Business context and reporting period
This is Car Charging Group, Inc.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2014. The filing identifies the registrant as Car Charging Group, Inc.; the supplied company metadata says Blink Charging Co. The company operated a U.S. electric-vehicle charging network, generating revenue from charging services, equipment sales, grants, rebates, and incentives. Its 2013 acquisitions expanded its station network and are included in 2014 results.
Financial performance and position
| Metric | Three months ended June 30, 2014 | Three months ended June 30, 2013 | Six months ended June 30, 2014 | Six months ended June 30, 2013 |
|---|---|---|---|---|
| Revenue | $973,268 | $77,739 | $1,328,953 | $93,314 |
| Gross profit (loss) | $(606,706) | $27,720 | $(1,563,222) | $38,886 |
| Operating loss | $(7,953,312) | $(5,433,391) | $(12,099,052) | $(7,433,653) |
| Net loss | $(7,113,648) | $(5,640,416) | $(10,972,565) | $(7,863,477) |
| Net loss per share | $(0.09) | $(0.11) | $(0.14) | $(0.16) |
Gross margin was approximately negative 62% for the quarter and negative 118% for the six-month period. Revenue growth reflected acquired charging operations, higher grant revenue, and increased residential station sales; it did not translate into gross profit. The 2014 cost-of-revenue presentation includes station depreciation and network amortization, which were classified in operating expenses in 2013, limiting direct period comparisons.
- Cash flow: Six-month operating cash use was $4.64 million, investing cash use was $0.67 million, and financing cash use was $0.24 million. Cash fell by $5.56 million to $2.28 million at June 30, compared with $7.84 million at December 31, 2013.
- Liquidity: Current assets were $4.70 million versus current liabilities of $17.83 million. At August 19, 2014, cash was approximately $922,000.
- Debt and obligations: Notes payable totaled approximately $426,500, including current and noncurrent portions. Current liabilities also included $4.20 million of 350 Green payables, a $2.32 million accrued U.S. Department of Energy fee, a $1.54 million registration-rights penalty, and $4.85 million of derivative liability. Total liabilities were $18.77 million; stockholders’ deficit was $4.71 million.
Material changes versus the prior comparable period
For the first half, revenue rose to $1.33 million from $93,314, while net loss widened to $10.97 million from $7.86 million and operating cash use increased to $4.64 million from $993,031. The company recorded a $3.30 million goodwill impairment related to 350 Green. Favorable fair-value gains on warrant and derivative liabilities contributed to other income, so reported net loss was partly offset by non-operating, valuation-driven gains.
Outlook, risks, contingencies, and unusual items
- Going concern and funding: Management reported substantial doubt about the company’s ability to continue as a going concern. It expected operating cash flows and intended debt and equity proceeds to be insufficient for the next 12 months, planned to seek additional capital, and warned that financing might not be available on acceptable terms. Cost reductions, including headcount reductions and inventory sales, were expected to begin producing savings toward the end of the third quarter of 2014.
- Financing commitment: Four shareholders had agreed to provide financing of up to $6.25 million through early 2015, with warrants issued in connection with the arrangement. The filing also states that no new financing commitments were in place; the availability and conditions of this commitment should be clarified.
- 350 Green: The company placed 350 Green under a trust mortgage process for creditor recovery, fully impaired its $3.30 million goodwill, and agreed to acquire certain station assets for consideration of $807,647. Multiple creditor claims and litigation remain relevant.
- Commercial obligations: Under a Nissan agreement, the company was to install and maintain 48 fast chargers and establish a dealer referral program by December 31, 2014; six chargers were installed by June 30. The agreement provides remedies if obligations are not met. The company also accrued the maximum $1.54 million registration-rights penalty because its registration statement had not become effective.
- Other risks: The filing describes lawsuits involving Synapse, former 350 Green parties and creditors, and former Beam members. It also reports defaults on certain acquired-company obligations. Management said it did not expect litigation to have a material adverse effect, but outcomes remain uncertain.
- Controls: Management concluded disclosure controls were ineffective and identified material weaknesses involving undocumented controls, limited accounting resources and segregation of duties, inadequate flow of information to finance, and ineffective audit committee oversight.
Most important facts for investors to verify
- Whether the filing is the intended issuer and period, given the difference between the metadata name and the registrant named in the filing.
- How much of the up-to-$6.25 million shareholder financing was actually available, its conditions, and subsequent funding received.
- Cash runway and progress of planned cost reductions, especially in light of cash declining to approximately $922,000 by August 19, 2014.
- The status and expected resolution of 350 Green liabilities, creditor claims, litigation, and the trust mortgage asset transfer.
- Progress toward the Nissan installation and referral-program deadlines, and the status of the DOE fee and registration-rights penalty.
- Whether revenue growth can improve gross margins and whether the disclosed material weaknesses have been remediated.