Business Context and Reporting Period
Company: Car Charging Group, Inc. (formerly New Image Concepts, Inc.)
Filing Type: Form 10-K (Annual Report)
Period Ended: December 31, 2010
Business Model: The Company is a development-stage entity focused on owning, providing, and servicing electric vehicle (EV) charging stations. It installs stations at public locations and third-party properties (e.g., parking garages, municipalities) at no cost to the landowner, deriving revenue from shared fees for charging services. The Company utilizes a network of approved local vendors for installation and maintenance.
Key Financial Metrics
| Metric | Year Ended Dec 31, 2010 | Period Sep 3, 2009 - Dec 31, 2009 |
|---|---|---|
| Revenue | $0 | $0 |
| Net Loss | $(5,709,559) | $(6,801,183) |
| Accumulated Deficit | $(12,510,742) | $(6,801,183) |
| Cash and Cash Equivalents | $373,868 | $603,156 |
| Net Cash Used in Operating Activities | $(1,503,508) | $(364,212) |
| Net Cash Used in Investing Activities | $(173,826) | $(17,632) |
| Net Cash Provided by Financing Activities | $1,448,046 | $985,000 |
| Total Assets | $769,179 | $825,066 |
| Total Liabilities | $3,648,951 | $7,368,541 |
| Derivative Liabilities | $3,467,864 | $7,126,823 |
Note: The Company reported no revenue for the period. Significant non-cash compensation expenses related to warrants ($6,995,084) and a gain on the change in fair value of derivative liabilities ($3,211,356) heavily impacted the net loss.
Material Changes vs. Prior Period
- Operational Progress: The Company entered into Provider Agreements with 18 entities and completed the installation of 8 EV charging stations by year-end 2010. In 2009, operations were limited to business planning and capital raising.
- Capital Structure: The Company raised $1,448,046 through private sales of common stock in 2010, compared to $885,000 in 2009. A 1-for-50 reverse stock split was authorized in February 2011 (subsequent to the reporting period) to adjust share counts.
- Derivative Liability Reduction: The derivative liability decreased from $7.13 million in 2009 to $3.47 million in 2010, primarily due to a $3.21 million gain recognized from the change in fair value of these instruments.
- Asset Reclassification: $72,768 of inventory was reclassified to EV Charging Stations (Property and Equipment) in December 2010 as the Company shifted from holding inventory for resale to installing stations for its own network.
Outlook, Risks, and Management Commentary
Outlook and Guidance: Management anticipates that significant capital will be required in 2011 and 2012 to build a national network. Revenue generation is not expected to begin in significant volume until the fourth quarter of 2011, coinciding with the mass production and sale of electric vehicles by major manufacturers. The Company intends to secure locations with minimal capital outlay initially, expanding station density as market demand warrants.
Going Concern: The Company has an accumulated deficit of $12.5 million and has incurred net losses since inception. Auditors have expressed substantial doubt about the Company's ability to continue as a going concern. Continued operations are dependent on the Company's ability to raise additional capital and generate sufficient revenues.
Risks and Contingencies:
- Capital Needs: Failure to obtain additional financing could force the Company to limit operations or cease activities.
- Market Dependence: Success is entirely dependent on the adoption of electric vehicles by consumers and the availability of EVs on the road.
- Competition: The industry is fragmented with low barriers to entry; competitors may have significantly greater resources.
- Internal Controls: Management identified a material weakness in internal controls due to the lack of an independent audit committee or audit committee financial expert.
- Regulatory: Local regulations vary, and compliance may cause installation delays. The Company aims to charge per session to avoid being classified as a regulated public utility.
Investor Verification Checklist
- Capital Sufficiency: Verify the Company's current cash burn rate and the status of any new financing efforts required to sustain operations through 2011.
- Revenue Timeline: Confirm the actual deployment of EVs in the market and whether the projected Q4 2011 revenue start date remains realistic.
- Derivative Accounting: Review the valuation models used for the $3.47 million derivative liability, as fluctuations in stock price significantly impact reported earnings.
- Related Party Transactions: Scrutinize the $206,000 in consulting fees paid to a CEO-owned entity and the $4.95 million in warrants granted to the same entity.
- Internal Controls: Assess the progress in forming an independent audit committee to remediate the identified material weakness.