Business Context and Reporting Period
Company: Car Charging Group, Inc. (formerly New Image Concepts, Inc.)
Reporting Period: Quarter ended March 31, 2010
Status: Development Stage Company
Business Overview: The Company was formed via a reverse merger in December 2009 to develop electric vehicle (EV) charging service facilities. It acquires and installs "Chargepoint" charging stations at third-party properties (malls, hospitals, cities) and shares servicing fees with property owners. As of the reporting date, the Company had no operating revenues and was focused on business plan development, capital raising, and securing installation contracts.
Key Financial Metrics
| Metric | Three Months Ended Mar 31, 2010 | Period from Inception (Sep 3, 2009) to Mar 31, 2010 |
|---|---|---|
| Revenues | $0 | $0 |
| Operating Expenses | $329,650 | $668,437 |
| Net Income (Loss) | $2,071,522 | $(4,729,661) |
| Cash Balance (End of Period) | $289,661 | $289,661 |
| Net Cash Used in Operating Activities | $(311,814) | $(676,026) |
| Total Liabilities | $4,881,899 | $4,881,899 |
| Stockholders' Deficit | $(4,424,853) | $(4,424,853) |
Debt and Liquidity: The Company holds convertible notes payable of $63,020 (net of discount). Total liabilities are dominated by derivative liabilities of $4,718,174. Cash on hand is $289,661.
Material Changes and Unusual Items
- Net Income vs. Operating Loss: While the Company reported a net income of $2,071,522 for the quarter, this was entirely non-operational. The Company incurred an operating loss of $329,650. The net income was driven by a non-cash gain of $2,408,648 resulting from the change in fair value of derivative liabilities (embedded in convertible notes and warrants).
- Derivative Liability Fluctuation: The derivative liability decreased from $7,126,823 at December 31, 2009, to $4,718,174 at March 31, 2010, creating the aforementioned accounting gain.
- Stock Issuances: During the quarter, the Company issued 4,600,000 shares to founders to extinguish $4,600 of debt and 425,000 shares for services valued at $42,500.
- Cash Burn: Cash decreased by $313,495 during the quarter, primarily due to operating cash outflows of $311,814.
Outlook, Risks, and Management Commentary
- Going Concern: Management explicitly states that the Company's ability to continue as a going concern is dependent on its ability to raise additional capital and generate revenues. The accumulated deficit is $4.7 million, and cash reserves may not be sufficient to support daily operations.
- Revenue Timeline: Significant revenue generation is not anticipated until after the third calendar quarter of 2010, contingent on the mass production and sale of electric vehicles by automobile manufacturers.
- Capital Needs: The Company is investigating private debt and equity financing. There is no assurance that such financing will be available on acceptable terms.
- Risk Factors: No material changes to risk factors were disclosed from the previous 10-K. Primary risks include the lack of revenue, dependence on third-party property owners, and the need for additional funding.
Investor Verification Checklist
- Derivative Accounting: Verify the valuation methodology used for the $4.7 million derivative liability, as this non-cash item is the sole driver of the reported net income.
- Cash Runway: Assess the sufficiency of the $289,661 cash balance against the $311,814 quarterly operating burn rate to determine immediate liquidity risk.
- Revenue Milestones: Confirm the status of the three installation agreements mentioned in management commentary and the timeline for actual revenue recognition.
- Dilution Risk: Review the terms of the convertible notes and warrants (full ratchet reset features) which could lead to significant future dilution upon conversion or exercise.
- Capital Raising: Monitor for announcements regarding new equity or debt offerings, as the filing states additional funding is necessary to continue operations.