S-1/A 1 forms-1a.htm

 

Registration No. 333-214461

 

As filed with the U.S. Securities and Exchange Commission on January 11, 2018

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Amendment No. 5 to

FORM S-1

 

REGISTRATION STATEMENT

Under

The Securities Act of 1933

 

BLINK CHARGING CO.

(Exact name of Registrant as specified in its charter)

 

Nevada   3612   03-0608147

(State or other jurisdiction

of incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

 

3284 N 29th Court

Hollywood, Florida 33020-1320

(305) 521-0200

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

 

Michael J. Calise

Chief Executive Officer

3284 N 29th Court

Hollywood, Florida 33020-1320

(305) 521-0200

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

Copies to:

 

Joseph M. Lucosky

Steven A. Lipstein

Lucosky Brookman LLP

101 Wood Avenue South,

5th Floor

Woodbridge, NJ 08830

(732) 395-4400

 

Barry I. Grossman

Ellenoff Grossman & Schole LLP

1345 Avenue of the Americas

New York, NY 10105

(212) 370-1300

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [X]

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [  ]

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [  ]

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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]
       
    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 7(a)(2)(B) of the Securities Act. [  ]

 

CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities to be Registered  

Proposed Maximum

Aggregate Offering
Price(1) (4)

   

Amount of

Registration Fee

 
Units (2)   $ 26,450,000 (3)    $ 3,293.03  
Common Stock, par value $0.001 per share, included in the units   $ (5)    $ (5)
Warrants to purchase Common Stock, included in the units (6)     (5)      (5)
Shares of Common Stock, underlying the Warrants to purchase Common Stock (6)   $ 39,675,000     $ 4,939.54  
Total   $ 66,125,000     $ 8,232.57 (7)

 

(1)

Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended.

   
(2)

Each unit consists of one share of common stock, $0.001 par value per share, of the Registrant (the “Common Stock”) and one warrant to purchase one share of Common Stock.

   
(3) Includes shares of the Common Stock and/or warrants to purchase Common Stock which may be issued upon exercise of a 45-day option granted to the underwriters, to cover over-allotments, if any, equal to 15% of the number of units sold in the offering.
   
(4)

Pursuant to Rule 416, the securities being registered hereunder include such indeterminate number of additional securities as may be issued after the date hereof as a result of stock splits, stock dividends or similar transactions.

   
(5) Included in the price of the units. No fee required pursuant to Rule 457(g) under the Securities Act.
   
(6) The warrants are exercisable at a per share price of 150% of the unit offering price.
   
(7)

Previously paid.

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the registration statement shall become effective on such date as the SEC, acting pursuant to said Section 8(a), may determine.

 

 

 

 

 

 

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION DATED JANUARY 11 , 2018

 

 

4,600,000 Units

 

 

Blink Charging Co.

 

This is a firm commitment public offering of 4,600,000 units, each unit consisting of one share of our common stock, $0.001 par value per share (the “Common Stock”), and one warrant to purchase one share of Common Stock, of Blink Charging Co. (formerly known as “Car Charging Group, Inc.”), based on the last reported price of the Common Stock as reported on the OTC Pink Current Information Marketplace on December 28, 2017, which was $5.00 per share. The warrants included within the units are exercisable immediately, have an exercise price of $        per share, 150% of the public offering price of one unit, and expire five years from the date of issuance.

 

The units will not be issued or certificated. Purchasers will receive only shares of Common Stock and warrants. The shares of Common Stock and warrants may be transferred separately, immediately upon issuance. The offering also includes the shares of Common Stock issuable from time to time upon exercise of the warrants.

 

Our Common Stock is presently quoted on the OTC Pink Current Information Marketplace under the symbol “CCGI”. The last reported sales price for our Common Stock as reported on the OTC Pink Current Information Marketplace on January 10 , 2018 was $5.25 . We have applied to have our Common Stock and warrants listed on The NASDAQ Capital Market under the symbols “BLNK” and “BLNKW,” respectively. No assurance can be given that our application will be approved. There is no established public trading market for the warrants. No assurance can be given that a trading market will develop for the warrants.

 

Investing in our securities involves a high degree of risk. See “Risk Factors” beginning on page 10 of this prospectus for a discussion of information that should be considered in connection with an investment in our securities.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

  

Per Unit

   Total(2) 
Public offering price  $   $ 
Underwriting discounts and commissions(1)  $   $ 
Proceeds to us, before expenses  $   $ 

 

(1) Does not include a non-accountable expense allowance equal to 1% of the gross proceeds of this offering payable to Joseph Gunnar & Co., LLC, the representative of the underwriters. See “Underwriting” for a description of compensation payable to the underwriters.
   
(2) Assumes no exercise of the over-allotment option to purchase shares and/or warrants we have granted to the underwriters as described below.

 

A 1:50 reverse stock split of the Common Stock (the “Reverse Stock Split”) was effected on August 29, 2017. All share and per share information in this prospectus have been retroactively adjusted to give effect to the Reverse Stock Split, including the financial statements and notes thereto.  

 

We have granted a 45-day option to the representative of the underwriters to purchase up to an aggregate of 690,000 additional shares of Common Stock and/or warrants equal to 15% of the Common Stock and warrants underlying the units sold in the offering, solely to cover over-allotments, if any.

 

The underwriters expect to deliver our shares and warrants to purchasers in the offering on or about,                       2018.

 

Sole Book-Running Manager

Joseph Gunnar & Co.

 

Co-Managers

 

Benchmark Dawson James Securities, Inc.

 

The date of this prospectus is _______, 2018

 

 

 

 

 

 

 

 

 

 

 

TABLE OF CONTENTS

 

  Page
Prospectus Summary 1
Risk Factors 10
Cautionary Note Regarding Forward-Looking Statements 28
Use of Proceeds 30
Market For Our Common Stock and Related Stockholder Matters 31
Capitalization 32
Dilution 34
Management’s Discussion and Analysis of Financial Condition and Results of Operations 38
Business 49
Directors and Executive Officers 59
Executive Compensation 65
Security Ownership of Certain Beneficial Owners and Management 78
Certain Relationships and Related Party Transactions 81
Description of Capital Stock 89
Shares Eligible for Future Sale 96
Material U.S. Federal Income Tax Considerations 98
Underwriting 104
Transfer Agent and Registrar 114
Legal Matters 114
Experts 114
Where You Can Find More Information 114
Index to Consolidated Financial Statements F-1

 

You should rely only on information contained in this prospectus or in any free writing prospectus we may authorize to be delivered or made available to you. We have not, and the underwriters have not, authorized anyone to provide you with additional information or information different from that contained in this prospectus or in any free writing prospectus. Neither the delivery of this prospectus nor the sale of our securities means that the information contained in this prospectus or any free writing prospectus is correct after the date of this prospectus or such free writing prospectus. This prospectus is not an offer to sell or the solicitation of an offer to buy our securities in any circumstances under which the offer or solicitation is unlawful or in any state or other jurisdiction where the offer is not permitted.

 

The information in this prospectus is accurate only as of the date on the front cover of this prospectus and the information in any free writing prospectus that we may provide you in connection with this offering is accurate only as of the date of that free writing prospectus. Our business, financial condition, results of operations and prospects may have changed since those dates.

 

No person is authorized in connection with this prospectus to give any information or to make any representations about us, the securities offered hereby or any matter discussed in this prospectus, other than the information and representations contained in this prospectus. If any other information or representation is given or made, such information or representation may not be relied upon as having been authorized by us.

 

Through and including          , 2018 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

 

Neither we nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than the United States. You are required to inform yourself about, and to observe any restrictions relating to, this offering and the distribution of this prospectus.

 

The mark “Blink” is our registered trademark in the U.S., Australia, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Mexico, New Zealand, Philippines, South Africa, Singapore, Switzerland, Taiwan, and is a trademark registered under the Madrid Protocol and pursuant to the Community Trade Mark (“CTM”) in certain European countries. The mark “HQ” is our registered trademark in the U.S. We also use certain trademarks, trade names, and logos that have not been registered. We claim common law rights to these unregistered trademarks, trade names and logos.

 

 

 

 

 

PROSPECTUS SUMMARY

 

This summary highlights selected information appearing elsewhere in this prospectus. Because this is only a summary, it does not contain all of the information you should consider before investing in our securities. You should read this prospectus carefully, especially the risks and other information set forth under the heading “Risk Factors”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes included elsewhere in this prospectus, before making an investment decision. Some of the statements made in this prospectus discuss future events and developments, including our future strategy and our ability to generate revenue, income and cash flow. These forward-looking statements involve risks and uncertainties which could cause actual results to differ materially from those contemplated in these forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements”. Unless otherwise indicated or the context requires otherwise, the words “we,” “us,” “our,” the “Company” or “our Company” and “Blink” refer to Blink Charging Co. (formerly known as “Car Charging Group, Inc.”), a Nevada corporation, and its subsidiaries.

 

The Reverse Stock Split was effected on August 29, 2017. All share amounts in this prospectus have been retroactively adjusted to give effect to the Reverse Stock Split, including the financial statements and notes thereto.

 

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 is 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, 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 provides EV drivers with vital station information including station location, availability, and applicable fees.

 

We offer our Property Partners a flexible range of business models for EV charging equipment and services. In our comprehensive and turnkey business model, we own and operate the EV charging equipment, manage the installation, maintenance, and related services; and share 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, we can also provide EV charging hardware, site recommendations, connectivity to the Blink Network, and service and maintenance services.

 

We have strategic relationships with hundreds of Property Partners that include well-recognized companies, large municipalities, and local businesses. The types of properties include airports, auto dealers, healthcare/medical, hotels, mixed-use, municipal locations, multifamily residential and condo, parks and recreation areas, parking lots, religious institutions, restaurants, retailers, schools and universities, stadiums, supermarkets, transportation hubs, and workplace locations. Some examples are Caltrans, City of Azusa, City of Chula Vista, City of Springfield, City of Tucson, Cracker Barrel, Federal Realty, Fred Meyer Stores, Inc., Fry’s Food & Drug, Inc., IKEA, JBG Associates, LLC, Kroger Company and Ralphs Grocery Company. We continue to establish contracts with Property Partners that previously had contracts with the EV services providers that we acquired, including ECOtality, Inc. (“ECOtality”), the former owner of the Blink related assets, which we acquired in October 2013.

 

 

1

 

 

 

As of January 5, 2018, we have approximately 14,094 charging stations deployed of which 4,727 are Level 2 commercial charging units, 115 DC Fast Charging EV chargers and 2,025 residential charging units in service on the Blink Network. Additionally, we currently have approximately 324 Level 2 commercial charging units on other networks and there are also approximately an additional 6,903 non-networked, residential Blink EV charging stations. The non-networked, residential Blink EV charging stations are all partner owned. Level 2 EV chargers are ideal for commercial and residential use, and has the standard J1772 connector, which is compatible with all major auto manufacturer electric vehicle models. Our DC Fast Charging equipment (“DCFC”) currently has the CHAdeMo connector, which is compatible with Nissan, Kia, and Tesla electric vehicle models, and typically provides an 80% charge in less than 30 minutes.

 

Competitive Advantages/Operational Strengths

 

Early Mover Advantage: We continue to leverage our large and defendable first mover advantage and the digital customer experience we have created for both drivers and Property Partners. We have more than 110,000 drivers currently registered with Blink that appreciate the value of EV charging sessions on a leading, established, and robust network. We have thousands of Blink chargers deployed across the United States and the goal is to keep our Property Partners on one consistent network when expanding on any given property.

 

Long-Term Contracts with Property Owners: We have strategic and often long term agreements with location exclusivity for Property Partners across numerous transit/destination locations, including airports, car dealers, healthcare/medical, hotels, mixed-use, municipal locations, multifamily residential and condo, parks and recreation areas, parking lots, religious institutions, restaurants, retailers, schools and universities, stadiums, supermarkets, transportation hubs, and workplace locations. We have hundreds of Property Partners that include well-recognized companies, large municipalities, and local businesses. Some examples are Caltrans, Carl’s Jr., City of Azusa, City of Chula Vista, City of Springfield, City of Tucson, Cracker Barrel, Federal Realty, Fred Meyer Stores, Inc., Fry’s Food & Drug, Inc., Garage Management Company, Icon Parking, IKEA, iPark, JBG Associates, Kohls, Kroger Company, LAZ Parking, Macy’s, McDonald’s, and Ralphs Grocery Company, Sears, Simon Properties, and SP+ Parking. We continue to establish new contracts with Property Partners that previously secured our services independently, or had contracts with the EV services providers that we acquired, including ECOtality, the former owner of the Blink related assets.

 

Flexible Business Model: We are able to offer and sell both EV charging equipment as well as access to our robust, cloud-based EV charging software, which we refer to as the Blink Network. We believe that we have an advantage in our ability to offer various business models to Property Partners and leverage along with our technology to meet the needs of both Property Partners and EV drivers. Our Property Partner business model options include:

 

    1.

Blink Owned: We provide EV charging equipment, which we own and maintain, and operate the EV charging services through our Blink Network and share a portion of the revenues generated from the stations with our Property Partner.

 
         
    2. Host Owned: The Property Partner purchases our EV charging equipment and pays for connectivity to our Blink Network as well as payment transaction fees and optional service fees.  
         
    3. Hybrid: We also offer customized business models that meet individual Property Partner needs and combines features from the aforementioned business models.  

 

Ownership and Control of EV Charging Stations and Services: We own a large percentage of our stations, which is a significant differentiation between us and some of our primary competitors. This ownership model allows us to control the settings and pricing for our EV charging services, service the equipment as necessary, and have greater brand management and price uniformity.

 

 

2

 

 

 

Experience with Products and Services of Other EV Charging Service Providers. From inception in 2009 and via acquisitions of other EV charging service providers (Beam Charging, 350Green, EV Pass, and Blink), we have had the experience of owning and operating EV charging equipment provided by other EV charging service providers, including General Electric, ChargePoint, and SemaConnect. This experience has provided us with the working knowledge of the benefits and drawbacks of other equipment manufacturers and their applicable EV charging networks.

 

Our Risks and Challenges

 

An investment in our securities involves a high degree of risk including risks related to the following:

 

    Our Revenue Growth Depends on Consumers’ Willingness to Adopt EVs;  
         
    We Need Additional Capital to Fund Our Growing Operations and Cannot Assure You That We Will Be Able to Obtain Sufficient Capital on Reasonable Terms or at All, and We May Be Forced to Limit the Scope of Our Operations;  
         
    The Report of Our Independent Registered Public Accounting Firm Contains an Explanatory Paragraph That Expresses Substantial Doubt About Our Ability to Continue as a Going Concern;  
         
    We Have a History of Significant Losses, and If We Do Not Achieve and Sustain Profitability, Our Financial Condition Could Suffer;  
         
    We May Not Have The Liquidity to Support Our Future Operations and Capital Requirements;  
         
    The Unavailability, Reduction or Elimination of Government Incentives Could Have a Material Adverse Effect on Our Business, Financial Condition, Operating Results and Prospects; and  
         
    If We Are Unable to Keep up with Advances in Electric Vehicle Technology, We May Suffer a Decline in Our Competitive Position.  

 

We are subject to a number of additional risks which you should be aware of before you buy our securities in this offering. These risks are discussed more fully in the section entitled “Risk Factors” following this prospectus summary.

 

Securities Purchase Agreement with JMJ Financial

 

We entered into a Securities Purchase Agreement dated October 7, 2016 (the “Purchase Agreement”) with JMJ Financial, a Nevada sole proprietorship owned by Justin Keener (“JMJ,” and together with our Company, the “Parties”). In accordance with its terms, the Purchase Agreement became effective upon (i) execution by the Parties of the Purchase Agreement, a Promissory Note (as defined below), and the October JMJ Warrant (as defined below), and (ii) delivery of an initial advance pursuant to the Promissory Note of $500,000, which occurred on October 13, 2016. The Promissory Note and the October JMJ Warrant were issued on October 13, 2016. The Purchase Agreement was amended on March 23, May 15, June 15, July 20, August 28, August 29, September 6, September 14, and October 23 (all in 2017). Pursuant to the Purchase Agreement, JMJ purchased from our Company (i) a promissory note (the “Promissory Note”), convertible into Common Stock, in the aggregate principal amount of up to $3,725,000 due and payable on the earlier of January 31, 2018 or the third business day after the closing of this offering, and (ii) a Common Stock purchase warrant (the “October JMJ Warrant”) to purchase 14,286 shares of our Common Stock at an exercise price per share equal to the lesser of (i) 80% of the per share price of this offering, (ii) $35, (iii) 80% of the unit price of this offering (if applicable), (iv) the exercise price of any warrants issued in this offering, or (v) the lowest conversion price, exercise price, or exchange price, of any security issued by us that was outstanding on October 13, 2016. Pursuant to the terms of the Promissory Note, JMJ has agreed that it will not convert the Promissory Note into more than 9.99% of our outstanding shares of Common Stock. JMJ currently does not own any shares of our Common Stock. The initial amount borrowed under the Promissory Note was $500,000, with the remaining amounts permitted to be borrowed under the Promissory Note being subject to us achieving certain milestones. The Promissory Notes each have an original issue discount of approximately 6%. This means that the Company will need to repay at least $530,000 for every $500,000 borrowed.

 

If we do not repay the Promissory Note on the maturity date (currently January 31, 2018), JMJ can convert all or part of the outstanding and unpaid principal, accrued interest, and any other fees into shares of Common Stock at a conversion price that is the lesser of $35.00 or 60% of the lowest trade price in the 25 trading days previous to the conversion. If we do not repay the Promissory Note on the maturity date and if we have issued a variable security at any time the Promissory Note is outstanding, then in such event JMJ shall have the right to convert all or any portion of the outstanding balance of the Promissory Note into shares of Common Stock on the same terms as granted in any applicable variable security issued by us.

 

With the achievement of certain milestones in November 2016 (the filing with the Securities and Exchange Commissions (the “SEC”) of a Preliminary Information Statement on Schedule 14C regarding the Reverse Stock Split), an additional advance of $500,000 under the Promissory Note occurred on November 28, 2016. Another warrant to purchase 14,286 shares of our Common Stock was issued as of November 28, 2016. With the achievement of certain milestones in February 2017 (the filing with the SEC of a revised Preliminary Information Statement and a Definitive Information Statement, each on Schedule 14C regarding the Reverse Stock Split), additional advances of $225,100 and $300,000 under the Promissory Note occurred on February 10 and February 27, respectively. Thus, two more warrants to purchase the Company’s Common Stock were issued, one for 6,431 shares and the other for 8,571 shares, respectively. All advances after February 28, 2017 have been at the discretion of JMJ without regard to any specific milestones occurring. Additional advances of $250,000 and $30,000 under the Promissory Note occurred on March 14, 2017 and March 24, 2017, respectively, and two more warrants to purchase the Company’s Common Stock were issued, one for 7,143 shares and the other for 857 shares. An additional advance of $400,000 occurred on April 5, 2017 and another warrant to purchase 11,429 shares of our Common Stock was issued on the same date. An additional advance of $295,000 occurred on May 9, 2017 and another warrant to purchase 8,429 shares of the Company’s Common Stock was issued on the same date. On July 27, 2017, an additional advance of $50,000 was made to the Company and another warrant to purchase 1,429 shares of the Company’s Common Stock was issued to JMJ.

 

 

3

 

 

 

In connection with the Purchase Agreement, the Company entered into a Representations and Warranties Agreement (the “Representations and Warranties Agreement”) with JMJ regarding the Company’s existing debt as of October 7, 2016. The Company had agreed to obtain agreements, by December 15, 2016, with holders owning at least $7,000,000 of the outstanding liabilities as reflected on the Company’s balance sheet as of June 30, 2016, providing for those holders to convert their liabilities into shares of Series C Convertible Preferred Stock (“Series C Preferred Shares”) or Common Stock of the Company at or prior to the time of the closing of this offering. The Company had also agreed to, by December 15, 2016, seek agreements so that the Company would not have, other than securities issued to JMJ, any variable securities. The Company is still seeking these letter agreements. Although the Company did not meet the December 2016 deadline, JMJ has not sought any remedies or assessed any fees for such failure.

 

On March 23, 2017, the parties amended the terms of the Promissory Note such that JMJ agreed to conditionally waive the defaults with regards to our failure to meet the original maturity date of the Promissory Note and the original delivery date of February 15, 2017 for the Origination Shares and extended the Maturity Date to May 15, 2017.

 

“Origination Shares” is defined in the Purchase Agreement as the following: on the fifth (5th) trading day after the closing of this offering we will deliver to JMJ shares of our Common Stock 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 our 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 price of this offering, or (iv) 80% of the unit price of this offering (if applicable), or (v) the exercise price of any warrants issued in this offering. The number of shares to be issued will be determined based on the offering price in this offering.

 

On March 23, 2017, JMJ did not waive any damages, fees, penalties, liquidated damages, or other amounts or remedies otherwise resulting from such defaults (which damages, fees, penalties, liquidated damages, or other amounts or remedies JMJ may choose in the future to assess, apply or pursue in its sole discretion) and JMJ’s conditional waiver is conditioned on us not being in default of and not breaching any term of the note, the securities purchase agreement, or any other transaction documents in connection therewith at any time subsequent to March 23, 2017. The parties amended the terms of the Promissory Note in a similar manner on May 15, 2017 (extending the Maturity Date to June 15, 2017), June 15, 2017 (extending the Maturity Date to July 15, 2017), July 20, 2017 (extending the Maturity Date to August 20, 2017), August 28, 2017 (extending the Maturity Date to August 31, 2017), August 29, 2017 (extending the Maturity Date to September 6, 2017), September 6, 2017 (extending the Maturity Date to September 14, 2017) and September 14, 2017 (extending the Maturity Date to September 21, 2017).

 

JMJ and the Company entered into a Lockup, Conversion, and Additional Investment Agreement dated October 23, 2017 (the “Additional Agreement”), however, it became effective upon the document being fully executed on October 24, 2017.

 

In accordance with the terms of the Additional Agreement, on October 24, 2017, JMJ advanced to the Company $949,900 available pursuant to previous agreements with JMJ. The Additional Agreement extended the Maturity Date to December 15, 2017 (subsequently extended to January 31, 2018). In addition, JMJ has claimed that the Company would owe JMJ $12 million as a mandatory default amount pursuant to previous agreements with the Company. JMJ agreed to allow the Company to have two options for settling a previously issued note (including settling the mandatory default amount for either $1.1 million or $2.1 million), securing a lockup agreement from JMJ, and exchanging previously issued warrants for shares of Common Stock. Each of these options depends upon this offering closing by December 15, 2017 (subsequently extended to January 31, 2018). The option chosen is at the Company’s sole discretion.

 

The first option is that the Company, upon the closing of this offering: (a) will pay $2.0 million in cash to JMJ; and (b) will issue shares of Common Stock to JMJ with a value of $9,005,000. The second option is that the Company, upon the closing of this offering, will not pay any cash to JMJ and will issue shares of Common Stock to JMJ with a value of $12,005,000. In each case, the Company will issue such number of duly and validly issued, fully paid and non-assessable shares of Common Stock equal to the amount in question divided by the lowest of (i) $35.00 per share, or (ii) the lowest daily closing price of the Common Stock during the ten days prior to delivery of shares (subject to adjustment for stock splits), or (iii) 80% of the Common Stock price of this offering, or (iv) 80% of the unit price of this offering (if applicable), or (v) the exercise price of any warrants issued in this offering.

 

On November 29, 2017, the Company and JMJ entered into the first amendment to the Additional Agreement, extending the Maturity Date to December 31, 2017. On January 4, 2018, the Company and JMJ entered into the second amendment to the Additional Agreement, extending the Maturity Date to January 31, 2018.

 

Upon the closing of this offering, JMJ will sign a six-month lockup agreement. In addition, the Company agreed to give JMJ a right of participation of up to $5 million in this offering and up to $5 million in each of the Company’s subsequent financings during the two-year period after this offering.

 

As of January 5, 2018, ten (10) warrants to purchase a total of 100,001 shares of the Company’s Common Stock have been issued to JMJ. The aggregate exercise price is $3,500,000. On the fifth (5th) trading day after the closing of this offering, but in no event later than January 31, 2018, we will deliver the Origination Shares to JMJ. If this offering does not occur prior to January 31, 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.

 

As of January 5, 2018, JMJ has not asserted its right to assess penalties resulting from the defaults with regards to our failure to meet the original (and amended) maturity date of the Promissory Note and the original (and amended) delivery date for the Origination Shares.

 

We refer herein to these transactions with JMJ as the “JMJ Financing”.

 

4

 

 

 

Recent Developments

 

Non-Cash Expense: On August 29, 2017, following the effectiveness of the Reverse Stock Split, the Farkas Group Inc. (“FGI”) (an entity whose sole owner is Michael Farkas, our Executive Chairman) exercised, on a cashless basis, its warrants to purchase 3.1 million shares, accounted for as derivative liabilities, that were not subject to the Reverse Stock Split. The Company issued 2,990,404 shares of Common Stock to FGI as a result of the cashless exercise. As a result, since the exercised warrants were previously classified as a derivative liability, the Company recorded a mark-to-market adjustment during the three months ended September 30, 2017 of approximately $43.9 million which was included within change in fair value of warrant liabilities on the condensed consolidated statement of operations. On November 20, 2017, JMJ confirmed in writing that it would not pursue a price reset of its outstanding warrants as a result of the FGI warrant exercise. The Company expects that this will result in a substantial reduction of the fair market value of JMJ’s derivative liabilities ($25 million on the September 30, 2017 balance sheet) in the fourth quarter of 2017.

 

On December 6, 2017, the Company and Mr. Farkas signed a letter agreement, pursuant to which, Mr. Farkas, on behalf of FGI, agreed that upon the closing of this offering, FGI will cancel 2,930,596 of its shares of Common Stock (of the 2,990,404 received).

 

Listing on The Nasdaq Capital Market

 

We have applied to list our Common Stock and warrants on The Nasdaq Capital Market (“NASDAQ”) under the symbols “BLNK” and “BLNKW”, respectively. If our listing application is approved, we expect to list our Common Stock and warrants on NASDAQ upon the closing of this offering and our Common Stock will cease to be traded on the OTC Pink Current Information Marketplace. No assurance can be given that our listing application will be approved. This offering will occur only if NASDAQ approves the listing of our Common Stock and warrants on NASDAQ. If NASDAQ does not approve the listing of our Common Stock and warrants, we will not proceed with this offering.

 

Going Concern Considerations

 

As reflected in our unaudited condensed consolidated financial statements for the nine months ended September 30, 2017, we had a cash balance, a working capital deficiency and an accumulated deficit of $9,062, $67,198,792 and $182,206,113, respectively. During the nine months ended September 30, 2017, the Company incurred a net loss of $101,134,331. These factors raise substantial doubt about our ability to continue as a going concern within a period of one year after the September 30, 2017 financial statement issuance date, as expressed in the notes to our unaudited condensed consolidated financial statements. Historically, we have been able to raise funds to support our business operations.

 

While we believe in the viability of our strategy to generate sufficient revenues and in our ability to raise additional funds through the completion of this offering, there can be no assurance that we will be able to generate sufficient revenues or complete this offering, raise anticipated proceeds, or that any other debt or equity financing will be available or, if available, that it will be available on terms acceptable to us. If we fail to complete this offering or raise anticipated proceeds, we may not be able to continue operations and as such our independent auditor’s report will continue to contain an uncertainty paragraph expressing substantial doubt as to our ability to continue as a going concern.

 

Corporate Information

 

Blink Charging Co. (formerly known as “Car Charging Group, Inc.”), a Nevada corporation, is the parent company of Car Charging, Inc., a Delaware corporation, which serves as the main operating company and is, in turn, the parent company of several distinct wholly-owned subsidiary operating companies including, but not limited to, eCharging Stations LLC, Blink, Beam Charging LLC and EV Pass LLC. Blink Charging Co. was formed in the State of Nevada on October 3, 2006, under our prior name, New Image Concepts, Inc. New Image Concepts, Inc. changed its name to Car Charging Group, Inc., on December 8, 2008. Car Charging, Inc. was incorporated in Delaware on September 8, 2009. We purchased the assets referred to as the Blink Network from ECOtality, Inc. on October 16, 2013. From April 22, 2013 to April 16, 2014, 350 Green LLC (“350 Green”) was a wholly-owned subsidiary of the Company in which the Company had full control and was 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. We had determined that we were the primary beneficiary of 350 Green, and as such, 350 Green’s assets, liabilities and results of operations are included in our consolidated financial statements for the period of April 22, 2013 through May 17, 2017. 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 their 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, as of June 30, 2017, 350 Green’s approximately $3.7 million of liabilities were deconsolidated from the Company’s financial statements. On August 17, 2017, we changed our name to Blink Charging Co.

 

We maintain our principal offices at 3284 N 29th Court, Hollywood, Florida 33020. Our telephone number is (305) 521-0200. Our Silicon Valley office is located at 20 So. Santa Cruz Avenue, Suite 300, Los Gatos, CA 95030 and houses our Chief Executive Officer (“CEO”). Our website is www.blinkcharging.com and we can be contacted by email at info@BlinkCharging.com. Our website and the information contained in, or accessible through, our website will not be deemed to be incorporated by reference into this prospectus and does not constitute part of this prospectus.

 

 

5

 

 

     
  THE OFFERING  
         
  Securities offered by us:  

4,600,000 units, each consisting of one share of Common Stock and one warrant to purchase one share of Common Stock based on the last reported price of the Common Stock as reported on the OTC Pink Current Information Marketplace on December 28, 2017, which was $5.00 per share. Each warrant will have an exercise price of $ per share (150% of the public offering price per unit), is exercisable immediately and will expire five years from the date of issuance

 
         
  Offering Price   $          per unit  
         
 

Common Stock outstanding before the offering as of January 5, 2018:

 

5,523,673 shares

 
         
  Common Stock to be outstanding after the offering:  

19,278,989 shares of Common Stock including the below shares of Common Stock issuable upon the closing of this offering and assuming a public offering price of $5.00, which is the last reported sales price for our Common Stock as reported on the OTC Pink Current Information Marketplace on December 28, 2017.

 

Of the 5,523,673 shares outstanding on January 5, 2018, FGI, at the closing of this offering, will cancel 2,930,596 shares (of the 2,990,404 received as the result of the August 2017 cashless warrant exercise) pursuant to a letter agreement, dated December 6, 2017, signed by Mr. Farkas. This will result in there being 2,593,077 shares of Common Stock outstanding to which the below shares of Common Stock issuable upon the closing of this offering in addition to the shares of Common Stock being offered will be added.

 

These 19,278,989 shares do not include the shares underlying the warrants to be issued as part of the units offered by us in this offering or warrants issued as payments of open accounts and do not include any options or warrants owned by or to be issued to the people and entities listed below. As indicated below, some of these people and entities will be receiving unregistered units (with each unit consisting of one share of Common Stock and one warrant to purchase one share of Common Stock). After the offering and assuming a public offering price of $5.00, there will be 5,028,259 warrants and 139,741 options outstanding.

 

(A) 28,415 units of unregistered shares of Common Stock and warrants issuable to two employee members of the Board of Directors (the “Board”) (Mr. Farkas and Mike Calise, our Chief Executive Officer) as well as a former member of the Board who remains our President (Andy Kinard) in settlement and consideration of services rendered during the period of April 1, 2016 through March 31, 2017 for payment of $113,551 divided by the assumed public offering price of $5.00, which is the last reported sales price for our Common Stock as reported on the OTC Pink Current Information Marketplace on December 28, 2017 multiplied by 80%;

 

(B) 550,000 shares of Common Stock issuable pursuant to letter agreements, dated December 6, 2017 and December 7, 2017 signed by the two holders of the Series A Convertible Preferred Stock (“Series A Preferred Shares”) (Mr. Farkas and Ira Feintuch, our Chief Operating Officer) to convert 11,000,000 Series A Preferred Shares issued and outstanding as of January 5, 2018. Pursuant to this letter agreement, Mr. Farkas is extinguishing his right to 24.5 million shares on an as-converted basis and Mr. Feintuch is extinguishing his right to 2.45 million shares on an as-converted basis;

 

(C) 886,119 shares of Common Stock issuable pursuant to a letter agreement, dated December 6, 2017 signed by Mr. Farkas;

 

(D) 26,500 shares of Common Stock issuable pursuant to a letter agreement, dated December 7, 2017 signed by Mr. Feintuch;

 

(E) 189,750 shares of Common Stock issuable to the Series B Convertible Preferred Stock (“Series B Preferred Shares”) holders equal to $825,000 payable to the holders of Series B Preferred Shares to redeem the 8,250 shares of Series B Preferred Shares issued and outstanding as of January 5, 2018 divided by the assumed public offering price of $5.00, multiplied by a factor of 1.15;

 

(F) 6,599,591 shares of Common Stock issuable upon the conversion of 229,551 Series C Preferred Shares. The 6,599,591 shares will be issued based upon the following formula (the “Formula”): the number of outstanding Series C Preferred Shares (i) multiplied by a factor of 115 (ii) divided by the assumed public offering price of $5.00, (iii) multiplied by 80%. The majority of the Series C Preferred Shares are being converted pursuant to conversion agreements signed by holders of the Series C Preferred Shares and the remainder are being converted pursuant to an automatic preferred conversion set forth in amendments to the as-amended Certificate of Designations for the Series C Preferred Shares (the “Series C Amendments”) filed with the Secretary of State of the State of Nevada on August 25, 2017 August 29, 2017, and January 8, 2018;

 

(G) 40,171 shares of Common Stock issuable pursuant to a letter agreement with Horton Capital Partners, LLC with regard to issued and outstanding warrants to purchase 59,199 warrant shares;

 

(H) 3,001,250 shares of Common Stock issuable to JMJ pursuant to the Additional Agreement (as amended) in full payment of all dollar amounts and share amounts owed in connection with the JMJ Financing;

 

(I) 169,313 units of unregistered shares of Common Stock and warrants issuable as payment of $630,000 in shares of Common Stock owed to Mr. Farkas for the period of December 1, 2015 through May 31, 2017 pursuant to the Third Amendment to Executive Employment Agreement between the Company and Mr. Farkas, dated June 15, 2017 (the “Third Amendment”) and pursuant to a Conversion Agreement between the Company and Mr. Farkas, dated August 23, 2017 divided by the assumed public offering price of $5.00 multiplied by 80%;

 

(J) 113,256 units of unregistered shares of Common Stock and warrants issuable as payment of

 

(i) $375,000 in shares of Common Stock owed to Mr. Farkas for accrued commissions on hardware sales and revenue from charging stations for the period of November 2015 through March 2017 pursuant to the Third Amendment divided by the assumed public offering price of $5.00 multiplied by 80%;

 

(ii) $77,624 in shares of Common Stock owed to Mr. Farkas for accrued commissions on hardware sales and revenue from charging stations for the period of April 2017 through September 2017 pursuant to an oral agreement between the Company and Mr. Farkas divided by the assumed public offering price of $5.00 multiplied by 80%. This oral agreement was reached pursuant to Section 7(B) of the Third Amendment;

 

(K) 12,139 units of unregistered shares and warrants issuable as payment of

 

(i) $43,555 in shares of Common Stock owed to Mr. Feintuch which represents 25% of the accrued commissions on hardware sales and revenue from charging stations for the period of November 2015 through March 2017 owed to Mr. Feintuch pursuant to the Compensation Agreement between the Company and Mr. Feintuch, dated June 16, 2017 (the “Compensation Agreement”) divided by the assumed public offering price of $5.00 multiplied by 80%;

 

(ii) $5,000 in shares of Common Stock owed to Mr. Feintuch which represents 25% of the accrued commissions on hardware sales and revenue from charging stations for the period of April 2017 through September 2017 owed to Mr. Feintuch pursuant to an oral agreement between the Company and Mr. Feintuch divided by the assumed public offering price of $5.00 multiplied by 80%. This oral agreement was reached pursuant to Section 3(B) of the Compensation Agreement;

 

(L) 38,382 shares of Common Stock issuable as payment of a total of $153,529 to both SemaConnect Inc. and their legal counsel pursuant to the Settlement Agreement dated June 23, 2017 divided by the assumed public offering price of $5.00 multiplied by 80%;

 

(M) 2,000 shares of Common Stock issuable as payment of $10,000 to Russ Klenet & Associates, Inc. pursuant to the Settlement and Release Agreement between the Company and the counterparty, dated December 29, 2016 divided by the assumed public offering price of $5.00;

 

(N) 40,000 shares of Common Stock issuable as payment of $200,000 to ITT Cannon, LLC pursuant to a Confidential Settlement Agreement between the Company and the counterparty, dated May 17, 2017 divided by the assumed public offering price of $5.00;

 

(O) 61,267 shares of Common Stock issuable as payment of $213,102 owed to BLNK Holdings, in principal and interest pursuant to a Conversion Agreement between the Company and BLNK Holdings, dated August 23, 2017 based upon the Formula;

 

(P) 15,000 shares of Common Stock issuable as payment of $75,000 owed to Wilson Sonsini Goodrich & Rosati pursuant to a Settlement Agreement between the Company and the counterparty, dated June 8, 2017, divided by the assumed public offering price of $5.00;

 

(Q) 300,125 shares of Common Stock issuable to Ardour Capital Investments, LLC (“Ardour”) (an entity of which Mr. Farkas owns less than 5%) in placement agent fees related to the JMJ Financing;

 

(R) 11,034 shares of Common Stock issuable, in the aggregate, to Sunrise Securities Corp. and Ardour in connection with placement agent fees related to the sale of Series C Preferred Stock in December 2014; and

 

(S) 1,600 shares of Common Stock issuable to IBIS Co. in connection with an introduction to an investor.

 
         
  Option to purchase additional units:  

We have granted the underwriters a 45-day option to purchase up to 690,000 additional units at the public offering price as set forth on the cover of this prospectus, solely to cover over-allotments, if any.

 
         
  Use of proceeds:  

We intend to use the net proceeds of this offering for the following purposes:

 
         
     

Approximately $3.178 million for the repayment of certain debt and other obligations including

 

(i)     $650,279 in principal and interest owed pursuant to convertible notes issued to FGI that are currently past due and for which the interest rate is 18% (one note has an interest rate of 15%). The Company used the proceeds of these convertible notes for working capital;

 

(ii)   placement agent and legal fees of approximately $187,245 related to the JMJ Financing (of which $64,745 will be paid to Joseph Gunnar & Co., LLC, the representative of the underwriters of this offering (the “Representative”), $107,500 will be paid to Ardour, and $15,000 will be paid to IBIS Co.);

 

(iii)   $67,032 owed to Chase Mortgage, Inc., pursuant to the Fourth Amendment to Secured Convertible Promissory Note dated September 5, 2017 with a monthly interest rate of 1.5%. The original Secured Convertible Promissory Note, dated as of November 13, 2014 was also amended February 20, May 1, and November 9 (all in 2015);

 

(iv)  $417,351 of offering costs currently in accounts payable;

 

(v)  $80,000 to Mr. Farkas in repayment of accrued cash compensation for the period of July 2015 through November 2015 pursuant to the Third Amendment;

 

(vi)  $145,664 to Mr. Feintuch which represents

 

(a) 75% of the accrued commissions on hardware sales and revenue from charging stations for the period of November 2015 through March 2017 owed to Mr. Feintuch pursuant to the Compensation Agreement ($130,664); and (b) 75% of the accrued commissions on hardware sales and revenue from charging stations for the period of April 2017 through September 2017 owed to Mr. Feintuch pursuant to an oral agreement between the Company and Mr. Feintuch. This oral agreement was reached pursuant to Section 3(B) of the Compensation Agreement ($15,000);

 

(vii)  accrued fees of $344,311 to the members of the Board. Specifically, $69,827 to Donald Engel; $46,651 to Mr. Farkas; $34,913 to Mr. Calise; $32,095 to Mr. Kinard (a former Board member); $11,122 to Kevin Evans (a former Board member); and $149,703 to Andrew Shapiro;

 

(viii) $25,000 to be paid to Wilson Sonsini Goodrich & Rosati pursuant to a Settlement Agreement between the Company and the counterparty, dated June 8, 2017;

 

(ix)  $159,088 to be paid for accrued professional fees to our accounting firm, a warrant valuation consultant, and our legal counsel;

 

(x) $25,000 bonus to be paid to Mr. Calise for 2016 owed to him pursuant to his employment agreement, as determined by the Compensation Committee of the Board in 2017;

 

(xi) $561,985 to be paid in accrued payroll taxes including $8,600 to be paid to employees for payments owed to them pursuant to the Company’s 401(k) plan;

 

(xii) $25,000 of installment debt in accordance with a Settlement Agreement between the former principals of 350 Green LLC and the Company, dated August 21, 2015;

 

(xiii) $3,000 to be paid to Russ Klenet & Associates, Inc. pursuant to the Settlement and Release Agreement between the Company and the counterparty, dated December 29, 2016;

 

(xiv) $261,993 to be collectively repaid to Chase Mortgage, Inc. ($101,993) and SMS Real Estate LLC ($160,000) pursuant to Convertible Promissory Notes between the Company and each lender dated September 7, 2017. The Company used the proceeds of these convertible notes for working capital;

 

(xv) $223,168 to be paid to Douglas Stein pursuant to a Forbearance Agreement with the Company dated January 8, 2018 with $30,000 to be paid by January 11, 2018 and the balance to be paid concurrent with the closing of the offering.

 

 
     

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.  
           
      See “Use of Proceeds” section on page 30.  
         
  Risk factors:   Investing in our securities is highly speculative and involves a high degree of risk. You should carefully consider the information set forth in the “Risk Factors” section beginning on page 10 before deciding to invest in our securities.  
         
  Trading Symbol:  

Our Common Stock is presently quoted on the OTC Pink Current Information Marketplace under the symbol “CCGI”. We have applied to have our Common Stock and warrants listed on The NASDAQ Capital Market under the symbols “BLNK” and “BLNKW,” respectively.

 
         
  Lock-up:   We and our directors, officers and principal stockholders have agreed with the underwriters not to offer for sale, issue, sell, contract to sell, pledge or otherwise dispose of any of our Common Stock or securities convertible into Common Stock for a period of 180 days after the date of this prospectus, in the case of our directors and officers, 270 days or 90 days after the date of this prospectus, in the case of select stockholders. See “Underwriting” section on page 104.  
         

 

6

 

 

NASDAQ listing requirements include, among other things, a stock price threshold. As a result, we effected the Reverse Stock Split on August 29, 2017.

 

The 5,523,673 shares of Common Stock outstanding as of January 5, 2018 excludes the following as of such date:

 

   

105,136 shares of Common Stock issuable upon exercise of outstanding warrants with a weighted average exercise price of $44.93;

 
         
   

92,901 shares of Common Stock issuable upon exercise of outstanding options with a weighted average exercise price of $52.77;

 
         
   

550,000 shares of Common Stock issuable to convert 11,000,000 Series A Preferred Shares as of January 5, 2018;

 
         
   

142,495 shares of Common Stock issuable to the Series B Preferred Shares holders as of January 5, 2018 to convert 8,250 Series B Preferred Shares;

 
         
   

655,860 shares issuable upon the conversion of 229,551 Series C Preferred Shares outstanding as of January 5, 2018;

 
         
    15,240 shares of Common Stock issuable to Mr. Farkas upon exercise of options to be issued pursuant to the Third Amendment with the options having a weighted average exercise price of $34.06;  
         
    15,000 shares of Common Stock issuable to Mr. Farkas upon exercise of options to be issued as replacements of expired options with the options having a weighted average exercise price of $5.30;  
         
    16,600 shares of Common Stock issuable to Mr. Feintuch upon exercise of options to be issued pursuant to the Compensation Agreement with the options having a weighted average exercise price of $34.34;  
         
   

20,599 shares of Common Stock issuable upon conversion of principal and interest owed pursuant to outstanding convertible notes with a weighted average exercise price of $36.12;

 
         
    2,930,596 shares of Common Stock owned by FGI that will be cancelled upon the completion of the offering; and  
         
    the shares of Common Stock issuable upon exercise of warrants sold in this offering.  
   

 

 

 

Unless otherwise stated, all information in this prospectus assumes no exercise of the underwriters’ over-allotment option to purchase additional shares and/or warrants.

 
 

 

7

 

 

 

SUMMARY CONSOLIDATED FINANCIAL INFORMATION

 

The following summary consolidated statements of operations data for the years ended December 31, 2016 and 2015 and the selected consolidated balance sheet data as of December 31, 2016 and 2015 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The summary consolidated statements of operations data for the nine months ended September 30, 2017 and 2016 and the consolidated balance sheets data as of September 30, 2017 are derived from our unaudited consolidated financial statements that are included elsewhere in this prospectus. The historical financial data presented below is not necessarily indicative of our financial results in future periods, and the results for the nine months ended September 30, 2017 are not necessarily indicative of our operating results to be expected for the full fiscal year ending December 31, 2017 or any other period. You should read the summary consolidated financial data in conjunction with those financial statements and the accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our consolidated financial statements are prepared and presented in accordance with United States generally accepted accounting principles (“U.S. GAAP”). Our unaudited consolidated financial statements have been prepared on a basis consistent with our audited financial statements and include all adjustments, consisting of normal and recurring adjustments that we consider necessary for a fair presentation of the financial position and results of operations as of and for such periods.

 

SUMMARY STATEMENTS OF OPERATIONS DATA

 

 
   

     

For The Nine Months

Ended September 30,

   

For The Fiscal Years

Ended December 31*,

 
     

(unaudited)

2017

   

(unaudited)

2016

    2016     2015  
                           
  Revenues:                                
  Total Revenues   $ 1,735,493     $ 2,459,496     $ 3,326,021       3,957,795  
  Total Cost of Revenues     1,128,066       2,253,190       2,813,680       2,861,738  
  Gross Profit (Loss)     607,427       206,306       512,341       1,096,057  
  Operating Expenses:                                
  Compensation     4,091,681       4,217,250       4,879,612       8,200,246  
  Other operating expenses     681,630       1,057,147       1,451,683       1,662,748  
  General and administrative expenses     774,482       1,058,670       1,393,954       2,552,857  
  Lease termination costs     300,000                    
  Impairments and loss of title of assets                       9,531,612  
  Total Operating Expenses     5,847,793       6,333,067       7,725,249       12,415,851  
  Total Other (Expense) Income     (95,893,965 )     (3,028,163 )     (486,219 )     3,074,870  
  Net Loss     (101,134,331 )     (9,154,924 )     (7,699,127 )     (8,244,924 )
  Dividend attributable to Series C shareholders     (2,374,300)       (1,070,400)       (1,468,500)       (950,100)  
  Net Income Attributable to the Noncontrolling Interest                       389,600  
  Net Loss Attributable to Common Stockholders   $ (103,508,631 )   $ (10,225,324 )   $ (9,167,627 )   $ (9,584,624 )
  Net Loss Per Share                                
  Basic and Diluted   $ (52.04 )   $ (6.39 )     (3.17 )     (6.06 )
  Weighted Average Number of Shares of Common Stock Outstanding                                
  Basic and Diluted     1,989,022       1,600,993       2,894,509       1,580,584  

 

 

* Derived from audited consolidated financial statements.

 

The outstanding historical share information in the table above is based on shares of Common Stock outstanding as of September 30, 2017 and excludes as of such date the following:

 

(i) Preferred Shares:

 

a. 2,200,000 shares of Common Stock issuable upon conversion of the 11,000,000 Series A Preferred Shares, issued and outstanding as of September 30, 2017, based on the Series A Certificate of Designations;

 

b. 54,577 shares of Common Stock issuable upon conversion of the 8,250 Series B Preferred Shares, issued and outstanding as of September 30, 2017, based on the Series B Certificate of Designations; and

 

c. 629,806 shares of Common Stock issuable upon conversion of 220,432 Series C Preferred Shares, issued and outstanding as of September 30, 2017, based on the Series C Certificate of Designations;

 

(ii) outstanding options to purchase an aggregate of 147,300 shares of Common Stock, with a weighted-average exercise price of approximately $58.18 per share, under our equity compensation plans; and

 

(iii) 19,856 shares of Common Stock issuable upon the conversion of convertible notes outstanding as of September 30, 2017.

 

 
  SELECTED BALANCE SHEETS DATA  
     

   

September 30,

   

December 31*,

 
   

2017

    2016     2015  
    (unaudited)              
Cash and cash equivalents   $ 9,062     $ 5,898     $ 189,231  
Working capital deficiency   $ (67,198,792 )   $ (21,184,871 )   $ (14,437,434 )
Total assets   $ 1,900,680     $ 1,910,881     $ 3,674,126  
Total liabilities   $ 67,790,946     $ 21,898,035     $ 16,465,822  
Total stockholders’ deficiency   $ (66,715,266 )   $ (20,812,154 )   $ (13,616,696 )

 

* Derived from audited consolidated financial statements.

 

The balance sheet table below presents consolidated balance sheets data as of September 30, 2017 on:

 

    an actual basis;  
         
   

a pro forma basis, giving effect to

 

(1) an additional advance under the JMJ Promissory Note in the amount of $949,900 offset by the Promissory Note discounts and issuance costs of:

 

(A) Common Stock purchase warrants for 27,140 shares of Common Stock issued to JMJ with an estimated fair value of $5,979,688 using the multi-nomial lattice pricing model based upon: (i) an expected life of 5.0 years; (ii) estimated volatility of 149.3%; (iii) annual rate of expected dividends of 0%; (iv) a risk-free interest rate of 1.50%; and (v) an estimated exercise price of $35.00; and

 

(B) placement agent cash fees of $94,990 and warrants to purchase 2,714 shares of Common Stock with an estimated fair value of $597,969 using the multi-nomial lattice pricing model based upon: (i) an expected life of 5 years; (ii) estimated volatility of 149.3%; (iii) annual rate of expected dividends of 0%; (iv) a risk-free interest rate of 1.50%; and (v) an estimated exercise price of $35.00. Such fees and warrants were issued in connection with the JMJ Financing.

 

(2) The Company received agreements signed by certain holders of outstanding warrants to purchase Common Stock, pursuant to which warrants to purchase an aggregate of 726,504 warrant shares converted into 710,841 shares of Common Stock. These 710,841 shares were issued pursuant to Board resolutions dated September 26, 2017. The issuance of these 710,841 shares will result in a gain of approximately $3.8 million and reduce liabilities by approximately $8.0 million.

 

(3) The issuance on November 29, 2017 of 9,119 Series C Preferred Shares as payment in full of payment-in-kind dividends and registration rights penalties and accrued interest thereon, owed to our Series C Preferred Shareholders accrued as of September 30, 2017.

 
         

 

8

 

         
   

a pro forma as adjusted basis, giving effect to the pro forma events above and for the sale by us of 4,600,000 units in this offering at an assumed public offering price of $5.00 per unit, which is the last reported sales price for our Common Stock as reported on the OTC Pink Current Information Marketplace on December 28, 2017, after deducting underwriting discounts and commissions and estimated offering expenses, and the following:

 
         

  (1) On December 6, 2017 and December 7, 2017, the two holders of the Series A Preferred Shares (Mr. Farkas and Mr. Feintuch) signed letter agreements pursuant to which, at the closing of this offering, 11,000,000 Series A Preferred Shares will convert into 550,000 shares of Common Stock. The Company recorded the beneficial conversion feature with a value of $1,000,000 as a deemed dividend by recording an offsetting debit and credit to additional paid-in capital because the Company has an accumulated deficit.
     
  (2)

On May 19, 2017, the holder of the Series B Preferred Shares signed a conversion agreement pursuant to which, at the closing of this offering, 8,250 Series B Preferred Shares will convert into 189,750 shares of Common Stock which will result in an inducement charge of approximately $124,000, divided by the assumed public offering price of $5.00 and multiplied by a factor of 1.15.

     
  (3)

At the closing of this offering, 6,599,591 shares issuable upon the conversion of 229,551 Series C Preferred Shares. The 6,599,591 shares will be issued based upon the Formula. The majority of the shares are being converted pursuant to conversion agreements signed by holders of the Series C Preferred Shares and the remainder are being issued pursuant to the Series C Amendments. The conversion of the Series C Preferred Shares resulted in a deemed dividend of approximately $9.7 million which was recognized by recording an offsetting debit and credit to additional paid-in capital because the Company has an accumulated deficit. The Series C Certificate of Designation (as amended) contains a provision that allows the Series C Preferred Shares holders to have the most favorable conversion formula agreed to by the Company with any investor. At this time, pursuant to the Additional Agreement, JMJ has the most favorable conversion formula. The Company has not yet quantified how many shares if any are issuable upon the conversion of the 229,551 Series C Preferred Shares using JMJ's conversion formula.

     
  (4)

At the closing of this offering, the Company will repay: (i) $650,279 in principal and interest owed pursuant to outstanding convertible notes issued to FGI; and (ii) placement agent and legal fees of approximately $187,245 related to the JMJ Financing (of which $64,745 will be paid to the Representative, $107,500 will be paid to Ardour, and $15,000 will be paid to IBIS Co.). 3,001,250 shares of Common Stock will be issued to JMJ in full consideration pursuant to the Additional Agreement in full payment of all dollar amounts and share amounts owed in connection with the JMJ Financing. The settlement with JMJ will result in a gain of $35.1 million. See “Use of Proceeds” section on page 30.

     
  (5)

At the closing of this offering, the Company will 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) in accordance with a Settlement Agreement between the parties dated August 21, 2015 resulting in a gain of $285,000.

     
  (6) At the closing of this offering, the Company will issue 28,415 units issuable to two employee members of the Board (Mr. Farkas and Mr. Calise) as well as a former member of the Board who remains our President (Mr. Kinard) in settlement and consideration of services rendered during the period of April 1, 2016 through March 31, 2017 for payment of $113,551 divided by the assumed public offering price of $5.00 multiplied by 80%, resulting in an inducement charge of $28,000. Each unit will consist of one share of Common Stock and one warrant to purchase one share of Common Stock. The Company will not be registering any of the securities issued in connection with this payment.
     
  (7)

At the closing of this offering, the Company will charge approximately $781,000 against additional paid-in capital related to offering costs that have been deferred.

     
  (8)

On June 8, 2017, the Company entered into a settlement agreement with Wilson Sonsini Goodrich & Rosati to settle $475,394 in payables owed for legal services as of June 30, 2017 requiring: (a) $25,000 to be paid in cash at the closing of this offering; and (b) $75,000 in the form of 15,000 shares of Common Stock issuable upon the closing of this offering. As a result, the Company will show a $375,394 reduction in liabilities.

     
  (9)

On June 13, 2017, the Company entered into an agreement with ITT Canon LLC whereby the Company reached a settlement regarding, as of June 30, 2017, an accrued liability of $200,000. The Company will issue 40,000 shares of Common Stock at the closing of this offering as settlement for such liability.

     
  (10)

Concurrent with the closing of this offering, the Company will pay Mr. Farkas:

 

(i) $80,000 to Mr. Farkas in repayment of accrued cash compensation for the period of July 2015 through November 2015; (ii) 169,313 in shares of Common Stock issuable as payment of $630,000 in shares of Common Stock owed to Mr. Farkas for the period of December 1, 2015 through May 31, 2017 pursuant to the Third Amendment and pursuant to a Conversion Agreement between the Company and Mr. Farkas, dated August 23, 2017 divided by the assumed public offering price of $5.00 multiplied by 80%; (iii) 113,256 units of unregistered shares of Common Stock and warrants issuable as payment of (a) $375,000 in shares of Common Stock owed to Mr. Farkas for accrued commissions on hardware sales and revenue from charging stations for the period of November 2015 through March 2017 pursuant to the Third Amendment divided by the assumed public offering price of $5.00 multiplied by 80%; (b) $77,624 in shares of Common Stock owed to Mr. Farkas for accrued commissions on hardware sales and revenue from charging stations for the period of April 2017 through September 2017 pursuant to an oral agreement between the Company and Mr. Farkas divided by the assumed public offering price of $5.00 multiplied by 80%. This oral agreement was reached pursuant to Section 7(B) of the Third Amendment; (iv) 61,267 shares of Common Stock issuable as payment of $213,102 owed to BLNK Holdings, in principal and interest pursuant to a Conversion Agreement between the Company and BLNK Holdings, dated August 23, 2017 based upon the Formula. Mr. Farkas is also due to receive 886,119 shares of Common Stock issuable pursuant to a letter agreement, dated December 6, 2017. Mr. Farkas will also receive options (regardless of the status of the offering) for 7,000 shares of our Common Stock at an exercise price of $30.00 per share and options for 8,240 shares of our Common Stock at an exercise price of $37.50 per share in connection with amounts owed pursuant to the Third Amendment. 

   
  (11) In accordance with the Compensation Agreement with Mr. Feintuch, the Company shall pay Mr. Feintuch (i) $130,664 in cash which represents 75% of the accrued commissions on hardware sales and revenue from charging stations for the period of November 2015 through March 2017 owed to Mr. Feintuch pursuant to the Compensation Agreement; (ii) $15,000 in cash which represents 75% of the accrued commissions on hardware sales and revenue from charging stations for the period of April 2017 through September 2017 owed to Mr. Feintuch pursuant to an oral agreement between the Company and Mr. Feintuch. This oral agreement was reached pursuant to Section 3(B) of the Compensation Agreement; (iii) 12,139 units of unregistered shares of Common Stock and warrants issuable as payment of (a) $43,555 in shares of Common Stock owed to Mr. Feintuch which represents 25% of the accrued commissions on hardware sales and revenue from charging stations for the period of November 2015 through March 2017 owed to Mr. Feintuch pursuant to the Compensation Agreement divided by the assumed public offering price of $5.00 multiplied by 80% and (b) $5,000 in shares of Common Stock owed to Mr. Feintuch which represents 25% of the accrued commissions on hardware sales and revenue from charging stations for the period of April 2017 through September 2017 owed to Mr. Feintuch pursuant to an oral agreement between the Company and Mr. Feintuch divided by the assumed public offering price of $5.00 multiplied by 80%. This oral agreement was reached pursuant to Section 3(B) of the Compensation Agreement. Mr. Feintuch will also receive options (regardless of the status of the offering) for 7,000 shares of our Common Stock at an exercise price of $30.00 per share and options for 9,600 shares of our Common Stock at an exercise price of $37.50 per share pursuant to his Compensation Agreement.

     
    Mr. Feintuch is also due to receive 26,500 shares of Common Stock issuable pursuant to a letter agreement, dated December 7, 2017.
     
  (12)

Concurrent with the closing of the offering, the Company will pay accrued professional fees of $159,088 to our accounting firm, a warrant valuation consultant, and our legal counsel.

     
  (13) Concurrent with the closing of the offering, the Company will pay accrued cash fees owed to the Board members in the amount of $344,311. Specifically, $69,827 to Mr. Engel; $46,651 to Mr. Farkas; $34,913 to Mr. Calise; $32,095 to Mr. Kinard; $11,122 to Mr. Evans; and $149,703 to Mr. Shapiro.
     
  (14)

Concurrent with the closing of the offering, the Company will pay Mr. Calise a bonus of $25,000 for 2016 owed to him pursuant to his employment agreement, as determined by the Compensation Committee of the Board in 2017.

     
  (15)

Concurrent with the closing of the offering, the Company will pay accrued payroll taxes of $561,985 including $8,600 to be paid to employees for payments owed to them pursuant to the Company’s 401(k) plan.

     
  (16) Concurrent with the closing of the offering, the Company will pay accrued offering costs of $417,351, currently characterized as accounts payable.
     
  (17) Concurrent with the closing of the offering, the Company will pay $67,032 owed to Chase Mortgage, Inc., pursuant to the Fourth Amendment to Secured Convertible Promissory Note dated September 5, 2017 with a monthly interest rate of 1.5%. The original Secured Convertible Promissory Note, dated as of November 13, 2014 was also amended February 20, May 1, and November 9 (all in 2015).
     
  (18)

Concurrent with the closing of the offering, the Company will: (i) issue 2,000 shares of Common Stock as payment of $10,000; and (ii) pay $3,000 to Russ Klenet & Associates, Inc. Both payments will be made pursuant to the Settlement and Release Agreement between the Company and the counterparty, dated December 29, 2016 with the share payment divided by the assumed public offering price of $5.00.

     
  (19)

Concurrent with the closing of the offering, the Company will issue, in the aggregate, 11,034 shares of Common Stock to Sunrise Securities Corp. and Ardour in connection with placement agent fees related to the sale of Series C Preferred Stock in December 2014.

     
  (20)

Concurrent with the closing of the offering, the Company will issue 38,382 shares of Common Stock as payment of a total of $153,529 to both SemaConnect Inc. and their legal counsel pursuant to the Settlement Agreement dated June 23, 2017 divided by the assumed public offering price of $5.00 multiplied by 80%.

     
  (21)

Concurrent with the closing of the offering, the Company will issue 300,125 shares of Common Stock to Ardour in placement agent fees related to the JMJ Financing.

     
  (22)

Concurrent with the closing of the offering, the Company will issue 1,600 shares of Common Stock to IBIS Co. in connection with an introduction to an investor.

     
  (23) Concurrent with the closing of the offering, the Company will collectively repay $261,993 to Chase Mortgage, Inc. ($101,993) and SMS Real Estate LLC ($160,000) pursuant to Convertible Promissory Notes between the Company and each lender dated September 7, 2017.
     
  (24) $223,168 to be paid to Douglas Stein pursuant to a Forbearance Agreement with the Company dated January 8, 2018 with $30,000 to be paid by January 11, 2018 and the balance to be paid concurrent with the closing of the offering.

 
The pro forma information will be adjusted based on the actual public offering price and other terms of this offering determined at pricing.
 

     

Actual

(unaudited)

   

Pro Forma

(unaudited)

   

Pro Forma

As

Adjusted(1)

(unaudited)

 
  Consolidated Balance Sheet Data (as of September 30, 2017):                        
  Cash and cash equivalents   $ 9,062     $ 958,962       18,719,606  
  Working capital (deficit)   $ (67,198,792)     $ (62,568,107)       10,747,977  
  Total assets   $ 1,900,680     $ 2,850,580       19,829,808  
  Total liabilities   $ 67,790,946     $ 64,110,161       8,554,722  
  Total stockholders’ equity (deficit)   $ (66,715,266)     $ (62,084,581)       11,275,086  

     
(1)

A $1.00 increase or decrease in the assumed public offering price per unit would increase or decrease our cash and cash equivalents, working capital (deficit), total assets and total stockholders’ equity (deficit) by approximately $4.2 million, assuming the number of units offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the underwriting discount and estimated offering expenses payable by us.

 
     

 

9

 

 

RISK FACTORS

 

Investing in our securities involves a high degree of risk. You should carefully consider the following risks and uncertainties described below, as well as other information included in this prospectus before deciding to purchase our securities. There are many risks that affect our business and results of operations, some of which are beyond our control. Our business, financial condition or operating results could be materially harmed by any of these risks. This could cause the trading price of our securities to decline, and you may lose all or part of your investment. Additional risks that we do not yet know of or that we currently think are immaterial may also affect our business and results of operations.

 

Relating to Our Business

 

Our Revenue Growth Depends on Consumers’ Willingness to Adopt Electric Vehicles.

 

Our growth is highly dependent upon the adoption by consumers of electric vehicles (“EV”), and we are subject to a risk of any reduced demand for EVs. If the market for EVs does not gain broad market acceptance or develops more slowly than we expect, our business, prospects, financial condition and operating results will be harmed. The market for alternative fuel vehicles is relatively new, rapidly evolving, characterized by rapidly changing technologies, price competition, additional competitors, evolving government regulation and industry standards, frequent new vehicle announcements, long development cycles for EV original equipment manufacturers, and changing consumer demands and behaviors. Factors that may influence the purchase and use of alternative fuel vehicles, and specifically EVs, include:

 

  perceptions about EV quality, safety (in particular with respect to lithium-ion battery packs), design, performance and cost, especially if adverse events or accidents occur that are linked to the quality or safety of EVs;
     
  the limited range over which EVs may be driven on a single battery charge and concerns about running out of power while in use;
     
  improvements in the fuel economy of the internal combustion engine;
     
  consumers’ desire and ability to purchase a luxury automobile or one that is perceived as exclusive;
     
  the environmental consciousness of consumers;
     
  volatility in the cost of oil and gasoline;
     
  consumers’ perceptions of the dependency of the U.S. on oil from unstable or hostile countries and the impact of international conflicts;
     
  government regulations and economic incentives promoting fuel efficiency and alternate forms of energy;
     
  access to charging stations, standardization of EV charging systems and consumers’ perceptions about convenience and cost to charge an EV; and
     
  the availability of tax and other governmental incentives to purchase and operate EVs or future regulation requiring increased use of nonpolluting vehicles.

 

10

 

 

The influence of any of the factors described above may negatively impact the widespread consumer adoption of EVs, which would materially adversely affect our business, operating results, financial condition and prospects.

 

Changes to the Corporate Average Fuel Economy Standards May Impact the Electric Vehicle Market and Affect our Business and Results of Operations.

 

As regulatory initiatives have required an increase in the consumption of renewable transportation fuels, such as ethanol and biodiesel, consumer acceptance of electric and other alternative vehicles is increasing. To meet higher fuel efficiency and greenhouse gas emission standards for passenger vehicles, automobile manufacturers are increasingly using technologies, such as turbocharging, direct injection and higher compression ratios, that require high octane gasoline. If fuel efficiency of vehicles continues to rise, and affordability of vehicles using renewable transportation fuels increases, the demand for electric and high energy vehicles could diminish. If consumers no longer purchase electric vehicles, it would materially adversely affect our business, operating results, financial condition and prospects.

 

Computer Malware, Viruses, Hacking, Phishing Attacks and Spamming Could Harm Our Business and Results of Operations.

 

Computer malware, viruses, physical or electronic break-ins and similar disruptions could lead to interruption and delays in our services and operations and loss, misuse or theft of data. Computer malware, viruses, computer hacking and phishing attacks against online networking platforms have become more prevalent and may occur on our systems in the future.

 

Any attempts by hackers to disrupt our website service or our internal systems, if successful, could harm our business, be expensive to remedy and damage our reputation or brand. Our network security business disruption insurance may not be sufficient to cover significant expenses and losses related to direct attacks on our website or internal systems. Efforts to prevent hackers from entering our computer systems are expensive to implement and may limit the functionality of our services. Though it is difficult to determine what, if any, harm may directly result from any specific interruption or attack, any failure to maintain performance, reliability, security and availability of our products and services and technical infrastructure may harm our reputation, brand and our ability to attract customers. Any significant disruption to our website or internal computer systems could result in a loss of customers and could adversely affect our business and results of operations.

 

We have previously experienced, and may in the future experience, service disruptions, outages and other performance problems due to a variety of factors, including infrastructure changes, third-party service providers, human or software errors and capacity constraints. If our mobile application is unavailable when customers attempt to access it or it does not load as quickly as they expect, customers may seek other services.

 

Our platform functions on software that is highly technical and complex and may now or in the future contain undetected errors, bugs, or vulnerabilities. Some errors in our software code may only be discovered after the code has been deployed. Any errors, bugs, or vulnerabilities discovered in our code after deployment, inability to identify the cause or causes of performance problems within an acceptable period of time or difficultly maintaining and improving the performance of our platform, particularly during peak usage times, could result in damage to our reputation or brand, loss of revenues, or liability for damages, any of which could adversely affect our business and financial results.

 

We expect to continue to make significant investments to maintain and improve the availability of our platform and to enable rapid releases of new features and products. To the extent that we do not effectively address capacity constraints, upgrade our systems as needed and continually develop our technology and network architecture to accommodate actual and anticipated changes in technology, our business and operating results may be harmed.

 

We have a disaster recovery program to transition our operating platform and data to a failover location in the event of a catastrophe and have tested this capability under controlled circumstances, however, there are several factors ranging from human error to data corruption that could materially lengthen the time our platform is partially or fully unavailable to our user base as a result of the transition. If our platform is unavailable for a significant period of time as a result of such a transition, especially during peak periods, we could suffer damage to our reputation or brand, or loss of revenues any of which could adversely affect our business and financial results.

 

11

 

 

Growing Our Customer Base Depends Upon the Effective Operation of Our Mobile Applications with Mobile Operating Systems, Networks and Standards That We Do Not Control.

 

We are dependent on the interoperability of our mobile applications with popular mobile operating systems that we do not control, such as Google’s Android and iOS, and any changes in such systems that degrade our products’ functionality or give preferential treatment to competitive products could adversely affect the usage of our applications on mobile devices. Additionally, in order to deliver high quality mobile products, it is important that our products work well with a range of mobile technologies, systems, networks and standards that we do not control. We may not be successful in developing relationships with key participants in the mobile industry or in developing products that operate effectively with these technologies, systems, networks or standards.

 

We Need Additional Capital to Fund Our Growing Operations and Cannot Assure You That We Will Be Able to Obtain Sufficient Capital on Reasonable Terms or at All, and We May Be Forced to Limit the Scope of Our Operations.

 

We need additional capital to fund our growing operations and if adequate additional financing is not available on reasonable terms or available at all, we may not be able to undertake expansion or continue our marketing efforts and we would have to modify our business plans accordingly. The extent of our capital needs will depend on numerous factors, including (i) our profitability; (ii) the release of competitive products and/or services by our competition; (iii) the level of our investment in research and development; (iv) the amount of our capital expenditures, including acquisitions; and (v) our growth. We cannot assure you that we will be able to obtain capital in the future to meet our needs.

 

Even if we do find a source of additional capital, we may not be able to negotiate terms and conditions for receiving the additional capital that are acceptable to us. Any future capital investments could dilute or otherwise materially and adversely affect the holdings or rights of our existing stockholders. In addition, new equity or convertible debt securities issued by us to obtain financing could have rights, preferences and privileges senior to our Common Stock. We cannot give you any assurance that any additional financing will be available to us, or if available, will be on terms favorable to us.

 

The Report of Our Independent Registered Public Accounting Firm Contains an Explanatory Paragraph That Expresses Substantial Doubt About Our Ability to Continue as a Going Concern.

 

The report of our independent registered public accounting firm with respect to our financial statements as of December 31, 2016 and for the year then ended indicates that our financial statements have been prepared assuming that we will continue as a going concern. The report states that, since we have incurred net losses since inception and we need to raise additional funds to meet our obligations and sustain our operations, there is substantial doubt about our ability to continue as a going concern. Our plans in regard to these matters are described in Note 2 to our audited financial statements as of December 31, 2016 and 2015 and for the years then ended. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

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 losses of $7.7 million and $8.2 million the years ended December 31, 2016 and 2015, respectively, and as of December 31, 2016 our accumulated deficit was $81.1 million. We incurred a net loss of $101.1 million during the nine months ended September 30, 2017, and as of September 30, 2017 our accumulated deficit was $182.2 million.

 

The net loss was primarily due to an increase in other expenses of $92,865,802 from $3,028,163 for the nine months ended September 30, 2016 to $95,893,965 for the nine months ended September 30, 2017. The increase was primarily due to an increase in the non-cash change in fair value of warrant liabilities of approximately $70.4 million, which was primarily attributable to the quantity of warrants held by our Executive Chairman not being subject to our Reverse Split, which, as a result of the Reverse Split, caused them to increase in value.

 

On December 6, 2017, the Company and Mr. Farkas signed a letter agreement, pursuant to which, Mr. Farkas, on behalf of FGI, agreed that upon the closing of this offering, FGI will cancel 2,930,596 of its shares of Common Stock (of the 2,990,404 received).

 

Our prior losses, combined with expected future losses, have had and will continue to have, for the foreseeable future, an adverse effect on our stockholders’ equity and working capital. If our revenue grows more slowly than we anticipate, 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 in addition to the proceeds from this offering, we may need to borrow additional funds or sell debt or equity securities, or some combination thereof, to provide funding for our operations. Such additional funding may not be available on commercially reasonable terms, or at all.

 

12

 

 

If the proceeds from this offering are insufficient for us to continue as a going concern, it could make it more difficult for us to raise additional capital, should it be needed, or cause our customers, suppliers and other business partners to lose confidence in us thereby resulting in a reduction of revenue, loss of supply resources and other effects that would be significantly harmful to our business. If adequate funds are not available when needed, our liquidity, financial condition and operating results would be materially and adversely affected, and we may not be able to operate our business without significant changes in our operations or at all.

 

We May Not Have The Liquidity to Support Our Future Operations and Capital Requirements.

 

Whether we can achieve cash flow levels sufficient to support our operations cannot be accurately predicted. Unless such cash flow levels are achieved, in addition to the proceeds from this offering, we may need to borrow additional funds or sell debt or equity securities, or some combination thereof, to provide funding for our operations. Such additional funding may not be available on commercially reasonable terms, or at all. If adequate funds are not available when needed, our financial condition and operating results would be materially and adversely affected and we may not be able to operate our business without significant changes in our operations, or at all.

 

We Have Failed to Pay Certain State and Federal Taxes and May be Subject to Penalties as a Result.

 

We are delinquent in filing and, in certain instances, paying sales taxes collected from customers in specific states that impose a tax on sales of our products. We have accrued an approximate $227,000 and $218,000 liability as of September 30, 2017 and December 31, 2016, respectively, related to this matter. In addition, we are currently delinquent in remitting approximately $577,000 and $244,000 as of September 30, 2017 and December 31, 2016, respectively, of federal and state payroll taxes withheld from employees. On March 29, 2017 and August 21, 2017, we sent a letter to the Internal Revenue Service (“IRS”) notifying the IRS of our intention to resolve the delinquent taxes upon the receipt of additional working capital. We may be subject to penalties as a result of our failure to pay these taxes and such penalties may have an adverse effect on our business.

 

We Are Applying For Listing of Our Common Stock And Warrants on NASDAQ. We Can Provide No Assurance That Our Common Stock and Warrants Qualify to Be Listed, and if Listed, That Our Securities Will Continue to Meet NASDAQ Listing Requirements. If We Fail to Comply With The Continuing Listing Standards of NASDAQ, Our Securities Could Be Delisted.

 

We expect that our securities will be eligible to be listed on NASDAQ subject to our ability to satisfy the initial listing requirements. Our ability to have our securities become listed on NASDAQ will require us to, among other items, improve our balance sheet, which we may be unable to accomplish. As of December 31, 2016, we had accumulated stockholders’ deficiency of approximately $20.8 million. As of September 30, 2017, we had accumulated stockholders’ deficiency of approximately $66.7 million, and our stockholders’ deficiency may increase as a result of additional net losses in subsequent quarterly periods.

 

We can provide no assurance that our listing application will be approved, and that an active trading market for our Common Stock will develop and continue. If, after listing, we fail to satisfy the continued listing requirements of NASDAQ, such as the corporate governance requirements, stockholder equity requirements or the minimum closing bid price requirement, NASDAQ may take steps to delist our Common Stock. Such a delisting would likely have a negative effect on the price of our Common Stock and would impair your ability to sell or purchase Common Stock underlying the units when you wish to do so. In the event of a delisting, we can provide no assurance that any action taken by us to restore compliance with listing requirements would allow our Common Stock to become listed again, stabilize the market price or improve the liquidity of our Common Stock, prevent our Common Stock from dropping below the NASDAQ minimum bid price requirement or prevent future non-compliance with NASDAQ’s listing requirements.

 

To meet the requirements of NASDAQ, we may be required to restructure certain of our equity securities or satisfy certain liabilities through the issuance of additional equity securities. Our ability to restructure certain of our equity securities may require us to enter into new agreements with the applicable security holders, which we may be unable to do on favorable terms or at all. Any such agreement may result in the issuance of new securities or the modification of the rights of existing securities in a manner that may be dilutive to our Common Stock holders. In addition, NASDAQ has certain requirements that are beyond our control, such as financial requirements that are based on the trading price of our stock. If we are unable to meet the minimum financial eligibility of NASDAQ, we may be unable to list our stock, and we may be unsuccessful in completing this offering. Moreover, it would prevent us from increasing liquidity in our shares of Common Stock and make it more difficult for us to raise capital on favorable terms, or at all.

 

13

 

 

The Unavailability, Reduction or Elimination of Government Incentives Could Have a Material Adverse Effect on Our Business, Financial Condition, Operating Results and Prospects.

 

As of December 31, 2016, and September 30, 2017, government grants accounted for 10% and 10%, respectively, of our revenues. Any reduction, elimination or discriminatory application of government subsidies and economic incentives because of policy changes, fiscal tightening or other reasons may result in diminished revenues from government sources and diminished demand for our products. This could materially and adversely affect our business, prospects, financial condition and operating results.

 

Our growth depends in part on the availability and amounts of government subsidies for EV charging equipment. In the event such subsidies discontinue, our business outlook and financial conditions could be negatively impacted.

 

If We Are Unable to Keep Up With Advances in EV Technology, We May Suffer a Decline in Our Competitive Position.

 

The EV industry is characterized by rapid technological change. If we are unable to keep up with changes in EV technology, our competitive position may deteriorate which would materially and adversely affect our business, prospects, operating results and financial condition. As technologies change, we plan to upgrade or adapt our EV charging stations and Blink Network software in order to continue to provide EV charging services with the latest technology. However, due to our limited cash resources, our efforts to do so may be limited. For example, the EV charging network that we acquired from ECOtality was originally funded, in part, by the U.S. Department of Energy (“DOE”), which funding is no longer available to us. As a result, we may be unable to grow, maintain and enhance the network of charging stations that we acquired from ECOtality at the same rate and scale as ECOtality did prior to the acquisition or at levels comparable our current competitors. Any failure of our charging stations to compete effectively with other manufacturers’ charging stations will harm our business, operating results and prospects.

 

We Need to Manage Growth in Operations to Realize Our Growth Potential and Achieve Our Expected Revenues, and Our Failure to Manage Growth Will Cause a Disruption of Our Operations Resulting in the Failure to Generate Revenue and an Impairment of Our Long-Lived Assets.

 

In order to take advantage of the growth that we anticipate in our current and potential markets, we believe that we must expand our marketing operations. This expansion will place a significant strain on our management and our operational, accounting, and information systems. We expect that we will need to continue to improve our financial controls, operating procedures and management information systems. We will also need to effectively train, motivate and manage our employees. Our failure to manage our growth could disrupt our operations and ultimately prevent us from generating the revenues we expect.

 

In order to achieve the above-mentioned targets, the general strategies of our Company are to maintain and search for hard-working employees who have innovative initiatives, as well as to keep a close eye on expansion opportunities through merger and/or acquisition.

 

If Our Estimates or Judgments Relating to Our Critical Accounting Policies Prove to Be Incorrect, Our Financial Condition And Results of Operations Could Be Adversely Affected.

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as discussed under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included elsewhere in this prospectus and in our consolidated financial statements included herein. The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities and equity, and the amount of revenue and expenses that are not readily apparent from other sources. Significant assumptions and estimates used in preparing our consolidated financial statements include those related to revenue recognition, allowance for doubtful accounts, inventory reserves, impairment of goodwill, indefinite-lived and long-lived assets, pension and other post-retirement benefits, product warranty, valuation allowances for deferred tax assets, valuation of Common Stock warrants, and share-based compensation. Our financial condition and results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the price of our Common Stock.

 

14

 

 

We Face Risks Arising From Acquisitions.

 

In 2012 and 2013, we acquired certain assets from 350 Green and Beam Charging, LLC (“Beam Charging”). We may pursue similar strategic transactions in the future. Risks in acquisition transactions include difficulties in the integration of acquired businesses into our operations and control environment, difficulties in assimilating and retaining employees and intermediaries, difficulties in retaining the existing clients of the acquired entities, assumed or unforeseen liabilities that arise in connection with the acquired businesses, the failure of counterparties to satisfy any obligations to indemnify us against liabilities arising from the acquired businesses, and unfavorable market conditions that could negatively impact our growth expectations for the acquired businesses. Fully integrating an acquired company or business into our operations may take a significant amount of time. We cannot assure you that we will be successful in overcoming these risks or any other problems encountered with acquisitions and other strategic transactions. These risks may prevent us from realizing the expected benefits from acquisitions and could result in the failure to realize the full economic value of a strategic transaction or the impairment of goodwill and/or intangible assets recognized at the time of an acquisition. These risks could be heightened if we complete a large acquisition or multiple acquisitions within a short period of time. In addition, in connection with the acquisition of 50% of the interests of the ECOtality Estate in April 2015, we issued certain Series B Preferred Shares, which we believe constitute an exempt issuance as intended under agreements with certain of our investors as such shares (i) were issued to effectuate the strategic acquisition of ECOtality, and (ii) permit us, in our sole control, to settle these shares for cash at stated optional redemption dates, as opposed to a variable number of shares. However, there can be no assurance that our investors agree with our interpretation of our investment documents and won’t pursue any of the potential remedies that may be available to them.

 

We Could Be Forced To Pay Damages In Connection With Litigation Involving 350 Green.

 

On September 9, 2015, the United States Court of Appeals for the Seventh Circuit of Chicago, Illinois affirmed the ruling of the United States District Court for the Northern District of Illinois in the matter of JNS Power & Control Systems, Inc. (“JNS”) v. 350 Green, LLC in favor of JNS, which affirmed the sale of certain assets by our former subsidiary 350 Green to JNS and the assumption of certain 350 Green liabilities by JNS. On April 7, 2016, JNS amended the complaint to add the Company alleging an unspecified amount of lost revenues from the chargers, among other matters, caused by the defendants. JNS also seeks indemnity for its unspecified costs in connection with enforcing the asset purchase agreement dated April 13, 2013 between 350 Green and JNS in courts in New York and Chicago. On July 26, 2017, the District Court denied the Company’s motion to dismiss the Company from the suit. The Company filed its answer and affirmative defenses to the second amended complaint on August 16, 2017. The deadline for the parties to complete discovery was December 8, 2017. The next status hearing on the matter is set for January 11, 2018. We believe our legal position is strong on any potential corporate veil-piercing arguments with regard to our former subsidiary, however, if this position is challenged and not upheld, it could have a material adverse effect on our business. As of September 30, 2017, the Company accrued a $750,000 liability in connection with its settlement offer to JNS. The parties are attempting to document a settlement.

 

We Have Limited Insurance Coverage, and Any Claims Beyond Our Insurance Coverage May Result in Our Incurring Substantial Costs and a Diversion of Resources.

 

We hold employer’s liability insurance generally covering death or work-related injury of employees. We hold public liability insurance covering certain incidents involving third parties that occur on or in the premises of our Company. We hold directors and officers liability insurance. We do not maintain key-man life insurance on any of our senior management or key personnel, or business interruption insurance. Our insurance coverage may be insufficient to cover any claim for product liability, damage to our fixed assets or employee injuries. Any liability or damage to, or caused by, our facilities or our personnel beyond our insurance coverage may result in our incurring substantial costs and a diversion of resources.

 

Our Future Success Depends, in Part, on the Performance and Continued Service of Our Officers.

 

We presently depend to a great extent upon the experience, abilities and continued services of our management team, which consists of Mr. Calise (our CEO), Mr. Farkas (our Executive Chairman), Mr. Kinard (“Andy Kinard” (our President)) and Mr. Feintuch (our Chief Operating Officer). The loss of services of Mr. Calise, Mr. Farkas, Mr. Kinard or Mr. Feintuch could have a material adverse effect on our business, financial condition or results of operation. Failure to maintain our management team could prove disruptive to our daily operations, require a disproportionate amount of resources and management attention and could have a material adverse effect on our business, financial condition and results of operations.

 

Our Future Success Depends, in Part, on Our Ability to Attract and Retain Highly Qualified Personnel.

 

Our future success also depends upon our ability to attract and retain highly qualified personnel. We are in the process of building our management team. Among other positions, we need to hire a Chief Financial Officer with public company experience. Mr. Calise currently acts as our interim principal financial officer and our interim principal accounting officer. Although we intend to hire a permanent Chief Financial Officer soon, there is no assurance that we will have sufficient financial resources to do so. Our accounting controls may continue to be deficient unless we obtain the services of an experienced Chief Financial Officer who can help us address material weaknesses. In addition, expansion of our business and the management and operation of our Company will require additional managers and employees with industry experience, and our success will be highly dependent on our ability to attract and retain skilled management personnel and other employees. There can be no assurance that we will be able to attract or retain highly qualified personnel. As our industry continues to evolve, competition for skilled personnel with the requisite experience will be significant. This competition may make it more difficult and expensive to attract, hire and retain qualified managers and employees.

 

15

 

 

We Are in an Intensely Competitive Industry and There Can Be No Assurance That We Will Be Able to Compete with Our Competitors Who May Have Greater Resources.

 

We face strong competition from competitors in the EV charging services industry, including competitors who could duplicate our model. Many of these competitors may have substantially greater financial, marketing and development resources and other capabilities than us. In addition, there are very few barriers to entry into the market for our services. There can be no assurance, therefore, that any of our current and future competitors, many of whom may have far greater resources, will not independently develop services that are substantially equivalent or superior to our services. Therefore, an investment in our Company is very risky and speculative due to the competitive environment in which we may operate.

 

Our competitors may be able to provide customers with different or greater capabilities or benefits than we can provide in areas such as technical qualifications, past contract performance, geographic presence and price. Furthermore, many of our competitors may be able to utilize substantially greater resources and economies of scale to develop competing products and technologies, divert sales away from us by winning broader contracts or hire away our employees by offering more lucrative compensation packages. In the event that the market for EV charging stations expands, we expect that competition will intensify as additional competitors enter the market and current competitors expand their product lines. In order to secure contracts successfully when competing with larger, well-financed companies, we may be forced to agree to contractual terms that provide for lower aggregate payments to us over the life of the contract, which could adversely affect our margins. Our failure to compete effectively with respect to any of these or other factors could have a material adverse effect on our business, prospects, financial condition or operating results.

 

We Have Experienced Significant Customer Concentration in Recent Periods, And Our Revenue Levels Could Be Adversely Affected if Any Significant Customer Fails To Purchase Products From Us At Anticipated Levels.

 

We are subject to customer concentration risk as a result of our reliance on a relatively small number of customers for a significant portion of our revenues. The relative magnitude and the mix of revenue from our largest customers have varied significantly quarter to quarter. During the nine months ended September 30, 2017, two customers accounted for 31% of our revenues. In addition, one of these customers accounted for 10% of total accounts receivable as of September 30, 2017. The loss of these customers could have a material adverse effect on our business.

 

16

 

 

If a Third Party Asserts That We Are Infringing Its Intellectual Property, Whether Successful or Not, It Could Subject Us to Costly and Time-Consuming Litigation or Expensive Licenses, and Our Business May Be Harmed.

 

The EV and EV charging industries are characterized by the existence of a large number of patents, copyrights, trademarks and trade secrets. As we face increasing competition, the possibility of intellectual property rights claims against us grows. Our technologies may not be able to withstand any third-party claims or rights against their use. Additionally, although we have acquired from other companies’ proprietary technology covered by patents, we cannot be certain that any such patents will not be challenged, invalidated or circumvented. Intellectual property infringement claims against us could harm our relationships with our customers, may deter future customers from subscribing to our services or could expose us to litigation with respect to these claims. Even if we are not a party to any litigation between a customer and a third party, an adverse outcome in any such litigation could make it more difficult for us to defend our intellectual property in any subsequent litigation in which we are a named party. Any of these results could harm our brand and operating results.

 

Any intellectual property rights claim against us or our customers, with or without merit, could be time-consuming, expensive to litigate or settle and could divert management resources and attention. An adverse determination also could prevent us from offering our services to our customers and may require that we procure or develop substitute services that do not infringe.

 

With respect to any intellectual property rights claim against us or our customers, we may have to pay damages or stop using technology found to be in violation of a third party’s rights. We may have to seek a license for the technology, which may not be available on reasonable terms, may significantly increase our operating expenses or require us to restrict our business activities in one or more respects. The technology also may not be available for license to us at all. As a result, we may also be required to develop alternative non-infringing technology, which could require significant effort and expense.

 

The Success of Our Business Depends in Large Part on Our Ability to Protect and Enforce Our Intellectual Property Rights.

 

We rely on a combination of patent, copyright, service mark, trademark, and trade secret laws, as well as confidentiality procedures and contractual restrictions, to establish and protect our proprietary rights, all of which provide only limited protection. We cannot assure you that any patents will issue with respect to our currently pending patent applications, in a manner that gives us the protection that we seek, if at all, or that any future patents issued to us will not be challenged, invalidated or circumvented. Our currently issued patents and any patents that may issue in the future with respect to pending or future patent applications may not provide sufficiently broad protection or they may not prove to be enforceable in actions against alleged infringers. Also, we cannot assure you that any future service mark registrations will be issued with respect to pending or future applications or that any registered service marks will be enforceable or provide adequate protection of our proprietary rights.

 

17

 

 

We endeavor to enter into agreements with our employees and contractors and agreements with parties with whom we do business in order to limit access to and disclosure of our proprietary information. We cannot be certain that the steps we have taken will prevent unauthorized use of our technology or the reverse engineering of our technology. Moreover, others may independently develop technologies that are competitive to ours or infringe our intellectual property. The enforcement of our intellectual property rights also depends on our legal actions against these infringers being successful, but we cannot be sure these actions will be successful, even when our rights have been infringed.

 

Furthermore, effective patent, trademark, service mark, copyright and trade secret protection may not be available in every country in which our services are available over the Internet. In addition, the legal standards relating to the validity, enforceability and scope of protection of intellectual property rights in EV-related industries are uncertain and still evolving.

 

Changes to Federal, State or International Laws or Regulations Applicable To Our Company Could Adversely Affect Our Business.

 

Our business is subject to a variety of federal, state and international laws and regulations, including those with respect government incentives promoting fuel efficiency and alternate forms of energy, electric vehicles and others. These laws and regulations, and the interpretation or application of these laws and regulations, could change. Any reduction, elimination or discriminatory application of government subsidies and economic incentives because of policy changes, fiscal tightening or other reasons may result in diminished revenues from government sources and diminished demand for our products. In addition, new laws or regulations affecting our business could be enacted. These laws and regulations are frequently costly to comply with and may divert a significant portion of management’s attention. If we fail to comply with these applicable laws or regulations, we could be subject to significant liabilities which could adversely affect our business.

 

There are many federal, state and international laws that may affect our business, including measures to regulate charging systems, electric vehicles, and others. If we fail to comply with these applicable laws or regulations we could be subject to significant liabilities which could adversely affect our business.

 

There are a number of significant matters under review and discussion with respect to government regulations which may affect the business we intend to enter and/or harm our customers, and thereby adversely affect our business, financial condition and results of operations.

 

Our Ability to Use Our Net Operating Loss Carryforwards May Be Limited.

 

For the year ended December 31, 2016, we had net operating loss carryforwards (“NOLs”) for U.S. federal income tax purposes of approximately $59 million. We generally are able to carry NOLs forward to reduce taxable income in future years. These NOLs may be offset against future taxable income through 2035, if not utilized before that time. We will not, however, be able to utilize the NOLs until we file our delinquent federal and state corporate income tax returns for the years ended December 31, 2014 and 2015. In addition, our ability to utilize the NOLs is subject to the rules of Section 382 of the Internal Revenue Code of 1986, as amended (“Section 382”). Section 382 generally restricts the use of NOLs after an “ownership change.” An ownership change generally occurs if, among other things, the stockholders (or specified groups of persons) who own, have owned or are treated as owning, directly or indirectly, five percent or more of our stock increase their aggregate percentage ownership of our stock by more than 50 percentage points over the lowest percentage of the stock owned by these persons over a three-year rolling period. In the event of an ownership change, Section 382 generally imposes an annual limitation on the amount of taxable income that we may offset with NOLs. Any unused annual limitation may be carried over to later years until the applicable expiration date for the respective NOLs.

 

18

 

 

The rules of Section 382 are complex and subject to varying interpretations. Because of our numerous capital raises, uncertainty exists as to whether we may have undergone an ownership change in the past or will undergo one as a result of the various transactions discussed herein or other future transactions. Accordingly, no assurance can be given that our NOLs will be fully available or utilizable.

 

Risks Associated with Our Common Stock

 

If We Fail to Establish and Maintain an Effective System of Internal Control, We May Not Be Able to Report Our Financial Results Accurately or Prevent Fraud. Any Inability to Report and File Our Financial Results Accurately and Timely Could Harm Our Reputation and Adversely Impact the Trading Price of Our Common Stock.

 

Effective internal control is necessary for us to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we may not be able to manage our business as effectively as we would if an effective control environment existed, and our business and reputation with investors may be harmed. As a result, our small size and any current internal control deficiencies may adversely affect our financial condition, results of operations and access to capital. We have also experienced complications reporting as a result of material weaknesses and have at times been delinquent in our reporting obligations. We have carried out an evaluation under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the most recent period covered by this report. Based on the foregoing, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses described below.

 

A material weakness is a deficiency, or a combination of deficiencies, within the meaning of Public Company Accounting Oversight Board (“PCAOB”) Audit Standard No. 5, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weaknesses which have caused management to conclude that as of September 30, 2017 our internal controls over financial reporting (“ICFR”) were not effective at the reasonable assurance level:

 

  1. We do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act which is applicable to us for the year ended December 31, 2016. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures during our assessment of our disclosure controls and procedures and concluded that the control deficiency that resulted represented a material weakness.
     
  2. We do not have sufficient resources in our accounting function, which restricts our ability to gather, analyze and properly review information related to financial reporting in a timely manner. In addition, due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties during our assessment of our disclosure controls and procedures and concluded that the control deficiency that resulted represented a material weakness.
     
  3. We do not have personnel with sufficient experience with U.S. GAAP to address complex transactions.
     
  4. We have inadequate controls to ensure that information necessary to properly record transactions is adequately communicated on a timely basis from non-financial personnel to those responsible for financial reporting. Management evaluated the impact of the lack of timely communication between non–financial and financial personnel on our assessment of our reporting controls and procedures and has concluded that the control deficiency represented a material weakness.
     
  5. We have determined that oversight over our external financial reporting and internal control over our financial reporting by our audit committee is ineffective. The audit committee has not provided adequate review of our SEC filings and consolidated financial statements and has not provided adequate supervision and review of our accounting personnel or oversight of the independent registered accounting firm’s audit of our consolidated financial statement.

 

We have taken steps to remediate some of the weaknesses described above, including by engaging third party financial consultants with expertise in accounting for complex transactions and SEC reporting. We intend to continue to address these weaknesses as resources permit.

 

19

 

 

We are Required to Register Under the Securities Act the Resale of Shares of Our Common Stock by a Number of Our Security Holders. Our Failure to Comply With Our Contractual Obligations and Timely Register the Resale of Any Shares of Our Common Stock Has Resulted in, and Will Result in, Among Other Things, the Payment of Liquidated Damages, And Could Have a Material Adverse Effect on Our Ability to Raise Additional Funds in The Future And Have a Material Adverse Effect on Our Business.

 

We have entered into various agreements with purchasers of our securities from time to time which require us to register under the Securities Act of 1933, as amended (the “Securities Act”) the resale of shares of our Common Stock that we have issued or will be required to issue to such purchasers. We had failed to perform our obligations under these agreements and had accrued registration rights penalties, inclusive of accrued interest, in an amount equal to $56,000 for the period April 1, 2017 through June 30, 2017. On May 8, 2017, the Company issued a total of 61,740 Series C Preferred Shares to forty-eight (48) stockholders as payment in full, among other items, of registration rights penalties accrued through March 31, 2017. On August 25, 2017, the Company issued 8,265 Series C Preferred Shares to forty-three (43) stockholders as payment in full, among other items, of registration rights penalties accrued for the period of April 1, 2017 through June 30, 2017. On November 29, 2017, the Company issued 9,119 Series C Preferred Shares to forty-five (45) stockholders as payment in full, among other items, of registration rights penalties accrued for the period of July 1, 2017 through September 30, 2017. The penalties and dividends have continued to accrue from October 1, 2017, and will continue to accrue through the time of the offering. At the time of the offering, the Series C Preferred Shares will be issued for the incremental penalties and dividends, and subsequently converted into Common Stock, the amount of which is currently indeterminable.

 

These additional issuances of securities had a dilutive effect on our other stockholders. In addition, our failure to timely register the resale of any shares of our Common Stock may result in reputational harm for our Company and could have a material adverse effect on our ability to raise additional funds in the future, which may have a material adverse effect on our business.

 

We are Required to Enable Some of our Stockholders to Sell Shares of Our Common Stock Pursuant to Rule 144 of the Securities Act. Our Failure to Comply With Our Contractual Obligations and Enable Such Sales Has Resulted in, and Will Result in, Among Other Things, the Payment of Liquidated Damages, And Could Have a Material Adverse Effect on Our Ability to Raise Additional Funds Through Private Placements in The Future And Have a Material Adverse Effect on Our Business.

 

The Company is a former shell company. As a result, to enable investors to sell shares of our Common Stock pursuant to Rule 144 of the Securities Act, we need to be: (A) subject to the reporting requirements of section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”); and (B) current in filing such reports. We have entered into various agreements with purchasers of our securities from time to time which require us to enable sales of our Common Stock pursuant to Rule 144. Although we became current in our filings in August 2016, because we are not currently subject to the Exchange Act and make such filings voluntarily, investors are still not able to utilize Rule 144. We accrued public information failure rights penalties in an aggregate amount equal to $3,005,277, inclusive of accrued interest, as of March 31, 2017 due to our failure to perform our obligations under these agreements. On May 8, 2017, the Company issued a total of 61,740 Series C Preferred Shares to forty-eight (48) stockholders as payment in full, among other items, of these public information failure rights penalties accrued through March 31, 2017. The Company is still assessing whether it needs to accrue any public information failure rights penalties going forward from April 1, 2017. On August 25, 2017, the Company issued 8,265 Series C Preferred Shares to forty-three (43) stockholders as payment in full, among other items, of registration rights penalties accrued for the period of April 1, 2017 through June 30, 2017. On November 29, 2017, the Company issued 9,119 Series C Preferred Shares to forty-five (45) stockholders as payment in full, among other items, of registration rights penalties accrued for the period of July 1, 2017 through September 30, 2017. The penalties and dividends have continued to accrue from October 1, 2017, and will continue to accrue through the time of the offering. At the time of the offering, the Series C Preferred Shares will be issued for the incremental penalties and dividends and subsequently converted into Common Stock, the amount of which is currently undeterminable.

 

Our failure to comply with our contractual obligations and timely register the resale of any shares of our Common Stock for any reason, including as a result of any unexpected delay in the completion of any offering, may result in additional breaches of the agreements with certain security holders and in the payment of liquidated damages as required under the terms of our agreements with certain security holders. These additional issuances of securities had a dilutive effect on our other stockholders. In addition, our failure to timely file our 10-Qs and 10-Ks may result in reputational harm for our Company and could have a material adverse effect on our ability to raise additional funds through private placements in the future, which may have a material adverse effect on our business.

 

Our Common Stock Is Currently Quoted Only on the OTC Pink Current Information Marketplace, Which May Have an Unfavorable Impact on Our Stock Price and Liquidity.

 

Our Common Stock is quoted on the OTC Pink Current Information Marketplace. The OTC Pink Current Information Marketplace is a significantly more limited market than the New York Stock Exchange or the NASDAQ stock market. The quotation of our shares on the OTC Pink Current Information Marketplace may result in a less liquid market available for existing and potential stockholders to trade shares of our Common Stock, could depress the trading price of our Common Stock and could have a long-term adverse impact on our ability to raise capital in the future.

 

There can be no assurance that there will be an active market for our shares of Common Stock either now or in the future. Market liquidity will depend on the perception of our operating business and any steps that our management might take to bring us to the awareness of investors. There can be no assurance given that there will be any awareness generated. Consequently, investors may not be able to liquidate their investment or liquidate it at a price that reflects the value of the business. As a result, holders of our securities may not find purchasers for our securities should they to desire to sell them. Consequently, our securities should be purchased only by investors having no need for liquidity in their investment and who can hold our securities for an indefinite period of time.

 

20

 

 

Shares of Our Common Stock Which May Be Issued Upon Conversion of Indebtedness by JMJ May Dilute the Ownership Interests of Our Stockholders.

 

On October 7, 2016, we executed a Promissory Note in favor of JMJ in the amount up to $3,725,000 bearing interest on the unpaid balance at the rate of six percent. The initial amount borrowed under the Promissory Note was $500,000, with the remaining amounts permitted to be borrowed under the Promissory Note being subject to us achieving certain milestones. The Promissory Note is convertible into shares of our Common Stock based on the lesser of a per share price of $35.00 or 60% of the lowest trade price in the 25 trading days prior to the date of conversion. If JMJ elects to convert the principal balance of the Promissory Note into shares of our Common Stock under the terms of the Promissory Note, our current stockholders would be subject to dilution of their interests. Pursuant to the terms of the Promissory Note, JMJ has agreed that it will not convert the note into more than 9.99% of our outstanding shares. JMJ currently does not own any shares of our Common Stock.

 

If we do not repay the Promissory Note on the maturity date (currently January 31, 2018) and if we issue a variable security at any time the Promissory Note is outstanding, then in such event JMJ shall have the right to convert all or any portion of the outstanding balance of the Promissory Note into shares of Common Stock on the same terms as granted in any applicable variable security issued by us.

 

We initially issued one warrant to JMJ to purchase a total of 14,286 shares of our Common Stock at an exercise price equal to the lesser of: (i) 80% of the Common Stock price of this offering, (ii) $35.00 per share, (iii) 80% of the unit price of this offering (if applicable), (iv) the exercise price of any warrants issued in this offering, or (v) the lowest conversion price, exercise price, or exchange price, of any security issued by us that is outstanding on October 13, 2016.

 

The initial amount borrowed under the Promissory Note was $500,000, with the remaining amounts permitted to be borrowed under the Promissory Note being subject to us achieving certain milestones. With the achievement of certain milestones in November 2016 (the filing with the SEC of a Preliminary Information Statement on Schedule 14C regarding the Reverse Stock Split), an additional advance of $500,000 under the Promissory Note occurred on November 28, 2016. Another warrant to purchase 14,286 shares of our Common Stock was issued as of November 28, 2016. With the achievement of certain milestones in February 2017 (the filing with the SEC of a revised Preliminary Information Statement and a Definitive Information Statement, each on Schedule 14C regarding the Reverse Stock Split), additional advances of $225,100 and $300,000 under the Promissory Note occurred on February 10 and February 27, respectively. Thus, two more warrants to purchase the Company’s Common Stock were issued, one for 6,431 shares and the other for 8,571 shares, respectively.

 

All advances after February 28, 2017 have been at the discretion of JMJ without regard to any specific milestones occurring. Additional advances of $250,000 and $30,000 under the Promissory Note occurred on March 14, 2017 and March 24, 2017, respectively, and two more warrants to purchase the Company’s Common Stock were issued, one for 7,143 shares and the other for 857 shares. An additional advance of $400,000 occurred on April 5, 2017 and another warrant to purchase 11,429 shares of our Common Stock was issued on the same date. An additional advance of $295,000 occurred on May 9, 2017 and another warrant to purchase 8,429 shares of the Company’s Common Stock was issued on the same date. On July 27, 2017, an additional advance of $50,000 was made to the Company and another warrant to purchase 1,429 shares of the Company’s Common Stock was issued to JMJ. The Company and JMJ entered into the Additional Agreement on October 23, 2017. In accordance with the terms of the Additional Agreement, on October 24, 2017, JMJ advanced to the Company $949,900 available pursuant to previous agreements with JMJ. As of January 5, 2018, ten (10) warrants to purchase a total of 100,001 shares of the Company’s Common Stock have been issued to JMJ. The aggregate exercise price is $3,500,000.

 

The Additional Agreement extended the Maturity Date to December 15, 2017 (subsequently extended to January 31, 2018). In addition, JMJ has claimed that the Company would owe JMJ $12 million as a mandatory default amount pursuant to previous agreements with the Company. JMJ agreed to allow the Company to have two options for settling a previously issued note (including settling the mandatory default amount for either $1.1 million or $2.1 million), securing a lockup agreement from JMJ, and exchanging previously issued warrants for shares of Common Stock. Each of these options depends upon this offering closing by December 15, 2017 (subsequently extended to January 31, 2018). The option chosen is at the Company’s sole discretion.

 

The first option is that the Company, upon the closing of this offering: (a) will pay $2.0 million in cash to JMJ; and (b) will issue shares of Common Stock to JMJ with a value of $9,005,000. The second option is that the Company, upon the closing of this offering, will not pay any cash to JMJ and will issue shares of Common Stock to JMJ with a value of $12,005,000. In each case, the Company will issue such number of duly and validly issued, fully paid and non-assessable shares of Common Stock equal to the amount in question divided by the lowest of (i) $35.00 per share, or (ii) the lowest daily closing price of the Common Stock during the ten days prior to delivery of shares (subject to adjustment for stock splits), or (iii) 80% of the Common Stock price of this offering, or (iv) 80% of the unit price of this offering (if applicable), or (v) the exercise price of any warrants issued in this offering.

 

On November 29, 2017, the Company and JMJ entered into the first amendment to the Additional Agreement, extending the Maturity Date to December 31, 2017. On January 4, 2018, the Company and JMJ entered into the second amendment to the Additional Agreement, extending the Maturity Date to January 31, 2018.

 

On the fifth (5th) trading day after the closing of this offering, but in no event later than January 31, 2018, we will deliver the Origination Shares to JMJ. If this offering does not occur prior to January 31, 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.

 

With an assumed public offering price of $5.00, the Company will issue 3,001,250 shares of Common Stock to JMJ pursuant to the Additional Agreement in full payment of all dollar amounts and share amounts owed in connection with the JMJ Financing resulting in dilution to holders of our Common Stock.

 

If this offering does not close prior to January 31, 2018 and we are unable to repay the Promissory Note, we will be in default under the Promissory Note and subject to penalties.

 

Our Shares of Common Stock Are Very Thinly Traded, and the Price May Not Reflect Our Value and There Can Be No Assurance That There Will Be an Active Market for Our Shares of Common Stock Either Now or in the Future.

 

Our shares of Common Stock are very thinly traded, and the price, if traded, may not reflect our value. There can be no assurance that there will be an active market for our shares of Common Stock either now or in the future. The market liquidity will be dependent on the perception of our operating business and any steps that our management might take to increase awareness of our Company with investors. There can be no assurance given that there will be any awareness generated. Consequently, investors may not be able to liquidate their investment or liquidate it at a price that reflects the value of the business. If a more active market should develop, the price may be highly volatile. Because there may be a low price for our shares of Common Stock, many brokerage firms may not be willing to effect transactions in the securities. Even if an investor finds a broker willing to effect a transaction in the shares of our Common Stock, the combination of brokerage commissions, transfer fees, taxes, if any, and any other selling costs may exceed the selling price. Further, many lending institutions will not permit the use of such shares of Common Stock as collateral for loans.

 

We Have a Significant Number of Shares of Our Common Stock Issuable Upon Conversion of Certain Outstanding Options, Warrants, Debt Obligations, and Convertible Preferred Stock, and The Issuance of Such Shares Upon Exercise or Conversion Will Have a Significant Dilutive Impact On Our Stockholders. Sales of a Substantial Number of Shares of Our Common Stock Following This Offering May Adversely Affect the Market Price of Our Common Stock and the Issuance of Additional Shares Will Dilute All Other Stockholders.

 

As of January 5, 2018, there were 550,000, 142,495, and 655,860 shares of Common Stock issuable upon conversion of our Series A, Series B and Series C Preferred Shares, respectively.

 

In addition, as of January 5, 2018, we had outstanding stock options and warrants to purchase a total of 198,037 shares of our Common Stock consisting of: (i) 105,136 shares of Common Stock issuable upon exercise of outstanding warrants with a weighted average exercise price of $44.93; and (iii) 92,901 shares issuable upon exercise of outstanding options with a weighted average exercise price of $52.77, under our equity compensation plans.

 

As of January 5, 2018, we currently owe (i) 15,240 shares issuable to Mr. Farkas upon exercise of options to be issued pursuant to the Third Amendment with the options having a weighted average exercise price of $34.06; (ii) 15,000 shares of Common Stock issuable to Mr. Farkas upon exercise of options to be issued as replacements of expired options with the options having a weighted average exercise price of $5.30; and (iii) 16,600 shares issuable to Mr. Feintuch upon exercise of outstanding options issued pursuant to the Compensation Agreement with the options having a weighted average exercise price of $34.34.

 

Sales of a substantial number of shares of our Common Stock in the public market or otherwise following this offering, or the perception that such sales could occur, could adversely affect the market price of our Common Stock. After completion of this offering at an assumed public offering price of $5.00 per share, the last reported sales price for our Common Stock as reported on the OTC Pink Current Information Marketplace on December 28, 2017, our existing stock holders will own approximately 76% of our shares of Common Stock assuming there is no exercise of the underwriters’ over-allotment option to purchase shares and/or warrants.

 

After completion of this offering at an assumed public offering price of $5.00 per share, there will be 19,278,989 shares of our Common Stock outstanding. In addition, our articles of incorporation, as amended, permits the issuance of up to approximately 480,721,011 additional shares of Common Stock after the completion of this offering. Thus, we have the ability to issue substantial amounts of Common Stock in the future, which would dilute the percentage ownership held by the investors who purchase shares of our Common Stock in this offering.

 

Upon the closing of this offering, there will be 550,000, 189,750 and 6,599,591 shares of Common Stock issued upon conversion of our Series A, Series B and Series C Preferred Shares, respectively.

 

For a more complete description concerning the dilution you will incur if you purchase Common Stock in this offering, see “Dilution.”

 

We and our officers, directors and certain stockholders have agreed, subject to customary exceptions, not to, without the prior written consent of Joseph Gunnar & Co., LLC, the representative of the underwriters of this offering, during the period ending 180 days from the date of this offering in the case of us and our directors and officers and 90 days from the date of this offering in the case of our stockholders who beneficially own more than 5% of our Common Stock, directly or indirectly, offer to sell, sell, pledge or otherwise transfer or dispose of any of shares of our Common Stock, enter into any swap or other derivatives transaction that transfers to another any of the economic benefits or risks of ownership of shares of our Common Stock, make any demand for or exercise any right or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any shares of Common Stock or securities convertible into or exercisable or exchangeable for Common Stock or any other securities of our Company or publicly disclose the intention to do any of the foregoing.

 

After the lock-up agreements with select stockholders pertaining to this offering expire: (i) 270 days from the date of this offering unless waived earlier by the representative, up to 806,937 of the shares that had been locked up; or (ii) 90 days from the date of this offering unless waived earlier by the representative, up to 205,410 of the shares that had been locked up will be eligible for future sale in the public market. After the lock-up agreements with our directors and officers and JMJ pertaining to this offering expire 180 days from the date of this offering unless waived earlier by the representative, up to 11,164,271 of the shares (net of any shares also restricted by lock-up agreements with select stockholders) that had been locked up will be eligible for future sale in the public market. Sales of a significant number of these shares of Common Stock in the public market could reduce the market price of the Common Stock.

 

21

 

 

Future Issuance of Our Common Stock, Preferred Stock, Options and Warrants Could Dilute the Interests of Existing Stockholders.

 

We may issue additional shares of our Common Stock, preferred stock, options and warrants in the future. The issuance of a substantial amount of Common Stock, options and warrants could have the effect of substantially diluting the interests of our current stockholders. In addition, the sale of a substantial amount of Common Stock or preferred stock in the public market, or the exercise of a substantial number of warrants and options either in the initial issuance or in a subsequent resale by the target company in an acquisition which received such Common Stock as consideration or by investors who acquired such Common Stock in a private placement could have an adverse effect on the market price of our Common Stock.

 

We Have Established Preferred Stock Which Can Be Designated By The Board and Have Established Series A Preferred Shares, Series B Preferred Shares and Series C Preferred Shares, Which Give The Holders Thereof a Liquidation Preference and The Ability to Convert Such Shares Into Our Common Stock.

 

We have 40,000,000 shares of preferred stock authorized, which includes 20,000,000 shares of designated Series A Preferred Shares of which 11,000,000 shares are issued and outstanding, 10,000 designated Series B Preferred Shares, of which 8,250 shares are issued and outstanding and 250,000 designated Series C Preferred Shares, of which 229,551 shares are issued and outstanding as of January 5, 2018. The Series A Preferred Shares do not have a liquidation preference so long as any Series C Preferred Shares are outstanding. The Series B Preferred Shares have a liquidation preference of $100 per share. The Series C Preferred Shares have a liquidation preference of $100 per share, which is pari passu to the liquidation preference of the Series B Preferred Shares and payable prior to the liquidation preference on the Series A Preferred Shares. As a result, if we were to dissolve, liquidate or sell our assets, the holders of our Series A Preferred Shares would not have the right to receive any proceeds from any such transaction, holders of our Series B Preferred Shares would have the right to receive up to approximately $825,000 from any such transaction, and the holders of our Series C Preferred Shares would have the right to receive up to $22,955,100 from any such transaction, but before any amount is paid to the holders of our Common Stock. The payment of the liquidation preferences could result in Common Stock holders not receiving any consideration if we were to liquidate, dissolve or wind up, either voluntarily or involuntarily.

 

Additionally, the existence of the liquidation preferences may reduce the value of our Common Stock, make it harder for us to sell shares of Common Stock in offerings in the future, or prevent or delay a change of control. Furthermore, the conversion of Series A Preferred Shares, Series B Preferred Shares and Series C Preferred Shares into Common Stock may cause substantial dilution to our Common Stock holders. Because our Board is entitled to designate the powers and preferences of the preferred stock without a vote of our stockholders, subject to NASDAQ rules and regulations, our stockholders will have no control over what designations and preferences our future preferred stock, if any, will have. In addition, we may be required to redeem any non-converted Series C Preferred Shares at the rate of $100 per share, plus accrued dividends; and (b) Series B Preferred Shares at the rate of $100 per share, which funds we may not have, or which may not be available on favorable terms, if at all.

 

At the closing of this offering, all of the Series A, B and C Preferred Shares will be converted into shares of Common Stock. If the closing of this offering does not occur, none of the Series A, B and C Preferred Shares will be converted and the liquidation preference described above will apply.

 

We Have Outstanding Shares of Preferred Stock With Rights And Preferences Superior to Those of Our Common Stock.

 

The issued and outstanding Series A Preferred Shares, Series B Preferred Shares and Series C Preferred Shares grant the holders of our preferred stock certain anti-dilution, voting, dividend and liquidation rights that are superior to those held by the holders of our Common Stock.

 

The issuance of shares of Common Stock in the future, issuances or deemed issuances of additional shares of Common Stock for a price below the applicable preferred shares conversion price will have the effect of diluting current stockholders. The rights of our preferred stockholders may increase our net losses, dilute our Common Stock holders, and allow such preferred stockholders to have approval rights and therefore to exert influence over certain corporate actions. For example, the holders of our Series C Preferred Shares are entitled to certain dividend, liquidation preference, and anti-dilution rights that are described in the as-amended Certificate of Designation of the Series C Preferred Shares (the “Series C Certificate of Designation”) and the related securities purchase agreement dated as of March 11, 2016. In addition, the holders of our Series C Preferred Shares have certain redemption rights that may be exercised after December 2016 and, if such rights are exercised, could adversely affect our business and could require us to consider a range of strategic alternatives, including refinancing their securities or effecting a sale of our Company or its assets. We cannot assure you that the rights associated with the Series C Preferred Shares or our other series of preferred stock will not adversely affect the holders of our Common Stock.

 

At the closing of this offering, all of the Series A, B and C Preferred Shares will be converted into shares of Common Stock. If the closing of this offering does not occur, none of the Series A, B and C Preferred Shares will be converted and the anti-dilution, voting, dividend and liquidation rights described above will apply.

 

22

 

 

We Do Not Intend to Pay Dividends for the Foreseeable Future, and You Must Rely on Increases in the Market Prices of Our Common Stock for Returns on Your Investment.

 

For the foreseeable future, we intend to retain any earnings to finance the development and expansion of our business, and we do not anticipate paying any cash dividends on our Common Stock. Accordingly, investors must be prepared to rely on sales of their Common Stock after price appreciation to earn an investment return, which may never occur. Investors seeking cash dividends should not purchase our Common Stock. Any determination to pay dividends in the future will be made at the discretion of our Board and will depend on our results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors the Board deems relevant.

 

Our Executive Officers and Directors, Including Our Executive Chairman Mr. Farkas and His Affiliates, Possess Controlling Voting Power With Respect to Our Common Stock, Which Will Limit Your Influence on Corporate Matters.

 

As of January 5, 2018, our directors and executive officers collectively beneficially own approximately 73.80% of the shares of our Common Stock on a fully-diluted basis including the beneficial ownership of our Executive Chairman and director Mr. Farkas and his affiliates of 72.26% of the shares of our Common Stock on a fully-diluted basis.

 

Upon the closing of this offering, our directors and executive officers will collectively beneficially own approximately 43.63% of the shares of our Common Stock on a fully-diluted basis including the beneficial ownership of Mr. Farkas and his affiliates of 43.25% of the shares of our Common Stock on a fully-diluted basis.

 

As a result, our insiders have the ability to effectively control our management and affairs through the election and removal of our Board and all other matters requiring stockholder approval, including any future merger, consolidation or sale of all or substantially all of our assets. This concentrated control could discourage others from initiating any potential merger, takeover or other change-of-control transaction that may otherwise be beneficial to our stockholders. Furthermore, this concentrated control will limit the practical effect of your influence over our business and affairs, through any stockholder vote or otherwise. Any of these effects could depress the price of our Common Stock.

 

Our Executive Chairman Mr. Farkas Will Be Able To Influence The Outcome of Stockholder Votes. Mr. Farkas’ Interests May Differ From Other Stockholders.

 

Upon the closing of this offering, Mr. Farkas and his affiliates will beneficially own 43.25% of the shares of our Common Stock on a fully-diluted basis.

 

Subject to any fiduciary duties owed to our other stockholders under Nevada law, Mr. Farkas will be able to exercise significant influence over matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, and will have some control over our management and policies. Mr. Farkas may have interests that are different from yours. For example, Mr. Farkas may support proposals and actions with which you may disagree. The concentration of ownership could delay or prevent a change in control of our Company or otherwise discourage a potential acquirer from attempting to obtain control of our Company, which in turn could reduce the price of our stock. In addition, Mr. Farkas could use his voting influence to maintain our existing management and directors in office, delay or prevent changes in control of our Company, or support or reject other management and board proposals that are subject to stockholder approval, such as amendments to our employee stock plans and approvals of significant financing transactions.

 

23

 

 

In addition, we currently owe $650,279 in principal and interest pursuant to ten convertible notes issued to FGI between June 2016 and August 2017, which have matured and are past due. Mr. Farkas could seek to enforce the notes against us, which could have an adverse effect on our business and reduce the market price of our Common Stock.

 

The notes issued to FGI are secured by substantially all of the assets of the Company.

 

Our Articles of Incorporation Grants Our Board The Power to Issue Additional Shares of Common And Preferred Shares And to Designate Other Classes of Preferred Shares, All Without Stockholder Approval.

 

Our authorized capital consists of 540,000,000 shares of capital stock of which 40,000,000 shares are designated as preferred stock. Our Board, without any action by our stockholders, may designate and issue shares of preferred stock in such series as it deems appropriate and establish the rights, preferences and privileges of such shares, including dividends, liquidation and voting rights, provided it is consistent with Nevada law.

 

The rights of holders of our preferred stock that may be issued could be superior to the rights of holders of our shares of Common Stock. The designation and issuance of shares of capital stock having preferential rights could adversely affect other rights appurtenant to shares of our Common Stock. Furthermore, any issuances of additional stock (common or preferred) will dilute the percentage of ownership interest of then-current holders of our capital stock and may dilute our book value per share.

 

Certain Provisions of Our Corporate Governing Documents And Nevada Law Could Discourage, Delay, or Prevent A Merger or Acquisition at a Premium Price.

 

Certain provisions of our organizational documents and Nevada law could discourage potential acquisition proposals, delay or prevent a change in control of our Company, or limit the price that investors may be willing to pay in the future for shares of our Common Stock. For example, our articles of incorporation and bylaws permit us to issue, without any further vote or action by the stockholders, up to 40,000,000 shares of preferred stock in one or more series and, with respect to each series, to fix the number of shares constituting the series and the designation of the series, the voting powers (if any) of the shares of the series, and the preferences and relative, participating, optional, and other special rights, if any, and any qualifications, limitations, or restrictions of the shares of the series.

 

Risks Related to the Offering

 

Investors in This Offering Will Experience Immediate and Substantial Dilution in Net Tangible Book Value.

 

The public offering price per unit will be substantially higher than the net tangible book value per share of our outstanding Common Stock. As a result, investors in this offering will incur immediate dilution of $4.42 per unit, based on the assumed public offering price of $5.00 per unit. Investors in this offering will pay a price per unit that substantially exceeds the book value of our assets after subtracting our liabilities. See “Dilution” for a more complete description of how the value of your investment will be diluted upon the completion of this offering.

 

24

 

 

In the Event That Our Common Stock and Warrants Are Listed on NASDAQ, Our Stock Price Could Fall and We Could Be Delisted in Which Case Broker-Dealers May Be Discouraged from Effecting Transactions in Shares of Our Common Stock Because They May Be Considered Penny Stocks and Thus Be Subject to the Penny Stock Rules.

 

The Securities and Exchange Commission (the “SEC”) has adopted a number of rules to regulate “penny stocks” that restricts transactions involving stock which is deemed to be penny stock. Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Exchange Act. These rules may have the effect of reducing the liquidity of penny stocks. “Penny stocks” generally are equity securities with a price of less than $5.00 per share (other than securities registered on certain national securities exchanges or quoted on the NASDAQ Stock Market if current price and volume information with respect to transactions in such securities is provided by the exchange or system). Our securities have in the past constituted, and may again in the future constitute, “penny stock” within the meaning of the rules. The additional sales practice and disclosure requirements imposed upon U.S. broker-dealers may discourage such broker-dealers from effecting transactions in shares of our Common Stock, which could severely limit the market liquidity of such shares and impede their sale in the secondary market.

 

A U.S. broker-dealer selling penny stock to anyone other than an established customer or “accredited investor” (generally, an individual with net worth in excess of $1,000,000 or an annual income exceeding $200,000, or $300,000 together with his or her spouse) must make a special suitability determination for the purchaser and must receive the purchaser’s written consent to the transaction prior to sale, unless the broker-dealer or the transaction is otherwise exempt. In addition, the “penny stock” regulations require the U.S. broker-dealer to deliver, prior to any transaction involving a “penny stock”, a disclosure schedule prepared in accordance with SEC standards relating to the “penny stock” market, unless the broker-dealer or the transaction is otherwise exempt. A U.S. broker-dealer is also required to disclose commissions payable to the U.S. broker-dealer and the registered representative and current quotations for the securities. Finally, a U.S. broker-dealer is required to submit monthly statements disclosing recent price information with respect to the “penny stock” held in a customer’s account and information with respect to the limited market in “penny stocks”.

 

Stockholders should be aware that, according to the SEC, the market for “penny stocks” has suffered in recent years from patterns of fraud and abuse. Such patterns include (i) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (ii) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (iii) “boiler room” practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (iv) excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and (v) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, resulting in investor losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities.

 

Speculative Nature of Warrants.

 

The warrants offered in this offering do not confer any rights of Common Stock ownership on their holders, such as voting rights or the right to receive dividends, but rather merely represent the right to acquire shares of our Common Stock at a fixed price for a limited period of time. Specifically, commencing on the date of issuance, holders of the warrants may exercise their right to acquire the Common Stock and pay an exercise price of $                 per share (150% of the public offering price of our Common Stock and warrants in this offering), prior to five years from the date of issuance, after which date any unexercised warrants will expire and have no further value. Moreover, following this offering, the market value of the warrants is uncertain and there can be no assurance that the market value of the warrants will equal or exceed their public offering price. There can be no assurance that the market price of the Common Stock will ever equal or exceed the exercise price of the warrants, and consequently, whether it will ever be profitable for holders of the warrants to exercise the warrants.

 

25

 

 

We May Need Additional Capital, and the Sale of Additional Shares or Equity or Debt Securities Could Result in Additional Dilution to Our Stockholders.

 

We believe that our existing cash, together with the net proceeds from this offering, will be sufficient to meet our anticipated cash needs for at least the next two years. We may, however, require additional cash resources due to changed business conditions or other future developments. If these resources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities or obtain one or more credit facilities. The sale of additional equity securities could result in additional dilution to our stockholders and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a Common Stock holder. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations. It is uncertain whether financing will be available in amounts or on terms acceptable to us, if at all.

 

If we raise additional funds through government grants, collaborations, strategic alliances, licensing arrangements or marketing and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue stream or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market products that we would otherwise prefer to develop and market ourselves.

 

We Have Broad Discretion in the Use of the Net Proceeds from This Offering and May Not Use Them Effectively.

 

Our management will have broad discretion in the application of the net proceeds, including for any of the purposes described in the section of this prospectus entitled “Use of Proceeds.” You will be relying on the judgment of our management with regard to the use of these net proceeds, and you will not have the opportunity, as part of your investment decision, to assess whether the net proceeds are being used appropriately. The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business, cause the price of our securities to decline and delay the development of our product candidates. Pending the application of these funds, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.

 

26

 

 

If Securities or Industry Analysts Do Not Publish Research or Reports About Our Business, or Publish Inaccurate or Unfavorable Research Reports About Our Business, Our Share Price and Trading Volume Could Decline.

 

The trading market for our Common Stock will, to some extent, depend on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts. If one or more of the analysts who cover us from time to time should downgrade our shares or change their opinion of our business prospects, our share price would likely decline. If one or more of these analysts ceases coverage of our Company or fails to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.

 

Substantial Future Sales of Shares of Our Common Stock In The Public Market Could Cause Our Stock Price To Fall.

 

Shares of our Common Stock that we have issued directly or that have been or may be acquired upon exercise of warrants or the conversion of convertible securities are or may be covered by registration statements which permit the public sale of stock. Other holders of shares of Common Stock that we have issued, including shares of Common Stock issuable upon conversion and/or exercise of outstanding convertible notes, shares of preferred stock and warrants, may be entitled to dispose of their shares pursuant to an exemption from registration under the Securities Act. Additional sales of a substantial number of our shares of our Common Stock in the public market, or the perception that sales could occur, could have a material adverse effect on the price of our Common Stock. Our Common Stock is quoted on the OTC Pink Current Information Marketplace and there is not now, nor has there been, any significant market for shares of our Common Stock, and an active trading market for our shares may never develop or be sustained. If our Common Stock becomes listed on NASDAQ or if we register our Common Stock as a class pursuant to the Exchange Act, investors will be able to use Rule 144 to sell shares of our Common Stock in which case the then-prevailing market prices for our Common Stock may be reduced. Any substantial sales of our Common Stock or listing of our Common Stock on NASDAQ may have an adverse effect on the market price of our securities.

 

Sales of a substantial number of shares of our Common Stock in the public market following this offering could cause the market price of our Common Stock to decline. If there are more shares of Common Stock offered for sale than buyers are willing to purchase, then the market price of our Common Stock may decline to a market price at which buyers are willing to purchase the offered shares of Common Stock and sellers remain willing to sell the shares. All of the securities issued in the offering will be freely tradable without restriction or further registration under the Securities Act.

 

27

 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectus contains forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve substantial risks and uncertainties. Forward-looking statements present our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. Forward-looking statements involve risks and uncertainties and include statements regarding, among other things, our projected revenue growth and profitability, our growth strategies and opportunity, anticipated trends in our market and our anticipated needs for working capital. They are generally identifiable by use of the words “may,” “will,” “should,” “anticipate,” “estimate,” “plans,” “potential,” “projects,” “continuing,” “ongoing,” “expects,” “management believes,” “we believe,” “we intend” or the negative of these words or other variations on these words or comparable terminology. These statements may be found under the sections entitled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” as well as in this prospectus generally. In particular, these include statements relating to future actions, prospective products, market acceptance, future performance or results of current and anticipated products, sales efforts, expenses, and the outcome of contingencies such as legal proceedings and financial results.

 

Forward-looking statements include, without limitation, statements about our market opportunities, our business and growth strategies, our projected revenue and expense levels, possible future consolidated results of operations, the adequacy of our available cash resources, our financing plans, our competitive position and the effects of competition and the projected growth of the industries in which we operate, as well as the following statements:

 

  according to Navigant Research, the global market for electric vehicle supply equipment (EVSE) is expected to grow from 505,000 units in 2016 to 2.5 million in 2025.
     
  that the EV charger industry as a whole is undercapitalized to deliver the full potential of the expected EV market growth in the near future;
     
  that we expect to retain our leadership position with new capital;
     
  that we do not anticipate paying any cash dividends on our Common Stock;
     
  that we anticipate continuing to expand our revenues by selling our next generation of EV charging equipment, expanding our sales channels, and implementing EV charging station occupancy fees (fees for remaining connected to the charging station beyond an allotted grace period after charging is completed), subscription plans for our Blink-owned public charging locations, and advertising fees;
     
 

that we are unique in our ability to offer various business models to Property Partners and leverage our technology to meet the needs of both Property Partners and EV drivers;

     
  important factors that could cause actual results to differ materially from the results and events anticipated or implied by such forward-looking statements include, but are not limited to:
     
  changes in the market acceptance of our products and services;

 

28

 

 

  increased levels of competition;
     
  changes in political, economic or regulatory conditions generally and in the markets in which we operate;
     
  our relationships with our key customers;
     
  adverse conditions in the industries in which our customers operate;
     
  our ability to retain and attract senior management and other key employees;
     
  our ability to quickly and effectively respond to new technological developments;
     
  our ability to protect our trade secrets or other proprietary rights, operate without infringing upon the proprietary rights of others and prevent others from infringing on our proprietary rights; and
     
  other risks, including those described in the “Risk Factors” discussion of this prospectus.

 

We operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict all of those risks, nor can we assess the impact of all of those risks on our business or the extent to which any factor may cause actual results to differ materially from those contained in any forward-looking statement. The forward-looking statements in this prospectus are based on assumptions management believes are reasonable. However, due to the uncertainties associated with forward-looking statements, you should not place undue reliance on any forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and unless required by law, we expressly disclaim any obligation or undertaking to publicly update any of them in light of new information, future events, or otherwise.

 

Certain of the market data and other statistical information contained in this prospectus are based on information from independent industry organizations and other third-party sources, including industry publications, surveys and forecasts. Some market data and statistical information contained in this prospectus are also based on management’s estimates and calculations, which are derived from our review and interpretation of the independent sources listed above, our internal research and our knowledge of the EV industry. While we believe such information is reliable, we have not independently verified any third-party information and our internal data has not been verified by any independent source.

 

29

 

 

USE OF PROCEEDS

 

We estimate that the net proceeds to us from the sale of the units that we are offering will be approximately $20.9 million, after deducting the underwriting discounts and commissions and estimated offering expenses, or $24 million if the underwriters exercise their over-allotment option to purchase units in full.

 

We intend to use the net proceeds of this offering for the repayment of certain debt and other obligations, for the deployment of charging stations, to expand our product offerings, to add additional staff in the areas of finance, sales, and engineering, and for general working capital purposes.

 

We currently expect to use the net proceeds of this offering primarily for the following purposes:

 

Approximately $3.178 million for the repayment of certain debt and other obligations including

 

  (i) $650,279 in principal and interest owed pursuant to convertible notes issued to FGI that are currently past due and for which the interest rate is 18% (one note has an interest rate of 15%). The Company used the proceeds of these convertible notes for working capital;
     
  (ii)

placement agent and legal fees of approximately $187,245 related to the JMJ Financing (of which $64,745 will be paid to the Representative, $107,500 will be paid to Ardour, and $15,000 will be paid to IBIS Co.);

     
  (iii) $67,032 owed to Chase Mortgage, Inc., pursuant to the Fourth Amendment to Secured Convertible Promissory Note dated September 5, 2017 with a monthly interest rate of 1.5%. The original Secured Convertible Promissory Note, dated as of November 13, 2014 was also amended February 20, May 1, and November 9 (all in 2015);
     
  (iv) $417,351 of offering costs currently in accounts payable;
     
  (v)

$80,000 to Mr. Farkas in repayment of accrued cash compensation for the period of July 2015 through November 2015 pursuant to the Third Amendment;

     
  (vi) $145,664 to Mr. Feintuch which represents

 

  (a) 75% of the accrued commissions on hardware sales and revenue from charging stations for the period of November 2015 through March 2017 owed to Mr. Feintuch pursuant to the Compensation Agreement ($130,664);
     
  (b) 75% of the accrued commissions on hardware sales and revenue from charging stations for the period of April 2017 through September 2017 owed to Mr. Feintuch pursuant to an oral agreement between the Company and Mr. Feintuch. This oral agreement was reached pursuant to Section 3(B) of the Compensation Agreement ($15,000)

 

  (vii)

accrued fees of $344,311 to the members of the Board. Specifically, $69,827 to Donald Engel; $46,651 to Mr. Farkas; $34,913 to Mr. Calise; $32,095 to Mr. Kinard (a former Board member); $11,122 to Kevin Evans (a former Board member); and $149,703 to Andrew Shapiro;

     
  (viii) $25,000 to be paid to Wilson Sonsini Goodrich & Rosati pursuant to a Settlement Agreement between the Company and the counterparty, dated June 8, 2017;
     
  (ix)  $159,088 to be paid for accrued professional fees to our accounting firm, a warrant valuation consultant, and our legal counsel;
     
  (x)

$25,000 bonus to be paid to Mr. Calise for 2016 owed to him pursuant to his employment agreement, as determined by the Compensation Committee of the Board in 2017;

     
  (xi) $561,985 to be paid in accrued payroll taxes including $8,600 to be paid to employees for payments owed to them pursuant to the Company’s 401(k) plan;
     
  (xii) $25,000 of installment debt in accordance with a Settlement Agreement between the former principals of 350 Green LLC and the Company, dated August 21, 2015;
     
  (xiii)  $3,000 to be paid to Russ Klenet & Associates, Inc. pursuant to the Settlement and Release Agreement between the Company and the counterparty, dated December 29, 2016;
     
  (xiv) $261,993 to be collectively repaid to Chase Mortgage, Inc. ($101,993) and SMS Real Estate LLC ($160,000) pursuant to Convertible Promissory Notes between the Company and each lender dated September 7, 2017. The Company used the proceeds of these convertible notes for working capital;
     
  (xv) $223,168 to be paid to Douglas Stein pursuant to a Forbearance Agreement with the Company dated January 8, 2018 with $30,000 to be paid by January 11, 2018 and the balance to be paid concurrent with the closing of the offering.

 

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

 

We believe that the expected net proceeds from this offering and our existing cash and cash equivalents, together with interest thereon, will be sufficient to fund our operations for at least the next two years, although we cannot assure you that this will occur.

 

The amount and timing of our actual expenditures will depend on numerous factors, including the status of our development efforts, sales and marketing activities and the amount of cash generated or used by our operations. We may find it necessary or advisable to use portions of the proceeds for other purposes, and we will have broad discretion and flexibility in the application of the net proceeds. Pending these uses, the proceeds will be invested in short-term bank deposits.

 

30

 

 

MARKET FOR OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS

 

Market and Other Information

 

Our Common Stock is quoted on the OTC Pink Current Information Marketplace under the trading symbol “CCGI”. We applied to the NASDAQ to list our Common Stock under the symbol “BLNK” and our warrants under the symbol “BLNKW.”

 

As of January 5, 2018, there were approximately 210 holders of record of our Common Stock. The last reported sale price of our Common Stock on January 10 , 2018 on the OTC Pink Current Information Marketplace was $5.25 per share.

 

The following table sets forth, for the periods indicated, the high and low bid prices per share for our Common Stock as reported by the relevant OTC quotation service. These bid prices represent prices quoted by broker-dealers on the relevant OTC quotation service. The prices reflect inter-dealer quotations, do not include retail mark-ups, markdowns or commissions and do not necessarily reflect actual transactions. These prices have all been adjusted to give effect to the Reverse Stock Split.

 

Quarter ended  High   Low 
January 1, 2018 through January 10 , 2018  $ 5.49    $ 4.50  
December 31, 2017  $11.20   $4.50 
September 30, 2017  $33.70   $8.50 
June 30, 2017  $10.50   $8.00 
March 31, 2017  $12.50   $5.00 
December 31, 2016  $22.00   $5.50 
September 30, 2016  $30.00   $13.00 
June 30, 2016  $44.50   $12.50 
March 31, 2016  $27.50   $5.00 

 

Dividend Policy

 

To date, we have not paid any dividends on our Common Stock and do not anticipate paying any such dividends in the foreseeable future. The declaration and payment of dividends on the Common Stock is at the discretion of our Board and will depend on, among other things, our operating results, financial condition, capital requirements, contractual restrictions or such other factors as our Board may deem relevant. We currently expect to use all available funds to finance the future development and expansion of our business and do not anticipate paying dividends on our Common Stock in the foreseeable future. The payment of cash dividends was prohibited under our Series C Preferred Shares financing agreements with Eventide Gilead Fund (“Eventide”). On February 7, 2017, BLNK, for which Mr. Farkas has voting power and investment power with regard to this entity’s holdings, bought all of the Company’s securities owned by Eventide and now owns over 75% of the Series C Preferred Shares outstanding. In addition, under the as-amended Certificate of Designation for the Series B Preferred Shares (the “Series B Certificate of Designation”), for so long as any shares of the Series B Preferred Shares remain outstanding, we are restricted from paying cash dividends on any shares of our capital stock.

 

31

 

 

CAPITALIZATION

 

The following table sets forth our consolidated cash and capitalization as of September 30, 2017. Such information is set forth on the following basis:

 
  On an actual basis.
     
  On a pro forma basis, giving effect to:
     
   

(1) an additional advance under the JMJ Promissory Note in the amount of $949,900 offset by the Promissory Note discounts and issuance costs of:

 

(A) Common Stock purchase warrants for 27,140 shares of Common Stock issued to JMJ with an estimated fair value of $5,979,688 using the multi-nomial lattice pricing model based upon: (i) an expected life of 5.0 years; (ii) estimated volatility of 149.3%; (iii) annual rate of expected dividends of 0%; (iv) a risk free interest rate of 1.50%; and (v) an estimated exercise price of $35.00; and

 

(B) placement agent cash fees of $94,990 and warrants to purchase 2,714 shares of Common Stock with an estimated fair value of $597,969 using the multi-nomial lattice pricing model based upon: (i) an expected life of 5 years; (ii) estimated volatility of 149.3%; (iii) annual rate of expected dividends of 0%; (iv) a risk free interest rate of 1.50%; and (v) an estimated exercise price of $35.00. Such fees and warrants were issued in connection with the JMJ Financing.

 

(2) The Company received agreements signed by certain holders of outstanding warrants to purchase Common Stock, pursuant to which warrants to purchase an aggregate of 726,504 warrant shares converted into 710,841 shares of Common Stock. These 710,841 shares were issued pursuant to Board resolutions dated September 26, 2017. The issuance of these 710,841 shares will result in a gain of approximately $3.8 million and reduce liabilities by approximately $8.0 million.

 

(3) The issuance on November 29, 2017 of 9,119 Series C Preferred Shares as payment in full of payment-in-kind dividends and registration rights penalties and accrued interest thereon, owed to our Series C Preferred Shareholders accrued as of September 30, 2017.

     

●   On a pro forma as adjusted basis, giving effect to the pro forma events above and for the sale by us of 4,600,000 units in this offering at an assumed public offering price of $5.00 per unit, which is the last reported sales price for our Common Stock as reported on the OTC Pink Current Information Marketplace on December 28, 2017, after deducting underwriting discounts and commissions and estimated offering expenses, and the following:

 

  (1)

On December 6, 2017 and December 7, 2017, the two holders of the Series A Preferred Shares (Mr. Farkas and Mr. Feintuch) signed letter agreements pursuant to which, at the closing of this offering, 11,000,000 Series A Preferred Shares will convert into 550,000 shares of Common Stock. The Company recorded the beneficial conversion feature with a value of $1,000,000 as a deemed dividend by recording an offsetting debit and credit to additional paid-in capital because the Company has an accumulated deficit.

     
  (2)

On May 19, 2017, the holder of the Series B Preferred Shares signed a conversion agreement pursuant to which, at the closing of this offering, 8,250 Series B Preferred Shares will convert into 189,750 shares of Common Stock which will result in an inducement charge of approximately $124,000, divided by the assumed public offering price of $5.00 and multiplied by a factor of 1.15.

     
  (3) At the closing of this offering, 6,599,591 shares issuable upon the conversion of 229,551 Series C Preferred Shares. The 6,599,591 shares will be issued based upon the Formula. The majority of the shares are being converted pursuant to conversion agreements signed by holders of the Series C Preferred Shares and the remainder are being issued pursuant to the Series C Amendments. The conversion of the Series C Preferred Shares resulted in a deemed dividend of approximately $9.7 million which was recognized by recording an offsetting debit and credit to additional paid-in capital because the Company has an accumulated deficit.
     
  (4)

At the closing of this offering, the Company will repay: (i) $650,279 in principal and interest owed pursuant to outstanding convertible notes issued to FGI; and (ii) placement agent and legal fees of approximately $187,245 related to the JMJ Financing (of which $64,745 will be paid to the Representative, $107,500 will be paid to Ardour, and $15,000 will be paid to IBIS Co.). 3,001,250 shares of Common Stock will be issued to JMJ in full consideration pursuant to the Additional Agreement in full payment of all dollar amounts and share amounts owed in connection with the JMJ Financing. The settlement with JMJ will result in a gain of $35.1 million. See “Use of Proceeds” section on page 30.

     
  (5)

At the closing of this offering, the Company will 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) in accordance with a Settlement Agreement between the parties dated August 21, 2015 resulting in a gain of $285,000.

     
  (6)

At the closing of this offering, the Company will issue 28,415 units issuable to two employee members of the Board (Mr. Farkas and Mr. Calise) as well as a former member of the Board who remains our President (Mr. Kinard) in settlement and consideration of services rendered during the period of April 1, 2016 through March 31, 2017 for payment of $113,551 divided by the assumed public offering price of $5.00 multiplied by 80%, resulting in an inducement charge of $28,000. Each unit will consist of one share of Common Stock and one warrant to purchase one share of Common Stock. The Company will not be registering any of the securities issued in connection with this payment.

     
  (7) At the closing of this offering, the Company will charge approximately $781,000 against additional paid-in capital related to offering costs that have been deferred.
     
  (8)

On June 8, 2017, the Company entered into a settlement agreement with Wilson Sonsini Goodrich & Rosati to settle $475,394 in payables owed for legal services as of June 30, 2017 requiring: (a) $25,000 to be paid in cash at the closing of this offering; and (b) $75,000 in the form of 15,000 shares of Common Stock issuable upon the closing of this offering. As a result, the Company will show a $375,394 reduction in liabilities.

     
  (9)

On June 13, 2017, the Company entered into an agreement with ITT Canon LLC whereby the Company reached a settlement regarding, as of June 30, 2017, an accrued liability of $200,000. The Company will issue 40,000 shares of Common Stock at the closing of this offering as settlement for such liability.

     
  (10)

Concurrent with the closing of this offering, the Company will pay Mr. Farkas:

     
   

(i) $80,000 to Mr. Farkas in repayment of accrued cash compensation for the period of July 2015 through November 2015; (ii) 169,3113 shares of Common Stock issuable as payment of $630,000 in shares of Common Stock owed to Mr. Farkas for the period of December 1, 2015 through May 31, 2017 pursuant to the Third Amendment and pursuant to a Conversion Agreement between the Company and Mr. Farkas, dated August 23, 2017 divided by the assumed public offering price of $5.00 multiplied by 80%; (iii) 113,256 units of unregistered shares of Common Stock and warrants issuable as payment of (a) $375,000 in shares of Common Stock owed to Mr. Farkas for accrued commissions on hardware sales and revenue from charging stations for the period of November 2015 through March 2017 pursuant to the Third Amendment divided by the assumed public offering price of $5.00 multiplied by 80%; (b) $77,624 in shares of Common Stock owed to Mr. Farkas for accrued commissions on hardware sales and revenue from charging stations for the period of April 2017 through September 2017 pursuant to an oral agreement between the Company and Mr. Farkas divided by the assumed public offering price of $5.00 multiplied by 80%. This oral agreement was reached pursuant to Section 7(B) of the Third Amendment; (iv) 61,267 shares of Common Stock issuable as payment of $213,102 owed to BLNK Holdings, in principal and interest pursuant to a Conversion Agreement between the Company and BLNK Holdings, dated August 23, 2017 based upon the Formula. Mr. Farkas is also due to receive 886,119 shares of Common Stock issuable pursuant to a letter agreement, dated December 6, 2017. Mr. Farkas will also receive options (regardless of the status of the offering) for 7,000 shares of our Common Stock at an exercise price of $30.00 per share and options for 8,240 shares of our Common Stock at an exercise price of $37.50 per share in connection with amounts owed pursuant to the Third Amendment.

     
  (11)

In accordance with the Compensation Agreement with Mr. Feintuch, the Company shall pay Mr. Feintuch (i) $130,664 in cash which represents 75% of the accrued commissions on hardware sales and revenue from charging stations for the period of November 2015 through March 2017 owed to Mr. Feintuch pursuant to the Compensation Agreement; (ii) $15,000 in cash which represents 75% of the accrued commissions on hardware sales and revenue from charging stations for the period of April 2017 through September 2017 owed to Mr. Feintuch pursuant to an oral agreement between the Company and Mr. Feintuch. This oral agreement was reached pursuant to Section 3(B) of the Compensation Agreement; (iii) 12,139 units of unregistered shares of Common Stock and warrants issuable as payment of (a) $43,555 in shares of Common Stock owed to Mr. Feintuch which represents 25% of the accrued commissions on hardware sales and revenue from charging stations for the period of November 2015 through March 2017 owed to Mr. Feintuch pursuant to the Compensation Agreement divided by the assumed public offering price of $5.00 multiplied by 80% and (b) $5,000 in shares of Common Stock owed to Mr. Feintuch which represents 25% of the accrued commissions on hardware sales and revenue from charging stations for the period of April 2017 through September 2017 owed to Mr. Feintuch pursuant to an oral agreement between the Company and Mr. Feintuch divided by the assumed public offering price of $5.00 multiplied by 80%. This oral agreement was reached pursuant to Section 3(B) of the Compensation Agreement. Mr. Feintuch will also receive options (regardless of the status of the offering) for 7,000 shares of our Common Stock at an exercise price of $30.00 per share and options for 9,600 shares of our Common Stock at an exercise price of $37.50 per share pursuant to his Compensation Agreement.

     
   

Mr. Feintuch is also due to receive 26,500 shares of Common Stock issuable pursuant to a letter agreement, dated December 7, 2017.

     
  (12)

Concurrent with the closing of the offering, the Company will pay accrued professional fees of $159,088 to our accounting firm, a warrant valuation consultant, and our legal counsel.

     
  (13)

Concurrent with the closing of the offering, the Company will pay accrued cash fees owed to the Board members in the amount of $344,311. Specifically, $69,827 to Mr. Engel; $46,651 to Mr. Farkas; $34,913 to Mr. Calise; $32,095 to Mr. Kinard; $11,122 to Mr. Evans; and $149,703 to Mr. Shapiro.

     
  (14)

Concurrent with the closing of the offering, the Company will pay Mr. Calise a bonus of $25,000 for 2016 owed to him pursuant to his employment agreement, as determined by the Compensation Committee of the Board in 2017.

     
  (15)

Concurrent with the closing of the offering, the Company will pay accrued payroll taxes of $561,985 including $8,600 to be paid to employees for payments owed to them pursuant to the Company’s 401(k) plan.

     
  (16) Concurrent with the closing of the offering, the Company will pay accrued offering costs of $417,351, currently characterized as accounts payable.
     
  (17) Concurrent with the closing of the offering, the Company will pay $67,032 owed to Chase Mortgage, Inc., pursuant to the Fourth Amendment to Secured Convertible Promissory Note dated September 5, 2017 with a monthly interest rate of 1.5%. The original Secured Convertible Promissory Note, dated as of November 13, 2014 was also amended February 20, May 1, and November 9 (all in 2015).
     
  (18) Concurrent with the closing of the offering, the Company will: (i) issue 2,000 shares of Common Stock as payment of $10,000; and (ii) pay $3,000 to Russ Klenet & Associates, Inc. Both payments will be made pursuant to the Settlement and Release Agreement between the Company and the counterparty, dated December 29, 2016 with the share payment divided by the assumed public offering price of $5.00.
     
  (19)

Concurrent with the closing of the offering, the Company will issue, in the aggregate, 11,034 shares of Common Stock to Sunrise Securities Corp. and Ardour in connection with placement agent fees related to the sale of Series C Preferred Stock in December 2014.

     
  (20)

Concurrent with the closing of the offering, the Company will issue 38,382 shares of Common Stock as payment of a total of $153,529 to both SemaConnect Inc. and their legal counsel pursuant to the Settlement Agreement dated June 23, 2017 divided by the assumed public offering price of $5.00 multiplied by 80%.

     
  (21)

Concurrent with the closing of the offering, the Company will issue 300,125 shares of Common Stock to Ardour in placement agent fees related to the JMJ Financing.

     
  (22)

Concurrent with the closing of the offering, the Company will issue 1,600 shares of Common Stock to IBIS Co. in connection with an introduction to an investor.

     
  (23) $261,993 to be collectively repaid to Chase Mortgage, Inc. ($101,993) and SMS Real Estate LLC ($160,000) pursuant to Convertible Promissory Notes between the Company and each lender dated September 7, 2017
     
  (24) $223,168 to be paid to Douglas Stein pursuant to a Forbearance Agreement with the Company dated January 8, 2018 with $30,000 to be paid by January 11, 2018 and the balance to be paid concurrent with the closing of the offering.

 
The pro forma information below is illustrative only and our capitalization following the completion of this offering will be adjusted based on the actual public offering price and other terms of this offering determined at pricing. You should read this table together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited and unaudited consolidated financial statements and the related notes appearing elsewhere in this prospectus.
 

 

32

 

 

   Actual
(unaudited)
   Pro Forma
(unaudited)
  

 

Pro Forma As
Adjusted

(unaudited)

 
Cash and cash equivalents  $9,062   $958,962   $18,719,606 
Total indebtedness   67,790,946    64,110,161    8,554,722 
Series B Convertible Preferred Stock, 10,000 shares designated, 8,250 shares issued and outstanding as of September 30, 2017   825,000    825,000    0 
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 September 30, 2017   11,000    11,000    0 
Series C Convertible Preferred Stock, 250,000 shares designated, 220,432 shares issued and outstanding as of September 30, 2017   220    229    0 
Common stock, $0.001 par value, 500,000,000 shares authorized, 4,812,632 shares issued and outstanding as of September 30, 2017   4,813    5,524    

19,280

 
Additional paid-in capital   115,474,814    120,579,956    161,192,771 
Accumulated deficit   (182,206,113)   (182,681,290)   (149,936,965)
Total Stockholders’ Deficiency  $($66,715,266)  $(62,084,581)  $11,275,086 

 

The outstanding historical share information in the table above is based on shares of Common Stock outstanding as of September 30, 2017 and excludes as of such date the following:

 

(i) Preferred Shares

 

  a. 2,200,000 shares of Common Stock issuable upon conversion of the 11,000,000 Series A Preferred Shares, issued and outstanding as of September 30, 2017, based on the Series A Certificate of Designations,
  b. 54,577 shares of Common Stock issuable upon conversion of the 8,250 Series B Preferred Shares, issued and outstanding as of September 30, 2017, based on the Series B Certificate of Designations; and
  c. 629,806 shares of Common Stock issuable upon conversion of 220,432 Series C Preferred Shares, issued and outstanding as of September 30, 2017, based on the Series C Certificate of Designations,

 

(ii) outstanding options to purchase an aggregate of 147,300 shares issuable upon exercise of outstanding options with a weighted average exercise price of $58.18, under our equity compensation plans;
   
(iii) 266,143 shares of Common Stock issuable upon exercise of outstanding warrants with a weighted average exercise price of $48.33;

 

A $1.00 increase (decrease) in the assumed public offering price of $5.00, the last reported sales price for our Common Stock as reported on the OTC Pink Current Information Marketplace on December 28, 2017, would increase (decrease) each of cash, total shareholders’ equity and total capitalization by approximately $4.2 million, assuming the number of units we are offering in this offering, as set forth on the cover page of this prospectus, remains the same, after deducting the estimated underwriting discount and estimated offering expenses payable by us. We may also increase or decrease the number of units we are offering in this offering. Each increase (decrease) of 500,000 units we are offering would increase (decrease) each of cash, total shareholders’ equity and total capitalization from this offering by approximately $2.3 million, assuming the assumed public offering price remains the same, and after deducting the estimated underwriting discount and estimated offering expenses payable by us.

 

33

 

 

DILUTION

 

If you invest in our securities, your investment will be diluted immediately to the extent of the difference between the public offering price per share of Common Stock in the unit you pay in this offering, and the pro forma net tangible book value per share of Common Stock immediately after this offering.

 

Net tangible book value (deficit) per share represents the amount of our total tangible assets reduced by our total liabilities, divided by the outstanding shares of Common Stock. Tangible assets equal our total assets less intangible assets. As of September 30, 2017, our actual net tangible book value (deficit) was $(67.6) million and our net tangible book value (deficit) per share was $(14.05).

 

Our pro forma net tangible book value (deficit) of our Common Stock as of September 30, 2017 was $(63.0) million, or $(11.40) per share. Pro forma net tangible book value (deficit) represents pro forma total tangible assets less pro forma total liabilities and pro forma net tangible book value (deficit) per share represents pro forma net tangible book value divided by the total number of shares outstanding as of September 30, 2017, each after giving effect to:

 

(1)

an additional advance under the JMJ Promissory Note in the amount of $949,900 offset by the Promissory Note discounts and issuance costs of:

 

(A)

Common Stock purchase warrants for 27,140 shares of Common Stock issued to JMJ with an estimated fair value of $5,979,688 using the multi-nomial lattice pricing model based upon: (i) an expected life of 5.0 years; (ii) estimated volatility of 149.3%; (iii) annual rate of expected dividends of 0%; (iv) a risk free interest rate of 1.50%; and (v) an estimated exercise price of $35.00; and

 

(B)

placement agent cash fees of $94,990 and warrants to purchase 2,714 shares of Common Stock with an estimated fair value of $597,969 using the multi-nomial lattice pricing model based upon: (i) an expected life of 5 years; (ii) estimated volatility of 149.3%; (iii) annual rate of expected dividends of 0%; (iv) a risk free interest rate of 1.50%; and (v) an estimated exercise price of $35.00. Such fees and warrants were issued in connection with the JMJ Financing.

 

  (2) The Company received agreements signed by certain holders of outstanding warrants to purchase Common Stock, pursuant to which warrants to purchase an aggregate of 726,504 warrant shares converted into 710,841 shares of Common Stock. These 710,841 shares were issued pursuant to Board resolutions dated September 26, 2017. The issuance of these 710,841 shares will result in a gain of approximately $3.8 million and reduce liabilities by approximately $8.0 million.
     
  (3) The issuance on November 29, 2017 of 9,119 Series C Preferred Shares as payment in full of payment-in-kind dividends and registration rights penalties and accrued interest thereon, owed to our Series C Preferred Shareholders accrued as of September 30, 2017.

 

Our pro forma as adjusted net tangible book value as of September 30, 2017 would have been approximately $11.2 million, or $0.71 per share of Common Stock. This amount represents an immediate increase in pro forma as adjusted net tangible book value of $12.11 per share to existing stockholders and an immediate dilution of $4.42 per share to new investors purchasing units in this offering. Our pro forma as adjusted net tangible book value of our Common Stock as of September 30, 2017 gives effect to the sale of shares of Common Stock at the assumed public offering price of $5.00 per share, after deducting the underwriting discount and commission and estimated offering expenses, and the following:

 

(1) On December 6, 2017 and December 7, 2017, the two holders of the Series A Preferred Shares (Mr. Farkas and Mr. Feintuch) signed letter agreements pursuant to which, at the closing of this offering, 11,000,000 Series A Preferred Shares will convert into 550,000 shares of Common Stock. The Company recorded the beneficial conversion feature with a value of $1,000,000 as a deemed dividend by recording an offsetting debit and credit to additional paid-in capital because the Company has an accumulated deficit.
   
(2) On May 19, 2017, the holder of the Series B Preferred Shares signed a conversion agreement pursuant to which, at the closing of this offering, 8,250 Series B Preferred Shares will convert into 189,750 shares of Common Stock which will result in an inducement charge of approximately $124,000, divided by the assumed public offering price of $5.00 and multiplied by a factor of 1.15.
   
(3) At the closing of this offering, 6,599,591 shares issuable upon the conversion of 229,551 Series C Preferred Shares. The 6,599,591 shares will be issued based upon the Formula. The majority of the shares are being converted pursuant to conversion agreements signed by holders of the Series C Preferred Shares and the remainder are being issued pursuant to the Series C Amendments. The conversion of the Series C Preferred Shares resulted in a deemed dividend of approximately $9.7 million which was recognized by recording an offsetting debit and credit to additional paid-in capital because the Company has an accumulated deficit.
   
(4) At the closing of this offering, the Company will repay: (i) $650,279 in principal and interest owed pursuant to outstanding convertible notes issued to FGI; and (ii) placement agent and legal fees of approximately $187,245 related to the JMJ Financing (of which $64,745 will be paid to the Representative, $107,500 will be paid to Ardour, and $15,000 will be paid to IBIS Co.). 3,001,250 shares of Common Stock will be issued to JMJ in full consideration pursuant to the Additional Agreement in full payment of all dollar amounts and share amounts owed in connection with the JMJ Financing. The settlement with JMJ will result in a gain of $35.1 million. See “Use of Proceeds” section on page 30.
   
(5) At the closing of this offering, the Company will 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) in accordance with a Settlement Agreement between the parties dated August 21, 2015 resulting in a gain of $285,000.
   
(6) At the closing of this offering, the Company will issue 28,415 units issuable to two employee members of the Board (Mr. Farkas and Mr. Calise) as well as a former member of the Board who remains our President (Mr. Kinard) in settlement and consideration of services rendered during the period of April 1, 2016 through March 31, 2017 for payment of $113,551 divided by the assumed public offering price of $5.00 multiplied by 80%, resulting in an inducement charge of $28,000. Each unit will consist of one share of Common Stock and one warrant to purchase one share of Common Stock. The Company will not be registering any of the securities issued in connection with this payment.

 

34

 

 

(7) At the closing of this offering, the Company will charge approximately $781,000 against additional paid-in capital related to offering costs that have been deferred.
   
(8) On June 8, 2017, the Company entered into a settlement agreement with Wilson Sonsini Goodrich & Rosati to settle $475,394 in payables owed for legal services as of June 30, 2017 requiring: (a) $25,000 to be paid in cash at the closing of this offering; and (b) $75,000 in the form of 15,000 shares of Common Stock issuable upon the closing of this offering. As a result, the Company will show a $375,394 reduction in liabilities.
   
(9) On June 13, 2017, the Company entered into an agreement with ITT Canon LLC whereby the Company reached a settlement regarding, as of June 30, 2017, an accrued liability of $200,000. The Company will issue 40,000 shares of Common Stock at the closing of this offering.
   
(10)

Concurrent with the closing of this offering, the Company will pay Mr. Farkas:

 

(i) $80,000 to Mr. Farkas in repayment of accrued cash compensation for the period of July 2015 through November 2015; (ii) 169,313 shares of Common Stock issuable as payment of $630,000 in shares of Common Stock owed to Mr. Farkas for the period of December 1, 2015 through May 31, 2017 pursuant to the Third Amendment and pursuant to a Conversion Agreement between the Company and Mr. Farkas, dated August 23, 2017 divided by the assumed public offering price of $5.00 multiplied by 80%; (iii) 113,256 units of unregistered shares of Common Stock and warrants issuable as payment of (a) $375,000 in shares of Common Stock owed to Mr. Farkas for accrued commissions on hardware sales and revenue from charging stations for the period of November 2015 through March 2017 pursuant to the Third Amendment divided by the assumed public offering price of $5.00 multiplied by 80%; (b) $77,624 in shares of Common Stock owed to Mr. Farkas for accrued commissions on hardware sales and revenue from charging stations for the period of April 2017 through September 2017 pursuant to an oral agreement between the Company and Mr. Farkas divided by the assumed public offering price of $5.00 multiplied by 80%. This oral agreement was reached pursuant to Section 7(B) of the Third Amendment; (iv) 61,267 shares of Common Stock issuable as payment of $213,102 owed to BLNK Holdings, in principal and interest pursuant to a Conversion Agreement between the Company and BLNK Holdings, dated August 23, 2017 based upon the Formula. Mr. Farkas is also due to receive 886,119 shares of Common Stock issuable pursuant to a letter agreement, dated December 6, 2017. Mr. Farkas will also receive options (regardless of the status of the offering) for 7,000 shares of our Common Stock at an exercise price of $30.00 per share and options for 8,240 shares of our Common Stock at an exercise price of $37.50 per share in connection with amounts owed pursuant to the Third Amendment.

   
(11)

In accordance with the Compensation Agreement with Mr. Feintuch, the Company shall pay Mr. Feintuch (i) $130,664 in cash which represents 75% of the accrued commissions on hardware sales and revenue from charging stations for the period of November 2015 through March 2017 owed to Mr. Feintuch pursuant to the Compensation Agreement; (ii) $15,000 in cash which represents 75% of the accrued commissions on hardware sales and revenue from charging stations for the period of April 2017 through September 2017 owed to Mr. Feintuch pursuant to an oral agreement between the Company and Mr. Feintuch. This oral agreement was reached pursuant to Section 3(B) of the Compensation Agreement; (iii) 12,139 units of unregistered shares of Common Stock and warrants issuable as payment of (a) $43,555 in shares of Common Stock owed to Mr. Feintuch which represents 25% of the accrued commissions on hardware sales and revenue from charging stations for the period of November 2015 through March 2017 owed to Mr. Feintuch pursuant to the Compensation Agreement divided by the assumed public offering price of $5.00 multiplied by 80% and (b) $5,000 in shares of Common Stock owed to Mr. Feintuch which represents 25% of the accrued commissions on hardware sales and revenue from charging stations for the period of April 2017 through September 2017 owed to Mr. Feintuch pursuant to an oral agreement between the Company and Mr. Feintuch divided by the assumed public offering price of $5.00 multiplied by 80%. This oral agreement was reached pursuant to Section 3(B) of the Compensation Agreement. Mr. Feintuch will also receive options (regardless of the status of the offering) for 7,000 shares of our Common Stock at an exercise price of $30.00 per share and options for 9,600 shares of our Common Stock at an exercise price of $37.50 per share pursuant to his Compensation Agreement.

 

Mr. Feintuch is also due to receive 26,500 shares of Common Stock issuable pursuant to a letter agreement, dated December 7, 2017.

   
(12) Concurrent with the closing of the offering, the Company will pay accrued professional fees of $159,088 to our accounting firm, a warrant valuation consultant, and our legal counsel.
   
(13) Concurrent with the closing of the offering, the Company will pay accrued cash fees owed to the Board members in the amount of $344,311. Specifically, $69,827 to Mr. Engel; $46,651 to Mr. Farkas; $34,913 to Mr. Calise; $32,095 to Mr. Kinard; $11,122 to Mr. Evans; and $149,703 to Mr. Shapiro.
   
(14) Concurrent with the closing of the offering, the Company will pay Mr. Calise a bonus of $25,000 for 2016 owed to him pursuant to his employment agreement, as determined by the Compensation Committee of the Board in 2017.
   
(15)

Concurrent with the closing of the offering, the Company will pay accrued payroll taxes of $561,985 including $8,600 to be paid to employees for payments owed to them pursuant to the Company’s 401(k) plan.

   
(16) Concurrent with the closing of the offering, the Company will pay accrued offering costs of $417,351, currently characterized as accounts payable.

 

35

 

 

(17) Concurrent with the closing of the offering, the Company will pay $67,032 owed to Chase Mortgage, Inc., pursuant to the Fourth Amendment to Secured Convertible Promissory Note dated September 5, 2017 with a monthly interest rate of 1.5%. The original Secured Convertible Promissory Note, dated as of November 13, 2014 was also amended February 20, May 1, and November 9 (all in 2015).
   
(18) Concurrent with the closing of the offering, the Company will: (i) issue 2,000 shares of Common Stock as payment of $10,000; and (ii) and pay $3,000 to Russ Klenet & Associates, Inc. Both payments will be made pursuant to the Settlement and Release Agreement between the Company and the counterparty, dated December 29, 2016 with the share payment divided by the assumed public offering price of $5.00.
   
(19) Concurrent with the closing of the offering, the Company will issue, in the aggregate, 11,034 shares of Common Stock to Sunrise Securities Corp. and Ardour in connection with placement agent fees related to the sale of Series C Preferred Stock in December 2014.
   
(20) Concurrent with the closing of the offering, the Company will issue 38,382 shares of Common Stock as payment of a total of $153,529 to both SemaConnect Inc. and their legal counsel pursuant to the Settlement Agreement dated June 23, 2017 divided by the assumed public offering price of $5.00 multiplied by 80%.
   
(21) Concurrent with the closing of the offering, the Company will issue 300,125 shares of Common Stock to Ardour in placement agent fees related to the JMJ Financing.
   
(22) Concurrent with the closing of the offering, the Company will issue 1,600 shares of Common Stock to IBIS Co. in connection with an introduction to an investor.
   

(23)

$261,993 to be collectively repaid to Chase Mortgage, Inc. ($101,993) and SMS Real Estate LLC ($160,000) pursuant to Convertible Promissory Notes between the Company and each lender dated September 7, 2017
   
(24) $223,168 to be paid to Douglas Stein pursuant to a Forbearance Agreement with the Company dated January 8, 2018 with $30,000 to be paid by January 11, 2018 and the balance to be paid concurrent with the closing of the offering.

 

36

 

 

The following table illustrates this per share dilution:

 

Assumed public offering price per share           $ 5.00  
Historical net tangible book value (deficit) per share as of September 30, 2017   $ (14.05 )        
Pro forma increase in net tangible book value (deficit) as of September 30, 2017   $ 2.65          
Pro forma net tangible book value (deficit) per share as of September 30, 2017   $ (11.40 )        
Increase in historical net tangible book value per share attributable to existing investors in this offering   $ 11.98          
Pro forma, as adjusted, net tangible book value (deficit) per share as of September 30, 2017 after giving effect to this offering           $ 0.58  
Dilution per share to new investors in this offering           $ 4.42  

 

If the underwriter’s overallotment option is exercised in full, our pro forma as adjusted net tangible book value per share following this offering will be $0.72 per share, which amount represents an immediate increase in net tangible book value of $12.12 per share of our Common Stock to existing shareholders and an immediate dilution in net tangible book value of $4.28 per share of our Common Stock to new investors purchasing shares in this offering.

 

The outstanding historical share information in the table above is based on shares of Common Stock outstanding as of September 30, 2017 and excludes as of such date the following:

 

(i) Preferred Shares:

 

a.   2,200,000 shares of Common Stock issuable upon conversion of the 11,000,000 Series A Preferred Shares, issued and outstanding as of September 30, 2017, based on the Series A Certificate of Designations;

 

b.   54,577 shares of Common Stock issuable upon conversion of the 8,250 Series B Preferred Shares, issued and outstanding as of September 30, 2017, based on the Series B Certificate of Designations; and

 

c.    629,806 shares of Common Stock issuable upon conversion of 220,432 Series C Preferred Shares, issued and outstanding as of September 30, 2017, based on the Series C Certificate of Designations;

 

  (ii) outstanding options to purchase an aggregate of 147,300 shares issuable upon exercise of outstanding options with a weighted average exercise price of $58.18, under our equity compensation plans; and
     
  (iii)  266,143 shares of Common Stock issuable upon exercise of outstanding warrants with a weighted average exercise price of $48.33.

 

A $1.00 increase or decrease in the assumed public offering price per unit would increase or decrease our pro forma as adjusted net tangible book value per share after this offering by approximately $0.22 per share, and increase or decrease the dilution per share to new investors by approximately $0.80 per share, assuming the number of shares of Common Stock offered by us, as set forth on the cover page of this prospectus, remains the same, after deducting the underwriting discount and estimated offering expenses payable by us.

 

If any Common Stock are issued upon exercise of outstanding options or warrants or conversion of outstanding Series A, B or C Preferred Shares, you may experience further dilution.

 

37

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis of the financial condition and results of our operations should be read in conjunction with the “Summary Statements of Operations Data” and our consolidated financial statements and the notes to those statements appearing elsewhere in this prospectus. This discussion and analysis contains forward-looking statements reflecting our management’s current expectations that involve risks, uncertainties and assumptions. Our actual results and the timing of events may differ materially from those described in or implied by these forward-looking statements due to a number of factors, including those discussed below and elsewhere in this prospectus particularly on page 10 entitled “Risk Factors”.

 

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 is 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, 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 flexible range of business models for EV charging equipment and services. In our comprehensive and turnkey business model, we own and operate the EV charging equipment, manage the installation, maintenance, and related services, and share a portion of the EV charging revenue with the property owner. Alternatively, Property Partners may share in the equipment and installation expenses, with Blink Charging 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, we can also provide EV charging hardware, site recommendations, connectivity to the Blink Network, and service and maintenance services.

 

As reflected in our unaudited condensed consolidated financial statements as of September 30, 2017, we had a cash balance, a working capital deficiency and an accumulated deficit of $9,062, $67,198,792 and $182,206,113, respectively. During the three and nine months ended September 30, 2017, we incurred a net loss of $93,620,432 and $101,134,331, respectively. These factors raise substantial doubt about our ability to continue as a going concern within a year after the issuance date of this filing, as expressed in the notes to our condensed consolidated financial statements. Historically, we have been able to raise funds to support our business operations, although there can be no assurance we will be successful.

 

Through April 16, 2014, 350 Green was our wholly-owned subsidiary in which we had full control and the Company was 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 VIE and perform ongoing reassessments of whether an enterprise is the primary beneficiary of a VIE. We determined that our Company is the primary beneficiary of 350 Green, and as such, 350 Green’s assets, liabilities and results of operations are included in our condensed 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 results in their 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 VIE of the Company and, accordingly, 350 Green’s approximately $3.7 million of liabilities have been deconsolidated from our financial statements.

 

38

 

 

On August 17, 2017, Car Charging Group, Inc. changed its name to Blink Charging Co. Effective August 29, 2017, pursuant to authority granted by the stockholders of the Company, the Company implemented 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.

 

Consolidated Results of Operations

 

Three Months Ended September 30, 2017 Compared With Three Months Ended September 30, 2016

 

Revenues

 

Total revenue for the three months ended September 30, 2017 was $606,899 compared to $748,950 a decline of $142,051, or 19%. The decline is attributed to a $48,557, or 24%, decline in product sales that decreased to $157,264 for the three months ended September 30, 2017 compared to $205,821 for the three months ended September 30, 2016. The decrease was primarily due to cost-cutting measures, limited resources during reorientation of operations, as well as lower volume of residential and commercial units sold during the three months ended September 30, 2017. The decrease is also attributable to a $56,148, or 79%, decline in grant and rebate revenue that decreased to $14,978 for the three months ended September 30, 2017 compared to $71,126 for the comparable 2016 period. Grants 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 revenues is typically unpredictable and, therefore, uncertain. We have not recently received any new grants and, as a result, the 2017 revenue is related to the amortization of previous grants.

 

Charging service revenue from company-owned charging stations was $328,302 for the three months ended September 30, 2017 compared to $317,443 for the three months ended September 30, 2016, an increase of $10,859, or 3%. Charging service revenue derived from company-owned charging stations increased despite a $58,826 decrease in revenue from a program sponsored by Nissan North America that the Company has participated in since July 2014. The Program Coordinator pays the Company based on the number of program participants and the percentage of DC Fast Chargers in the program. Starting in July 2015, a private company participating in this program began adding chargers to the program and the Company generated less revenue as a result of the decline in its percentage of chargers in the program. The Company expects revenues derived from this program during the balance of 2017 to continue to be lower than the revenues it derived from this program in the same periods in 2016.

 

Total revenue from warranty revenue, network fees and other revenue was $106,355 for the three months ended September 30, 2017 as compared to $154,560 for the three months ended September 30, 2016, a decrease of $48,205, or 31%. The decrease is primarily attributable to a decrease in non-company-owned fee-generating units on our network, which is included within other revenues, during the three months ended September 30, 2017 as compared to the prior period.

 

Cost of Revenues

 

Cost of revenues primarily consists of depreciation of installed charging stations, amortization of the Blink Network infrastructure, the cost of charging station goods and related services sold, repairs and maintenance, electricity reimbursements and revenue share payments to hosts when we are the primary obligor in the revenue share arrangement. Cost of revenues for the three months ended September 30, 2017 were $305,610 as compared to $694,656 for the three months ended September 30, 2016. The decrease is primarily attributable to a decrease of $135,576, or 72%, in warranty, repairs and maintenance, and network costs expense due to a lower cost of repairs provided by us as compared to repairs provided by third party vendors. Additionally, the decrease is due to a decrease of $77,104, or 12%, in total cost of revenues in connection with cost of charging services, host provider fees and cost of product sales, primarily due to a decrease in charging service revenues and equipment sales, as well as a reduction in depreciation and amortization expense that declined to $86,744 for the three months ended September 30, 2017 as compared to $263,110 for the three months ended September 30, 2016, as the underlying assets became fully depreciated since the 2016 period. There is a degree of variability in our gross margins related to charging services revenues from period to period primarily due to (i) the mix of revenue share payment arrangements, (ii) electricity reimbursements, and (iii) the costs of maintaining charging stations not currently in operation. Any variability in our gross margins related to equipment sales depends on the mix of products sold.

 

Operating Expenses

 

Operating expenses consist of selling, marketing, advertising, payroll, administrative, finance and professional expenses.

 

Compensation expense decreased by $483,819, or 31%, from $1,564,463 (consisting of approximately $1.3 million of cash compensation and approximately $0.3 million of non-cash compensation) for the three months ended September 30, 2016 to $1,080,644 (consisting of approximately $0.8 million of cash compensation and approximately $0.3 million of non-cash compensation) for the three months ended September 30, 2017. The decrease was primarily attributable to decreased cash commission expenses of approximately $315,000 earned by a company owned by our Executive Chairman as well as decrease of approximately $180,000 of payroll expenses due to decreased headcount as compared to the 2016 period.

 

Other operating expenses consist primarily of rent, travel and IT expenses. Other operating expenses decreased by $114,847, or 34%, from $342,774 for the three months ended September 30, 2016 to $227,927 for the three months ended September 30, 2017. The decrease was primarily attributable to a reduction in rent expense, travel expense due to decreased travel, as well as a decreased in software development expenses in connection with generation 2 chargers.

 

General and administrative expenses decreased by $198,554, or 47%, from $420,953 for the three months ended September 30, 2016 to $222,399 for the three months ended September 30, 2017. The decrease was primarily attributable to a decrease in legal and professional fees of approximately of $183,639, and consulting fees of approximately $31,500, partially offset by an increase in credit card processing fees $17,715.

 

39

 

 

Other Expense

 

Other expense increased by $92,256,491, or 68,715%, from $134,260 for the three months ended September 30, 2016 to $92,390,751 for the three months ended September 30, 2017. The increase was primarily due to an increase in the non-cash change in fair value of warrant liabilities of approximately $71.8 million, which was primarily attributable to the quantity of warrants held by our Executive Chairman not being subject to our Reverse Split, which, as a result of the Reverse Split, caused them to increase in value. The increase in other expense was also attributable to a loss on settlement reserve of $12.5 million, which was primarily related to our default on our note with JMJ, as well as a non-cash loss on inducement of $7.6 million which related to exchange agreements whereby the value consideration received by the counterparty exceeded the carrying value of the liability.

 

Net Loss

 

Our net loss for the three months ended September 30, 2017 increased by $91,212,276 or 3,788%, to $93,620,432 compared to $2,408,156 for the three months ended September 30, 2016. The increase was primarily due to increased other expenses of $92,256,491. Our net loss attributable to common shareholders for the three months ended September 30, 2017 increased by $91,654,076, or 3,279%, from $2,794,856 to $94,448,932 for the aforementioned reasons and due to an increase in the dividend attributable to Series C Convertible Preferred shareholders of $441,800.

 

The increase in other expense was primarily due to an increase in the non-cash change in fair value of warrant liabilities of approximately $71.8 million, which was primarily attributable to the quantity of warrants held by our Executive Chairman not being subject to our Reverse Split, which, as a result of the Reverse Split, caused them to increase in value. The increase in other expense was also attributable to a loss on settlement reserve of $12.5, which was primarily related to our default on our note with JMJ, as well as a non-cash loss on inducement of $7.6 million which related to exchange agreements whereby the value consideration received by the counterparty exceeded the carrying value of the liability.

 

Nine Months Ended September 30, 2017 Compared With Nine Months Ended September 30, 2016

 

Revenues

 

Total revenue for the nine months ended September 30, 2017 was $1,735,493 compared to $2,459,496, a decline of $724,003, or 29%. The decline is primarily attributed to a $488,388, or 57%, decline in product sales that decreased to $367,808 for the nine months ended September 30, 2017 compared to $856,195 for the nine months ended September 30, 2016. The decrease was primarily due to cost-cutting measures, limited resources during reorientation of operations, as well as lower volume of residential and commercial units sold during the nine months ended September 30, 2017. The decrease is also attributable to a $134,492, or 59%, decline in grant and rebate revenue that decreased to $93,798 for the nine months ended September 30, 2017 compared to $228,290 for the comparable 2016 period. Grants 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 revenues is typically unpredictable and, therefore, uncertain. We have not recently received any new grants and, as a result, the 2017 revenue is related to the amortization of previous grants.

 

Charging service revenue from company-owned charging stations was $879,428 for the nine months ended September 30, 2017 compared to $958,376 for the nine months ended September 30, 2016, a decrease of $78,948, or 8%. Charging service revenue from company-owned charging stations decreased primarily due to a $170,020 decrease in revenue from a program sponsored by Nissan North America that the Company has participated in since July 2014, partially offset by an increase in revenue of $91,071 from company-owned charging stations. The Program Coordinator pays the Company based on the number of program participants and the percentage of DC Fast Chargers in the program. Starting in July 2015, a private company participating in this program began adding chargers to the program and the Company generated less revenue as a result of the decline in its percentage of chargers in the program. The Company expects revenues derived from this program during the balance of 2017 to continue to be lower than the revenues it derived from this program in the same periods in 2016.

 

Total revenue from warranty revenue, network fees and other revenue was $394,459 for the nine months ended September 30, 2017 as compared to $416,634 for the nine months ended September 30, 2016, a decrease of $22,175, or 5%. The decrease is primarily attributable to a decrease in non-company-owned fee-generating units on our network during the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016, partially offset by an increase in network fees as compared to the prior period.

 

Cost of Revenues

 

Cost of revenues primarily consists of depreciation of installed charging stations, amortization of the Blink Network infrastructure, the cost of charging station goods and related services sold, repairs and maintenance, electricity reimbursements and revenue share payments to hosts when we are the primary obligor in the revenue share arrangement. Cost of revenues for the nine months ended September 30, 2017 were $1,128,066 as compared to $2,253,190 for the nine months ended September 30, 2016. Cost of revenues decreased in virtually every category as compared to the 2016 period except for charging services which experienced an increase of $18,400, however, the decrease is primarily attributable to a decrease of $392,678, or 65%, in warranty and repairs and maintenance and network costs expense due to a lower cost of repairs provided by us as compared to repairs provided by third party vendors. Warranty and repairs and maintenance expense decreased as compared to the 2016 period primarily due to a lower cost of repairs provided by us as compared to repairs provided by third party vendors.

 

In addition, there was a decrease of $351,947, or 44%, in total cost of revenues in connection with cost of host provider fees and cost of product sales, primarily due to a decrease in charging service revenues and equipment sales, as well as a reduction in depreciation and amortization expense that declined to $298,168 for the nine months ended September 30, 2017 as compared to $697,067 for the nine months ended September 30, 2016, as the underlying assets became fully depreciated since the 2016 period. There is a degree of variability in our gross margins related to charging services revenues from period to period primarily due to (i) the mix of revenue share payment arrangements, (ii) electricity reimbursements, and (iii) the costs of maintaining charging stations not currently in operation. Any variability in our gross margins related to equipment sales depends on the mix of products sold.

 

40

 

 

Operating Expenses

 

Operating expenses consist of selling, marketing, advertising, payroll, administrative, finance and professional expenses.

 

Compensation expense decreased by $125,569, or 3%, from $4,217,250 (consisting of approximately $3.1 million of cash compensation and approximately $1.1 million of non-cash compensation) for the nine months ended September 30, 2016 to $4,091,681 (consisting of approximately $2.7 million of cash compensation and approximately $1.4 million of non-cash compensation) for the nine months ended September 30, 2017. The decrease was attributable decreased commission expenses of approximately $130,000 earned by a company owned by our Executive Chairman as well as decrease of approximately $290,000 of payroll expenses due to decreased headcount as compared to the 2016 period, partially offset by an increase in non-cash compensation expense primarily attributable to stock-based compensation issued to directors.

 

Other operating expenses consist primarily of rent, travel and IT expenses. Other operating expenses decreased by $375,517, or 36%, from $1,057,147 for the nine months ended September 30, 2016 to $681,630 for the nine months ended September 30, 2017. The decrease was primarily attributable to a reduction in rent expense, travel expense due to decreased travel, as well as decreased IT expenses due to decreased call center expenses as the Company inaugurated their own internal call center in Phoenix, Arizona during 2016.

 

General and administrative expenses decreased by $284,188, or 27%, from $1,058,670 for the nine months ended September 30, 2016 to $774,482 for the nine months ended September 30, 2017. The decrease was primarily attributable to a decrease in accounting expenses of approximately of $200,905 and consulting expenses of approximately $106,500, partially offset by an increase in legal and professional fees of approximately $74,311.

 

During the nine months ended September 30, 2017, we incurred lease termination costs of $300,000 which represents the fair value of our remaining under our lease agreement.

 

Other Expense

 

Other expense increased by $92,865,802, or 3,067%, from $3,028,163 for the nine months ended September 30, 2016 to $95,893,965 for the nine months ended September 30, 2017. The increase was primarily due to an increase in the non-cash change in fair value of warrant liabilities of approximately $70.4 million, which was primarily attributable to the quantity of warrants held by our Executive Chairman not being subject to our Reverse Split, which, as a result of the Reverse Split, caused them to increase in value. The increase in other expense was also attributable to a loss on settlement reserve of $13.0, which was primarily related to our default on our note with JMJ, as well as a non-cash loss on inducement of $7.6 million which related to exchange agreements whereby the value consideration received by the counterparty exceeded the carrying value of the liability.

 

Net Loss

 

Our net loss for the nine months ended September 30, 2017 increased by $91,979,407, or 1,005%, to $101,134,331 as compared to $9,154,924 for the nine months ended September 30, 2016. The increase was primarily due an increase in other expenses of $92,865,802. Our net loss attributable to common shareholders for the nine months ended September 30, 2017 increased by $92,283,307, or 912%, from $10,225,324 to $103,508,631 for the aforementioned reasons and due to an increase in the dividend attributable to Series C Convertible Preferred shareholders of $1,303,900.

 

The increase in other expense was primarily due to an increase in the non-cash change in fair value of warrant liabilities of approximately $70.4 million, which was primarily attributable to the quantity of warrants held by our Executive Chairman not being subject to our Reverse Split, which, as a result of the Reverse Split, caused them to increase in value. The increase in other expense was also attributable to a loss on settlement reserve of $13.0, which was primarily related to our default on our note with JMJ, as well as a non-cash loss on inducement of $7.6 million which related to exchange agreements whereby the value consideration received by the counterparty exceeded the carrying value of the liability.

 

Year Ended December 31, 2016 Compared With Year Ended December 31, 2015

 

Revenues

 

Total revenue for the year ended December 31, 2016 was $3,326,021 compared to $ 3,957,795, a decline of $631,774 or 16%. The decline is primarily attributed to an $836,477 decline in grants and rebates revenue that decreased to $332,672, or 72% for the year ended December 31, 2016 compared to $1,169,149 for the year ended December 31, 2015. Grants 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. Our grant revenue during the 2014 and 2015 fiscal years was primarily derived from our agreement with the Bay Area Air Quality Management District (the “BAAQMD”). Our agreement with the BAAQMD ended on December 31, 2015. Although we are not currently receiving funding under the grant, we are recognizing the funding received as revenue over the lives of the chargers to which they pertained.

 

41

 

 

Charging service revenue company-owned charging stations was $1,144,016 for the year ended December 31, 2016 compared to $1,074,163 for the year ended December 31, 2015, a slight increase of $69,853 or 7%. Charging services derived from revenue company-owned charging stations increased, despite a $155,940 decrease in revenue from a program sponsored by Nissan North America (called No Charge to Charge and currently still active), that the Company has participated in since July 2014. The Program Coordinator pays the Company based on the number of program participants and the percentage of DC Fast Chargers in the program. Starting in July 2015, the private company participating in this program began adding chargers to the program and we no longer were able to generate as much revenue from the percentage of chargers we have in the program. We expect revenues derived from this program during the balance of 2017 to continue to be lower than the revenues we derived from this program in the same periods in 2016.

 

Revenue from product sales was $1,126,939 for the year ended December 31, 2016 compared to $805,143 for the year ended December 31, 2015, an increase of $321,796 or 40%. The increase was primarily due to a higher volume of residential and commercial units sold in 2016.

 

Total revenue from warranty revenue, network fees and other revenue was $722,394 for the year ended December 31, 2016, compared to $909,340 the year ended December 31, 2015 a decrease of $186,946, or 21%. The decrease is attributed to a one-time gain of $209,086 associated with the settlement of accounts payable related to network fees.

 

Cost of Revenues

 

Cost of revenues primarily consists of depreciation of installed charging stations, amortization of the Blink Network infrastructure, the cost of charging station goods and related services sold, repairs and maintenance, electricity reimbursements and revenue share payments to hosts when we are the primary obligor in the revenue share arrangement. Cost of revenues for the year ended December 31, 2016 were $2,813,680 as compared to $2,861,738 for the year ended December 31, 2015, a decrease of $48,058, or 2%, primarily due to a reduction in warranty and repair costs that declined to $346,477 for year ended December 31, 2016 compared to $671,474 for the year ended December 31, 2015. There is a degree of variability in our gross margins related to charging services revenues from period to period primarily due to (i) the mix of revenue share payment arrangements, (ii) electricity reimbursements, and (iii) the costs of maintaining charging stations not currently in operation. Any variability in our gross margins related to equipment sales depends on the mix of products sold.

 

Gross Profit

 

The gross profit for the year ended December 31, 2016, was $512,341 compared to $1,096,057 for the year ended December 31, 2015, a decrease of $583,716. The reduction in gross profit contribution is largely attributed to a year over year reduction in grant and rebate revenue of $836,477. For the year ended December 31, 2016, the gross profit contribution from company-owned charging stations defined as charging service revenue from company-owned charging stations less cost of charging services- company-owned charging stations less host provider fees was $495,587 or 43% compared to $562,979 or 52% for the year ended December 31, 2015. The reduction in gross profit contribution from company-owned charging stations is attributed to the reduction in revenue from a program sponsored by Nissan North America (called No Charge to Charge and currently still active) that the Company has participated in since July 2014.

 

Gross Profit from product sales defined as product sales less cost of equipment sales was $625,210 or 55% for the year ended December 31, 2016, compared to $434,217 or 54% for the year ended December 31, 2015 an improvement of $190,993. Management anticipates that product sales attributed to the launch of the Company’s next generation charging stations targeted in the second half of 2017 will contribute to increased gross profit from product sales.

 

42

 

 

Operating Expenses

 

Operating expenses consist of selling, marketing, advertising, payroll, administrative, finance and professional expenses.

 

Compensation expense decreased by $3,320,634, or 40%, from $8,200,246 (consisting of approximately $4.3 million of cash compensation and approximately $3.9 million of non-cash compensation) for the year ended December 31, 2015 to $4,879,612 (consisting of approximately $4.1 million of cash compensation and approximately $0.8 million of non-cash compensation) for the year ended December 31, 2016. The decrease was primarily attributable to share-based payments with a fair value of approximately $1,750,000 made to our Chief Operating Officer during the year ended December 31, 2015 under the terms of an employment agreement, as well as reduced payroll expenses of approximately $1,251,000 due to the departure of certain management and other personnel during the second half of 2015.

 

Other operating expenses consist primarily of rent, travel and IT expenses. Other operating expenses decreased by $211,065, or 13%, from $1,662,748 for the year ended December 31, 2015 to $1,451,683 for the year ended December 31, 2016. The decrease was primarily attributable to decreased call center expenses as the Company inaugurated their own internal call center in Phoenix, Arizona during 2016 and reduced travel expenses as compared to the prior period.

 

General and administrative expenses decreased by $1,158,903, or 45%, from $2,552,857 for the year ended December 31, 2015 to $1,393,954 for the year ended December 31, 2016. The decrease was primarily due to reduced legal and consulting fees as compared to the year ended December 31, 2015, which was primarily attributable to a greater demand for legal and consulting services during the year ended December 31, 2015.

 

Other (Expense) Income

 

Other (expense) income decreased by $3,561,089, or 116%, from other income of $3,074,870 for the year ended December 31, 2015 to other (expense) of $(486,219) for the year ended December 31, 2016. The decrease was primarily attributable to a decrease in the gain of the fair value of warrant liabilities of $2,535,398, or 78%, from $3,262,637 for the years ended December 31, 2015 to $727,239 for the year ended December 31, 2016, partially offset by an increase in a gain of settlements or forgiveness of accounts payable of $780,028. In addition, there was $1,833,896 of income during the year ended December 31, 2015 which related to a notification from the DOE that it had no further property interest in certain direct current fast chargers, which resulted in the release of our liability to the DOE, partially offset by a decrease in the provision for non-compliance penalty for delinquent regular SEC filings of $1,150,674, or 67%, from $1,722,217 for the year ended December 31, 2015 to $571,543 for the years ended December 31, 2016.

 

Net Loss

 

Our net loss for the year ended December 31, 2016 decreased by $545,797, or 7%, to $7,699,127 as compared to $8,244,924 for the year ended December 31, 2015. The decrease was primarily attributable to a decrease in operating expenses of $4,690,602 and gross profit of $583,716, partially offset by an increase in other expenses of $3,561,089. Our net loss attributable to Common Stock holders for the year ended December 31, 2016 decreased by $416,997, or 4%, from $9,584,624 to $9,167,627 for the aforementioned reasons and due to an increase in the dividend attributable to holders of Series C Preferred Shares of $518,400 and a decrease in income attributable to our non-controlling interest of $389,600.

 

Liquidity and Capital Resources

 

During the nine months ended September 30, 2017, we financed our activities from proceeds derived from debt and equity financing. A significant portion of the funds raised from the sale of capital stock have been used to cover working capital needs and personnel, office expenses and various consulting and professional fees.

 

For the nine months ended September 30, 2017 and 2016, we used cash of $2,020,021 and $1,913,463, respectively, in operations. Our cash use for the nine months ended September 30, 2017 was primarily attributable to our net loss of $101,134,331, adjusted for net non-cash expenses in the aggregate amount of $84,498,217, partially offset by $14,616,093 of net cash provided by changes in the levels of operating assets and liabilities.  Our cash used in operating activities for the nine months ended September 30, 2016 was primarily attributable to our net loss of $9,154,924, adjusted for non-cash expenses in the aggregate amount of $5,383,069, partially offset by $1,858,392 of net cash provided by changes in the levels of operating assets and liabilities.

 

43

 

 

During the nine months ended September 30, 2017, cash used in investing activities was $12,681, which was used to purchase charger cables. Net cash used in investing activities was $80,463 during the nine months ended September 30, 2016, which was used to purchase charging stations and other fixed assets.

 

Net cash provided by financing activities for the nine months ended September 30, 2017 was $2,035,866, of which, $2,067,745 was provided in connection with the issuance of various forms of notes payable and $84,144 provided from bank overdrafts, partially offset by the payment of $38,263 of associated with future offering costs and $72,945 of debt issuance costs as well as the repayment of notes payable of $4,815. Cash provided by financing activities for the nine months ended September 30, 2016 was $1,813,827, of which, $1,314,620 of net proceeds (gross proceeds of $1,367,120 less issuance costs of $52,500) were from the sale of Series C Convertible Preferred Stock and warrants, $600,000 was provided in connection with proceeds from the issuance of convertible notes to a related party, partially offset by the repayment of notes payable of $135,428.

 

We expect that through the next 12 months from the date of this filing, we will require external funding to sustain operations and to follow through on the execution of our business plan. There can be no assurance that our plans will materialize and/or that we will be successful in our efforts to obtain the funding to cover working capital shortfalls. Given these conditions, there is substantial doubt about our ability to continue as a going concern and our future is contingent upon our ability to secure the levels of debt or equity capital we need to meet our cash requirements. In addition, our ability to continue as a going concern must be considered in light of the problems, expenses and complications frequently encountered by entrants into established markets, the competitive environment in which we operate and the current capital raising environment.

 

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, except as described above under the heading Recent Developments, and there is no assurance that we will be able to obtain funds on commercially acceptable terms, if at all.

 

We intend to raise additional funds during the next twelve months. The additional capital raised would be used to fund our operations. The current level of cash and operating margins is insufficient to cover our existing fixed and variable obligations, so increased revenue performance and the addition of capital through issuances of securities are critical to our success. Should we not be able to raise additional debt or equity capital through a private placement or some other financing source, we would take one or more of the following actions to conserve cash: further reductions in employee headcount, reduction in base salaries to senior executives and employees, and other cost reduction measures. Assuming that we are successful in our growth plans and development efforts, we believe that we will be able to raise additional debt or equity capital. There is no guarantee that we will be able to raise such additional funds on acceptable terms, if at all.

 

Through September 30, 2017, we incurred an accumulated deficit since inception of $182,206,113. As of September 30, 2017, we had a cash balance and working capital deficit of $9,062 and $67,198,792, respectively. During the nine months ended September 30, 2017, we incurred a net loss of $101,134,331. These conditions raise substantial doubt about our ability to continue as a going concern within one year after the issuance date of this filing.

 

Our condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classifications of liabilities that might be necessary should we be unable to continue as a going concern.

 

44

 

 

Recent Developments

 

Securities Purchase Agreement with JMJ Financial

 

On October 7, 2016, we executed a Promissory Note in favor of JMJ in the amount up to $3,725,000 bearing interest on the unpaid balance at the rate of six percent. The initial amount borrowed under the Promissory Note was $500,000, with the remaining amounts permitted to be borrowed under the Promissory Note being subject to us achieving certain milestones. The Promissory Note is convertible into shares of our Common Stock based on the lesser of a per share price of $35.00 or 60% of the lowest trade price in the 25 trading days prior to the date of conversion. If JMJ elects to convert the principal balance of the Promissory Note into shares of our Common Stock under the terms of the Promissory Note, our current stockholders would be subject to dilution of their interests. Pursuant to the terms of the Promissory Note, JMJ has agreed that it will not convert the note into more than 9.99% of our outstanding shares. JMJ currently does not own any shares of our Common Stock.

 

If we do not repay the Promissory Note on the maturity date (currently January 31, 2018) and if we issue a variable security at any time the Promissory Note is outstanding, then in such event JMJ shall have the right to convert all or any portion of the outstanding balance of the Promissory Note into shares of Common Stock on the same terms as granted in any applicable variable security issued by us.

 

We initially issued one warrant to JMJ to purchase a total of 14,286 shares of our Common Stock at an exercise price equal to the lesser of: (i) 80% of the per share price of the Common Stock in this offering, (ii) $35.00 per share, (iii) 80% of the unit price of this offering (if applicable), (iv) the exercise price of any warrants issued in this offering, or (v) the lowest conversion price, exercise price, or exchange price, of any security issued by us that is outstanding on October 13, 2016.

 

The initial amount borrowed under the Promissory Note was $500,000, with the remaining amounts permitted to be borrowed under the Promissory Note being subject to us achieving certain milestones. With the achievement of certain milestones in November 2016 (the filing with the SEC of a Preliminary Information Statement on Schedule 14C regarding the Reverse Stock Split), an additional advance of $500,000 under the Promissory Note occurred on November 28, 2016. Another warrant to purchase 14,286 shares of our Common Stock was issued as of November 28, 2016. With the achievement of certain milestones in February 2017 (the filing with the SEC of a revised Preliminary Information Statement and a Definitive Information Statement, each on Schedule 14C regarding the Reverse Stock Split), additional advances of $225,100 and $300,000 under the Promissory Note occurred on February 10 and February 27, respectively. Thus, two more warrants to purchase the Company’s Common Stock were issued, one for 6,431 shares and the other for 8,571 shares, respectively. All advances after February 28, 2017 have been at the discretion of JMJ without regard to any specific milestones occurring. Additional advances of $250,000 and $30,000 under the Promissory Note occurred on March 14, 2017 and March 24, 2017, respectively, and two more warrants to purchase the Company’s Common Stock were issued, one for 7,143 shares and the other for 857 shares. An additional advance of $400,000 occurred on April 5, 2017 and another warrant to purchase 11,429 shares of our Common Stock was issued on the same date. An additional advance of $295,000 occurred on May 9, 2017 and another warrant to purchase 8,429 shares of the Company’s Common Stock was issued on the same date. On July 27, 2017, an additional advance of $50,000 was made to the Company and another warrant to purchase 1,429 shares of the Company’s Common Stock was issued to JMJ. The Company and JMJ entered into the Additional Agreement on October 23, 2017. In accordance with the terms of the Additional Agreement, on October 24, 2017, JMJ advanced to the Company $949,900 available pursuant to previous agreements with JMJ. As of January 5, 2018, ten (10) warrants to purchase a total of 100,001 shares of the Company’s Common Stock have been issued to JMJ. The aggregate exercise price is $3,500,000.

 

The Additional Agreement extended the Maturity Date to December 15, 2017 (subsequently extended to January 31, 2018). In addition, JMJ has claimed that the Company would owe JMJ $12 million as a mandatory default amount pursuant to previous agreements with the Company. JMJ agreed to allow the Company to have two options for settling a previously issued note (including settling the mandatory default amount for either $1.1 million or $2.1 million), securing a lockup agreement from JMJ, and exchanging previously issued warrants for shares of the Common Stock. Each of these options depends upon this offering closing by December 15, 2017 (subsequently extended to January 31, 2018). The option chosen is at the Company’s sole discretion.

 

45

 

 

The first option is that the Company, upon the closing of this offering: (a) will pay $2.0 million in cash to JMJ; and (b) will issue shares of Common Stock to JMJ with a value of $9,005,000. The second option is that the Company, upon the closing of this offering, will not pay any cash to JMJ and will issue shares of Common Stock to JMJ with a value of $12,005,000. In each case, the Company will issue such number of duly and validly issued, fully paid and non-assessable shares of Common Stock equal to the amount in question divided by the lowest of (i) $35.00 per share, or (ii) the lowest daily closing price of the Common Stock during the ten days prior to delivery of shares (subject to adjustment for stock splits), or (iii) 80% of the Common Stock price of this offering, or (iv) 80% of the unit price of this offering (if applicable), or (v) the exercise price of any warrants issued in this offering.

 

On November 29, 2017, the Company and JMJ entered into the first amendment to the Additional Agreement, extending the Maturity Date to December 31, 2017. On January 4, 2018, the Company and JMJ entered into the second amendment to the Additional Agreement, extending the Maturity Date to January 31, 2018.

 

On the fifth (5th) trading day after the closing of this offering, but in no event later than January 31, 2018, we will deliver the Origination Shares to JMJ. If this offering does not occur prior to January 31, 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.

 

With an assumed public offering price of $5.00, the Company will issue 3,001,250 shares of Common Stock to JMJ pursuant to the Additional Agreement in full payment of all dollar amounts and share amounts owed in connection with the JMJ Financing resulting in dilution to holders of our Common Stock.

 

350 Green

 

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 results in their 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 VIE of the Company and, accordingly, as of June 30, 2017, 350 Green’s approximately $3.7 million of liabilities were deconsolidated from the Company’s financial statements.

 

Non-Cash Expense

 

On August 29, 2017, following the effectiveness of the Reverse Stock Split, FGI exercised, on a cashless basis, its 3.1 million warrant shares, accounted for as derivative liabilities, not subject to the Reverse Stock Split. The Company issued 2,990,404 shares of Common Stock to FGI as a result of the cashless exercise. As a result, since the exercised warrants were previously classified as a derivative liability, the Company recorded a mark-to-market adjustment during the three months ended September 30, 2017 of approximately $43.9 million which was included within change in fair value of warrant liabilities on the condensed consolidated statement of operations. On November 20, 2017, JMJ confirmed in writing that it would not pursue a price reset of its outstanding warrants as a result of the FGI warrant exercise. The Company expects that this will result in a substantial reduction of the fair market value of JMJ’s derivative liabilities ($25 million on the September 30, 2017 balance sheet) in the fourth quarter of 2017.

 

On December 6, 2017, the Company and Mr. Farkas signed a letter agreement, pursuant to which, Mr. Farkas, on behalf of FGI, agreed that upon the closing of this offering, FGI will cancel 2,930,596 of its shares of Common Stock (of the 2,990,404 received).

 

Critical Accounting Policies

 

There are no material changes from the critical accounting policies set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for the year ended December 31, 2016 filed with the SEC on April 14, 2017. Please refer to that document for disclosures regarding the critical accounting policies related to our business.

 

46

 

 

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).

 

Recently Issued Accounting Standards

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers,” (“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 core principle of the standard 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. ASU 2014-09 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 in ASU 2014-09 was revised in July 2015 to be effective for interim periods beginning on or after December 15, 2017 and should be applied on a transitional basis either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application. In 2016, FASB issued additional ASUs that clarify the implementation guidance on principal versus agent considerations (ASU 2016-08), on identifying performance obligations and licensing (ASU 2016-10), and on narrow-scope improvements and practical expedients (ASU 2016-12) as well as on the revenue recognition criteria and other technical corrections (ASU 2016-20). The Company has not yet selected a transition method and is currently evaluating the impact of the adoption of these ASUs on its consolidated financial position and results of operations, however, based on its preliminary analysis, the Company does not believe the adoption of these ASUs will have a material impact on its condensed consolidated financial position and results of operations.

 

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 condensed consolidated financial statements and related disclosures.

 

In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260) and Derivatives and Hedging (Topic 815) - Accounting for Certain Financial Instruments with Down Round Features. 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 the ASU, 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 has not yet selected a transition method and is currently evaluating the impact of the adoption of these ASUs on its consolidated financial position and results of operations.

 

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 condensed consolidated financial statements and related disclosures.

 

47

 

 

Evaluation of Disclosure Controls and Procedures

 

Our management, with the participation of our Chief Executive Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2017. The term “disclosure controls and procedures,” as defined in Rule 13a-15 under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

 

Based on our evaluation, our Chief Executive Officer concluded that, as of September 30, 2017, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses described below.

 

  1.

We do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act which is applicable to us for the year ended December 31, 2016. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

     
  2. We do not have sufficient resources in our accounting function, which restricts the Company’s ability to gather, analyze and properly review information related to financial reporting in a timely manner. In addition, due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
     
  3. We have inadequate controls to ensure that information necessary to properly record transactions is adequately communicated on a timely basis from non-financial personnel to those responsible for financial reporting. Management evaluated the impact of the lack of timely communication between non-financial personnel and financial personnel on our assessment of our reporting controls and procedures and has concluded that the control deficiency represented a material weakness.
     
  4.

We have determined that oversight over our external financial reporting and internal control over our financial reporting by our Board of Directors is ineffective. The Board of Directors has not provided adequate review of the Company’s SEC’s filings and condensed consolidated financial statements and has not provided adequate supervision and review of the Company’s accounting personnel or oversight of the independent registered accounting firm’s audit of the Company’s condensed consolidated financial statement.

 

During July 2017, we appointed Robert Schweitzer to our audit committee, who we have determined meets the requirements of a financial expert as defined under the applicable rules and regulations of the SEC and who has the requisite financial sophistication as defined under the applicable rules and regulations of NASDAQ. Our Board has considered the independence and other characteristics of each of the three members of our audit committee, and our Board believes that each member meets the independence and other requirements of NASDAQ and the SEC. As part of its duties, the audit committee will assist our management in the establishment and monitoring of our internal controls and procedures.

 

In November 2017, the audit committee, as currently comprised, conducted its first review of the interim financial statements for the period ended September 30, 2017. Our management believes that the controls implemented in relation to the audit committee are sufficient to address the above weakness on a go forward basis, however, they have concluded that as of September 30, 2017, our disclosure controls were not effective.

 

Notwithstanding the assessment that our disclosure controls and procedures and our internal controls over financial reporting were not effective and that there are material weaknesses as identified herein, we believe that our condensed consolidated financial statements for the period ended September 30, 2017 fairly present our financial position, results of operations and cash flows for the periods covered thereby in all material respects.

 

48

 

 

BUSINESS

 

Overview

 

We are a leading owner, operator, and provider of 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 Network and EV charging equipment (also known as electric vehicle supply equipment) and EV related services. Our Blink Network is 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, 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 provides EV drivers with vital station information including station location, availability, and applicable fees.

 

We offer our Property Partners with a flexible range of business models for EV charging equipment and services. In our comprehensive and turnkey business model, we own and operate the EV charging equipment, manage the installation, maintenance, and related services; and share a portion of the EV charging revenue with the property owner. Alternatively, Property Partners may share in the equipment and installation expenses, with us 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, we can also provide EV charging hardware, site recommendations, connectivity to the Blink Network, and service and maintenance services.

 

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 January 5, 2018, we have approximately 14,094 charging stations deployed of which 4,727 are Level 2 commercial charging units, 115 DC Fast Charging EV chargers and 2,025 residential charging units in service on the Blink Network. Additionally, we currently have approximately 324 Level 2 commercial charging units on other networks and there are also approximately an additional 6,903 non-networked, residential Blink EV charging stations. The non-networked, residential Blink EV charging stations are all partner owned.

 

Industry Overview

 

We believe that the market for plug-in electric vehicles has experienced significant growth in recent years in response to consumer demand for vehicles with greater fuel efficiency, greater performance, and with lower environmental emissions. We believe that the demand for EVs has also been spurred in part by federal and state fuel economy standards and other state and local incentives and rebates for EVs. For example, the states of California, Oregon, New York, Maryland, Massachusetts and others have created mandates for EVs with the goal of 3.3 million EVs on the road by 2025. At the same time, oil and gas prices continue to experience spikes and fluctuations, while at the same time the cost of battery technology continues to fall as the battery industry achieves scale. In response, major automotive OEMs have accelerated the adoption of EV models, with more than 25 EV models currently available from Tesla, Nissan, Kia, GM, Ford, Fiat, BMW, Mercedes, Audi, Volkswagen, Toyota, Mitsubishi, Land Rover, Porsche, and many others. According to the Electric Drive Transportation Association, sales of plug-in vehicles since introduction to the market in 2010 is over 500,000 and according to a third-party researcher, sales are expected to grow by a factor of 12 to 2.5 million in 2025.

 

49

 

 

However, we believe that a major impediment to EV adoption has been the lack of EV charging infrastructure, and that a viable model for continued deployment of EV charging infrastructure continues to evolve. Examples of federal programs designed to stimulate development of EV charging infrastructure includes the recent White House announcement of, among other things, programs to release up to $4.5 billion in loan guarantees and invite applications to support the deployment of commercial EV charging facilities, and the launching of the Fixing America’s Surface Transportation (FAST) Act process to identify and develop corridors for zero emission and alternative fuel vehicles, which will include a network of EV fast charging stations.

 

According to Navigant Research, the global market for electric vehicle supply equipment (EVSE) is expected to grow from 505,000 units in 2016 to 2.5 million in 2025. Major utility companies are also working to upgrade their grid infrastructure in order to prepare for mass consumption of electricity by electric vehicles.

 

While many believe that the majority of EV charging occurs at home, we believe the need for a robust, pervasive public EV charging infrastructure is required to eliminate range anxiety (that is, a worried feeling while driving an electric car caused by the driver thinking they might run out of power before reaching their destination). In addition to providing strategic, public charging stations, we believe that it is necessary to provide EV charging solutions to those drivers that do not live in single-family homes, but share parking facilities, including multifamily residential apartment buildings and condominiums. While there are a few, leading competitors and various, smaller EV charging equipment or service providers that have emerged in the market, we believe their products and services are limited. Typically, these companies offer EV charging equipment, an EV charging network, or EV charging services with third party equipment.

 

Our EV Charging Solutions

 

We offer a broad range of EV charging products and services to Property Partners and EV drivers.

 

EV Charging Products

 

  Level 2. We offer Level 2 (AC) EV charging equipment, which is ideal for commercial and residential use, and has the standard J1772 connector, which is compatible with all major auto manufacturer electric vehicle models. Our commercial equipment is available in pedestal or wall mount configurations, with the ability to connect to our robust Blink Network. Our non-networked residential product, Blink HQ, is available in a wall-mount configuration and offers a delay start feature that allows users to optimize charging by utility rates. Level 2 charging stations typically provide a full charge in two to eight hours. Level 2 chargers are ideally suited for low-cost installations and frequently used parking locations, such as workplace, multifamily residential, retail and mixed-use, parking garages, municipalities, colleges/schools, hospitals, and airports.
     
  DCFC. Our DC Fast Charging equipment (“DCFC”) currently has the CHAdeMo connector, which is compatible with Nissan, Kia, and Tesla electric vehicle models (additional models may be potentially available in the future), and typically provides an 80% charge in less than 30 minutes. Installation of DCFC stations and grid requirements are typically greater than Level 2 charging stations, and are ideally suited for transportation hubs and locations between travel destinations.

 

50

 

 

We intend to enhance our current equipment offerings by developing and offering new generations of EV charging equipment in the second half of 2018. Blink’s next generation of EV charging equipment, which we anticipate will be manufactured by Liteon, offers a modern, stylish appearance, the versatility of both wall and pedestal configurations, and peer-to-peer architecture, which provides the ability to support a single primary charger and multiple secondary chargers. Additionally, the next generation of our EV charging hardware is intended to considerably reduce the current standard charging times within the industry and add new robust Blink Network features, including near-field communication (NFC) payment capabilities.

 

EV Charging Services

 

  Blink Network. Our proprietary, cloud-based Blink Network allows us to share convenient and advantageous station management features and pertinent data with Property Partners and EV drivers through user interfaces. These features include real-time station status, payment processing, detailed charging session information, monitoring and troubleshooting stations remotely, as well as standard and customized reporting capabilities on, among others, energy dispensed, greenhouse gases reduced, oil barrels saved, and gallons of fuel saved.
     
  Blink Mobile application. Our proprietary mobile application, available for iOS and Android, provides EV drivers with vital station information, including the ability to locate EV charging stations on the Blink Network, view real-time station status information, pay and initiate EV charging sessions, become a Blink member, and manage their Blink account (billing information, radio frequency identification cards, text messaging, and email notifications).

 

We believe that we are unique in our ability to offer various business models to Property Partners and leverage our technology to meet the needs of both Property Partners and EV drivers. Our property partner business model options include:

 

  1. Host Owned: The Property Partner purchases our EV charging equipment for use by EV drivers and pays for connectivity to the Blink Network as well as payment transaction fees.
     
  2. Blink Owned: We provide EV charging equipment, which we own and maintain, and operate the EV charging services through our Blink Network and share a portion of the revenues generated from the stations with our Property Partner.
     
  3. Hybrid: We also offer customized business models that meet individual Property Partner needs and combines features from the aforementioned business models.

 

Competitive Advantages/Operational Strengths

 

Early Mover Advantage: We continue to leverage our large and defendable first mover advantage and the digital customer experience we have created for both drivers and Property Partners. We have more than 110,000 drivers currently registered with Blink that appreciate the value of EV charging sessions on a leading, established, and robust network. We have thousands of Blink chargers deployed across the United States and the goal is to keep our Property Partners on one consistent network when expanding on any given property.

 

Long-Term Contracts with Property Owners: We have strategic and often long term agreements with location exclusivity for Property Partners across numerous transit/destination locations, including airports, car dealers, healthcare/medical, hotels, mixed-use, municipal locations, multifamily residential and condo, parks and recreation areas, parking lots, religious institutions, restaurants, retailers, schools and universities, stadiums, supermarkets, transportation hubs, and workplace locations. We have hundreds of Property Partners that include well-recognized companies, large municipalities, and local businesses. Some examples are Caltrans, Carl’s Jr., City of Azusa, City of Chula Vista, City of Springfield, City of Tucson, Cracker Barrel, Federal Realty, Fred Meyer Stores, Inc., Fry’s Food & Drug, Inc., Garage Management Company, Icon Parking, IKEA, iPark, JBG Associates, Kohls, Kroger Company, LAZ Parking, Macy’s, McDonald’s, Ralphs Grocery Company, Sears, Simon Properties, and SP+ Parking. We continue to establish new contracts with Property Partners that previously secured our services independently, or had contracts with the EV service providers that we acquired, including ECOtality, the former owner of the Blink related assets.

 

51

 

 

Flexible Business Model: We are able to offer and sell both EV charging equipment as well as access to our robust, cloud-based EV charging software, which we refer to as the Blink Network. We believe that we have an advantage in our ability to offer various business models to Property Partners and leverage our technology to meet the needs of both Property Partners and EV drivers.

 

Ownership and Control of EV Charging Stations and Services: We own a large percentage of our stations, which is a significant differentiation between us and some of our primary competitors. This ownership model allows us to control the settings and pricing for our EV charging services, service the equipment as necessary, and have greater brand management and price uniformity.

 

Experience with Products and Services of Other EV Charging Service Providers. From our early days and through our acquisitions, we have had the experience of owning and operating EV charging equipment provided by other EV charging service providers, including General Electric, ChargePoint, and SemaConnect. This experience has provided us with the working knowledge of the benefits and drawbacks of other equipment manufacturers and their applicable EV charging networks.

 

Our Strategy

 

Our objective is to continue to be a leading provider of EV charging solutions by deploying mass scale EV charging infrastructure, and by doing so, enable the accelerated growth of EV adoption and the EV industry. Key elements of our strategy include:

 

  Relentless Focus on Customer Satisfaction. Increase overall customer satisfaction with new and existing Property Partners and EV drivers by upgrading and expanding the EV charging footprint throughout high demand, high density geographic areas. In addition, improve productivity and utilization of existing EV charging stations, as well as to continue to enhance the valuable features of our EV charging station hardware and the Blink Network.
     
  Leverage Our Early Mover Advantage. We continue to leverage our large and defendable first mover advantage and the digital customer experience we have created for both drivers and Property Partners. We believe that there are tens of thousands of Blink driver registrants that appreciate the value of transacting charging sessions on a leading, established, and robust network experience. We have thousands of Blink chargers deployed across the United States and the tendency, among users, is to stay within one consistent network for expansion on any given property.
     
  Expand Sales and Marketing Resources. Our intention is to invest in sales and marketing infrastructure to capitalize on the growth in the market as well as to expand our go-to-market strategy. Today, we use a direct sales force and intend to continue to expand our efforts as well as invest in a wholesale channel go-to-market strategy that may include wholesale electrical distributors, independent sales agents, utilities, solar distributors, contractors, automotive manufacturers, and auto dealers.

 

52

 

 

  Continue to Invest in Technology Innovation. We will continue to enhance the product offerings available in our EV charging hardware, cloud-based software, and networking capability. This includes the design and launch of our next generation of EV charging solutions, including accelerating the charge currents currently available in EV charging hardware and new, robust Blink Network features in order to distance ourselves from the competition. Our key service solutions allow us to remain technology agnostic, and if market conditions shift, we have the option to leverage pure play hardware providers to augment our products.
     
  Properly Capitalize Our Business. We continue to pursue and welcome new potential capital sources to deliver on key operational objectives and the necessary resources to execute our overall strategy. The EV charger industry as a whole is undercapitalized to deliver the full potential of the expected EV market growth in the near future. We expect to retain our leadership position with new capital.

 

Sales

 

We currently maintain an in-house field sales force that maintains business relationships with our Property Partners and develops new sales opportunities through lead generation and marketing. We also sell our EV charging hardware, software services (connectivity to Blink Network), and service plans through reseller partners, which then sell these products and services to property representatives and/or hosts.

 

Marketing is performed by our in-house staff. To promote and sell our services to property owners and managers, parking companies, and EV drivers, we also utilize marketing and communication channels including press releases, email marketing, website (www.blinkcharging.com), Google AdWords, and social media. The information on our websites is not, and will not be deemed, a part of this prospectus or incorporated into any other filings we make with the SEC.

 

We continue to invest in the improvement of the service and maintenance of our Company-owned stations, as well as those stations with a service and maintenance plans, and expanding our cloud-based network capabilities. We anticipate continuing to expand our revenues by selling our next generation of EV charging equipment to current as well as new Property Partners, which includes 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, expanding our sales channels to wholesale distributors, utilities, auto original equipment manufacturers (“OEMs”), solar integrators, and dealers, which will include implementing EV charging station occupancy fees (after charging is completed, fees for remaining connected to the charging station beyond an allotted grace period), and subscription plans for EV drivers on our Blink-owned public charging locations.

 

Our revenues are primarily derived from fees charged to EV drivers for EV charging in public locations, EV charging hardware sales, and government grants. EV charging fees to EV drivers are based either on an hourly rate, a per kilowatt-hour (“kWh”) rate, or by session, and are calculated based on a variety of factors, including associated station costs and local electricity tariffs. EV charging hardware is sold to our Property Partners such as Green Commuter, IKEA, Nashville Music Center, and Wendy’s. In addition, other sources of fees from EV charging services are network fees and payment processing fees paid by our Property Partners.

 

53

 

 

Our Customers and Partners

 

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. We have hundreds of Property Partners that include well-recognized companies, large municipalities, and local businesses. Some examples are Caltrans, City of Azusa, City of Chula Vista, City of Springfield, City of Tucson, Cracker Barrel, Federal Realty, Fred Meyer Stores, Inc., Fry’s Food & Drug, Inc., IKEA, JBG Associates, LLC, Kroger Company and Ralphs Grocery Company. We continue to establish new contracts with Property Partners that previously secured our services independently, or had contracts with the EV services providers that we acquired, including ECOtality, the former owner of the Blink related assets.

 

Our revenues are primarily derived from EV charging hardware sales to our Property Partners, fees from public EV charging services to EV drivers, government grants, and marketing incentives. EV charging fees to EV drivers are based either on an hourly rate, a per kWh rate, or by session, and are calculated based on a variety of factors, including associated station costs and local electricity tariffs. In addition, other sources of fees from EV charging services are network fees and payment processing fees paid by our Property Partners.

 

We continue to invest in the improvement of the service and maintenance of our Company-owned stations, as well as those stations with a service and maintenance plans, and expanding our cloud-based network capabilities. We anticipate continuing to expand our revenues by selling our next generation of EV charging equipment, expanding our sales channels, and implementing EV charging station occupancy fees (after charging is completed, fees for remaining connected to the charging station beyond an allotted grace period), subscription plans for our Blink-owned public charging locations, and advertising fees.

 

Competition

 

The EV charging equipment and service market is highly competitive and we expect the market to become increasingly competitive as new entrants enter this growing market. Our products and services compete on the basis of product performance and features, total cost of ownership, sales capabilities, financial stability, brand recognition, product reliability and size of installed base. Our existing competition currently includes ChargePoint, which manufactures EV charging equipment and operates the ChargePoint Network; and EVgo, which offers home and public charging with pay-as-you-go and subscription models. There are other entrants into the connected EV charging station equipment market, such as General Electric, SemaCharge, EVConnect, and Greenlots. We believe these additional competitors struggle with gaining the necessary network traction but could gain momentum in the future. While Tesla does offer EV charging services, the connector type utilized currently restricts the chargers to Tesla vehicles. There are many other large and small EV charger companies that offer non-networked or “basic” chargers that have limited customer leverage, but could provide a low-cost solution for basic charger needs in commercial and home locations.

 

We believe we have competitive advantages over our competitors, such as our long-term contracts with property owners and managers, and our flexible business model where we are able to sell both EV charging stations as well provide access to a leading EV charging network. However, many of our current and expected future competitors have considerably greater financial and other resources than we do, and may leverage those resources to compete effectively.

 

54

 

 

Government Regulation and Incentives

 

State, regional, and local regulations for installation of EV charging stations vary from jurisdiction to jurisdiction and may include permitting requirements, inspection requirements, licensing of contractors, and certifications as examples. Compliance with such regulation(s) may cause installation delays.

 

Currently, we apply charging fees by the kWh for our services in states that permit this policy and hourly and by session for our services in states that do not permit per kWh pricing. California, Colorado, District of Columbia, Florida, Hawaii, Illinois, Maryland, Massachusetts, Minnesota, New York, Oregon, Pennsylvania, Utah, Virginia, and Washington have determined that companies that sell EV charging services to the public will not be regulated as utilities, therefore, allowing us to charge fees based on kW usage. These individual state determinations are not binding on any other regulator or jurisdiction; however, they demonstrate a trend in the way states view the industry. Other jurisdictions are in the process of adopting such reforms.

 

We intend to continue to vigorously seek additional grants, loans, rebates, subsidies, and incentives as a cost effective means of reducing our capital investment in the promotion, purchase, and installation of charging stations where applicable. We expect that these incentives, rebates, and tax credits will be critical to our future growth. Additionally, there are incentives that are currently offered to support electric car adoption at the federal, state, and local levels, including a $7,500 federal income tax credit, and rebates/credits in California, Colorado, Delaware, Louisiana, Massachusetts, New York, and Rhode Island.

 

CESQG

 

As a Conditionally Exempt Small Quantity Generator (“CESQG”), we generate a limited quantity of hazardous waste, mostly solvent contaminated wipes that are transported to the local solid waste facility. Scrapped electronic boards are transported to a local recycler. A CESQG of hazardous waste is a generator that:

 

  Produces no more than 100 kg (220lbs) of hazardous waste per month;
     
  Produces no more than 1 kg (2.2lbs) of acute hazardous waste per month;