Blink Charging Co. - Quarter Report: 2011 September (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM 10-Q
_______________(Mark One)
|
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended September 30, 2011
or
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the transition period from ______ to ______.
CAR CHARGING GROUP, INC.
(Exact name of registrant as specified in charter)
|
Nevada
|
33-1155965
|
03-0608147
|
||
|
(State or other jurisdiction of
incorporation or organization)
|
(Commission File Number)
|
(I.R.S Employee Identification No.)
|
1691 Michigan Avenue, Sixth Floor
Miami Beach, FL 33139
(Address of principal executive offices)
_______________
(305) 521-0200
(Registrant’s telephone number, including area code)
_______________
(Former name or former address and former fiscal year, if changed since last report)
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 issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).
Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
|
Large Accelerated Filer
|
o |
Accelerated Filer
|
o |
|
Non-Accelerated Filer
|
o (Do not check if smaller reporting company) |
Smaller Reporting Company
|
x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes o No x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock. As of November 18, 2011, there were 36,384,414 shares of common stock, $0.001 par value were issued and outstanding.
CAR CHARGING GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
FORM 10-Q
September 30, 2011
INDEX
|
PART I-- FINANCIAL INFORMATION
|
Page | |
|
|
||
|
Item 1.
|
Financial Statements
|
F-1 |
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
1 |
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
3 |
|
Item 4.
|
Control and Procedures
|
3 |
|
PART II-- OTHER INFORMATION
|
||
|
Item 1.
|
Legal Proceedings
|
4 |
|
Item 1A.
|
Risk Factors
|
4 |
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
4 |
|
Item 3.
|
Defaults Upon Senior Securities
|
5 |
|
Item 4.
|
(Removed and Reserved)
|
5 |
|
Item 5.
|
Other Information
|
5 |
|
Item 6.
|
Exhibits
|
5 |
|
SIGNATURES
|
6 | |
PART I- FINANCIAL INFORMATION
Item 1. Financial Statements
CAR CHARGING GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
September 30, 2011
Index to Financial Statements
|
FINANCIAL STATEMENTS
|
Page #
|
|
Condensed Consolidated Balance Sheets as of September 30, 2011 (Unaudited) and December 31, 2010
|
F-2
|
|
Condensed Consolidated Statements of Operations for the Three Months Ended September 30, 2011 and 2010, for the Nine Months Ended September 30, 2011 and 2010 and for the Period from September 3, 2009 (Inception) through September 30, 2011 (Unaudited)
|
F-3 & F-4
|
|
Condensed Consolidated Statement of Stockholders’ Equity (Deficit) for the Period from September 3, 2009 (Inception) through September 30, 2011 (Unaudited)
|
F-5
|
|
Condensed Consolidated Statements of Cash flows for the Nine Months Ended September 30, 2011 and 2010, and for the Period from September 3, 2009 (Inception) through September 30, 2011 (Unaudited)
|
F-6
|
|
Condensed Notes to the Consolidated Financial Statements (Unaudited)
|
F-7
|
F-1
CAR CHARGING GROUP, INC.
(A Development Stage Company)
Condensed Consolidated Balance Sheets
|
September 30 2011
|
December 31 2010
|
|||||||
|
ASSETS
|
(UNAUDITED)
|
|||||||
|
Current Assets:
|
||||||||
|
Cash
|
$
|
48,111
|
$
|
373,868
|
||||
|
Accounts receivable
|
562
|
0
|
||||||
|
Prepaid expenses and other current assets
|
165,250
|
78,004
|
||||||
|
Total current assets
|
213,923
|
451,872
|
||||||
|
OTHER ASSETS:
|
||||||||
|
Deposits
|
39,088
|
69,696
|
||||||
|
EV Charging Stations (net of accumulated depreciation of $88,722 and $11,242, respectively)
|
310,456
|
216,616
|
||||||
|
Office and computer equipment (net of accumulated depreciation of $12,382 and $5,373, respectively)
|
38,285
|
30,995
|
||||||
|
Total other assets
|
387,829
|
317,307
|
||||||
|
TOTAL ASSETS
|
$
|
601,752
|
$
|
769,179
|
||||
|
LIABILITIES AND STOCKHOLDERS' EQUITY ( DEFICIT)
|
||||||||
|
Current Liabilities:
|
||||||||
|
Accounts payable and accrued expenses
|
$
|
210,153
|
$
|
104,432
|
||||
|
Accrued interest
|
5,169
|
7,268
|
||||||
|
Short-term notes, net of discount of $ 19,944 and $ 0, respectively
|
200,056
|
0
|
||||||
|
Current maturities of Convertible notes payable, net of discount of $ 0 and $15,614, respectively
|
3,750
|
69,387
|
||||||
|
Total current liabilities
|
419,128
|
181,087
|
||||||
|
Derivative liabilities
|
116,072
|
3,467,864
|
||||||
|
Total liabilities
|
535,200
|
3,648,951
|
||||||
|
Stockholders' Equity (Deficit):
|
||||||||
|
Series A Convertible Preferred stock: $0.001 par value; 20,000,000 shares authorized and designated as Series A; 10,000,000 shares issued and outstanding
|
10,000
|
10,000
|
||||||
|
Common stock: $0.001 par value; 500,000,000 shares authorized; 35,293,405 and 1,796,817 shares issued and outstanding, respectively
|
35,293
|
1,797
|
||||||
|
Additional paid-in capital
|
12,460,194
|
9,619,173
|
||||||
|
Deficit Accumulated in the Development Stage
|
(12,438,935
|
)
|
(12,510,742
|
)
|
||||
|
Total Stockholders’ Equity (Deficit)
|
66,552
|
(2,879,772
|
)
|
|||||
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY ( DEFICIT)
|
$
|
601,752
|
$
|
769,179
|
||||
See accompanying notes to the condensed consolidated financial statements.
F-2
CAR CHARGING GROUP, INC.
(A Development Stage Company)
Condensed Consolidated Statements of Operations
(UNAUDITED)
|
For the Three
|
For the Three
|
|||||||
|
Months Ended
|
Months Ended
|
|||||||
|
September 30,
|
September 30, | |||||||
| 2011 | 2010 | |||||||
|
Revenues:
|
||||||||
| Services | $ | 981 | $ | - | ||||
| Sales | - | - | ||||||
| Total revenue | 981 | - | ||||||
| Cost of sales | - | - | ||||||
| Gross profit | 981 | - | ||||||
|
Operating expenses:
|
||||||||
|
Compensation
|
863,396 | 7,227,171 | ||||||
|
Other
|
603,332 | 52,474 | ||||||
|
General and administrative
|
192,737 | 335,755 | ||||||
|
Total operating expenses
|
1,659,465 | 7,615,400 | ||||||
|
Income (loss) from operations
|
(1,658,484 | ) | (7,615,400 | ) | ||||
|
Other income (expense):
|
||||||||
|
Interest expense, net
|
(4,828 | ) | (6,512 | ) | ||||
|
Gain (loss) on change in fair value of
|
||||||||
|
derivative liability
|
94,380 | 3,048,180 | ||||||
|
Total other income (expense)
|
89,552 | (3,041,668 | ) | |||||
|
Income (loss) before income taxes
|
(1,568,932 | ) | (4,573,732 | ) | ||||
|
Income tax provision
|
- | - | ||||||
|
Net Income (loss)
|
$ | (1,568,932 | ) | $ | (4,573,732 | ) | ||
|
Net loss per common share – basic
|
$ | (.13 | ) | $ | (2.68 | ) | ||
|
Net loss per common share – diluted
|
$ | (.13 | ) | $ | (2.68 | ) | ||
|
Weighted average number of common shares outstanding – basic
|
12,131,442 | 1,702,317 | ||||||
|
Weighted average number of common shares outstanding – diluted
|
12,139,050 | 1,702,317 | ||||||
See accompanying notes to the condensed consolidated financial statements.
F-3
CAR CHARGING GROUP, INC.
(A Development Stage Company)
Condensed Consolidated Statements of Operations
(UNAUDITED)
|
For the Nine
Months Ended
September 30,
2011
|
For the Nine
Months Ended
September 30,
2010
|
For the
Period from
September 3, 2009
(Inception) to
September 30,
2011
|
||||||||||
|
Revenues:
|
||||||||||||
| Services |
$
|
981
|
$
|
-
|
$
|
981
|
||||||
| Sales | 59,490 | - | 59,490 | |||||||||
| Total revenue | 60,471 | - | 60,471 | |||||||||
| Cost of sales | 60,830 | - | 60,830 | |||||||||
| Gross profit | (359 | ) | - | (359 | ) | |||||||
|
Operating expenses:
|
||||||||||||
|
Compensation
|
1,833,815
|
7,613,956
|
9,929,980
|
|||||||||
|
Other
|
829,008
|
154,215
|
1,124,414
|
|||||||||
|
General and administrative
|
611,994
|
573,111
|
1,451,547
|
|||||||||
|
Total operating expenses
|
3,274,817
|
8,341,282
|
12,505,941
|
|||||||||
|
Income (loss) from operations
|
(3,273,176
|
) |
(8,341,282
|
)
|
(12,506,300
|
)
|
||||||
|
Other income (expense):
|
||||||||||||
|
Interest expense, net
|
(25,560
|
) |
21,345
|
(61,780
|
)
|
|||||||
|
Gain (loss) on change in fair value of
|
||||||||||||
|
Derivative liability
|
3,372,543
|
2,212,579
|
129,145
|
|||||||||
|
Total other income (loss)
|
3,346,983
|
(2,191,234
|
) |
67,365
|
||||||||
|
Income (loss) before income taxes
|
71,807
|
(6,150,048
|
) |
(12,438,935
|
)
|
|||||||
|
Income tax provision
|
-
|
-
|
-
|
|||||||||
|
Net Income (loss)
|
$
|
71,807
|
$
|
(6,150,048
|
) |
$
|
(12,438,935
|
)
|
||||
|
Net income (loss) per common share – basic
|
$
|
.00
|
$
|
(3.98
|
) | |||||||
|
Net income (loss) per common share – diluted
|
$
|
.00
|
$
|
(3.98
|
) | |||||||
|
Weighted average number of common shares
|
||||||||||||
|
Outstanding - basic
|
19,864,030
|
1,542,342
|
||||||||||
|
outstanding – diluted
|
19,871,836
|
1,542,342
|
||||||||||
See accompanying notes to the condensed consolidated financial statements.
F-4
CAR CHARGING GROUP, INC .
(A Development Stage Company)
Condensed Consolidated Statement of Stockholders’ Equity (Deficit)
For the Period from September 3, 2009 (inception) to September 30, 2011
|
Preferred
|
Preferred
|
Common Stock
|
Additional
Paid-in
|
Deficit
Accumulated
in the
Development
|
Total
Stockholders'
Equity
|
|||||||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Stage
|
(Deficit)
|
||||||||||||||||||||||
|
Balance at September 3, 2009 (Inception)
|
-
|
$
|
-
|
1,000,000
|
$
|
50,000
|
$
|
(50,000
|
)
|
$
|
-
|
$
|
-
|
|||||||||||||||
|
Reverse acquisition adjustment
|
10,000,000
|
10,000
|
395,150
|
19,758
|
(70,515
|
)
|
(40,757
|
)
|
||||||||||||||||||||
|
Sale of common (net of derivative liability of warrants of $586,535)
|
61,333
|
3,067
|
295,398
|
298,465
|
||||||||||||||||||||||||
|
Reverse Split 1:50
|
(71,369
|
)
|
71,369
|
|||||||||||||||||||||||||
|
Net loss
|
(6,801,183
|
)
|
(6,801,183
|
)
|
||||||||||||||||||||||||
|
Balance at December 31, 2009
|
10,000,000
|
10,000
|
1,456,483
|
1,456
|
246,252
|
(6,801,183
|
)
|
(6,543,475
|
)
|
|||||||||||||||||||
|
Common stock issued for debt to founders
|
92,000
|
4,600
|
4,600
|
|||||||||||||||||||||||||
|
Common stock issued for services
|
21,167
|
1,058
|
432,441
|
433,499
|
||||||||||||||||||||||||
|
Common stock issued for conversion of convertible notes (net of derivative liability for conversion feature of $552,872)
|
120,000
|
6,000
|
561, 872
|
567,872
|
||||||||||||||||||||||||
|
Sale of common stock with warrants attached (net of derivative liability on 3,834 warrants of $75,839)
|
3,834
|
191
|
(18,531
|
)
|
(18,340
|
)
|
||||||||||||||||||||||
|
Common stock issued for cash
|
103,333
|
5,167
|
1,385,380
|
1,390,547
|
||||||||||||||||||||||||
|
Warrants issued for
|
||||||||||||||||||||||||||||
|
services
|
6,995,084
|
6,995,084
|
||||||||||||||||||||||||||
|
Reverse split 1:50
|
(16,675
|
)
|
16,675
|
|||||||||||||||||||||||||
|
Net loss
|
(5,709,559
|
)
|
(5,709,559
|
)
|
||||||||||||||||||||||||
|
Balance at December 31, 2010
|
10,000,000
|
$
|
10,000
|
1,796,817
|
$
|
1,797
|
$
|
9,619,173
|
$
|
(12,510,742
|
)
|
$
|
(2,879,772
|
)
|
||||||||||||||
|
Common stock issued for conversion of convertible notes and accrued interest
|
32,708,544
|
32,709
|
52,982
|
85,691
|
||||||||||||||||||||||||
|
Common stock issued for services
|
454,711
|
454
|
695,045
|
695,499
|
||||||||||||||||||||||||
|
Sale of common stock
|
|
|
333,333
|
333
|
999,666
|
999,999
|
||||||||||||||||||||||
|
Warrants issued for -services
|
1,093,328
|
1,093,328
|
||||||||||||||||||||||||||
|
Net income
|
71,807
|
71,807
|
||||||||||||||||||||||||||
|
Balance at September 30, 2011 (unaudited)
|
10,000,000
|
$
|
10,000
|
35,293,405
|
$
|
35,293
|
$
|
12,460,194
|
$
|
(12,438,935
|
)
|
$
|
66,552
|
|||||||||||||||
See accompanying notes to the condensed consolidated financial statements.
F-5
CAR CHARGING GROUP, INC.
(A Development Stage Company)
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
For the Nine
Months Ended
September 30, 2011
|
For the Nine
Months Ended
September 30, 2010
|
For the
Period from
September 3,
2009
(Inception) to
September 30, 2011
|
||||||||||
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||
|
Net Income ( loss)
|
$
|
71,807
|
$
|
(6,150,048
|
) |
(12,438,935
|
)
|
|||||
|
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
|
||||||||||||
|
Depreciation
|
83,700
|
6,116
|
100,315
|
|||||||||
|
Amortization of discount on convertible notes payable
|
16,421
|
22,181
|
50,222
|
|||||||||
|
Change in fair value of derivatives liability
|
(3,372,543
|
) |
(2,212,579
|
) |
(129,145
|
) | ||||||
|
Common stock and warrants issued for services and incentive
|
1, 788,828
|
7,458,013
|
9,246,841
|
|||||||||
|
Changes in operating assets and liabilities:
|
||||||||||||
|
Inventory
|
0
|
27,400
|
(72,768
|
) | ||||||||
|
Prepaid expenses and other current assets
|
(87,246
|
)
|
2,925
|
(165,250
|
)
|
|||||||
|
Deposits
|
31,411
|
(211
|
) |
(38,285
|
)
|
|||||||
|
Account receivable
|
|
(562
|
) |
0
|
(562
|
) | ||||||
|
Accounts payable and accrued expenses
|
105,721
|
(126,556
|
)
|
210,116
|
||||||||
|
Accrued interest-related party
|
2,340
|
3,985
|
9,608
|
|||||||||
|
Net Cash Used in Operating Activities
|
( 1,360,123
|
)
|
(968,774
|
)
|
(3,227,843
|
)
|
||||||
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||
|
Purchase of office and computer equipment
|
(15,102
|
)
|
(9,206
|
)
|
(51,470
|
)
|
||||||
|
Purchase of Electric Charging Stations
|
(170,531
|
)
|
(27,400
|
)
|
(325,621
|
)
|
||||||
|
Net Cash Used in Investing Activities
|
( 185,633
|
)
|
(36,606
|
)
|
(377,091
|
)
|
||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||||||
|
Proceeds from convertible notes payable
|
0
|
0
|
100,000
|
|||||||||
|
Proceeds from notes payable to stockholder
|
220,000
|
0
|
220,000
|
|||||||||
|
Sale of common stock, net of issuing costs
|
999,999
|
1,448,046
|
3,333,045
|
|||||||||
|
Net Cash Provided By Financing
|
1,219,999
|
1,448,046
|
3,653,045
|
|||||||||
|
NET CHANGE IN CASH
|
(325,757
|
)
|
442,666
|
|
48,111
|
|||||||
|
CASH AT BEGINNING OF PERIOD
|
373,868
|
603,156
|
0
|
|||||||||
|
CASH AT END OF PERIOD
|
$
|
48,111
|
$
|
1,045,822
|
$
|
48,111
|
||||||
| SUPPLEMENTAL SCHEDULE OF CASH FLOW ACTIVITIES – | ||||||||||||
|
Cash Paid For:
|
||||||||||||
|
Interest expenses
|
$
|
0
|
$ |
0
|
$
|
0
|
||||||
|
Income taxes
|
$
|
0
|
$ |
0
|
$
|
0
|
||||||
|
NONCASH INVESTING AND FINANCING ACTIVITIES:
|
||||||||||||
|
Notes payable converted to common stock
|
$
|
81,250
|
$ |
4,600
|
$
|
96,250
|
||||||
|
Inventory reclassified to Property and Equipment
|
$
|
0
|
$ |
0
|
$
|
72,768
|
||||||
See accompanying notes to the condensed consolidated financial statements.
F-6
CAR CHARGING GROUP, INC.
September 30, 2011
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION
Car Charging Group Inc. (“CCGI”) was incorporated on October 3, 2006 under the laws of the State of Nevada as New Image Concepts, Inc. On November 20, 2009, New Image Concepts, Inc. changed its name to Car Charging Group, Inc.
Car Charging, Inc., was incorporated as a Delaware corporation on September 3, 2009. Car Charging Inc. was created to develop electric charging service facilities for the electric vehicle (EV) automobile market. Pursuant to its business plan, Car Charging Inc. (or its affiliates) acquires and installs EV charging stations, and shares servicing fees received from customers that use the charging stations with the property owner(s), on a property by property basis. Car Charging, Inc., therefore, enters into individual arrangements for this purpose with various property owners, which may include, cities, counties, garage operators, hospitals, shopping-malls and facility owner/operators.
During February 2011, the Shareholders and Board of Directors authorized a decrease of its 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”). There was no change to the authorized amount of shares or to the par value. 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.
Merger
On December 7, 2009, CCGI entered into a Share Exchange Agreement (the “Agreement”) with Car Charging, Inc. (“CCI”)
Pursuant to the terms of the Agreement, CCGI agreed to issue an aggregate of 10,000,000 restricted shares of CCGI's common stock and 10,000,000 shares of its Series A Convertible Preferred Stock to the CCI Shareholders in exchange for all of the issued and outstanding shares of CCI.
The merger was accounted for as a reverse acquisition and recapitalization. CCI is the acquirer for accounting purposes and CCGI is the issuer. Accordingly, CCGI’s historical financial statements for periods prior to the acquisition became those of the acquirer retroactively restated for the equivalent number of shares issued in the merger. Operations prior to the merger are those of CCI. From inception on September 3, 2009 until the merger date, December 7, 2009, CCI had minimal operations with no revenues. Earnings per share for the period prior to the merger are restated to reflect the equivalent number of shares outstanding.
The consolidated financial statements consist of CCGI and its wholly-owned subsidiaries, collectively referred to herein as the “Company” or “Car Charging.” All intercompany transactions and balances have been eliminated in consolidation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited interim condensed consolidated financial statements and related notes (“financial statements”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These financial statements should be read in conjunction with the consolidated financial statements of the Company for the year ended December 31, 2010 and notes thereto contained in the Company’s Annual Report on Form 10-K as filed with the SEC on April 13, 2011.
F-7
DEVELOPMENT STAGE COMPANY
The Company is a development stage company as defined by ASC 915-10 “ Development Stage Entities .” The Company is still devoting substantially all of its efforts on establishing the business; its planned principal operations commenced effective August 12, 2011, when the Company announced that it would initiate charging for its services, but no significant revenue has, as yet, been collected. The Company’s plan continues to anticipate that it will leave its development stage during the last calendar quarter of 2011. Accordingly, all losses accumulated since inception have been considered as part of the Company’s development stage activities.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and reporting period. Accordingly, actual results could differ from those estimates.
EV CHARGING STATIONS
EV Charging Stations represents the depreciable cost of charging devices that have been installed on the premises of participating owner/operator properties. They are stated at cost less accumulated depreciation. Depreciation is provided on the straight-line basis over an estimated useful life of three years. Upon sale, replacement or retirement, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in consolidated statements of income. The Company held approximately $33,000 and $156,000 in EV charging stations that were not placed in service as of September 30, 2011 and December 31, 2010, respectively. The Company will begin depreciating this equipment when installation is substantially complete. Depreciation for the nine months ended September 30, 2011 and 2010, and for the period from September 3, 2009 (inception) through September 30, 2011 was $76,691 and $0, and $87,933, respectively.
In December 2010, management determined that EV Charging Stations that were previously recorded as inventory would be used for future installations and reclassified $72,768 in inventory to EV Charging Stations.
OFFICE AND COMPUTER EQUIPMENT
Office and computer equipment are stated at cost less accumulated depreciation. Depreciation is provided on the straight-line basis over an estimated useful life of five years. Upon sale or retirement of furniture and fixtures, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in consolidated statements of income. Depreciation for the nine months ended September 30, 2011 and 2010, and for the period from September 3, 2009 (inception) through September 30, 2011 was $7,009 and $ 3,218 and $12,382, respectively.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company has adopted paragraph 360-10-35-17 of the FASB Accounting Standards Codification for its long-lived assets. The Company’s long-lived assets, which include EV Charging Stations, office and computer equipment and deposits, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.
The Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives. The Company determined that there were no impairments of long-lived assets as of September 30, 2011 .
F-8
DERIVATIVE INSTRUMENTS
The Company evaluates its convertible debt, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with paragraph 810-10-05-4 of the FASB Accounting Standards Codification and paragraph 815-40-25 of the FASB Accounting Standards Codification. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the Statement of Operations as other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity.
In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.
The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities will be classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected within 12 months of the balance sheet date.
FAIR VALUE OF FINANCIAL INSTRUMENTS
U.S. GAAP for fair value measurements establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three levels. The fair value hierarchy gives the highest priority to quoted market prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Level 2 inputs are inputs, other than quoted prices included within Level 1, which are observable for the asset or liability, either directly or indirectly. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.
The carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued expenses, approximate their fair values because of the short maturity of these instruments. The Company’s convertible notes payable approximates the fair value of such instrument based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangement at September 30, 2011.
The Company revalues its derivative liability at every reporting period and recognizes gains or losses in the consolidated statement of operations that are attributable to the change in the fair value of the derivative liability. The Company has no other assets or liabilities measured at fair value on a recurring basis.
REVENUE RECOGNITION
The Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company will recognize revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured. Accordingly , when a customer completes use of a charging station , the service can be deemed rendered and revenue may be recognized.
RECLASSIFICATION
During the quarter ended September 30, 2011, Management revised the Company’s operating plan in response to customer requests to purchase charging stations that would be provided and serviced by the Company. Management believes that this type of sales activity will continue and will continue to function as a reseller of charging stations. Accordingly, a sale of equipment that was classified in other income (expense) in the prior quarter was reclassified to sales revenue.
F-9
STOCK-BASED COMPENSATION FOR OBTAINING EMPLOYEE SERVICES
The Company accounts for equity instruments issued to employees and directors pursuant to paragraphs 718-10-30-6 of the FASB Accounting Standards Codification, whereby all transactions in which services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more readily measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur.
The Company’s policy is to recognize compensation cost for awards with service conditions and when applicable a graded vesting schedule on a straight-line basis over the requisite service period for the entire award.
EQUITY INSTRUMENTS ISSUED TO PARTIES OTHER THAN EMPLOYEES FOR ACQUIRING GOODS OR SERVICES
The Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under guidance of section 505-50-30 of the FASB Accounting Standards Codification (“FASB ASC Section 505-50-30”). Pursuant to FASB ASC Section 505-50-30, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur.
INCOME TAXES
The Company follows Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Operations in the period that includes the enactment date.
The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25.addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.
F-10
NET LOSS PER COMMON SHARE
Net loss per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock and potentially outstanding shares of common stock during the period.
The following table shows the weighted-average number of potentially outstanding dilutive shares excluded from the diluted net loss per share calculation for the nine months ended September 30, 2011 and 2010, as they were anti-dilutive (after giving effect to the Reverse Stock-Split):
|
2011
|
2010
|
|||||||
|
Convertible notes issued on September 25, 2009
|
1,500,000
|
34,000,000
|
||||||
|
Preferred stock issued on December 7, 2009
|
25,000,000
|
25,000,000
|
||||||
|
Warrants issued on December 7, 2009
|
546,665
|
71,333
|
||||||
|
Warrants issued on April 1, 2010
|
55,000
|
55,000
|
||||||
|
Warrants issued on April 12, 2010
|
5,000
|
5,000
|
||||||
|
Warrants issued on April 27, 2010
|
2,200,000
|
200,000
|
||||||
|
Warrants issued on May 5, 2010
|
3,834
|
3,834
|
||||||
|
Warrants issued on August 25, 2010
|
5,177,165
|
311,000
|
||||||
|
Warrants issued on February 17, 2011
|
50,000
|
|||||||
|
Warrants issued on July 18, 2011
|
1,277,170
|
|||||||
|
Warrants issued on August 10, 2011
|
1,700,000
|
|||||||
|
Warrants issued on September 23, 2011
|
100,000
|
|||||||
|
Total Potential Dilutive Shares
|
37,614,834
|
59,646,167
|
F-11
SUBSEQUENT EVENTS
The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
A variety of proposed or otherwise potential accounting standards are currently under study by standard-setting organizations and various regulatory agencies. Because of the tentative and preliminary nature of these proposed standards, management has not determined whether implementation of such proposed standards would be material to our consolidated financial statements.
Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements.
3. GOING CONCERN
As shown in the accompanying financial statements, the Company has a retained deficit of $12,438,935 at September 30, 2011, with a net income for the nine months ended September 30 2011 of $71,807 and net cash used in operating activities of $1,360,123 for the nine month period then ended, respectively. In addition, convertible debt maturing within one year of the financial statement date and other short-term debt, net of discount, was approximately $204,000 . The Company has earned no significant revenues from its primary business since inception. These raises substantial doubt about the Company’s ability to continue as a going concern.
Management intends to raise additional funds by way of a public or private offering. Management believes that the actions presently being taken to further implement its business plan, including installation of charging stations throughout the United States, provides the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to generate revenues and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient additional capital and revenues.
The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
4. NOTES PAYABLE – SHORT TERM NOTES PAYABLE
Short-term notes consist of funds borrowed for three to six months at an annual interest rate of 10%, payable upon maturity from shareholders. At September 30, 2011 $200,056, net of a discount of $19,944, of these notes remain outstanding. The notes mature between October 28, 2011 and March 23, 2012.
On September 23, 2011, as additional incentive for a $100,000 six month loan include herein, the Company issued 100,000 warrants to acquire common stock and agreed to issue 5,000 shares of common stock (at a charge of $1.20 per share) resulting in a discount of $20,751. The discount is amortized to interest over the term of the loan.
NOTES PAYABLE - CONVERTIBLE NOTES PAYABLE
All 6% Convertible Notes, which were payable upon maturity on September, 25 2011, have a conversion price of $.0025 for both principal and interest.
During June, 2010, $5,000 of these notes was converted to 40,000 common shares.
During July, 2010, $10,000 of these notes was converted to 80,000 common shares.
During January, 2011. $4,000 of these notes was converted to 32,000 common shares.
During March, 2011, $50,000 of these notes together with $4,441 of accrued interest were converted to 21,776,544 common shares
On March 18, 2011, the Company issued 21,776,544 common shares pursuant to the conversion of $50,000 in notes payable together with $4,441of accrued interest. The conversion of the remaining $3,750 of convertible notes, together with interest thereon.
During the 2nd quarter of 2011 $4,000 of these notes were converted to 1,600,000 common shares.
During July, 2011, $12,500 of these notes were converted to 5,000,000 shares.
During September, 2011, $10,750 of these notes were converted to 4,300,000 shares.
At September 30, 2011, $3,750 of these notes remain outstanding.
F-12
Derivative analysis
Upon their origination these notes were determined to have had full reset adjustments based upon the issuance of equity securities by the Company in the future, This feature subjected the notes to derivative liability treatment under Section 815-40-15 of the FASB Accounting Standard Codification (“Section 815-40-15”) (formerly FASB Emerging Issues Task Force (“EITF”) 07-5). The notes have been measured at fair value using a lattice model at each reporting periods with gains and losses from the change in fair value of derivative liabilities recognized on the consolidated statement of operations. The convertible notes gave rise to a derivative liability which was recorded as a discount to the notes upon origination.
In March 2011, agreements between the Company and the note holders to fix the conversion rate stated in the convertible notes effectively removed the embedded derivative from the convertible notes. Accordingly, as future conversions were no longer subject to reset, the derivative liability related to the notes was adjusted to $0 at and the Company recognized a gain on the change in value of the derivative liability of $2,701,894 upon execution.
5. COMMON STOCK EQUIVALENTS
Subscription warrants
In connection with the closing of the Share Exchange Agreement, on December 7, 2009 the Company entered into a Subscription Agreement for the sale of 61,333 units of securities of the Company aggregating $920,000. As of May 5, 2010, 3,834 additional units aggregating $57,500 were issued under similar terms as the December 7, 2009 subscription agreement. Each unit consisted of one share of common stock and a warrant to purchase one share of Company’s common stock exercisable at $30.00 per share. The exercise price was subject to a full ratchet reset feature. As of December 31, 2010, pursuant to the terms of the reset feature, the exercise price of these warrants was reset to 89,333 warrants exercisable at $15.00 per share and 3,834 warrants exercisable at $30.00 per share. As of June 30, 2011 and September 30, 2011, pursuant to the terms of the reset feature, the exercise price of these warrants was reset to 446,665 warrants exercisable at $3.00 per share and 3,834 warrants exercisable at $30.00 per share. The fair value of these warrants granted, were estimated on the date of grant, and recorded as a derivative liability. The derivative was re-measured at September 30, 2011 using their reset value yielding a gain for the three months ended September 30, 2011 of $74,184. The outstanding liability for the related derivative liability was reduced to $81,399 as of September 30, 2011.
In connection with the closing of the Share Exchange Agreement, on December 7, 2009 the Company also issued warrants to purchase 20,000 shares of Company’s common stock exercisable at $30.00 per share. The exercise price was subject to a full ratchet reset feature. As of June 30, 2011, 2010 and September 30, 2011, pursuant to the terms of the reset feature, the quantity of shares was adjust to 100,000 and the exercise price of these warrants was reset to $3.00 per share. The derivative for these 100,000 warrants was re-measured at September 30, 2011, yielding a derivative liability of $17,815 and a gain on change in fair value for the three months ended September 30, 2011 of $16,301.
Compensation and Incentive warrants
On April 12, 2010, the Company issued 5,000 warrants to purchase shares exercisable at $42.50 per share. The fair value of these warrants, estimated on the date of grant, was recorded as a expense for consulting services of $32,355.
On April 1, 2010, the Company issued 55,000 warrants to purchase shares of the Company’s common stock, 5,000 at an exercise price of $15.00 and 50,000 warrants exercisable at $30.00 per share. On April 27, 2010, the Company issued warrants to purchase 440,000 shares of Company’s common stock exercisable at $15 per share. The exercise price of these 440,000 shares was subject to a full ratchet reset feature. The fair value of all of these warrants, estimated on the date of grant, was recorded as compensation expense of $3,099,009.
On August 25, 2010, the Company issued 1,033,433 warrants to purchase shares of the Company’s common stock exercisable at $15 per share. The exercise price of these warrants was subject to a full ratchet reset feature. The Company also issued 10,000 warrants to purchase shares of the Company’s common stock exercisable at $51.50 per share. The fair value of all of the warrants, estimated on the date of grant, was recorded as compensation expense of $3,896,075. Certain of these warrants were subject to reset to 5,167,165 warrants exercisable at $3.00.
On February 17, 2011, the Company issued 50,000 warrants to purchase shares of the Company’s common stock exercisable at $20 per share. The fair value of all of the warrants, estimated on the date of grant, was recorded as compensation expense of
$ 483,583.
On July 18, 2011, the Company issued 1,277,170 warrants to purchase shares of the Company’s common stock exercisable at $1.66 per share. The fair value of all of the warrants, estimated on the date of grant, was recorded as other operating incentive expense of $528,111.
On August 10, 2011, the Company issued 200,000 warrants to purchase shares of the Company’s common stock exercisable at $2.50 per share; and 500,000 warrants to purchase shares of the Company’s common stock exercisable at $5.00 per share; and 500,000 warrants to purchase shares of the Company’s common stock exercisable at $7.50 per share; and 500,000 warrants to purchase shares of the Company’s common stock exercisable at $10.00. The fair value of all of these warrants, estimated on the date of grant, was recorded as consulting compensation expense of $81,633.
On September 23, 2011, the Company issued 100,000 warrants to purchase shares of the Company’s common stock exercisable at $1.00 per share. The exercise price was subject to a full ratchet reset feature. As a result he fair value of these warrants, estimated on the date of grant, was recorded as a derivative liability and related discount of short-term notes of $20,751. The derivative was re-measured at September 30, 2011 using their reset value yielding a gain for the three months ended September 30, 2011 of $3,893. The discount will be amortized as interest expense over the term of the note.
F-13
6. STOCKHOLDERS’ DEFICIT
Series A Convertible Preferred Stock
In connection with the closing of the Share Exchange Agreement, on December 7, 2009 the Company issued 10,000,000 shares of Series A Convertible Preferred Stock with a par value of $0.001.
The Series A has five (5) times the number of votes on all matters to which common shareholders are entitled, bears no dividends, has a liquidation value eight times that sum available for distribution to common stock holders and is convertible at the option of the holder after the date of issuance at a rate of 2.5 shares of common stock for every preferred share issued however, the preferred shares cannot be converted if conversion would cause the holder to own more than 4.99% of the outstanding shares of common stock (or after 61 days up to 9.99%).
The Company is authorized to issue 500,000,000 shares of common stock and 20,000,000 shares of preferred stock.
Common stock
On December 7, 2009 the Company entered into a Subscription Agreement for the sale of 61,333 units of securities of the Company aggregating $920,000. Each unit consisted of one share of common stock and a warrant to purchase one share of Company’s common stock exercisable at $30.00 per share. The Company received $885,000, which was net of costs of $35,000.
On February 19, 2010, the Company issued 92,000 shares of its common stock at $.05 per share, to extinguish a debt to its founders of $4,600 included in accounts payable. The stock was treated as founders’ shares and issued at its par value of $0.001.
On February 19, 2010, the Company issued 8,500 shares of its common stock at $15 per share, for services performed with a fair value of $127,500.
On May 5, 2010, the Company issued 3,834 shares of common stock at $15.00 per share with warrants attached exercisable at $30.00 per share. See the description of warrants with embedded derivatives in Note 5 above for a more complete description of this transaction.
During June 2010, the Company issued 40,000 shares of common stock at $.125 each, in exchange for $5,000 of convertible notes payable . During July 2010 the Company issued 80,000 shares of common stock at $.125 each, in exchange for $10,000 of convertible notes payable. During January 2011, the Company issued 32,000 shares of common stock at $.125 each, in exchange for $4,000 of convertible notes payable. During March, 2011, the Company issued 21,776,544 common shares in exchange for $50,000 of convertible notes payable and related interest of $4,441. See the derivative analysis of this transaction in Note 4 above for a description of this transaction.
On July 30, 2010, the Company issued 36,667 shares of common stock at $15.00 per share.
On August 19, 2010, the Company issued 6,000 shares of its common stock at $ 51.50 per share, for services performed with a fair value of $ 309,000.
On September 7, 2010, the Company issued 66,667 shares of common stock at $15.00 per share, together with 6,667 shares of common stock for services performed in connection with the sale of these share. The Company received $886,005, which was net of costs of $113,995.
On January 3, 2011, the Company issued 250 shares of common stock in payment of $17,000 in services that had been received during 2010. In addition, the Company entered into a continuing services agreement that provides for issuance of $1,500 of common stock per month (see commitments note). The Company issued 3,706 shares of common stock during the three months ended March 31, 2011, in accordance with the agreement.
On February 4, 2011, the Company issued 3,000 shares of common stock in payment of $81,000 in services.
During June, 2011, the Company issued 1,005 shares of common stock in payment of $3,000 in services and 333,333 at $3.00 per share.
During July, 2011, $12,500 of convertible notes payable were converted by the holders into 5,000,000 shares of common stock; and the Company issued 50,000 shares of common stock at $1.80 per share for services performed.
During August, 2011, the Company issued 400,000 shares of common stock at $1.25 per share for services performed.
During September 2011, $10,750 of convertible notes payable were converted by the holders into 4,300,000 shares of common stock.
F-14
7. COMMITMENTS
The company has entered into several contracts that obligate it to office space lease payments and equipment acquisition. The following is a summary of these commitments:
|
a)
|
At March 31, 2011, the Company entered into a three (3) year lease for office space at approximately $132,480 per year, with an option to renew for an additional three years at approximately $137,655 per year. As of September 30, 2011, this lease is subject to renegotiation.
|
|
b)
|
Pursuant to the terms of a master agreement, the Company has committed to purchase 300 charging stations over the year, 25 units per month starting during October, 2011 , for an amount in excess of $3,100 per unit.
|
8. SUBSEQUENT EVENTS
The Company has evaluated all events that occurred after the balance sheet date of September 30, 2011 through the date when these financial statements were filed to determine if they must be reported. In November, 2011, the Company entered into a subscription agreement for the purchase of 2,500,000 common shares ($1.00 per share) payable in five equal installments. As of November 21, 2011, the Company has issued 500,000 shares for $500,000. Management has determined that the were no other reportable subsequent events.
F-15
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation
The following provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto. Car Charging Group, Inc. (formerly, New Image Concepts, Inc.) entered into a Share Exchange Agreement on December 7, 2009, with Car Charging, Inc. New Image Concepts Inc. was a development stage entity that had a failed business plan. Car Charging Inc., was formed on September 3, 2009, to develop a market to service electric vehicle charging. Following the closing of the Share Exchange Agreement, the Company has followed Car Charging Inc.’s business plan, to identify and acquire the best possible auto charging devices and install them on properties (large garages, shopping-malls, hospitals, cities, and the like) owned by third parties, which through LLC (CCGI subsidiaries) arrangements, share in service revenue generated from customer charging station use. Such use is not anticipate in any significant volume until sometime after the third calendar quarter of 2011, when automobile manufacturers are scheduled to mass produce and sell electric vehicles to the public.
The following discussion and analysis contains forward-looking statements, which involve risks and uncertainties. The Company’s actual results may differ significantly from the results, expectations and plans discussed in these forward-looking statements.
To date, the Company’s operations have been devoted primarily to developing a business plan, identifying acquisition target companies, raising capital for future operations, initial contracts with property owner/operators and administrative functions. The Company intends to grow through internal development and selected acquisitions. The ability of the Company to achieve its business objectives is contingent upon its success in raising additional capital until adequate revenues are realized from operations.
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2011
Our net operating loss during the three months ended September 30, 2011 is attributable to the fact that we have not derived significant revenue from operations to offset our business development expenses. Losses from operations for the three months amounted to $1,658,484, which primarily consisted of compensation expense of $863,396 which includes consulting expense of $590,000 and warrants issued as incentive to consultants of $81,633, other operating expense equal to $603,332, which is primarily a non-cash charge for warrants issued as an incentive to property providers, and general and administrative expense of $192,737, which is primarily legal fees of $58,593, other promotion fees of $45,000 and public/investor relations fees of $22,901.
During the three months ended September 30, 2011, management entered into nine (9) provider agreements to install EV devices. The Company has now entered into a total of 33 Provider Agreements through September 30, 2011. We installed 4 charging stations pursuant to these agreements during the quarter ended September 30, 2011.
During August, the Company initiated charging for its services. However, revenue is not anticipated to be significant during 2011 due to the small quantity of electric vehicles currently on the road and the small number of installed charging stations in service. The Company continues to follow its business plan which anticipates that it will increase charging station installations during the fourth quarter and discontinue development stage operations reporting as of December 31, 2011.
During the third quarter of 2011, the Company continued its process of hiring additional sales staff (on a commission basis) and negotiating for additional potential installation sites.
During this three month period the change in the Company’s liability related to embedded derivative transactions resulted in a gain on change in fair value of $ 94,380.
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2010
Our net loss during the three months ended September 30, 2010, was attributable to the fact that we did not derived any revenue from operations to offset our business development expenses. Losses from operations for the three months ended September 30, 2010 amounted to $7,615,400, which primarily consists of compensation (including non-cash warrant compensation) equal to $7,227,171,; as well as non-cash warrant general and administrative charges of $309,000, rent $25,257 and travel $20,004.
1
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011
Our net operating loss during the nine months ended September 30, 2011 is attributable to the fact that we have not derived significant revenue from operations to offset our business development expenses. Losses from operations for the nine months amounted to $3,274,817, which primarily consisted of compensation expense of $1,833,815, including consulting of $1,353,730, warrants issued as incentive to consultants equal to $81,633, other operating expense of $829,007, which is primarily a non-cash charge for warrants issued as an incentive to property, and general and administrative expense equal to $611,993, consisting primarily of legal fees equal to $120,573, other promotion fees equal to $152,795, and public/investor relation fees equal to $76,401. During June the Company sold and installed seven charging stations to one customer; the Company will service these units and anticipates additional future sales or other placement opportunities, During August, the Company initiated charging for its services. However, revenue is not anticipated to be significant during 2011 due to the small quantity of electric vehicles currently on the road and the small number of installed charging stations in service.
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010
Our net loss during the nine months ended September 30, 2010, is attributable to the fact that we have not derived any revenue from operations to offset our business development expenses. Losses from operations for the nine months ended September 30, 2010 amounted to $8,341,282, primarily consists of compensation (including non-cash warrant costs $7,152,013, consulting $394,817, other net payroll $141,854), and general and administrative charges, including public / investor relations non-cash warrants and stock $309,000 and other investor relations of $84,470, rent of $57,382, and travel related expenses of $64,401. During these nine months management has entered into negotiation and agreements to install EV devices at locations throughout the United States; and is process of hiring additional sales personnel and negotiating additional potential installation cite
PERIOD FROM SEPTEMBER 3, 2009 (DATE OF INCEPTION) THROUGH SEPTEMBER 30, 2011
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 $12,505,941 (including non-cash charges of $9,269,092 which is the estimate value of warrants and common stock issued for services and incentives to property owners, consulting fees of $1,532,191, professional fees of $314,365, and public/investor relations fees of $379,313). The Company’s officers and staff have initiated a number of negotiations to install selected charging stations (currently supplied by Coulomb Technologies, a California corporation founded in 2007) through-out the United States and Europe. Manufacture and supply of electric vehicles that will require utilization of the Company’s services is not anticipated to be significant until 2012. This timeframe provides the Company adequate time to develop its distribution plan, but also requires that the Company continue to develop capital sources.
In March 2011, agreements between the Company and the note holders to fix the conversion rate stated in the convertible notes effectively removed the embedded derivative from the convertible notes. Accordingly, as future conversions were no longer subject to reset, the derivative liability related to the notes was adjusted to $0 at and the Company recognized a gain on the change in value of the derivative liability of $2,701,894 upon execution.
2
Our cumulative liability related to embedded derivative transactions resulted in a liability of $116,072 as of September 30, 2011. The Company evaluates its convertible debt, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with paragraph 810-10-05-4 of the FASB Accounting Standards Codification and paragraph 815-40-25 of the FASB Accounting Standards Codification. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the Statement of Operations as other income or expense (income of $94,380 for the three months ended September 30, 2011). Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity.
Liquidity and Capital Resources
The Company has financed its activities from sales of capital stock of the Company 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 office expenses and various consulting and professional fees.
For the nine months ended September 30, 2011 and 2010, we used cash for operations of $1,360,123 and $968,774, respectively and $3,227,843 since inception. Such cash use and accumulated losses have resulted primarily from costs related to various consulting and professional fee and costs incurred in connection with capital transactions. During the nine months ended September 30, 2011, cash used for investing activities consisted of $170,531 for charging stations and $15,102, for purchases of office and computer equipment. This compares to $36,606 for all such purchases during the nine months ended September 30, 2010 The net decrease in cash during the nine months ended September 30, 2011 was $325,757 as compared with a net increase of $442,666 for the nine months ended September 30, 2010.
Since its inception, the Company has used cash for investing activities of $377,091 for the purchase of Charging Stations and office and computer equipment; and the Company has received cash provided by financing activities of $3,653,045 from notes payable ($320,000) and $3,333,045 from sales of common stock. As of September 30, 2011, the Company entered into a commitment to acquire additional charging stations during the coming year for $1,043,700.
Management believes that additional funding will be necessary in order for the Company to continue as a going concern. Significant additional capital or debt must be incurred to develop the Company’s business plan (that is, the acquisition and installation of charging stations prior to the generation of adequate service revenue). The Company is investigating several forms of private debt and/or equity financing, although there can be no assurances that the Company will be successful in procuring such financing or that it will be available on terms acceptable to the Company. If the Company is unable to generate profits, or unable to obtain additional funds for its working capital needs, it may have to cease operations. As of November 4, 2011, the Company has negotiated the acquisition of $2,500,000, in additional equity contributions.
Recent Accounting Pronouncements
A variety of proposed or otherwise potential accounting standards are currently under study by standard-setting organizations and various regulatory agencies. Because of the tentative and preliminary nature of these proposed standards, management has not determined whether implementation of such proposed standards would be material to our consolidated financial statements.
Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements.
Critical Accounting Policies and Estimates
None.
Off Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not required for smaller reporting companies.
Item 4. Controls and Procedures
Disclosure controls and procedures. Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are ineffective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Management is aware of the lack of an independent audit committee or audit committee financial expert. Although our board of directors serves as the audit committee it has no independent directors. Further, we have not identified an audit committee financial expert on our board of directors. These factors are counter to corporate governance practices as defined by the various stock exchanges and may lead to less supervision over management.
Changes in internal control over financial reporting. There have been no changes in our internal control over financial reporting that occurred during the quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
3
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
Item 1A. Risk Factors
Not required for smaller reporting companies.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On July 21, 2011, the Company issued 50,000 shares to Lyons Capital, LLC pursuant to a consulting agreement entered into on July 21, 2011.
The foregoing description of the consulting agreement with the consultant is not intended to be complete and is qualified in its entirety by the complete text of the Agreements attached to this current report on Form 10-Q as Exhibit 10.1.
On July 26, 2011, NLBDIT Portfolio LLC converted $4,375.00 of the principal on the convertible note dated September 25, 2009 into 1,750,000 shares of common stock at a conversion price of $.0025 per share.
On July 26, 2011, Ruth Low converted $625.00 of the principal on the convertible note dated September 25, 2009 into 250,000 shares of common stock at the conversion price of $.0025 per share.
On July 26, 2011, Sunrise Charitable Foundation, Inc. converted $2,500.00 of the principal on the convertible note dated September 25, 2009 into 1,000,000 shares of common stock at a conversion price of $.0025 per share.
On July 26, 2011 Sunrise Securities Corp converted $5,000.00 of the principal on the convertible note dated September 25, 2009 into 2,000,000 shares of common stock at the conversion price of $.0025 per share.
On August 10, 2011 the Company entered into a consulting agreement with Constellation Asset Advisors, Inc., (“Constellation”). Pursuant to the consulting agreement, Constellation has agreed to provide the Company with investor communications and public relations with existing shareholders and investment professionals for a period of two years. As consideration for the consulting agreement, the Company agreed to issue to Constellation 300,000 shares of the Company’s par value $.001 common stock and four series of warrants to purchase: (i) 200,000 shares of the Company’s par value $.001 common stock for $2.50, (ii) 500,000 shares of the Company’s par value $.001 common stock for $5.00; (iii) 500,000 shares of the Company’s par value $.001 for $7.50, and (iv) 500,000 shares of the Company’s $.001 par value common stock for $10.00. The term for each of the four series of warrants is five years.
The foregoing description of the consulting agreement and warrant with the consultant is not intended to be complete and are qualified in their entirety by the complete text of the Agreements attached to this current report on Form 10-Q as Exhibit 10.2.
On September 23, 2011, the Company issue a Senior Promissory Note and Security Agreement to Nathan Low (the “Holder”) due and payable on March 23, 2012 (the “Maturity Date”) for $100,000 (the ”Note”) . The Note and Security Agreement is attached as Exhibit 10.3. The Note bears interest at an annual rate of 10% payable on the Maturity Date. Pursuant to its terms this Note was prepaid, without penalty or consent of the Holder, on November 10, 2011, for the principal balance and accrued interest of $1,315.06.
Simultaneous with the execution of the Note, the Company issued a total of 5,000 shares of par value $.001 common stock to Holder.
In connection with the issuance of the Note, the Company issued to Holder a warrant to purchase one hundred thousand (100,000) shares of the Company’s par value $.001 common stock (the “Warrant”) attached as Exhibit A to the Note. Pursuant to the terms of the Warrant, Holder shall have the right to exercise the Warrant at any time within seven (7) years of the date of the Note at a purchase price of $3.00 per share of common stock.
On September 28, 2011, Ze’evi Group, Inc. converted $10,750 of the principal due on the convertible note dated September 25, 2009 into 4,300,000 shares of common stock at the conversion price of $.0025 per share.
4
Item 3. Defaults Upon Senior Securities
There were no defaults upon senior securities during the period ended September 30, 2011.
Item 4. (Removed and Reserved)
Item 5. Other Information
None.
Item 6. Exhibits
(a) Exhibits
|
10.1
|
Senior Promissory Note between Car Charging Group, Inc. and Lyons Capital, LLC as of July 21, 2011.
|
|
10.2
|
Consulting Agreement between Car Charging Group, Inc. and Constellation Asset Advisors, Inc. as of August 10, 2011.
|
|
10.3
|
Senior Promissory Note and Security Agreement between Car Charging Group, Inc. and Nathan Low as of September 23, 2011.
|
|
31.1
|
Certification of Principal Executive Officer of the Registrant pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31.2
|
Certification of Principal Financial Officer of the Registrant pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32.1
|
Certification of Principal Executive Officer of the Registrant pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
32.2
|
Certification of Principal Financial Officer of the Registrant pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
101
|
Interactive Data File (Form 10-Q for the quarterly period ended September 30, 2011 furnished in XBRL).
|
|
In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.
|
|
5
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
CAR CHARGING GROUP, INC.
|
|
|
By: /s/ Michael D. Farkas
|
|
|
Date: November 21, 2011
|
Michael D. Farkas
Chief Executive Officer
Principal Executive Officer
|
|
By: /s/ Richard Adeline
|
|
|
Richard Adeline
Chief Financial Officer
|
6