stockholders’ Deficiency | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | 4,228,073 | $ | 3,500,267 | ||||
| Accounts payable [1] | - | 3,728,193 | ||||||
| Accrued expenses | 26,075,250 | 7,955,976 | ||||||
| Accrued expenses [1] | - | 5,969 | ||||||
| Accrued public information fee | - | 3,005,277 | ||||||
| Derivative liabilities | 3,448,390 | 1,583,103 | ||||||
Current portion of convertible notes payable, net of debt discount of $0 and $501,981 | 50,000 | 581,274 | ||||||
| Convertible notes payable - related party | 747,567 | 495,000 | ||||||
| Notes payable | 597,966 | 342,781 | ||||||
| Current portion of deferred revenue | 383,771 | 600,700 | ||||||
| Total Current Liabilities | 35,531,017 | 21,798,540 | ||||||
| Convertible notes payable, non-current portion, net of debt discount of $499,435 and $0 as of December 31, 2017 and 2016, respectively | 3,200,096 | - | ||||||
| Deferred revenue, non-current portion | 50,283 | 99,495 | ||||||
| Total Liabilities | 38,781,396 | 21,898,035 | ||||||
| Series B Convertible Preferred Stock, 10,000 shares designated, 8,250 shares issued and outstanding as of December 31, 2017 and 2016, respectively | 825,000 | 825,000 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ Deficiency: | ||||||||
| Preferred stock, $0.001 par value, 40,000,000 shares authorized; | ||||||||
| Series A Convertible Preferred Stock, 20,000,000 shares designated, 11,000,000 shares issued and outstanding as of December 31, 2017 and 2016, respectively | 11,000 | 11,000 | ||||||
| Series C Convertible Preferred Stock, 250,000 shares designated, 229,551 and 150,426 shares issued and outstanding as of December 31, 2017 and 2016, respectively | 230 | 150 | ||||||
| Series D Convertible Preferred Stock, 13,000 shares designated, 0 shares issued and outstanding as of December 31, 2017 and 2016, respectively | - | - | ||||||
| Common stock, $0.001 par value, 500,000,000 shares authorized, 5,523,673 and 1,609,530 shares issued and outstanding as of December 31, 2017 and 2016, respectively | 5,524 | 1,610 | ||||||
| Additional paid-in capital | 119,499,141 | 64,078,182 | ||||||
| Accumulated deficit | (156,435,278 | ) | (81,071,782 | ) | ||||
| Total Blink Charging Co. - Stockholders’ Deficiency | (36,919,383 | ) | (16,980,840 | ) | ||||
| Non-controlling interest [1] | - | (3,831,314 | ) | |||||
| Total Stockholders’ Deficiency | (36,919,383 | ) | (20,812,154 | ) | ||||
| Total Liabilities and Stockholders’ Deficiency | $ | 2,687,013 | $ | 1,910,881 | ||||
| [1] | - Related to 350 Green, which, as of May 18, 2017, is no longer a variable interest entity of the Company and, accordingly, 350 Green’s was deconsolidated as of May 18, 2017. |
The accompanying notes are an integral part of these consolidated financial statements.
| F-2 |
BLINK CHARGING CO. AND SUBSIDIARIES
(FORMERLY CAR CHARGING GROUP, INC.)
Consolidated Statements of Operations
| For the Years Ended | ||||||||
| December 31, | ||||||||
| 2017 | 2016 | |||||||
| Revenues: | ||||||||
| Charging service revenue - company-owned charging stations | $ | 1,186,710 | $ | 1,144,016 | ||||
| Product sales | 495,086 | 1,126,939 | ||||||
| Grant and rebate revenue | 120,905 | 332,672 | ||||||
| Warranty revenue | 133,867 | 136,375 | ||||||
| Network fees | 225,349 | 244,509 | ||||||
| Other | 338,440 | 341,510 | ||||||
| Total Revenues | 2,500,357 | 3,326,021 | ||||||
| Cost of Revenues: | ||||||||
| Cost of charging services - company-owned charging stations | 230,283 | 189,498 | ||||||
| Host provider fees | 336,917 | 458,931 | ||||||
| Cost of product sales | 237,422 | 501,729 | ||||||
| Network costs | 302,645 | 511,438 | ||||||
| Warranty and repairs and maintenance | (32,890 | ) | 346,477 | |||||
| Depreciation and amortization | 380,309 | 805,607 | ||||||
| Total Cost of Revenues | 1,454,686 | 2,813,680 | ||||||
| Gross Profit | 1,045,671 | 512,341 | ||||||
| Operating Expenses: | ||||||||
| Compensation | 5,981,561 | 4,879,612 | ||||||
| Other operating expenses | 904,830 | 1,451,683 | ||||||
| General and administrative expenses | 1,281,925 | 1,393,954 | ||||||
| Lease termination costs | 300,000 | - | ||||||
| Total Operating Expenses | 8,468,316 | 7,725,249 | ||||||
| Loss From Operations | (7,422,645 | ) | (7,212,908 | ) | ||||
| Other (Expense) Income: | ||||||||
| Interest expense | (946,131 | ) | (256,098 | ) | ||||
| Amortization of discount on convertible debt | (2,285,173 | ) | (962,412 | ) | ||||
| Gain on settlement of accounts payable, net | 22,914 | 840,625 | ||||||
| Loss on settlement reserve | (12,980,588 | ) | - | |||||
| Change in fair value of warrant liabilities | (138,164 | ) | 727,239 | |||||
| Change in fair value of FGI warrant liabilities | (43,871,675 | ) | - | |||||
| Loss on disposal of fixed assets | (803 | ) | (17,557 | ) | ||||
| Loss on inducement in exchange for warrants | (7,570,581 | ) | - | |||||
| Loss on deconsolidation of 350 Green | (97,152 | ) | - | |||||
| Investor warrant expense | - | (7,295 | ) | |||||
| Non-compliance penalty for delinquent regular SEC filings | - | (571,543 | ) | |||||
| Non-compliance penalty for SEC registration requirement | (73,498 | ) | (239,178 | ) | ||||
| Total Other Expense | (67,940,851 | ) | (486,219 | ) | ||||
| Net Loss | (75,363,496 | ) | (7,699,127 | ) | ||||
| Dividend attributable to Series C shareholders | (4,267,100 | ) | (1,468,500 | ) | ||||
| Net Loss Attributable to Common Shareholders | $ | (79,630,596 | ) | $ | (9,167,627 | ) | ||
| Net Loss Per Share | ||||||||
| - Basic and Diluted | $ | (25.95 | ) | $ | (3.17 | ) | ||
| Weighted Average Number of Common Shares Outstanding | ||||||||
| - Basic and Diluted | 3,068,456 | 2,894,509 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-3 |
BLINK CHARGING CO. AND SUBSIDIARIES
(FORMERLY CAR CHARGING GROUP, INC.)
Consolidated Statements of Changes in Stockholders’ Deficiency
For the Years Ended December 31, 2017 and 2016
| Non | ||||||||||||||||||||||||||||||||||||||||
| Convertible | Additional | Controlling | Total | |||||||||||||||||||||||||||||||||||||
| Preferred-A | Preferred-C | Common Stock | Paid-In | Accumulated | Interest | Stockholders’ | ||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | Deficiency | |||||||||||||||||||||||||||||||
| Balance - December 31, 2015 | 10,500,000 | $ | 10,500 | 120,330 | $ | 120 | 1,592,415 | $ | 1,592 | $ | 63,754,877 | $ | (73,372,655 | ) | $ | (4,011,130 | ) | $ | (13,616,696 | ) | ||||||||||||||||||||
| Sale of Series C convertible preferred stock, net of issuance costs [1] | - | - | 22,786 | 22 | - | - | 976,849 | - | - | 976,871 | ||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | - | - | 3,883 | 4 | 381,435 | - | - | 381,439 | ||||||||||||||||||||||||||||||
| - | ||||||||||||||||||||||||||||||||||||||||
| Common stock issued as compensation for services previously accrued | - | - | - | - | 18,078 | 18 | (18 | ) | - | - | - | |||||||||||||||||||||||||||||
| Return and retirement of common stock in connection with settlement | - | - | - | - | (4,846 | ) | (5 | ) | (44,995 | ) | - | - | (45,000 | ) | ||||||||||||||||||||||||||
| Convertible preferred stock issued as compensation to the Chief Operating Officer | 500,000 | 500 | 750 | 1 | - | - | (501 | ) | - | - | - | |||||||||||||||||||||||||||||
| Series C convertible preferred stock issued as compensation to the Executive Chairman | - | - | 444 | 1 | - | - | 39,963 | - | - | 39,964 | ||||||||||||||||||||||||||||||
| Series C convertible preferred stock dividends: | ||||||||||||||||||||||||||||||||||||||||
| Accrual of dividends earned | - | - | - | - | - | - | (1,468,500 | ) | - | - | (1,468,500 | ) | ||||||||||||||||||||||||||||
| Payment of dividends in kind | - | - | 6,116 | 6 | - | - | 611,594 | - | - | 611,600 | ||||||||||||||||||||||||||||||
| Warrant modification expense | - | - | - | - | - | - | 7,295 | - | - | 7,295 | ||||||||||||||||||||||||||||||
| Assumption of liability of 350 Green by Car Charging Group, Inc. | - | - | - | - | - | - | (179,816 | ) | - | 179,816 | - | |||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | (7,699,127 | ) | - | (7,699,127 | ) | ||||||||||||||||||||||||||||
| Balance - December 31, 2016 | 11,000,000 | $ | 11,000 | 150,426 | $ | 150 | 1,609,530 | $ | 1,610 | $ | 64,078,182 | $ | (81,071,782 | ) | $ | (3,831,314 | ) | $ | (20,812,154 | ) | ||||||||||||||||||||
| Stock-based compensation | - | - | - | - | 10,000 | 10 | 973,182 | - | - | 973,192 | ||||||||||||||||||||||||||||||
| Series C convertible preferred stock issued in satisfaction of public information fee | - | - | 30,235 | 30 | - | - | 3,023,470 | - | - | 3,023,500 | ||||||||||||||||||||||||||||||
| Series C convertible preferred stock issued in satisfaction of registration rights penalty | - | - | 12,455 | 13 | - | - | 1,245,487 | - | - | 1,245,500 | ||||||||||||||||||||||||||||||
| Series C convertible preferred stock dividends: | ||||||||||||||||||||||||||||||||||||||||
| Accrual of dividends earned | - | - | - | - | - | - | (4,267,100 | ) | - | - | (4,267,100 | ) | ||||||||||||||||||||||||||||
| Payment of dividends in kind | - | - | 36,435 | 37 | - | - | 3,643,364 | - | - | 3,643,401 | ||||||||||||||||||||||||||||||
| Common stock issued in partial satisfaction of debt | - | - | - | - | 21,166 | 21 | 181,903 | - | - | 181,924 | ||||||||||||||||||||||||||||||
| Common stock issued in exchange for warrants | - | - | - | - | 180,733 | 181 | 2,430,014 | - | - | 2,430,194 | ||||||||||||||||||||||||||||||
| Common stock issued in exchange for FGI warrants | - | - | - | - | 2,990,404 | 2,990 | 43,955,948 | - | - | 43,958,939 | ||||||||||||||||||||||||||||||
| Impact of share rounding as a result of reverse stock split | - | - | - | - | 999 | 1 | - | - | - | 1 | ||||||||||||||||||||||||||||||
| Common stock issued in satisfaction of accrued issuable equity | - | - | - | - | 710,841 | 711 | 4,234,691 | - | - | 4,235,402 | ||||||||||||||||||||||||||||||
| Deconsolidation of 350 Green | - | - | - | - | - | - | - | - | 3,831,314 | 3,831,314 | ||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | (75,363,496 | ) | - | (75,363,496 | ) | ||||||||||||||||||||||||||||
| Balance - December 31, 2017 | 11,000,000 | $ | 11,000 | 229,551 | $ | 230 | 5,523,673 | $ | 5,524 | $ | 119,499,141 | $ | (156,435,278 | ) | $ | - | $ | (36,919,383 | ) | |||||||||||||||||||||
| [1] | Includes gross proceeds of $1,367,120, less issuance costs of $211,835 ($150,383 of cash and $61,452 non-cash) and warrants with an issuance date fair value of $178,414 recorded as a derivative liability. |
The accompanying notes are an integral part of these consolidated financial statements.
| F-4 |
BLINK CHARGING CO. AND SUBSIDIARIES
(FORMERLY CAR CHARGING GROUP, INC.)
Consolidated Statements of Cash Flows
| For the Years Ended | ||||||||
| December 31, | ||||||||
| 2017 | 2016 | |||||||
| Cash Flows From Operating Activities | ||||||||
| Net loss | $ | (75,363,496 | ) | $ | (7,699,127 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 412,594 | 861,831 | ||||||
| Accretion of interest expense | 532,323 | 63,773 | ||||||
| Amortization of discount on convertible debt | 2,285,173 | 962,412 | ||||||
| Change in fair value of warrant liabilities | 44,009,839 | (727,239 | ) | |||||
| Loss on inducement in exchange for warrants | 7,570,581 | - | ||||||
| Provision for bad debt | 35,000 | 98,650 | ||||||
| Loss on disposal of fixed assets | 803 | 17,557 | ||||||
| Loss on deconsolidation of 350 Green | 97,152 | - | ||||||
| Gain on settlement of accounts payable, net | (22,914 | ) | (840,625 | ) | ||||
| Non-compliance penalty for delinquent regular SEC filings | - | 571,543 | ||||||
| Non-compliance penalty for SEC registration requirement | 73,498 | 239,178 | ||||||
| Non-cash compensation: | ||||||||
| Convertible preferred stock | - | 131,967 | ||||||
| Common stock | 1,474,367 | 248,545 | ||||||
| Options | 320,443 | 396,124 | ||||||
| Warrants | 1,349,994 | 7,821 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable and other receivables | (134,603 | ) | 324,249 | |||||
| Inventory | 147,359 | 289,616 | ||||||
| Prepaid expenses and other current assets | (23,721 | ) | 397,667 | |||||
| Other assets | 22,264 | 42,470 | ||||||
| Accounts payable and accrued expenses | 14,930,824 | 2,181,363 | ||||||
| Deferred revenue | (266,141 | ) | (316,798 | ) | ||||
| Total Adjustments | 72,814,835 | 4,950,104 | ||||||
| Net Cash Used in Operating Activities | (2,548,661 | ) | (2,749,023 | ) | ||||
| Cash Flows From Investing Activities | ||||||||
| Purchases of fixed assets | (23,169 | ) | (80,463 | ) | ||||
| Net Cash Used In Investing Activities | (23,169 | ) | (80,463 | ) | ||||
| Cash Flows From Financing Activities | ||||||||
| Proceeds from sale of shares of Series C Convertible | ||||||||
| Preferred stock and warrants | - | 1,367,120 | ||||||
| Payment of Series C Convertible Preferred Stock issuance costs | - | (52,500 | ) | |||||
| Payments of deferred offering costs | (172,158 | ) | (53,640 | ) | ||||
| Payments of debt issuance costs | (72,945 | ) | (87,405 | ) | ||||
| Bank overdrafts, net | (11,566 | ) | 11,566 | |||||
| Proceeds from issuance of convertible note payable | 2,500,000 | 1,000,000 | ||||||
| Proceeds from issuance of notes payable to non-related party | 260,000 | - | ||||||
| Proceeds from issuance of notes payable to a related party | 257,645 | 600,000 | ||||||
| Repayment of notes and convertible notes payable | (9,893 | ) | (138,988 | ) | ||||
| Net Cash Provided by Financing Activities | 2,751,083 | 2,646,153 | ||||||
| Net Increase (Decrease) In Cash | 179,253 | (183,333 | ) | |||||
| Cash - Beginning of Year | 5,898 | 189,231 | ||||||
| Cash - End of Year | $ | 185,151 | $ | 5,898 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-5 |
BLINK CHARGING CO. AND SUBSIDIARIES
(FORMERLY CAR CHARGING GROUP, INC.)
Consolidated Statements of Cash Flows -- Continued
| For The Years Ended | ||||||||
| December 31, | ||||||||
| 2017 | 2016 | |||||||
| Supplemental Disclosures of Cash Flow Information: | ||||||||
| Cash paid during the years for: | ||||||||
| Interest expense | $ | 44 | $ | 2,414 | ||||
| Non-cash investing and financing activities: | ||||||||
| Return and retirement of common stock in connection with settlement | $ | - | $ | 45,000 | ||||
| Issuance of common stock for services previously accrued | $ | 181,924 | $ | 26,982 | ||||
| Accrual of contractual dividends on Series C Convertible Preferred Stock | $ | 4,267,100 | $ | - | ||||
| Issuance of Series C Convertible Preferred Stock in satisfaction of contractual dividends | $ | 3,643,401 | $ | (611,600 | ) | |||
| Issuance of Series C Convertible Preferred Stock in satisfaction of public information fee | $ | 3,023,500 | $ | - | ||||
| Issuance of Series C Convertible Preferred Stock in satisfaction of registration rights penalty | $ | 1,245,500 | $ | 1,468,500 | ||||
| Transfer of inventory to fixed assets | $ | - | $ | 59,709 | ||||
| Accrual of warrant obligation in connection with issuance of notes payable | $ | 1,200,000 | $ | - | ||||
| Issuance or accrual of common stock, warrants and embedded conversion options as debt discount in connection with the issuance of notes payable | $ | 1,382,224 | $ | 204,465 | ||||
| Warrants issued in connection with sale of Series C convertible preferred stock | $ | - | $ | 178,414 | ||||
| Accrual of deferred public offering costs | $ | 860,097 | $ | 281,835 | ||||
| Accrual of issuance costs on Series C Convertible Preferred Stock | $ | - | $ | 159,335 | ||||
| Warrants issued as debt discount in connection with issuances of notes payable | $ | - | $ | 285,468 | ||||
| Issuance of common stock in exchange for warrants | $ | 46,385,962 | $ | - | ||||
| Common stock issued in satisfaction of accrued issuable equity | $ | 4,235,402 | $ | - | ||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-6 |
BLINK
CHARGING CO. AND SUBSIDIARIES
(FORMERLY KNOWN AS CAR CHARGING GROUP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
1. BUSINESS ORGANIZATION, NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Blink Charging Co. was incorporated on October 3, 2006 under the laws of the State of Nevada as New Image Concepts, Inc. On December 7, 2009, New Image Concepts, Inc. changed its name to Car Charging Group, Inc. On August 17, 2017, Car Charging Group, Inc. changed its name to Blink Charging Co.
Blink Charging Co., through its wholly-owned subsidiaries (collectively, the “Company” or “Blink”), is a leading owner, operator, and provider of electric vehicle (“EV”) charging equipment and networked EV charging services. Blink offers both residential and commercial EV charging equipment, enabling EV drivers to easily recharge at various location types.
Blink’s principal line of products and services is its Blink EV charging network (the “Blink Network”) and EV charging equipment (also known as electric vehicle supply equipment (“EVSE”) and EV-related services. The Blink Network is a proprietary cloud-based software that operates, maintains, and tracks all of the Blink EV charging stations and the associated charging data. The Blink Network provides property owners, managers, and parking companies (“Property Partners”) with cloud-based services that enable the remote monitoring and management of EV charging stations, payment processing, and provides EV drivers with vital station information including station location, availability, and applicable fees.
Blink offers its Property Partners a flexible range of business models for EV charging equipment and services. In its comprehensive and turnkey business model, Blink owns and operates the EV charging equipment, manages the installation, maintenance, and related services; and shares a portion of the EV charging revenue with the property owner. Alternatively, Property Partners may share in the equipment and installation expenses, with Blink operating and managing the EV charging stations and providing connectivity to the Blink Network. For Property Partners interested in purchasing and owning EV charging stations that they manage, Blink provides EV charging hardware, site recommendations, connectivity to the Blink Network, and service and maintenance services.
Effective August 29, 2017, pursuant to authority granted by the stockholders of the Company, the Company implemented a 1-for-50 reverse split of the Company’s issued and outstanding common stock (the “Reverse Split”). The number of authorized shares remains unchanged. All share and per share information has been retroactively adjusted to reflect the Reverse Split for all periods presented, unless otherwise indicated. See Note 11 – Stockholders’ Deficiency for additional details regarding the Company’s authorized capital.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
LIQUIDITY AND FINANCIAL CONDITION
As of December 31, 2017, the Company had a cash balance, a working capital deficiency and an accumulated deficit of $185,151, $34,762,130 and $156,435,278, respectively. During the years ended December 31, 2017 and 2016 the Company incurred net losses of $75,363,496 and $7,699,127, respectively. The Company has not yet achieved profitability. Subsequent to December 31, 2017, the Company raised aggregate net proceeds of approximately $14.1 million in connection with its public offering (“Public Offering”) and exchanged aggregate liabilities of approximately $26.0 million for equity. See Note 15 – Subsequent Events for additional details.
The Company believes its current cash on hand, as of the date of this filing, is sufficient to meet its operating and capital requirements for at least the next twelve months from the date of this filing. Thereafter, the Company will need to raise further capital through the sale of additional equity or debt securities or other debt instruments to support its future operations. The Company’s operating needs include the planned costs to operate its business, including amounts required to fund working capital and capital expenditures. The Company’s future capital requirements and the adequacy of its available funds will depend on many factors, including the Company’s ability to successfully commercialize its products and services, competing technological and market developments, and the need to enter into collaborations with other companies or acquire other companies or technologies to enhance or complement its product and service offerings. There is also no assurance that the amount of funds the Company might raise will enable the Company to complete its development initiatives or attain profitable operations. If the Company is unable to obtain additional financing on a timely basis, it may have to curtail its development, marketing and promotional activities, which would have a material adverse effect on the Company’s business, financial condition and results of operations, and ultimately, the Company could be forced to discontinue its operations and liquidate.
| F-7 |
BLINK
CHARGING CO. AND SUBSIDIARIES
(FORMERLY KNOWN AS CAR CHARGING GROUP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Blink Charging Co. and its wholly-owned subsidiaries, including Car Charging, Inc., Beam Charging LLC (“Beam”), EV Pass LLC (“EV Pass”), Blink Network LLC (“Blink Network”) and Car Charging China Corp. (“Car Charging China”). All intercompany transactions and balances have been eliminated in consolidation.
Through April 16, 2014, 350 Green LLC (“350 Green”) was a wholly-owned subsidiary of the Company in which the Company had full voting control and was therefore consolidated. Beginning on April 17, 2014, when 350 Green’s assets and liabilities were transferred to a trust mortgage, 350 Green became a Variable Interest Entity (“VIE”). The consolidation guidance relating to accounting for VIEs requires an enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a variable interest entity and perform ongoing reassessments of whether an enterprise is the primary beneficiary of a VIE. The Company determined that it was the primary beneficiary of 350 Green, and as such, effective April 17, 2014, and as such 350 Green’s assets, liabilities and results of operations were included in the Company’s consolidated financial statements. On May 18, 2017, each of 350 Green and Green 350 Trust Mortgage LLC filed to commence an Assignment for the Benefit of Creditors, which resulted in its residual assets being controlled by an assignee in a judicial proceeding. As a result, as of May 18, 2017, 350 Green is no longer a variable interest entity of the Company and, accordingly, 350 Green, which had approximately $3.7 million of liabilities, has been deconsolidated from the Company’s financial statements which resulted in a loss $97,152 and was recorded on the statement of operations for the year ended December 31, 2017. On March 26, 2018, final judgment has been reached relating to the Assignment for the Benefit of the Creditors, whereby all remaining assets of 350 Green are abandoned to their respective property owners where the charging stations have been installed, thus on March 26, 2018 the assignment proceeding has closed.
USE OF ESTIMATES
Preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, together with amounts disclosed in the related notes to the financial statements. The Company’s significant estimates used in these financial statements include, but are not limited to, stock-based compensation, accounts receivable reserves, warranty reserves, inventory valuations, the valuation allowance related to the Company’s deferred tax assets, the carrying amount of intangible assets, estimates of future EV sales and the effects thereon, derivative liabilities and the recoverability and useful lives of long-lived assets. Certain of the Company’s estimates could be affected by external conditions, including those unique to the Company and general economic conditions. It is reasonably possible that these external factors could have an effect on the Company’s estimates and could cause actual results to differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents in the consolidated financial statements. The Company has cash on deposits in several financial institutions which, at times, may be in excess of FDIC insurance limits. The Company has not experienced losses in such accounts.
ACCOUNTS RECEIVABLE
Accounts receivable are carried at their contractual amounts, less an estimate for uncollectible amounts. As of December 31, 2017 and 2016, there was an allowance for uncollectable amounts of $35,000 and $42,349, respectively. Management estimates the allowance for bad debts based on existing economic conditions, the financial conditions of the customers, and the amount and age of past due accounts. Receivables are considered past due if full payment is not received by the contractual due date. Past due accounts are generally written off against the allowance for bad debts only after all collection attempts have been exhausted.
| F-8 |
BLINK
CHARGING CO. AND SUBSIDIARIES
(FORMERLY KNOWN AS CAR CHARGING GROUP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
INVENTORY
Inventory is comprised of electric charging stations and related parts, which are available for sale or for warranty requirements. Inventory is stated at the lower of cost and net realizable value. Cost is determined by the first-in, first-out method. Inventory that is sold to third parties is included within cost of sales and inventory that is installed on the premises of participating owner/operator properties, where the Company retains ownership, is transferred to fixed assets at the carrying value of the inventory. The Company periodically reviews for slow-moving, excess or obsolete inventories. Products that are determined to be obsolete, if any, are written down to net realizable value. Based on the aforementioned periodic reviews, the Company recorded an inventory reserve for slow-moving or excess inventory of $209,325 and $154,000 as of December 31, 2017 and 2016, respectively.
As of December 31, 2017 and 2016, the Company’s inventory was comprised solely of finished goods and parts that are available for sale.
FIXED ASSETS
Fixed assets are stated at cost, net of accumulated depreciation and amortization which is recorded commencing at the in-service date using the straight-line method over the estimated useful lives of the assets.
| Useful Lives | ||||
| Asset | (In Years) | |||
| Computer software and office and computer equipment | 3 - 5 | |||
| Machinery and equipment, automobiles, furniture and fixtures | 3 - 10 | |||
| Installed Level 2 electric vehicle charging stations | 3 | |||
| Installed Level 3 (DC Fast Chargers (“DCFC”)) electric vehicle charging stations | 5 | |||
When fixed assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the statements of operations for the respective period. Minor additions and repairs are expensed in the period incurred. Major additions and repairs which extend the useful life of existing assets are capitalized and depreciated using the straight-line method over their remaining estimated useful lives.
EV charging stations represents the cost, net of accumulated depreciation, of charging devices that have been installed on the premises of participating owner/operator properties or are earmarked to be installed. The Company held approximately $0 and $48,000 in EV charging stations that were not placed in service as of December 31, 2017 and 2016, respectively.
The Company’s long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The Company assesses the recoverability of its long-lived assets by monitoring current selling prices of car charging units in the open market, the adoption rate of various auto manufacturers in the EV market and projected car charging utilization at various public car charging stations throughout its network in determining fair value. An impairment loss would be recognized when estimated future cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. See Note 3 – Fixed Assets for additional details.
| F-9 |
BLINK
CHARGING CO. AND SUBSIDIARIES
(FORMERLY KNOWN AS CAR CHARGING GROUP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
INTANGIBLE ASSETS
Intangible assets were acquired in conjunction with the acquisition of Blink Network during 2013 and were recorded at their fair value at such time. Trademarks are amortized on a straight-line basis over their useful life of ten years. Patents are amortized on a straight-line basis over the lives of the patent (twenty years or less), commencing when the patent is approved and placed in service.
SEGMENTS
The Company operates a single segment business. The Company’s Chief Executive Officer, who is the chief operating decision maker, views the Company’s operating performance on a consolidated basis as its only business is the sale and distribution of electric vehicle charging machines and revenues that it earns from customers who use machines connected to its network, whether owned by the Company or third-party hosts.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company evaluates its convertible instruments to determine if those contracts or embedded components of those contracts qualify as derivative financial instruments to be separately accounted for in accordance with Topic 815 of the Financial Accounting Standards Board (“FASB”) ASC. The accounting treatment of derivative financial instruments requires that the Company record the conversion options and warrants at their fair values as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date. Conversion options are recorded as a discount to the host instrument and are amortized as interest expense over the life of the underlying instrument. The Company reassesses the classification of its derivative instruments at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification.
The Binomial Lattice Model was used to estimate the fair value of the warrants that are classified as derivative liabilities on the consolidated balance sheets. The model includes subjective input assumptions that can materially affect the fair value estimates. The expected volatility is estimated based on the most recent historical period of time equal to the weighted average life of the warrants.
SEQUENCING POLICY
Under ASC 815-40-35, the Company has adopted a sequencing policy whereby, in the event that reclassification of contracts from equity to assets or liabilities is necessary pursuant to ASC 815 due to the Company’s inability to demonstrate it has sufficient authorized shares as a result of certain securities with a potentially indeterminable number of shares, shares will be allocated on the basis of the earliest issuance date of potentially dilutive instruments, with the earliest grants receiving the first allocation of shares. Pursuant to ASC 815, issuance of securities to the Company’s employees or directors are not subject to the sequencing policy.
| F-10 |
BLINK
CHARGING CO. AND SUBSIDIARIES
(FORMERLY KNOWN AS CAR CHARGING GROUP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
REVENUE RECOGNITION
The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured. Accordingly, when a customer completes use of a charging station, the service can be deemed rendered and revenue may be recognized based on the time duration of the session or kilowatt hours drawn during the session. Sales of EV stations are recognized upon shipment to the customer, free on board shipping point, or the point of customer acceptance.
Governmental grants and rebates pertaining to revenues and periodic expenses are recognized as income when the related revenue and/or periodic expense are recorded. Government 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.
For arrangements with multiple elements, which is comprised of (1) a charging station unit, (2) installation of the charging station unit, (3) maintenance and (4) network fees, revenue is recognized dependent upon whether vendor specific objective evidence (“VSOE”) of fair value exists for separating each of the elements. The Company determined that VSOE exists for both the delivered and undelivered elements of the company’s multiple-element arrangements. The Company limited their assessment of fair value to either (a) the price charged when the same element is sold separately or (b) the price established by management having the relevant authority.
See Note 2 – Summary of Significant Accounting Policies for details surrounding the Company’s adoption of Accounting Standards Codification 606 – Revenue Recognition.
CONCENTRATIONS
During the years ended December 31, 2017 and 2016, revenues generated from Entity C represented approximately less than 10% and 13% of the Company’s total revenue, respectively. As of December 31, 2017 and 2016, accounts receivable from Entity C was approximately less than 10% and 18%, respectively, of total accounts receivable. As of December 31, 2017 and 2016 accounts receivable from Entity D was approximately 32% and less than 10%, respectively, of total accounts receivable.
STOCK-BASED COMPENSATION
The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees, the fair value of the award is measured on the grant date and for non-employees, the fair value of the award is measured on the measurement date and re-measured on vesting dates and interim financial reporting dates until the service period is complete. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period. Awards granted to non-employee directors for their service as a director are treated on the same basis as awards granted to employees. The Company computes the fair value of equity-classified warrants and options granted using the Black-Scholes option pricing model.
| F-11 |
BLINK
CHARGING CO. AND SUBSIDIARIES
(FORMERLY KNOWN AS CAR CHARGING GROUP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
INCOME TAXES
The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of items that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date. As of December 31, 2017 and 2016, the Company maintained a full valuation allowance against its deferred tax assets, since it is more likely than not that the future tax benefit on such temporary differences will not be realized.
The Company recognizes the tax benefit from an uncertain income tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement by examining taxing authorities. The Company has open tax years going back to 2014 (or the tax year ended December 31, 2009 if the Company were to utilize its NOLs) which will be subject to audit by federal and state authorities upon filing. The Company’s policy is to recognize interest and penalties accrued on uncertain income tax positions in interest expense in the Company’s consolidated statements of operations. As of December 31, 2017 and 2016, the Company had no liability for unrecognized tax benefits. The Company does not expect the unrecognized tax benefits to change significantly over the next 12 months.
See Note 12 – Income Taxes for additional details including the effects of the tax cuts and Jobs Act enacted in December 2017.
NET LOSS PER COMMON SHARE
Basic net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding, plus the number of additional common shares that would have been outstanding if the common share equivalents had been issued (computed using the treasury stock or if converted method), if dilutive.
The following common share equivalents are excluded from the calculation of weighted average common shares because their inclusion would have been anti-dilutive:
| For the Years Ended | ||||||||
| December 31, | ||||||||
| 2017 | 2016 | |||||||
| Convertible preferred stock | 2,998,355 | 1,053,004 | ||||||
| Warrants | 275,332 | 1,035,115 | ||||||
| Options | 107,901 | 149,233 | ||||||
| Convertible notes | 20,555 | 16,332 | ||||||
| Total potentially dilutive shares | 3,402,143 | 2,253,684 | ||||||
COMMITMENTS AND CONTINGENCIES
Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.
| F-12 |
BLINK
CHARGING CO. AND SUBSIDIARIES
(FORMERLY KNOWN AS CAR CHARGING GROUP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
RECENTLY ISSUED ACCOUNTING PRONOUCEMENTS
In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” (“ASU 2014-09”). ASU 2014-09 supersedes the revenue recognition requirements in ASC 605 - Revenue Recognition (“ASC 605”) and most industry-specific guidance throughout ASC 605. The FASB has issued numerous updates that provide clarification on a number of specific issues as well as requiring additional disclosures. The core principle of ASC 606 requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASC 606 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing U.S. GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. The guidance may be adopted through either retrospective application to all periods presented in the financial statements (full retrospective approach) or through a cumulative effect adjustment to retained earnings at the effective date (modified retrospective approach). The guidance was revised in July 2015 to be effective for public companies for annual and interim periods beginning on or after December 15, 2017.
The Company plans to adopt ASC 606 effective January 1, 2018 using the modified retrospective method. As of the date of filing, the Company has not completed its ASC 606 implementation process and, as a result, cannot disclose the quantitative impact of adoption on its financial statement. That being said, based on its preliminary analysis, the Company believes that revenue related to charging service, product sales and network fees, which, in aggregate, represented approximately 75% of its total revenues for the years ended December 31, 2017 and 2016, will not be materially impacted as a result of adopting ASC 606. Revenues related to grants and rebates, warranty and other revenues represented approximately 25% of its total revenues for the years ended December 31, 2017 and 2016 and, while the Company does not currently believe these revenue streams will be materially impacted as a result of adopting ASC 606, it needs to complete the implementation process before it is able to conclude, including related to the timing of revenue recognition of these revenue streams.
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases. ASU 2016-02 will also require new qualitative and quantitative disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating ASU 2016-02 and its impact on its consolidated financial statements.
In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”). ASU 2016-15 will make eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017. ASU 2016-15 requires adoption on a retrospective basis unless it is impracticable to apply, in which case the Company would be required to apply the amendments prospectively as of the earliest date practicable. The Company adopted ASU 2016-15 effective January 1, 2018 and its adoption of did not have a material impact on the Company’s consolidated financial statements.
In May 2017, the FASB issued ASU No. 2017-09, “Compensation—Stock Compensation (Topic 718)” (“ASU 2017-09”). ASU 2017-09 provides clarity on the accounting for modifications of stock-based awards. ASU 2017-09 requires adoption on a prospective basis in the annual and interim periods for our fiscal year ending December 31, 2019 for share-based payment awards modified on or after the adoption date. The Company is currently evaluating the effect that adopting this new accounting guidance will have on its consolidated financial statements and related disclosures.
In July 2017, the FASB issued ASU No. 2017-11, “Earnings Per Share (Topic 260) and Derivatives and Hedging (Topic 815) - Accounting for Certain Financial Instruments with Down Round Features” (“ASU 2017-11”). Equity-linked instruments, such as warrants and convertible instruments may contain down round features that result in the strike price being reduced on the basis of the pricing of future equity offerings. Under ASU 2017-11, a down round feature will no longer require a freestanding equity-linked instrument (or embedded conversion option) to be classified as a liability that is remeasured at fair value through the income statement (i.e. marked-to-market). However, other features of the equity-linked instrument (or embedded conversion option) must still be evaluated to determine whether liability or equity classification is appropriate. Equity classified instruments are not marked-to-market. For earnings per share (“EPS”) reporting, the ASU requires companies to recognize the effect of the down round feature only when it is triggered by treating it as a dividend and as a reduction of income available to common shareholders in basic EPS. The amendments in this ASU are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption in any interim period. The Company is currently evaluating the effect that adopting this new accounting guidance will have on its consolidated financial statements and related disclosures.
| F-13 |
BLINK
CHARGING CO. AND SUBSIDIARIES
(FORMERLY KNOWN AS CAR CHARGING GROUP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
RECENTLY ISSUED ACCOUNTING PRONOUCEMENTS - CONTINUED
In August 2017, the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities” (“ASU 2017-12”) which is intended to better align an entity’s risk management activities and its financial reporting for hedging relationships. ASU 2017-12 will change both the designation and measurement guidance for a qualifying hedging relationship and the presentation of the impact of the hedging relationship on the entity’s financial statements. In addition, ASU 2017-12 contains targeted improvements to ease the application of current guidance related to the assessment of hedge effectiveness and eliminates the requirement for an entity to separately measure and report hedge ineffectiveness. For public companies, these amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the effect that adopting this new accounting guidance will have on its consolidated financial statements and related disclosures.
3. FIXED ASSETS
Fixed assets consist of the following:
| December 31, | ||||||||
| 2017 | 2016 | |||||||
| EV charging stations | $ | 4,275,008 | $ | 4,687,294 | ||||
| Software | 579,630 | 464,997 | ||||||
| Automobiles | 132,751 | 132,751 | ||||||
| Office and computer equipment | 125,992 | 125,992 | ||||||
| Leasehold improvements | 18,715 | - | ||||||
| Machinery and equipment | 71,509 | 71,509 | ||||||
| 5,203,605 | 5,482,543 | |||||||
| Less: accumulated depreciation | (4,826,685 | ) | (4,726,861 | ) | ||||
| Fixed assets, net | $ | 376,920 | $ | 755,682 | ||||
Depreciation and amortization expense related to fixed assets was $402,279 and $851,516 for the years ended December 31, 2017 and 2016, respectively, of which $380,309 and $805,607, respectively, was recorded within cost of sales in the accompanying consolidated statements of operations.
During the years ended December 31, 2017 and 2016, the Company disposed of fixed assets with a net book value of $803 and $17,557 which resulted in a loss on disposal of $803 and $17,557, respectively, which was included within other expense in the consolidated statements of operations.
| F-14 |
BLINK
CHARGING CO. AND SUBSIDIARIES
(FORMERLY KNOWN AS CAR CHARGING GROUP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
4. INTANGIBLE ASSETS
Intangible assets consist of the following:
| December 31, | ||||||||
| 2017 | 2016 | |||||||
| Trademarks | $ | 17,581 | $ | 17,580 | ||||
| Patents | 132,661 | 132,661 | ||||||
| $ | 150,242 | 150,241 | ||||||
| Less: accumulated amortization | (44,075 | ) | (33,759 | ) | ||||
| Intangible assets, net | $ | 106,167 | $ | 116,482 | ||||
Amortization expense related to intangible assets was $10,315 for the years ended December 31, 2017 and 2016.
The estimated future amortization expense is as follows:
| For the Years Ending December 31, | Patents | Trademarks | Total | |||||||||
| 2018 | $ | 7,804 | $ | 2,511 | $ | 10,315 | ||||||
| 2019 | 7,804 | 2,511 | 10,315 | |||||||||
| 2020 | 7,804 | 1,146 | 8,950 | |||||||||
| 2021 | 7,804 | - | 7,804 | |||||||||
| 2022 | 7,804 | - | 7,804 | |||||||||
| Thereafter | 60,979 | - | 60,979 | |||||||||
| $ | 99,999 | $ | 6,168 | $ | 106,167 | |||||||
5. OTHER ASSETS
Other assets consist of the following:
| December 31, | ||||||||
| 2017 | 2016 | |||||||
| Deposits | $ | 63,523 | $ | 34,057 | ||||
| Inventory conversion costs | - | 51,730 | ||||||
| Other | 3,786 | 3,786 | ||||||
| $ | 67,309 | $ | 89,573 | |||||
| F-15 |
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CHARGING CO. AND SUBSIDIARIES
(FORMERLY KNOWN AS CAR CHARGING GROUP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
6. ACCRUED EXPENSES
SUMMARY
Accrued expenses consist of the following:
| December 31, | ||||||||
| 2017 | 2016 | |||||||
| Registration rights penalty | $ | - | $ | 967,928 | ||||
| Accrued consulting fees | - | 184,800 | ||||||
| Accrued host fees | 1,657,663 | 1,308,897 | ||||||
| Accrued professional, board and other fees | 2,683,557 | 1,381,399 | ||||||
| Accrued wages | 1,016,563 | 241,466 | ||||||
| Accrued commissions | 883,763 | 445,000 | ||||||
| Warranty payable | 171,000 | 338,000 | ||||||
| Accrued taxes payable | 551,190 | 511,902 | ||||||
| Accrued payroll taxes payable | 632,078 | 122,069 | ||||||
| Warrants payable | 1,154,120 | 155,412 | ||||||
| Accrued issuable equity | 1,785,786 | 862,377 | ||||||
| Accrued interest expense | 347,027 | 273,838 | ||||||
| Accrued lease termination costs | 300,000 | - | ||||||
| Accrued settlement reserve costs | 12,980,588 | - | ||||||
| Dividend payable | 1,892,800 | 1,150,100 | ||||||
| Other accrued expenses | 19,115 | 12,788 | ||||||
| Total accrued expenses | $ | 26,075,250 | $ | 7,955,976 | ||||
REGISTRATION RIGHTS PENALTY
In connection with the sale of the Company’s Series C Convertible Preferred Stock, the Company granted the purchasers certain registration rights. The registration rights agreements entered into with the Series C Convertible Preferred Stock purchasers provide that the Company has to pay liquidated damages equal to 1% of all Series C subscription amounts received on the date the Series C resale registration statement was due to be filed pursuant to such registration rights agreements. The Company is required to pay such penalty each month thereafter until the resale registration statement is filed and once filed the Company has 30 days for the registration statement to be deemed effective otherwise the penalty resumes each month until the terms are met. The maximum liquidated damages amount is 10% of all Series C subscription amounts received. Failure to pay such liquidated damages results in interest on such damages at a rate of 18% per annum becoming due. On May 9, 2017, the Company issued 12,455 shares of Series C Convertible Preferred Stock in satisfaction of $1,245,500 of liabilities associated with the Company’s registration rights penalty.
| F-16 |
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CHARGING CO. AND SUBSIDIARIES
(FORMERLY KNOWN AS CAR CHARGING GROUP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
6. ACCRUED EXPENSES – CONTINUED
ACCRUED PROFESSIONAL, BOARD AND OTHER FEES
Accrued professional, board and other fees consist of the following:
| December 31, | ||||||||
| 2017 | 2016 | |||||||
| Investment banking fees | $ | 860,183 | $ | 860,183 | ||||
| Legal fees related to public offering | 436,715 | - | ||||||
| Professional fees | 684,673 | 142,900 | ||||||
| Board fees | 608,945 | 296,845 | ||||||
| Other | 93,041 | 81,471 | ||||||
| Total accrued professional, board and other fees | $ | 2,683,557 | $ | 1,381,399 | ||||
On June 8, 2017, the Board approved aggregate compensation of $490,173 (compromised of $344,311 to be paid in cash and $145,862 to be paid in units consisting of shares of the Company’s common stock and warrants (with each such warrant having an exercise price equal to the price per unit of the units sold in the public offering) at a 20% discount to the price per unit sold in the public offering to be paid to members of the Board based on the accrued amounts owed to such Board members as of March 31, 2017. The compensation will be paid by the third business day following: (i) a public offering of the Company’s securities; and (ii) the listing of the Company’s shares of common stock on the NASDAQ or other national securities exchange. Subsequent to December 31, 2017, the Company had paid $344,311 in cash and had issued the units.
ACCRUED COMMISSIONS
See Note 13 – Related Parties for additional details.
WARRANTY PAYABLE
The Company provides a limited product warranty against defects in materials and workmanship for its Blink Network residential and commercial chargers, ranging in length from one to two years. The Company accrues for estimated warranty costs at the time of revenue recognition and records the expense of such accrued liabilities as a component of cost of sales. Estimated warranty costs are based on historical product data and anticipated future costs. Should actual cost to repair and failure rates differ significantly from estimates, the impact of these unforeseen costs would be recorded as a change in estimate in the period identified. For the year ended December 31, 2017, the change in reserve was approximately $131,000. Warranty (benefit) expenses for the years ended December 31, 2017 and 2016 were $(35,755) and $118,978, respectively.
ACCRUED TAXES PAYABLE
See Note 14 – Commitments and Contingencies for additional details.
ACCRUED ISSUABLE EQUITY
During the year ended December 31, 2017, the Company issued an aggregate of 11,503 shares of common stock in partial satisfaction of certain liabilities.
During the year ended December 31, 2017, the Company accrued $55,046 in connection with replacement warrants to purchase 15,000 shares of common stock issuable to the Executive Chairman.
| F-17 |
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CHARGING CO. AND SUBSIDIARIES
(FORMERLY KNOWN AS CAR CHARGING GROUP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
6. ACCRUED EXPENSES - CONTINUED
ACCRUED ISSUABLE EQUITY – CONTINUED
On September 26, 2017, the Company entered into agreements with certain warrant holders to exchange warrants to purchase an aggregate of 726,504 shares of common stock with an approximate value on the date of exchange of $1.5 million for an aggregate of 710,841 shares of common stock with an approximate value on the date the parties agreed to the exchange of $8.0 million. As a result, the Company recorded a loss on inducement expense of approximately $6.5 million during the year ended December 31, 2017 related to the exchange. Between November 27, 2017 and December 1, 2017, the Company issued the 710,841 shares of common stock with an aggregate issuance date fair value of approximately $4.2 million. As a result of the change in the share price of the common stock in between the date the parties agreed to the exchange and the date the Company issued the shares, the Company recorded the change of approximately $3.8 million within change in fair value of warrant liability on the consolidated statement of operations during the year ended December 31, 2017.
See Note 10 – Fair Value Measurement, Note 8 – Notes Payable and Note 13– Related Parties for additional details.
ACCRUED LEASE TERMINATION COSTS
See Note 14 – Commitments and Contingencies for additional details.
ACCRUED SETTLEMENT RESERVE COSTS
See Note 8 – Notes Payable and Note 14 – Commitments and Contingencies.
7. ACCRUED PUBLIC INFORMATION FEE
In accordance with certain securities purchase agreements, the Company is required to be compliant with Rule 144(c)(1) of the SEC, as defined, so as to enable investors to sell their holdings of Company shares in accordance with the securities purchase agreements. In the event of the Company’s noncompliance with Rule 144(c)(1) at any time after the six-month anniversary of the offering, the investors are entitled to receive a fee of 1% of the aggregate subscription amount of the purchaser’s securities, plus an additional 1% for every pro rata 30-day period that the Company is not in compliance (payable in cash or in kind). As of December 31, 2016, the Company had accrued $3,005,277 as a result of periods of noncompliance with Rule 144(c)(1). On May 9, 2017, the Company issued 30,235 shares of Series C Convertible Preferred Stock in satisfaction of this liability. As of December 31, 2017, the Company was in compliance with Rule 144(c)(1).
See Note 11 – Stockholders’ Deficiency for additional details.
| F-18 |
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CHARGING CO. AND SUBSIDIARIES
(FORMERLY KNOWN AS CAR CHARGING GROUP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
8. NOTES PAYABLE
JMJ PROMISSORY NOTE AND JMJ AGREEMENT
The Company entered into a securities purchase agreement, dated October 7, 2016 (the “Purchase Agreement”) with JMJ Financial (“JMJ”), the terms of which were amended most recently in connection with the JMJ Agreement (defined below). Pursuant to the Purchase Agreement, JMJ purchased from the Company (i) a promissory note (the “Promissory Note”) in the aggregate principal amount of up to $3,725,000, due and payable on the earlier of February 15, 2018 or the third business day after the closing of the public offering, and (ii) five-year warrants to purchase up 100,001 shares of the Company’s common stock at an exercise price per share equal to the lesser of (a) 80% of the per share price of the common stock in the Company’s contemplated public offering, (b) $35.00 per share, (c) 80% of the unit price in the public offering (if applicable), (d) the exercise price of any warrants issued in the public offering, or (e) the lowest conversion price, exercise price, or exchange price, of any security issued by the Company that is outstanding on October 13, 2016. As of December 31, 2017, an aggregate of $3,500,000 had been advanced to the Company by JMJ, such that $3,725,000 was due pursuant to the Promissory Note. The difference between the principal amount and the cash received was recorded as debt discount and is being accreted to interest expense over the term of the Promissory Note. As of December 31, 2017, ten (10) warrants to purchase a total of 100,001 shares of the Company’s common stock with an aggregate exercise price of $3,500,000 have been issued. During the years ended December 31, 2017 and 2016, the Company issued warrants with an aggregate issuance date fair value of an of $147,569 and $185,468, respectively, which was recorded as a derivative liability. As of December 31, 2017, the Company had not issued the Origination Shares (as defined in the Purchase Agreement) associated with the advances and, as a result, accrued for the $1,680,000 fair value of the obligation. See Note 6 – Accrued Expenses. The conversion option of the Promissory Note was determined to be a derivative liability. The aggregate issuance date fair value of the warrants, Origination Shares, conversion option, placement agent fees and other issuance costs in connection with the advances during the years ended December 31, 2017 and 2016 was $2,610,568 and $1,290,446, respectively which was recorded as a debt discount against the principal amount of the Promissory Note and is amortized over the term of the note using the effective interest method. The original issue discount was $499,435 and $501,982, respectively. Amortization expense for the JMJ note was $2,133,865 and $757,946 for the years ended December 31, 2017 and 2016 respectively.
Pursuant to the default provisions of the Promissory Note, the Company accrued a $12 million default penalty as of December 31, 2017, which was included within accrued expenses on the consolidated balance sheet.
| F-19 |
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CHARGING CO. AND SUBSIDIARIES
(FORMERLY KNOWN AS CAR CHARGING GROUP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
8. NOTES PAYABLE - CONTINUED
JMJ PROMISSORY NOTE AND JMJ AGREEMENT – CONTINUED
On October 23, 2017, as amended on November 29, 2017, January 4, 2018, and February 1, 2018, the Company entered into a Lockup, Conversion, and Additional Investment Agreement (the “JMJ Agreement”) with JMJ whereby the Company and JMJ agreed to settle the current defaults under the Promissory Note. Pursuant to the JMJ Agreement, the parties agreed to two different scenarios under which the defaults under the Promissory Note would be settled, provided that (i) the Company completes its public offering by February 15, 2018, and (ii) no additional event of default or breach occurs between the date of the JMJ Agreement and the close of the public offering. Pursuant to the JMJ Agreement, the following options are available to the Company:
Option A
| i. | Cash Payment – Within three (3) trading days after closing of the public offering, the Company shall pay JMJ $2 million of the Promissory Note balance in cash. | |
| ii. | Mandatory Default Amount – JMJ agrees to settle the $12 million default penalty for $1,100,000 of common stock (“Settlement Shares”). | |
| iii. | Warrants – JMJ’s warrants (with a derivative liability value of $3.4 million on the December 31, 2017 balance sheet) shall be exchanged for $3.5 million of common stock (“Warrant Shares”). | |
| iv. | Promissory Note Balance – The balance on the Promissory Note, after applying the $2 million Cash Payment, shall be payable in common stock (“Note Balance Shares”). | |
| v. | Lockup Fee – The Company agrees to pay a lockup fee of $250,000 payable in common stock as consideration for JMJ entering into a lockup agreement, not to exceed six months, that will be effective upon closing of the public offering (“Lockup Shares”). | |
| vi. | Defaults – The Company agrees to pay to JMJ $750,000 in common stock as fees for the numerous events of default under the Purchase Agreement, the Promissory Note and related documents (“Default Shares”). | |
| vii. | Share Delivery and Pricing – The number of Settlement Shares, Warrant Shares, Note Balance Shares, Lockup Shares, Origination Shares and Default Shares (collectively, “Investor Shares”) deliverable to JMJ, and the time of the delivery of the Investor Shares, shall be determined in accordance with the pricing formula and delivery specified in the Purchase Agreement. | |
| viii. | Investor Shares Beneficial Ownership Limitation – Unless agreed by both parties, at no time will the Company issue such shares that would result in JMJ owning more than 9.99% of all shares of common stock. |
Option B
| i. | No Cash Payment – The Company shall not pay to JMJ any part of the Promissory Note balance in cash. | |
| ii. | Mandatory Default Amount – JMJ agrees to settle the $12 million default penalty for $2,100,000 of common stock (“Settlement Shares”). | |
| iii. | Warrants – JMJ’s warrants (with a derivative liability value of $3.4 million on the December 31, 2017 balance sheet) shall be exchanged for $3.5 million of common stock (“Warrant Shares”). | |
| iv. | Promissory Note Balance – The balance on the Promissory Note shall be payable in common stock (“Note Balance Shares”). | |
| v. | Lockup Fee – The Company agrees to pay a lockup fee of $250,000 payable in common stock as consideration for JMJ entering into a lockup agreement, not to exceed six months, that will be effective upon closing of the public offering (“Lockup Shares”). | |
| vi. | Defaults – The Company agrees to pay to JMJ $750,000 in common stock as fees for the numerous events of default under the Purchase Agreement, the Promissory Note and related documents (“Default Shares”). | |
| vii. | Share Delivery and Pricing – The number of Settlement Shares, Warrant Shares, Note Balance Shares, Lockup Shares, Origination Shares and Default Shares (collectively, “Investor Shares”) deliverable to JMJ, and the time of the delivery of the Investor Shares, shall be determined in accordance with the pricing formula and delivery specified in the Purchase Agreement. | |
| viii. | Investor Shares Beneficial Ownership Limitation – Unless agreed by both parties, at no time will the Company issue such shares that would result in JMJ owning more than 9.99% of all shares of common stock. |
| F-20 |
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CHARGING CO. AND SUBSIDIARIES
(FORMERLY KNOWN AS CAR CHARGING GROUP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
8. NOTES PAYABLE - CONTINUED
JMJ PROMISSORY NOTE AND JMJ AGREEMENT – CONTINUED
Furthermore, at JMJ’s election at any time prior to the closing of the public offering, the Company shall create, within five (5) business days after such election, a series of convertible preferred stock to address the Beneficial Ownership Limitation on Investor Shares. JMJ shall have the right to invest up to $5 million in the public offering and up to $5 million in each of the Company’s subsequent financings during the two-year period after the public offering, on the same terms as the best terms, as determined by JMJ, provided to any investor in the public offering or in any such subsequent financing.
On the fifth (5th) trading day after the closing of the public offering, but in no event later than February 15, 2018, the Company will deliver to JMJ shares of common stock (“Origination Shares”) equal to 48% of the consideration paid by JMJ under the Promissory Note divided by the lowest of (i) $35.00 per share, or (ii) the lowest daily closing price of the Company’s common stock during the ten days prior to delivery of the Origination Shares (subject to adjustment for stock splits), or (iii) 80% of the common stock offering price of the public offering, or (iv) 80% of the unit offering price of the public offering (if applicable), or (v) the exercise price of any warrants issued in the public offering. The number of shares to be issued will be determined based on the offering price in the public offering. If the public offering does not occur prior to February 15, 2018 and JMJ owns Origination Shares at the time of a subsequent public offering where the pricing terms above would result in a lower Origination Share pricing, the Origination Shares pricing shall be subject to a reset based on the same pricing terms as described above.
Pursuant to the JMJ Agreement, on January 29, 2018, JMJ informed the Company that it had elected to convert all of the principal and interest due and owing to them in connection with the Promissory Note and all other advances made to the Company into a series of preferred stock with the designations, rights, preferences and privileges as mutually agreed upon between the Company and JMJ. Accordingly, the Company filed a Certificate of Designation for its Series D Convertible Preferred Stock. See Note 15 – Subsequent Events for additional details.
Upon closing of the Public Offering, the Company chose Option B of the JMJ Agreement and did not pay cash to JMJ.
CONVERTIBLE AND OTHER NOTES – RELATED PARTY
Farkas Group Inc. (“FGI”) Notes
During the year ended December 31, 2016, the Company issued convertibles notes payable in the aggregate principal amount of $600,000 to FGI. FGI is wholly-owned by the Company’s Executive Chairman of the Board of Directors. Notes payable with an aggregate principal amount of $495,000 are to be repaid upon the earlier of (i) the sixty (60) day anniversary of the date of issuance or (ii) the date on which the Company has received at least $1,000,000 in financing from third parties. A note payable with a principal amount of $105,000 was repaid in 2016 upon the date at which the Company has received payment under an existing grant with the Pennsylvania Turnpike. Interest on the notes accrues at a rate of 18% annually and is payable at maturity. The unpaid principal and accrued interest are convertible at the election of the holder into shares of Common Stock at $35.00 per share. These notes are secured by substantially all of the assets of the Company. In connection with the notes issuances, the Company issued five-year immediately vested warrants to purchase an aggregate of 3,100,000 shares of Common Stock not subject to split at an exercise price of $0.70 per share with an aggregate issuance date fair value of $204,465, which was recorded as a debt discount. In connection with the Company’s sequencing policy, the warrants were determined to be derivative liabilities and the conversion options were also determined to be a derivative liability, however, their fair value was de minimis.
During the year ended December 31, 2017, the Company issued a convertible note payable in the principal amount of $50,000 to FGI. Interest on the note accrues at a rate of 15% annually and is payable at maturity. The unpaid principal and accrued interest are convertible at the election of the holder into shares of common stock at $35.00 per share. The note is secured by substantially all of the assets of the Company.
During the years ended December 31, 2017 and 2016, the Company made aggregate principal repayments of $0 and $125,000, respectively, associated with convertible notes payable to FGI.
Subsequent to December 31, 2017 and pursuant to the closing of the Public Offering, the Company paid $688,238 of principal and interest in satisfaction of the debt.
| F-21 |
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CHARGING CO. AND SUBSIDIARIES
(FORMERLY KNOWN AS CAR CHARGING GROUP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
8. NOTES PAYABLE - CONTINUED
CONVERTIBLE AND OTHER NOTES - RELATED PARTY - CONTINUED
BLNK Holdings, LLC (“BLNK Holdings”) Notes
During the year ended December 31, 2017, the Company issued promissory notes in the aggregate principal amount of $207,645 to BLNK Holdings. The Company’s Executive Chairman has a controlling interest in BLNK Holdings. The notes bear interest at a rate of 10% per annum, which is payable upon maturity.
Effective August 23, 2017, the Company entered into an agreement with BLNK Holdings (the “BLNK Conversion Agreement”) where the parties agreed to, upon the closing of the public offering, convert an aggregate of $209,442 of principal and interest into common stock, determined by the following formula: (i) the debt amount multiplied by a factor of 1.15 and (ii) then divided by 80% of the per share price of common stock sold in the public offering. If the Company converts securities at more favorable terms than those provided in the BLNK Conversion Agreement, then the conversion price herein shall be automatically modified to equal such more favorable terms. On January 4, 2018, the parties agreed to extend the expiration date of the BLNK Conversion Agreement from December 29, 2017 to February 14, 2018. On March 16, 2018, the Company issued 74,753 shares of common stock to BLNK Holdings.
During the year ended December 31, 2017, the Company made aggregate principal repayments of $5,078 associated with notes payable to BLNK Holdings.
OTHER NOTES
During the year ended December 31, 2017, the Company issued notes payable in the aggregate principal amount of $260,000 to certain lenders. Interest on the notes accrues at a rate of 12% annually and is payable at maturity. The notes matured on the earlier of December 29, 2017 or the Company receiving $5,000,000 from equity investors or through debt financings. In connection with the issuances of these notes, the Company issued five-year warrants to purchase an aggregate of 15,600 shares of common stock at an exercise price equal to the lower of $35.00 per share or a price equal to a 20% discount to the price per share sold in any equity financing transaction within the next twelve months whereby the Company cumulatively receives at least $1,000,000. The aggregate issuance date fair value of the warrants of $52,260 was recorded as a debt discount and is being amortized over the terms of the respective notes. Subsequent to December 31, 2017, the Company repaid the principal and interest related to the note.
During the year ended December 31, 2017, the Company made aggregate principal repayments of $4,815 associated with other notes payable.
INTEREST EXPENSE
Interest expense on notes payable for the years ended December 31, 2017 and 2016 was $946,131 and $256,098, respectively.
| F-22 |
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CHARGING CO. AND SUBSIDIARIES
(FORMERLY KNOWN AS CAR CHARGING GROUP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
9. DEFERRED REVENUE
The Company is the recipient of various private and governmental grants, rebates and marketing incentives. Reimbursements of periodic expenses are recognized as income when the related expense is incurred. Private and government grants and rebates related to EV charging stations and their installation are deferred and amortized in a manner consistent with the recognition of the related depreciation expense of the related asset over their useful lives.
Grant, rebate and incentive revenue recognized during the years ended December 31, 2017 and 2016 was $120,905 and $332,672, respectively.
Deferred revenue consists of the following:
| December 31, | ||||||||
| 2017 | 2016 | |||||||
| Nissan | $ | 46,212 | $ | 78,832 | ||||
| NYSERDA | - | 2,690 | ||||||
| CEC | - | 16,588 | ||||||
| NV Energy Commission | - | 2,626 | ||||||
| PA Turnpike | 34,185 | 47,135 | ||||||
| AFIG-PAT | 86,112 | 119,453 | ||||||
| Prepaid Network and Maintenance Fees | 155,810 | 176,745 | ||||||
| Green Commuter | - | 128,000 | ||||||
| Other | 111,735 | 128,126 | ||||||
| Total deferred revenue | 434,054 | 700,195 | ||||||
| Deferred revenue, non-current portion | (50,283 | ) | (99,495 | ) | ||||
| Current portion of deferred revenue | $ | 383,771 | $ | 600,700 | ||||
It is anticipated that deferred revenue as of December 31, 2017 will be recognized over the next three years as follows:
| For the Year Ending | ||||
| December 31, | Revenue | |||
| 2018 | $ | 383,771 | ||
| 2019 | 36,259 | |||
| 2020 | 14,024 | |||