Business Context and Reporting Period
Company: Car Charging Group, Inc. (formerly New Image Concepts, Inc.)
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: September 30, 2010
Status: Development Stage Company
Business Overview: The Company is engaged in developing electric vehicle (EV) charging service facilities. It acquires and installs EV charging stations on third-party properties (e.g., malls, hospitals, cities) and shares servicing fees with property owners. As of the reporting date, the Company had entered into agreements with eight entities and installed seven charging stations, with significant revenue generation not anticipated until the second half of 2011.
Key Financial Metrics
| Metric | Nine Months Ended Sept 30, 2010 | Three Months Ended Sept 30, 2010 | Balance Sheet (Sept 30, 2010) |
|---|---|---|---|
| Revenues | $0 | $0 | N/A |
| Net Loss | $(6,150,048) | $(4,573,732) | N/A |
| Operating Expenses | $8,341,282 | $7,615,400 | N/A |
| Cash and Cash Equivalents | N/A | N/A | $1,045,822 |
| Total Assets | N/A | N/A | $1,268,108 |
| Total Liabilities | N/A | N/A | $4,558,940 |
| Stockholders' Deficit | N/A | N/A | $(3,290,832) |
| Derivative Liabilities | N/A | N/A | $4,437,211 |
| Convertible Notes Payable (Current) | N/A | N/A | $63,934 |
Cash Flow (Nine Months Ended Sept 30, 2010):
- Net cash used in operating activities: $(968,774)
- Net cash used in investing activities: $(36,606)
- Net cash provided by financing activities: $1,448,046
Material Changes vs. Prior Period
- Revenue: Remained at $0, consistent with the prior period and inception date (September 3, 2009).
- Loss Expansion: Net loss for the nine months ended September 30, 2010, was $(6,150,048), compared to a loss of $(6,400) for the period from inception through September 30, 2009. This increase is primarily due to significant non-cash compensation expenses related to warrant issuances.
- Derivative Liability: The Company recorded a gain on the change in fair value of derivative liabilities of $2,212,579 for the nine months ended September 30, 2010, partially offsetting operating losses. This contrasts with a loss of $4,242,175 recorded cumulatively from inception through September 30, 2010, due to the volatility of embedded derivatives in convertible notes and warrants.
- Liquidity: Cash increased from $603,156 at December 31, 2009, to $1,045,822 at September 30, 2010, driven by financing activities including the sale of common stock.
Guidance, Outlook, Risks, and Unusual Items
- Outlook: Management anticipates significant revenue generation from EV charging services will not begin until the second half of 2011, coinciding with the mass production of electric vehicles. The Company is currently focused on installing charging stations and securing provider agreements.
- Capital Needs: The Company has a significant accumulated deficit of $(12,951,231) since inception. Management believes additional funding is necessary to continue as a going concern. While recent fundraising ($1.39 million in July/August 2010) is expected to cover operations for the next twelve months, there is no assurance of future financing success.
- Unusual Items: A substantial portion of operating expenses consists of non-cash charges. For the nine months ended September 30, 2010, compensation expenses included approximately $7.15 million in non-cash warrant costs. Additionally, the Company carries a large derivative liability ($4.4 million) resulting from the fair value accounting of embedded conversion features in convertible notes and warrants.
- Risks: The primary risk is the Company's ability to raise additional capital to fund operations until revenue generation commences. Failure to secure funding could force the Company to cease operations.
Investor Verification Checklist
- Going Concern Status: Verify the Company's ability to secure additional financing given the accumulated deficit of nearly $13 million and lack of operating revenue.
- Derivative Liability Volatility: Assess the impact of the $4.4 million derivative liability on future earnings, as changes in fair value can cause significant non-cash gains or losses.
- Revenue Timeline: Confirm the feasibility of the projected revenue start date (H2 2011) and the progress of EV adoption and charging station installations.
- Dilution Risk: Review the significant number of outstanding warrants and convertible notes (over 91 million potential dilutive shares) which could heavily dilute existing shareholders upon exercise or conversion.
- Cash Burn Rate: Monitor the cash burn rate of approximately $1 million per quarter to ensure the current cash balance of $1.05 million is sufficient to meet the 12-month operational runway.