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CCGI > SEC Filings for CCGI > Form 10-Q on 14-Nov-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.


14-Nov-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 public EV charging services, government grants, state and federal rebates, marketing incentives and hardware sales. 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.

In July 2013, CarCharging joined the National Electrical Manufacturers Association (NEMA), the association of electrical equipment and medical imaging manufacturers. Founded in 1926, NEMA has over 440 member companies that manufacture a diverse set of products including power transmission and distribution equipment. Car Charging joined as an associate member of the EV Supply Equipment (EVSE)/Systems section.

In September 2013, CarCharging served as a sponsor of several National Plug-In Day events including events in Northern California, New York City, and South Florida. Over 5,000 visitors participated in the events, which provided the opportunity to test drive an EV, learn about CarCharging and its EV charging stations, and to obtain a free RFID card to access CarCharging's EV charging stations. Additionally, in New York City, subscription plans were promoted, which generated new subscribers.

We purchase 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 a result of our acquisitions of three competitors, we increased our EV charging stations by 679 charging units ("EV Devices") and installed an additional 29 EV Devices bringing our total EV Devices to 1,003 as of September 30, 2013. 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 solely used in the past.

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 September 30, 2013, EV Pass LLC for the period of April 3, 2013, the acquisition date, through September 30, 2013 and 350Green LLC for the period of April 22, 2013, acquisition date, through September 30, 2013.

For the three months ended September 30, 2013 and 2012

Revenues

We have generated revenues of $40,863 from service fees related to installed EV Charging Stations for the three months ended September 30, 2013 as compared to $4,589 in service fees for the three months ended September 30, 2012 primarily as a result of the 679 charging heads acquired from Beam, EV Pass and 350Green. Grant revenue increased from $0 to $48,303. 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. Grant 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 $4,254 to $0. During the quarter ended September 30, 2012 we sold 1 unit whereas we sold no units during the quarter ended September 30, 2013.

Cost of Revenues

Cost of revenues for the quarter ended September 30, 2013 increased to $39,662 as compared to $7,038 for the quarter ended September 30, 2012 primarily because of the incremental service fees.

Operating Expenses

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

Compensation expense increased by $4,860,240 from $658,574 for the three months ended September 30, 2012 to $5,518,814 for the three months ended September 30, 2013. The increase was attributable to an increase in compensation expense related to options and warrants granted under both our Omnibus Incentive Plans and non-Plan grants.

Other operating expenses increased by $174,080 from $117,479 for the three months ended September 30, 2012 to $291,559 for the three months ended September 30, 2013. The increase was attributable to an increase in rent expense and sales and use tax expenses.

General and administrative expenses increased by $964,262 from $385,814 for the three months ended September 30, 2012 to $1,350,076 for the three months ended September 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 September 30, 2013 increased by $5,950,883 as compared to the three months ended September 30, 2012 from $1,160,062 in 2012 to $7,110,945 in 2013 primarily as a result of an increase in cost of revenues, compensation expenses, general and administrative expenses, and other operating expenses partially offset by an increase in revenues.

Other Income (Expense)

Other expense increased by $819,458 from $6,467 for the three months ended September 30, 2012 to $826,015 for the three months ended September 30, 2013. The increase was attributable to a debt conversion expense of $687,286 as result of the fair value of the conversion of notes payable into common stock and warrants on conversion terms more favorable than the fair value of the conversion terms when the notes were initially issued, a provision for warrant liability of $122,000 associated with the Beam acquisition, an increase in interest expense $10,262 due to debt incurred in connection with the acquisitions.

Net Income (Loss)

Our net loss for the three months ended September 30, 2013 increased by $6,770,431 to $7,936,960 as compared to $1,166,529 for the three months ended September 30, 2012. The increase was attributable to a net increase in operating expenses of $5,998,582, an increase in other expense of $819,458 offset by an increase in gross profit of $47,699. Our net loss attributable to common shareholders for the three months ended September 30, 2013 increased by $9,602,261 from $1,166,529 to $10,768,790 for the aforementioned reasons and for the deemed dividend of $2,831,830 attributable to the fair value of the conversion of Series B Preferred shares into common shares and warrants on terms more favorable than the fair value of the initial conversion terms by which the Series B shares were initially issued.


For the nine months ended September 30, 2013 and 2012

Revenues

We have generated revenues of $83,666 from service fees related to installed EV Charging Stations for the nine months ended September 30, 2013 as compared to $10,604 in service fees for the nine months ended September 30, 2012 primarily as a result of the 679 charging heads acquired from Beam, EV Pass and 350Green. Grant revenue increased from $0 to $86,052. 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. Grant 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 $235,726 to $12,762. During the nine months ended September 30, 2012 we sold 69 units whereas we sold three units during the nine months ended September 30, 2013.

Cost of Revenues

Cost of revenues for the nine months ended September 30, 2013 decreased to $94,090 as compared to $195,884 for the nine months ended September 30, 2012. Cost of services increased to $86,380 for the nine months ended September 30, 2013 as compared to $5,683 for the nine months ended September 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 $190,201 during the nine month period ended September 30, 2012 to $7,710 due to a decrease of 66 units sold.

Operating Expenses

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

Compensation expense increased by $8,049,756 from $1,774,531 for the nine months ended September 30, 2012 to $9,824,287 for the nine months ended September 30, 2013. The increase was attributable to an increase in compensation expense related to warrants and options granted under both our Omnibus Incentive Plans and non-Plan grants.

Other operating expenses increased by $144,204 from $421,699 for the nine months ended September 30, 2012 to $565,903 for the nine months ended September 30, 2013. The increase was attributable to an increase in rent and sales and use tax expenses.

General and administrative expenses increased by $2,798,040 from $1,444,758 for the nine months ended September 30, 2012 to $4,242,798 for the nine months ended September 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 nine months ended September 30, 2013 increased by $10,954,056 as compared to the nine months ended September 30, 2012 from $3,590,542 in 2012 to $14,544,598 in 2013 primarily as a result of an increase in compensation expenses, general and administrative expenses and other operating expenses partially offset by an increase in gross profit.

Other Income (Expense)

Other expense increased by $1,248,830 from $7,009 for the nine months ended September 30, 2012 to $1,255,839 for the nine months ended September 30, 2013. The increase was attributable to a debt conversion expense of $687,286 as result of the fair value of the conversion of notes payable into common stock and warrants on conversion terms more favorable than the fair value of the conversion terms when the notes were initially issued, a provision for warrant liability associated with the Beam transaction of $309,000, $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 $31,204 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 nine months ended September 30, 2013 increased by $12,202,886 to $15,800,437 as compared to $3,597,551 for the nine months ended September 30, 2012. The increase was attributable to a net increase in operating expenses of $10,992,010, an increase of other expense of $1,248,830 partially offset by an increase in gross profit of $37,944. Our net loss attributable to common shareholders for the nine months ended September 30, 2013 increased by $15,034,716 from $3,597,551 to $18,632,267 for the aforementioned reasons and for the deemed dividend of $2,831,830 attributable to the fair value of the conversion terms of Series B Preferred shares into common shares and warrants on terms more favorable than the fair value of the initial conversion terms by which the Series B shares were initially issued.

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

Our cumulative net loss attributable to common shareholders since inception, $37,572,694, including non-cash charges of $21,932,338 (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 nine months ended September 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 nine months ended September 30, 2013 and 2012, we used cash for operations of $1,218,611 and $2,060,655 and used $7,438,465 since inception. Such cash use has been primarily to fund operations. During the nine months ended September 30, 2013, cash used for investing activities consisted of $968,458 for purchases of electric vehicle charging stations and computer equipment, the purchase of a note receivable related to the Beam acquisition of $163,292 and the excess of cash received over the cash invested pertaining to our acquisitions of $9,345 as compared to $646,425 for the nine months ended September 30, 2012 primarily for capital expenditures. Cash provided by financing activities for the nine months ended September 30, 2013 was $2,982,431 of which $2,384,661 was from the sale of shares of our common stock, net of issuance costs, the proceeds from non-convertible notes totaling $145,00 and repayment of notes of $725,029 as compared to $2,320,184 provided primarily by the net proceeds from the sale of shares of our common stock and preferred stock and the issuance of convertible debt for the nine months ended September 30, 2012. The net increase in cash during the nine months ended September 30, 2013 was $43,650 as compared with a net decrease of $386,896 for the nine months ended September 30, 2012.

Since inception, we have used cash for investing activities of $2,492,731 for the purchase of EV charging stations, office and computer equipment and an automobile. We have received cash provided by financing activities of convertible and non-convertible notes payable of $541,000, and $10,180,043, net of issuance costs, primarily from sales of shares of our common and Series B Convertible Preferred stock and have made not repayments of $732,781.

At September 30, 2013, we had $57,066 in cash resources to meet current obligations. In addition, as of September 30, 2013, the Company had a net working capital deficit of $6,645,498. From September 1, 2013 through November 14, 2013, we have raised an additional $4,895,509, net of issuance costs of which $3,305,000 was expended toward the purchase of the Blink Network Historically, the Company has been dependent on debt and equity raised from individual investors to sustain its operations. The Company's product has not been placed in enough locations nor have a sufficient number of plug-in electric vehicles been sold that utilize public charging stations to generate significant revenue. Management intends to raise additional funds in an equity financing transaction during the three months ending December 31, 2013. There can be no assurance that the Company will be successful in obtaining such financing at the level needed for long-term operations or on terms acceptable to the Company. If the Company is not successful in obtaining sufficient financing, the Company's ability to continue as a going concern is uncertain. The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

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 September 30, 2014.


Off Balance Sheet Arrangements

We have no off-balance sheet arrangements.

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