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CCGI > SEC Filings for CCGI > Form 10-Q on 20-May-2013All Recent SEC Filings

Show all filings for CAR CHARGING GROUP, INC. | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for CAR CHARGING GROUP, INC.


20-May-2013

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, 2013.

Overview

We are a nationwide provider of electric vehicle ("EV") charging services. We currently provide comprehensive turnkey EV charging services to commercial, residential, and municipal property owners. These services enable EV drivers to recharge their EVs where they live, work, and play.

Our current service offerings are designed to accelerate the adoption of public EV charging services. Our complete turnkey service enables property owners to rollout EV charging services on their properties with no capital outlay in return for long-term service contracts. We pay for all equipment, installation, maintenance and related services. We believe that this innovative amenity increases property value, retains current tenants, and attracts new tenants.

We have more than 85 strategic partnerships across multiple business sectors, including multifamily residential and commercial properties, parking garages, shopping malls, retail centers, and municipalities. Our strategic partners own or manage a total of over 8 million parking spaces and include, but are not limited to Walgreens, Simon Property Group, Sears, Intel, Ace Parking, Central Parking, Equity One, Equity Residential, Icon Parking, Rapid Parking, Related Properties, USA Parking, Pennsylvania Department of Environmental Protection, City of Miami Beach (FL), City of Hollywood (FL), and City of Santa Clara (CA).


Our revenues are primarily derived from hardware sales, public EV charging services and government grants and rebates. We set our EV charging fees based on a variety of factors, including local electricity tariffs, location, and competitive services and alternative fuels. EV charging fees are set on an hourly rate or a per kilowatt-hour rate. We are also implementing subscription plans to include electricity for single-family homes, multifamily residential, and our public charging locations.

On March 28, 2013, we purchased 48 fast chargers from Aerovironment at an aggregate cost of $792,912. The Company entered into joint marketing agreement with Nissan North America for which among other matters requires us to build, own, operate and maintain a network of 48 fast chargers throughout the United States and create an auto dealer network promotion and referral program so as to facilitate sales of electric vehicles to their potential customers. Revenue received from the agreement on March 29, 2013, $782,880 is deferred and recognized ratably over the three year life of the chargers upon installation. We are required to install the network by December 31, 2013.

We are able to facilitate the purchase of EV charging stations through its wholly owned subsidiary, eCharging Stations, LLC. The installation and maintenance of the EV charging equipment is subcontracted through approved local vendors, and are competitively bid to maintain the lowest installation and on-going costs possible. The use of the stations is not anticipated in any significant volume until sometime after the second half of 2014, when it is anticipated additional automobile manufacturers are scheduled to mass produce and sell electric vehicles to the public.

By March 31, 2013, we had entered into contracts to provide charging services on third party premises, "Provider Agreements", with 64 entities and completed installation of 328 charging units ("EV Devices"). These do not include EV Devices procured in conjunction with the Synapse and 350Green acquisitions subsequent to March 31, 2013.

We generally have acquired charging stations from Coulomb Technologies Inc., but consistent with its policy and business plan, continuously reviews the availability of acquiring EV Devices from other manufacturers.

Pursuant to our business plan, to stimulate growth, control cash-flow and minimize costs, we have implemented a policy of both acquiring leads to property owners for Provider Agreements through independent contractors and the utilization of in-house personnel in pursuit of Provider Agreements. Our executives accordingly, are employed to close and maintain Provider Agreements and relationships, in addition to those who coordinate installations and operations of EV charging stations.


Results of Operations

The results of operations include the operations of Beam Charging LLC for the period of February 26, 2013, the acquisition date, through March 31, 2013.

For the three months ended March 31, 2013 and 2012

Revenues

We have generated revenues of $10,576 from service fees related to installed EV Charging Stations for the three months ended March 31, 2013 as compared to $2,605 in service fees for the three months ended March 31, 2012. 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 2012, we received a grant and a rebate totaling $59,988 to defray the cost of equipment and installation of 13 charging stations during 2012 from two governmental entities. The rebate and grant are deferred and amortized in a manner consistent with the depreciation expense of the related assets over their useful lives. As a result we amortized $4,999 into revenue during the three months ended March 31, 2013. We intend to vigorously seek additional grants, rebates, subsidies and equipment manufacturer incentives as a cost effective means of reducing our capital investment in the purchase and installation of charging stations. We did not derive any revenue from grants or rebates during the three months ended March 31, 2012

Operating Expenses

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

Compensation expense increased by $490,074 from $528,779 for the three months ended March 31, 2012 to $1,018,853 for the three months ended March 31, 2012. The increase was attributable to stock option compensation expense resulting from option grants under our 2012 Omnibus Incentive Plan and increased payroll costs as result of an increase in employee headcount..

Other operating expenses increased by $8,042 from $124,808 for the three months ended March 31, 2012 to $132,850 for the three months ended March 31, 2013. The increase was attributable to an increase in rent expense offset by a decrease in travel expenses.

General and administrative expenses decreased by $20,858 from $881,383 for the three months ended March 31, 2012 to $860,525 for the three months ended March 31, 2013. The decrease was primarily as a result of a decrease in investor relations and professional fees offset by an increase in depreciation expense related to the installations during the three months ended March 31, 2013 and the Beam depreciation expense for the period of February 26, 2013 through March 31, 2013.

Operating Loss

Our operating loss for the three months ended March 31, 2013 increased by $467,489 as compared to the three months ended March 31, 2012 from $1,532,773 in 2012 to $2,000,262 in 2013 primarily as a result of an increase in compensation expenses and other operating expenses offset by an increase in gross profit and a decrease in general and administrative expenses.

Other Income (Expense)

Other (expense) increased by $222,766 from $33 for the three months ended March 31, 2012 to $222,799 for the three months ended March 31, 2013. The increase was attributable to the amortization of debt discount of $117,992 associated with the convertible notes outstanding, a $47,856 loss sustained by issuing shares of common stock in settlement of an account payable, a loss of $46,701 upon repayment of convertible notes payable and an increase in interest expense.

Net Income (Loss)

Our net loss for the three months ended March 31, 2013 increased by $690,255 to $2,223,061 as compared to $1,532,806 for the three months ended March 31, 2012. The increase was attributable to a net increase in operating expenses of $476,458 and an increase in other expense of $222,766 offset by an increase in gross profit of $8,968.

Period from September 3, 2009 (date of inception) through March 31, 2013

Our cumulative net loss since inception, $21,163,488, including non-cash charges of $12,726,912 (which includes the fair value of warrants, options and common stock issued for services and compensation) primarily consisting of consulting, professional fees and public relations fees is attributable to the fact that we have not derived significant revenues from our operations to offset our business development expenses. Although auto manufacturers have initiated EV sales in the United States and that year over year increases in the number of Plug-in Electric Vehicles sold from 2012 to 2013 should lead to production of greater revenues, manufacture and demand of electric vehicles that will require utilization of our services, the demand is not anticipated to be widespread until the second half of 2014; this gives us adequate time to develop its distribution plan and additional capital sources.


Liquidity and Capital Resources

During the three months ended March 31, 2013, we have financed our activities from operations and from the sales of our capital stock. A significant portion of the funds raised from the sale of capital stock has been used to cover working capital needs such as personnel, office expenses and various consulting and professional fees.

For the three months ended March 31, 2013 and 2012, we provided cash of $228,298 in 2013 and used cash of $1,036,694 for operations and used $5,991,556 since inception. Such cash use and accumulated losses have resulted primarily from costs related to various personnel, consulting and professional fees. During the three months ended March 31, 2013, cash used for investing activities consisted of $859,547 for purchases of electric vehicle charging stations and our investment in Beam LLC of $171,075 as compared with $199,498 for the three months ended March 31, 2012. Cash provided by financing activities for the three months ended March 31, 2013 was $1,809,097 of which $1,958,069 was from the sale of shares of our common stock, net of issuance costs, the repayment of $146,000 of convertible notes and the repayment of the auto loan of $2,972 as compared to $1,500,000 provided by net proceeds from the sale of shares of our common stock and preferred stock for the three months ended March 31, 2012. The net increase in cash during the three months ended March 31, 2013 was $1,006,773 as compared with a net increase of $251,745 for the three months ended March 31, 2012.

Since inception, we have used cash for investing activities of $2,400,948 for the purchase of EV charging stations, office and computer equipment, an automobile and other assets. We have received cash provided by financing activities of notes payable of $150,000, and $9,173,417, net of issuance costs, primarily from sales of shares of our common and Series B Convertible Preferred stock.

At March 31, 2013, we had $1,020,189 in cash resources to meet current obligations. Although there can be no assurance, management believes that we have sufficient resources to fund our operations through at least March 31, 2014.


Subsequent Events

Acquisitions

Synapse Acquisition

On April 3, 2013 (the "Closing Date"), we, entered into an equity exchange agreement (the "Exchange Agreement") by and among us, EV Pass, LLC, a New York limited liability company ("EV Pass") and Synapse Sustainability Trust, Inc., a New York non-profit corporation ("Synapse") pursuant to which we acquired from Synapse (i) all of the outstanding membership interests in EV Pass; (ii) the right to operate, maintain and receive revenue from 68 charging stations located throughout Central New York State ("CNY") in exchange for 671,141 shares (the "Exchange Shares") of our common stock, par value $0.001 (the "Common Stock"); and (iii) title to the registered trademark "EV Pass" (the "Equity Exchange").

As part of the Equity Exchange, we made a payment of $100,000 to Synapse, of which $25,000 was paid on the Closing Date and $75,000 was issued in the form of a promissory note (the "Promissory Note"). The Promissory Note does not bear interest and is payable in three installment payments of $25,000 on each subsequent three month anniversary of the Closing Date.

On the Closing Date, the parties also executed (i) a Revenue Sharing Agreement wherein we agreed to pay Synapse 3.6% of the net revenues earned from all current and future charging units installed at any of the 68 CNY locations and
(ii) a Bleed-Out Agreement pursuant to which Synapse agreed to limit its total daily trading of the Common Stock to no more than 5% of the total daily trading volume of the Company's shares.

350Green Acquisition

On April 22, 2013 (the "Closing Date"), we entered into an addendum (the "Addendum") to an equity exchange agreement, dated March 8, 2013 (the "Exchange Agreement "), by and among us, 350 Holdings, LLC, a Florida limited liability company ("CCGI Sub"), 350 Green, LLC, a Virginia limited liability company ("350 Green"), Mariana Gerzanych ("Gerzanych"), and Timothy Mason ("Mason" and, together with Gerzanych, the "350 Members") for the acquisition of 350 Green.

350 Green operates a scalable network of plug-in electric vehicle ("EV") charging stations across the U.S. It distributes its stations by partnering with retail hosts at select, high-traffic shopping centers and other places where EV drivers live and work, to create an expansive and convenient network of EV charging locations.

Pursuant to the Addendum, we (through CCGI Sub) acquired all the membership interests of 350 Green from the 350 Members in exchange for $1,250,000 of which:
(a) $750,000 was paid in the form of 604,838 unregistered shares of our common stock, par value $0.001 (such shares, the "Exchange Shares"), and (b) $500,000 was paid in the form of a promissory note (the "Promissory Note") payable to the 350 Members (the "Equity Exchange"). The Promissory Note does not bear interest and is payable in the following installments: (i) a payment of $10,000 on the Closing Date, (ii) an additional $10,000 payment on the thirty (30) day anniversary of the Closing Date, and (iii) monthly installments in the amount of $20,000 thereafter until paid in full.

In connection with the Equity Exchange, we entered into a right of first refusal agreement (the "ROFR Agreement") between us and the 350 Members pursuant to which we obtained a right of first refusal to participate in any and all EV charging and infrastructure related business opportunities presented to the 350 Members for one (1) year following the Closing Date. If we participate in business opportunities presented to it by the 350 Members pursuant to the ROFR Agreement that results in our installing EV charging stations (each an "EV Station"), we shall pay the 350 Members $250 for the first station, $125 for each additional EV Station, and 1% of any revenues generated by each EV Station for five (5) years from date of installation. The 350 Members are not currently, and will not be, affiliated with, nor employees of, our Company in any way in the future.

On October 19, 2010, 350 Green was awarded a grant from the City of Chicago to install and maintain an EV charging network throughout the city pursuant to a grant agreement (the "Grant"). On or about June 14, 2012, the City of Chicago delivered a Notice of Default to 350 Green citing, among other deficiencies, that all work had stopped on the Grant project because of 350 Green's failure to pay its subcontractors and that 350 Green had made misrepresentations with regard to such payments and financial obligations. On February 5, 2013, the City of Chicago and ourselves accepted a Preliminary Terms of Approval of Transfer of Grant Agreement (the "Terms of Approval") that set forth (i) that the we will be allowed to receive assignment of the Grant if it, among other criteria, settles all of the outstanding claims by the unpaid subcontractors and finishes the Grant project pursuant to a revised scope and budget and (ii) that the City of Chicago will release 350 Green and ourselves from any and all liability with respect to misrepresentations regarding payments and financial obligations made by 350 Green prior to the Closing Date. The individual members of 350 Green will not receive a release as part of this settlement with the City of Chicago.

On March 1, 2013, the City of Chicago delivered approval of the Equity Exchange (the "Chicago Approval").

On April 22, 2013, we acquired 350 Green, and 350 Green became a wholly-owned subsidiary of CCGI Sub.

Equity Issuances

On February 19, 2013, the Company retained an individual to serve on the Company's Board of Directors for three years subject to the Board of Directors approval. As part of the agreement and the individual's compensation, the Company was obligated to issue him 50,000 shares of the Company's common stock valued at $71,000 under the 2012 Omnibus Plan. As the Company's Board of Directors did not approve his appointment to the Board of Directors until April 3, 2013 in conjunction with the Company's acquisition of EV Pass LLC, at which time he was issued 50,000 shares of common stock at $1.42 per share and options to purchase 12,000 shares at $1.19 per share which vest two years from date of grant and expire five years from date of grant. Both shares and options were issued from the 2013 Omnibus Incentive Plan.

As part of its acquisition of 350Green LLC, the Company issued an aggregate of 107,513 shares of its common stock at $1.19 per share to third parties to pay off debt owed to these parties by 350Green LLC.


During the period of April 1, 2013 through May 15, 2013, the Company in connection with a grant dated January 1, 2013 issued a firm shares restricted stock award under the Company's 2013 Omnibus Incentive Plan consisting of 45,833 shares of the Company's common stock at an average price of $1.27 per share for advisory services rendered during said period based on an agreement entered into on September 13, 2012.

During the period of April 1, 2013 through May 15, 2013, the Company in connection with a grant dated January 1, 2013, issued a firm a restricted stock award under the Company's 2013 Omnibus Incentive Plan consisting of 175,000 shares of the Company's common stock at an average price of $1.30 per share for advisory services rendered during said period based on an agreement entered into on September 10, 2012.

During the period of April 1, 2013 through May 15, 2013, in conjunction with a consulting agreement which the Company entered into on December 10, 2012 with a firm, the Company issued 19,634 shares of its common stock to the firm for consulting services at an average price of $1.30 per share for services rendered during said period.

During the period of April 1, 2013 through May 15, 2013, in conjunction with a social media marketing agreement entered into by the Company on December 19, 2012, the Company issued 7,765 shares of its common stock at average price of $1.29 per share as a fee for said period.

During the period of April 1, 2013 through May 15, 2013, in conjunction with a consulting agreement with a firm for business development services entered into by the Company on August 15, 2012, the Company issued 7,550 shares of its common stock to the firm at an average price of $1.32 during said period.

Off Balance Sheet Arrangements

We have no off-balance sheet arrangements.

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