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CCGI > SEC Filings for CCGI > Form 10-Q on 14-Nov-2012All Recent SEC Filings

Show all filings for CAR CHARGING GROUP, INC.

Form 10-Q for CAR CHARGING GROUP, INC.


14-Nov-2012

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation

Cautionary Notice Regarding Forward Looking Statements

This Quarterly Report on Form 10-Q (this "Report") contains "forward-looking statements" within the meaning of the Section 27A of the Securities Act, and
Section 21E of the Exchange Act. Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as "anticipate," "believe," "estimate," "intend," "could," "should," "would," "may," "seek," "plan," "might," "will," "expect," "predict," "project," "forecast," "potential," "continue" negatives thereof or similar expressions. These forward-looking statements are found at various places throughout this Report and include information concerning possible or assumed future results of our operations; business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future operations, future cash needs, business plans and future financial results, and any other statements that are not historical facts.

From time to time, forward-looking statements also are included in our other periodic reports on Form 10-K, Forms 10-Q and 8-K, in our press releases, in our presentations, on our website and in other materials released to the public. Any or all of the forward-looking statements included in this Report and in any other reports or public statements made by us are not guarantees of future performance and may turn out to be inaccurate. These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report.

Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.

For discussion of factors that we believe could cause our actual results to differ materially from expected and historical results see "Item 1A - Risk Factors" in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 16, 2012.

Overview

We provide an electric charging service for the electric vehicle ("EV") automobile market, delivering convenient access for EV drivers to refuel their automobiles wherever they live, work and play. We seek to become a leading provider of EV charging services throughout North America and ultimately in Europe and Asia. In order for electric vehicles to become a mainstream reality, public EV charging stations need to be in place and readily available to consumers nationally.

We install electric charging services where EV owners are likely to live, commute, and shop, leading to a higher utilization on every installation investment. We contract with property owners and managers who control locations in high traffic areas where there is accelerating consumer adoption of electric cars as a less expensive means of transportation coupled with a focus on greenhouse gas savings.

We install charging stations, enabling most EV owners to fully recharge their batteries from empty in about four hours. However, most drivers will use our service to "top off" their batteries, to re-energize their batteries from approximately half a charge to a full charge. We set prices based on a variety of factors, some of which are local electricity tariffs, location, and competitive services. The stations that provide our service are sourced from a third party today, most of which are purchased from Coulomb Technologies.

Our approach is to become a strategic partner with property owners, who own high value real estate, and to demonstrate the value we offer their locations. Consumers seek businesses that support energy conservation and our service provides a differentiator for those real estate owners who want to promote themselves as supporters of the "green" movement. Electric vehicle charging provides this missing component for many property owners. Furthermore, our business model provides for the potential for increased revenue per parking spot. We offer the property owner a share in the revenue stream generated from the charging sessions as well as any other revenue derived from the location.

Over the past two years, we have entered into contracts with and generated strong relationships with many of the essential property owners required to build a nationwide charging business. Real estate segments which we have established strong ties with include apartment complexes/MDUs for residential living, REITs, national parking garage owners and managers, retailers, shopping centers and malls, high population density municipalities, and office parks. Partnerships under contract in the parking market segment include ICON Parking, City Park, Central Parking, ACE Parking, and LAZ Parking.


In the residential arena, we have contracts with Crescent Heights, Equity Residential, and Kettler. In the commercial venue, we have agreements with Forest City and Equity One. In the retail segment, relationships include Walgreens, Mall of America, Aventura Mall, Roundy's Supermarkets and Four Seasons in Miami. Lastly, municipalities own and operate prime locations where we have relationships and those include the Pennsylvania Turnpike, Hollywood, Florida, Norwalk, Connecticut, Santa Clara, California and Dania Beach and Miami Beach, Florida.

Currently, our main source of revenue is derived from the electric charging services, with pricing set as an hourly rate or on a per kilowatt hour rate as permitted by state regulation. As more states adopt electricity deregulation, we will be in a more advantageous position to competitively price our service vis-a-vis refueling at home. As a first mover in the EV infrastructure category, we are set to capitalize on the opportunities presented by this emerging industry. We are currently exploring other sources of revenue including a subscription model and residential hardware and services.

We are able to facilitate the purchase of EV charging stations through our wholly owned subsidiary, eCharging Stations, LLC. The installation and maintenance of the EV charging equipment is subcontracted through approved local vendors. It is competitively bid so as to maintain the lowest installation and on-going costs possible.

During the nine months ended September 30, 2012, we have installed 62 charging units at 45 additional locations, bringing the total number of charging units and locations that we currently service to 226 and 139, respectively.

On July 16, 2012, we announced that we have entered into a term sheet to acquire 350Green LLC, an owner and operator of EV charging stations throughout the United States. The deal is subject to the ongoing negotiation of the final terms of the definitive agreement and regulatory approval, and is anticipated to close between thirty and seventy-five days after the definitive agreement is signed.

History

We were incorporated on October 3, 2006 in Nevada with the intention of providing personal consultation services to the general public. On December 7, 2009, we entered into a share exchange agreement with Car Charging, Inc., a Delaware corporation.

At closing, pursuant to the majority consent of our board of directors and shareholders, we approved (i) an amendment to our Articles of Incorporation changing our name to Car Charging Group, Inc. and (ii) the authorization of 20,000,000 shares of preferred stock of the Company; subsequently amended to 40,000,000 shares of preferred stock. Additionally, we filed a Certificate of Designation with the state of Nevada designating rights to the authorized preferred stock of the Company.

During February, 2011, our Shareholders and Board of Directors authorized a decrease of our issued and outstanding common stock, in the form of a reverse stock-split, on a one-for-fifty (1:50) basis (the "Reverse Stock-Split"). All share and per share amounts included in the consolidated financial statements have been adjusted retroactively to reflect the effects of the Reverse Stock-Split.

Corporate Structure

Car Charging Group, Inc. is the parent company of Car Charging, Inc., a Delaware corporation, which serves as the main operating company and is, in turn, the parent company of several distinct wholly-owned subsidiary operating companies.

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Results of Operations

For the three months ended September 30, 2012 and 2011

Revenues

We generated revenues of $4,589 from service fees related to installed EV charging stations for the three months ended September 30, 2012 as opposed to $981 for the three months ended September 30, 2011. While our primary strategy is to earn revenue through the installation and maintenance of EV charging stations, we will sell EV charging stations on occasions when the opportunity presents itself. During the quarter ended September 30, 2012, we sold one EV charging station to a customer for a total price of $4,254 and at a gross profit of $1,109. During the quarter ended September 30, 2011, we did not sell any EV charging stations.

Operating Expenses

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

Compensation expense increased by $500,478 from $158,096 for the three months ended September 30, 2011 to $658,574 for the three months ended September 30, 2012. The increase was attributable to higher payroll costs as a result of the hiring of a Chief Operating Officer and controller, the hiring of additional employees to support the growth in the number of EV charging station installations and higher non-cash compensation costs as result of the issuance of warrants.

Other operating expenses decreased by $2,967 from $120,446 for the three months ended September 30, 2011 to $117,479 for the three months ended September 30, 2012. The decrease was attributable to a decrease in rent due to the reversal of an accrued sublease liability for which the landlord of the building released us from liability offset by an increase in office, utility and travel expenses.

General and administrative expenses decreased by $995,109 from $1,380,923 for the three months ended September 30, 2011 to $385,814 for the three months ended September 30, 2012. The decrease was primarily as a result of a decrease in outside non-cash consulting expenses during the three months ended September 30, 2012 offset by an increase in depreciation expense as result of an additional 45 installations during the quarter ended September 30, 2012.

Operating Loss

Our operating loss for the three months ended September 30, 2012 decreased by $498,422 as compared to the three months ended September 30, 2011 from $1,658,484 in 2011 to $1,160,062 in 2012 primarily as a result of decrease in general and administrative and other operating expenses and an increase in revenues offset by an increase in compensation expenses.

Other Income (Expense)

Other income decreased from income of $89,552 for the three months ended September 30, 2011 to other expense of $6,467 for the three months ended September 30, 2012 primarily as result of the gain on the change in the fair value of the derivative liability in 2011 of $94,380.

Net Income (Loss)

Our net loss for the three months ended September 30, 2012 decreased by $402,403 to $1,166,529 as compared to $1,568,932 for the three months ended September 30, 2011. The decrease was attributable to a net decrease in operating expenses of $497,598 and an increase in gross profit of $824 offset by a decrease in other income of $96,019.

For the nine months ended September 30, 2012 and 2011

Revenues

We generated revenues of $10,604 from service fees related to installed EV charging stations for the nine months ended September 30, 2012 as opposed to $981 in service fees for the nine months ended September 30, 2011. While our primary strategy is to earn revenue through the installation and maintenance of EV charging stations, we will sell EV charging stations on occasions when the opportunity presents itself. During the nine months ended September 30, 2012, we sold 69 EV charging stations to a customer for a total price of $235,726 and at a gross profit of $45,525. During the nine months ended September 30, 2011, we sold seven EV charging stations to a customer for a total price of $59,490 and at a loss of $1,340.


Operating Expenses

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

Compensation expense increased by $1,306,529 from $468,002 for the nine months ended September 30, 2011 to $1,774,531 for the nine months ended September 30, 2012. The increase was attributable to higher payroll costs as a result of the hiring of a Chief Operating Officer and controller, the hiring of additional employees to support the growth in the number of EV charging station installations and higher non-cash compensation costs as result of the issuance of warrants.

Other operating expenses increased by $126,802 from $294,897 for the nine months ended September 30, 2011 to $421,699 for the nine months ended September 30, 2012. The increase was attributable to an increase travel expenses as a result of the increase in the number of EV charging station installations, office and utility expenses offset by a decrease in rent due to the reversal of an accrued sublease liability for which the landlord of the building released us from liability.

General and administrative expenses decreased by $1,067,160 from $2,511,918 for the nine months ended September 30, 2011 to $1,444,758 for the nine months ended September 30, 2012. The decrease was primarily as a result of an decrease in non-cash outside consulting expenses during the nine months ended September 30, 2012.,

Operating Loss

Our operating loss for the nine months ended September 30, 2012 increased by $315,366 as compared to the nine months ended September 30, 2011 from $3,275,176, in 2011 to $3,590,542 in 2012 primarily as a result of an increase in other operating expenses and compensation expenses offset by a decrease in general and administrative expenses and an increase in gross profit.

Other Income (Expense)

Other income decreased from $3,346,983 for the nine months ended September 30, 2011 to other expense of $7,009 for the nine months ended September 30, 2012 primarily as result of a one-time gain of $3,372,543 from the change in fair value of a derivative liability in 2011.

Net Income (Loss)

Our net loss for the nine months ended September 30, 2012 increased by $3,669,358 to $3,597,551 as compared to net income of $71,807 for the nine months ended September 30, 2011. The increase was attributable to an increase in operating expenses of $366,171 and other expense of $3,353,992 offset by an increase in gross profit of $50,805.

Period from September 3, 2009 (date of inception) through September 30, 2012

Our cumulative net operating loss since inception is attributable to the fact that we have not derived significant revenue from operations to offset our business development expenses. Losses from operations since inception have amounted to $16,910,471 (including non-cash charges of $10,851,530 which includes the estimated value of warrants and common stock issued for services) primarily consisting of consulting, professional fees and public/investor relations fees. Our officers and staff have initiated a number of negotiations to install the selected charging stations through-out the United States and Europe. Manufacture and supply of electric vehicles that will require utilization of our services is not anticipated to be significant until the last calendar quarter of 2014; this gives us adequate time to develop its distribution plan, but also requires that we continue to develop capital sources.

Liquidity and Capital Resources

On February 6, 2012, we entered into a stock purchase agreement to sell 1,000,000 shares of Series B preferred stock at per share price of $1.00. The agreement includes an option to purchase an additional 1,500,000 shares of the Series B Preferred stock at an exercise price of $1.00 per share within 60 days of the issuance of the original 1,000,000 shares in June 2012. Simultaneously with the issuance of the original 1,000,000 Series B Preferred shares, Purchaser was entitled to receive two percent (2%) of the issued and outstanding common stock of CarCharging Limited (a subsidiary formed September 2012) in exchange for consulting services for developing business relationships and obtaining charging station locations in Romania. Additionally, if the Purchaser exercises its options in the initial stock purchase agreement, it will receive additional payment for their consulting services for developing business relationships and obtaining charging station locations in Greece in the form of 3% of the total outstanding common stock of CarCharging Ltd. We received the $900,000, net of issuance costs, in February 2012 and have issued 1,000,000 shares of Series B Preferred Stock as of June 28, 2012.

On February 27, 2012, we entered into a stock purchase agreement for 500,000 shares of restricted common stock in exchange for $500,000 cash.

On September 14, 2012, the Company issued an unsecured $65,000 convertible note payable to a warrant holder which bears interest at 12% per anum and is due with accrued interest on March 14, 2013. The note is convertible, at the discretion of the holder into the Company's common stock at the fixed rate of $1.00 per principal value for any unpaid principal and accrued interest thereon until the note is paid in full. In conjunction with the issuance of the note, the Company issued a warrant, to a stockholder to purchase 65,000 shares of the Company's common stock at a $1.00 per share until September 14, 2014.


We have financed our activities from sales of our capital stock and from loans from unrelated and related parties. A significant portion of the funds raised from the sale of capital stock has been used to cover working capital needs such as personnel and office expenses and various consulting and professional fees.

For the nine months ended September 30, 2012 and 2011, we used cash of $2,029,652 and $1,360,123 for operations, respectively, and $5,897,865 since inception. Such cash use and accumulated losses have resulted primarily from costs related to various personnel, consulting and professional fees and costs. During the nine months ended September 30, 2012, cash used for investing activities consisted of $677,428 for purchases of electric vehicle charging stations, automobile, domain names and office equipment as compared with $185,633 for the nine months ended September 30, 2011. Cash provided by financing activities for the nine months ended September 30, 2012 was $2,320,184 of which $1,360,000 was from the sale of shares of our common stock, net of issuance costs, and $900,000 from the sale of shares of our preferred stock, net of issuance costs and $65,000 from the issuance of a convertible note as compared to $999,999 provided by net proceeds from the sale of shares of our common stock for the nine months ended September 30, 2011. The net decrease in cash during the nine months ended September 30, 2012 was $386,896 as compared with a net decrease of $325,757 for the nine months ended September 30, 2011.

Since its inception, we have used cash for investing activities of $1,335,401 for the purchase of fixed and other assets and we have received cash provided by financing activities of $165,000 from notes payable and $7,093,045 from sales of shares of our preferred and common stock.

Subsequent Events

On October 10, 2012, we issued a convertible note in the amount of $100,000, secured by all of our assets due April 10, 2013 with interest at 10% per anum. The note is convertible, at the discretion of the holder into our common stock at the fixed rate of $1.00 per principal value for any unpaid principal and accrued interest thereon until the note is paid in full. The noteholder is entitled to be repaid $25,000 for every $1,000,000 raised in equity by us. In conjunction with the issuance of the note, we issued a warrant, to a stockholder to purchase 100,000 shares of our common stock at a $1.00 per share until October 10, 2015.

On October 12, 2012, we issued a convertible note in the amount of $50,000, secured by all of our assets, due April 12, 2013 with interest at 10% per anum. The note is convertible, at the discretion of the holder into our common stock at the fixed rate of $1.00 per principal value for any unpaid principal and accrued interest thereon until the note is paid in full. The noteholder is entitled to be repaid $25,000 for every $1,000,000 raised in equity by us. In conjunction with the issuance of the note, we issued a warrant, to a stockholder to purchase 50,000 shares of our common stock at a $1.00 per share until October 12, 2015.

The noteholders pertaining to the October 10, 2012 and October 12, 2012 transactions have mutually agreed to enjoy equal rights as secured lenders under each of their respective notes and that neither shall have priority over the other.

On October 24, 2012, we initiated a private offering of our common stock at $1.00 per share to "accredited investors", as defined, ("Investors") for which the minimum investment for all Investors shall be $500,000. In addition, each Investor shall receive a warrant to purchase a like number of shares of our common stock at $2.25 per share for a period of three years from the purchase date of the shares under the offering.

On October 25, 2012 in conjunction with this offering, we received $500,000 and issued 500,000 shares of our common stock and a warrant to purchase 500,000 share of our common stock at $2.25 per share which expires on October 25, 2015.

On November 1, 2012, we returned 15 charging stations and related software licenses totaling $40,185 to a vendor as the charging stations were in excess of our current requirements.

Off Balance Sheet Arrangements

We have no off-balance sheet arrangements.

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