Charge Enterprises, Inc. [CRGE] Filings

10-Q 1 crge_10q.htm FORM 10-Q crge_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended June 30, 2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from____________to____________

Commission file number: 333-253073

CHARGE ENTERPRISES, INC.

(Exact name of registrant as specified in its charter)

Delaware		90-0471969
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

125 Park Avenue, 25th Floor New York, NY		10017
(Address of principal executive offices)		(Zip Code)

(212) 921-2100

(Registrant’s telephone number, including area code)

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

Title of each class		Ticker symbol		Name of each exchange on which registered
Common Stock, par value $.0001 per share		CRGE		Nasdaq Global Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of August 2, 2023, a total of 214,984,545 shares of common stock, par value $0.0001 per share, were issued and outstanding.

CHARGE ENTERPRISES, INC.

TABLE OF CONTENTS

Part I – Financial Information			Page

	Item 1	Financial Statements	4

	Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37

	Item 3	Quantitative and Qualitative Disclosures About Market Risk	47

	Item 4	Controls and Procedures	48

Part II – Other Information

	Item 1	Legal Proceedings	50

	Item 1A	Risk Factors	50

	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	52

	Item 3	Defaults Upon Senior Securities	52

	Item 4	Mine Safety Disclosures	52

	Item 5	Other Information	52

	Item 6	Exhibits	53

		Signatures	55

Table of Contents

Special Note Regarding Forward--Looking Statements

You should read this Quarterly Report on Form 10-Q, our Current Report on Form 8-K filed May 10, 2023 (our “May 10, 2023 Form 8-K”) and our Annual Report on Form 10-K for the year ending December 31, 2022 (our “2022 Form 10-K”) completely and with the understanding that our actual future results, levels of activity, performance and achievements may be different from what we expect and that these differences may be material. We qualify all of our forward-looking statements by these cautionary statements.

Certain statements contained in this Form 10-Q, which reflect our current views with respect to future events and financial performance, and any other statements of a future or forward-looking nature, constitute “forward-looking statements” for the purpose of the federal securities laws. Our forward-looking statements include, but are not limited to, statements regarding our or our management’s expectations, hopes, beliefs, intentions, or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. These statements relate to future events or our future operational or financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under the section titled “Risk Factors”. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements.

Any forward-looking statement in this Form 10-Q reflects our current view with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our business, results of operations, industry, and future growth. Given these uncertainties, you should not place undue reliance on these forward-looking statements. No forward-looking statement is a guarantee of future performance. You should read this Form 10-Q in conjunction with our May 10, 2023 Form 8-K, our Annual Report on Form 10-K filed on March 15, 2023, and the documents that we reference herein and therein and have filed as exhibits hereto and thereto completely and with the understanding that our actual future results may be materially different from any future results expressed or implied by these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

This Quarterly Report on Form 10-Q also contains or may contain estimates, projections and other information concerning our industry, our business, and the markets for our products, including data regarding the estimated size of those markets and their projected growth rates. We obtained the industry and market data in this report from our own research as well as from industry and general publications, surveys and studies conducted by third parties. This data involves a number of assumptions and limitations and contains projections and estimates of the future performance of the industries in which we operate that are subject to a high degree of uncertainty, including those discussed in “Risk Factors.” We caution you not to give undue weight to such projections, assumptions, and estimates. Further, industry and general publications, studies and surveys generally state that they have been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe that these publications, studies, and surveys are reliable, we have not independently verified the data contained in them. In addition, while we believe that the results and estimates from our internal research are reliable, such results and estimates have not been verified by any independent source.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements as predictions of future results. Our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

Table of Contents

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

Charge Enterprises, Inc.
Consolidated Balance Sheets
*(Unaudited)*

	June 30,			December 31,
In thousands, except share and per share data	2023			2022 (As Adjusted)
Assets
Current assets
Cash and cash equivalents	$	50,142		$	26,837
Restricted cash		886			886
Accounts receivable net of allowances of $184 in 2023 and $322 in 2022		74,036			72,405
Inventory		118			111
Deposits, prepaids and other current assets		2,298			3,187
Investments in marketable securities		11,597			6,757
Investments in non-marketable securities		236			236
Contract assets		7,290			6,090
Total current assets		146,603			116,509

Property, plant and equipment, net		553			732
Finance lease right-of-use asset		600			341
Operating lease right-of-use asset		3,323			4,028
Non-current assets		248			240
Goodwill		12,672			12,672
Intangible assets, net		31,865			33,932
Total Assets		195,864			168,454

Liabilities and Stockholders' Equity
Current liabilities
Accounts payable	$	87,946		$	61,644
Accrued liabilities		7,801			11,121
Contract liabilities		24,765			13,741
Derivative liability		59			6,521
Finance lease liability		163			112
Operating lease liability		1,336			1,579
Current portion of long-term debt		26,136			29,180
Total current liabilities		148,206			123,898

Non-current liabilities
Finance lease liability, non-current		374			146
Operating lease liability, non-current		1,809			2,199
Net deferred tax liability		1,170			1,410
Total Liabilities		151,559			127,653

Mezzanine Equity
Series C Preferred Stock (6,226,370 shares issued and outstanding at June 30, 2023, and December 31, 2022)		16,572			16,572
Total Mezzanine Equity		16,572			16,572

Commitments, contingencies and concentration risk

Stockholders' Equity
Preferred stock, $0.0001 par value, 20,000,000 shares authorized;
Series D: 1,177,023 shares issued and outstanding at June 30, 2023, and December 31, 2022		-			-
Series E: 3,200,000 shares issued and outstanding at June 30, 2023, and 0 shares outstanding at December 31, 2022		-			-
Common stock, $0.0001 par value; 750,000,000 shares authorized 212,899,281 and 206,844,580 issued and outstanding at June 30, 2023 and December 31, 2022, respectively		21			20
Additional paid in capital		201,989			179,723
Accumulated other comprehensive income (loss)		-			-
Accumulated deficit		(174,277	)		(155,514	)
Total Stockholders' Equity		27,733			24,229
Total Liabilities and Stockholders' Equity	$	195,864		$	168,454

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

Table of Contents

Charge Enterprises, Inc.
Consolidated Statement of Operations
*(Unaudited)*

	Three Months Ended June 30,						Six Months Ended June 30,
In thousands, except per share data	2023			2022 (As Adjusted)			2023			2022 (As Adjusted)
Revenues	$	147,586		$	181,041		$	341,135		$	344,019
Cost of sales		139,838			174,767			327,098			332,383
Gross profit		7,748			6,274			14,037			11,636

Operating expenses
General and administrative		5,433			6,452			10,539			12,059
Salaries and related benefits		9,156			7,799			18,283			15,747
Professional fees		446			848			912			1,912
Depreciation and amortization expense		1,192			1,103			2,402			1,312
Total operating expenses		16,227			16,202			32,136			31,030

(Loss) from operations		(8,479	)		(9,928	)		(18,099	)		(19,394	)

Other income (expenses):
Income (loss) from investments, net		666			(973	)		962			(1,143	)
Change in fair value of derivative liabilities		280			-			1,656			-
Interest expense		(1,488	)		(7,160	)		(3,026	)		(8,924	)
Loss on impairment		(58	)		-			(58	)		-
Other income (expense), net		637			776			1,028			1,034
Foreign exchange adjustments		(162	)		170			(169	)		(87	)
Total other income (expenses), net		(125	)		(7,187	)		393			(9,120	)

(Loss) before income taxes		(8,604	)		(17,115	)		(17,706	)		(28,514	)

Income tax (expense) benefit		(242	)		(45	)		(352	)		1,328

Net (loss)	$	(8,846	)	$	(17,160	)	$	(18,058	)	$	(27,186	)
Less: Deemed dividend		-			(32,841	)		-			(36,697	)
Less: Preferred dividends		(362	)		(353	)		(724	)		(620	)
Net (loss) available to common stockholders	$	(9,208	)	$	(50,354	)	$	(18,782	)	$	(64,503	)

Basic income (loss) per share available to common stockholders	$	(0.04	)	$	(0.26	)	$	(0.09	)	$	(0.34	)
Diluted income (loss) per share available to common stockholders	$	(0.04	)	$	(0.26	)	$	(0.09	)	$	(0.34	)

Weighted average number of shares outstanding, basic		212,858			193,508			209,974			190,966
Weighted average number of shares outstanding, diluted		212,858			193,508			209,974			190,966

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

Table of Contents

Charge Enterprises, Inc.
Consolidated Statements of Comprehensive Income (Loss)
*(Unaudited)*

	Three Months Ended June 30,						Six Months Ended June 30,
In thousands	2023			2022 (As Adjusted)			2023			2022 (As Adjusted)
Net (loss)	$	(8,846	)	$	(17,160	)	$	(18,058	)	$	(27,186	)
Other comprehensive income (loss), net of tax
Components of comprehensive income (loss)		-			-			-			-
Other comprehensive income (loss), net of tax		-			-			-			-
Comprehensive (loss)	$	(8,846	)	$	(17,160	)	$	(18,058	)	$	(27,186	)

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

Table of Contents

Charge Enterprises, Inc.
Consolidated Statements of Stockholders' Equity
*(Unaudited)*
																Additional Paid-In			Accumulated Other			Accumulated
	Preferred Stock					Common Stock				Common Stock to be Issued						Capital (As			Comprehensive			Deficit (As			Total (As
In thousands, except share data	Shares			Amount		Shares		Amount		Shares			Amount			Adjusted)			Income			Adjusted)			Adjusted)
Balance, December 31, 2021 (As Adjusted)		2,370,370		$	-		184,266,934	$	18		6,587,897		$	1		$	117,727		$	(32	)	$	(103,366	)	$	14,348
Modified retrospective application of stock-based compensation accounting as of January 1, 2022		-			-		-		-		-			-			(3,320	)		-			3,115			(205	)
Stock-based compensation expense		-			-		-		-		-			-			10,744			-			-			10,744
Declaration of preferred dividends		-			-		-		-		-			-			-			-			(267	)		(267	)
Series C Preferred Stock		3,856,000			-		-		-		-			-			12,050			-			-			12,050
Beneficial conversion feature arising from preferred stock		-			-		-		-		-			-			2,651			-			-			2,651
Deemed dividend in connection with Series C Preferred Stock		-			-		-		-		-			-			-			-			(3,856	)		(3,856	)
Common stock issued for acquisition		-			-		5,201,863		1		-			-			17,530			-			-			17,531
Conversion of debt into common stock		-			-		319,950		-		-			-			80			-			-			80
Net loss		-			-		-		-		-			-			-			-			(13,141	)		(13,141	)
Balance, March 31, 2022 (As Adjusted)		6,226,370		$	-		189,788,747	$	19		6,587,897		$	1		$	157,462		$	(32	)	$	(117,515	)	$	39,935
Stock-based compensation expense		-			-		-		-		-			-			9,343			-			-			9,343
Declaration of preferred dividends		-			-		-		-		-			-			-			-			(353	)		(353	)
Series D Preferred Stock		1,177,023			-		-		-		-			-			12,499			-			-			12,499
Common stock issued for private placement		-			-		1,428,575		-		-			-			4,696			-			-			4,696
Issuance of warrants for private placement		-			-		-		-		-			-			5,304			-			-			5,304
Issuance of shares committed in prior period		-			-		1,862,146		-		(1,862,146	)		-			-			-			-			-
Settlement of holdback shares for acquisition		-			-		4,725,748		-		(4,725,748	)		(1	)		-			-			-			(1	)
Exercise of warrants		-			-		5,973,515		1		-			-			1,072			-			-			1,073
Exercise of stock options		-			-		10,000		-		-			-			20			-			-			20
Vesting of restricted stock units		-			-		138,327		-		-			-			-			-			-			-
Conversion of Series B Preferred into common stock		-			-		2,155,594		-		-			-			6,165			-			-			6,165
Classification of Preferred C to Mezzanine Equity		(6,226,370	)		-		-		-		-			-			(18,940	)		-			6,256			(12,684	)
Deemed dividend in connection with reclass of warrants to Derivative Liability		-			-		-		-		-			-			(7,601	)		-			(32,841	)		(40,442	)
Other		-			-		-		-		(3	)		-			-			-			-			-
Net loss		-			-		-		-		-			-			-			-			(19,642	)		(19,642	)
Modified retrospective application of stock-based compensation accounting																	(2,538	)					2,482			(56	)
Balance, June 30, 2022 (As Adjusted)		1,177,023		$	-		206,082,652	$	20		-		$	-		$	167,482		$	(32	)	$	(161,613	)	$	5,857

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

Table of Contents

Charge Enterprises, Inc.
Consolidated Statements of Stockholders' Equity
*(Unaudited)*
														Additional		Accumulated Other
	Preferred Stock				Common Stock					Common Stock to be Issued				Paid-In		Comprehensive		Accumulated
In thousands, except share data	Shares		Amount		Shares			Amount		Shares		Amount		Capital		Income		Deficit			Total
Balance, December 31, 2022 (As Adjusted)		1,177,023	$	-		206,844,580		$	20		-	$	-	$	179,723	$	-	$	(155,514	)	$	24,229
Stock-based compensation expense		-		-		(444	)		-		-		-		5,902		-		-			5,902
Declaration of preferred dividends		-		-		-			-		-		-		-		-		(362	)		(362	)
Exercise of warrants		3,200,000		-		4,400,000			1		-		-		3,799		-		-			3,800
Derivative liability impact to exercise of warrants		-		-		-			-		-		-		4,806		-		-			4,806
Exercise of stock options		-		-		75,000			-		-		-		43		-		-			43
Common stock issued for acquisition		-		-		1,530,145			-		-		-		2,752		-		-			2,752
Net loss		-		-		-			-		-		-		-		-		(9,212	)		(9,212	)
Balance, March 31, 2023		4,377,023	$	-		212,849,281		$	21		-	$	-	$	197,025	$	-	$	(165,088	)	$	31,958
Stock-based compensation expense		-		-		50,000			-		-		-		4,964		-		-			4,964
Declaration of preferred dividends		-		-		-			-		-		-		-		-		(362	)		(362	)
Other		-		-		-			-		-		-		-		-		19			19
Net loss		-		-		-			-		-		-		-		-		(8,846	)		(8,846	)
Balance, June 30, 2023		4,377,023	$	-		212,899,281		$	21		-	$	-	$	201,989	$	-	$	(174,277	)	$	27,733

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

Table of Contents

Charge Enterprises, Inc.
Consolidated Statement of Cash Flows
*(Unaudited)*
	Six Months Ended June 30,
	2023			2022 (As Adjusted)
In thousands

Cash flows from Operating Activities:
Net loss	$	(18,058	)	$	(27,186	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Amortization		2,067			861
Depreciation		335			451
Stock-based compensation		10,866			14,228
Change in fair value of derivative liabilities		(1,656	)		-
Amortization of debt discount		1,980			7,444
Loss on foreign currency exchange		169			87
Loss on impairment		58			-
Net loss (gain) from investments		(962	)		1,143
Other expense, net		(794	)		(855	)
Change in deferred income taxes		(219	)		(1,328	)
Changes in working capital requirements:
Accounts receivable		(1,776	)		(1,856	)
Inventory		(6	)		(57	)
Deposits, prepaids and other current assets		112			(304	)
Other assets / liabilities		124			(30	)
Contract assets		(1,200	)		(3,445	)
Accounts payable		26,477			27,162
Other current liabilities		186			1,062
Contract liabilities		11,024			(1,741	)
Net cash provided by operating activities		28,727			15,636

Cash flows from Investing Activities:
Acquisition of property, plant and equipment		(102	)		(70	)
Sale of intellectual property		794			159
Purchase of marketable securities		(22,530	)		(43,255	)
Sale of marketable securities		18,612			34,901
Acquisition of EV Depot		1			(1,231	)
Cash acquired in acquisitions		-			104
Net cash (used in) investing activities		(3,225	)		(9,392	)

Cash flows from Financing Activities:
Proceeds from sale of common stock		-			10,000
Proceeds from sale of Series C preferred stock		-			10,845
Proceeds from issuance of Series E preferred stock		1,600			-
Proceeds from exercise of warrants		2,200			1,072
Proceeds from exercise of stock options		41			20
Draws from revolving line of credit		4,717			10,409
Payments on revolving line of credit		(9,741	)		(9,550	)
Payment on financing lease		(141	)		(102	)
Payment of dividends on preferred stock		(724	)		(498	)
Net cash (used in) provided by financing activities		(2,048	)		22,196

Effect of foreign exchange rate changes		(149	)		(97	)

Net Increase in Cash and Cash Equivalents		23,305			28,343
Cash, Cash Equivalents, and Restricted Cash, Beginning of Period		27,723			18,238
Cash, Cash Equivalents, and Restricted Cash, End of Period	$	51,028		$	46,581

Cash paid for interest expense	$	969		$	1,477
Cash paid for income taxes	$	718		$	-
Non-cash investing and financing activities:
Issuance of common stock for acquisition	$	-		$	17,530

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

Table of Contents

CHARGE ENTERPRISES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Nature of operations

Charge Enterprises, Inc. (the “Company”), (formerly known as “Transworld Holdings, Inc.”, “GoIP Global, Inc.” and “E Education Network, Inc.”) was incorporated in Nevada in 2003. The Company was subsequently redomiciled in Delaware.

The Company is an electrical, broadband and electric vehicle (“EV”) charging infrastructure company that provides clients with end-to-end project management services, from advising, designing, engineering, acquiring and installing equipment, to monitoring, servicing, and maintenance. The Company’s vision is to be a leader in enabling the next wave of transportation and connectivity. By building, designing, and operating seamless infrastructure for charging EVs and high-speed broadband, the Company aims to create a future where transportation is safe, reliable, clean, efficient, and connected.

The Company has two operating segments which also represent the Company’s reportable segments:

•	Infrastructure, which has a primary focus on EV charging (“EVC”), broadband, including cell tower, small cell, and in-building applications, and electrical contracting services.
•	Telecommunications, which provides connection of voice calls, Short Message Services (“SMS”), and data to global carriers.

Note 2. Summary of significant accounting policies

Basis of Presentation

The interim unaudited consolidated financial statements included herein have been prepared by the Company in accordance with: (i) generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial information; and (ii) the instructions of the Securities and Exchange Commission (the “SEC”) for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for annual financial statements. In the opinion of management, the consolidated financial statements reflect all adjustments considered necessary for a fair statement of the results of operations and financial position for the interim periods presented. All such adjustments are of a normal and recurring nature. The Company’s results shown on an interim basis are not necessarily indicative of results for a full year.

This Form 10-Q should be read in conjunction with the current report on Form 8-K filed with the SEC on May 10, 2023 (the “May 10, 2023 Form 8-K”) and the consolidated financial statements and related notes included in the Company’s audited consolidated financial statements as of and for the year ended December 31, 2022, and filed with the SEC on March 15, 2023, as part of the Company’s Annual Report on Form 10-K (the "2022 Annual Report"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations.

There have been no material changes from Note 2, Summary of significant accounting policies, as described in the notes to the Company’s consolidated financial statements contained in the May 10, 2023 Form 8-K and the 2022 Annual Report, other than as noted below.

The Company is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and the Company has and intends to continue to take advantage of certain exemptions from various reporting requirements.

Table of Contents

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The consolidated financial statements and related disclosures, presented in U.S. dollars, have been prepared in accordance with U.S. GAAP and pursuant to the rules and regulations of the SEC. The results and trends in these consolidated financial statements may not be representative for any future periods or the full year.

Revenue

Nature of Services

Infrastructure

The Company’s Infrastructure segment revenues are derived from: (i) broadband and wireless; (ii) electrical contracting services; (iii) electric vehicle charging infrastructure; and (iv) fleet services.

Broadband and wireless, electrical contracting, and electric vehicle charging infrastructure primarily involve design, engineering and construction services. Types of services typically include providing: (i) end-to-end network design and implementation services for telecommunication and wireless carriers, cable companies and enterprise organizations; (ii) cell tower construction and modification services for national and regional wireless service providers, tower owners, and federal, state, and local government agencies; (iii) cellular distributed antenna systems (“DAS”) and bi-directional antenna (“BDA”) public safety systems from initial Radio Frequency (“RF”) site assessment, through design, engineering, implementation, and testing; (iv) DAS maintenance and monitoring service, including an in-house 24 hour network operations center, utilizing Software-as-a-Service cloud-based software and customized maintenance program; (v) scalable and energy-efficient mission critical power systems to meet the demand of data equipment deployment for mission critical data centers; (vi) electrical and telecommunications construction and facilities services to commercial, industrial, and institutional facilities; and (vii) end-to-end solutions for safe, reliable, flexible and scalable charging ecosystems.

Projects can be performed under individual contracts or a statement of work under a master service agreement, which are generally multi-year agreements. The typical length of projects can vary and depends on size and complexity: broadband and wireless – two to three months; electrical contracting services – six months to three years; electric vehicle charging infrastructure – three to twelve months.

The types of services for fleet services primarily involve leasing and maintenance of real property to commercial and fleet operator customers in return for payment. Lease agreements include fixed payments and vary in length from 12 months to 3 years.

Telecommunications

The Company’s Telecommunications segment revenues are derived from operating a global telecommunication network consisting of domestic switching and related peripheral equipment, carrier-grade routers, and switches for internet and circuit-based services. Types of services typically include providing: (i) routing of voice, data, and Short Message Services (“SMS”) to Carriers and Mobile Network Operators (“MNO”) globally; and (ii) customers with internet-protocol-based and time-division multiplexing (“TDM”) access for the transport of long-distance voice and data minutes.

The Company’s Telecommunications segment operates an extensive network of direct routes and offers premium voice communication services for carrying a mix of business, residential and carrier long-distance traffic, data and transit traffic. Telecommunications has both a customer and vendor relationship with most parties. Telecommunications provides the customer routing services through the Telecommunications supplier routes on incoming calls and then Telecommunications purchases routing services from other vendor’s supplier routes in order to complete the call.

Table of Contents

Revenue Recognition

Revenue is recognized when a customer obtains control of promised services. The amount of revenue that is recorded reflects the consideration that the Company expects to receive in exchange for those services. The Company applies the following five-step model in order to determine this amount: (i) identification of the promised services in the contract; (ii) determination of whether the promised services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. The Company’s primary revenue stream is from services. The Company recognizes as revenues the amount of the transaction price for the performance obligation when the performance obligation is satisfied or as it is satisfied.

The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer, in an amount that reflects the consideration it expects to be entitled to in exchange for those products or services. The Company evaluates when it is appropriate to recognize revenues based on the gross amount invoiced to the customer or the net amount retained by the Company if a third party is involved.

A contract liability for deferred revenue is recorded when consideration is received or is unconditionally due from a customer prior to transferring control of goods or services to the customer under the terms of a contract. Deferred revenue balances typically result from advance payments received from customers for contracts or from billings in excess of revenue recognized on services arrangements.

Contract assets represent when revenues are recognized in advance of invoice issuance. These assets are presented separately on the consolidated balance sheet and are converted to accounts receivable once the Company’s right to the consideration becomes unconditional, which varies by contract but is generally based on achieving certain acceptance milestones. The Company recognizes the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset would be one year or less.

Infrastructure

Broadband and wireless, electrical contracting services, and electric vehicle charging projects often require significant services to integrate complex activities and equipment into a single deliverable and are therefore generally accounted for as a single performance obligation, even when delivering multiple services that are capable of being distinct. Contract amendments and change orders, which are generally not distinct from the existing contract, are typically accounted for as a modification of the existing contract and performance obligation.

The Company recognizes revenues from these services over time using an input method, based on assessment of performance completed to date. The Company uses the percentage of completion method when it measures its progress towards completion of the performance obligation based on the ratio of costs incurred to date to total estimated costs at completion under the contract. The Company believes that this approach faithfully depicts the Company’s performance toward complete satisfaction of the performance obligation as it accurately measures the transfer of control of the finished product to the customer.

Due to the nature of the Company’s performance obligations, the estimation of total revenue and cost at completion is complex, subject to many variables and requires significant judgment. Management must make assumptions and estimates regarding labor productivity and availability, the complexity of the work to be performed, the cost and availability of materials, the performance of subcontracts, and the availability and timing of funding from the customer, among other variables. As a significant change in one or more of these estimates could affect the profitability of contracts, the Company updates contract-related estimates regularly through a review process in which management evaluates the progress and execution of each performance obligation and the estimated cost at completion. As part of this process, management reviews information including, but not limited to, any outstanding key contract matter, progress towards completion and the related program schedule and the related changes in estimates of revenues and costs. The Company recognizes adjustments in estimated profit on contracts on a cumulative catch-up basis. Therefore, the impact of the adjustment on profit recorded to date is recognized in the period the adjustment is identified. Revenue and profit in future periods of contract performance is recognized using the adjusted estimate. If at any time the estimate of contract profitability indicates an anticipated loss on the contract, the Company recognizes a provision for the entire loss in the period it is identified.

Table of Contents

The nature of the Company’s contracts gives rise to several types of variable consideration, including claims and unpriced change orders. The Company includes variable consideration in the estimated transaction price when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. The Company estimates the amount of variable consideration to be included in the transaction price, using the expected value or the most likely amount method, which is expected to better predict the amount. The Company’s estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on assessments of legal enforceability, performance, and all information that is reasonably available to the Company.

Fleet services include a single deliverable of leased parking spaces. The Company recognizes revenues from these services evenly over the life of the contracts.

Telecommunications

The amount of consideration the Company receives and revenue it recognizes is fixed based upon contractually agreed upon rates. The Company recognizes revenue at a point in time when the voice, data and SMS are routed, and the performance obligation is satisfied.

Revenue is earned based on the number of minutes during a call multiplied by the price per minute and is recorded upon completion of a call. Incomplete calls are not revenues earned by Telecommunications and may occur as a result of technical issues or because the customer’s credit limit was exceeded and thus the customer routing of traffic was prevented. Telecommunications evaluates gross versus net revenue recognition for each of its contractual arrangements by assessing indicators of control to determine whether Telecommunications acts as a principal (i.e., gross recognition) or an agent (i.e., net recognition). Telecommunications has determined that it acts as a principal for all of its performance obligations as Telecommunications may accept or reject calls, determines the routing decision and routing vendor and has the risk of financial loss on revenues from customers and amounts owed to the vendors. Net revenue represents gross revenue, net of allowance for doubtful accounts receivable, service credits and service adjustments. Cost of revenue includes network costs that consist of access, transport and termination costs. The majority of Telecommunications’ cost of revenue is variable, primarily based upon minutes of use, with transmission and termination costs being the most significant expense.

Refer to Note 4, Revenue, for additional information on the Company’s revenue.

Cost of Sales

Cost of sales consists primarily of network telecommunication costs, contracted services, salaries and related employee benefits, including stock-based compensation, material and equipment costs, travel and other costs related to vehicles, training and lease expense.

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 requires entities to use a forward-looking approach based on current expected credit losses (“CECL”) to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. The Company implemented ASU 2016-13 on January 1, 2023. The impact of adopting this new guidance was not material.

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations - Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”). ASU 2021-08 is designed to improve comparability for both the recognition and measurement of acquired revenue contracts with customers at the date of and after a business combination. ASU 2021-08 was effective for the Company beginning January 1, 2023, under a prospective application and may impact the accounting for future business combinations.

Table of Contents

In August 2020, the FASB issued ASU No. 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). ASU 2020-06 will simplify the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models will result in fewer embedded conversion features being separately recognized from the host contract as compared with current U.S. GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. ASU 2020-06 also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. ASU 2020-06 will be effective for the Company as of January 1, 2024. Early adoption is permitted. Management is currently evaluating the effect of the adoption of ASU 2020-06 on the consolidated financial statements, but currently does not believe ASU 2020-06 will have a significant impact on the Company’s financial statements because it no longer has convertible debt outstanding. The Company will continue to monitor relevant accounting pronouncements.

Reclassification

Certain amounts included in the prior year financial statements and disclosures have been reclassified to conform to the current year presentation. These reclassifications did not have a material impact on the Company’s previously reported financial statements.

Change in Accounting Principle

Effective January 1, 2023, the Company changed its accounting principle for recognizing stock-based compensation expense from the graded vesting attribution method, where an award is divided into vesting increments or tranches, to the straight-line attribution method of accounting. The Company believes the straight-line attribution method more accurately reflects how awards are earned over its employees’ service periods. Also, it is the predominant method used in its industry, and therefore it better aligns the Company’s recognition of stock-based compensation expense with its peers.

The retrospective application of the change in accounting principle had an effect on the consolidated balance sheets, consolidated statements of operations, consolidated statements of comprehensive income (loss) and consolidated statements of stockholders’ equity. There was no net effect to the amounts reported for net cash provided by (used in) operating, investing or financing activities in the consolidated statements of cash flows for prior periods as a result of the change in accounting method. However, the net loss, change in deferred income taxes and stock-based compensation line items within net cash flows provided by operating activities each decreased as shown below to reflect the change in accounting method.

Table of Contents

The following tables present the comparative effect of the change in accounting principle and its effect on the Company’s previously reported financial statements.

	Three Months Ended						Six Months Ended
	June 30, 2023			June 30, 2022			June 30, 2023			June 30, 2022
	(amounts, in thousands, except per share data)
Stock-based compensation
Prior to revision	$	5		$	9,761		$	5,547		$	20,505
Revision		4,959			(2,538	)		5,319			(5,858	)
As revised	$	4,964		$	7,223		$	10,866		$	14,647
Loss from operations
Prior to revision	$	(3,520	)	$	(12,466	)	$	(12,780	)	$	(25,252	)
Revision		(4,959	)		2,538			(5,319	)		5,858
As revised	$	(8,479	)	$	(9,928	)	$	(18,099	)	$	(19,394	)
Income tax benefit (expense)
Prior to revision	$	(242	)	$	11		$	(352	)	$	1,589
Revision		-			(56	)		-			(261	)
As revised	$	(242	)	$	(45	)	$	(352	)	$	1,328
Net income (loss)
Prior to revision	$	(3,887	)	$	(19,642	)	$	(12,739	)	$	(32,783	)
Revision		(4,959	)		2,482			(5,319	)		5,597
As revised	$	(8,846	)	$	(17,160	)	$	(18,058	)	$	(27,186	)
Basic income (loss) per share available to common stockholders
Prior to revision	$	(0.02	)	$	(0.27	)	$	(0.06	)	$	(0.37	)
Revision		(0.02	)		0.01			(0.03	)		0.03
As revised	$	(0.04	)	$	(0.26	)	$	(0.09	)	$	(0.34	)
Diluted income (loss) per share available to common stockholders
Prior to revision	$	(0.02	)	$	(0.27	)	$	(0.06	)	$	(0.37	)
Revision		(0.02	)		0.01			(0.03	)		0.03
As revised	$	(0.04	)	$	(0.26	)	$	(0.09	)	$	(0.34	)

Table of Contents

The opening balances of accumulated deficit and additional paid in capital as of December 31, 2021, have been adjusted by $8.0 million and $9.1 million, respectively to reflect the cumulative effect of the change.

	As of
	June 30,			December 31,
	2023			2022
	(amounts, in thousands)
Net deferred tax (liability) asset
Prior to revision	$	(1,144	)	$	(1,389	)
Revision		(26	)		(21	)
As revised	$	(1,170	)	$	(1,410	)
Additional paid in capital
Prior to revision	$	214,763		$	197,816
Revision		(12,774	)		(18,093	)
As revised	$	201,989		$	179,723
Accumulated deficit
Prior to revision	$	(187,025	)	$	(173,586	)
Revision		12,748			18,072
As revised	$	(174,277	)	$	(155,514	)
Total stockholders' equity
Prior to revision	$	27,759		$	24,250
Revision		(26	)		(21	)
As revised	$	27,733		$	24,229

Stock-based compensation correction of immaterial error

In 2023, the Company identified a misstatement related to its presentation of stock-based compensation in its consolidated statements of operations. Although determined to be immaterial, the Company elected to correct the immaterial misstatement and reclassified its stock-based compensation expense to the same financial statement line item as cash compensation paid to the same employees and nonemployees.

The reclassification reflects the change in accounting principle discussed above and had no incremental impact on the consolidated balance sheets, consolidated statements of comprehensive income (loss), consolidated statements of stockholders’ equity, or consolidated statement of cash flows. There was no net effect to the amounts reported for (loss) from operations as a result of this reclassification. However, cost of sales, gross profit, stock-based compensation, general and administrative, salaries and related benefits, and total operating expenses each were adjusted as shown below to reflect the reclassification.

Table of Contents

The following tables present the effect of the reclassification on the Company’s previously reported financial statements.

	Year Ended December 31,
	2022			2021			2020
	(amounts, in thousands)
Cost of sales
Prior to revision	$	669,620		$	465,503		$	83,554
Revision		2,503			1,771			-
As revised	$	672,123		$	467,274		$	83,554
Gross Profit
Prior to revision	$	28,213		$	11,515		$	1,172
Revision		(2,503	)		(1,771	)		-
As revised	$	25,710		$	9,744		$	1,172
Stock-based compensation
Prior to revision	$	26,499		$	21,801		$	2,005
Revision		(26,499	)		(21,801	)		(2,005	)
As revised	$	-		$	-		$	-
General and administrative
Prior to revision	$	14,392		$	7,995		$	2,020
Revision		9,117			11,011			121
Other Reclassifications		(677	)		-			-
As revised	$	22,832		$	19,006		$	2,141
Salaries and related benefits
Prior to revision	$	16,677		$	8,806		$	687
Revision		14,879			9,019			1,884
Other Reclassifications		657			-			-
As revised	$	32,203		$	17,825		$	2,571
Total operating expenses
Prior to revision	$	67,225		$	40,977		$	5,922
Revision		(2,503	)		(1,771	)		-
Other Reclassifications		(20	)		-			-
As revised	$	64,702		$	39,206		$	5,922

Table of Contents

	Three Months Ended
	March 31, 2022			June 30, 2022			September 30, 2022			December 31, 2022
	(amounts, in thousands)
Cost of sales
Prior to revision	$	156,812		$	173,760		$	178,951		$	160,097
Revision		804			704			506			489
Other Reclassifications		-			303			303			(606	)
As revised	$	157,616		$	174,767		$	179,760		$	159,980
Gross Profit
Prior to revision	$	6,166		$	7,281		$	6,906		$	7,860
Revision		(804	)		(704	)		(506	)		(489	)
Other Reclassifications		-			(303	)		(303	)		606
As revised	$	5,362		$	6,274		$	6,097		$	7,977
Stock-based compensation
Prior to revision	$	7,424		$	7,223		$	5,867		$	5,985
Revision		(7,424	)		(7,223	)		(5,867	)		(5,985	)
As revised	$	-		$	-		$	-		$	-
General and administrative
Prior to revision	$	2,742		$	3,908		$	3,516		$	4,266
Revision		2,865			2,704			1,775			1,773
Other Reclassifications		-			(160	)		(150	)		(367	)
As revised	$	5,607		$	6,452		$	5,141		$	5,632
Salaries and related benefits
Prior to revision	$	4,193		$	4,127		$	4,417		$	3,930
Revision		3,755			3,815			3,586			3,723
Other Reclassifications		-			(143	)		(153	)		953
As revised	$	7,948		$	7,799		$	7,850		$	8,607
Total operating expenses
Prior to revision	$	15,632		$	16,906		$	14,596		$	20,091
Revision		(804	)		(704	)		(506	)		(489	)
Other Reclassifications		-			(303	)		(303	)		586
As revised	$	14,828		$	16,202		$	14,090		$	19,582

Table of Contents

	Three Months Ended
	March 31, 2023
	(amounts, in thousands)
Cost of sales
Prior to revision	$	186,828
Revision		432
As revised	$	187,260
Gross Profit
Prior to revision	$	6,721
Revision		(432	)
As revised	$	6,289
Stock-based compensation
Prior to revision	$	5,902
Revision		(5,902	)
As revised	$	-
General and administrative
Prior to revision	$

Charge Enterprises, Inc. [CRGE] Filings
10-Q	[2023-08-14]
10-Q	[2023-05-10]
10-K	[2023-03-15]
10-Q	[2022-11-14]
S-1	[2022-08-24]
10-Q	[2022-08-15]
10-Q	[2022-05-16]
10-K	[2022-03-29]
S-1	[2021-02-12]