Blink Charging Co 8-K/A, filed Nov 25, 2020
Blink Charging Co. (BLNK)
About this 8-K/A
Blink Charging Co filed this 8-K/A on November 25, 2020, reporting on events of September 11, 2020.
Items reported
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): September 11, 2020 (November 25, 2020)
BLINK CHARGING CO.
(Exact Name of Registrant as Specified in Its Charter)
| Nevada | 001-38392 | 03-0608147 | ||
(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
| 407 Lincoln Road, Suite 704 | ||
| Miami Beach, FL | 33139 | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: (305) 521-0200
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| [ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
| [ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| [ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| [ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Exchange Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Common Stock | BLNK | The NASDAQ Stock Market LLC | ||
| Common Stock Purchase Warrants | BLNKW | The NASDAQ Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Explanatory Note
On September 17, 2020, Blink Charging Co. ( “Blink”) filed a current report on Form 8-K (the “Original Filing”) in connection with Blink’s September 11, 2020 acquisition of BlueLA Carsharing, LLC (“BlueLA”). This Current Report on Form 8-K/A (Amendment No. 1) amends and supplements the Original Filing to provide the required Item 9.01(a) Financial Statements of Businesses Acquired and the required Item 9.01(b) Pro Forma Financial Information for the acquisition of BlueLA. This Current Report on Form 8-K/A should be read in connection with the Original Filing, which provides a more complete description of the acquisition of BlueLA. Except as indicated above, all other information in the Original Filing remains unchanged.
Item 9.01 Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired.
The audited balance sheets of BlueLA as of December 31, 2019 and 2018, and the audited statements of income, accumulated deficit, and cash flows for the years ended December 31, 2019 and 2018, are filed as Exhibit 99.1 and incorporated herein by reference.
The unaudited balance sheet of BlueLA as of June 30, 2020 and 2019, and the unaudited statements of income, accumulated deficit, and cash flows for the six months ended June 30, 2020 and 2019, are filed as Exhibit 99.2 and incorporated herein by reference.
(b) Pro Forma Financial Information.
The unaudited pro forma condensed combined statements of operations of Blink and BlueLA for the six months ended June 30, 2020 and for the year ended December 31, 2019, are filed as Exhibit 99.3 and incorporated herein by reference.
(d) Exhibits.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: November 25, 2020
| BLINK CHARGING CO. | ||
| (Registrant) | ||
| By: | /s/ Michael P. Rama | |
| Name: | Michael P. Rama | |
| Title: | Chief Financial Officer | |
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated May 20, 2020, with respect to the financial statements of BlueLA Carsharing, LLC which are included in the Current Report on Form 8-K/A of Blink Charging Co. filed November 25, 2020. We consent to the incorporation by reference of said report in the Registration Statements of Blink Charging Co. on Form S-3 (File No. 333-233580).
/s/ Constantin Associates, LLP
New York, New York
November 25, 2020
Exhibit 99.1
BLUELA CARSHARING, LLC
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
BLUELA CARSHARING, LLC
INDEX TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
| -1- |
To the Board of Directors of
BlueLA Carsharing, LLC
Los Angeles, California
We have audited the accompanying financial statements of BlueLA Carsharing, LLC, which comprise the balance sheets as of December 31, 2019 and 2018, and the related statements of income, accumulated deficit, and cash flows for the years then ended, and the related notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our unmodified opinion on 2019 and our qualified audit opinion on 2018.
Basis for Qualified Opinion on the Results of Operations and Cash flows
Because it was an initial audit engagement and in accordance with the terms of our engagement, we have not applied audit procedures necessary to obtain sufficient appropriate audit evidence about the classifications and amounts comprising the balance sheet at December 31, 2017. At December 31, 2017, some aspects of the balance sheet, including classifications and amounts, materially affect the determination of the results of operations and cash flows for the year ended December 31, 2018.
Unmodified opinion on 2019 and qualified opinion on 2018
In our opinion, except for the possible effects on the 2018 financial statements of the matter discussed in the Basis for Qualified Opinion on the Results of Operations, Cash flows, and Consistency paragraph, the financial statements referred to in the first paragraph present fairly, in all material respects, the financial position of BlueLA Carsharing, LLC as of December 31, 2019 and 2018, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
Constantin Associates, LLP
New York, New York
May 20, 2020
| -2- |
BALANCE SHEETS
DECEMBER 31, 2019 AND 2018
ASSETS
| 2019 | 2018 | |||||||
| Current assets | ||||||||
| Cash and cash equivalents (Note 1) | $ | 488,613 | $ | 859,000 | ||||
| Accounts receivable - trade, net of an allowance of $197,219 and $60,646, respectively (Note 1) | 49,082 | 22,391 | ||||||
| Accounts receivable - related party (Note 2) | 26,356 | - | ||||||
| Other receivables | 14,440 | 11,967 | ||||||
| Grant to be received (Note 3) | 217,255 | 334,560 | ||||||
| Prepaid expenses | 4,016 | 119,024 | ||||||
Total current assets | 799,762 | 1,346,942 | ||||||
| Property and equipment, net of accumulated depreciation (Notes 1 and 4) | - | 3,106,784 | ||||||
| Other assets | ||||||||
| Intangible assets, net of accumulated amortization (Notes 1 and 5) | - | 521,404 | ||||||
| Security deposits | 73,357 | 34,560 | ||||||
| Total other assets | 73,357 | 555,964 | ||||||
Total assets | $ | 873,119 | $ | 5,009,690 | ||||
The accompanying notes are an integral part of these financial statements.
| -3- |
LIABILITIES AND STOCKHOLDER’S DEFICIT
| 2019 | 2018 | |||||||
| Current liabilities | ||||||||
| Accounts payable - trade | $ | 100,075 | $ | 93,736 | ||||
| Accounts payable - related party (Note 2) | 268,057 | 631,866 | ||||||
| Payroll and related accruals | 75,789 | 18,495 | ||||||
| Accrued expenses and other current liabilities (Note 1) | 212,954 | 124,452 | ||||||
| Accrued expenses - related party (Note 2) | 196,640 | 255,132 | ||||||
| Note payable - related party (Note 2) | 12,677,379 | 7,694,268 | ||||||
| Provision for risk (Note 6) | 754,659 | - | ||||||
| Total current liabilities | 14,285,553 | 8,817,949 | ||||||
| Long-term liabilities | ||||||||
| Deferred grant (Note 7) | - | 607,381 | ||||||
| Total long-term liabilities | - | 607,381 | ||||||
| Commitments and contingencies (Note 8) | ||||||||
| Stockholder’s deficit | ||||||||
| Common stock | 100 | 100 | ||||||
| Accumulated deficit (Note 10) | (13,412,534 | ) | (4,415,740 | ) | ||||
| Total stockholder’s deficit | (13,412,434 | ) | (4,415,640 | ) | ||||
| Total liabilities and stockholder’s deficit | $ | 873,119 | $ | 5,009,690 | ||||
| -4- |
STATEMENTS OF INCOME AND ACCUMULATED DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
| 2019 | 2018 | |||||||
| Revenue, net (Note 1) | $ | 577,712 | $ | 159,831 | ||||
| Cost of sales (Note 11 and Schedule I) | 622,260 | 290,475 | ||||||
| Gross profit | (44,548 | ) | (130,644 | ) | ||||
| Operating expenses (Note 11 and Schedule II) | 8,717,807 | 3,180,366 | ||||||
| Operating loss | (8,762,355 | ) | (3,311,010 | ) | ||||
| Other income (expenses) | ||||||||
| Interest expense, net | (322,407 | ) | (172,627 | ) | ||||
| Realized exchange gain (loss), net | 13,228 | (5,972 | ) | |||||
| Other income (Note 3) | 50,000 | 50,000 | ||||||
| Grant income (Note 7) | 27,540 | 712,883 | ||||||
| Total other income (expenses) | (231,639 | ) | 584,284 | |||||
| Loss before income taxes | (8,993,994 | ) | (2,726,726 | ) | ||||
| Provision for income taxes (Note 9) | 2,800 | 800 | ||||||
| Net loss | (8,996,794 | ) | (2,727,526 | ) | ||||
| Accumulated deficit - beginning of year | (4,415,740 | ) | (1,688,214 | ) | ||||
| Accumulated deficit - end of year (Note 10) | $ | (13,412,534 | ) | $ | (4,415,740 | ) | ||
The accompanying notes are an integral part of these financial statements.
| -5- |
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
2019 | 2018 | |||||||
| (Unaudited) | ||||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | (8,996,794 | ) | $ | (2,727,526 | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities | ||||||||
| Depreciation and amortization | 4,210,796 | 212,898 | ||||||
| Provision for bad debt | 136,573 | 60,646 | ||||||
| Provision for risk | 754,659 | - | ||||||
| (Increase) decrease in: | ||||||||
| Accounts receivable - trade | (163,264 | ) | 5,064 | |||||
| Accounts receivable - related party | (26,356 | ) | - | |||||
| Other receivables | (2,473 | ) | (7,242 | ) | ||||
| Grant to be received | 267,305 | (280,898 | ) | |||||
| Prepaid expenses | 115,008 | (87,724 | ) | |||||
| Security deposits | (38,797 | ) | (4,130 | ) | ||||
| Increase (decrease) in: | ||||||||
| Accounts payable - trade | 6,339 | (110,986 | ) | |||||
| Accounts payable - related party | (363,809 | ) | 631,866 | |||||
| Payroll and related accruals | 57,294 | 18,495 | ||||||
| Accrued expenses and other current liabilities | 88,502 | (94,017 | ) | |||||
| Accrued expenses - related party | (58,492 | ) | 255,132 | |||||
| Net cash used in operating activities | (4,013,509 | ) | (2,128,422 | ) | ||||
| Cash flows from investing activities | ||||||||
| Purchase of property and equipment | (1,539,989 | ) | (1,630,353 | ) | ||||
| Grant received | 200,000 | 643,710 | ||||||
| Net cash used in investing activities | $ | (1,339,989 | ) | $ | (986,643 | ) | ||
The accompanying notes are an integral part of these financial statements.
| -6- |
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(Continued)
| 2019 | 2018 | |||||||
| (Unaudited) | ||||||||
| Cash flows from financing activities | ||||||||
| Change in note payable - related party | $ | 4,983,111 | $ | 3,709,999 | ||||
| Net cash provided by financing activities | 4,983,111 | 3,709,999 | ||||||
| Net increase (decrease) in cash and cash equivalents | (370,387 | ) | 594,934 | |||||
| Cash and cash equivalents - beginning of year | 859,000 | 264,066 | ||||||
| Cash and cash equivalents - end of year | $ | 488,613 | $ | 859,000 | ||||
| Supplemental disclosures on cash flow information | ||||||||
| Interest paid during the year | $ | - | $ | - | ||||
| Income taxes paid during the year | $ | 2,000 | $ | 900 | ||||
The accompanying notes are an integral part of these financial statements.
| -7- |
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
| Note 1 | Summary of Significant Accounting Policies |
Organization
BlueLA Carsharing, LLC (“The Company”), a U.S. corporation, was organized in the State of California in February 2016. The Company is wholly owned by Blue Systems USA, Inc. The Company operates in Los Angeles, CA.
The Company was established to provide, manage, operate and maintain electric vehicle rental services and charging stations in the city of Los Angeles, CA. On April 2018, the car sharing program BlueLA was officially launched to the public with a limited number of vehicles and charging stations.
Basis of Accounting
The Company’s financial statements are prepared using the accrual basis of accounting.
Use of Accounting Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with a maturity of three months or less to be cash equivalents.
Concentration of Credit Risk
Financial instruments that potentially expose the Company to concentrations of credit risk, as defined by FASB, ASC 825-10-50, primarily consist of cash and cash equivalent accounts. The Company places its temporary cash investments with high credit quality financial institutions. Accounts are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per bank.
As of December 31, 2019 and 2018, cash and cash equivalents exceeding federally insured limits amounted to $262,323 and $646,011, respectively.
| -8- |
BLUELA CARSHARING, LLC
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(Continued)
| Note 1 | Summary of Significant Accounting Policies (Continued) |
Allowance for Doubtful Accounts
The allowance for doubtful accounts is based on management’s evaluation of the adequacy of the allowance for possible non recoverable accounts receivable. This evaluation encompasses consideration of past loss experiences and the composition of the outstanding accounts receivable. As of December 31, 2019 and 2018, the allowance for doubtful accounts amounted to $197,219 and $60,646, respectively.
Property and Equipment
Property and equipment are stated at cost. Maintenance and repairs are charged to expense as incurred. Costs of additions and betterment are capitalized.
Depreciation is computed using the straight-line method over the useful live of the assets or over the length of the lease for the assets acquired by leasing.
Long-Lived Assets
The Company has adopted FASB, ASC 360-10, “Accounting for the Impairment or Disposal of Long-Lived Assets”. Long-lived assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Revenue Recognition
Revenue from the sale of the Company’s services is recognized when services are delivered to customers.
Government Grant
Government grant is recognized when there is reasonable assurance that the Company will comply with any conditions attached to the grant and the grant will be received. The grant is recognized as income over the period necessary to match them with the related costs, for which they are intended to compensate, on a systematic basis. A grant receivable as compensation for costs already incurred or for immediate financial support, with no future related costs, is recognized as income in the period in which it is receivable.
A grant relating to assets is presented as deferred income and deducted from the related expenses.
| -9- |
BLUELA CARSHARING, LLC
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(Continued)
| Note 1 | Summary of Significant Accounting Policies (Continued) |
Income Taxes
The Company accounts for income taxes under the liability method as required by FASB ASC 740-10-25. Under this method deferred tax assets and liabilities are recognized for the future consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carry-forwards.
Deferred taxes are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
Valuation reserves have been established for deferred assets that may not be utilized in the near future.
| Note 2 | Related Party Transactions |
Transactions between the Company, its parent and its affiliates as of December 31, 2019 and 2018 consisted of the following:
| 2019 | 2018 | |||||||
| Accounts receivable - related party | ||||||||
| BlueIndy | $ | 26,356 | $ | - | ||||
| Total accounts receivable - related party | $ | 26,356 | $ | - | ||||
| Accounts payable - related party | ||||||||
| SDV Cartrading | $ | 214,010 | $ | 127,856 | ||||
| BlueIndy | 35,898 | 1,960 | ||||||
| IER S.A. | 8,957 | 132,233 | ||||||
| Polyconseil | 3,314 | 54,466 | ||||||
| BlueCarsharing SAS | 2,636 | 301,685 | ||||||
| Other | 3,242 | 13,666 | ||||||
| Total accounts payable - related party | $ | 268,057 | $ | 631,866 | ||||
| -10- |
BLUELA CARSHARING, LLC
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(Continued)
| Note 2 | Related Party Transactions (Continued) |
| 2019 | 2018 | |||||||
| Accrued expenses - related party | ||||||||
| BlueCarsharing SAS | $ | 106,413 | $ | 129,631 | ||||
| SDV Cartrading | 40,000 | 47,000 | ||||||
| BlueIndy | 26,929 | 34,498 | ||||||
| Wifirst | 23,298 | 36,980 | ||||||
| Polyconseil | - | 7,023 | ||||||
| Total accrued expenses - related party | $ | 196,640 | $ | 255,132 | ||||
| Note payable - related party | ||||||||
| BlueCarsharing SAS | $ | 12,677,379 | $ | 7,694,268 | ||||
| Total note payable - related party | $ | 12,677,379 | $ | 7,694,268 | ||||
| Note 3 | Government Grant |
Starting April 2018, the Company received grants from the city of Los Angeles in connection with the agreement with the city of Los Angeles for Electric Vehicle Car Sharing dated January 17, 2017.
As per agreement, the Company shall receive $4,000 from the City of Los Angeles for each charging point put in service and operated in the City of Los Angeles, CA. The amount has been increased to $5,000 for each charging point.
Grants claimed for the years ended December 31, 2019 and 2018, amounted to $350,000 and $697,372, respectively. Furthermore, the Company shall receive grant for marketing costs, permits and parking costs.
As of December 31, 2019 and 2018, the grant to be received is made of the following :
| 2019 | 2018 | |||||||
| Grant to be received related to investment | $ | 217,255 | $ | 53,662 | ||||
| Grant to be received related to operations | - | 280,898 | ||||||
| Total grant to be received | $ | 217,255 | $ | 334,560 | ||||
| -11- |
BLUELA CARSHARING, LLC
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(Continued)
| Note 4 | Property and Equipment |
As of December 31, 2019 and 2018, property and equipment consisted of:
| Description | 2019 | 2018 | Estimated useful life | |||||||
| Machinery and equipment | $ | 3,736,068 | $ | 1,979,562 | 3 - 10 years | |||||
| Tangible assets in progress | 821,666 | 1,231,383 | ||||||||
| Total property and equipment | 4,557,734 | 3,210,945 | ||||||||
| Less accumulated depreciation | (4,557,734 | ) | (104,161 | ) | ||||||
| Property and equipment, net | $ | - | $ | 3,106,784 | ||||||
Depreciation expense for the years ended December 31, 2019 and 2018 amounted to $4,453,573 and $104,161, respectively.
Depreciation expense for the year 2019 includes an impairment charge of $4,155,854.
| Note 5 | Intangible assets |
As of December 31, 2019 and 2018, intangible assets are made of:
| Description | 2019 | 2018 | Estimated useful life | |||||||
| Licenses | $ | 876,739 | $ | 629,123 | 3 years | |||||
| Intangible assets in progress | 36,593 | 91,009 | ||||||||
| Total intangible assets | 913,332 | 720,132 | ||||||||
| Less accumulated amortization | (913,332 | ) | (198,728 | ) | ||||||
| Intangible assets, net | $ | - | $ | 521,404 | ||||||
Amortization expense for the years ended December 31, 2019 and 2018 amounted to $714,604 and $198,728, respectively.
Amortization expense for the year 2019 includes an impairment charge of $459,323.
| -12- |
BLUELA CARSHARING, LLC
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(Continued)
| Note 6 | Provision for risk |
A provision for risk has been recorded for $754,659 for risk associated with performance of Company contracts.
| Note 7 | Deferred Grant |
The grant related to the acquisitions of charging points and start-up costs were recorded in deferred income and depreciated over their useful life (10 years and 3 years, respectively). As of December 31, 2019 and 2018, the deferred grant is as follows :
| 2019 | 2018 | |||||||
| Grant related to investment | $ | - | $ | 697,372 | ||||
| Accumulated depreciation | - | (89,991 | ) | |||||
| Total deferred grant | $ | - | $ | 607,381 | ||||
In 2019, with the impairment of the tangible and intangible assets, the Company decided to reverse the deferred grant and record in income the remaining balance for an amount of $790,974.
| Note 8 | Commitments and Contingencies |
In 2017, the Company entered into three membership agreements for office premises located downtown Los Angeles. In April 2018, the Company entered into a fourth membership agreement for an additional office. In September 2018, all agreements were amended into one new membership agreement and extended for 6 months until February 2019. The agreement was renewed until August 2020 and requires monthly payments amounting from $5,876 to $8,326.
Future minimum rental payments under the membership agreement are as follows:
| Year ending December 31, | Amount | |||
| 2020 | $ | 61,708 | ||
| Total | $ | 61,708 | ||
For the years ended December 31, 2019 and 2018, the rent expenses related to the membership agreement were $101,114 and $85,470, respectively.
| -13- |
BLUELA CARSHARING, LLC
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(Continued)
| Note 9 | Income Taxes |
For the years ended December 31, 2019 and 2018, the provision for income taxes is made of the following:
| 2019 | 2018 | |||||||
| Current income tax expense | ||||||||
| Federal | $ | - | $ | - | ||||
| States and city | 2,800 | 800 | ||||||
| Total current income tax expense | 2,800 | 800 | ||||||
| Deferred income tax expense | - | - | ||||||
| Provision for income taxes | $ | 2,800 | $ | 800 | ||||
| Note 10 | Going Concern |
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the financial statements, the Company has incurred recurring losses, which led to a stockholders’ deficit of $13,412,434 as of December 31, 2019. The parent Company, BlueCarsharing SAS, confirmed in a letter dated June 20, 2019 the financial support of its subsidiary for the next four years.
The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
| Note 11 | Reclassifications |
Reclassifications have been made to the 2018 financial statements to conform with the 2019 presentation.
| Note 12 | Subsequent Events |
The Company has evaluated events and transactions occurring after December 31, 2019 through May 20, 2020, and as a result of the spread of Covid19 coronavirus, economic uncertainties have arisen which are likely to negatively impact the operating results of the Company. However, the related financial statements impact and duration cannot be reasonably estimated at this time.
| -14- |
SUPPLEMENTARY INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
| -15- |
INDEPENDENT AUDITOR’S REPORT ON SUPPLEMENTARY INFORMATION
To the Board of Directors of
BlueLA Carsharing, LLC
Los Angeles, California
We have audited the financial statements of BlueLA Carsharing, LLC as of and for the years ended December 31, 2019 and 2018, and our report thereon dated May 20, 2020, which expressed an unmodified opinion on the balance sheet and qualified opinion on the results of operations and cash flows, appears on pages 2 and 3. Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The schedules of cost of sales and of operating expenses, pages 16 and 17, are presented for purpose of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
Constantin Associates, LLP
New York, New York
May 20, 2020
| -16- |
STATEMENTS OF COST OF SALES
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
SCHEDULE I
| 2019 | 2018 | |||||||
| Car rentals | $ | 583,197 | $ | 253,000 | ||||
| Car documentation | 39,063 | 37,475 | ||||||
| Total cost of sales | $ | 622,260 | $ | 290,475 | ||||
| -17- |
STATEMENTS OF OPERATING EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
SCHEDULE II
| 2019 | 2018 | |||||||
| Depreciation and amortization expenses | $ | 4,210,796 | $ | 212,898 | ||||
| Salaries and bonuses | 1,084,453 | 818,674 | ||||||
| Provision for risk | 754,659 | - | ||||||
| Repair and maintenance | 622,230 | 252,468 | ||||||
| Insurance | 281,492 | 122,282 | ||||||
| Advertising and marketing | 262,655 | 392,813 | ||||||
| Outsourced services | 248,068 | 141,266 | ||||||
| Payroll taxes and benefits | 238,655 | 155,256 | ||||||
| Professional fees | 222,374 | 419,460 | ||||||
| Temporary help | 178,552 | 237,709 | ||||||
| Electricity at stations | 150,137 | 37,543 | ||||||
| Bad debt expense | 136,573 | 60,646 | ||||||
| Rent | 134,277 | 105,525 | ||||||
| Station internet connectivity | 130,672 | 69,995 | ||||||
| Travel, meals and entertainment | 72,952 | 74,851 | ||||||
| Bank charges and payment processing fees | 57,491 | 23,256 | ||||||
| Miscellaneous expenses | 43,040 | 7,945 | ||||||
| Freight | 26,184 | 29,439 | ||||||
| Office supplies | 19,943 | 43,859 | ||||||
| Rebilling of expenses | (157,396 | ) | (25,519 | ) | ||||
| Total operating expenses | $ | 8,717,807 | $ | 3,180,366 | ||||
| -18- |
Exhibit 99.2
BLUELA CARSHARING, LLC
FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019
BLUELA CARSHARING, LLC
INDEX TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019
| Page | |
| Financial Statements | |
| Balance Sheets | 2 |
| Statements of Income and Accumulated Deficit | 4 |
| Statements of Cash Flows | 5 - 6 |
| Notes to Financial Statements | 7 - 14 |
| -1- |
BALANCE SHEETS
JUNE 30, 2020 AND 2019
ASSETS
| 2020 | 2019 | |||||||
| Current assets | ||||||||
| Cash and cash equivalents (Note 1) | $ | 191,015 | $ | 416,214 | ||||
| Accounts receivable - trade, net of an allowance of $257,986 and $117,065, respectively (Note 1) | 30,264 | 29,390 | ||||||
| Accounts receivable - related party (Notes 2 and 11) | 36,428 | 22,465 | ||||||
| Other receivables | 18,589 | 12,463 | ||||||
| Grant to be received (Note 3) | 217,255 | 283,738 | ||||||
| Prepaid expenses | 3,500 | 22,169 | ||||||
| Total current assets | 497,051 | 786,439 | ||||||
| Property and equipment, net of accumulated depreciation (Notes 1 and 4) | - | 3,842,091 | ||||||
| Other assets | ||||||||
| Intangible assets, net of accumulated amortization (Notes 1 and 5) | - | 598,399 | ||||||
| Security deposits | 71,662 | 68,357 | ||||||
| Total other assets | 71,662 | 666,756 | ||||||
| Total assets | $ | 568,713 | $ | 5,295,286 | ||||
Unaudited - See accompanying notes to the financial statements
| -2- |
LIABILITIES AND STOCKHOLDER’S DEFICIT
| 2020 | 2019 | |||||||
| Current liabilities | ||||||||
| Accounts payable - trade | $ | 56,165 | $ | 264,384 | ||||
| Accounts payable - related party (Notes 2 and 11) | 301,058 | 549,791 | ||||||
| Payroll and related accruals | 47,899 | 18,341 | ||||||
| Accrued expenses and other current liabilities (Note 1) | 197,436 | 175,498 | ||||||
| Accrued expenses - related party (Notes 2 and 11) | 242,865 | 364,029 | ||||||
| Note payable - related party (Notes 2 and 11) | 14,710,194 | 9,826,530 | ||||||
| Total current liabilities | 15,555,617 | 11,198,573 | ||||||
| Long-term liabilities | ||||||||
| Deferred grant (Note 7) | - | 728,136 | ||||||
| Total long-term liabilities | - | 728,136 | ||||||
| Commitments and contingencies (Note 8) | ||||||||
| Stockholder’s deficit | ||||||||
| Common stock | 100 | 100 | ||||||
| Accumulated deficit | (14,987,004 | ) | (6,631,523 | ) | ||||
| Total stockholder’s deficit (Notes 10 and 11) | (14,986,904 | ) | (6,631,423 | ) | ||||
| Total liabilities and stockholder’s deficit | $ | 568,713 | $ | 5,295,286 | ||||
| -3- |
STATEMENTS OF INCOME AND ACCUMULATED DEFICIT
FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019
| 2020 | 2019 | |||||||
| Revenue, net (Note 1) | $ | 182,366 | $ | 247,817 | ||||
| Cost of sales | 329,517 | 293,489 | ||||||
| Gross loss | (147,151 | ) | (45,672 | ) | ||||
| Depreciation and amortization expenses (Notes 4 and 5) | 664,956 | 257,538 | ||||||
| Reversal of provision for risk (Note 6) | (754,659 | ) | - | |||||
| Other operating expenses | 1,393,133 | 1,767,038 | ||||||
| Operating loss | (1,450,581 | ) | (2,070,248 | ) | ||||
| Other income (expenses) | ||||||||
| Interest expense, net | (129,824 | ) | (149,898 | ) | ||||
| Realized exchange gain, net | 335 | 7,163 | ||||||
| Grant income (Note 7) | 5,600 | - | ||||||
| Total other expenses | (123,889 | ) | (142,735 | ) | ||||
| Loss before income taxes | (1,574,470 | ) | (2,212,983 | ) | ||||
| Provision for income taxes (Note 9) | - | 2,800 | ||||||
| Net loss | (1,574,470 | ) | (2,215,783 | ) | ||||
| Accumulated deficit - beginning of period | (13,412,534 | ) | (4,415,740 | ) | ||||
| Accumulated deficit - end of period | $ | (14,987,004 | ) | $ | (6,631,523 | ) | ||
Unaudited - See accompanying notes to the financial statements
| -4- |
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019
| 2020 | 2019 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | (1,574,470 | ) | $ | (2,215,783 | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities | ||||||||
| Depreciation and amortization | 664,956 | 257,538 | ||||||
| Deferred grant | (72,810 | ) | (79,245 | ) | ||||
| Provision for bad debt | 60,767 | 56,419 | ||||||
| Provision for risk | (754,659 | ) | - | |||||
| (Increase) decrease in: | ||||||||
| Accounts receivable - trade | (41,949 | ) | (63,418 | ) | ||||
| Accounts receivable - related party | (10,072 | ) | (22,465 | ) | ||||
| Other receivables | (4,149 | ) | (496 | ) | ||||
| Grant to be received | - | 50,822 | ||||||
| Prepaid expenses | 516 | 96,855 | ||||||
| Security deposits | 1,695 | (33,797 | ) | |||||
| Increase (decrease) in: | ||||||||
| Accounts payable - trade | (43,910 | ) | 170,648 | |||||
| Accounts payable - related party | 33,001 | (82,075 | ) | |||||
| Payroll and related accruals | (27,890 | ) | (154 | ) | ||||
| Accrued expenses and other current liabilities | (15,518 | ) | 51,046 | |||||
| Accrued expenses - related party | 46,225 | 108,897 | ||||||
| Net cash used in operating activities | (1,738,267 | ) | (1,705,208 | ) | ||||
| Cash flows from investing activities | ||||||||
| Purchase of property and equipment | (664,956 | ) | (1,069,840 | ) | ||||
| Grant received | 72,810 | 200,000 | ||||||
| Net cash used in investing activities | $ | (592,146 | ) | $ | (869,840 | ) | ||
Unaudited - See accompanying notes to the financial statements
| -5- |
BLUELA CARSHARING, LLC
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019
(Continued)
| 2020 | 2019 | |||||||
| Cash flows from financing activities | ||||||||
| Change in note payable - related party | $ | 2,032,815 | $ | 2,132,262 | ||||
| Net cash provided by financing activities | 2,032,815 | 2,132,262 | ||||||
| Net decrease in cash and cash equivalents | (297,598 | ) | (442,786 | ) | ||||
| Cash and cash equivalents - beginning of the half-year | 488,613 | 859,000 | ||||||
| Cash and cash equivalents - end of the half-year | $ | 191,015 | $ | 416,214 | ||||
| Supplemental disclosures on cash flow information | ||||||||
| Interest paid during the period | $ | - | $ | - | ||||
| Income taxes paid during the period | $ | - | $ | 2,000 | ||||
Unaudited - See accompanying notes to the financial statements
| -6- |
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019
| Note 1 | Summary of Significant Accounting Policies |
Organization
BlueLA Carsharing, LLC (“The Company”), a U.S. corporation, was organized in the State of California in February 2016. The Company is wholly owned by Blue Systems USA, Inc. The Company operates in Los Angeles, CA.
The Company was established to provide, manage, operate and maintain electric vehicle rental services and charging stations in the city of Los Angeles, CA. In April 2018, the car sharing program BlueLA was officially launched to the public with a limited number of vehicles and charging stations.
Basis of Accounting
The Company’s financial statements are prepared using the accrual basis of accounting.
Use of Accounting Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with a maturity of three months or less to be cash equivalents.
| -7- |
BLUELA CARSHARING, LLC
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019
(Continued)
| Note 1 | Summary of Significant Accounting Policies (Continued) |
Concentration of Credit Risk
Financial instruments that potentially expose the Company to concentrations of credit risk, as defined by FASB, ASC 825-10-50, primarily consist of cash and cash equivalent accounts. The Company places its temporary cash investments with high credit quality financial institutions. Accounts are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per bank.
As of June 30, 2020 and 2019, cash and cash equivalents exceeding federally insured limits amounted to $0 and $180,584, respectively.
Allowance for Doubtful Accounts
The allowance for doubtful accounts is based on management’s evaluation of the adequacy of the allowance for possible non recoverable accounts receivable. This evaluation encompasses consideration of past loss experiences and the composition of the outstanding accounts receivable. As of June 30, 2020 and 2019, the allowance for doubtful accounts amounted to $257,986 and $117,065, respectively.
Property and Equipment
Property and equipment are stated at cost. Maintenance and repairs are charged to expense as incurred. Costs of additions and betterment are capitalized.
Depreciation is computed using the straight-line method over the useful live of the assets or over the length of the lease for the assets acquired by leasing.
Long-Lived Assets
The Company has adopted FASB, ASC 360-10, “Accounting for the Impairment or Disposal of Long-Lived Assets”. Long-lived assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Revenue Recognition
Revenue from the sale of the Company’s services is recognized when services are delivered to customers.
| -8- |
BLUELA CARSHARING, LLC
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019
(Continued)
| Note 1 | Summary of Significant Accounting Policies (Continued) |
Government Grant
Government grant is recognized when there is reasonable assurance that the Company will comply with any conditions attached to the grant and the grant will be received.
The grant is recognized as income over the period commensurate with the related costs for which they are intended to reimburse.
A grant receivable as compensation for costs already incurred or for immediate financial support, with no future related costs, is recognized as income in the period in which it is receivable.
A grant relating to assets is presented as deferred income and deducted from the related expenses.
Income Taxes
The Company accounts for income taxes under the liability method as required by FASB ASC 740-10-25. Under this method deferred tax assets and liabilities are recognized for the future consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carry-forwards.
Deferred taxes are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
Valuation reserves have been established for deferred assets that may not be utilized in the near future.
| Note 2 | Related Party Transactions |
Transactions between the Company, its parent and its affiliates as of June 30, 2020 and 2019 consisted of the following:
| 2020 | 2019 | |||||||
| Accounts receivable - related party | ||||||||
| Blue Systems USA | $ | 36,428 | $ | 1,600 | ||||
| BlueIndy | - | 20,865 | ||||||
| Total accounts receivable - related party | $ | 36,428 | $ | 22,465 | ||||
| -9- |
BLUELA CARSHARING, LLC
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019
(Continued)
| Note 2 | Related Party Transactions (Continued) |
| 2020 | 2019 | |||||||
| Accounts payable - related party | ||||||||
| SDV Cartrading (Car rental) | $ | 135,692 | $ | 139,837 | ||||
| BlueCarsharing SAS (Technical assistance) | 99,414 | 252,629 | ||||||
| BlueIndy (IT and Customer service assistance) | 41,210 | 80,691 | ||||||
| Blue Systems USA (Access to datacenter server) | 11,737 | 21,540 | ||||||
| Polyconseil | 6,529 | 19,875 | ||||||
| IER S.A. | 3,822 | 24,438 | ||||||
| Blue Solutions Canada | 2,654 | 2,776 | ||||||
| IER Inc. | - | 4,949 | ||||||
| Wifirst | - | 2,447 | ||||||
| Blue LA | - | 609 | ||||||
| Total accounts payable - related party | $ | 301,058 | $ | 549,791 | ||||
| Accrued expenses - related party | ||||||||
| SDV Cartrading | $ | 109,046 | $ | 98,940 | ||||
| BlueCarsharing SAS | 104,849 | 259,589 | ||||||
| BlueIndy | 18,211 | 5,500 | ||||||
| Blue Systems USA | 10,759 | - | ||||||
| Total accrued expenses - related party | $ | 242,865 | $ | 364,029 | ||||
| Note payable - related party | ||||||||
| BlueCarsharing SAS | $ | 14,710,194 | $ | 9,826,530 | ||||
| Total note payable - related party | $ | 14,710,194 | $ | 9,826,530 | ||||
| Note 3 | Government Grant |
Commencing April 2018, the Company received grants from the City of Los Angeles in connection with the agreement (the “Agreement”) with the City of Los Angeles for Electric Vehicle Car Sharing dated January 17, 2017.
| -10- |
BLUELA CARSHARING, LLC
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019
(Continued)
| Note 3 | Government Grant (Continued) |
As per the Agreement, the Company shall receive $4,000 from the City of Los Angeles for each charging point put in service and operated in the City of Los Angeles, CA.
The Charge-up LA program for Commercial EV Charger Rebate was increased to $5,000 for each charging point in September 2018.
Funds claimed in accordance with the Agreement for the periods ended June 30, 2020 and 2019, amounted to $150,000 and $200,000, respectively. Furthermore, the Company shall receive grant for marketing costs, permits and parking costs.
As of June 30, 2020 and 2019, the grant receivable is made of the following :
| 2020 | 2019 | |||||||
| Grant receivable related to investment | $ | 217,255 | $ | 253,662 | ||||
| Grant receivable related to operations | - | 30,076 | ||||||
| Total grant receivable | $ | 217,255 | $ | 283,738 | ||||
| Note 4 | Property and Equipment |
As of June 30, 2020 and 2019, property and equipment consisted of:
| Description | 2020 | 2019 | Estimated useful life | |||||||
| Machinery and equipment | $ | 4,767,274 | $ | 3,237,524 | 3 - 10 years | |||||
| Tangible assets in progress | 353,748 | 845,031 | ||||||||
| Total property and equipment | 5,121,022 | 4,082,555 | ||||||||
| Less accumulated depreciation | (5,121,022 | ) | (240,464 | ) | ||||||
| Property and equipment, net | $ | - | $ | 3,842,091 | ||||||
Depreciation expense for the years ended June 30, 2020 and 2019 amounted to $0 and $136,303, respectively.
During the fourth quarter of 2019, management deemed Property and Equipment impaired, as a result an impairment charge of $4,155,854 was recorded during the second half of 2019 and an impairment charge of $563,288 was recorded in the first half of 2020.
| -11- |
BLUELA CARSHARING, LLC
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019
(Continued)
| Note 5 | Intangible assets |
As of June 30, 2020 and 2019, intangible assets are made of:
| Description | 2020 | 2019 | Estimated useful life | |||||||
| Licenses | $ | 953,207 | $ | 736,753 | 3 years | |||||
| Intangible assets in progress | 61,791 | 181,609 | ||||||||
| Total intangible assets | 1,014,998 | 918,362 | ||||||||
| Less accumulated amortization | (1,014,998 | ) | (319,963 | ) | ||||||
| Intangible assets, net | $ | - | $ | 598,399 | ||||||
Amortization expense for the years ended June 30, 2020 and 2019 amounted to $0 and $121,235, respectively.
During the fourth quarter of 2019, management deemed Intangible Assets impaired, as a result an impairment charge of $459,323 was recorded during the second half of 2019 and an impairment charge of $101,668 was recorded in the first half of 2020.
| Note 6 | Provision for risk |
As of June 30, 2020, a provision for risk associated with performance of Company contracts recorded in December 2019 has been fully reversed for $754,659.
Management estimates the risk is not likely to happen anymore.
| Note 7 | Deferred Grant |
The grant related to the acquisition of charging points and start-up costs were recorded in deferred grant and depreciated and amortized over their useful life (10 years and 3 years, respectively). As of June 30, 2020 and 2019, the deferred grant is as follows:
| 2020 | 2019 | |||||||
| Grant related to investment | $ | - | $ | 897,372 | ||||
| Accumulated depreciation | - | (169,236 | ) | |||||
| Total deferred grant | $ | - | $ | 728,136 | ||||
| -12- |
BLUELA CARSHARING, LLC
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019
(Continued)
| Note 7 | Deferred Grant (Continued) |
In the second half of the year 2019, with the impairment of the tangible and intangible assets, the Company decided to reverse the deferred grant and record in income the remaining balance for an amount of $790,974.
| Note 8 | Commitments and Contingencies |
In 2017, the Company entered into three membership agreements for office premises located downtown Los Angeles. In April 2018, the Company entered into a fourth membership agreement for an additional office. In September 2018, all agreements were amended into one new membership agreement and extended for 6 months until February 2019. The agreement was renewed until August 2020 and requires monthly payments amounting from $5,876 to $8,326.
Future minimum rental payments under the membership agreement are as follows:
| Period ending June 30, | Amount | ||||
| 2021 | $ | 16,652 | |||
| Total | $ | 16,652 | |||
For the periods ended June 30, 2020 and 2019, the rent expenses related to the membership agreement were $51,578 and $50,169, respectively.
| Note 9 | Income Taxes |
For the periods ended June 30, 2020 and 2019, the provision for income taxes is made of the following:
| 2020 | 2019 | |||||||
| Current income tax expense | ||||||||
| Federal | $ | - | $ | - | ||||
| States and city | - | 2,800 | ||||||
| Total current income tax expense | - | 2,800 | ||||||
| Deferred income tax expense | - | - | ||||||
| Provision for income taxes | $ | - | $ | 2,800 | ||||
| -13- |
BLUELA CARSHARING, LLC
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019
(Continued)
| Note 10 | Going Concern |
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the financial statements, the Company has incurred recurring losses, which led to a stockholders’ deficit of $14,986,904 as of June 30, 2020. Prior to the change in ownership of the Company, the related parties loan and payable were fully forgiven, resulting in approximately $15.6 million income booked in the Company’s financial statements in September 2020.
The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
| Note 11 | Subsequent Events |
The Company has evaluated events and transactions occurring after June 30, 2020 through November 25, 2020, and as a result of the spread of Covid19 coronavirus, economic uncertainties have arisen which are likely to negatively impact the operating results of the Company. However, the related financial statements impact and duration cannot be reasonably estimated at this time.
On September 11, 2020 , Blink Mobility, LLC, a wholly-owned subsidiary of Blink Charging Co, a publicly traded company, entered into an Ownership Interest Purchase Agreement with Blue Systems USA, Inc. (the “Seller”), and pursuant thereto acquired from the Seller all of the ownership interests of BlueLA Carsharing, LLC. Blink Charging Co. is a leading owner, operator, and supplier of proprietary electric vehicle (“EV”) charging equipment and networked EV charging services.
Prior to the change in ownership of the Company, the related parties loan and payable were fully forgiven, resulting in approximately $15.6 million income booked in the Company’s financial statements in September 2020.
| -14- |
Exhibit 99.3
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
On September 11, 2020, Blink Charging Co., (the “Company” or “Blink”) entered into an Ownership Interest Purchase Agreement (the “Agreement”) with Blue Systems USA, Inc. (the “Seller”), and pursuant thereto acquired from the Seller all of the ownership interests of BlueLA Carsharing, LLC (“BlueLA”). The purchase consideration for the acquisition of BlueLA includes: (a) a cash payment of $1.00, which was paid to the Seller at closing, and (b) in the event BlueLA timely amends its carsharing services agreement with the City of Los Angeles, California, a cash payment to the Seller of $1,000,000, payable within three business days after such amendment. The amendment to the carsharing services agreement with the City of Los Angeles must be obtained by BlueLA no later than December 31, 2020, subject to an extension to March 31, 2021 if a representative of the City of Los Angeles indicates to the Company by the December 31, 2020 deadline its approval of the modifications to the carsharing services agreement, as more particularly outlined in the Agreement. The total consideration paid or payable by the Company excludes transaction costs. The Company has agreed to guaranty the performance of the Company’s obligations under the Agreement as an inducement for the Seller to enter into the Agreement.
The unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2020, and the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2019, combine the financial statements of the Company and BlueLA giving effect to the transactions described above, as if they had occurred on January 1, 2019 in respect of the unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2020, and for the year ended December 31, 2019.
The unaudited pro forma condensed combined financial information should be read in conjunction with the accompanying notes to the unaudited pro forma condensed combined financial information and:
| ● | Blink’s condensed consolidated financial statements contained in its Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2020, filed with the Securities and Exchange Commission (“SEC”) on August 13, 2020; |
| ● | Blink’s consolidated financial statements contained in its Annual Report on Form 10-K for the years ended December 31, 2019 and 2018, filed with the SEC on April 2, 2020; |
| ● | BlueLA’s financial statements for the years ended December 31, 2019 and 2018, which are filed as Exhibit 99.1 and incorporated herein by reference; |
| ● | BlueLA’s financial statements for the six months ended June 30, 2020 and 2019, which are filed as Exhibit 99.2 and incorporated herein by reference; |
| ● | the other information contained in or incorporated by reference into this Current Report on Form 8-K. |
The consolidated financial statements of the Company and the financial statements of BlueLA were prepared in accordance with U.S. GAAP.
The unaudited pro forma condensed combined financial information has been prepared using the acquisition method of accounting in accordance with Accounting Standards Codification 805 - Business Combinations (“ASC 805”), which requires that one company is designated as the acquirer for accounting purposes. It has been determined that Blink is the accounting acquirer of BlueLA.
The unaudited pro forma adjustments give effect to events that are directly attributable to the transaction and are based on available data and certain assumptions that management believes are factually supportable. In addition, with respect to the unaudited pro forma condensed combined statements of operations, the unaudited pro forma adjustments are expected to have a continuing impact on the combined results.
An unaudited pro forma condensed combined balance sheet as of June 30, 2020 is not required to be included as part of the unaudited pro forma condensed combined financial information as the condensed balance sheet of BlueLA was included within the condensed consolidated balance sheet of Blink as of September 30, 2020 that was included as part of the Quarterly Report on Form 10-Q of the Company that filed with the SEC on November 13 , 2020.
The unaudited pro forma condensed combined financial information is presented for informational purposes only and to aid you in your analysis of the financial aspects of the transactions described above. The unaudited pro forma condensed combined financial information described above has been derived from the historical financial statements of Blink and BlueLA and the related notes, as described above. The unaudited pro forma condensed combined financial information has been conformed to Blink’s accounting policies. Further review may identify additional differences between the accounting policies of Blink and BlueLA. The unaudited pro forma adjustments and the unaudited pro forma condensed combined financial information do not reflect the impact of synergies or post-transaction management actions and are not necessarily indicative of the financial position or results of operations that may have actually occurred had the transactions taken place on the dates noted.
BLINK CHARGING CO. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Six Months Ended June 30, 2020
| Blink | BlueLA | |||||||||||||||||||||||
| As Reported | As Reported | Reclassification Adjustments | As Reclassified | Pro Forma Adjustments | Pro Forma Combined | |||||||||||||||||||
| Note A | Note B | Note B | Note B | Note C | ||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||
| Charging service revenue - company-owned charging stations | $ | 406,874 | $ | - | $ | - | $ | - | $ | - | $ | 406,874 | ||||||||||||
| Product sales | 2,051,777 | - | - | - | - | 2,051,777 | ||||||||||||||||||
| Network fees | 126,830 | - | - | - | - | 126,830 | ||||||||||||||||||
| Warranty | 16,479 | - | - | - | - | 16,479 | ||||||||||||||||||
| Grant and rebate | 8,491 | - | 5,600 | 5,600 | - | 14,091 | ||||||||||||||||||
| Other | 261,023 | 182,366 | - | 182,366 | - | 443,389 | ||||||||||||||||||
| Total Revenue | 2,871,474 | 182,366 | 5,600 | 187,966 | - | 3,059,440 | ||||||||||||||||||
| Cost of revenues: | ||||||||||||||||||||||||
| Cost of charging services - company-owned charging stations | 65,488 | - | - | - | - | 65,488 | ||||||||||||||||||
| Host provider fees | 113,515 | - | - | - | - | 113,515 | ||||||||||||||||||
| Cost of product sales | 1,391,876 | - | - | - | - | 1,391,876 | ||||||||||||||||||
| Network costs | 357,622 | - | - | - | - | 357,622 | ||||||||||||||||||
| Car rentals | - | 329,517 | - | 329,517 | - | 329,517 | ||||||||||||||||||
| Warranty and repairs and maintenance | 132,643 | - | - | - | - | 132,643 | ||||||||||||||||||
| Depreciation and amortization | 87,728 | - | - | - | - | 87,728 | ||||||||||||||||||
| Other | - | - | 77,771 | 77,771 | - | 77,771 | ||||||||||||||||||
| Total Cost of Revenue | 2,148,872 | 329,517 | 77,771 | 407,288 | - | 2,556,160 | ||||||||||||||||||
| Gross Profit | 722,602 | (147,151 | ) | (72,171 | ) | (219,322 | ) | - | 503,280 | |||||||||||||||
| Operating Expenses: | ||||||||||||||||||||||||
| Compensation | 4,420,205 | - | 617,014 | 617,014 | - | 5,037,219 | ||||||||||||||||||
| Depreciation and amortization | - | 664,956 | (664,956 | ) | - | - | - | |||||||||||||||||
| Reversal of provision for risk | - | (754,659 | ) | - | (754,659 | ) | - | (754,659 | ) | |||||||||||||||
| Impairment expense | - | - | 664,956 | 664,956 | (664,956 | )(b) | - | |||||||||||||||||
| General and administrative expenses | 1,316,536 | - | 190,999 | 190,999 | - | 1,507,535 | ||||||||||||||||||
| Other operating expenses | 1,026,618 | 1,393,133 | (885,784 | ) | 507,349 | - | 1,533,967 | |||||||||||||||||
| Total Operating Expenses | 6,763,359 | 1,303,430 | (77,771 | ) | 1,225,659 | (664,956 | ) | 7,324,062 | ||||||||||||||||
| Loss From Operations | (6,040,757 | ) | (1,450,581 | ) | 5,600 | (1,444,981 | ) | 664,956 | (6,820,782 | ) | ||||||||||||||
| Other Income (Expense): | ||||||||||||||||||||||||
| Interest income, net | 21,110 | - | - | - | - | 21,110 | ||||||||||||||||||
| Interest expense | - | (129,824 | ) | - | (129,824 | ) | 129,824 | (a) | - | |||||||||||||||
| Foreign currency exchange gain | - | 335 | - | 335 | - | 335 | ||||||||||||||||||
| Grant income | - | 5,600 | (5,600 | ) | - | - | - | |||||||||||||||||
| Gain on settlement of accounts payable, net | 19,086 | - | - | - | - | 19,086 | ||||||||||||||||||
| Change in fair value of derivative and other accrued liabilities | (16,039 | ) | - | - | - | - | (16,039 | ) | ||||||||||||||||
| Other income | 25,987 | - | - | - | - | 25,987 | ||||||||||||||||||
| Total Other Income (Expense) | 50,144 | (123,889 | ) | (5,600 | ) | (129,489 | ) | 129,824 | 50,479 | |||||||||||||||
| Net Loss | $ | (5,990,613 | ) | $ | (1,574,470 | ) | $ | - | $ | (1,574,470 | ) | $ | 794,780 | $ | (6,770,303 | ) | ||||||||
| Earnings per share: | ||||||||||||||||||||||||
| Basic | $ | (0.22 | ) | $ | (0.25 | ) | ||||||||||||||||||
| Diluted | $ | (0.22 | ) | $ | (0.25 | ) | ||||||||||||||||||
| Number of common shares outstanding | ||||||||||||||||||||||||
| Basic | 27,584,918 | 27,584,918 | ||||||||||||||||||||||
| Diluted | 27,584,918 | 27,584,918 | ||||||||||||||||||||||
See notes to the unaudited pro forma condensed combined financial information
BLINK CHARGING CO. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Year Ended December 31, 2019
| Blink | BlueLA | |||||||||||||||||||||||
| As Reported | As Reported | Reclassification Adjustments | As Reclassified | Pro Forma Adjustments | Pro Forma Combined | |||||||||||||||||||
| Note A | Note B | Note B | Note B | Note C | ||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||
| Charging service revenue - company-owned charging stations | $ | 1,359,218 | $ | - | $ | - | $ | - | $ | - | $ | 1,359,218 | ||||||||||||
| Product sales | 856,243 | - | - | - | - | 856,243 | ||||||||||||||||||
| Network fees | 301,627 | - | - | - | - | 301,627 | ||||||||||||||||||
| Warranty | 52,996 | - | - | - | - | 52,996 | ||||||||||||||||||
| Grant and rebate | 22,396 | - | 27,540 | 27,540 | - | 49,936 | ||||||||||||||||||
| Other | 166,710 | 577,712 | - | 577,712 | - | 744,422 | ||||||||||||||||||
| Total Revenue | 2,759,190 | 577,712 | 27,540 | 605,252 | - | 3,364,442 | ||||||||||||||||||
| Cost of revenues: | ||||||||||||||||||||||||
| Cost of charging services - company-owned charging stations | 151,479 | - | - | - | - | 151,479 | ||||||||||||||||||
| Host provider fees | 420,075 | - | - | - | - | 420,075 | ||||||||||||||||||
| Cost of product sales | 961,192 | - | - | - | - | 961,192 | ||||||||||||||||||
| Network costs | 255,339 | - | - | - | - | 255,339 | ||||||||||||||||||
| Car rentals | - | 622,260 | - | 622,260 | - | 622,260 | ||||||||||||||||||
| Warranty and repairs and maintenance | 450,765 | - | - | - | - | 450,765 | ||||||||||||||||||
| Depreciation and amortization | 127,929 | - | - | - | - | 127,929 | ||||||||||||||||||
| Other | - | - | 150,137 | 150,137 | - | 150,137 | ||||||||||||||||||
| Total Cost of Revenue | 2,366,779 | 622,260 | 150,137 | 772,397 | - | 3,139,176 | ||||||||||||||||||
| Gross Profit | 392,411 | (44,548 | ) | (122,597 | ) | (167,145 | ) | - | 225,266 | |||||||||||||||
| Operating Expenses: | ||||||||||||||||||||||||
| Compensation | 6,750,753 | - | 1,501,660 | 1,501,660 | - | 8,252,413 | ||||||||||||||||||
| Operating expenses | - | 8,717,807 | (8,717,807 | ) | - | - | - | |||||||||||||||||
| Impairment expense | - | - | 4,615,177 | 4,615,177 | (4,615,177 | )(b) | - | |||||||||||||||||
| General and administrative expenses | 1,916,817 | - | 1,303,247 | 1,303,247 | - | 3,220,064 | ||||||||||||||||||
| Other operating expenses | 2,196,784 | - | 1,150,386 | 1,150,386 | - | 3,347,170 | ||||||||||||||||||
| Total Operating Expenses | 10,864,354 | 8,717,807 | (147,337 | ) | 8,570,470 | (4,615,177 | ) | 14,819,647 | ||||||||||||||||
| Loss From Operations | (10,471,943 | ) | (8,762,355 | ) | 24,740 | (8,737,615 | ) | 4,615,177 | (14,594,381 | ) | ||||||||||||||
| Other Income (Expense): | ||||||||||||||||||||||||
| Interest income, net | 73,158 | - | - | - | - | 73,158 | ||||||||||||||||||
| Interest expense | - | (322,407 | ) | - | (322,407 | ) | 322,407 | (a) | - | |||||||||||||||
| Foreign currency exchange gain | - | 13,228 | - | 13,228 | - | 13,228 | ||||||||||||||||||
| Gain on settlement of debt | 310,000 | - | - | - | - | 310,000 | ||||||||||||||||||
| Grant income | - | 27,540 | (27,540 | ) | - | - | - | |||||||||||||||||
| Gain on settlement of accounts payable, net | 273,667 | - | - | - | - | 273,667 | ||||||||||||||||||
| Change in fair value of derivative and other accrued liabilities | (65,104 | ) | - | - | - | - | (65,104 | ) | ||||||||||||||||
| Other income | 231,722 | 50,000 | - | 50,000 | - | 281,722 | ||||||||||||||||||
| Total Other Income (Expense) | 823,443 | (231,639 | ) | (27,540 | ) | (259,179 | ) | 322,407 | 886,671 | |||||||||||||||
| Loss Before Provision for Income Taxes | (9,648,500 | ) | (8,993,994 | ) | (2,800 | ) | (8,996,794 | ) | 4,937,584 | (13,707,710 | ) | |||||||||||||
| Income tax provision | - | (2,800 | ) | 2,800 | - | - | - | |||||||||||||||||
| Net Loss | $ | (9,648,500 | ) | $ | (8,996,794 | ) | $ | - | $ | (8,996,794 | ) | $ | 4,937,584 | $ | (13,707,710 | ) | ||||||||
| Earnings per share: | ||||||||||||||||||||||||
| Basic | $ | (0.37 | ) | $ | (0.52 | ) | ||||||||||||||||||
| Diluted | $ | (0.37 | ) | $ | (0.52 | ) | ||||||||||||||||||
| Number of common shares outstanding | ||||||||||||||||||||||||
| Basic | 26,237,486 | 26,237,486 | ||||||||||||||||||||||
| Diluted | 26,237,486 | 26,237,486 | ||||||||||||||||||||||
See notes to the unaudited pro forma condensed combined financial information
Pro Forma Adjustments
The following pro forma adjustments give effect to the transactions:
Unaudited Pro Forma Condensed Combined Statement of Operations - For The Six Months Ended June 30, 2020
| Note A | Derived from the unaudited interim condensed consolidated financial statements of Blink for the period ended June 30, 2020, as previously filed with the SEC. |
| Note B | Derived from the unaudited condensed statement of operations of BlueLA for the six months ended June 30, 2020 included elsewhere in this Current Report.
Includes certain reclassification adjustments in order to conform BlueLA’s as reported historical results of operations to Blink’s historical results of operations. The reclassification adjustments had no effect on net loss. |
Pro Forma Adjustments:
| Note C | (a) | To eliminate the impairment expense associated with BlueLA’s one-time write-down of property and equipment and intangible assets. | ||||
| (b) | To eliminate the interest expense associated with BlueLA’s indebtedness due to its parent that was forgiven at the time of the acquisition. |
Unaudited Pro Forma Condensed Combined Statement of Operations - For The Year Ended December 31, 2019
| Note A | Derived from the consolidated statement of operations of Blink for the year ended December 31, 2019, as previously filed with the SEC. |
| Note B | Derived from the statement of operations of BlueLA for the year ended December 31, 2019 which is included elsewhere in this Current Report.
Includes certain reclassification adjustments in order to conform BlueLA’s as reported historical results of operations to Blink’s historical results of operations. The reclassification adjustments had no effect on net loss. |
Pro Forma Adjustments:
| Note C | (a) | To eliminate the impairment expense associated with BlueLA’s one-time write-down of property and equipment and intangible assets. | ||||
| (b) | To eliminate the interest expense associated with BlueLA’s indebtedness due to its parent that was forgiven at the time of the acquisition. |