10-Q 1 form10q.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2019

 

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.)
     
407 Lincoln Road, Suite 704    
Miami Beach, Florida   33139-3024
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code: (305) 521-0200

 

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class   Trading Symbol(s)   Name of Each Exchange on Which Registered
Common Stock   BLNK   The NASDAQ Stock Market LLC
Common Stock Purchase Warrants   BLNKW   The NASDAQ Stock Market LLC

 

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 [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes [X] No [  ]

 

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 [X] Smaller reporting company [X]
    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]

 

As of May 7, 2019, the registrant had 26,236,804 shares of common stock outstanding.

 

 

 

 
 

 

BLINK CHARGING CO. AND SUBSIDIARIES

 

FORM 10-Q

 

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2019

 

TABLE OF CONTENTS

 

  Page
PART I - FINANCIAL INFORMATION  
   
Item 1. Financial Statements.  
   
Condensed Consolidated Balance Sheets as of March 31, 2019 (Unaudited) and December 31, 2018 1
   
Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2019 and 2018 2
   
Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income for the Three Months Ended March 31, 2019 and 2018 3
   
Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2019 4
   
Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity (Deficiency) for the Three Months Ended March 31, 2018 5
   
Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2019 and 2018 6
   
Notes to Unaudited Condensed Consolidated Financial Statements 8
   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 19
   
Item 3. Quantitative and Qualitative Disclosures About Market Risk. 23
   
Item 4. Controls and Procedures. 23
   
PART II - OTHER INFORMATION  
   
Item 1. Legal Proceedings. 25
   
Item 1A. Risk Factors. 25
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 26
   
Item 3. Defaults Upon Senior Securities. 26
   
Item 4. Mine Safety Disclosures. 26
   
Item 5. Other Information. 26
   
Item 6. Exhibits. 27
   
SIGNATURES 28

 

i
 

 

PART 1 – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS.

 

BLINK CHARGING CO. AND SUBSIDIARIES

 

Condensed Consolidated Balance Sheets

 

   March 31, 2019   December 31, 2018 
    (unaudited)      
Assets          
           
Current Assets:          
Cash  $12,599,600   $15,538,849 
Marketable securities   2,988,175    2,878,664 
Accounts receivable and other receivables, net   197,511    168,169 
Inventory, net   1,872,667    1,235,334 
Current portion of operating lease right-of-use asset   104,854    168,595 
Prepaid expenses and other current asset   737,150    839,520 
           
Total Current Assets   18,499,957    20,829,131 
Property and equipment, net   415,196    383,567 
Operating lease right-of-use asset, non-current portion   308,239    270,713 
Intangible assets, net   92,673    95,852 
Other assets   72,077    71,198 
           
Total Assets  $19,388,142   $21,650,461 
           
Liabilities and Stockholders’ Equity          
           
Current Liabilities:          
Accounts payable  $2,313,856   $2,582,196 
Accrued expenses   1,469,077    1,544,921 
Accrued issuable equity   200,414    318,493 
Notes payable   10,000    287,966 
Current portion of operating lease liabilities   173,487    151,997 
Current portion of deferred revenue   337,452    357,048 
           
Total Current Liabilities   4,504,286    5,242,621 
           
Operating lease liabilities, non-current portion   254,645    299,733 
Deferred revenue, non-current portion   9,299    13,878 
           
Total Liabilities   4,768,230    5,556,232 
           
Series B Convertible Preferred Stock, 10,000 shares designated, 0 issued and outstanding as of March 31, 2019 and December 31, 2018, respectively   -    - 
           
Commitments and contingencies (Note 10)          
           
Stockholders’ Equity:          
Preferred stock, $0.001 par value, 40,000,000 shares authorized;          
Series A Convertible Preferred Stock, 20,000,000 shares designated, 0 shares issued and outstanding as of March 31, 2019 and  December 31, 2018, respectively   -    - 
Series C Convertible Preferred Stock, 250,000 shares designated, 0 issued and outstanding as of March 31, 2019 and December 31, 2018   -    - 
Series D Convertible Preferred Stock, 13,000 shares designated, 5,125 and 5,141 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively   5    5 
Common stock, $0.001 par value, 500,000,000 shares authorized, 26,223,809 26,118,075 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively   26,224    26,118 
Additional paid-in capital   176,243,105    175,924,587 
Accumulated other comprehensive income   100,686    - 
Accumulated deficit   (161,750,108)   (159,856,481)
           
Total Stockholders’ Equity   14,619,912    16,094,229 
           
Total Liabilities and Stockholders’ Equity  $19,388,142   $21,650,461 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

1
 

 

BLINK CHARGING CO. AND SUBSIDIARIES

 

Condensed Consolidated Statements of Operations

 

(unaudited)

 

   For The Three Months Ended 
   March 31, 
   2019   2018 
Revenues:          
Charging service revenue - company-owned charging stations  $324,895   $305,747 
Product sales   103,204    135,760 
Network fees   74,470    57,251 
Warranty   16,508    30,402 
Grant and rebate   6,714    16,231 
Other   51,599    50,529 
           
Total Revenues   577,390    595,920 
           
Cost of Revenues:          
Cost of charging services - company-owned charging stations   29,729    43,761 
Host provider fees   82,039    108,405 
Cost of product sales   213,320    63,533 
Network costs   77,223    66,928 
Warranty and repairs and maintenance   88,872    63,728 
Depreciation and amortization   32,249    77,744 
Total Cost of Revenues   523,432    424,099 
           
Gross Profit   53,958    171,821 
           
Operating Expenses:          
Compensation   1,603,485    3,688,636 
General and administrative expenses   257,136    101,169 
Other operating expenses   508,825    183,955 
           
Total Operating Expenses   2,369,446    3,973,760 
           
Loss From Operations   (2,315,488)   (3,801,939)
           
Other Income (Expense):          
Interest income (expense), net   16,072    (104,983)
Interest expense - related party share transfer   -    (785,200)
Amortization of discount on convertible debt   -    (528,929)
Gain on settlement of debt   310,000    - 
Gain on settlement of accounts payable, net   52,500    920,352 
Loss on settlement reserve   -    (127,941)
Change in fair value of derivative and other accrued liabilities   (54,742)   3,024,598 
Loss on settlement of liabilities for equity   -    (2,192,045)
Gain on settlement of liabilities to JMJ for equity   -    5,800,175 
Other income   98,031    - 
           
Total Other Income   421,861    6,006,027 
           
Net (Loss) Income   (1,893,627)   2,204,088 
Dividend attributable to Series C shareholders   -    (607,800)
Deemed dividend   -    (23,458,931)
Net Loss Attributable to Common Shareholders  $(1,893,627)  $(21,862,643)
           
Net Loss Per Share:          
Basic  $(0.07)  $(2.58)
Diluted  $(0.07)  $(2.58)
           
Weighted Average Number of Common Shares Outstanding:          
Basic   26,171,070    8,472,092 
Diluted   26,171,070    8,472,092 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

2
 

 

BLINK CHARGING CO. AND SUBSIDIARIES

 

Condensed Consolidated Statements of Comprehensive (Loss) Income

 

(unaudited)

 

   For the Three Months Ended 
   March 31, 
   2019   2018 
Net (Loss) Income  $(1,893,627)  $2,204,088 
Other Comprehensive Income:          
Change in fair value of marketable securities   100,686    - 
Total Comprehensive (Loss) Income  $(1,792,941)  $2,204,088 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

3
 

 

BLINK CHARGING CO. AND SUBSIDIARIES

 

Condensed Consolidated Statement of Changes in Stockholders’ Equity

For the Three Months Ended March 31, 2019

 

(unaudited)

 

    Convertible Preferred Stock                 Additional     Accumulated Other           Total  
    Series D     Common Stock     Paid-In     Comprehensive     Accumulated     Stockholders’  
    Shares     Amount     Shares     Amount     Capital     Income     Deficit     Equity  
                                                 
Balance - January 1, 2019     5,141     $ 5       26,118,075     $ 26,118     $ 175,924,587     $ -     $ (159,856,481 )   $ 16,094,229  
                                                              -  
Stock-based compensation     -       -       51,724       52       118,684       -       -       118,736  
                                                              -  
Restricted stock issued in satisfaction of accrued issuable equity     -       -       56,948       57       199,831       -       -       199,888  
                                                              -  
Common stock issued upon conversion of Series D convertible preferred stock     (16 )     -       5,128       5       (5 )     -       -       -  
                                                                 
Return and retirement of common stock     -       -       (8,066 )     (8 )     8       -       -       -  
                                                                 
Other comprehensive income     -       -       -       -       -       100,686       -       100,686  
                                                                 
Net loss     -       -       -       -       -       -       (1,893,627 )     (1,893,627 )
                                                                 
Balance - March 31, 2019     5,125     $ 5       26,223,809     $ 26,224     $ 176,243,105     $ 100,686     $ (161,750,108 )   $ 14,619,912  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

4
 

 

BLINK CHARGING CO. AND SUBSIDIARIES

 

Condensed Consolidated Statement of Changes in Stockholders’ Equity (Deficiency)

For the Three Months Ended March 31, 2018

 

(unaudited)

 

                                           Total 
   Convertible Preferred Stock           Additional       Stockholders’ 
   Series A   Series C   Series D   Common Stock   Paid-In   Accumulated   (Deficiency) 
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Deficit   Equity 
                                             
Balance - January 1, 2018   11,000,000   $11,000    229,551   $230    -   $-    5,523,673   $5,524   $119,499,141   $(156,435,278)  $(36,919,383)
                                                        
Common stock and warrants issued in public offering [1]   -    -    -    -    -    -    4,353,000    4,353    14,876,462    -    14,880,815 
                                                        
Common stock issued upon conversion of Series A convertible preferred stock   (11,000,000)   (11,000)   -    -    -    -    550,000    550    10,450    -    - 
                                                        
Common stock issued in satisfaction of Series B convertible preferred stock   -    -    -    -    -    -    223,235    223    824,777    -    825,000 
                                                        
Common stock issued upon conversion of Series C convertible preferred stock   -    -    (254,557)   (255)   -    -    9,111,644    9,112    (8,857)   -    - 
                                                        
Series D convertible preferred stock issued in satisfaction of liabilities   -    -    -    -    12,005    12    -    -    12,004,988    -    12,005,000 
                                                        
Common stock issued in partial satisfaction of debt and other liabilities   -    -    -    -    -    -    1,488,021    1,488    4,282,500    -    4,283,988 
                                                        
Warrants reclassified from derivative liabilities   -    -    -    -    -    -    -    -    36,445    -    36,445 
                                                        
Series C convertible preferred stock dividends:                                                       
Accrual of dividends earned   -    -    -    -    -    -    -    -    (607,800)   -    (607,800)
Payment of dividends in kind   -    -    25,006    25    -    -    -    -    2,500,575    -    2,500,600 
                                                        
Stock-based compensation   -    -    -    -    -    -    932,328    932    2,664,343    -    2,665,275 
                                                        
Beneficial conversion feature of Series B and C convertible preferred stock   -    -    -    -    -    -    -    -    23,458,931    -    23,458,931 
                                                        
Deemed dividend related to immediate accretion of beneficial conversion of Series B and C convertible preferred stock   -    -    -    -    -    -    -    -    (23,458,931)   -    (23,458,931)
                                                        
Contribution of capital - related party share transfer (see Note 8)   -    -    -    -    -    -    -    -    785,200    -    785,200 
                                                        
Net income   -    -    -    -    -    -    -    -    -    2,204,088    2,204,088 
                                                        
Balance - March 31, 2018   -   $-    -   $-    12,005   $12    22,181,901   $22,182   $156,868,224   $(154,231,190)  $2,659,228 

 

[1] Includes gross proceeds of $18,504,320, less issuance costs of $3,623,505.

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

5
 

 

BLINK CHARGING CO. AND SUBSIDIARIES

 

Condensed Consolidated Statements of Cash Flows

 

(unaudited)

 

   For The Three Months Ended 
   March 31, 
   2019   2018 
Cash Flows From Operating Activities:          
Net (loss) income  $(1,893,627)  $2,204,088 
Adjustments to reconcile net (loss) income to net cash used in operating activities:          
Depreciation and amortization   69,235    82,216 
Amortization of discount on convertible debt   -    528,929 
Change in fair value of derivative and other accrued liabilities   (54,742)   (3,024,598)
Provision for bad debt   9,777    38,275 
Gain on settlement of debt   (310,000)   - 
Loss on settlement reserve   -    127,941 
Loss on settlement of liabilities for equity   -    2,192,045 
Gain on settlement of liabilities to JMJ for equity   -    (5,800,175)
Interest expense - related party share transfer   -    785,200 
Provision for slow moving and obsolete inventory   123,808    - 
Gain on settlement of accounts payable, net   (52,500)   (920,352)
Non-cash compensation:          
Common stock   184,295    2,703,245 
Options   (39,290)   - 
Warrants   -    114,069 
Changes in operating assets and liabilities:          
Accounts receivable and other receivables   (39,119)   (17,439)
Inventory   (805,220)   37,899 
Prepaid expenses and other current assets   102,370    (722,651)
Other assets   (879)   22,797 
Accounts payable and accrued expenses   (181,790)   (3,122,531)
Deferred revenue   (24,175)   (43,929)
           
Total Adjustments   (1,018,230)   (7,019,059)
          
Net Cash Used in Operating Activities   (2,911,857)   (4,814,971)
           
Cash Flows From Investing Activities:          
Purchases of property and equipment   (27,392)   (21,499)
           
Net Cash Used In Investing Activities   (27,392)   (21,499)
           
Cash Flows From Financing Activities:          
Proceeds from sale of common stock in public offering [1]   -    16,243,055 
Payment of public offering costs   -    (1,190,082)
Proceeds from issuance of notes payable to non-related party   -    55,000 
Proceeds from advance from a related party   -    250,000 
Repayment of notes and convertible notes payable   -    (760,000)
          
Net Cash Provided by Financing Activities   -    14,597,973 
           
Net (Decrease) Increase In Cash   (2,939,249)   9,761,503 
           
Cash - Beginning of Period   15,538,849    185,151 
           
Cash - End of Period  $12,599,600   $9,946,654 

 

[1] Includes gross proceeds of $18,504,320, less issuance costs of $2,261,265 deducted directly from the offering proceeds.

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

6
 

 

BLINK CHARGING CO. AND SUBSIDIARIES

 

Condensed Consolidated Statements of Cash Flows -- Continued

 

(unaudited)

 

   For The Three Months Ended 
   March 31, 
   2019   2018 
Supplemental Disclosures of Cash Flow Information:          
Cash paid during the years for:          
Interest expense  $-   $5,072 
Non-cash investing and financing activities:          
Common stock issued in partial satisfaction of debt and other liabilities  $-   $4,283,988 
Reduction of additional paid-in capital for public offering issuance costs that were previously paid  $-   $(172,158)
Common stock issued upon conversion of Series A convertible preferred stock  $-   $11,000 
Common stock issued in satisfaction of Series B convertible preferred stock  $-   $825,000 
Common stock issued upon conversion of Series C convertible preferred stock  $-   $255 
Common stock issued upon conversion of Series D convertible preferred stock  $5   $- 
Return and retirement of common stock  $(8)  $- 
Restricted stock issued in satisfaction of accrued issuable equity  $199,888   $- 
Change in fair value of marketable securities  $100,686   $- 
Warrants reclassified from derivative liabilities  $-   $36,445 
Accrual of contractual dividends on Series C Convertible Preferred Stock  $-   $607,800 
Issuance of Series C Convertible Preferred Stock in satisfaction of contractual dividends  $-      
Transfer of inventory to property and equipment  $(44,079)  $(21,163)
Series D convertible preferred stock issued in satisfaction of liabilities  $-   $12,005,000 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

7
 

 

BLINK CHARGING CO. AND SUBSIDIARIES

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

(UNAUDITED)

 

1. BUSINESS ORGANIZATION, NATURE OF OPERATIONS AND BASIS OF PRESENTATION

 

Blink Charging Co., through its wholly-owned subsidiaries (collectively, the “Company” or “Blink”), is a leading owner, operator, and provider of electric vehicle (“EV”) charging equipment and networked EV charging services. Blink offers both residential and commercial EV charging equipment, enabling EV drivers to easily recharge at various location types. Blink’s principal line of products and services is its Blink EV charging network (the “Blink Network”) and EV charging equipment, also known as electric vehicle supply equipment (“EVSE”) and EV-related services. The Blink Network is a proprietary cloud-based software that operates, maintains, and tracks 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, payment processing, and provides EV drivers with vital station information including station location, availability, and applicable fees. Blink offers its Property Partners a range of business models for EV charging equipment and services that generally fall into one of the three business models below.

 

  ● In the Company’s comprehensive Turnkey business model, Blink owns and operates the EV charging equipment, undertakes and manages the installation, maintenance and related services, and Blink keeps substantially all of the EV charging revenue.
     
  ● In the Company’s Hybrid business model, the Property Partner incurs the installation costs, while Blink provides the charging equipment. Blink operates and manages the EV charging station and provides connectivity of the charging station to the Blink Network. As a result, Blink shares a greater portion of the EV charging revenue with the Property Partner than under the turnkey model above.
     
  ● In the Company’s Host owned business model, the Property Partner purchases, owns and manages the Blink EV charging station, incurs the installation costs of the equipment, while Blink provides site recommendations, connectivity to the Blink Network and optional maintenance services, and the Property Partner keeps substantially all of the EV charging revenue.

 

We have strategic partnerships across numerous transit/destination locations, including airports, auto dealers, healthcare/medical, hotels, mixed-use, municipal locations, multifamily residential and condos, parks and recreation areas, parking lots, religious institutions, restaurants, retailers, schools and universities, stadiums, supermarkets, transportation hubs, and workplace locations.

 

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 March 31, 2019 and for the three months then ended. The results of operations for the three months ended March 31, 2019 are not necessarily indicative of the operating results for the full year ending December 31, 2019 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, 2018 and for the year then ended, which were filed with the Securities and Exchange Commission (“SEC”) on April 1, 2019 as part of the Company’s Annual Report on Form 10-K.

 

8
 

 

BLINK CHARGING CO. AND SUBSIDIARIES

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

(UNAUDITED)

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Since the Annual Report for the year ended December 31, 2018, there have been no material changes to the Company’s significant accounting policies, except as disclosed in this note.

 

LIQUIDITY AND FINANCIAL CONDITION

 

As of March 31, 2019, the Company had cash, working capital and an accumulated deficit of $12,599,600, $13,995,671 and $161,750,108, respectively. During the three months ended March 31, 2019, the Company incurred a net loss of $1,893,627.

 

The Company believes its current cash on hand is sufficient to meet its operating and capital requirements for at least twelve months from the issuance date of these financial statements. Thereafter, the Company may need to raise further capital through the sale of additional equity or debt securities or other debt instruments to support its future operations. The Company’s operating needs include the planned costs to operate its business, including amounts required to fund working capital and capital expenditures. The Company’s future capital requirements and the adequacy of its available funds will depend on many factors, including the Company’s ability to successfully commercialize its products and services, competing technological and market developments, and the need to enter into collaborations with other companies or acquire other companies or technologies to enhance or complement its product and service offerings.

 

There is no assurance that the amount of funds the Company might raise in the future, will enable the Company to complete its development initiatives or attain profitable operations. If the Company is unable to obtain additional financing on a timely basis, it may have to curtail its development, marketing and promotional activities, which would have a material adverse effect on the Company’s business, financial condition and results of operations, and ultimately, the Company could be forced to discontinue its operations and liquidate.

 

CASH

 

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents in the condensed consolidated financial statements. The Company has cash on deposits in several financial institutions which, at times, may be in excess of Federal Deposit Insurance Corporation (“FDIC”) insurance limits. The Company has not experienced losses in such accounts and periodically evaluates the creditworthiness of its financial institutions. The Company reduces its credit risk by placing its cash and cash equivalents with major financial institutions. As of March 31, 2019, the Company had cash balances in excess of FDIC insurance limits of $12,249,662. As of December 31, 2018, the Company had cash balances in excess of FDIC insurance limits of $15,538,849.

 

INVESTMENTS

 

Available-for-sale 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.

 

9
 

 

BLINK CHARGING CO. AND SUBSIDIARIES

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

(UNAUDITED)

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED

 

INVESTMENTS – CONTINUED

 

The following summarizes our investments as of March 31, 2019 and December 31, 2018:

 

   March 31, 2019   December 31, 2018 
Short-term investments:          
Available- for-sale investments  $2,988,175   $2,878,664 

 

The following is a summary of the unrealized gains, and fair value by investment type as of March 31, 2019 and December 31, 2018:

 

   March 31, 2019 
   Gross Unrealized Gains   Fair Value 
Fixed income  $100,686   $2,988,175 

 

   December 31, 2018 
   Gross Unrealized Gains   Fair Value 
Fixed income  $            -   $2,878,664 

 

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.

 

10
 

 

BLINK CHARGING CO. AND SUBSIDIARIES

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

(UNAUDITED)

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED

 

REVENUE RECOGNITION – CONTINUED

 

The following table summarizes our revenue recognized under ASC 606 in our condensed consolidated statements of operations:

 

   For The Three Months Ended 
   March 31, 
   2019   2018 
         
Revenues - Recognized at a Point in Time:          
Charging service revenue - company-owned charging stations  $324,895   $305,747 
Product sales   103,204    135,760 
Other   51,599    50,529 
Total Revenues - Recognized at a Point in Time   479,698    492,036 
           
Revenues - Recognized Over a Period of Time:          
Network fees and other   90,978    87,653 
Total Revenues - Recognized Over a Period of Time   90,978    87,653 
           
Total Revenue Under ASC 606  $570,676   $579,689 

 

The timing of the Company’s revenue recognition may differ from the timing of payment by its customers. A receivable is recorded when revenue is recognized prior to payment and the Company has an unconditional right to payment. Alternatively, when payment precedes the provision of the related goods or services, the Company records deferred revenue until the performance obligations are satisfied.

 

As of March 31, 2019, the Company had $245,500 related to contract liabilities where performance obligations have not yet been satisfied, which has been included within deferred revenue on the condensed consolidated balance sheet as of March 31, 2019. The Company expects to satisfy its remaining performance obligations for network fees and warranty revenue and recognize the revenue within the next twelve months.

 

During the three months ended March 31, 2019, the Company recognized $83,279 of revenues related to network fees and warranty contracts, which were included in deferred revenues as of December 31, 2018.

 

During the three months ended March 31, 2019, there was no revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods.

 

Grants, rebates and alternative fuel credits, which are not within the scope of ASC 606, pertaining to revenues and periodic expenses are recognized as income when the related revenue and/or periodic expense are recorded. Grants and rebates related to EV charging stations and their installation are deferred and amortized in a manner consistent with the related depreciation expense of the related asset over their useful lives over the useful life of the charging station. During the three months ended March 31, 2019 and 2018, the Company recorded $6,714 and $16,231, respectively, related to grant, rebate and alternative fuel credits revenue. At March 31, 2019 and December 31, 2018, there was $99,351 and $106,066, respectively, of deferred grant and rebate revenue to be amortized.

 

11
 

 

BLINK CHARGING CO. AND SUBSIDIARIES

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

(UNAUDITED)

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED

 

CONCENTRATIONS

 

During the three months ended March 31, 2019 and 2018, revenues generated from a significant customer represented approximately 12% and less than 10%, respectively of the Company’s total revenue. As of March 31, 2019 and December 31, 2018, accounts receivable from a significant customer was 27% and 35% of accounts receivable, respectively.

 

NET LOSS PER COMMON SHARE

 

Basic net loss per common share is computed by dividing net loss attributable to common shareholders by the weighted average number of common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss attributable to common shareholders by the weighted average number of common shares outstanding, plus the number of additional common shares that would have been outstanding if the common share equivalents had been issued (computed using the treasury stock or if converted method), if dilutive.

 

The following common share equivalents are excluded from the calculation of weighted average common shares outstanding because their inclusion would have been anti-dilutive:

 

   For the Three Months Ended 
   March 31, 
   2019   2018 
Convertible preferred stock   1,642,628    3,847,756 
Warrants   6,837,061    10,913,658 
Options   105,308    106,808 
Total potentially dilutive shares   8,584,997    14,868,222 

 

RECLASSIFICATIONS

 

Certain prior year balances have been reclassified in order to conform to current year presentation. These reclassifications have no effect on previously reported results of operations or loss per share.

 

RECENTLY ISSUED ACCOUNTING STANDARDS

 

In 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 Company will be required to adopt the provisions of this ASU on January 1, 2020, with early adoption permitted for certain amendments. The Company is currently assessing the impact that this pronouncement will have on its condensed consolidated financial statements.

 

3. PREPAID EXPENSES AND OTHER CURRRENT ASSETS

 

As of March 31, 2019, The Company had remaining purchase commitments to acquire second generation charging stations with an aggregate value of $1,009,326. The Company has a remaining deposit of $334,457 for these charging stations, which is included within prepaid expenses and other current assets on our condensed consolidated balance sheet as of March 31, 2019. The net commitment of $674,899 will come due upon delivery of the charging stations.

 

12
 

 

BLINK CHARGING CO. AND SUBSIDIARIES

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

(UNAUDITED)

 

4. ACCRUED EXPENSES

 

SUMMARY

 

Accrued expenses consist of the following:

 

   March 31, 2019   December 31, 2018 
   (unaudited)     
Accrued host fees  $56,583   $54,527 
Accrued professional, board and other fees   84,500    159,500 
Accrued wages   174,123    493,069 
Accrued commissions   18,500    22,300 
Warranty payable   11,000    9,700 
Accrued taxes payable   557,327    556,211 
Accrued interest expense   -    32,034 
Inventory in transit   547,142    195,480 
Other accrued expenses   19,902    22,100 
Total accrued expenses  $1,469,077   $1,544,921 

 

5. ACCRUED ISSUABLE EQUITY

 

Accrued issuable equity consists of the following:

 

   March 31, 2019   December 31, 2018 
   (unaudited)     
Warrants  $10,889   $5,965 
Common stock   189,525    187,523 
Options   -    125,005 
Total accrued issuable equity  $200,414   $318,493 

 

See Note 8 – Stockholders’ Equity for additional information.

 

6. NOTES PAYABLE

 

See Note 10 – Commitments and Contingencies – Litigation and Disputes for additional information.

 

13
 

 

BLINK CHARGING CO. AND SUBSIDIARIES

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

(UNAUDITED)

 

7. FAIR VALUE MEASUREMENT

 

Assumptions utilized in the valuation of Level 3 liabilities are described as follows:

 

   For the Three Months Ended 
   March 31, 
   2019   2018 
         
Risk-free interest rate   2.40%   1.62% - 2.63%
Contractual term (years)   1.00    0.53- 3.25 
Expected volatility   140%   113% - 131%
Expected dividend yield   0.00%   0.00%

 

The following table sets forth a summary of the changes in the fair value of Level 3 warrant liabilities that are measured at fair value on a recurring basis:

 

Warrants Payable     
Beginning balance as of January 1, 2019  $5,965 
Change in fair value of warrants payable   4,924 
Ending balance as of March 31, 2019  $10,889 

 

See Note 5 - Accrued Issuable Equity for additional information.

 

Assets and liabilities measured at fair value on a recurring or nonrecurring basis are as follows:

 

   March 31, 2019 
   Level 1   Level 2   Level 3   Total 
Assets:                          
Marketable securities  $2,988,175   $-   $-   $2,988,175 
Total assets  $2,988,175   $-   $-   $2,988,175 
                     
Liabilities:                    
Warrants payable  $-   $-   $10,889   $10,889 
Total liabilities  $-   $-   $10,889   $10,889 

 

   December 31, 2018 
   Level 1   Level 2   Level 3   Total 
Assets:                    
Marketable securities  $2,878,664   $-   $-   $2,878,664 
Total assets  $2,878,664   $-   $-   $2,878,664 
                     
Liabilities:                    
Warrants payable  $-   $-   $5,965   $5,965 
Total liabilities  $-   $-   $5,965   $5,965 

 

14
 

 

BLINK CHARGING CO. AND SUBSIDIARIES

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

(UNAUDITED)

 

8. STOCKHOLDERS’ EQUITY

 

PREFERRED STOCK

 

SERIES D CONVERTIBLE PREFERRED STOCK

 

On February 22, 2019, JMJ elected to convert 16 shares of Series D Convertible Preferred Stock into 5,128 shares of the Company’s common stock at a conversion price of $3.12 per share.

 

COMMON STOCK

 

On February 2, 2019, the Company issued 51,724 shares of common stock to independent board members for services rendered during 2018 and 2019 with a grant date fair value of $114,310.

 

On February 19, 2019, the Company retired 8,066 shares of common stock previously in accordance with a settlement agreement with the former members of 350 Green LLC. See Note 10 – Commitments and Contingencies – Litigation and Disputes for additional details.

 

On February 22, 2019, the Company issued 56,948 shares of common stock to Michael J. Calise, the Company’s former CEO, in connection with his repositioning agreement with a grant date fair value of $199,888. Such amount was previously accrued for as of December 31, 2018.

 

STOCK-BASED COMPENSATION

 

The Company recognized stock-based compensation expense related to common stock, stock options and warrants for the three months ended March 31, 2019 and 2018 of $145,005 and $2,817,314, respectively, which is included within compensation expense on the condensed consolidated statements of operations. As of March 31, 2019, there was $370,517 of unrecognized stock-based compensation expense that will be recognized over the weighted average remaining vesting period of 0.6 years.

 

9. LEASES

 

OPERATING LEASES

 

On March 5, 2019, the Company entered into a 26 month lease agreement for an additional 1,241 square feet of office space in its current Miami Beach office building, beginning April 1, 2019 and ending May 31, 2021. The tenant and landlord have the option to cancel the contract after the first six months with 90 day’s written notice. The lease does not contain an option to extend past the lease term.

 

As of March 31, 2019, the Company had no leases that were classified as a financing lease. As of March 31, 2019, the Company did not have additional operating and financing leases that have not yet commenced except as disclosed elsewhere in this note.

 

Total operating lease expenses for the three months ended March 31, 2019 were $69,941 and are recorded in other operating expenses on the condensed consolidated statement of operations. Total rent expense for the three months ended March 31, 2018 was $33,872 and is recorded in other operating expenses on the condensed consolidated statement of operations.

 

15
 

 

BLINK CHARGING CO. AND SUBSIDIARIES

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

(UNAUDITED)

 

9. LEASES – CONTINUED

 

OPERATING LEASES – CONTINUED

 

Supplemental cash flows information related to leases was as follows:

 

   Three Months Ended
March 31, 2019		 
Cash paid for amounts included in the measurement of lease liabilities:     
Operating cash flows from operating leases  $30,400 
      
Right-of-use assets obtained in exchange for lease obligations:     
Operating leases  $- 
      
Weighted Average Remaining Lease Term     
Operating leases   2.32 
      
Weighted Average Discount Rate     
Operating leases   6.0%

 

Future minimum payments under non-cancellable leases as of March 31, 2019 were as follows:

 

For the Years Ending December 31,  Amount 
2019  $190,863 
2020   218,483 
2021   86,214 
Total future minimum lease payments   495,560 
Less: imputed interest   (67,427)
Total  $428,133 

 

10. COMMITMENTS AND CONTINGENCIES

 

TAXES

 

The Company has not filed its Federal and State corporate income tax returns for the years ended December 31, 2014, 2015, 2016, 2017 and 2018. The Company has sustained losses for the years ended December 31, 2014, 2015, 2016, 2017, and 2018. The Company has determined that no tax liability, other than required minimums and related interest and penalties, has been incurred.

 

16
 

 

BLINK CHARGING CO. AND SUBSIDIARIES

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

(UNAUDITED)

 

10. COMMITMENTS AND CONTINGENCIES – CONTINUED

 

LITIGATION AND DISPUTES

 

In July 2017, the Company was served with a complaint by Zwick and Banyai PLLC and Jack Zwick for breach of a written agreement and unjust enrichment for failure to pay invoices in the aggregate amount of $53,069 for services rendered, plus interest and costs. The plaintiffs’ complaint was subsequently amended in February 2018. In June 2018, the court denied the Company’s motion to dismiss the amended complaint, although the plaintiffs voluntarily withdrew certain counts in the amended complaint. In July 2018, the Company filed its answer and affirmative defense to the amended complaint denying liability. As of October 26, 2018, Company updated its affirmative defenses in its answer and the parties are proceeding with discovery. The Company intends to continue to defend this case vigorously.

 

From time to time, the Company is a defendant or plaintiff in various legal actions that arise in the normal course of business.

 

350 Green, LLC

 

350 Green lawsuits relate solely to alleged pre-acquisition unpaid debts of 350 Green. There are other unpaid creditors that claim to be owed certain amounts for pre-acquisition work done on behalf of 350 Green solely, that potentially could file lawsuits at some point in the future.

 

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. On March 26, 2018, the assignment proceeding has closed. Concurrent with the closing of the Company’s February 2018 public offering, the Company was to pay the former principals of 350 Green LLC $25,000 in installment debt and $50,000 within 60 days thereafter in settlement of a $360,000 debt (inclusive of imputed interest) and the return of 8,065 shares of the Company’s common stock by the former principals of 350 Green LLC, in accordance with a Settlement Agreement between the parties dated August 21, 2015.

 

On December 31, 2018, the Company entered into a modification of the Settlement Agreement and Mutual Release dated August 21, 2015 with the former members of 350 Green LLC whereby the members would return to the Company 8,064 shares of common stock and would also cancel the outstanding note (“Note”) issued to the members with a balance of $360,000, both, initially issued in conjunction with the acquisition of 350 Green LLC, in exchange for $50,000. The Company paid the $50,000 as of December 31, 2018. The Note and common shares were returned and canceled in January 2019. The Company recorded a gain of approximately $310,000 during the first quarter of 2019 which was included in other income and expense on the condensed consolidated statement of operations.

 

EXECUTIVE COMPENSATION

 

In February 2019, the Company’s Executive Chairman and CEO asserted a claim for unpaid bonuses of $90,000 and $120,000 related to the 2017 and 2018 fiscal years, respectively. In February 2019, the Company paid $120,000 related to the 2018 fiscal year, which was accrued for as of December 31, 2018. The Company is currently evaluating the claim associated with the fiscal 2017 bonus.

 

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 owns 60% in total. The Company currently has no operations.

 

17
 

 

BLINK CHARGING CO. AND SUBSIDIARIES

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

(UNAUDITED)

 

11. SUBSEQUENT EVENTS

 

The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued. Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the condensed consolidated financial statements.

 

18
 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Special Note Regarding Forward-Looking Information

 

The following discussion and analysis of the results of operations and financial condition of Blink Charging Co. (and, including its subsidiaries, “Blink” and the “Company”) as of March 31, 2019 and for the three months ended March 31, 2019 and 2018 should be read in conjunction with our financial statements and the notes to those financial statements that are included elsewhere in this Quarterly Report on Form 10-Q. References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to “us”, “we”, “our” and similar terms refer to Blink. This Quarterly Report contains forward-looking statements as that term is defined in the federal securities laws. The events described in forward-looking statements contained in this Quarterly Report may not occur. Generally, these statements relate to business plans or strategies, projected or anticipated benefits or other consequences of our plans or strategies, projected or anticipated benefits from acquisitions to be made by us, or projections involving anticipated revenues, earnings or other aspects of our operating results. The words “may,” “will,” “expect,” “believe,” “anticipate,” “project,” “plan,” “intend,” “estimate,” and “continue,” and their opposites and similar expressions, are intended to identify forward-looking statements. We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond our control, which may influence the accuracy of the statements and the projections upon which the statements are based. Factors that may affect our results include, but are not limited to, the risks and uncertainties set forth under Item 1A. Risk Factors in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, as discussed elsewhere in this Quarterly Report on Form 10-Q particularly in Item IA - Risk Factors.

 

Any one or more of these uncertainties, risks and other influences could materially affect our results of operations and whether forward-looking statements made by us ultimately prove to be accurate. Our actual results, performance and achievements could differ materially from those expressed or implied in these forward-looking statements except as required by federal securities laws, We undertake no obligation to publicly update or revise any forward-looking statements, whether from new information, future events or otherwise.

 

Overview

 

We are a leading owner, operator and provider of electric vehicle (“EV”) charging equipment and networked EV charging services. We offer both residential and commercial EV charging equipment, enabling EV drivers to easily recharge at various location types.

 

Our principal line of products and services is our Blink EV charging network (the “Blink Network”) and EV charging equipment (also known as electric vehicle supply equipment) and EV related services. Our Blink Network consists of proprietary cloud-based software that operates, maintain, and tracks all of the Blink EV charging stations and the associated charging data. The Blink Network provides property owners, managers and parking companies, who we refer to as our “Property Partners”, with cloud-based services that enable the remote monitoring and management of EV charging stations payment processing, and provide EV drivers with vital station information including station location, availability and applicable fees.

 

We offer our Property Partners a range of business models for EV charging equipment and services that generally fall into one of the three business models below.

 

  ● In our comprehensive Turnkey business model, we own and operate the EV charging equipment, undertake and manage the installation, maintenance and related services, and we keep substantially all of the EV charging revenue.
     
  ● In our Hybrid business model, the Property Partner incurs the installation costs, while we provide the charging equipment. We operate and manage the EV charging station and provide connectivity of the charging station to the Blink Network. As a result, we share a greater portion of the EV charging revenue with the Property Partner than under the turnkey model above.
     
  ● In our Host owned business model, the Property Partner purchases, owns and manages the Blink EV charging station, incurs the installation costs of the equipment, while we provide site recommendations, connectivity to the Blink Network and optional maintenance services, and the Property Partner keeps substantially all of the EV charging revenue.

 

We have strategic partnerships across numerous transit/destination locations, including airports, auto dealers, healthcare/medical, hotels, mixed-use, municipal locations, multifamily residential and condos, parks and recreation areas, parking lots, religious institutions, restaurants, retailers, schools and universities, stadiums, supermarkets, transportation hubs, and workplace locations. As of March 31, 2019, we had approximately 14,314 charging stations deployed, of which, 5,082 are Level 2 commercial charging units, 104 are DC Fast Charging EV chargers and 1,670 are residential charging units in service on the Blink Network. Additionally, as of March 31, 2019, we had approximately 7,458 non-networked, residential Blink EV charging stations. The non-networked, residential Blink EV charging stations are all Property Partner owned.

 

19
 

 

As reflected in our unaudited condensed consolidated financial statements as of March 31, 2019, we had cash, working capital and an accumulated deficit of $12,599,600, $13,995,671 and $161,750,108, respectively. During the three months ended March 31, 2019, we had a net loss of $1,893,627. We have not yet achieved profitability.

 

Consolidated Results of Operations

 

Three Months Ended March 31, 2019 Compared With Three Months Ended March 31, 2018

 

Revenues

 

Total revenue for the quarter ended March 31, 2019 was $577,390, compared to $595,920 for the quarter ended March 31, 2018, a decrease of $18,530, or 3%. Charging service revenue for company-owned charging stations was $324,895 for the quarter ended March 31, 2019 compared to $305,747 for the quarter ended March 31, 2018, an increase of $19,148, or 6%. The increase was attributable to a greater number of charging stations in the network as compared to the same 2018 quarter and an increase in the number of subscribers in Nissan’s No Charge-To-Charge Program.

 

Revenue from product sales was $103,204 for the quarter ended March 31, 2019, compared to $135,760 for the quarter ended March 31, 2018, a decrease of $32,556, or 24%. This decrease was attributable to a lower volume of commercial units sold as compared to the same quarter in 2018. The Company is currently phasing out its first generation of charging stations and is in the process of rolling out its second generation of charging stations.

 

Network fee revenue was $74,470 for the quarter ended March 31, 2019, compared to $57,251 for the quarter ended March 31, 2018, an increase of $17,219, or 30%. The increase was commensurate with the increase in the number of charging stations in the network as compared to same quarter in 2018.

 

Warranty revenue was $16,508 for the quarter ended March 31, 2019, compared to $30,402 for the quarter ended March 31, 2018, a decrease of $13,894, or 46%. The decrease was primarily attributable to a decrease in the renewal rate of Property Partners of host owned chargers warranty contracts.

 

Grant and rebate revenues were $6,714 for the quarter ended March 31, 2019, compared to $16,231 for the quarter ended March 31, 2018, a decrease of $9,517, or 59%. Grant and rebates relating to equipment and the related installation are deferred and amortized in a manner consistent with the depreciation expense of the related assets over their useful lives. The ability to secure grant revenue is typically unpredictable and, therefore, uncertain. The 2019 revenue was related to the amortization of previous years’ grants.

 

Other revenue increased by $1,070 to $51,599 for the quarter ended March 31, 2019, compared to $50,529 for the quarter ended March 31, 2018. The increase was primarily attributable to an increase in transaction fees.

 

Cost of Revenues

 

Cost of revenues primarily consists of electricity reimbursements, revenue share payments to our Property Partner hosts, the cost of charging stations sold (including commissions), connectivity charges provided by telco and other networks, warranty, repairs and maintenance services, and depreciation of our installed charging stations.

 

Cost of revenues for the quarter ended March 31, 2019 was $523,432, compared to $424,099 for the quarter ended March 31, 2018, an increase of $99,333, or 23%. There is a degree of variability in our costs in relationship to our revenues from period to period, primarily due to:

 

  ● electricity reimbursements that are unique to those Property Partner host agreements which provide for such reimbursements;
     
  ● revenue share payments are predicated on the contractual obligation under the property partner agreement and the revenue generated by the applicable chargers;
     
  ●  cost of charging stations sold is predicated on the mix of types of charging stations and parts sold during the period;
     
  ● network costs are fixed in nature based on the number of chargers connected to the telco network regardless of whether the charger generates revenue; and
     
  ● warranty and repairs and maintenance expenses are based on both the number of service cases completed during the period.

 

Cost of charging services for Company-owned charging stations (electricity reimbursements) decreased by $14,032 to $29,729 for the quarter ended March 31, 2019, compared to $43,761 for the quarter ended March 31, 2018, or 32%. The decrease was attributable in 2019 to the mix of charging stations generating charging service revenues subject to electricity reimbursement.

 

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Host provider fees decreased by $26,366, or 24%, to $82,039 during the quarter ended March 31, 2019, compared to $108,405 for the quarter ended March 31, 2018. This decrease was a result of the mix of chargers generating revenue and their corresponding revenue share percentage payments to Property Partner hosts per their agreements.

 

Cost of product sales increased by $149,787 or 236% from $63,533 for the quarter ended March 31, 2018, compared to $213,320 for the quarter ended March 31, 2019. The cost of product sales for the quarter ended March 31, 2019 included a provision of $124,000 for slow-moving and obsolete inventory acquired in conjunction with the acquisition of Blink Network LLC in 2013.

 

Network costs increased by $10,295 or 15%, to $77,223 for the quarter ended March 31, 2019, compared to $66,928 for the quarter ended March 31, 2018. This increase was attributed to incremental network fees in connection with the introduction of our second generation of charging stations and the increase in the number of first generation of chargers on our network.

 

Warranty and repairs and maintenance costs increased by $25,144, or 39%, to $88,872 for the quarter ended March 31, 2019 from $63,728 for the quarter ended March 31, 2018. The increase was attributable to significant efforts expended to reduce the backlog in warranty cases which had cost more than originally estimated. As of March 31, 2019, we recorded a liability of $11,000 representing the estimated cost of existing backlog of known warranty cases. We estimate the cost to repair chargers which we own to approximate $113,000.

 

Depreciation and amortization expense declined by $45,495 or 59%, to $32,249 for the quarter ended March 31, 2019, compared to $77,744 for the quarter ended March 31, 2018, as additional underlying assets became fully depreciated during 2019.

 

Operating Expenses

 

Compensation expense decreased by $2,085,151, or 57%, from $3,688,636 (consisting of approximately $0.9 million of cash compensation and approximately $2.8 million of non-cash compensation) for the quarter ended March 31, 2018, to $1,603,485 (consisting of approximately $1.5 million of cash compensation and approximately $0.1 million of non-cash compensation) for the quarter ended March 31, 2019. The decrease was primarily attributable an increase in non-cash compensation of $2.6 million due to common stock awards to the Executive Chairman and the Chief Operating Officer in 2018, offset by an increase in payroll and related benefits of $562,000 due to the hiring of additional employees and senior management during the second half of 2018.

 

General and administrative expenses increased by $155,967, or 154%, from $101,169 for the quarter ended March 31, 2018 to $257,136 for the quarter ended March 31, 2019. The increase was primarily due to an increase in legal fees of $108,000 because of a one-time credit in the same quarter in 2018, an increase in marketing expenses of $29,000 as a result of the introduction of tour second generation of chargers and an increase in NASDAQ fees of $14,000 as a result of our registered sale of our common stock in February 2018.

 

Other operating expenses increased by $324,870 or 177%, from $183,955 for the quarter ended March 31, 2018 to $508,825 for the quarter ended March 31, 2019. The increase was primarily attributable to an increase insurance expenses of $59,000 primarily related to Directors and Officers liability insurance, an increase of $133,000 related to the update of our Blink network software, an increase in travel expenses of $49,000, an increase in rent of $51,000 as result of moving into our larger corporate offices in Miami Beach in June 2018 and the increased space in our Phoenix office and a general net increase in other operating expenses of $33,000.

 

Other Income (Expense)

 

Other income (expense) decreased by $5,584.166 from income of $6,006,027 for the quarter ended March 31, 2018 to income of $421,861 for the quarter ended March 31, 2019. During the quarter ended March 31, 2019, we settled accounts payable resulting in a gain of $52,500 and $360,000 of notes payable, inclusive of accrued interest to the former members of 350 Green in exchange for the cancellation of the notes, the return of 8,066 of our common shares and the payment of $50,000, in 2018, to the former members of 350 Green, resulting in a gain of $310,000. Additionally, we issued common stock to satisfy a contractual obligation resulting in a loss of $54,742. During the quarter ended March 31, 2019, and earned interest income, dividend income of $99,675 from our cash and marketable securities portfolio, and changes in value of Low Carbon Fuel Standard credits of $11,828. During the quarter ended March 31, 2018, we settled with JMJ in$17,800,000 of obligations to JMJ with the issuance of series D convertible preferred stock, which resulted in a gain of approximately $5,800,000.

 

Net (Loss) Income

 

Our net loss for the quarter ended March 31, 2019 increased by $4,097,715, or 186%, to $1,893,627 as compared to net income of $2,204,088 for the quarter ended March 31, 2018. The decrease was primarily attributable to an increase in other income (expenses) of $5,584,166 offset by a decrease in operating expenses of $1,604,314. Our net loss attributable to common shareholders for the quarter ended March 31, 2019 decreased by $19,969,016, or 91%, from a 2018 loss of $21,862,643 to a net loss of $1,893,627 for the aforementioned reasons and due to a decrease in the dividend attributable to series C convertible preferred stockholders of $607,800, as well as the deemed dividend attributable to the immediate accretion of the beneficial conversion feature related to the series B and C convertible preferred stock of $23,458,931.

 

Total Comprehensive (Loss) Income

 

Our total comprehensive loss for the quarter ended March 31, 2019 was $1,792,941 whereas our total comprehensive income for the quarter ended March 31, 2018 was $2,204,088. The 2019 period included a gain on change in fair value of marketable securities of $100,686.

 

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Liquidity and Capital Resources

 

We measure our liquidity in a number of ways, including the following:

 

   March 31, 2019   December 31, 2018 
   (unaudited)     
Cash  $12,599,600   $15,538,849 
           
Working Capital  $13,995,671   $15,586,510 
           
Notes Payable (Gross)  $10,000   $287,966 

 

During the three months ended March 31, 2019, we financed our activities from proceeds derived from debt and equity financings occurring in prior periods. A significant portion of the funds raised from the sale of capital stock has been used to cover working capital needs and personnel, office expenses and various consulting and professional fees.

 

For the three months ended March 31, 2019 and 2018, we used cash of $2,911,857 and $4,814,971, respectively, in operations. Our cash use for the three months ended March 31, 2019 was primarily attributable to our net loss of $1,893,627 adjusted for net non-cash income in the aggregate amount of $69,417 and $948,813 of net cash used in changes in the levels of operating assets and liabilities. Our cash use for the three months ended March 31, 2018 was primarily attributable to our net income of $2,204,088, adjusted for net non-cash income in the aggregate amount of $3,173,205, and $3,845,854 of net cash used in changes in the levels of operating assets and liabilities.

 

During the three months ended March 31, 2019, cash used in investing activities was $27,392, which was used to purchase charging stations and other fixed assets. Net cash used in investing activities was $21,499 during the three months ended March 31, 2018, which was used to purchase charging stations and other fixed assets.

 

Net cash provided by financing activities for the three months ended March 31, 2019 was $0. Net cash provided by financing activities for the three months ended March 31, 2018 was $14,597,973, of which, $16,243,055 was attributable to the proceeds from the sale of common stock and warrants in our 2018 public offering, reduced by issuance costs related to the public offering of $1,190,082 that were paid by us during the period. In addition, $305,000 was provided in connection with the issuances of notes payable, offset by the repayment of notes payable of $760,000.

 

Through March 31, 2019, we incurred an accumulated deficit since inception of $161,750,108 As of March 31, 2019, we had cash and working capital of $12,599,600 and $13,995,671, respectively. During the three months ended March 31, 2019, we had a net loss of $1,893,627.

 

As of March 31, 2019, we had remaining purchase commitments to acquire second generation charging stations with an aggregate value of $1,009,326. We have a remaining deposit of $334,457 for these charging stations, which is included within prepaid expenses and other current assets on our condensed consolidated balance sheet as of March 31, 2019. The net commitment of $674,899 will come due upon delivery of the charging stations. Additionally, we have commitments to repair Company owned chargers estimated at $113,000. These repairs will be charged to income as incurred.

 

There has been no material change in the planned use of proceeds from the public offering as described in our public offering prospectus, dated February 13, 2018. Approximately $4.4 million was to be used for the repayment of certain debt and other obligations, of which, as of March 31, 2019, approximately $3.8 million had been paid and the remaining $0.6 million had been settled with the issuance of equity. The remaining amount will be used as follows:

 

  ● Approximately $4.0 million for the deployment of charging stations;
     
  ● Approximately $1.0 million to expand our product offerings including but not limited to completing the research and development, as well as the launch, of our next generation of EV charging equipment;
     
  ● Approximately $3.0 million to add additional staff in the areas of finance, sales, customer support, and engineering; and
     
  ● The remainder for working capital and other general corporate purposes.

 

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We believe our current cash on hand is sufficient to meet our obligations, operating and capital requirements for at least the next twelve months from the date of this filing. Thereafter, we may need to raise further capital, through the sale of additional equity or debt securities, or other debt instruments to support our future operations. Our operating needs include the planned costs to operate our business, including amounts required to fund working capital and capital expenditures. Our future capital requirements and the adequacy of our available funds will depend on many factors, including our ability to successfully commercialize our products and services, competing technological and market developments, and the need to enter into collaborations with other companies or acquire other companies or technologies to enhance or complement our product and service offerings. There is no assurance that the amount of funds we might raise will enable us to complete our development initiatives or attain profitable operations. If we are unable to obtain additional financing on a timely basis, we may have to curtail our development, marketing and promotional activities, which would have a material adverse effect on our business, financial condition and results of operations, and ultimately, we could be forced to discontinue our operations and liquidate.

 

Since inception, our operations have primarily been funded through proceeds from equity and debt financings. Although management believes that we have access to capital resources, there are currently no commitments in place for new financing at this time. There is no assurance that we will be able to obtain funds on commercially acceptable terms, if at all.

 

Critical Accounting Policies

 

For a description of our critical accounting policies, see Note 2 – Summary of Significant Accounting Policies in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

 

Recently Issued Accounting Standards

 

For a description of our recently issued accounting standards, see Note 2 – Summary of Significant Accounting Policies in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities” (SPEs).

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are not required to provide the information required by this Item because we are a smaller reporting company.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

As of March 31, 2019, being the end of the period covered by this Report, our management conducted an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

Disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow for timely decisions regarding required disclosure.

 

Based on that evaluation, our chief executive officer and chief financial officer concluded that, as of March 31, 2019, our disclosure controls and procedures were not effective due to the material weaknesses in our internal control over financial reporting as discussed in Item 9A. Controls and Procedures of the Company’s Form 10-K for the fiscal year ended December 31, 2018, under the heading “Management’s Report on Internal Control Over Financial Reporting” and that continued to exist as of March 31, 2019.

 

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Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the quarter ended March 31, 2019 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

However, as part of its ongoing remediation initiative, with the help of an outside advisory and consulting firm, management has commenced and is engaged in the process of:

 

  (a) Designing disclosure controls and procedures across the organization;
     
  (b) Updating the scoping and financial risk assessment on a periodic basis;
     
  (c) Validating the operational effectiveness of the internal controls within the recently implemented NetSuite accounting system;
     
  (d) Preparing, formalizing and putting into effect a prioritized set of accounting policies and procedures; and
     
  (e) Reviewing and documenting the design of various business and entity-level processes including segregation of duties among personnel, to the extent practicable, in order to separate the initiation and execution of transactions and custody of assets.

 

Management expects to make and report continuous progress in the effective remediation of the identified material weaknesses.

 

Limitations on Effectiveness of Controls and Procedures

 

In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

 

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PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS.

 

For a description of our legal proceedings, see Note 10 – Commitments and Contingencies – Litigation and Disputes in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

 

ITEM 1A. RISK FACTORS.

 

In addition to the information set forth under Item 1A of Part I to our Annual Report on Form 10-K for the year ended December 31, 2018, the information set forth at the beginning of Management’s Discussion and Analysis entitled “Special Note Regarding Forward-Looking Information,” and updates noted below, you should consider that there are numerous and varied risks, known and unknown, that may prevent us from achieving our goals. If any of these risks actually occur, our business, financial condition or results of operation may be materially and adversely affected. In such case, the trading price of our common stock could decline and investors could lose all or part of their investment. These risk factors may not identify all risks that we face and our operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our operations.

 

We have a history of significant losses, and if we do not achieve and sustain profitability, our financial condition could suffer.

 

We have experienced significant net losses, and we expect to continue to incur losses for the foreseeable future. We incurred net (loss) income of approximately $(1.9) million and $2.2 million for the three months ended March 31, 2019 and 2018, respectively, and as of March 31, 2019, our accumulated deficit was approximately $162 million.

 

Our net loss for the quarter ended March 31, 2019 increased by $4,097,715, or 186%, to $1,893,627 as compared to net income of $2,204,088 for the quarter ended March 31, 2018. The decrease was primarily attributable to an increase in other income (expenses) of $5,584,166 offset by a decrease in operating expenses of $1,604,314. Our net loss attributable to common shareholders for the quarter ended March 31, 2019 decreased by $19,969,016, or 91%, from a 2018 loss of $21,862,643 to a net loss of $1,893,627 for the aforementioned reasons and due to a decrease in the dividend attributable to series C convertible preferred stockholders of $607,800, as well as the deemed dividend attributable to the immediate accretion of the beneficial conversion feature related to the series B and C convertible preferred stock of $23,458,931.

 

If our revenue grows slower than we anticipate, or declines, or if our operating expenses are higher than we expect, we may not be able to achieve profitability and our financial condition could suffer. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Whether we can achieve cash flow levels sufficient to support our operations cannot be accurately predicted. Unless such cash flow levels are achieved, we may need to borrow additional funds or sell debt or equity securities, or some combination of both, to provide funding for our operations. Such additional funding may not be available on commercially reasonable terms, if at all.

 

We have a significant number of shares of our common stock issuable upon conversion of certain outstanding options, warrants and convertible preferred stock, and the issuance of such shares upon exercise or conversion will have a significant dilutive impact on our stockholders.

 

As of May 7, 2019, there are outstanding warrants and stock options to purchase 6,836,661 and 105,308 shares of our common stock, respectively. The warrants and options have a weighted average exercise price of $4.64 and $33.10, respectively.

 

As of May 7, 2019, there are 1,642,628 shares of common stock issuable upon conversion of our outstanding shares of series D preferred stock.

 

In addition, our articles of incorporation permit the issuance of up to approximately 473 million additional shares of common stock. Thus, we have the ability to issue a substantial number of shares of common stock in the future, which would dilute the percentage ownership held by our stockholders.

 

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

During the quarterly period ended March 31, 2019, there have been no unregistered sales of equity securities that have not been previously disclosed in a Current Report on Form 8-K, except as described below:

 

On February 2, 2019, the Company issued 51,724 shares of common stock to external board members for services rendered during 2018 and 2019 with a grant date fair value of $114,310.

 

On February 19, 2019, the Company retired 8,066 shares of common stock previously in accordance with a settlement agreement with the former members of 350 Green LLC.

 

On February 22, 2019, JMJ elected to convert 16 shares of Series D Convertible Preferred Stock into 5,128 shares of the Company’s common stock at a conversion price of $3.12 per share. The Company determined that the Series D Convertible Preferred Stock did not include a beneficial conversion feature.

 

On February 22, 2019, the Company issued 56,948 shares of common stock to Michael J. Calise, the Company’s former CEO, in connection with his repositioning agreement with a grant date fair value of $199,888. Such amount was previously accrued for as of December 31, 2018.

 

The issuances described in Item 2 were deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering. In addition, the issuance described in the fourth paragraph of Item 2 was deemed exempt from registration under the Securities Act in reliance on Section 3(a)(9) thereof. The recipients of securities in each such transaction represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the share certificates and other instruments issued in such transactions. All recipients either received adequate information about the Company or had access, through employment or other relationships, to such information.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

 

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ITEM 6.EXHIBITS

 

Exhibit Number   Exhibit Description   Form   Exhibit   Filing Date   Herewith
3.1   Articles of Incorporation, as amended most recently on August 17, 2017.   10-K   3.1   04/17/2018    
3.2   Bylaws, as amended most recently on January 29, 2018.   10-K   3.2   04/17/2018    
3.3   Certificate of Designations for Series D Preferred Stock.   8-K   3.1   02/21/2018    
4.1   Warrant Agency Agreement by and between the Company and Worldwide Stock Transfer, LLC and Form of Warrant Certificate for Registered Offering.   8-K   4.1   02/21/2018    
4.2   Form of Common Stock Purchase Warrant dated April 9, 2018.   8-K   4.1   04/19/2018    
31.1   Rule 13a-14(a) Certification of Principal Executive Officer.               X
31.2   Rule 13a-14(a) Certification of Principal Financial Officer.               X
32.1*   Section 1350 Certification of Principal Executive Officer.               X
32.2*   Section 1350 Certification of Principal Financial Officer.               X
101.INS   XBRL Instance.             X
101.XSD   XBRL Schema.             X
101.PRE   XBRL Presentation.             X
101.CAL   XBRL Calculation.             X
101.DEF   XBRL Definition.             X
101.LAB   XBRL Label.             X

 

* In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not deemed filed for purposes of Section 18 of the Exchange Act.

 

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SIGNATURES

 

Pursuant to the requirements 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.

 

Date: May 15, 2019 BLINK CHARGING CO.
     
  By: /s/ Michael D. Farkas
    Michael D. Farkas
    Chairman of the Board and Chief Executive Officer
    (Principal Executive Officer)

 

  By: /s/ Jonathan New
    Jonathan New
    Chief Financial Officer
    (Principal Financial and Accounting Officer)

 

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