Business context and reporting period
Car Charging Group, Inc. (the registrant named in this 2012 filing; not Blink Charging Co. by name) filed this unaudited Form 10-Q for the quarter ended June 30, 2012. It was a development-stage EV charging services and equipment business. It reported 164 charging units at 94 locations in service at quarter-end, including 56 units installed at 30 additional locations during the first half.
Financial results and position
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Revenue | 2012: $234,882; 2011: $59,490 | 2012: $237,487; 2011: $59,490 |
| Gross profit (loss) | 2012: $46,444; 2011: $(1,340) | 2012: $48,641; 2011: $(1,340) |
| Gross margin | 2012: 19.8%; 2011: (2.3%) | 2012: 20.5%; 2011: (2.3%) |
| Operating expenses | 2012: $944,151; 2011: $664,506 | 2012: $2,479,121; 2011: $1,615,352 |
| Operating loss | 2012: $(897,707); 2011: $(665,846) | 2012: $(2,430,480); 2011: $(1,616,692) |
| Net income (loss) | 2012: $(898,216); 2011: $(729,844) | 2012: $(2,431,022); 2011: $1,640,739 |
| Operating cash used | First half 2012: $1,407,435; first half 2011: $1,024,779 |
Quarterly 2012 revenue included $231,472 from sales of 68 charging stations and $3,410 in service fees. First-half station sales generated $44,416 gross profit. At June 30, cash was $728,959; current assets were $1,084,082 and current liabilities $485,328, for working capital of $598,754. Total assets were $2,206,708 and total liabilities $562,363. Notes payable totaled $62,778, secured by the company automobile and bearing 4.75% interest. Stockholders’ equity was $1,644,345; accumulated deficit was $16,081,839.
Material changes versus prior comparable periods
- Quarterly revenue increased from $59,490 to $234,882, principally from station sales; service fees began to contribute but remained small.
- Quarterly gross results improved to a profit, but operating loss widened as compensation and other operating costs increased.
- First-half 2012 net loss of $2.43 million compared with prior-year net income of $1.64 million. The 2011 result included a one-time $3.28 million gain from a change in derivative fair value; the 2012 period had no such gain.
- Cash increased by $322,100 in the first half, supported by $2.26 million in financing proceeds, including $1.36 million net from common stock and $900,000 net from Series B preferred stock. Investing cash use rose to $528,550.
- Common shares outstanding were 40,805,780 at June 30; the filing reported 40,905,780 issued and outstanding as of August 13, 2012.
Outlook, risks, contingencies, and unusual items
- Management said it believed available resources would fund operations through at least June 30, 2013, while noting reliance on additional common or preferred stock sales and no assurance of obtaining them. The business had recurring operating cash outflows and had not generated significant operating revenue.
- The company committed to purchase 500 charging stations during the year at $2,500–$2,700 each; it had purchased 90 by June 30. Management said the supplier had not performed under the agreement, and resolution was unknown. Failure to take all units could require reimbursement of certain discounts.
- A July 16, 2012 term sheet proposed acquiring 350Green LLC, subject to definitive documentation and regulatory approval; the filing did not report a completed acquisition.
- Pending litigation included a former officer/director’s claims involving compensation, warrant rights, and termination, which management intended to contest, and a consultant’s $41,000 fee claim already accrued.
- Related-party matters included $40,250 of second-quarter commissions paid to a company owned by the CEO and a patent license requiring royalties of 10% of gross profits; no royalties had been paid by quarter-end.
- Disclosure controls and procedures were deemed ineffective at June 30. The board had no independent directors and no identified audit committee financial expert. The filing reported no material changes in internal control over financial reporting during the quarter.
- Warrants and preferred stock create potential dilution; 11,928,169 warrants were outstanding at June 30. The Series B purchaser also held an option to buy 1.5 million additional preferred shares for $1 per share within 60 days of issuance.
Important facts for investors to verify
- Whether service-fee revenue and charging-station utilization grew beyond equipment resale activity after June 30.
- Whether additional equity financing was secured and whether management’s stated liquidity runway was achieved.
- The outcome of the 500-station supplier dispute, including any reimbursement exposure or effect on deployment plans.
- Whether the proposed 350Green acquisition closed, and its final terms, funding, and integration impact.
- Developments in the former officer/director litigation, the consultant claim, related-party arrangements, and disclosure-control remediation.
- The potential dilution and governance implications of outstanding warrants, preferred shares, and their conversion or purchase rights.