Notes
to Unaudited Condensed Consolidated Financial Statements
(in
thousands, except for share and per share amounts)
1. BUSINESS ORGANIZATION, NATURE OF OPERATIONS, BASIS OF PRESENTATION AND RISKS AND UNCERTAINTIES
Organization
and Operations
Blink
Charging Co., through its wholly-owned subsidiaries (collectively, the “Company” or “Blink”), is a leading owner,
operator, and provider of electric vehicle (“EV”) charging equipment and networked EV charging services. Blink offers residential
and commercial EV charging equipment, enabling EV drivers to recharge at various location types. Blink’s principal line of products
and services is its Blink EV charging network (the “Blink Network”) and Blink EV charging equipment, also known as electric
vehicle supply equipment (“EVSE”) and other EV-related services. The Blink Network provides property owners, managers, parking
companies, and state and municipal entities (“Property Partners”) with cloud-based services that enable the remote monitoring
and management of EV charging stations. The Blink Network also provides EV drivers with vital station information, including station
location, availability and fees. Blink also operates a ride-sharing program through the Company’s wholly owned subsidiary, BlueLA
Rideshare, LLC and the City of Los Angeles which allows customers the ability to rent EVs through a subscription service.
Basis
of Presentation
The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form
10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for
complete financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring
items) which are considered necessary for a fair presentation of the condensed consolidated financial statements of the Company as of
June 30, 2022 and for the six months then ended. The results of operations for the three and six months ended June 30, 2022 are not necessarily
indicative of the operating results for the full year ending December 31, 2022 or any other period. These unaudited condensed consolidated
financial statements should be read in conjunction with the audited consolidated financial statements and related disclosures of the
Company as of December 31, 2021 and for the year then ended, which were filed with the Securities and Exchange Commission (“SEC”)
on March 16, 2022 as part of the Company’s Annual Report on Form 10-K.
Risks
and Uncertainties
The
Covid-19 pandemic has impacted global stock markets and economies. The Company closely monitors the impact of the continuing presence
of Covid-19 and multiple Covid-19 variants. The Company has taken and continues to take precautions to ensure the safety of its employees,
customers and business partners, while assuring business continuity and reliable service and support to its customers. The Company continues
to receive orders for its products, although some shipments of equipment have been temporarily delayed. The global chip shortage and
supply chain disruption has caused some delays in equipment orders from its contract manufacturer. As federal, state and local economies
begin to return to pre-pandemic levels, the Company expects demand for charging station usage to increase, however, the Company is unable
to predict the extent of such recovery due to the uncertainty of Covid-19. As a result, the Company is unable to predict the ultimate
impact of equipment order delays, chip shortage and continuous presence of Covid-19 will have on its business, future results of operations,
financial position, or cash flows.
BLINK
CHARGING CO. AND SUBSIDIARIES
Notes
to Unaudited Condensed Consolidated Financial Statements
(in
thousands, except for share and per share amounts)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Since
the Annual Report for the year ended December 31, 2021, there have been no material changes to the Company’s significant accounting
policies, except as disclosed in this note.
FOREIGN
CURRENCY TRANSLATION
The
Company’s reporting currency is the United States dollar. The functional currency of certain subsidiaries is the Euro and the Indian
Rupee. Assets and liabilities are translated based on the exchange rates at the balance sheet date (1.043 for the Euro, 0.0127 for the
Indian Rupee, and 1.214 for the Pound Sterling as of June 30, 2022), while expense accounts are translated at the weighted average exchange
rate for the period (1.0554 for the Euro, 0.0127 for the Indian Rupee, and 1.2281 for the Pound Sterling for the six months ended June
30, 2022). Equity accounts are translated at historical exchange rates. The resulting translation adjustments are recognized in stockholders’
equity as a component of accumulated other comprehensive income. Comprehensive income (loss) is defined as the change in equity of an
entity from all sources other than investments by owners or distributions to owners and includes foreign currency translation adjustments
as described above. Transaction gains and losses are charged to the statement of operations as incurred. Transaction losses attributable
to foreign exchange were $244 and $241 during the three and six months ended June 30, 2022, respectively. Transaction losses attributable
to foreign exchange were $108 during the three and six months ended June 30, 2021.
REVENUE
RECOGNITION
The
Company recognizes revenue primarily from five different types of contracts:
● |
Product
sales – Revenue is recognized at the point where the customer obtains control of the goods and the Company satisfies its performance obligation, which generally is at the time it ships the product to the customer or upon installation of chargers for which the Company is contracted to perform. |
● |
Charging
service revenue – company-owned charging stations - Revenue is recognized at the point when a particular charging session
is completed. |
● |
Network
fees and other – Represents a stand-ready obligation whereby the Company is obligated to perform over a period of time
and, as a result, revenue is recognized on a straight-line basis over the contract term. Network fees are billed annually. |
● |
Ride-sharing
services – Primarily related to ride-sharing services agreement with the City of Los Angeles which allows customers the
ability to rent electric vehicles through a subscription service. The Company recognizes revenue over the contractual period of performance
of the subscription. |
● |
Other
– Primarily related to charging service revenue from non-company-owned charging stations. Revenue is recognized from non-company-owned
charging stations at the point when a particular charging session is completed in accordance with a contractual relationship between
the Company and the owner of the station. Other revenues also comprises of revenues generated from alternative fuel credits. |
The
following table summarizes revenue recognized under ASC 606 in the condensed consolidated statements of operations:
SCHEDULE OF REVENUE RECOGNITION BY CONTRACT
| |
| | | |
| | | |
| | | |
| | |
| |
For
The Three Months Ended | | |
For
The Six Months Ended | |
| |
June
30, | | |
June
30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| |
| | |
| | |
| | |
| |
Revenues
- Recognized at a Point in Time: | |
| | | |
| | | |
| | | |
| | |
Product
sales | |
$ | 8,828 | | |
$ | 3,267 | | |
$ | 16,880 | | |
$ | 4,938 | |
Charging
service revenue - company-owned charging stations | |
| 1,494 | | |
| 586 | | |
| 2,601 | | |
| 768 | |
Other | |
| 189 | | |
| 114 | | |
| 288 | | |
| 175 | |
Total
Revenues - Recognized at a Point in Time | |
| 10,511 | | |
| 3,967 | | |
| 19,769 | | |
| 5,881 | |
| |
| | | |
| | | |
| | | |
| | |
Revenues
- Recognized Over a Period of Time: | |
| | | |
| | | |
| | | |
| | |
Ride-sharing
services | |
| 279 | | |
| 189 | | |
| 518 | | |
| 235 | |
Network
and other fees | |
| 571 | | |
| 125 | | |
| 799 | | |
| 247 | |
Total
Revenues - Recognized Over a Period of Time | |
| 850 | | |
| 314 | | |
| 1,317 | | |
| 482 | |
| |
| | | |
| | | |
| | | |
| | |
Total
Revenue | |
$ | 11,361 | | |
$ | 4,281 | | |
$ | 21,086 | | |
$ | 6,363 | |
BLINK
CHARGING CO. AND SUBSIDIARIES
Notes
to Unaudited Condensed Consolidated Financial Statements
(in
thousands, except for share and per share amounts)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
REVENUE
RECOGNITION – CONTINUED
The
following table summarizes our revenue recognized under ASC 606 in the condensed consolidated statements of operations by geographical
area:
SCHEDULE OF REVENUE RECOGNITION BY GEOGRAPHICAL AREA
| |
| | | |
| | | |
| | | |
| | |
| |
For
The Three Months Ended | | |
For
The Six Months Ended | |
| |
June
30, | | |
June
30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Revenues
by Geographical Area | |
| | | |
| | | |
| | | |
| | |
U.S.A | |
$ | 7,198 | | |
$ | 2,063 | | |
$ | 12,979 | | |
$ | 3,148 | |
International | |
| 4,163 | | |
| 2,218 | | |
| 8,107 | | |
| 3,215 | |
Total
Revenue | |
$ | 11,361 | | |
$ | 4,281 | | |
$ | 21,086 | | |
$ | 6,363 | |
The
timing of the Company’s revenue recognition may differ from the timing of payment by its customers. A receivable is recorded when
revenue is recognized prior to payment and the Company has an unconditional right to payment. Alternatively, when payment precedes the
provision of the related goods or services, the Company records deferred revenue until the performance obligations are satisfied.
As
of June 30, 2022, the Company had $12,030 related to contract liabilities where performance obligations have not yet been satisfied,
which has been included within deferred revenue on the condensed consolidated balance sheet as of June 30, 2022. The Company expects
to satisfy $7,794 of its remaining performance obligations for network fees, charging services, warranty revenue, product sales, and
other and recognize the revenue within the next twelve months.
During
the three and six months ended June 30, 2022, the Company recognized $310 and $491, respectively, of revenues related to network fees
and warranty contracts, which were included in deferred revenues as of December 31, 2021. During the six months ended June 30, 2022,
there was no revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods.
Grants and rebates which
are not within the scope of ASC 606, pertaining to revenues and periodic expenses are recognized as income when the related revenue and/or
periodic expense are recorded. Grants and rebates related to EV charging stations and their installation are deferred and amortized over
the shorter of the related depreciation expense of the related asset over their useful lives over the useful life of the charging station
or the contractual obligation of the grant. During the three months ended June 30, 2022 and 2021, the Company recognized $125 and $74,
respectively, related to grant and rebate revenue. During the six months ended June 30, 2022 and 2021, the Company recognized $200 and
$224, respectively, related to grant and rebate revenue. At June 30, 2022 and December 31, 2021, there was $3,225 and $70 of deferred
grant and rebate revenue to be amortized.
CONCENTRATIONS
As of December 31, 2021, accounts receivable
from a significant customer were approximately 18%
of total accounts receivable. During the three months ended June 30, 2022, revenues from one significant customer represented 10% of
total revenues. During the six months ended June 30, 2021, sales to a significant customer represented 12%
of total revenue. During the six months ended June
30, 2022, the Company made purchases from a significant supplier that represented 13% of total purchases.
BLINK
CHARGING CO. AND SUBSIDIARIES
Notes
to Unaudited Condensed Consolidated Financial Statements
(in
thousands, except for share and per share amounts)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
NET
LOSS PER COMMON SHARE
Basic
net loss per common share is computed by dividing net loss attributable to common shareholders by the weighted average number of common
shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss attributable to common shareholders
by the weighted average number of common shares outstanding, plus the number of additional common shares that would have been outstanding
if the common share equivalents had been issued (computed using the treasury stock or if converted method), if dilutive.
The
following common share equivalents are excluded from the calculation of weighted average common shares outstanding because their inclusion
would have been anti-dilutive:
SCHEDULE OF OUTSTANDING DILUTED SHARES EXCLUDED FROM DILUTED LOSS PER SHARE COMPUTATION
| |
| | | |
| | |
| |
For
the Three and Six Months Ended | |
| |
June
30, | |
| |
2022 | | |
2021 | |
Warrants | |
| 3,255,114 | | |
| 3,339,294 | |
Options | |
| 1,015,787 | | |
| 1,123,110 | |
Unvested
restricted common stock | |
| - | | |
| 48,819 | |
Total
potentially dilutive shares | |
| 4,270,901 | | |
| 4,511,223 | |
3.
OTHER ASSETS
On
April 19, 2022, the Company signed a non-binding letter of intent with a U.S. privately-held company (the “Target”) providing
for the possible purchase by the Company of all of the outstanding shares of the Target from its shareholders in consideration for cash,
a note and, under certain circumstances, shares of common stock of a subsidiary of the Company or, if such subsidiary’s shares
are not publicly-traded, common stock of the Company. In addition, in the letter of intent, the Company agreed to extend a loan of $1,250
to the Target (the “Loan”), in which $1,000 was loaned by the Company during second quarter of 2022 and $250 was loaned in July
2022 pursuant to a 6% Secured Convertible Promissory Note signed by the Target. Under the terms of the Loan, if the Company proceeds
with the possible stock purchase of the Target, the principal and accrued interest amount under the Loan will be deducted from the cash
consideration paid to the Target’s shareholders at closing. If, however, the Company determines not to proceed with the possible
stock purchase of the Target, the Loan will continue to accrue 6% interest per annum, and mature on the earliest of (i) a “Change
of Control” (as defined); (ii) the closing of the next investment round by the Target; (iii) an Event of Default (as defined);
or (iv) May 1, 2027.
4. BUSINESS COMBINATONS
ELECTRIC
BLUE LIMITED ACQUISITION
On
April 22, 2022, pursuant to a Sale and Purchase Agreement dated April 22, 2022, the Company acquired, through its Dutch subsidiary, Blink
Holdings B.V., all of the outstanding capital stock of Electric Blue Limited, a private company limited by shares and registered in England
and Wales (“EB”), from its shareholders. Headquartered in St. Albans, United Kingdom, EB is a leading, independently-owned
provider of electric vehicle charging and sustainable energy solutions and technologies. EB works with local authorities and businesses
to create the infrastructure the United Kingdom needs to meet the 2050 net zero emissions target and prepare for the 2030 ban on the
sale of new petrol and diesel cars and vans.
The fair value purchase price for the acquisition
of all of EB’s outstanding capital stock is $18,903, consisting of $12,651 in cash, and 152,803 of the Company’s common stock
(the “Consideration Shares”) with a fair value of $2,852.
In addition, provided EB reaches specified gross revenue
or new EV charger installation targets over the three years post-closing, the Company also agreed to issue up to approximately $6,400
in additional shares of its common stock to EB shareholders (the “Contingent Consideration”). The Contingent Consideration
was recorded at an estimated fair value of $3,400. As of June 30, 2022, the estimated fair value of the Contingent Consideration was $3,514.
The Company uses a probability-weighted discounted cash flow approach as a valuation technique to determine the fair value of the contingent
consideration liabilities on the acquisition date and at each reporting period. The significant unobservable inputs used in the fair value
measurements are projections over the earn-out period, and the probability outcome percentages that are assigned to each scenario. Significant
increases or decreases to either of these inputs in isolation could result in a significantly higher or lower liability with a higher
liability capped by the contractual maximum of the contingent consideration liabilities.
Of
the purchase price to be issued to the EB shareholders at closing, approximately $650
in cash and 25,466
shares of common stock are being held in escrow
accounts for periods of 12 months (cash escrow) and 18 months (stock escrow), respectively, following the closing to cover any losses
or damages we may incur by reason of, among other things, any misrepresentation or breach of warranty by EB under the Sale and Purchase
Agreement.
BLINK
CHARGING CO. AND SUBSIDIARIES
Notes
to Unaudited Condensed Consolidated Financial Statements
(in
thousands, except for share and per share amounts)
4. BUSINESS COMBINATONS – CONTINUED
ELECTRIC
BLUE LIMITED ACQUISITION - CONTINUED
The
Company engaged a third-party independent valuation specialist to assist in the determination of fair values of tangible and intangible
assets acquired and liabilities assumed for EB. The final determination of the fair value of assets and liabilities will be completed
within the one-year measurement period as required by ASC Topic 805. The EB acquisition will necessitate the use of this measurement
period to adequately analyze and assess the factors used in establishing the asset and liability fair values as of the acquisition date,
including intangible assets, accounts receivable and certain fixed assets.
The
following table summarizes the preliminary fair values of the assets acquired and liabilities assumed as of the acquisition date of EB:
SCHEDULE OF ASSETS ACQUIRED AND LIABILITIES ASSUMED
Preliminary
Purchase Price Allocation | |
| |
| |
| |
Purchase
Consideration: | |
| |
Cash | |
$ | 12,651 | |
Deferred cash consideration | |
| | |
Common
stock | |
| 2,852 | |
Contingent
consideration | |
| 3,400 | |
| |
| | |
Total
Purchase Consideration | |
$ | 18,903 | |
| |
| | |
Less: | |
| | |
Trade
name | |
| 486 | |
Customer
relationships | |
| 3,075 | |
Internally
developed technology | |
| 504 | |
Non-compete | |
| 1,908 | |
Property and equipment | |
| 4,162 | |
Other assets | |
| | |
Right-of-use asset | |
| | |
Lease liability, non-current portion | |
| | |
Non-current portion of deferred revenue | |
| (730 | ) |
Debt-free
net working capital deficit | |
| (1,047 | ) |
| |
| | |
Fair
Value of Identified Net Assets | |
| 8,358 | |
| |
| | |
Remaining
Unidentified Goodwill Value | |
$ | 10,545 | |
Changes
in the balance of identified intangible assets and goodwill reflected on the balance sheet are the result of the impact of the change
in foreign currency exchange rates.
BLINK
CHARGING CO. AND SUBSIDIARIES
Notes
to Unaudited Condensed Consolidated Financial Statements
(in
thousands, except for share and per share amounts)
4. BUSINESS COMBINATONS – CONTINUED
ELECTRIC
BLUE LIMITED ACQUISITION – CONTINUED
The
components of debt free net working capital deficit are as follows:
Goodwill
was recorded based on the amount by which the purchase price exceeded the fair value of the net assets acquired and the amount is attributable
to the reputation of the business acquired, the workforce in place and the synergies to be achieved from this acquisition. Goodwill of
$10,545 from the acquisition of EB is expected to be deductible for income tax purposes.
The
condensed consolidated financial statements of the Company include the results of operations of EB from April 22, 2022 to June 30, 2022
and do not include results of operations for periods prior to April 22, 2022. The results of operations of EB from April 22, 2022 to
June 30, 2022 included revenues of $1,362 and a net loss of $743.
The
following table presents the unaudited pro forma condensed consolidated results of operations for the three and six months ended June
30, 2022 and 2021 as if the acquisition of EB had occurred at the beginning of fiscal year 2021. The pro forma information provided below
is compiled from the pre-acquisition financial information of EB and includes pro forma adjustments for interest expense and adjustments
to certain expenses. The pro forma results are not necessarily indicative of (i) the results of operations that would have occurred had
the operations of this acquisition actually been acquired at the beginning of fiscal year 2021 or (ii) future results of operations
SCHEDULE OF PROFORMA INFORMATION OF OPERATIONS
| |
For
the Three Months Ended June 30, | | |
For
the Six Months Ended June 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| |
(Unaudited) | | |
(Unaudited) | | |
(Unaudited) | | |
(Unaudited) | |
Revenues | |
$ | 13,203 | | |
$ | 4,698 | | |
$ | 23,439 | | |
$ | 7,183 | |
Net
loss | |
$ | (23,591 | ) | |
$ | (14,373 | ) | |
$ | (39,542 | ) | |
$ | (22,946 | ) |
The
above pro forma information includes pro forma adjustments to remove the effect of merger expenses recognized in the results of operations
of the Company during the three and six months ended June 30, 2022 of $138 and $178, respectively.
As
of the date of the acquisition, the Company expected to collect all contractual cash flows related to receivables acquired in the acquisition.
Acquisition-related costs are expensed as incurred and are recorded within general and administrative expenses on the condensed consolidated
statements of operations.
See
Note 10 – Fair Value Measurement for additional information.
BLINK
CHARGING CO. AND SUBSIDIARIES
Notes
to Unaudited Condensed Consolidated Financial Statements
(in
thousands, except for share and per share amounts)
4. BUSINESS COMBINATONS – CONTINUED
SEMACONNECT
ACQUISITION
On
June 15, 2022, the Company completed the acquisition of SemaConnect, Inc., a Delaware corporation
(“SemaConnect”), pursuant to an Agreement and Plan of Merger, dated as of June 13, 2022 (“Acquisition Agreement”),
by and among the Company, Blink Sub I Corp., Blink Sub II LLC, SemaConnect and Shareholder Representative Services LLC (solely in its
capacity as the stockholders’ representative). Upon consummation of the acquisition, SemaConnect became a wholly owned subsidiary
of the Company. SemaConnect is a leading provider of EV charging infrastructure solutions in North America.
The aggregate fair value purchase price was $200,573,
which includes excess working capital of $1,229 and closing date cash of $3,639. The consideration paid in the acquisition consisted of:
(a) $86,736 in cash, (i) $46,136 of which was paid at the closing of the Acquisition Agreement (“Closing”) and (ii) the remaining
$40,600 is payable (bearing interest at 7%) until not earlier than nine months following the Closing and not later than three years following
the Closing; and (b) 7,454,975 shares of the Company’s common stock (the “Stock Payment”) with a fair value of $113,837.
Included in the cash consideration is $8,103 related to payments due to stock option holders of SemaConnect. Subsequent to the acquisition
date, payments to the stock option holder were made after the stock option holder signed an option cash-out agreement. As of June 30,
2022, there was an unpaid balance of $4,058 which is classified as restricted cash on condensed consolidated balance sheet as of June
30, 2022, all of which was paid during July 2022.
In
order to determine the estimated fair values of tangible and intangible assets acquired and liabilities assumed for SemaConnect, the
Company performed internal calculations and analysis based on information and resources available. The Company engaged a third-party
independent valuation specialist to assist in the determination of fair values which will become available during the third quarter of
2022. The final determination of the fair value of assets and liabilities will be completed within the one-year measurement period as
required by ASC Topic 805. The SemaConnect acquisition will necessitate the use of this measurement period to adequately analyze and
assess the factors used in establishing the asset and liability fair values as of the acquisition date, including intangible assets,
accounts receivable and certain fixed assets.
The
following table summarizes the preliminary fair values of the assets acquired and liabilities assumed as of the acquisition date of SemaConnect:
SCHEDULE OF ASSETS ACQUIRED AND LIABILITIES ASSUMED
Preliminary
Purchase Price Allocation | |
| | |
| |
| | |
Purchase
Consideration: | |
| | |
Cash | |
$ | 46,136 | |
Deferred cash consideration | |
| 40,600 | |
Common
stock | |
| 113,837 | |
| |
| | |
Total
Purchase Consideration | |
$ | 200,573 | |
| |
| | |
Less: | |
| | |
Trade
name | |
| 4,097 | |
Customer
relationships | |
| 40,973 | |
Internally
developed technology | |
| 2,049 | |
Non-compete | |
| 20,487 | |
Fixed
Assets | |
| 614 | |
Other
assets | |
| 449 | |
Right-of-use asset | |
| 1,092 | |
Lease liability, non-current portion | |
| (611 | ) |
Deferred revenue- non -current portion | |
| (702 | ) |
Debt-free
net working capital | |
| 4,558 | |
Fair
Value of Identified Net Assets | |
| 73,006 | |
| |
| | |
Remaining
Unidentified Goodwill Value | |
$ | 127,567 | |
BLINK
CHARGING CO. AND SUBSIDIARIES
Notes
to Unaudited Condensed Consolidated Financial Statements
(in
thousands, except for share and per share amounts)
4. BUSINESS COMBINATONS – CONTINUED
SEMACONNECT
ACQUISITION - CONTINUED
The
components of debt free net working capital are as follows:
Goodwill
was recorded based on the amount by which the purchase price exceeded the fair value of the net assets acquired and the amount is attributable
to the reputation of the business acquired, the workforce in place and the synergies to be achieved from this acquisition. Goodwill of
$127,567 from the acquisition of SemaConnect is not expected to be deductible for income tax purposes.
The
condensed consolidated financial statements of the Company include the results of operations of SemaConnect from June 15, 2022 to June
30, 2022 and do not include results of operations for periods prior to June 15, 2022. The results of operations of SemaConnect from June
15, 2022 to June 30, 2022 included revenues of $1,414 and a net loss of $194.
The
following table presents the unaudited pro forma consolidated results of operations for the three and six months ended June 30, 2022
and 2021 as if the acquisition of SemaConnect had occurred at the beginning of fiscal year 2021. The pro forma information provided below
is compiled from the pre-acquisition financial information of SemaConnect and includes pro forma adjustments for interest expense and
adjustments to certain expenses. The pro forma results are not necessarily indicative of (i) the results of operations that would have
occurred had the operations of this acquisition actually been acquired at the beginning of fiscal year 2021 or (ii) future results of
operations:
SCHEDULE OF PROFORMA INFORMATION OF OPERATIONS
| |
For
the Three Months Ended June 30, | | |
For
the Six Months Ended June 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| |
(Unaudited) | | |
(Unaudited) | | |
(Unaudited) | | |
(Unaudited) | |
Revenues | |
$ | 15,751 | | |
$ | 7,478 | | |
$ | 30,225 | | |
$ | 12,287 | |
Net
loss | |
$ | (26,844 | ) | |
$ | (14,575 | ) | |
$ | (45,552 | ) | |
$ | (23,150 | ) |
The
above pro forma information includes pro forma adjustments to remove the effect of merger expenses recognized in the results of operations
of the Company during the three and six months ended June 30, 2022 of $3,078 and $3,096, respectively.
As
of the date of the acquisition, the Company expected to collect all contractual cash flows related to receivables acquired in the acquisition.
Acquisition-related costs are expensed as incurred and are recorded within general and administrative expenses on the consolidated statements
of operations. Acquisition-related costs were $3,216 and $3,274 during the three and six months ended June 30, 2022, respectively.
BLINK
CHARGING CO. AND SUBSIDIARIES
Notes
to Unaudited Condensed Consolidated Financial Statements
(in
thousands, except for share and per share amounts)
5. INTANGIBLE ASSETS AND GOODWILL
Intangible
assets consist of the following:
SCHEDULE OF INTANGIBLE ASSETS
| |
| | | |
| | | |
|
| |
June
30, 2022 | | |
December
31,
2021 | | |
Useful
Lives |
Internal
use software | |
$ | 874 | | |
$ | 600 | | |
3 years |
Capitalized
engineering costs | |
| 237 | | |
| 237 | | |
Indefinite |
Trade
name | |
| 4,852 | | |
| 340 | | |
1.5 years |
Customer
relationships | |
| 45,810 | | |
| 1,677 | | |
5.6 years |
Favorable
leases | |
| 250 | | |
| 272 | | |
1.6 years |
Internally
developed technology | |
| 3,207 | | |
| 1,148 | | |
3 years |
Non-compete
agreements | |
| 22,425 | | |
| 139 | | |
2
years |
Intangible
assets, gross | |
| 77,655 | | |
| 4,413 | | |
|
Less:
accumulated amortization | |
| (2,243 | ) | |
| (958 | ) | |
|
Intangible
assets, net | |
$ | 75,412 | | |
$ | 3,455 | | |
|
The
following represents the change in goodwill during the six months ended June 30, 2022:
SCHEDULE OF GOODWILL
Beginning
balance - January 1, 2022 | |
$ | 19,390 | |
Acquisition
of Electric Blue | |
| 10,545 | |
Acquisition of SemaConnect | |
| 127,567 | |
Effect
of translation adjustments | |
| (1,410 | ) |
Ending
balance - June 30, 2022 | |
$ | |
Changes
in the balance of intangible assets and goodwill reflected on the balance sheet include the impact of the change in foreign currency
exchange rates. See Note 4 - Business Combinations for additional details.
6. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued
expenses consist of the following:
SCHEDULE OF ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
| |
| | | |
| | |
| |
June
30, 2022 | | |
December
31, 2021 | |
| |
| (unaudited) | | |
| | |
Accrued
host fees | |
$ | 130 | | |
$ | 130 | |
Accrued
professional, board and other fees | |
| 465 | | |
| 543 | |
Accrued
wages | |
| 3,943 | | |
| 2,678 | |
Accrued
commissions | |
| 606 | | |
| 144 | |
Warranty
payable | |
| 43 | | |
| 10 | |
Accrued
income, property and sales taxes payable | |
| 525 | | |
| 462 | |
Accrued
issuable equity | |
| 758 | | |
| 454 | |
Accrued
purchases | |
| 635 | | |
| 117 | |
Finance
lease payable | |
| 296 | | |
| - | |
Internal
use software liability | |
| 365 | | |
| 383 | |
Other
accrued expenses | |
| 1,187 | | |
| 757 | |
Total
accrued expenses | |
$ | 8,953 | | |
$ | 5,678 | |
BLINK
CHARGING CO. AND SUBSIDIARIES
Notes
to Unaudited Condensed Consolidated Financial Statements
(in
thousands, except for share and per share amounts)
7. STOCKHOLDERS’ EQUITY
COMMON
STOCK
During
the six months ended June 30, 2022, the Company issued an aggregate of 19,942 shares of common stock pursuant to exercises of warrants
to purchase an aggregate of 19,942 shares of common stock for aggregate net proceeds of $82.
During
the six months ended June 30, 2022, the Company issued an aggregate of 5,955 shares of common stock pursuant to exercises of warrants
to purchase an aggregate of 5,955 shares of common stock for aggregate net proceeds of $10.
During
the six months ended June 30, 2022, the Company issued an aggregate of 144,497 shares of common stock for services to employees and consultants
with an aggregate issuance date fair value of $331.
See
Note 4 – Business Combinations – Electric Blue Limited Acquisition and SemaConnect Acquisition for additional information
of common stock issued as partial consideration for acquisitions.
STOCK-BASED
COMPENSATION
The
Company recognized stock-based compensation expense related to common stock, stock options and warrants for the three and six months
ended June 30, 2022 of $1,027 and $2,989, respectively, which is included within compensation expense on the condensed consolidated statements
of operations. The Company recognized stock-based compensation expense related to common stock and stock options for the three and six
months ended June 30, 2021 of $3,670 and $4,084, respectively, As of June 30, 2022, there was $5,444 of unrecognized stock-based compensation
expense that will be recognized over the weighted average remaining vesting period of 2.81 years.
8. RELATED PARTY TRANSACTIONS
See
Note 11 – Commitments and Contingencies – Purchase Commitments for disclosure of a commitment made to a related party.
JOINT
VENTURE
The
Company and a group of three Cyprus entities entered into a shareholders’ agreement on February 11, 2019, pertaining to the parties’
respective shareholdings in a new joint venture entity, Blink Charging Europe Ltd. (the “Entity”), that was formed under
the laws of Cyprus on the same date. Subsequently, two of the three Cyprus entities exited from the Entity. Pursuant to the agreement,
the Company is not required to fund operating losses. The Company owns 40% of the Entity while another entity owns 60% of the Entity.
The Entity currently owns 100% of a Greek subsidiary, Blink Charging Hellas SA (“Hellas”), which started operations in the
Greek EV market. There are currently no plans for the Company to make any capital contributions or investments. During the three and
six months ended June 30, 2022, the Company recognized sales of $0 and $68, respectively, and $315
and $791 during the three and six months ended June 30, 2021, respectively, to Hellas. As of June 30, 2022 and December 31, 2021,
the Company had a receivable from Hellas of approximately $0 and $6, respectively. The Company determined that the Entity is a variable
interest entity, however, the Company does not have a controlling financial interest and, as a result, the Company is not required to
consolidate the Entity and instead has applied equity method accounting to its investment in the Entity. From inception through June
30, 2022, the Entity has not generated net income and, as a result, pursuant to ASC 323, the Company has not recorded a gain or loss
on its equity method investment in the Entity during the three and six months ended June 30, 2022 and 2021.
BLUE
CORNER
As
of June 30, 2022, three senior management employees at the recently acquired entity Blue Corner had an ownership interest in a major
supplier of charging equipment for Blue Corner. As of June 30, 2022 and December 31, 2021, the Company owed approximately $502 and $800
to this supplier, respectively. During the six months ended June 30, 2022, the Company purchased approximately $2,648 of inventory from
this supplier.
BLINK
CHARGING CO. AND SUBSIDIARIES
Notes
to Unaudited Condensed Consolidated Financial Statements
(in
thousands, except for share and per share amounts)
9. LEASES
As
of June 30, 2022, the Company had $860 of right of use assets that were classified as a financing leases for vehicles associated with
the operations of Blink Mobility are included as a component of property and equipment on the condensed consolidated balance sheet as
of June 30, 2022. The duration of the leases are three years and the Company is expected to pay approximately $1,020 throughout the term.
Total
operating lease expenses for the three and six months ended June 30, 2022 were $175 and $343, respectively, and for the three and six
months ended June 30, 2021 were $128 and $298, respectively, which were recorded in other operating expenses on the condensed consolidated
statements of operations.
During
the three and six months ended June 30, 2022, the Company recorded $14 of interest expense related to finance leases, which were recorded
within interest expense on the condensed consolidated statements of operations. During the three and six months ended June 30, 2022,
the Company recorded amortization expense of $181 related to finance leases. Finance lease liabilities are included within accrued expenses
and other liabilities on the condensed consolidated balance sheet as of June 30, 2022.
Supplemental
cash flows information related to leases was as follows:
SCHEDULE
OF SUPPLEMENTAL CASH FLOWS INFORMATION RELATED TO LEASES
| |
For
The Six Months Ended | |
| |
June
30, | |
| |
2022 | | |
2021 | |
Cash paid for amounts
included in the measurement of lease liabilities: | |
| | |
| |
| |
| | |
| |
Operating
cash flows from operating leases | |
$ | 146 | | |
$ | 274 | |
Financing
cash flows from finance leases | |
$ | 71 | | |
$ | - | |
| |
| | | |
| | |
Right-of-use
assets obtained in exchange for lease obligations: | |
| | | |
| | |
Operating
leases | |
$ | 258 | | |
$ | 1,358 | |
Finance
leases | |
$ | 931 | | |
$ | - | |
| |
| | | |
| | |
Weighted
Average Remaining Lease Term | |
| | | |
| | |
Operating
leases | |
| 3.53 | | |
| 5.79 | |
Finance
leases | |
| 2.75 | | |
| - | |
| |
| | | |
| | |
Weighted
Average Discount Rate | |
| | | |
| | |
Operating
leases | |
| 3.8 | % | |
| 4.9 | % |
Finance
leases | |
| 6.2 | % | |
| - | % |
BLINK
CHARGING CO. AND SUBSIDIARIES
Notes
to Unaudited Condensed Consolidated Financial Statements
(in
thousands, except for share and per share amounts)
9. LEASES – CONTINUED
Future
minimum payments under non-cancellable leases as of June 30, 2022 were as follows:
SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS
For
the Years Ending December 31, | | |
Operating
Lease | | |
Finance
Lease | |
2022 | | |
$ | 1,491 | | |
$ | 340 | |
2023 | | |
| 722 | | |
| 340 | |
2024 | | |
| 479 | | |
| 255 | |
2025 | | |
| 347 | | |
| - | |
2026 | | |
| 305 | | |
| - | |
Thereafter | | |
| 198 | | |
| - | |
Total
future minimum lease payments | | |
| 3,542 | | |
| 935 | |
Less:
imputed interest | | |
| (237 | ) | |
| (75 | ) |
Total | | |
$ | 3,305 | | |
$ | 860 | |
10. FAIR VALUE MEASUREMENT
Assets
and liabilities measured at fair value on a recurring or nonrecurring basis are as follows:
SUMMARY
OF ASSETS AND LIABILITIES MEASURED AT FAIR VALUE RECURRING AND NONRECURRING BASIS
| |
June
30, 2022 | |
| |
Level
1 | | |
Level
2 | | |
Level
3 | | |
Total | |
Assets: | |
| | |
| | |
| | |
| |
Alternative
fuel credits | |
$ | - | | |
$ | 39 | | |
$ | - | | |
$ | 39 | |
Total
assets | |
$ | - | | |
$ | 39 | | |
$ | - | | |
$ | 39 | |
| |
| | | |
| | | |
| | | |
| | |
Liabilities: | |
| | | |
| | | |
| | | |
| | |
Common
stock liability | |
$ | 710 | | |
$ | - | | |
$ | - | | |
$ | 710 | |
Contingent consideration | |
| - | | |
| - | | |
| 3,514 | | |
| 3,514 | |
Warrant
liability | |
| - | | |
| - | | |
| 47 | | |
| 47 | |
Total
liabilities | |
$ | 710 | | |
$ | - | | |
$ | 3,561 | | |
$ | 4,272 | |
| |
December
31, 2021 | |
| |
Level
1 | | |
Level
2 | | |
Level
3 | | |
Total | |
Assets: | |
| | | |
| | | |
| | | |
| | |
Alternative
fuel credits | |
$ | - | | |
$ | 58 | | |
$ | - | | |
$ | 58 | |
Total
assets | |
$ | - | | |
$ | 58 | | |
$ | - | | |
$ | 58 | |
| |
| | | |
| | | |
| | | |
| | |
Liabilities: | |
| | | |
| | | |
| | | |
| | |
Common
stock liability | |
$ | 364 | | |
$ | - | | |
$ | - | | |
$ | 364 | |
Warrant
liability | |
| - | | |
| - | | |
| 159 | | |
| 159 | |
Total
liabilities | |
$ | 364 | | |
$ | - | | |
$ | 159 | | |
$ | 523 | |
BLINK
CHARGING CO. AND SUBSIDIARIES
Notes
to Unaudited Condensed Consolidated Financial Statements
(in
thousands, except for share and per share amounts)
10. FAIR VALUE MEASUREMENT– CONTINUED
The
following table sets forth a summary of the changes in the fair value of Level 3 warrant liabilities that are measured at fair value
on a recurring basis:
SUMMARY
OF CHANGES IN FAIR VALUE OF LEVEL 3 WARRANT LIABILITIES MEASURED AT RECURRING BASIS
Contingent
Consideration | |
| |
Beginning balance
as of January 1, 2022 | |
$ |
- | |
Contingent
consideration assumed in Electric Blue acquisition | |
| 3,400 | |
Change
in fair value of contingent consideration | |
| 114 | |
Ending
balance as of June 30, 2022 | |
$ | 3,514 | |
Warrant
Liability | |
| | |
Beginning balance
as of January 1, 2022 | |
$ | 90 | |
Change
in fair value of warrant liability | |
| (43 | ) |
Ending
balance as of June 30, 2022 | |
$ | 47 | |
11. COMMITMENTS AND CONTINGENCIES
PURCHASE
COMMITMENTS
As
of June 30, 2022, the Company had purchase commitments of approximately $41,127 of which, approximately $10,772 is with a related party,
which will become payable upon the suppliers’ delivery of the charging stations and other related items. The purchase commitments
were made primarily for future sales, deployments of charging stations, inventory management planning and other related items, all of
which are expected to be received during the next 12-24 months.
LITIGATION
AND DISPUTES
On August 24, 2020, a purported securities class action lawsuit, captioned
Bush v. Blink Charging Co. et al., Case No. 20-cv-23527, was filed in the United States District Court for the Southern District of Florida
against the Company, Michael Farkas (Blink’s Chairman of the Board and Chief Executive Officer), and Michael Rama (Blink’s
Chief Financial Officer) (the “Bush Lawsuit”). On September 1, 2020, another purported securities class action lawsuit, captioned
Vittoria v. Blink Charging Co. et al., Case No. 20-cv-23643, was filed in the United States District Court for the Southern District of
Florida against the same defendants and seeking to recover the same alleged damages (the “Vittoria Lawsuit”). On October 1,
2020, the court consolidated the Vittoria Lawsuit with the Bush Lawsuit and on December 21, 2020 the court appointed Tianyou Wu, Alexander
Yu and H. Marc Joseph to serve as the Co-Lead Plaintiffs. The Co-Lead Plaintiffs filed an Amended Complaint on February 19, 2021. The
Amended Complaint alleges, among other things, that the defendants made false or misleading statements about the size and functionality
of the Blink Network, and asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The Amended Complaint
does not quantify damages but seeks to recover damages on behalf of investors who purchased or otherwise acquired Blink’s common
stock between March 6, 2020 and August 19, 2020. On April 20, 2021, Blink and the other defendants filed a motion to dismiss the Amended
Complaint, which has now been fully briefed and is ready for review. On April 7, 2022, the court held oral argument on the motion
to dismiss, but did not issue a decision. The Company wholly and completely disputes the allegations therein. The Company has retained
legal counsel in order to defend the action vigorously. The Company has not recorded an accrual related to this matter as of June 30,
2022 as it determined that any such loss contingency was either not probable or estimable.
BLINK
CHARGING CO. AND SUBSIDIARIES
Notes
to Unaudited Condensed Consolidated Financial Statements
(in
thousands, except for share and per share amounts)
11. COMMITMENTS AND CONTINGENCIES – CONTINUED
LITIGATION
AND DISPUTES – CONTINUED
On
September 15, 2020, a shareholder derivative lawsuit, captioned Klein (derivatively on behalf of Blink Charging Co.) v. Farkas et
al., Case No. 20- 19815CA01, was filed in Miami-Dade County Circuit Court seeking to pursue claims belonging to the Company against
Blink’s Board of Directors and Michael Rama (the “Klein Lawsuit”). Blink is named as a nominal defendant. The
Klein Lawsuit asserts that the Director defendants caused Blink to make the statements that are at issue in the securities class
action and, as a result, the Company will incur costs defending against the consolidated Bush Lawsuit and other unidentified
investigations. The Klein Lawsuit asserts claims against the Director defendants for breach of fiduciary duties and corporate waste
and against all of the defendants for unjust enrichment. Klein did not quantify the alleged damages in his complaint, but he seeks
damages sustained by the Company as a result of the defendants’ breaches of fiduciary duties, corporate governance changes,
restitution, and disgorgement of profits from the defendants and attorneys’ fees and other litigation expenses. The parties
agreed to temporarily stay the Klein Lawsuit until there is a ruling on the motion to dismiss filed in the consolidated Bush
Lawsuit. On June 17, 2022, the court substituted the executrix of Klein’s estate as the plaintiff. The Company has
not recorded an accrual related to this matter as of June 30, 2022 as it determined that any such loss contingency was either not
probable or estimable.
On
December 23, 2020, another shareholder derivative action, captioned Bhatia (derivatively on behalf of Blink Charging Co.) v. Farkas
et al., Case No. 20-27632CA01, was filed in Miami-Dade County Circuit Court against the same defendants sued in the Klein Lawsuit
and asserting similar claims, as well as additional claims relating to the Company’s nomination, appointment and hiring of
minorities and women and the Company’s decision to retain its outside auditor (the “Bhatia Lawsuit”). On February
17, 2021, the parties agreed to consolidate the Klein and Bhatia actions, which the court consolidated under the caption In re Blink
Charging Company Stockholder Derivative Litigation, Lead Case No. 2020-019815-CA-01. The parties also agreed to keep in place the
temporary stay. The court subsequently vacated the consolidation order and explained the parties should first file a motion to
transfer, which the parties have done. On June 22, 2022, the court re-consolidated the Klein and Bhatia actions and reinstated
the temporary stay. The Company wholly and completely disputes the allegations therein. The Company has retained legal counsel in
order to defend the action vigorously. The Company has not recorded an accrual related to this matter as of June 30, 2022 as it
determined that any such loss contingency was either not probable or estimable.
On
February 12, 2021, another shareholder derivative lawsuit, captioned Wolery (derivatively on behalf of Blink Charging Co.) v. Buffalino
et al., Case No. A-21-829395-C, was filed in the Eighth Judicial District Court in Clark County, Nevada seeking to pursue claims belonging
to the Company against Blink’s Board of Directors (the “Wolery Lawsuit”). Blink is named as a nominal defendant. The
Wolery complaint alleges that the amount of restricted stock awarded to Blink’s outside directors in December 2020 exceeded the
amounts permitted by Blink’s incentive compensation plan. The complaint asks the court to rescind the excess restricted stock awards,
as well as other relief. On September 15, 2021, the parties entered into a term sheet in which they agreed to settle the claims subject
to the court’s approval. On April 18, 2022, the court signed a final judgment approving the settlement and dismissing the lawsuit
with prejudice. As a result of the settlement, the Company has agreed to make certain changes to its compensation practices for its directors
and officers, including, among other things, eliminating the practice of making cash payments to directors to cover expected income taxes
on stock grants and placing a $200 annual limit for two years on the combined stock and cash Awards to outside directors. The defendants
did not admit any liability or wrongdoing in the settlement and will not make any cash payment as part of the settlement, but the Company
will be responsible for paying the costs to give notice of the settlement to the Company’s shareholders and to pay $190 in attorney’s
fees to the plaintiff’s counsel which was paid in April 2022.
On
February 7, 2022, another shareholder derivative lawsuit, captioned McCauley (derivatively on behalf of Blink Charging Co.) v. Farkas
et al., Case No. A-22-847894-C, was filed in the Eighth Judicial District Court in Clark County, Nevada, seeking to pursue claims belonging
to the Company against six of Blink’s directors and Michael Rama (the “McCauley Lawsuit”). Blink is named as a nominal
defendant. The complaint filed in the McCauley Lawsuit asserts similar allegations to the Klein Lawsuit relating to the statements at
issue in the securities class action and asserts claims for breach of fiduciary duty and unjust enrichment. The McCauley Lawsuit seeks
both injunctive and monetary relief from the individual defendants, as well as an award of attorneys’ fees and costs. On March
29, 2022, the Nevada court approved the parties’ stipulation to temporarily stay the McCauley Lawsuit until there is a ruling on
the motion to dismiss filed in the consolidated Bush Lawsuit. The Company has not recorded an accrual related to this matter as of June
30, 2022 as it determined that any such loss contingency was either not probable or estimable.
BLINK
CHARGING CO. AND SUBSIDIARIES
Notes
to Unaudited Condensed Consolidated Financial Statements
(in
thousands, except for share and per share amounts)
11. COMMITMENTS AND CONTINGENCIES – CONTINUED
WARRANTY
The
Company estimates an approximate cost of $368 to repair deployed chargers, which the Company owns as of June 30, 2022.
CHARGING
NETWORK UPGRADES
As
electric vehicle charging requirements and technologies change, driven by federal, state or local regulatory authorities or by electric
vehicle manufacturers or other technology or services providers for the charging station industry, in particular cellular connectivity
technology, the Company may need to upgrade or adapt its charging station products or introduce new products in order to serve new vehicles,
conform to new standards, or adapt new technologies to serve existing customers or new customers at substantial research, development,
and network upgrades costs. During 2021, many cellular technology providers announced they will require the upgrade from 2G/3G connectivity
to 4G LTE during 2022 (the “Upgrade”). As of June 30, 2022, the remaining cost for the Upgrade is approximately $1,200 for certain of the Company’s
owned and operated EV charging stations. During the six months ended June 30, 2022, the Company incurred $1,313 related to these upgrades.
EMPLOYMENT AGREEMENT
Mahi Reddy, is the Chief
Executive Officer of SemaConnect, LLC, a Blink Charging company, our wholly owned subsidiary (“SemaConnect”), which we formed
in connection with our recent acquisition of SemaConnect, Inc., as previously disclosed in our Current Report on Form 8-K filed with the
Securities and Exchange Commission (“SEC”) on June 14, 2022. Mr. Reddy founded SemaConnect, Inc. in October 2007 and served
as a director and its Chief Executive Officer until the closing of our acquisition of the company. Mr. Reddy co-founded CBay Systems Ltd.,
a healthcare business process outsourcing company, and served as its Chief Operating Officer and President from August 1998 to September
2008. Mr. Reddy received a B.A. degree from St. Joseph’s College in Bangalore, India.
In connection with the SemaConnect
acquisition, Mahi Reddy entered into an employment offer letter (the “Offer Letter”) on June 15, 2022 with our SemaConnect
subsidiary setting forth the terms of his employment and compensation. Mr. Reddy’s term of employment with SemaConnect is for one
year, and we have the right to either (i) renew his term of employment with SemaConnect for an additional one-year term or (ii) offer
him a new position as a service provider on terms to be negotiated at such time. In accordance with the Offer Letter, Mr. Reddy receives
a base salary of $31,250 per month ($375,000 annually) and is eligible to receive an annual bonus in an amount of up to 50% of his base
salary, to be paid based on achieving Key Performance Indicators (“KPIs”) to be established by SemaConnect in collaboration
with Mr. Reddy.
Mr. Reddy is also entitled
to receive equity awards in the form of restricted common stock of our company (“RCSs”) with an aggregate annual value of
up to 50% of his base salary, subject to adjustment from time to time, under our 2018 Incentive Compensation Plan (the “Plan”).
The RCSs would vest in equal one-third increments on each anniversary of the date of grant, provided that Mr. Reddy (i) is employed by
SemaConnect on each such date and (ii) satisfies the KPIs and other performance criteria established by the Plan.
Additionally, Mr. Reddy is entitled to certain severance benefits upon
the occurrence of one of the following events: (i) we do not elect to renew Mr. Reddy’s employment with SemaConnect or offer him
a position as a service provider (a “Non-renewal Trigger Event”) or (ii) SemaConnect terminates Mr. Reddy’s employment
without cause (a “Termination Trigger Event”). Upon a Non-renewal Trigger Event, Mr. Reddy is entitled to three months of
his base salary. Upon a Termination Trigger Event, Mr. Reddy is entitled to his base salary for an additional number of months equal to
the number of months he was employed with SemaConnect, not to exceed 12 months.
12.
SUBSEQUENT EVENTS
EQUITY
AWARDS
On
July 29, 2022, Michael D. Farkas, the Company’s Chairman and Chief Executive Officer, and other senior executives of the company
who are responsible for the acquisition and integration of SemaConnect, at the discretion of Mr. Farkas, were granted one-time performance-based
restricted stock awards under the Company’s 2018 Incentive Compensation Plan. A total number of 590,458 shares of common stock,
with a market value on the grant date of $12.5 million, were awarded to the executives. The agreements provide that Messrs. Farkas, Brendan
S. Jones, President, Michael P. Rama, Chief Financial Officer, Aviv Hillo, General Counsel, and Harjinder Bhade, Chief Technology Officer,
will each receive 472,367, 47,237, 23,618, 23,618 and 23,618 shares of common stock, respectively.
The awards of performance-based restricted stock are
intended to provide an appropriate incentive structure for the executive management team of our company to integrate and commercialize
the SemaConnect acquisition given the transformational nature of the acquisition in a way that is aligned with stockholder interests.
The awards of these performance-based restricted stock become vested based on a series of six performance hurdles that must be achieved
before the third anniversary of the grants, as described in greater detail below.
In addition to the closing of the SemaConnect acquisition
with certain cost savings as the initial 20% vesting event, the vesting of the remaining 80% of the restricted stock is generally determined
based on the (i) integration of SemaConnect’s hardware and software platforms, (ii) integration of its business processes, (iii)
integration of its human capital processes, (iv) delivery and execution of a product rationalization roadmap and new productionready units
for UL certification, and (v) our common stock’s closing price reaching on average for a period of ten consecutive trading days
a price of $23.78, which is 50% over the price paid by us to SemaConnect shareholders in the acquisition, in each case without regard
to the order of achieving the foregoing hurdles. The Board has discretion to determine when each performance hurdle has been achieved
and to accelerate awards pursuant to the program.