Car Charging Group, Inc. — Form 10-Q Summary
Reporting period: Quarter ended September 30, 2011; filed November 21, 2011. The filing is by Car Charging Group, Inc., identified as a development-stage company, not under the name Blink Charging Co. The business planned, installed, and serviced electric-vehicle charging stations and shared service revenue with property owners.
Financial results and position
| Metric | Q3 2011 / September 30, 2011 | Comparable period / prior balance-sheet date |
|---|---|---|
| Revenue | $981 for the quarter; $60,471 for nine months | Q3 and nine-month 2010 revenue: $0 |
| Gross profit (loss) | $981 for the quarter; $(359) for nine months | 2010: $0 for both periods |
| Operating expenses | $1.66 million for the quarter; $3.27 million for nine months | Q3 2010: $7.62 million; nine-month 2010: $8.34 million |
| Net income (loss) | $(1.57) million for the quarter; $71,807 for nine months | Q3 2010: $(4.57) million; nine-month 2010: $(6.15) million |
| Cash and current position | Cash $48,111; current assets $213,923; current liabilities $419,128 | Cash at December 31, 2010: $373,868 |
| Total assets / liabilities | $601,752 / $535,200 | December 31, 2010: $769,179 / $3.65 million |
| Cash flow, nine months | Operating cash use $1.36 million; investing cash use $185,633; financing cash provided $1.22 million | 2010 operating cash use: $968,774; investing cash use: $36,606; financing cash provided: $1.45 million |
The nine-month net income did not reflect profitable operations: it included a $3.37 million gain from changes in derivative fair value, while the operating loss was $3.27 million. The filing reports no meaningful operating margin; nine-month gross loss was $359 on $60,471 of revenue. No conventional profitability or cash-flow margin was provided.
At September 30, short-term notes were $200,056 net of discount and convertible notes due within a year were $3,750; accrued interest was $5,169. Derivative liabilities were $116,072. Working capital was negative by approximately $205,000. The company had 35.3 million common shares outstanding at quarter-end and reported 36.4 million as of November 18.
Changes versus prior periods
- Revenue began to appear in 2011: nine-month sales were $59,490, plus $981 of services; the comparable 2010 periods had no revenue. The company said it began charging for services in August.
- Operating losses narrowed substantially year over year, partly because 2010 included large noncash stock- and warrant-compensation charges. Q3 2011 still generated only $981 of revenue against $1.66 million of operating expenses.
- Nine-month 2011 net income turned positive from a loss in 2010, primarily because of noncash derivative remeasurement gains, including a $2.70 million gain when convertible-note reset terms were fixed in March.
- Cash fell by $325,757 during the first nine months. Derivative liabilities declined from $3.47 million at year-end 2010 to $116,072 at September 30, 2011, while stockholders’ equity moved from a $2.88 million deficit to $66,552 of equity.
- Common shares outstanding increased from 1.80 million at December 31, 2010 to 35.29 million at September 30, 2011, including substantial note conversions and equity issuance.
Outlook, risks, contingencies, and unusual items
- Management expected 2011 revenue to remain insignificant, citing few electric vehicles and a small number of installed stations. It planned to accelerate installations in Q4 and expected to exit development-stage status by December 31, 2011; these are expectations, not assured results.
- The filing expressly raises substantial doubt about the company’s ability to continue as a going concern. Management said additional financing and revenue growth were necessary and that financing was not assured. It reported negotiating $2.5 million in additional equity; a subsequent-event disclosure says a November subscription covered 2.5 million shares at $1 per share, with $500,000 received and 500,000 shares issued by November 21.
- The company had committed to purchase 300 charging stations, 25 per month beginning October 2011, for more than $3,100 each; MD&A quantified the commitment at $1,043,700. The office lease, stated at approximately $132,480 annually, was subject to renegotiation.
- Q3 included a $94,380 derivative fair-value gain. Stock and warrants issued for services and incentives were significant noncash expenses. A $100,000 shareholder note issued in September at 10% was prepaid November 10, 2011, with accrued interest of $1,315.06.
- Management concluded disclosure controls and procedures were ineffective. The board had no independent directors serving as an audit committee and no identified audit committee financial expert. The company reported no material litigation and no off-balance-sheet arrangements.
Important facts for investors to verify
- Whether the subsequent $2.5 million equity subscription was fully funded, and the company’s cash and financing position after quarter-end.
- Actual service revenue, station utilization, installation pace, and economics of the charging-station sales and service model.
- Funding and payment capacity for the $1.04 million station-purchase commitment, lease obligations, and short-term debt.
- Share and warrant dilution, including the terms and conversion effects of preferred stock and outstanding warrants.
- The source and repeatability of reported earnings: nine-month positive net income depended on derivative fair-value gains despite operating and operating-cash-flow losses.
- Remediation of ineffective disclosure controls and the company’s progress toward independent audit oversight.