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CCGI > SEC Filings for CCGI > Form 10-Q on 20-Aug-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-Aug-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, and 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.

Among other things, our service offerings are designed to accelerate the adoption of public EV charging services. In return for long-term service contracts, our complete turnkey service enables property owners to rollout EV charging on their properties at no expense, as we pay for all EV charging equipment, installation, maintenance and related services. It is our belief that this innovative amenity serves to increase property value, retains current tenants, and attracts prospective tenants as well.

With more than 87 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 over 8 million parking spaces. These partnerships include, but are not limited to, companies such as 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, government grants, state and federal rebates, and marketing incentives. EV charging fees are based either on an hourly rate or a per kilowatt-hour rate, and are calculated based on a variety of factors, including local electricity tariffs, strength of location, competitive services, and the prices of other fuels (such as gasoline). We are also implementing subscription plans to include electricity for single-family homes, multifamily residential homes, and our public charging locations.

On March 28, 2013, we purchased 48 DC fast chargers from AeroVironment, a distributor for Nissan North America, at an aggregate cost of $792,912. To memorialize this purchase, the Company entered into joint marketing agreement with Nissan North America, pursuant to which we received marketing incentive funds of $782,880. This agreement requires us to build, own, operate and maintain a network of DC fast chargers throughout the United States, and to create a Nissan dealer network promotion and referral program to facilitate sales of EVs to Nissan's customers. We are required to install the network by December 31, 2013 but have not installed any of these chargers as of June 30, 2013. All marketing incentive funds received pursuant to the agreement with Nissan will be recognized as revenues ratably over the three-year life of the chargers upon installation.

We purchase of all of the company's EV charging stations through our wholly-owned subsidiary, eCharging Stations, LLC. Stations are then installed and maintained though competitively bid subcontractor agreements with certified local vendors, to maintain the lowest installation and long-term costs possible. It is anticipated that automobile manufacturers are scheduled to mass produce and sell more models of electric vehicles to the public sometime after the second half of 2014. Accordingly, at that time we anticipate that there will be a significant increase in the use of our EV charging stations.

As of June 30, 2013, we had entered into contracts to provide EV charging services to a total of 87 strategic partners. As a result of our acquisitions of three competitors, we increased our EV charging stations by 679 charging units ("EV Devices"), to a total of 974 EV Devices. Further, we have also added 27 DC fast charging to our network through our acquisitions. As a result of recent partnerships with EV manufacturers, our network has broadened its offerings and includes units from numerous manufacturers, in addition to ChargePoint, whose charging units we have used solely used in the past. Due to our recent efforts being focused on the absorption and integration of newly acquired charging units into our network, we were not able to complete any installations during the quarter ended June 30, 2013. However, during July 2013, we were able to move forward and complete installation of an additional 7 charging units.

To generate leads and enter into additional strategic partnership agreements with property owners, we have utilized the services of independent contractors and in house personnel. We have found that by following this model, we are better able to stimulate growth, control cash-flow, and minimize costs. Accordingly, our independent contractors are able to close and maintain client relationships, as well as coordinate EV charging station installations and operations.


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 June 30, 2013, EV Pass LLC for the period of April 3, 2013, the acquisition date, through June 30, 2013 and 350Green LLC for the period of April 23, 2013, acquisition date, through June 30, 2013.

For the three months ended June 30, 2013 and 2012

Revenues

We have generated revenues of $32,227 from service fees related to installed EV Charging Stations for the three months ended June 30, 2013 as compared to $3,410 in service fees for the three months ended June 30, 2012 as a result of the 679 charging heads acquired from Beam, EV Pass and 350Green. Grant revenue increased from $0 to $32,750. Grants, rebate and incentives, collectively "grant revenue" related to equipment and related installation are deferred and amortized in a manner consistent with the depreciation expense of the related assets over their useful lives. Grants revenue related to operating expenses are recognized as revenue when the expense is incurred. Grant revenue was primarily derived from a grant from New York State Energy Research and Development Authority ("NYSERDA"). 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. Equipment sales decreased from $231,472 to $12,762. During the quarter ended June 30, 2012 we sold 68 units whereas we sold three units during the quarter ended June 30, 2013.

Cost of Revenues

Cost of revenues for the quarter ended June 30, 2013 decreased to $50,019 as compared to $188,438 for the quarter ended June 30, 2012.

Cost of services increased to $42,309 for the quarter ended June 30, 2013 as compared to $1,382 for the quarter ended June 30, 2012 as a result of the increased revenues during the same period due to an increase in the number of heads in operation resulting from the acquisitions. Cost of sales decreased from $187,056 during the period ended June 30, 2012 to $7,710 due to a decrease of 65 units sold.

Operating Expenses

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

Compensation expense increased by $2,700,242 from $587,178 for the three months ended June 30, 2012 to $3,287,420 for the three months ended June 30, 2013. The increase was attributable to an increase in grants of warrants compensation expense and option grants under our 2012 Omnibus Incentive Plan.

Other operating expenses decreased by $37,918 from $179,412 for the three months ended June 30, 2012 to $141,494 for the three months ended June 30, 2013. The decrease was attributable to a decrease in rent expense and office expenses.

General and administrative expenses increased by $1,854,636 from $177,561 for the three months ended June 30, 2012 to $2,032,197 for the three months ended June 30, 2013. The increase was primarily as a result of an increase in stock and warrants issued to consultants, an increase in professional fees as a result of the acquisitions and an increase in depreciation expense related to the increase in the number of charging heads acquired.

Operating Loss

Our operating loss for the three months ended June 30, 2013 increased by $4,535,684 as compared to the three months ended June 30, 2012 from $897,707 in 2012 to $5,433,391 in 2013 primarily as a result of a decrease in revenues, an increase compensation expenses, general and administrative expenses, and other expenses offset by an decrease in cost of revenue s and other operating expenses.

Other Income (Expense)

Other expense increased by $206,516 from $509 for the three months ended June 30, 2012 to $207,025 for the three months ended June 30, 2013. The increase was attributable to a provision for warrant liability of $187,000 associated with the Beam acquisition, an increase in interest expense $10,725 due to debt incurred in connection with the acquisitions and an increase in amortization of discount on convertible notes payable of $8,791.

Net Income (Loss)

Our net loss for the three months ended June 30, 2013 increased by $4,742,200 to $5,640,416 as compared to $898,216 for the three months ended June 30, 2012. The increase was attributable to a net increase in operating expenses of $4,516,960, an increase in other expense of $206,516 and a decrease in gross profit of $18,724.


For the six months ended June 30, 2013 and 2012

Revenues

We have generated revenues of $42,803 from service fees related to installed EV Charging Stations for the six months ended June 30, 2013 as compared to $6,015 in service fees for the six months ended June 30, 2012 as a result of the 679 charging heads acquired from Beam, EV Pass and 350Green. Grant revenue increased from $0 to $37,749. Grants, rebate and incentives, collectively "grant revenue" related to equipment and related installation are deferred and amortized in a manner consistent with the depreciation expense of the related assets over their useful lives. Grants revenue related to operating expenses are recognized as revenue when the expense is incurred. Grant revenue was primarily derived from a grant from New York State Energy Research and Development Authority ("NYSERDA"). 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. Equipment sales decreased from $231,472 to $12,762. During the quarter ended June 30, 2012 we sold 68 units whereas we sold three units during the quarter ended June 30, 2013.

Cost of Revenues

Cost of revenues for the six months ended June 30, 2013 decreased to $54,428 as compared to $188,846 for the six months ended June 30, 2012. Cost of services increased to $46,718 for the six months ended June 30, 2013 as compared to $1,790 for the six months ended June 30, 2012 as a result of the increased revenues during the same period due to an increase in the number of heads in operation resulting from the acquisitions. Cost of sales decreased from $187,056 during the period ended June 30, 2012 to $7,710 due to a decrease of 65 units sold.

Operating Expenses

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

Compensation expense increased by $3,189,516 from $1,115,957 for the six months ended June 30, 2012 to $4,305,473 for the six months ended June 30, 2013. The increase was attributable to an increase in grants of warrants and options under our 2012 Omnibus Incentive Plan.

Other operating expenses decreased by $29,876 from $304,220 for the six months ended June 30, 2012 to $274,344 for the six months ended June 30, 2013. The decrease was attributable to a decrease in travel expense expenses.

General and administrative expenses increased by $1,833,778 from $1,058,944 for the six months ended June 30, 2012 to $2,892,722 for the six months ended June 30, 2013. The increase was primarily as a result of an increase in stock and warrants issued to consultants, an increase in professional fees as a result of the acquisitions and an increase in depreciation expense related to the increase in the number of charging heads acquired.

Operating Loss

Our operating loss for the six months ended June 30, 2013 increased by $5,003,173 as compared to the six months ended June 30, 2012 from $2,430,480 in 2012 to $7,433,653 in 2013 primarily as a result of an increase in compensation expenses and general and administrative expenses, a decrease in revenues, offset by decreases in other operating expenses and cost of revenue.

Other Income (Expense)

Other expense increased by $429,282 from $542 for the six months ended June 30, 2012 to $429,824 for the six months ended June 30, 2013. The increase was attributable to a provision for warrant liability associated with the Beam transaction of $187,000, $47,856 net loss sustained by issuing shares of common stock in settlement of an account payable, a loss on payment of convertible notes payable of $46,701 an increase in interest expense $20,942 due to debt incurred in connection with the acquisitions and an increase in amortization of discount on convertible notes payable of $126,783.

Net Income (Loss)

Our net loss for the six months ended June 30, 2013 increased by $5,432,455 to $7,863,477 as compared to $2,431,022 for the six months ended June 30, 2012. The increase was attributable to a net increase in operating expenses of $4,993,418, an increase of other expense of $429,282 and a decrease in gross profit of $9,755.

Period from September 3, 2009 (date of inception) through June 30, 2013

Our cumulative net loss since inception, $26,803,904, including non-cash charges of $16,885,661 (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 six months ended June 30, 2013, we have financed our activities from operations and from the sales of our capital stock and issuance of debt. 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 six months ended June 30, 2013 and 2012, we used cash of $993,031 in 2013 and $1,439,692 for operations and used $7,212,885 since inception. Such cash use has been primarily to fund operations. During the six months ended June 30, 2013, cash used for investing activities consisted of $905,502 for purchases of electric vehicle charging stations and the excess of cash received over the cash invested pertaining to our acquisitions of $9,354 and $163,292 for the purchase of an accounts receivable as compared to $496,293 for the six months ended June 30, 2012 primarily for the purchase of capital expenditure. Cash provided by financing activities for the six months ended June 30, 2013 was $2,204,220 of which $2,208,000 was from the sale of shares of our common stock, net of issuance costs, the net repayment of $673,780 of convertible and non-convertible notes and $525,000 of proceeds derived from the receipt funds for investment in common stock of the Company which was issued subsequent to June 30, 2013 as compared to $2,258,085 provided primarily by the net proceeds from the sale of shares of our common stock and preferred stock for the six months ended June 30, 2012. The net increase in cash during the six months ended June 30, 2013 was $151,749 as compared with a net increase of $322,100 for the six months ended June 30, 2012.

Since inception, we have used cash for investing activities of $2,429,766 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 convertible and non-convertible notes payable of $541,000, and $9,423,348, net of issuance costs, primarily from sales of shares of our common and Series B Convertible Preferred stock.

At June 30, 2013, we had $165,165 in cash resources to meet current obligations. In addition, as of June 30, 2013, the Company had a net working capital deficit of $7,746,256. These conditions raise substantial doubt about our ability to continue as a going concern. Our management's plans include seeking additional equity investments, sale of energy tax credits, and institution of a cost reduction plan. Although there can be no assurance of achieving its plan, our management believes its plan, if successful, will allow it to have sufficient resources to fund the Company's operations through at least June 30, 2014.


Off Balance Sheet Arrangements

We have no off-balance sheet arrangements.

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